<PAGE>
As filed with the Securities and Exchange Commission on March 1, 1999
Registration No. 333-71909
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT 1 TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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FLYCAST COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 7319 77-0431028
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
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181 Fremont Street, Suite 120
San Francisco, California 94105
(415) 977-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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George R. Garrick, Chairman of the Board, Chief Executive Officer and President
FLYCAST COMMUNICATIONS CORPORATION
181 Fremont Street, Suite 120
San Francisco, California 94105
(415) 977-1000
(Name, Address Including Zip Code, and Telephone Number Including Area Code, of
Agent for Service)
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Copies to:
Jeffrey Y. Suto Laird H. Simons III
Alissa W. Lee Katherine Tallman Schuda
Scott S. Ring Nicholas S. Khadder
VENTURE LAW GROUP FENWICK & WEST LLP
A Professional Corporation A Professional Corporation
2800 Sand Hill Road Two Palo Alto Square
Menlo Park, CA 94025 Palo Alto, CA 94306
(650) 854-4488 (650) 494-0600
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title Of Each Class Of Securities Proposed Maximum Aggregate
To Be Registered Offering Price (1) Amount Of Registration Fee
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<S> <C> <C>
Common Stock, par value
$0.0001........................ $40,250,000 $11,190(2)
</TABLE>
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(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act.
(2) Previously paid.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
March 1, 1999
Shares
[LOGO OF FLYCAST COMMUNICATIONS CORPORATION]
FLYCAST COMMUNICATIONS CORPORATION
Common Stock
---------
This is the initial public offering of Flycast Communications Corporation and
we are offering shares of our common stock. We anticipate the
initial public offering price will be between $ and $ per share.
We have applied to list our common stock on the Nasdaq National Market under
the symbol "FCST."
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 5.
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price................................ $ $
Underwriting Discounts and Commissions............... $ $
Proceeds to Flycast.................................. $ $
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
Flycast has granted the underwriters the right to purchase up to
additional shares to cover any over-allotments.
BT Alex. Brown
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
Hambrecht & Quist
, 1999
<PAGE>
[INSIDE FRONT COVER]
Title: Maximizing ROI by Acting as a Market Maker
Flow chart beginning with larger sites and smaller sites (represented by larger
and smaller three-dimensional cylinders), from which arrows point to the
Flycast logo and "flycast network." Two-way arrows also point between the logo
and Media Sales Force, represented by a series of faces, and Ad Agent,
represented by a desktop computer. Two-way arrows also point between "Media
Sales Force" and "Larger Advertisers and Agencies," which is accompanied by
corporate logos, and "Ad Agent" and "Smaller Buyers," which is also accompanied
by corporate logos. From the flycast network and the Flycast logo, a two-way
arrow also points to the BellSouth logo, the SBC logo and "Value Added
Resellers." A two-way arrow also points between these items and "Vertical
Marketplace Solutions."
[INSIDE FRONT COVER FOLD-OUT]
Title: AdExchange, our proprietary automated advertising management platform
that optimizes real-time advertising delivery using PassiveProfiling, ValueTrak
reporting and immediate adjustments by both advertisers and Web sites.
Text to the left of the bottom graphics representing process:
1.The viewer requests a Web page from a browser representing process.
2.An advertisement is requested from AdEx.
3.AdEx delivers the advertisement to the viewer.
4.The site delivers the requested page with an embedded advertisement.
5.The viewer clicks on an advertisement and links to an e-commerce site.
6.ValueTrak records any transactions initiated by the viewer on the site and
conveys it to AdEx.
7.Advertisers use AdAgent to execute and manage their advertising campaigns and
AdReporter to monitor the performance of their campaign.
8.Web sites use SiteRegistry to register their ad space with the Flycast
Network and SiteReporter to monitor the performance of advertising campaigns
run on their site.
Text box to the right of the bottom graphic representing process: AdEx receives
orders from advertisers and matches them with appropriate advertising space
available on the Flycast Network. AdEx allows Flycast to target advertising to
viewers based on a wide selection of Web site and viewer characteristics,
including geographical, nature of content, Web usage patterns and prior
advertising exposure.
Flycast is a registered trademark and AdAgent, AdEx, AdExchange, AdReporter,
Category Select, Passive Profiling, Run of Category, Run of Network,
SiteRegistry, SiteReporter, Site Select and ValueTrak are trademarks of
Flycast. All other brand names or trademarks appearing in this prospectus are
the property of their respective holders.
2
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and Financial Statements and notes thereto appearing elsewhere in
this prospectus.
This prospectus contains forward-looking statements. The outcome of the
events described in these forward-looking statements is subject to risks and
actual results could differ materially. The sections entitled "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" contain a discussion of some of the factors that
could contribute to these differences.
THE COMPANY
We are a leading provider of Web-based advertising solutions designed to
maximize the return on investment for response-oriented advertisers, direct
marketers and e-commerce companies. An industry source estimates that
approximately 75% of available Web advertising space goes unsold. By
aggregating unsold advertising space from over 780 Web sites, we can offer
advertisers a large audience of Web users and high-quality advertising space at
favorable prices. At the same time, we create an incremental revenue
opportunity for Web sites that does not conflict with their other sales efforts
because we offer their unsold advertising space on an unbranded basis. In this
way, we act as a market maker for response-oriented advertising inventory on
the Web, a market that Forrester Research, Inc. estimates to be approximately
65% of total Internet advertising in 2002.
We create value for both advertisers and Web sites through our network of
aggregated inventory, proprietary AdEx technology and superior customer
service. By aggregating inventory from small and medium-sized Web sites, as
well as unsold advertising inventory from large Web sites, we can deliver high-
quality, cost-effective advertising space to response-oriented advertisers.
Once an advertiser defines an advertising campaign, AdEx matches individual
advertisements from this campaign with appropriate advertising space available
on our network. Media consultants then monitor the progress of, and regularly
adjust, the campaign to optimize its performance relative to the advertiser's
goals. By delivering a comprehensive Web advertising solution, we have been
able to increase monthly advertising impressions served on our network from 93
million in December 1997 to 600 million in December 1998. In addition, our
network reached over 20 million unique Web users or over 35% of Web users in
the U.S. in December 1998, which compared favorably to the audience reach of
the top 10 Web sites.
Advertising on the Web is expanding rapidly. Forrester Research, Inc.
estimates that $1.5 billion was spent on Internet advertising worldwide in 1998
and that this amount will grow to $15.1 billion in 2003. On the Web, as in
traditional media, there are two widely recognized types of advertising--brand
advertising and response-oriented advertising. Brand advertising is intended to
generate awareness of and create a specific image for a particular company,
product or service. In contrast, response-oriented advertising, or direct
marketing, is intended to generate a specific response or action from the
consumer after exposure to an advertisement. Response-oriented advertisers
focus on the short-term benefit from their advertising and seek to maximize the
number of desired responses per advertising dollar.
We believe that the Web is particularly well-suited for response-oriented
advertising. The Web makes it easier for consumers to read and respond to an
advertisement than do traditional direct response media such as toll-free
numbers or business reply cards. Also, measuring response rates, an essential
element for response-oriented advertisers, is easier on the Web than in
traditional media, enabling advertisers to modify their campaigns quickly to
increase response rates. Finally, response-oriented advertisers benefit from
the growing supply of cost-effective, unsold advertising inventory on the Web.
Forrester estimates that spending on direct marketing on the Internet will
reach $5.5 billion or approximately 65% of total Internet advertising spending
in 2002.
We believe that local advertisers represent a growing market for response-
oriented Web advertising. To develop this market, we recently entered into
value added reseller relationships with BellSouth Corporation and SBC
Communications Inc. Under these agreements, we will deliver local Web
advertising inventory to BellSouth's and SBC's sales forces that they will
resell to local advertisers. We also intend to develop relationships with
companies representing national advertisers that are seeking local advertising
solutions.
Flycast's principal executive offices are located at 181 Fremont Street,
Suite 120, San Francisco, California 94105. Its telephone number at that
location is (415) 977-1000. Information contained on our Web site at
http://www.flycast.com does not constitute part of this prospectus.
3
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by Flycast..... shares
Common stock to be outstanding after
the offering....................... shares(1)
Use of proceeds..................... For working capital and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol............................. FCST
</TABLE>
Summary Financial Information
<TABLE>
<CAPTION>
Years Ended
December 31, Three Months Ended
---------------- -----------------------------------
Mar. 31, Jun. 30, Sep. 30, Dec. 31,
1997 1998 1998 1998 1998 1998
------- ------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ 630 $ 8,029 $ 603 $1,172 $2,116 $4,138
Gross profit............ 74 2,084 120 293 546 1,125
Operating loss.......... (3,411) (8,895) (1,495) (1,758) (2,477) (3,165)
Net loss................ (3,417) (9,307) (1,467) (1,776) (2,532) (3,532)
Basic and diluted loss
per common share(2).... $(31.80) $(11.93) $(3.26) $(2.37) $(2.85) $(3.43)
Shares used in basic and
diluted loss per common
share(2)............... 114 835 500 819 945 1,076
Pro forma basic and
diluted loss per common
share(3)............... $ (1.40)
Shares used in pro forma
basic and diluted loss
per common share(3).... 7,113
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------------
Pro Forma
Actual Pro Forma(4) As Adjusted(5)
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Balance Sheet Data: (in thousands)
<S> <C> <C> <C>
Cash, cash equivalents and investments.. $ 5,193 $19,992 $
Working capital......................... 4,088 18,887
Total assets............................ 10,791 25,590
Long-term obligations, less current
portion................................ 4,704 4,704
Mandatorily redeemable preferred stock.. 13,855 --
Total stockholders' equity (deficit).... (12,578) 16,076
</TABLE>
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(1) Based on the number of shares outstanding as of December 31, 1998. Excludes
2,045,904 shares subject to outstanding options or reserved for issuance
under our 1997 Stock Option Plan, 169,067 shares subject to outstanding
warrants (net of warrants to purchase 217,170 shares that will be exercised
immediately before completion of this offering), 2,000,000 shares reserved
for issuance under our 1999 Stock Option Plan, 200,000 shares reserved for
issuance under our 1999 Directors' Stock Option Plan, and 350,000 shares
reserved for issuance under our 1999 Employee Stock Purchase Plan. See
"Management--Stock Plans" and Notes 5 and 8 of Notes to Financial
Statements.
(2) Computed by dividing loss attributable to common stockholders by shares
used in basic and diluted loss per common share. See Note 6 of Notes to
Financial Statements for an explanation of the determination of the number
of shares used in computing basic and diluted loss per common share
amounts.
(3) Pro forma basic and diluted loss per common share gives effect to the
assumed conversion of all outstanding shares of preferred stock into shares
of common stock as if such conversion had occurred on January 1, 1998 or,
if later, the date of original issuance. See Note 1 of Notes to Financial
Statements for an explanation of the determination of the number of shares
used in computing pro forma basic and diluted loss per common share.
(4) Reflects the sale of 1,496,347 shares of preferred stock sold in January
1999 for an aggregate purchase price of $13.5 million, the exercise of
warrants to purchase 217,170 shares that will expire upon the closing of
this offering for an aggregate exercise price of approximately $1.3 million
and the conversion of all outstanding shares of preferred stock into shares
of common stock upon the closing of this offering.
(5) Reflects the receipt of the net proceeds from the sale of the shares of
common stock sold in this offering at an assumed initial public offering
price of $ per share, after deducting estimated underwriting discounts
and commissions and estimated offering expenses. See "Use of Proceeds" and
"Capitalization."
---------------
Unless otherwise indicated, all information in this prospectus assumes (1)
the sale of 1,496,347 shares of preferred stock in January 1999 and (2)
Flycast's reincorporation in Delaware, the exercise of warrants to purchase
40,476 shares of common stock and 176,694 shares of preferred stock and the
conversion of each outstanding share of preferred stock into one share of
common stock, all of which will occur before the closing of this offering.
In addition, all information in this prospectus assumes no exercise of the
Underwriters' over-allotment option.
4
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks and uncertainties described below and the other information in this
prospectus before deciding whether to invest in shares of our common stock. If
any of the following risks actually occur, our business, results of operations
and financial condition could be materially adversely affected. This could
cause the trading price of our common stock to decline, and you might lose part
or all of your investment.
This prospectus also contains certain forward-looking statements that involve
risks and uncertainties. These statements refer to our future plans,
objectives, expectations and intentions. These statements may be identified by
the use of words such as "expects," "anticipates," "intends," "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors that could contribute to these
differences include those discussed below and elsewhere in this prospectus.
We have a limited operating history
We commenced operations in April 1996 and did not begin to generate revenue
until the second quarter of 1997. Thus, we have only a limited operating
history upon which you can evaluate our business. Our prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by early-stage companies in the Web advertising market, which is
new and rapidly evolving. We may not be successful in addressing these risks
and our business strategy may not be successful. These risks include our
ability to:
. continue our revenue growth;
. manage expanding operations;
. maintain and increase our inventory of advertising space on Web sites;
. maintain and increase the number of advertisers that use our products
and services;
. further develop and upgrade our technology to keep pace with the Web
advertising industry;
. respond to competitive developments, including the development or
acquisition of equal or superior products or services by competitors;
. continue to expand the number of products and services we offer;
. attract, retain and motivate qualified personnel; and
. anticipate and adapt to the changing Internet market.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for more detailed information.
We have a history of losses and anticipate continued losses
Our accumulated deficit as of December 31, 1998 was $14.0 million. Although
we have experienced revenue growth in recent periods, this growth may not be
sustained and is not necessarily indicative of our future revenue. We have not
achieved profitability and, given the level of planned operating and capital
expenditures, we expect to continue to incur losses for the foreseeable future.
In this regard, we specifically disavow certain revenue projections that
received limited circulation in the press in the fall of 1998 and that greatly
exceed our most recent comparable projections for future years. We plan to
increase our operating expenses to expand our infrastructure to support our
current
5
<PAGE>
business and new lines of businesses, including our reseller network. The
timing of this expansion and the rate at which our reseller network generates
revenue could cause material fluctuations in our results of operations. We also
plan to purchase additional capital equipment. Our losses may increase in the
future and we may not be able to achieve or sustain profitability. Even if we
do achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis in the future. If our revenue
grows more slowly than we anticipate, or if our operating expenses exceed our
expectations and cannot be adjusted accordingly, our business, results of
operations and financial condition will be materially and adversely affected.
Please see "Selected Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for more detailed
information.
Our quarterly operating results are subject to fluctuations and seasonality
Our revenue and operating results may vary significantly from quarter to
quarter due to a number of factors, some of which are outside of our control.
These factors include:
. demand for our advertising solutions;
. the number of available impressions on Web sites in the Flycast Network;
. the commitment of advertisers to Web advertising generally;
. the advertising budget cycles of individual advertisers;
. the mix of types of advertising we sell, including the amount of
advertising sold at higher rates;
. the timing and amount of costs relating to the expansion of operations;
. changes in our pricing policies, the pricing policies of our competitors
or the pricing policies for advertising on the Web generally;
. the introduction of new solutions by us or by our competitors;
. the ability of our distribution partners to market and sell our
advertising solutions effectively;
. costs related to acquisitions of technology or businesses; and
. general economic and market conditions.
We believe that our revenue will be subject to seasonal fluctuations because
advertisers generally place fewer advertisements during the first and third
calendar quarters of each year. In addition, expenditures by advertisers tend
to be cyclical, reflecting overall economic conditions as well as budgeting and
buying patterns. A decline in the economic prospects of advertisers or the
economy generally, which could alter current or prospective advertisers'
spending priorities or budget cycles, or extend the sales cycle with respect to
certain of our advertisers, could cause our business to be materially and
adversely affected.
Due to the above factors, revenue and operating results for the foreseeable
future are difficult to forecast. Our current and future expense estimates are
based, in large part, on estimates of future revenue and on our investment
plans . In particular, we plan to increase our operating expenses significantly
in order to expand our sales and marketing operations, including our reseller
network, to enhance AdEx, our proprietary automated advertising management
platform, and to expand internationally. To the extent that such expenses
precede increased revenue, our business, results of operations and financial
condition would be materially and adversely affected. We may be unable to, or
may elect not to, adjust spending
6
<PAGE>
quickly enough to offset any unexpected revenue shortfall. Therefore, any
significant shortfall in revenue in relation to our expectations would also
have a material adverse effect on our business, results of operations and
financial condition.
Due to all of the above factors and the other risks discussed in this
section, you should not rely on period-to-period comparisons of results of
operations as an indication of our future performance. It is possible that in
some future periods our operating results may fall below the expectations of
public market analysts and investors. In this event, the market price of our
common stock would likely fall. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for more detailed
information.
We may experience capacity constraints
Our future success depends in part on the efficient performance of AdEx, as
well as the efficient performance of the systems of third parties such as our
Internet service providers (ISPs). An increase in the volume of advertising
delivered through our servers could strain the capacity of the software or
hardware that we have deployed, which could lead to slower response time or
system failures and adversely affect the availability of advertisements, the
number of impressions received by advertisers and our advertising revenues. Due
to the unexpected growth in the number of impressions served in 1998, we
experienced a slowdown, and in some cases an interruption, in delivering
advertisements to viewers over a three-week period that limited the number of
impressions we were able to serve. As the numbers of Web pages and users
increase, our products, services and infrastructure may not be able to scale
accordingly. To the extent that we do not effectively address any capacity
constraints or system failures, our business, results of operations and
financial condition would be materially and adversely affected. Please see
"Business--Technology and Operations" for more detailed information.
We run the risk of system failure
The continuing and uninterrupted performance of our system is critical to our
success. Customers may become dissatisfied by any system failure that
interrupts our ability to provide our services to them, including failures
affecting the ability to deliver advertisements quickly and accurately to the
targeted audience. Sustained or repeated system failures would reduce
significantly the attractiveness of our solutions to advertisers and Web sites.
Our operations depend on our ability to protect our computer systems against
damage from fire, power loss, water damage, telecommunications failures,
vandalism and other malicious acts, and similar unexpected adverse events,
including earthquakes. In addition, interruptions in our solutions could result
from the failure of our telecommunications providers to provide the necessary
data communications capacity in the time frame required. We lease server space
at three physically separate locations in the San Francisco Bay Area.
Therefore, any of the above factors affecting the Bay Area specifically would
have a material adverse effect on Flycast's business. Further, despite our
implementation of network security measures, our servers are vulnerable to
computer viruses, break-ins and similar disruptions from unauthorized tampering
with our computer systems. We do not carry enough business interruption
insurance to compensate for losses that may occur as a result of any of these
events. Despite precautions we have taken, unanticipated problems affecting our
systems could cause interruptions in the delivery of our solutions in the
future. Our data storage centers incorporate redundant systems, consisting of
additional servers and arrays, but we have no automatic switchover. Our
business, results of operations and financial condition could be materially and
adversely affected by any damage or failure that interrupts or delays our
operations.
We also depend upon Web browsers and ISPs that provide consumers with access
to our products and services. In the past, users have occasionally experienced
difficulties due to system failures unrelated to our systems. Any disruption in
the Internet access provided by third-party providers or any failure of third-
party providers to handle higher volumes of user traffic could have a material
adverse effect on our business, results of operations and financial condition.
7
<PAGE>
We are subject to customer concentration
Our ten largest customers accounted for 40% of our revenue for the year ended
December 31, 1998 and 40% of our revenue for the quarter ended December 31,
1998. No single customer accounted for more than 10% of our revenue for the
year ended December 31, 1998. One customer, BONZI Software, accounted for 12%
of our revenue for the quarter ended December 31, 1998. We expect that a
limited number of customers will continue to account for a significant portion
of our revenue for the foreseeable future. As a result, if we lose a major
customer, our revenue could be adversely affected. In addition, we cannot be
certain that customers that have accounted for significant revenue in past
periods, individually or as a group, will continue to generate revenue in any
future period. We also target small advertisers that have limited advertising
budgets and/or are interested in reaching small and limited target audiences.
We may not be able to generate sufficient revenue from these advertisers to
lessen our dependence on our largest customers. We typically enter into short-
term contracts with Web sites for their supply of advertising impressions. The
loss of a significant amount of these impressions may result in the loss of
customers, which could have a material adverse effect on Flycast's business,
results of operations and financial condition. For more detailed information,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
We depend on the evolution of Web advertising
We expect to derive substantially all of our revenue in the foreseeable
future from Web advertising. Therefore, our future success depends on increased
use of the Web as an advertising medium. Demand and market acceptance for Web
advertising solutions is uncertain. The Web has not existed long enough as an
advertising medium to demonstrate its effectiveness relative to traditional
advertising media. Customers that have historically relied on traditional media
for advertising may be reluctant or slow to adopt Web advertising. Many
customers have limited or no experience using the Web as an advertising medium,
have allocated only a limited portion of their advertising budgets to Web
advertising or may find Web advertising to be less effective for promoting
their products and services than advertising using traditional media. In
addition, advertisers and advertising agencies that have invested substantial
resources in traditional methods of advertising may be reluctant to reallocate
their media buying resources to Web advertising. We cannot assure you that the
market for Web advertising will continue to develop or be sustainable. If the
market for Web advertising fails to develop or develops more slowly than we
expect, then our business, results of operations and financial condition would
be materially and adversely affected.
Substantially all of our revenue is derived from the delivery of banner
advertisements. If advertisers determine that banner advertising is not
effective or attractive as an advertising medium, we may not be able to shift
to any other form of Web advertising. Also, users can install "filter" software
programs that limit or prevent advertising from being delivered to a Web site.
The widespread adoption of filter software by Web users or the failure to
develop successfully alternative forms of Web advertising could have a material
and adverse effect on the Web advertising market and our business, results of
operations and financial condition.
Our business model is to generate revenue primarily by providing Web
advertising solutions to response-oriented advertisers. We cannot assure you
that Web advertising, response-oriented marketing or our model for providing
solutions based upon providing a return on investment for advertisers will
achieve broad market acceptance. Our ability to generate significant revenue
from advertisers will depend, in part, on our ability to:
. demonstrate to advertisers that direct response advertising on the Web
will add value and increase marketing effectiveness;
. attract advertisers and Web sites to the Flycast Network;
8
<PAGE>
. retain advertisers by differentiating the technology and services we
provide to them; and
. obtain adequate available advertising inventory from a large base of Web
sites.
Further, the Web sites in the Flycast Network must continue to generate
sufficient user traffic characteristics attractive to advertisers. The intense
competition among Web sites has led to the creation of a number of pricing
alternatives for Web advertising. These alternatives make it difficult for us
to project future levels of advertising revenue and applicable gross margins
that can be sustained either by us or the Web advertising industry in general.
A key component to our strategy is to enhance the return on investment and
other performance measurements for the advertisers using the Flycast Network.
We have limited experience in implementing and following such a strategy and we
cannot assure you that such a strategy will succeed or that we will be able to
achieve or maintain adequate gross margins.
We face intense competition
We face intense competition. We expect such competition to continue to
increase because there are no substantial barriers to entry. Competition may
also increase as a result of industry consolidation. We believe that our
ability to compete depends upon many factors both within and beyond our
control, including the following:
. the timing and market acceptance of new solutions and enhancements to
existing solutions developed either by us or our competitors;
. customer service and support efforts;
. sales and marketing efforts; and
. the ease of use, performance, price and reliability of solutions
developed either by us or our competitors.
Competition among current and future suppliers of Internet navigational and
informational services, high-traffic Web sites and ISPs, as well as competition
with other media for advertising placements, could result in significant price
competition and reductions in our advertising revenue.
As we expand the scope of our Web services, we may compete with a greater
number of Web sites and other media companies across a wide range of different
Web services, including in vertical markets where competitors may have
advantages in expertise, brand recognition and other factors. Several companies
offer competitive products or services through Web advertising networks,
including DoubleClick and 24/7 Media. Our business may also encounter
competition from providers of advertising inventory management products and
related services, including NetGravity, Accipiter and AdForce. In addition, we
may compete with a number of content aggregation companies, advertising
agencies and other companies that facilitate Web advertising such as America
Online (AOL.com), C/NET (Snap!), Yahoo!, SmartAge, Geocities, Digital Equipment
Corporation (AltaVista), Excite (including WebCrawler), Infoseek, Inktomi,
Lycos (including HotBot and Tripod), Microsoft (MSN and LinkExchange) and
Netscape (Netcenter).
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to respond more quickly than we can
to new or emerging technologies and changes in customer requirements. It may
also allow them to devote greater resources than we can to the development,
promotion and sale of their products and services. Such competitors may also
engage in more extensive research and development, undertake more far-reaching
marketing campaigns, adopt more aggressive pricing policies and make more
attractive offers to existing and potential employees, strategic partners,
advertisers and Web sites. Our
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<PAGE>
competitors may develop products or services that are equal or superior to our
solutions or that achieve greater market acceptance than our solutions. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
the ability of their products or services to address the needs of our
prospective advertisers, advertising agency customers and Web sites. As a
result, it is possible that new competitors may emerge and rapidly acquire
significant market share. Increased competition is likely to result in price
reductions, reduced gross margins and loss of our market share. We may not be
able to compete successfully, and competitive pressures may materially and
adversely affect our business, results of operations and financial condition.
Please see "Business--Competition."
We will depend on distribution relationships
We believe that our future success will depend in part on our relationships
with distribution partners. We have recently initiated reseller relationships
with BellSouth Corporation and SBC Communications Inc. Our agreements with
regional bell operating companies (RBOCs) provide that Flycast will deliver a
wholesale supply of local Web advertising that their Yellow Pages sales force
will resell to local advertisers. These relationships have not generated any
revenue to date, and, in order for us to be successful, revenue generated by
our resellers must increase. These resellers have no obligation to resell our
inventory of advertising space on Web sites and can terminate their
relationships with us with limited or no penalty with as little as 120 days'
notice. The loss of any reseller, the failure of any reseller to perform under
its agreement with us or our inability to attract and retain new resellers
could have a material adverse effect on our business, results of operations and
financial condition.
We also intend to develop relationships with companies representing national
advertisers that are seeking local advertising solutions, as well as companies
within vertical industries desiring to utilize our capabilities. Our inability
to enter into future distribution relationships might limit the number and size
of the markets that we serve. This could limit our revenue growth and have a
material adverse effect on our business, results of operations and financial
condition.
Intensive marketing and sales efforts may be necessary to educate prospective
local advertisers about the uses and benefits of our products and services in
order to generate demand for our services in the local advertiser market
segment. In addition, such companies may not have adequate resources available
to advertise their products and services and may not be willing to devote the
staff necessary to educate themselves on the uses and benefits of response-
oriented advertising for localized or otherwise limited target customers. In
addition, we will depend on our distribution partners to sell our Web
advertising solutions. If our partners do not sell our solutions in an
effective manner, our business, results of operations and financial condition
may be materially adversely affected. Please see "Business--Strategy" and
"Business--Products and Services--Flycast Local Market/Value Added Reseller
Division" for more detailed information.
We need to manage our advertising inventory and to establish relationships with
diverse Web sites
The Web sites that list their unsold inventory with us are not bound by
contracts that ensure us a consistent supply of inventory. In addition, Web
sites can change the number of advertising impressions they make available to
us at any time, subject to monthly minimums. If a Web site publisher decides
not to make inventory from its Web sites available to the Flycast Network, we
may not be able to replace such inventory with inventory from other Web sites
that have comparable traffic patterns and user demographics in time to fulfill
a buyer's request. We expect our customers' requirements to become more
sophisticated as the Web matures as an advertising medium. For example, we
expect our customers to become more precise in their requirements for
geographically- targeted advertising that we sell through our reseller network.
We cannot assure you that the amount
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<PAGE>
or type of inventory listed or the number of Web sites listing their inventory
on the Flycast Network will increase or even remain constant in the future. Our
business, results of operations and financial condition could be materially and
adversely affected if we are unable to maintain a desired level of available
inventory.
We need to manage our growth
As we continue to increase the scope of our operations, we will need an
effective planning and management process to implement our business plan
successfully in the rapidly evolving market for Web advertising. In addition,
we anticipate that we will commence international operations starting in the
second quarter of 1999. We have grown from 31 employees on January 1, 1998 to
70 employees on December 31, 1998. We plan to continue to expand our sales and
marketing, customer support and research and development organizations. Past
growth has placed, and any future growth will continue to place, a significant
strain on our management systems and resources. We have recently implemented a
new financial reporting system and expect that we will need to continue to
improve our financial and managerial controls, our reporting systems and
procedures. In addition, we will need to expand, train and manage our work
force. Our business, results of operations and financial condition will be
materially and adversely affected if we are unable to manage our expanding
operations effectively.
We depend on key personnel
Our future success depends to a significant extent on the continued service
of our key senior management, technical and sales personnel. We do not have
long-term employment agreements with any of our key personnel nor do we have
key-person insurance on any of our employees. The loss of the services of any
member of our management team, or certain other key employees, would have a
material adverse effect on our business, results of operations and financial
condition. Recently, we have experienced significant changes to our executive
management team. For example, our Chief Financial Officer, Vice President,
Engineering and Vice President, Sales joined Flycast in January 1999. Three
other members of our management team, including our Chief Executive Officer,
have been with us for less than one year. We cannot assure you that the new
members of our management team will work effectively together or with the rest
of our management. Our future success also depends on our continuing ability to
attract, retain and motivate highly skilled employees. Competition for
employees in the industry is intense. We may be unable to retain our key
employees or attract, assimilate or retain other highly qualified employees in
the future. We have experienced difficulty from time to time in attracting the
personnel necessary to support the growth of our business, and we may
experience similar difficulty in the future. Please see "Management" for more
detailed information.
We may face potential claims
As described more completely under "Certain Transactions--Employment and
Severance Agreements," we were unable to consummate an oral severance agreement
that we reached with a former employee and we were therefore forced to
foreclose on a promissory note from that employee. If that employee should
elect to contest the number of shares issued to him or any of the payments made
to him, we would be subjected to the costs and diversion of management time
that such litigation would entail. In addition, should we ultimately be
required to issue additional shares to this employee, our stockholders would
experience additional dilution in their holdings and we would incur a non-cash
charge equal to the fair market value of such shares at the time they are
issued.
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<PAGE>
We depend on the continued growth of Internet usage and infrastructure
Our market is new and rapidly evolving. Our business would be adversely
affected if Web usage does not continue to grow. Web usage may be inhibited for
a number of reasons, such as:
. inadequate network infrastructure;
. security concerns;
. inconsistent quality of service; and
. availability of cost-effective, high-speed service.
If Web usage grows, the Internet infrastructure may not be able to support
the demands placed on it by this growth or its performance and reliability may
decline. In addition, Web sites have experienced interruptions in their service
as a result of outages and other delays occurring throughout the Internet
network infrastructure. If use of the Internet does not continue to grow, or if
the Internet infrastructure does not effectively support growth that may occur,
our business, results of operations and financial condition would be materially
and adversely affected.
We must keep pace with rapidly changing technologies
The Web and Web advertising markets are characterized by rapidly changing
technologies, evolving industry standards, frequent new product and service
introductions and changing customer demands. The introduction of new products
and services embodying new technologies and the emergence of new industry
standards and practices can render existing products and services obsolete and
unmarketable or require unanticipated investments in research and development.
Our future success will depend on our ability to adapt to rapidly changing
technologies, to enhance existing solutions and to develop and introduce a
variety of new solutions to address our customers' changing demands. For
example, advertisers may require the ability to deliver advertisements
utilizing new rich media formats and more precise consumer targeting
techniques. In addition, increased availability of broadband Internet access is
expected to enable the development of new products and services that take
advantage of this expansion in delivery capability. Our failure to adapt
successfully to these changes could adversely affect our business, results of
operations and financial condition. We may also experience difficulties that
could delay or prevent the successful design, development, introduction or
marketing of our solutions. In addition, any new solutions or enhancements that
we develop must meet the requirements of our current and prospective customers
and must achieve significant market acceptance. Material delays in introducing
new solutions and enhancements may cause customers to forego purchases of our
solutions and purchase those of our competitors.
We will be subject to risks associated with international expansion
We expect to initiate operations in selected international markets in the
second quarter of 1999. To date, we have not developed international versions
of our solutions. Expansion into international markets will require management
attention and resources. We also may enter into a number of international
alliances as part of our international strategy and rely extensively on these
business partners to conduct operations, establish local networks, aggregate
Web sites and coordinate sales and marketing efforts. Our success in such
markets will depend on the success of our business partners and their
willingness to dedicate sufficient resources to our relationships. We cannot
assure you that we will be successful in expanding internationally.
International operations are subject to other inherent risks, including:
. the impact of recessions in economies outside the United States;
. changes in regulatory requirements;
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<PAGE>
. export restrictions, including export controls relating to encryption
technology;
. reduced protection for intellectual property rights in some countries;
. potentially adverse tax consequences;
. difficulties and costs of staffing and managing foreign operations;
. political and economic instability;
. tariffs and other trade barriers;
. fluctuations in currency exchange rates; and
. seasonal reductions in business activity.
Our failure to address these risks adequately may materially and adversely
affect our business, results of operations and financial condition.
Our patent status is uncertain
We have filed two patent applications in the United States, but we do not
have any issued patents. In September 1998, we mistakenly announced that we had
been issued one United States patent. At the time of our announcement, that
patent had been allowed by the United States Patent and Trademark Office
(USPTO). Subsequently, the USPTO informed us that the patent application had
been withdrawn from issue in the United States. A Patent Cooperation Treaty
application covering this invention has been filed and an application has also
been filed in the European Patent Office. The application relates to our AdEx
technology, specifically the ability to serve Web advertisements targeted to
yield a viewer response. In January 1999, the USPTO suggested a claim for
interference purposes with respect to such application. The purpose of an
interference proceeding is to determine the relative priority between two or
more applicants, and which of the applicants, if any, will ultimately be issued
the patent. The USPTO has not informed us of the identity of the other patent
applicant(s) involved. If an interference is declared, we may not obtain a
patent with respect to the application that is the subject of the interference
or may obtain a patent only for some subset of our original claims. Regardless
of the outcome of any interference, it would likely take years to resolve and
it may result in substantial expense to Flycast. Patents may not be issued with
respect to our pending or future patent applications. Even if patents are
issued, the patents may not be upheld as valid or prevent the development of
competitive solutions. Third parties may have or may in the future be granted
patents which cover our technology. We may be limited in our ability to use our
technology, whether or not patented, without licenses, which may not be
available on commercially reasonable terms.
We depend on our proprietary rights and are subject to the risk of infringement
Our success and ability to compete are substantially dependent on our
internally-developed technologies and trademarks, which we protect through a
combination of patent, copyright, trade secret and trademark law. We have
applied to register our trademarks in the United States. We cannot guarantee
that any of our patent applications or trademark registrations will be
approved. Even if they are approved, such patents or trademarks may be
successfully challenged by others or invalidated. If our trademark
registrations are not approved because third parties own such trademarks, our
use of such trademarks will be restricted unless we enter into arrangements
with such third parties, which may be unavailable on commercially reasonable
terms.
We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite these efforts, unauthorized parties may attempt to
disclose,
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<PAGE>
obtain or use our solutions or technologies. Our precautions may not prevent
misappropriation of our solutions or technologies, particularly in foreign
countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States.
Our customized advertiser, affiliate and sales applications collect and
utilize data derived from user activity on the Flycast Network and the Web
sites of advertisers and publishers using our solutions. This data is used for
advertisement targeting and predicting advertising performance. Although we
believe we have the right to use such data and the compilation of such data in
our database, trade secret, copyright or other protection may not be available
for such information. In addition, others may claim rights to such information.
We have licensed, and may license in the future, elements of our trademarks,
trade dress and similar proprietary rights to third parties. We attempt to
ensure that the quality of our brand is maintained by these third parties who
may take actions that could materially and adversely affect the value of our
proprietary rights or our reputation.
We cannot guarantee that any of our proprietary rights will be viable or
valuable in the future since the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries is
uncertain and still evolving. Furthermore, third parties may assert
infringement claims against us or the Web publishers with Web sites in the
Flycast Network. Any claims could subject us to significant liability for
damages and could result in the invalidation of our proprietary rights. In
addition, any claims could result in litigation which would be time-consuming
and expensive to defend, and divert our time and attention. Even if we prevail,
any such litigation could materially and adversely affect our business, results
of operations and financial condition. Any claims or litigation from third
parties may also result in limitations on our ability to use the intellectual
property subject to such claims or litigation unless we enter into arrangements
with the third parties responsible for such claims or litigation, which may be
unavailable on commercially reasonable terms.
We are subject to privacy concerns
Our technology collects and utilizes data derived from user activity on the
Web sites in the Flycast Network. AdEx enables the use of personal profiles, in
addition to other mechanisms, to deliver targeted advertising, to help compile
demographic information and to limit the frequency with which an advertisement
is shown to the user. These personal profiles contain bits of information keyed
to a specific server, file pathway or directory location that are stored in the
Internet user's hard drive and passed to a Web site's server through the user's
browser software. Personal profiles are placed on the user's hard drive without
the user's knowledge or consent, but can be removed by the user at any time
through the modification of the user's browser settings. In addition, certain
currently available Web browsers can be configured to prevent personal profiles
from being stored on their hard drive. Some commentators, privacy advocates and
governmental bodies have suggested limiting or eliminating the use of personal
profiles. The effectiveness of our technology and the success of our business
could be limited by any reduction or limitation in the use of personal
profiles.
The European Union has recently adopted a directive addressing data privacy
that may result in limitations on the collection and use of certain information
regarding Internet users. These limitations may limit our ability to target
advertising or collect and use information in most European countries.
We are subject to government regulation and legal uncertainties
Laws and regulations that apply to Internet communications, commerce and
advertising are becoming more prevalent. Recently, the United States Congress
enacted Internet legislation regarding children's privacy, copyrights and
taxation. A number of other laws and regulations may be adopted covering issues
such as user privacy, pricing, acceptable content, taxation and quality of
products and services. This legislation could hinder growth in the use of the
Web generally and decrease the
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<PAGE>
acceptance of the Web as a communications, commercial and advertising medium.
In addition, the growing use of the Web has burdened existing
telecommunications infrastructure and has caused interruptions in telephone
service. Certain telephone carriers have petitioned the government to regulate
and impose fees on Internet service providers and online service providers in a
manner similar to long distance carriers. These regulations could affect the
costs of communicating on the Web and adversely affect the growth in use of the
Web. In turn, these regulations could result in decreased demand for our
products or otherwise have a material and adverse affect on our business,
results of operations and financial condition.
Due to the global nature of the Web, it is possible that, while our
transmissions originate in California, the governments of other states or
foreign countries might attempt to regulate our transmissions or levy sales or
other taxes relating to our activities. Furthermore, the European Union
recently adopted a directive addressing data privacy that may result in limits
on the collection and use of certain user information. The laws governing the
Internet remain largely unsettled, even in areas where there has been some
legislative action. It may take years to determine whether and how existing
laws including those governing intellectual property, privacy, libel and
taxation apply to the Internet and Internet advertising. In addition, the
growth and development of the market for Internet commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting business over the
Internet. Our business, results of operations and financial condition could be
adversely affected by the adoption or modification of laws or regulations
relating to the Internet.
We face a number of Year 2000 risks
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
We have made a preliminary assessment of our Year 2000 readiness. We plan to
perform a Year 2000 simulation on our software during the second quarter of
1999. We are also in the process of contacting certain third-party vendors,
licensors and providers of software, hardware and services regarding their Year
2000 readiness. Following this testing and after contacting these vendors and
licensors, we will be better able to make a complete evaluation of our Year
2000 readiness, to determine what costs will be necessary to be Year 2000
compliant, and to determine whether contingency plans need to be developed.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Compliance" for more detailed information.
A substantial number of our shares will be eligible for future sale
If our stockholders sell substantial amounts of common stock (including
shares issued upon the exercise of outstanding options) in the public market
following this offering, the market price of our common stock could fall. These
sales also might make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate. Upon
completion of this offering, we will have shares of common stock
outstanding. Of these shares, the shares being offered hereby will
be freely tradable. 11,110,966 shares will become eligible for sale in the
public market as follows:
<TABLE>
<CAPTION>
Number of
Shares Date
------------ -----------------------------------------------------------------------
<C> <S>
10,349,751 At various times after the date of this prospectus pursuant to Rule 144
761,215 At various times after 90 days from the date of this prospectus
</TABLE>
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<PAGE>
These shares are subject to contractual restrictions with us and, in most
cases, with the underwriters, that prevent them from being sold until 180 days
after the effective date of the registration statement for this offering
without the consent of BT Alex. Brown Incorporated.
In addition, upon the effective date of this offering, we expect to register
for sale 2,800,000 shares of common stock reserved for issuance under our 1997
Stock Option Plan, 2,000,000 shares of common stock reserved for issuance under
the 1999 Stock Option Plan, 200,000 shares of common stock reserved for
issuance under the Directors' Stock Option Plan and 350,000 shares of common
stock reserved for issuance under the 1999 Employee Stock Purchase Plan. As of
December 31, 1998, options to purchase 1,934,199 shares of common stock were
outstanding and will be eligible for sale in the public market from time to
time subject to vesting and the contractual restrictions that apply to the
outstanding stock. These stock options generally have exercise prices
significantly below the expected initial offering price of our common stock.
The possible sale of a significant number of these shares may cause the price
of the common stock to fall. As of December 31, 1998, we also have 386,237
shares of common stock that may be issued upon the exercise of outstanding
warrants, including 217,170 shares of common stock that may be issued upon the
exercise of outstanding warrants that terminate upon the effective date of this
offering.
Certain stockholders, representing approximately 10,248,783 shares of common
stock, may have the right, subject to conditions, to include their shares in
certain registration statements relating to our securities. By exercising their
registration rights and causing a large number of shares to be registered and
sold in the public market, these holders could cause the price of the common
stock to fall. In addition, any demand to include such shares in our
registration statements could have an adverse effect on our ability to raise
needed capital. Please see "Management--Stock Plans," "Principal Stockholders,"
"Description of Capital Stock--Registration Rights," "Shares Eligible for
Future Sale" and "Underwriting" for more detailed information.
We expect to experience volatility in our stock price
Prior to this offering, there has been no public market for our common stock.
Accordingly, we cannot predict the extent to which investor interest in our
common stock will lead to the development of a trading market or how liquid
that market might become. The initial public offering price for the shares will
be determined by us and the representative of the Underwriters and may not be
indicative of prices that will prevail in the trading market. The price at
which our common stock will trade after this offering is likely to be highly
volatile and may fluctuate substantially due to factors such as:
. actual or anticipated fluctuations in our results of operations;
. changes in or failure by us to meet securities analysts' expectations;
. announcements of technological innovations;
. introduction of new services by us or our competitors;
. developments with respect to intellectual property rights;
. conditions and trends in the Internet and other technology industries;
and
. general market conditions.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
common stocks of technology companies, particularly Internet companies. In the
past, these broad market fluctuations have been unrelated or disproportionate
to the operating performance of these companies. Any such fluctuations in the
future might result in a material decline in the market price of our common
stock. In the past, following periods of volatility in the market price of a
particular company's securities, securities class action
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<PAGE>
litigation has often been brought against that company. We may become involved
in this type of litigation in the future. Litigation is often expensive and
diverts management's attention and resources, which could have a material
adverse effect upon our business and operating results.
We will be substantially influenced by officers and directors
We anticipate that executive officers, directors and entities affiliated with
them will, in the aggregate, beneficially own approximately % of our common
stock following the completion of this offering ( % if the over-allotment
option is exercised in full). These stockholders may be able to control all
matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of Flycast. Please see "Management" and "Principal
Stockholders" for more detailed information.
We will have broad discretion in use of the proceeds from this offering
Our management can spend most of the proceeds from this offering in ways with
which the stockholders may not agree. Please see "Use of Proceeds" for more
detailed information.
We have adopted anti-takeover provisions
Provisions of our Certificate of Incorporation, our Bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. Please see "Description of Capital
Stock--Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions" for
more detailed information.
You will incur immediate and substantial dilution
Investors purchasing shares in the offering will incur immediate and
substantial dilution in net tangible book value per share. In addition, the
exercise of options and warrants currently outstanding could cause additional
substantial dilution to such investors. Please see "Dilution" for more detailed
information.
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<PAGE>
USE OF PROCEEDS
The net proceeds to Flycast from the sale of the shares being offered by
Flycast hereby at an assumed initial public offering price of $ per share,
after deducting estimated underwriting discounts and commissions and estimated
offering expenses, are estimated to be $ ($ if the
underwriters' over-allotment option is exercised in full). Flycast expects to
use the net proceeds of the offering for general corporate purposes, including
working capital, capital expenditures and possible acquisitions of companies or
technology, although there are no current agreements or negotiations with
respect to any such acquisitions. Pending such uses, Flycast intends to invest
the net proceeds in short-term, interest-bearing, investment grade securities.
DIVIDEND POLICY
Flycast has never declared or paid cash dividends on its capital stock.
Flycast currently intends to retain all available funds and any future earnings
for use in the operation of its business and does not anticipate paying any
cash dividends in the foreseeable future.
THE COMPANY
Flycast was incorporated in California under the name "Orst, Inc." on
February 14, 1994, changed its name to Flycast Communications Corporation and
began operations on April 14, 1996 and will reincorporate in Delaware prior to
this offering. Flycast's principal executive offices are located at 181 Fremont
Street, Suite 120, San Francisco, California 94105. Our telephone number at
that location is (415) 977-1000. References in the prospectus to the "Company"
refer to Flycast and its predecessor California corporation. Information
contained in our Web site at http://www.flycast.com does not constitute part of
this prospectus.
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CAPITALIZATION
The following table sets forth Flycast's (a) actual capitalization as of
December 31, 1998, (b) pro forma capitalization as of that date to give effect
to (1) the filing of an amendment to Flycast's Certificate of Incorporation to
provide for authorized capital stock of 50,000,000 shares of common stock and
2,000,000 shares of undesignated preferred stock, (2) the issuance of 1,496,347
shares of Series C Preferred Stock in January 1999, (3) the issuance of 217,170
shares of common and preferred stock upon the exercise of outstanding warrants
that will expire upon the closing of this offering and (4) the conversion of
all outstanding shares of preferred stock into shares of common stock upon the
closing of this offering, and (c) pro forma as adjusted capitalization as of
such date to give effect to the receipt of the net proceeds from the sale by
Flycast of the shares of common stock offered hereby at an assumed initial
public offering price of $ per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses. See
"Use of Proceeds."
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Current portion of long-term obligations....... $ 1,460 $ 1,460 $ 1,460
======== ======= =======
Long-term obligations, less current portion.... $ 4,704 $ 4,704 4,704
Mandatorily redeemable preferred stock, $0.0001
par value; 9,904,000 shares authorized;
6,733,612 shares issued and outstanding,
actual; 9,904,000 shares authorized, no shares
issued and outstanding, pro forma; no shares
authorized issued and outstanding, pro forma
as adjusted................................... 13,855
Stockholders' equity (deficit)(1):
Preferred stock, $0.0001 par value; no shares
authorized, issued or outstanding, actual and
pro forma; 2,000,000 shares authorized, no
shares issued and outstanding, pro forma as
adjusted ....................................
Common stock, $0.0001 par value; 20,000,000
shares authorized; 2,656,635 shares issued
and outstanding, actual; 50,000,000 shares
authorized, 11,103,764 shares issued and
outstanding, pro forma; 50,000,000 shares
authorized, shares issued and
outstanding, pro forma as adjusted........... 912 29,566
Common stock options.......................... 2,837 2,837
Deferred stock compensation................... (1,690) (1,690) (1,690)
Notes receivable from stockholders............ (606) (606) (606)
Accumulated deficit........................... (14,031) (14,031) (14,031)
-------- ------- -------
Total stockholders' equity (deficit)......... (12,578) 16,076
-------- ------- -------
Total capitalization......................... $ 5,981 $20,780 $
======== ======= =======
</TABLE>
- --------
(1) Excludes (a) 2,045,904 shares subject to outstanding options or reserved
for issuance under our 1997 Stock Option Plan, (b) 169,067 shares, subject
to warrants outstanding (net of warrants to purchase 217,170 shares that
will be exercised immediately before completion of this offering), (c)
2,000,000 shares reserved for issuance under our 1999 Stock Option Plan,
(d) 200,000 shares reserved for issuance under our 1999 Directors' Stock
Option Plan, and (e) 350,000 shares reserved for issuance under our 1999
Employee Stock Purchase Plan. See "Management--Stock Plans" and Notes 5 and
8 of Notes to Financial Statements.
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DILUTION
The pro forma net tangible book value of Flycast as of December 31, 1998 was
approximately $1.45 per share of common stock. "Net tangible book value" per
share represents the amount of total tangible assets of Flycast reduced by the
amount of its total liabilities and divided by the total number of shares of
common stock outstanding. After giving effect to the sale of the shares of
common stock offered by Flycast at an assumed initial public offering price of
$ per share after deducting estimated underwriting discounts and
commissions and estimated offering expenses, the pro forma net tangible book
value of Flycast as of December 31, 1998 would have been $ per share of
common stock. This represents an immediate increase in net tangible book value
of $ per share to existing stockholders and an immediate dilution of $
per share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $
Pro forma net tangible book value per share before the
offering................................................... $1.45
Increase attributable to new investors......................
-----
Pro forma net tangible book value after the offering..........
------
Dilution per share to new investors........................... $
======
</TABLE>
The following table summarizes on a pro forma basis, as of December 31, 1998,
the differences between the existing stockholders and new investors with
respect to the number of shares of common stock purchased from Flycast, the
total consideration paid to Flycast and the average price per share paid.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).. 11,103,764 % $29,566,000 % $2.66
New investors.............
---------- ----- ----------- -----
Totals................ 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) Excludes (a) 2,045,904 shares subject to outstanding options or reserved
for issuance under our 1997 Stock Option Plan, (b) 169,067 shares, subject
to warrants outstanding (net of warrants to purchase 217,170 shares that
will be exercised immediately before completion of this offering), (c)
2,000,000 shares reserved for issuance under our 1999 Stock Option Plan,
(d) 200,000 shares reserved for issuance under our 1999 Directors' Stock
Option Plan, and (e) 350,000 shares reserved for issuance under our 1999
Employee Stock Purchase Plan. See "Management--Stock Plans" and Notes 5 and
8 of Notes to Financial Statements.
20
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with the financial statements, the notes thereto and the other information
contained in this prospectus. The selected balance sheet data as of December
31, 1997 and 1998 and the selected statement of operations data for the period
from April 14, 1996 (inception) to December 31, 1996 and for the years ended
December 31, 1997 and 1998 have been derived from the audited financial
statements of Flycast appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Years Ended
April 14, 1996 December 31,
(Inception) to --------------------------
December 31, 1996 1997 1998
------------------------------ ------------
(in thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue........................ $ -- $ 630 $ 8,029
Cost of revenue................ -- 556 5,945
------------- ------------ ------------
Gross profit................... -- 74 2,084
Operating expenses:
Sales and marketing.......... 103 1,384 5,180
Research and development..... 201 1,376 2,621
General and administrative... 141 725 2,031
Stock-based compensation..... -- -- 1,147
------------- ------------ ------------
Total operating expenses... 445 3,485 10,979
------------ ------------
Operating loss................. (445) (3,411) (8,895)
Interest expense, net.......... -- (6) (412)
------------- ------------ ------------
Net loss....................... $ (445) $ (3,417) $ (9,307)
============= ============ ============
Basic and diluted loss per
common share(1)............... $ (445.00) $ (31.80) $ (11.93)
============= ============ ============
Shares used in basic and
diluted loss per common
share(1)...................... 1 114 835
============= ============ ============
Pro forma basic and diluted
loss per common share(2)...... $ (1.40)
============
Shares used in pro forma basic
and diluted loss per common
share(2)...................... 7,113
============
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1997 1998
-------- ------- --------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and investments........... $ 11 $ 3,560 $ 5,193
Working capital (deficiency)..................... (51) 3,498 4,088
Total assets..................................... 214 4,675 10,791
Long term obligations, less current portion...... -- 40 4,704
Mandatorily redeemable preferred stock........... -- 8,195 13,855
Total stockholders' equity (deficit)............. 150 (4,058) (12,578)
</TABLE>
- --------
(1) Computed by dividing loss attributable to common stockholders by shares
used in basic and diluted loss per common share. See Note 6 of Notes to
Financial Statements for an explanation of the determination of the number
of shares used in computing basic and diluted loss per common share
amounts.
(2) Pro forma basic and diluted loss per common share gives effect to the
assumed conversion of all outstanding shares of preferred stock into shares
of common stock as if such conversion had occurred on January 1, 1998 or,
if later, the date of original issuance. See Note 1 of Notes to Financial
Statements for an explanation of the determination of the number of shares
used in computing pro forma basic and diluted loss per common share.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of Flycast.
Prospective investors are cautioned that such statements involve risks and
uncertainties, and that actual events or results may differ materially. In
evaluating such statements, prospective investors should specifically consider
the various factors identified in this prospectus, including the matters set
forth under the caption "Risk Factors," which could cause actual results to
differ materially from those indicated by such forward-looking statements.
Overview
Flycast delivers Web-based advertising solutions designed to maximize the
return on investment for response-oriented advertisers, direct marketers and e-
commerce companies. Flycast provides these solutions through a network of Web
sites, proprietary technology and responsive customer service. By aggregating
unsold advertising inventory from over 780 Web sites, the Flycast Network
offers advertisers a large audience of web users and high-quality advertising
space at favorable prices. Additionally, by selling advertising space on an
unnamed basis, Flycast creates a supplemental and incremental revenue
opportunity for Web sites that does not conflict with their other selling
efforts.
We commenced operations in April 1996 as a California corporation. From April
1996 through May 1997, our operating activities related primarily to developing
our AdEx technology and the Flycast Network, identifying markets and recruiting
personnel.
Revenue from advertisements delivered on the Flycast Network began in the
second quarter of 1997. We generate revenue by delivering advertisements to Web
sites in the Flycast Network. Pricing of advertising is CPM-based and varies
depending on whether the advertising is run across the network, across certain
categories or on individual Web sites. We sell our services through our sales
and marketing staff located in San Francisco, Atlanta, Boston, Chicago,
Boulder, Los Angeles, New York, Philadelphia and Sarasota. The advertisements
we deliver are typically sold pursuant to short-term agreements that are
subject to cancellation. Advertising revenue is recognized in the period that
advertisements are delivered. We pay each Web site in the Flycast Network an
agreed upon percentage of the revenue generated by advertisements run on its
site. That amount is included in cost of revenues. Generally we bill and
collect for advertisements delivered on the Flycast Network and assume the risk
of non-payment from advertisers.
We expect to generate most of our revenue for the foreseeable future from
advertisements delivered to Web sites on the Flycast Network. Our ten largest
customers accounted for 40% of our revenue for the year ended December 31, 1998
and 40% of our revenue for the quarter ended December 31, 1998. No single
customer accounted for more than 10% of our revenue for the year ended December
31, 1998. One customer accounted for 12% of our revenue for the quarter ended
December 31, 1998. No Web site contributed more than 5% of our advertising
impressions served (measured based on the fees paid by us to Web sites) during
the quarter ended December 31, 1998.
We have entered into value added reseller relationships with BellSouth
Corporation and SBC Communications, Inc. Under these agreements, we will
deliver local Web advertising inventory to BellSouth's and SBC's sales forces
that they will resell to local advertisers. To date, these agreements have not
accounted for significant revenue. However, we anticipate that revenue from
these agreements will account for an increasing percentage of our revenue in
the future.
We have incurred significant losses since inception and, as of December 31,
1998, had an accumulated deficit of $14.0 million. In addition, we have
recorded stock-based compensation, which
22
<PAGE>
represents the difference between the exercise price and the fair market value
of our common stock issuable upon the exercise of certain stock options granted
to employees. Stock-based compensation of $1.1 million was amortized during the
year ended December 31, 1998, and stock-based compensation of $1.7 million will
be amortized over the remaining vesting periods of the related options,
including $1.0 million in the year ending December 31, 1999.
In light of the rapidly evolving nature of our business and our limited
operating history, we believe that period-to-period comparisons of our
operating results are not meaningful and that the results for any period should
not be relied upon as an indication of future performance. We currently expect
to significantly increase our operating expenses in order to expand our sales
and marketing operations, including our reseller network, to enhance our AdEx
technology platform and to expand internationally. As a result of these
factors, we expect to incur significant losses on a quarterly and annual basis
for the foreseeable future.
Results of Operations
The following table sets forth statement of operations data for the periods
indicated as a percentage of revenues:
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------
1997 1998
------ ------
<S> <C> <C>
Revenue..................................................... 100.0% 100.0%
Cost of revenue............................................. 88.3 74.0
------ ------
Gross profit.............................................. 11.7 26.0
Operating expenses:
Sales and marketing....................................... 219.8 64.5
Research and development.................................. 218.4 32.6
General and administrative................................ 115.1 25.3
Stock-based compensation.................................. -- 14.3
------ ------
Total operating expenses................................ 553.3 136.7
------ ------
Operating loss.............................................. (541.6) (110.8)
Interest expense, net ...................................... (1.0) (5.1)
------ ------
Net loss.................................................... (542.6)% (115.9)%
====== ======
</TABLE>
Periods Ended December 31, 1996, 1997 and 1998
Revenue. Our revenue is derived primarily from the delivery of advertisements
on Web sites in the Flycast Network. We first recognized revenue in the second
quarter of 1997. Our revenue increased from $630,000 for the year ended
December 31, 1997 to $8.0 million for the year ended December 31, 1998. This
increase was mainly due to an increase in the number of advertisers purchasing
advertisements on the Flycast Network.
Cost of Revenue. Cost of revenue consists primarily of amounts we pay to Web
sites on the Flycast Network, which represent a percentage of the revenue
generated by delivering advertisements. Cost of revenue also includes costs of
the advertising delivery system and Internet access costs. Cost of revenue was
$556,000 for the year ended December 31, 1997 and $5.9 million for the year
ended December 31, 1998. The increase in cost of revenue was due to the related
growth in advertising revenue and associated amounts paid to Web sites,
increased expenses from third-party Internet service providers and increased
depreciation expenses. These expenses increased in absolute dollars
23
<PAGE>
but decreased as a percentage of revenue due to a decrease in the average
percentage of revenue paid to Web sites. We cannot predict whether this
decrease as a percentage of revenue will continue in the future.
Sales and Marketing. Sales and marketing expenses consist primarily of
compensation, travel, advertising, trade show and marketing materials expenses.
For the period ended December 31, 1996, sales and marketing expenses were
$103,000. Sales and marketing expenses were $1.4 million, or 219.8% of revenue,
for the year ended December 31, 1997, and $5.2 million, or 64.5% of revenue,
for the year ended December 31, 1998. The increase in absolute dollars was due
primarily to the increase in sales personnel and costs related to the continued
development and implementation of our marketing campaigns. We expect sales and
marketing expenses to increase on an absolute dollar basis in future periods as
we hire additional personnel, expand into new markets and continue to promote
our advertising solutions.
Research and Development. Research and development expenses consist primarily
of compensation, depreciation and supplies. To date, all research and
development costs have been expensed as incurred. For the period ended December
31, 1996, research and development expenses were $201,000. Research and
development expenses were $1.4 million, or 218.4% of revenue, for the year
ended December 31, 1997, and $2.6 million, or 32.6% of revenue, for the year
ended December 31, 1998. The increase in absolute dollars was due primarily to
increased personnel expenses. We believe that continued investment in research
and development is critical to attaining our strategic objectives and, as a
result, we expect research and development expenses to increase significantly
on an absolute dollar basis in future periods. Research and development
expenses may fluctuate as a percentage of revenue over time depending on the
projects we undertake from time to time.
General and Administrative. General and administrative expenses consist
primarily of compensation and professional service fees. For the period ended
December 31, 1996, general and administrative expenses were $141,000. General
and administrative expenses were $725,000, or 115.1% of revenue, for the year
ended December 31, 1997, and $2.0 million, or 25.3% of revenue, for the year
ended December 31, 1998. The increase in absolute dollars was consistent with
our growth. We expect general and administrative expenses to increase on an
absolute dollar basis in future periods as we hire additional personnel and
incur additional costs related to the growth of our business and our operations
as a public company, but to decrease as a percentage of revenue.
Stock-Based Compensation. Stock-based compensation of $1.1 million was
amortized during the year ended December 31, 1998, and stock-based compensation
of $1.7 million will be amortized over the remaining vesting periods of the
related options, including $1.0 million in the year ending December 31, 1999.
Interest Expense, Net. Interest expense consists of interest paid on capital
lease and debt obligations, offset in part by interest earnings on our cash,
cash equivalents and investments. Interest expense was $98,000 in 1997 and
$504,000 in 1998. Interest income was $92,000 in 1997 and $92,000 in 1998.
Income Taxes. No income tax benefits have been recorded for any of the
periods presented. At December 31, 1998, we had approximately $12.0 million of
federal net operating loss carryforwards available to offset future taxable
income; such carryforwards expire in various years through 2018. As a result of
various equity transactions during 1996, 1997 and 1998, we believe that we may
have undergone an "ownership change" as defined in section 382 of the Internal
Revenue Code. Accordingly, the utilization of a portion of the net operating
loss carryforwards may be limited. Due to the uncertainty regarding the
ultimate utilization of the net operating loss carryforwards, we have not
recorded any benefit for losses and a valuation allowance has been recorded for
the entire amount of the net deferred tax asset. In addition, certain events,
including sales of our stock pursuant to this offering, may further restrict
our ability to utilize our net operating loss carryforwards.
24
<PAGE>
Quarterly Results of Operations
The following table sets forth certain unaudited quarterly statement of
operations data and such data as a percentage of revenue for the four quarters
of 1998. In the opinion of management, this information has been prepared on
the same basis as the audited financial statements appearing elsewhere in this
prospectus, and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts stated below to present fairly
the unaudited quarterly results of operations. The quarterly data should be
read in conjunction with the audited financial statements of Flycast and the
notes thereto appearing elsewhere in this prospectus. The results of operations
for any quarter are not necessarily indicative of the results of operations for
any future period.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
Mar. 31, Jun. 30, Sep. 30, Dec. 31,
1998 1998 1998 1998
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Statements of Operations:
Revenue........................... $ 603 $ 1,172 $ 2,116 $ 4,138
Cost of revenue................... 483 879 1,570 3,013
------- ------- ------- -------
Gross profit.................. 120 293 546 1,125
Operating expenses:
Sales and marketing............. 697 805 1,460 2,218
Research and development........ 414 505 655 1,047
General and administrative...... 422 493 501 615
Stock-based compensation........ 82 248 407 410
------- ------- ------- -------
Total operating expenses...... 1,615 2,051 3,023 4,290
------- ------- ------- -------
Operating loss.................... (1,495) (1,758) (2,477) (3,165)
Interest income (expense) net..... 28 (18) (55) (367)
------- ------- ------- -------
Net loss.......................... $(1,467) $(1,776) $(2,532) $(3,532)
======= ======= ======= =======
<CAPTION>
Three Months Ended
-----------------------------------------
Mar. 31, Jun. 30, Sep. 30, Dec. 31,
1998 1998 1998 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
As a Percentage of Revenue:
Revenue........................... 100.0% 100.0% 100.0% 100.0%
Cost of revenue................... 80.2 75.0 74.2 72.8
------- ------- ------- -------
Gross profit.................... 19.8 25.0 25.8 27.2
Operating expenses:
Sales and marketing............. 115.6 68.7 69.0 53.6
Research and development........ 68.7 43.1 30.9 25.3
General and administrative...... 70.1 42.0 23.7 14.8
Stock-based compensation........ 13.5 21.1 19.2 9.9
------- ------- ------- -------
Total operating expenses...... 267.9 175.0 142.9 103.7
------- ------- ------- -------
Operating loss.................... (248.1) (150.0) (117.1) (76.5)
Interest income (expense) net..... 4.7 (1.6) (2.6) (8.9)
------- ------- ------- -------
Net loss.......................... (243.4)% (151.5)% (119.7)% (85.3)%
======= ======= ======= =======
</TABLE>
Our revenue increased in each quarter presented due to an increase in the
number of advertisements delivered on the Flycast Network. Cost of revenue as a
percentage of revenue decreased each quarter due to a decrease in the average
percentage of revenue paid to Web sites. Operating expenses increased in
absolute dollars but decreased as a percentage of revenue in each quarter.
Research and development expenses increased as a result of continued
enhancement of our
25
<PAGE>
tools and technology. Sales and marketing expenses increased as a result of
increased sales personnel and commissions and increased advertising and
promotion. General and administrative expenses increased due primarily to
additional personnel and professional fees.
We believe that our revenue will be subject to seasonal fluctuations because
advertisers generally place fewer advertisements during the first and third
calendar quarters of each year. In addition, expenditures by advertisers tend
to be cyclical, reflecting overall economic conditions as well as budgeting and
buying patterns. In addition, our results of operations may fluctuate
significantly in the future as a result of a variety of factors, many of which
are beyond our control. See "Risk Factors--Our quarterly operating results are
subject to Fluctuations and seasonality."
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through the
private placement of equity and convertible debt securities and borrowings from
a related party. As of December 31, 1998, we had raised approximately $12.5
million from the issuance of common and preferred stock. As of December 31,
1998, we had $5.0 million of cash and cash equivalents, and $183,000 in short-
term investments and had borrowed $6.9 million under credit and capital lease
facilities. In January 1999, we completed a private placement of equity
securities to new investors and received $13.5 million in proceeds.
Net cash used in operating activities was $366,000 for the period ended
December 31, 1996, $3.2 million for the year ended December 31, 1997 and $7.6
million for the year ended December 31, 1998. Cash used in operating activities
for the years ended December 31, 1997 and 1998 resulted from net losses and
increases in accounts receivable, which were partially offset by increases in
accounts payable and accrued liabilities.
Net cash used in investing activities was $218,000 for the period ended
December 31, 1996, $544,000 for the year ended December 31, 1997 and $190,000
for the year ended December 31, 1998. Cash used in investing activities was
primarily related to purchases of property and equipment in the first two
periods and short-term investments for the year ended December 31, 1998.
Net cash provided by financing activities was $595,000 for the period ended
December 31, 1996, $7.3 million for the year ended December 31, 1997 and $9.3
million for the year ended December 31, 1998. Net cash provided by financing
activities in the first two periods resulted almost entirely from sales of
preferred stock. In the year ended December 31, 1998, net cash provided by
financing activities resulted primarily from $5.1 million of long-term debt and
the sale of $4.5 million of preferred stock.
While we do not have any material commitments for capital expenditures, we
anticipate that we will experience a substantial increase in our capital
expenditures consistent with our anticipated growth in operations,
infrastructure and personnel. We currently anticipate that we will continue to
experience significant growth in our operating expenses for the foreseeable
future and that our operating expenses will be a material use of our cash
resources. We believe that the net proceeds of this offering, together with our
existing cash, cash equivalents and short-term investments and available credit
facilities, will be sufficient to meet our anticipated cash needs for working
capital, repayment of debt and capital expenditures for at least the next
twelve months.
Year 2000 Compliance
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result,
26
<PAGE>
computer systems and software used by many companies and governmental agencies
may need to be upgraded to comply with such Year 2000 requirements or risk
system failure or miscalculations causing disruptions of normal business
activities.
State of Readiness. We have made a preliminary assessment of the Year 2000
readiness of our information technology ("IT") systems, including the hardware
and software that enable us to provide and deliver our solutions, and our non-
IT systems. Our assessment plan consists of (i) quality assurance testing of
our internally developed proprietary software incorporated in our solutions
("AdEx Technology"); (ii) contacting third-party vendors and licensors of
material hardware, software and services that are both directly and indirectly
related to the delivery of our solutions to advertisers and the Web sites on
the Flycast Network; (iii) contacting vendors of material non-IT systems;
(iv) assessment of repair or replacement requirements; (v) repair or
replacement; (vi) implementation; and (vii) creation of contingency plans in
the event of Year 2000 failures. We plan to perform a Year 2000 simulation on
our AdEx Technology during the second quarter of 1999 to test system readiness.
Based on the results of our Year 2000 simulation test, we intend to revise the
code of our AdEx Technology as necessary to improve the Year 2000 compliance of
our AdEx Technology. We have been informed by many of our hardware and software
component vendors that the products we use are currently Year 2000 compliant.
We will require our other material hardware and software component vendors to
provide assurance of their Year 2000 compliance. We will complete this process
during 1999. We are currently assessing our non-IT systems and will seek
assurance of Year 2000 compliance from providers of material non-IT systems.
Until such testing is complete and such vendors and providers are contacted, we
will not be able to completely evaluate whether our IT systems or non-IT
systems will need to be revised or replaced.
Costs. To date, we have not incurred any material expenditures in connection
with identifying or evaluating Year 2000 compliance issues. Most of our
expenses have related to, and are expected to continue to relate to, the
operating costs associated with time spent by employees in the evaluation
process and Year 2000 compliance matters generally. At this time, we do not
possess the information necessary to estimate the potential costs of revisions
to our AdEx Technology should such revisions be required or the replacement of
third-party software, hardware or services that are determined not to be Year
2000 compliant. Although we do not anticipate that such expenses will be
material, such expenses, if higher than anticipated, could have a material
adverse effect on our business, results of operations and financial condition.
Risks. We are not currently aware of any Year 2000 compliance problems
relating to AdEx Technology or our IT or non-IT systems that would have a
material adverse effect on our business, results of operations or financial
condition, without taking into account our efforts to avoid or fix such
problems. We may discover Year 2000 compliance problems in our AdEx Technology
that will require substantial revisions. In addition, third-party software,
hardware or services incorporated into our material IT and non-IT systems may
need to be revised or replaced, all of which could be time consuming and
expensive. If we fail to fix our AdEx Technology or to fix or replace third-
party software, hardware or services on a timely basis, the result could be
lost revenues, increased operating costs, the loss of customers and other
business interruptions, any of which could have a material adverse effect on
our business, results of operations and financial condition. Moreover, the
failure to adequately address Year 2000 compliance issues in our AdEx
Technology, and our IT and non-IT systems could results in claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time-consuming to defend.
In addition, there can no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside Flycast's control will be Year 2000 compliant. The failure by such
entities to be Year 2000 compliant could results in a systemic failure beyond
the control of Flycast, such as a prolonged Internet, telecommunications or
electrical failure,
27
<PAGE>
which could also prevent Flycast from delivering its services to its customers,
decrease the use of the Internet or prevent users from accessing the Web sites
of its Web publisher customers, which could have a material averse effect on
Flycast's business, results of operations and financial condition.
Contingency Plan. As discussed above, Flycast is engaged in an ongoing Year
2000 assessment and has not yet developed any contingency plans. The results of
Flycast's Year 2000 simulation testing and the responses received from third-
party vendors and service providers will be taken into account in determining
the nature and extent of any contingency plans.
Recently Issued Accounting Principles
See Note 1 of Notes to Financial Statements for recently adopted and recently
issued accounting standards.
28
<PAGE>
BUSINESS
Overview
Flycast is a leading provider of Web-based advertising solutions designed to
maximize the return on investment for response-oriented advertisers direct
marketers and e-commerce companies. By aggregating unsold advertising space
from over 780 Web sites, we can offer advertisers a large audience of Web users
and high-quality advertising space at favorable prices. At the same time, we
create an incremental revenue opportunity for Web sites that does not conflict
with their other selling efforts by selling their unsold advertising space on
an unbranded basis. In this way, we act as a market maker for response-oriented
advertising inventory on the Web.
Industry Background
Growth of the Internet and E-Commerce
The Internet and the Web continue to expand at a rapid pace with respect to
the number of businesses with a Web presence, the number of people using the
Internet, the volume of commerce transacted on the Internet and the amount of
marketing dollars spent on the Web. Forrester Research, Inc. estimates that in
1998 approximately 51 million people were using the Internet in the U.S. and
86 million people were using the Internet worldwide. They estimate that by 2003
there will be approximately 100 million users in the U.S. and 287 million
worldwide.
Businesses have recognized the e-commerce opportunity and are increasingly
using the Internet to sell and distribute products and services to consumers.
Through the Web, they can cost-effectively reach worldwide audiences and easily
adjust their product offerings, strategies, tactics, advertising and pricing to
match the needs and responses of these audiences. According to Forrester
Research, Inc., revenue from Web sales to consumers will grow at a 69% compound
annual growth rate for the next five years, surpassing $108 billion in 2003.
Forrester also estimates that more than 40 million U.S. households will be
shopping online by 2003. As e-commerce and the number of Web users grow,
advertisers and direct marketers are increasingly using the Web to locate
customers, advertise and facilitate transactions. Forrester estimates that $1.5
billion was spent on Internet advertising worldwide in 1998 and that this
amount will grow to $15.1 billion in 2003.
The Web offers advertisers several advantages over other media. The Web
allows real-time interactions, promoting impulse purchases and facilitating
transactions through one-to-one relationships between advertisers and
consumers. Data regarding these transactions can be efficiently collected and
measured, thereby generating for advertisers immediate, valuable feedback on
advertising effectiveness that is not readily available from other media. In
addition, Web advertisements can be produced for a fraction of the costs
associated with the production of TV commercials or print advertising, and
companies can adjust their advertising campaigns quickly and easily in response
to consumer reaction. The Web also gives advertisers the flexibility to target
broad, global audiences, precisely-defined consumer groups and even individual
consumers with custom-tailored advertisements. Web advertising is particularly
attractive to companies conducting local campaigns and to advertisers with
smaller advertising budgets because it allows them to tailor their advertising
campaign, manage the size and scope of the target audience and lower their
advertising production costs. Flycast believes that because of these
advantages, companies over time will allocate an increasing portion of their
advertising budgets to Web advertising.
Brand Advertising Versus Response-Oriented Advertising
Within the advertising industry, there are two widely-recognized types of
advertising--brand advertising and response-oriented advertising. Brand
advertising is intended to generate awareness of
29
<PAGE>
and create a specific image for a particular company, product or service,
primarily through association with specific types of content or delivery within
a particular context. The short-term return on investment (ROI) from brand
advertising campaigns is difficult to measure and often thought unimportant.
Media that are typically used for brand advertising include prime-time
television, magazines and outdoor advertising, as well as sponsorships of major
events and venues.
Response-oriented advertising, or direct marketing, is intended to generate a
specific response or action from the consumer after exposure to an
advertisement. In contrast to the brand advertiser, the response-oriented
advertiser focuses on the short-term benefit from its advertising and attempts
to maximize the number of desired responses per advertising dollar. These
responses can range from simple replies to consumer registrations or actual
purchases. In order to measure the effectiveness of their advertising
campaigns, response-oriented advertisers require systems and infrastructures
for targeting consumers and managing information. Traditional response-oriented
advertising mechanisms include direct mail and toll-free numbers delivered
through print and late night television. According to the Direct Marketing
Association, direct marketing advertising expenditures exceeded $160 billion in
1998 or approximately 57% of the total U.S. advertising market.
The Internet as an Effective Medium for Response-Oriented Advertising
Flycast believes that the Web is particularly well-suited for response-
oriented advertising. Reading and clicking on a Web advertisement is easier and
more convenient for consumers than using traditional direct response
advertising mechanisms, such as calling toll-free numbers or returning a
business reply card. Web advertisements allow consumers to respond immediately
to the advertising and directly engage marketers. Advertisers and vendors of
products and services can use this feedback to adjust their advertising
campaigns appropriately. The following table illustrates Web advertising
dollars allocated to direct marketing according to Forrester Research, Inc.
Internet Advertising Allocated to Direct Marketing
[Chart representing direct marketing and brand advertising spending.]
Response-oriented advertisers benefit from the large amount of advertising
space on the Internet. Paul Kagan Associates, Inc. estimates that on average
approximately 75% of the advertising inventory on the Internet goes unsold.
Larger Web sites with in-house sales forces are usually unable to sell a
portion of their available advertising space each month. These Web sites are
often deterred from using media representative firms to sell their excess
inventory at reduced prices due to the conflict with their
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direct sales efforts. Smaller Web sites, even those having attractive audience
demographics, are often unable to sell their advertising space as they
frequently lack the volume of page impressions to justify a dedicated sales
force and the associated sales infrastructure. In addition, they often are too
small or lack the brand name value to attract the attention of media
representative firms. The excess supply of advertising space on the Web is
attractive to direct response advertisers because it can be acquired for lower
prices than inventory on branded Web sites, while providing similar audiences.
For e-commerce companies, Flycast believes that the Web will be the
advertising medium of choice for generating traffic and customers. These
companies want the benefits of efficient and convenient transactions with
consumers and easily measurable ROI. On the Web, e-commerce companies can
create advertising that provides consumers with an easy means for immediate
interactions, including accessing the e-commerce site, registering on the Web
site or making an actual purchase. These companies can also collect and measure
feedback on advertising effectiveness on a real-time basis, enabling them to
tailor their advertising campaigns to maximize ROI.
Challenges of Response-Oriented Advertising on the Internet
Response-oriented advertisers face a number of challenges in realizing the
full potential of the Web as an advertising medium. The fact that there are
millions of Web sites, only a fraction of which are of significant size,
creates numerous obstacles for advertisers. Interacting with a large number of
relatively small advertising purchasers increases administrative costs for
advertisers. In addition, advertisers often lack the analytical tools necessary
to define and target Web audiences and comprehensively measure ROI and
therefore are unable to monitor the effectiveness of their Web advertising
relative to other media choices. Small Web sites also have difficulty operating
and maintaining the sophisticated advertising servers, databases and reporting
tools that response-oriented advertisers need to monitor the cost effectiveness
of their advertising campaigns. Finally, the excess Web advertising inventory
from both small and large Web sites is often unavailable for purchase on terms
that are attractive to response-oriented advertisers.
To date, most Web advertising companies have failed to address completely the
challenges of response-oriented advertising. A number of companies have emerged
to act as advertising representatives for Web sites. These advertising
representatives typically focus on providing advertisers with a large network
of Web sites with high brand value. As the primary sales channel for Web sites,
media representatives seek to maximize advertising rates for their client Web
sites. These goals often conflict with those of response-oriented advertisers
that wish to maximize the effectiveness of their advertising budget. Other Web
advertising companies focus on technologies or services that allow companies to
track and manage their advertising campaigns or inventory. While these tools
and services can be effective for companies with extensive Web advertising
experience, the majority of advertisers and Web sites require additional
services to assist them in the planning, implementation and evaluation of their
Web advertising strategies.
Flycast believes that a significant opportunity exists for a company that can
provide complete, cost-effective solutions to response-oriented advertisers. By
providing large Web sites with the opportunity to sell advertising inventory
that would otherwise go unsold, small Web sites with a channel to sell their
advertising inventory and response-oriented advertisers with a means of
accessing cost-effective advertising space, a company can assume the valuable
role of market maker for response-oriented advertising inventory on the Web.
The Flycast Solution
Flycast delivers Web-based advertising solutions designed to maximize the
return on investment for response-oriented advertisers, direct marketers and e-
commerce companies. Flycast provides these solutions through a large network of
Web sites, proprietary technology and responsive customer
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service. By aggregating unsold advertising inventory from over 780 Web sites,
the Flycast Network offers advertisers a large audience of Web users and high-
quality advertising space at favorable prices. Additionally, by selling
advertising space on an unnamed basis, Flycast creates a supplemental and
incremental revenue opportunity for Web sites that does not conflict with their
other selling efforts. Flycast's AdExchange (AdEx) system, a proprietary
automated advertising management platform, analyzes response rates across the
network. Flycast's customer service staff translates real-time feedback
regarding advertising effectiveness into further optimization for the
advertiser.
Strategy
Flycast's objective is to be the leading provider of response-oriented
advertising solutions on the Web. Key elements of Flycast's strategy include:
Create Value for Web Sites and Advertisers. By combining its inventory
acquisition model with personalized optimization of advertising performance,
the Flycast Network offers advertisers ROI-oriented advertising solutions and
attractive pricing levels, while at the same time providing incremental
advertising revenue for its Web site affiliates. Flycast intends to continue to
increase the number of advertising impressions it acquires from its current Web
sites and to expand the number and type of Web sites in the Flycast Network.
Leverage Proprietary Technologies. Flycast seeks to increase the efficiency,
effectiveness and attractiveness of its service to advertisers through the use
of technology. AdEx facilitates the simultaneous processing and management of
millions of advertising transactions. AdEx allows Flycast to target advertising
to users based on a wide selection of Web site and user characteristics,
including geographical location, nature of content, type of browser and
operating system, originating Internet domain, Web usage patterns and prior
advertising exposure. It also enables advertisers to track their advertising
campaigns effectively and increase response rates. Flycast intends to continue
to invest aggressively in its AdEx platform and continue to improve the
performance and capability of this technology.
Expand Service Offerings. Flycast intends to continue to expand its products
and services. In July 1998, Flycast began to offer differentiated, geo-targeted
Internet advertising to local advertisers. To develop this market, Flycast has
initiated value added reseller relationships with BellSouth Corporation and SBC
Communications Inc. Under these agreements, Flycast will deliver a wholesale
supply of local Web advertising that the BellSouth and SBC Yellow Pages sales
forces will resell to local advertisers. Flycast also expects to develop
relationships with companies representing national advertisers seeking local
advertising solutions. Furthermore, Flycast intends to facilitate the expansion
of its foreign operations through relationships with foreign partners,
providing advertisers with the ability to deliver their advertising in global
markets.
Provide Superior Customer Service. Flycast believes that strong customer
service is vital to generating repeat business. Flycast intends to continue to
hire, train and support a staff of customer service representatives who work
with both advertisers and Web sites. Flycast also plans to continue enhancing
its service by providing on-demand customized online reports that allow
advertisers and Web sites to rapidly assess the efficiency and performance of
advertising campaigns.
Expand Sales and Marketing Efforts. Flycast believes that aggressive
marketing and selling programs are essential to selling Web advertising
solutions effectively. Flycast intends to increase its direct sales force and
continue its public relations and marketing efforts with an aggressive
marketing campaign beginning in the first quarter of 1999. In addition, Flycast
intends to continue expanding all marketing and sales categories to extend its
presence in the marketplace, as well as to drive the acquisition of new
advertisers and attract new Web sites.
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Products and Services
The Flycast Network
The Flycast Network offers a comprehensive system for planning, buying,
selling, managing, evaluating and administering Web advertising. To fulfill the
needs of response-oriented advertisers, the Flycast Network aggregates
advertising inventory from Web sites that meet minimum size and quality
requirements. Many small and medium-size Web sites that are unable to support
their own sales forces list all of their inventory with Flycast. Other sites
that maintain either a direct or outsourced sales force, but that are unable to
sell all of their inventory, list the unsold portion on the Flycast Network.
When a Web site joins the Flycast Network, Flycast makes no guarantees with
respect to revenue, cost per thousand (CPM) or impressions sold, and Web sites
are free to leave the Flycast Network at any time. Flycast pays each Web site
on the Flycast Network a percentage of the revenue generated by delivering
advertisements on their Web sites. As of December 31, 1998, the Flycast Network
consisted of over 780 Web sites and in the quarter ended December 31, 1998, the
Flycast Network generated approximately 1.7 billion total advertising
impressions. The Flycast Network reached more than 20 million unique users or
35% of Web users in the U.S. during the month of December 1998. By comparison,
according to Media Metrix, Inc., Yahoo.com had 26.8 million unique users and
Netscape.com had 17.5 million unique users in the same month. The following
tables show the number of Web sites and total advertising impressions that we
served during each quarter in 1998.
Graph entitled "Number of Flycast Network Sites" representing number of network
sites in each quarter of 1998.
Graph entitled "Number of Ad Impressions Served (in millions)" representing
number of advertising impressions served in each quarter of 1998.
Flycast designed its AdEx technology platform to deliver ROI-oriented
advertising solutions to advertisers. AdEx receives orders from advertisers and
matches them with the appropriate advertising space available on the network.
Each time a Web user visits a Flycast Network Web site, a signal is sent to the
AdEx system. This signal contains information on the type of advertising space
represented. The system then selects the appropriate advertisement and serves
it to the Web site, concluding a process that typically takes less than one
second.
Through comprehensive performance reports generated by AdEx, advertisers can
track the progress of their advertising campaigns via online reports. These
reports contain detailed information such as the Web sites included in an
advertising campaign, the number of impressions served and the click-through
rates or other performance measurements. They provide the information that
advertisers need to actively manage their advertising campaigns to maximize
effectiveness. In addition, Flycast's Media Consultants monitor the progress of
each advertising campaign relative to the performance goals set by the
advertiser. As each campaign progresses, Media Consultants are able to adjust
the advertiser's media plan in real time to optimize the performance of the
advertising campaign. Sites generating low response rates are either rotated
out of the campaign or their impression allocations
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are reduced, while sites generating higher responses are allocated increased
impressions. While the optimization process can be partially or fully
automated, most Flycast advertisers prefer to interact with Media Consultants
during the process.
Flycast maximizes value for advertisers by enabling them to calibrate a base
response of the effectiveness of advertisements placed across the Flycast
Network. Flycast's Media Consultants advise advertisers to purchase higher CPM
advertising space only if it can be justified on the basis of proportionately
increased responses. For example, if an advertiser receives a one percent
response rate from advertisements that cost $5 CPM, then that advertiser would
need to attain a response rate of at least eight percent in order to justify
purchasing advertising space which costs $40 CPM.
Advertising space on the Flycast Network is sold directly to advertisers and
agencies as one of four media products--Run of Network, Run of Category,
Category Select and Site Select. Flycast sales representatives work with
advertisers to select the appropriate media product based on the advertisers'
requirements for the amount and timing of impressions, and desired response
rates. The following is a more detailed description of the four media products.
. Run of Network: Run of Network offers advertising placements across the
entire Flycast Network without specificity regarding individual Web
sites. As the lowest-CPM option offered by Flycast, it provides the
greatest overall reach for advertisers. Flycast's current rate card for
Run of Network is $6 CPM.
. Run of Category: Flycast Network sites are categorized into 25 affinity
categories based on nature of content, such as sports and outdoors,
entertainment, and news and information. Run of Category allows the
advertiser to select one or more specific content types within which to
run its advertising, but without specificity regarding individual Web
sites. Flycast's current rate card for Run of Category is $15 CPM.
. Category Select: Category Select allows an advertiser to define a set of
Web sites as a unique category in which its advertising is to be run,
without allocating a specific number of impressions to individual Web
sites. Flycast's rates for Category Select vary based on the number of
Web sites and impressions.
. Site Select: Flycast offers advertisers the ability to allocate the
number of impressions on specifically designated individual Web sites.
Pricing is in accordance with the Web site's current rate card, or by
agreement with the Web site directly. Flycast does not discount the
named individual Web site's advertising space or sell at rates that
conflict with those published by the Web site.
Substantially all advertisers purchase the Run of Network media product.
Actual base rates for each media product may vary depending on the length of
contract and number of impressions purchased. In addition to the base rates
charged for each media product, Flycast charges, on a CPM basis, for special
targeting or advertising format requirements.
Flycast Local Market/Value Added Reseller Division
In addition to direct sales of advertising space, Flycast also packages and
sells impressions on a wholesale basis to value added resellers. To develop
this channel, Flycast recently initiated relationships with BellSouth
Corporation and SBC Communications Inc. Under these agreements, Flycast will
deliver local Web advertising to the BellSouth and SBC Yellow Pages sales
forces for resale to local advertisers. Reseller arrangements allow Flycast to
leverage the existing market presence, customer relationships, sales forces and
brand recognition of its channel partners.
Flycast has developed a suite of tools and services to support value added
resellers with a turnkey offering. In addition to supplying geo-targeted
advertising inventory for resale in accordance with the value added reseller's
specification, Flycast supplies customized, co-branded applications,
performance reporting, billing services and training and sales support.
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Flycast intends to develop additional relationships with companies
representing national advertisers that are seeking local advertising solutions
and direct marketing service providers that resell advertising space to direct
marketing organizations interested in expanding their campaigns to the Web.
Technology and Operations
Flycast's proprietary AdEx technology platform is a complete suite of agent-
based solutions that enables real-time advertising delivery and management. The
key applications that utilize the AdEx platform are:
. AdAgent, a Java-based client interface that allows buyers to plan,
execute and manage advertising buys.
. AdReporter, a Web-based tool that provides media buyers real-time
reports on their buys.
. ValueTrak, a program that provides e-commerce advertisers the ability to
track viewers beyond a click to a transaction on an e-commerce Web site
to measure viewer responses, including registrations, units downloaded
or products purchased.
. SiteRegistry, a tool that allows affiliated Web sites to control the
pages they provide to Flycast and to create instant online information
packages about Flycast and its advertising opportunities which are then
made available to advertisers.
. SiteReporter, a tool that allows affiliated Web sites to monitor the
performance of advertising campaigns on their sites and to track the
revenue they have earned through the Flycast Network.
AdEx is designed to be scaleable through a segmented and redundant,
distributed processing architecture. Flycast's modular and open architecture
allows it to interface with third-party ad servers such as NetGravity,
Accipiter and MatchLogic, as well as providers of proprietary media formats,
including Narrative, Unicast, MacroMedia, The Thinking Media, Audiobase and
InterVU. Separate sub-systems that utilize Oracle databases support real-time,
agent-based tools, including media planning, media buying, tracking, reporting,
auditing and billing. These applications are based on a three-tiered
architecture that allows the rapid development of new applications and
interfaces.
All transaction data is backed up periodically and all billing and reporting
data is archived and kept in fireproof storage facilities. Flycast's network
management software utilizes SNMP and Optivity, and constantly monitors each
aspect of network performance. System engineers are notified in the event
performance falls outside of expected bounds. Flycast leases space for its
servers at three physically separate locations in the Bay Area.
Flycast intends to enhance its existing advertising solutions and to
introduce new solutions in order to meet changing consumer demands. These
enhancements may include the ability to deliver advertisements utilizing new
rich media formats and more precise consumer targeting techniques. In addition,
increased availability of broadband Internet access is expected to enable the
development of new products and services that take advantage of this expansion
in delivery capability. As of December 31, 1998, Flycast had 22 employees in
research and development. For the periods ended December 31, 1996, 1997 and
1998, Flycast incurred approximately $201,000, $1.4 million and $2.6 million in
research and development expenses.
Sales, Marketing and Customer Service
Flycast sells its products and services primarily through its direct sales
force and also sells impressions on a wholesale basis to selected value added
reseller partners. Flycast's sales organization,
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which included 16 salespeople as of December 31, 1998, mainly targets larger
advertisers and agencies. These employees are located at Flycast's headquarters
in San Francisco and in Atlanta, Boston, Chicago, Boulder, Los Angeles, New
York, Philadelphia and Sarasota. Flycast intends to increase its sales presence
by opening additional offices and expanding its direct sales force. To support
its direct sales force, Flycast has established a media services consulting
group as well as a site network services group to help increase the
effectiveness and ease-of-use of Flycast's services.
The customer service group consists of 10 individuals within two subgroups:
Media Consultants and Network Services. The Media Consultant group's goals are
to maintain advertiser relationships, achieve optimal advertising results and
maximize current and future media revenue streams. Media Consultants assist
clients in the planning and design of their Web advertising campaigns. Once the
campaign is underway, a Media Consultant monitors the progress of each campaign
according to the goals set by the advertiser and can adjust the campaign in
real time in order to optimize the performance of the campaign. Media
Consultants also review and analyze media data to communicate status to the
client and provide technical support. The network services group reviews Web
sites that apply to be included in the Flycast Network, recruits new Web sites,
maintains Web site relationships and provides general Web site technical
support. The Network Services group also defines and monitors the advertising
categories on the Flycast Network and analyzes existing inventory to identify
categories that require more advertising space.
To support its direct sales efforts and to promote the Flycast brand, Flycast
markets its products and services to clients via direct marketing, print
advertising, online advertising, Flycast's Web site, trade show participation
and other media events. In addition, Flycast actively pursues its public
relations program to promote the Flycast brand and Flycast's products and
services to potential ad buyers and potential members of the Flycast Network.
Competition
The Internet advertising market is intensely competitive. We expect such
competition to continue to increase because there are no substantial barriers
to entry. Competition may also increase as a result of industry consolidation.
We believe that our ability to compete depends upon many factors both within
and beyond our control, including the following:
. the timing and market acceptance of new solutions and enhancements to
existing solutions developed either by us or our competitors;
. customer service and support efforts;
. sales and marketing efforts; and
. the ease of use, performance, price and reliability of solutions
developed either by us or our competitors.
Competition among current and future suppliers of Internet navigational and
informational services, high-traffic Web sites and ISPs, as well as competition
with other media for advertising placements, could result in significant price
competition and reductions in advertising revenues.
As we expand the scope of our Web services, we may compete with a greater
number of Web sites and other media companies across a wide range of different
Web services, including in vertical markets where competitors may have
advantages in expertise, brand recognition and other factors. Several companies
offer competitive products or services through Web advertising networks,
including DoubleClick and 24/7 Media. Our business may also encounter
competition from providers of advertising inventory management products and
related services, including NetGravity, Accipiter and AdForce. In addition, we
may compete with a number of content aggregation companies, advertising
agencies and other companies that facilitate Web advertising such as America
Online (AOL.com),
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C/NET (Snap!), Yahoo!, SmartAge, Geocities, Digital Equipment Corporation
(AltaVista), Excite (including WebCrawler), Infoseek, Inktomi, Lycos (including
HotBot and Tripod), Microsoft (MSN and LinkExchange, Inc.) and Netscape
Communications (Netcenter).
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources than we do. This may allow them to respond more quickly than we can
to new or emerging technologies and changes in customer requirements. It may
also allow them to devote greater resources than we can to the development,
promotion and sale of their products and services. Such competitors may also
engage in more extensive research and development, undertake more far-reaching
marketing campaigns, adopt more aggressive pricing policies and make more
attractive offers to existing and potential employees, strategic partners,
advertisers and Web sites. Our competitors may develop products or services
that are equal or superior to our solutions or that achieve greater market
acceptance than our solutions. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their products or services to
address the needs of our prospective advertisers, advertising agency customers
and Web sites. As a result, it is possible that new competitors may emerge and
rapidly acquire significant market share. Increased competition is likely to
result in price reductions, reduced gross margins and loss of market share. We
may not be able to compete successfully, and competitive pressures may
materially and adversely affect our business, results of operations and
financial condition. Please see "Risk Factors" for more detailed information.
Proprietary Technology
Flycast's success and ability to compete are substantially dependent on its
internally-developed technologies and trademarks, which it protects through a
combination of patent, copyright, trade secret and trademark law. Flycast has
applied to register certain trademarks in the United States. Flycast cannot
guarantee that any of its patent applications or trademark registrations will
be approved. Even if they are approved, such patents or trademarks may be
successfully challenged by others or invalidated. If Flycast's trademark
registrations are not approved because third parties own such trademarks, its
use of such trademarks will be restricted unless it enters into arrangements
with such third parties, which may be unavailable on commercially reasonable
terms.
Flycast generally enters into confidentiality or license agreements with its
employees, consultants and corporate partners, and generally controls access to
and distribution of its technologies, documentation and other proprietary
information. Despite these efforts, unauthorized parties may attempt to
disclose, obtain or use Flycast's solutions or technologies. Flycast's
precautions may not prevent misappropriation of its solutions or technologies,
particularly in foreign countries where laws or law enforcement practices may
not protect Flycast's proprietary rights as fully as in the United States.
Flycast's customized advertiser, affiliate and sales applications collect and
utilize data derived from user activity on the Flycast Network and the Web
sites of Web advertisers and sites using Flycast's solutions. This data is used
for ad targeting and predicting ad performance. Although Flycast believes it
has the right to use such data and the compilation of such data in its
database, trade secret, copyright or other protection may not be available for
such information. In addition, others may claim rights to such information.
Flycast has licensed, and may license in the future, elements of its
trademarks, trade dress and similar proprietary rights to third parties. While
Flycast attempts to ensure that the quality of our brand is maintained by these
third parties, they may take actions that could materially and adversely affect
the value of Flycast's proprietary rights or its reputation.
Flycast cannot guarantee that any of its proprietary rights will be viable or
valuable in the future since the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries is
uncertain and still evolving. Furthermore, third parties may assert
infringement claims
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against Flycast or the Web publishers with Web sites in the Flycast Network.
Any claims could subject Flycast to significant liability for damages and could
result in the invalidation of its proprietary rights. In addition, any claims
could result in litigation which would be time-consuming and expensive to
defend, and divert its time and attention. Even if Flycast prevails, any such
litigation could materially and adversely affect our business, results of
operations and financial condition. Any claims or litigation from third parties
may also result in limitations on Flycast's ability to use the intellectual
property subject to such claims or litigation unless it enters into
arrangements with the third parties responsible for such claims or litigation,
which may be unavailable on commercially reasonable terms.
Employees
As of December 31, 1998, Flycast had 70 employees, including 20 in sales, 9
in marketing, 11 in services and support, 22 in research and development and 8
in general and administrative functions. Flycast is not subject to any
collective bargaining agreements and believes that its employee relations are
good. Our future success depends on our ability to attract, retain and motivate
highly-skilled employees. Competition for employees in the industry is intense.
Please see "Risk Factors."
Legal Proceedings
From time to time, Flycast may be involved in litigation relating to claims
arising out of its ordinary course of business. Flycast presently is not
subject to any material legal proceedings.
Facilities
Flycast's principal executive offices are located in San Francisco,
California, where Flycast leases approximately 21,800 square feet under a lease
that expires in January 2005. Flycast also leases space in various geographic
locations for sales personnel. Flycast believes that its current facilities are
adequate to meet its needs through the end of 1999, at which time it may need
to lease additional space.
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MANAGEMENT
Executive Officers and Directors
The names and ages of Flycast's executive officers and directors as of
January 31, 1999 are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- ----------
<C> <C> <S>
George R. Garrick............ 47 Chairman of the Board, Chief Executive
Officer and President
Ralph J. Harms............... 49 Chief Financial Officer and Assistant
Secretary
Lawrence G. Braitman......... 40 Vice President, Business Development
Richard L. Thompson.......... 44 Vice President, Client Services
Frederick J. Ciaramaglia..... 51 Vice President, Engineering
Lyn Chitow Oakes............. 37 Vice President, Marketing
Peter T. Nicas............... 38 Vice President, Local Market/VAR Division
Jeff J. Lehman............... 42 Vice President, Media Sales
David J. Cowan(2)............ 33 Director
Ted R. Dintersmith........... 46 Director
Howard C. Draft(1)........... 45 Director
Gary L. Prophitt(1).......... 55 Director
Michael D. Solomon(2)........ 46 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee
George R. Garrick has served as Chief Executive Officer and President since
joining Flycast in May 1998, has been a member of the Board of Directors of
Flycast (the "Board"') since June 1998 and has been Chairman of the Board since
January 1999. From September 1997 until May 1998, Mr. Garrick owned and
operated his own private venture and consulting company, G2 Ventures, Inc. From
April 1997 until September 1997, Mr. Garrick served as Chief Marketing Officer
for PowerAgent, Inc., an Internet media and marketing company. From March 1996
until April 1997, Mr. Garrick founded and operated NetROI LLC, an audience
measurement software company. From November 1993 until March 1996, Mr. Garrick
served as the President and Chief Executive Officer of Information Resources,
Inc.-North America, a marketing measurement company. Other than the period from
July through October 1993, when Mr. Garrick served as President and Chief
Executive Officer of Nielsen Marketing Research U.S.A, a unit of A.C. Nielsen
Co., Mr. Garrick served Information Resources, Inc., a market measurement
company, in various capacities from 1981 until his departure in March 1996.
Mr. Garrick holds B.S. degrees in Mathematics and Engineering and an M.S.
degree in Management from Purdue University.
Ralph J. Harms has served as Chief Financial Officer and Assistant Secretary
since joining Flycast in January 1999. From September 1997 through December
1998, Mr. Harms was the Vice President and Chief Financial Officer of BayStone
Software, a customer relationship management software company. From September
1996 until September 1997, Mr. Harms served as Vice President and Chief
Financial Officer for dpiX, a Xerox Corporation spinout manufacturer of flat-
panel displays. Mr. Harms was Vice President and Chief Financial Officer of ESS
Technology, Inc., a developer of multimedia software and fabless chip
manufacturer, from February 1995 until September 1996, and Secretary of ESS
from August 1995 until September 1996. From 1983 until February 1995, Mr. Harms
held various financial positions at SEEQ Technology Incorporated, a
manufacturer of data communication semiconductor products, most recently as
Vice President, Chief Financial Officer and Secretary. Mr. Harms holds a
B.S.E.E. degree from Michigan State University and an M.B.A. degree from the
University of Michigan.
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Lawrence G. Braitman co-founded Flycast and has served as Flycast's Vice
President, Business Development since March 1997. Previously, Mr. Braitman
served as Flycast's Vice President, Marketing from April 1996 until March 1997.
Mr. Braitman also founded and served as President of Cogent Network
Corporation, a provider of ad-supported vertical market-oriented services, from
its inception in January 1995 through June 1996. From January 1996 to June
1996, Mr. Braitman was also special counsel at Prickett, Jones, Elliott,
Kristol & Schnee, a law firm, and from October 1987 to December 1995, he was an
associate and later a partner in the business and tax departments at the
Philadelphia law firm of Saul, Ewing, Remick & Saul. Mr. Braitman holds a
B.A. degree in Psychology from Franklin and Marshall College and a J.D. degree
from Georgetown Law School.
Richard L. Thompson co-founded Flycast and has served as Flycast's Vice
President, Client Services since June 1998. From November 1998 until January
1999, he also served as Flycast's acting Vice President, Engineering.
Previously, Mr. Thompson served as Flycast's Chief Operating Officer and
Assistant Secretary from March 1997 through May 1998 and as Flycast's
President, Chief Executive Officer and Chief Financial Officer from April 1996
until March 1997. Mr. Thompson also served on Flycast's Board of Directors from
April 1996 until June 1998. From September 1994 until April 1996, Mr. Thompson
pursued an M.B.A. degree at The Wharton School of Business at the University of
Pennsylvania. From September 1982 through September 1994, Mr. Thompson held
various positions in engineering, sales and marketing for Octel Communications,
a telecommunications company, most recently as Manager of the Advanced
Technologies Group. Mr. Thompson holds an A.B. degree in Psychology from the
University of California, Santa Cruz and an M.B.A. degree from The Wharton
School of Business.
Frederick J. Ciaramaglia has served as Vice President, Engineering since
joining Flycast in January 1999. Prior to joining Flycast, Mr. Ciaramaglia was
Vice President, Engineering for Eloquent, Inc., an Internet knowledge
deployment software and services company, from June 1998 to January 1999. From
March 1994 to March 1997, Mr. Ciaramaglia served as Vice President, Research
and Development for SQA, Inc., a developer of automated software quality
products, and from April 1997 to April 1998 as Vice President, Research and
Development for the SQA Division of Rational Software Corporation ("Rational")
after Rational acquired SQA. From June 1992 to February 1994, Mr. Ciaramaglia
served as Senior Vice President, Development at Clinical Information
Advantages, a computerized patient record software products company. Mr.
Ciaramaglia was a founder of Softbridge Microsystems, Inc., a software
development company, and served as its Senior Vice President, Technology from
January 1983 to June 1992. Mr. Ciaramaglia holds a B.S. degree in Computer
Science from the Massachusetts Institute of Technology.
Lyn Chitow Oakes has served as Vice President, Marketing since joining
Flycast in July 1998. From May 1997 until March 1998, Ms. Oakes was Vice
President of Marketing for Electric Classifieds, Inc., a provider of online
classifieds solutions. From April 1990 until November 1996, Ms. Oakes held
various positions at America Online, Inc., where she was Vice President of
Internet and Community Services from January until November 1996, Vice
President of GNN and Internet Services from June 1995 until January 1996, Vice
President of Internet and Multimedia Services from January through June 1995,
Director of Multimedia and New Technology Services from June 1994 until January
1995, and Manager of Corporate Development and New Technology from January 1993
until June 1994. From 1983 until 1990, Ms. Oakes held various other positions
in the advertising industry. Ms. Oakes holds a B.S. degree in Elementary
Education from Keene State College in the University of New Hampshire system
and an M.B.A. degree from Bentley College.
Peter T. Nicas has served as Vice President, Local Market/VAR Division since
joining Flycast in September 1998. From April 1998 until September 1998, Mr.
Nicas served as Flycast's Director of Sales, Eastern U.S. Prior to joining
Flycast, Mr. Nicas served as a Regional Vice President of Sales, Southeastern
and Southcentral Regions, for Softbank Interactive Marketing from January 1997
until April 1998, and as Softbank's Southeastern Sales Director from June 1996
until January 1997. From
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<PAGE>
September 1995 until May 1996, Mr. Nicas was a Vice President and Publisher of
both Multimedia Producer and AV/Video magazines for Knowledge Industry
Publications. Previously, Mr. Nicas worked for eight years at Cahners
Publishing Company, a division of Reed Elsevier, where he served as Vice
President and as a Publisher of Client/Server Today from January 1994 until
September 1995, as Datamation's Regional Sales Manager for the Southeastern
territory from March 1991 until January 1994, and in various other positions in
sales, marketing and acquisitions from January 1987 until March 1991. Mr. Nicas
holds a B.A. degree in Finance and Business Administration from Lenoir-Rhyne
College.
Jeff J. Lehman has served as Vice President, Media Sales since joining
Flycast in January 1999. From October 1997 through January 1999, Mr. Lehman
served as Vice President of Advertising Sales for RealNetworks, Inc. From
November 1996 until October 1997, Mr. Lehman served as Vice President of Client
Site Development for Softbank, and from April 1996 until November 1996 he
served as Softbank's Vice President of Technology Sales. From September 1985
until April 1996, Mr. Lehman held various sales positions at Ziff-Davis
Publishing Company ("Ziff-Davis"), where he most recently was Vice President of
Sales and Market Development of ZDNet, a division of Ziff-Davis, from July 1995
until April 1996 and Director of the Ziff-Davis Magazine Network from May 1994
until July 1995. Mr. Lehman holds a B.S.B.A. degree in Finance and Economics
and an M.B.A. degree, both from the University of Central Florida.
David J. Cowan has been a director of Flycast since July 1997. Mr. Cowan has
been a Partner of Bessemer Venture Partners since August 1996. While employed
by Bessemer Venture Partners, Mr. Cowan also served as the Chief Financial
Officer of VeriSign, Inc., a provider of secure communication solutions for the
Internet and private networks, from January 1995 until December 1996, and as
Chief Executive Officer of Visto, a private Internet services company, from
August 1996 until April 1997. From July 1992 to August 1996, Mr. Cowan was an
Associate of Bessemer Venture Partners. Mr. Cowan is also a director of
VeriSign, Inc. and Worldtalk Corporation, an Internet software company. Mr.
Cowan holds an A.B. degree in Computer Science and Mathematics and a M.B.A.
degree, both from Harvard University.
Ted R. Dintersmith has been a director of Flycast since July 1997. Since
February 1996, he has been a General Partner of Charles River Partnership VIII.
Previously, from October 1987 to February 1996, he was a General Partner of
Aegis Venture Funds. Prior in his career, Mr. Dintersmith was an executive with
Analog Devices, Inc., where he served as General Manager of their Digital
Signal Processing Division. Mr. Dintersmith is also a director of several
internet software companies. Mr. Dintersmith holds a B.A. degree in Physics and
English from the College of William and Mary and a Ph.D. in Engineering from
Stanford University.
Howard C. Draft has been a director of Flycast since January 1999. Since
1988, he has served as the Chairman of the Board and Chief Executive Officer of
Draft Worldwide, a full service international marketing enterprise. Previously,
he served as Draft Worldwide's President from 1986 to 1988, and in other
positions for Draft Worldwide since 1978, when he became a member of the
original Chicago agency. Mr. Draft holds a B.A. degree in Philosophy and Art
History from Ripon College.
Gary L. Prophitt has been a director of Flycast since January 1999. Since
1994, he has been the President of Intelligent Media Ventures, Inc., the wholly
owned electronic publishing subsidiary of BellSouth Enterprises. Mr. Prophitt
has served BellSouth Corporation, the parent company of BellSouth Enterprises,
in various capacities since 1972, including eight years in business development
and corporate mergers and acquisitions. Mr. Prophitt holds a B.A. degree in
Industrial Management and an M.B.A degree, both from the University of South
Florida.
Michael D. Solomon has been a director of Flycast since April 1996. Mr.
Solomon has been the acting Chief Executive Officer of MachOne Communications
since September 1998. In addition, Mr. Solomon has been a Venture Partner of
Mohr Davidow Ventures since March 1996. Between 1994
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<PAGE>
and 1998, Mr. Solomon has been a director of Collabra; e-sales, Ltd.; I.C.
VERIFY, Inc.; and ShareData, Inc., which were acquired by Netscape
Communications Corporation, Microsoft Corporation, CyberCash and E*Trade
Securities, Inc., respectively. From July 1990 to July 1994, Mr. Solomon served
as the President and Chief Executive Officer of LightSource, Inc., a color
measurement device company. From 1985 to 1989, Mr. Solomon served as the
founding Vice President of Sales and Marketing of Aldus Corporation, a desktop
publishing software company later acquired by Adobe Systems, Inc. Mr. Solomon
holds a B.A. degree in Business Administration from Kent State University.
Board Composition
Flycast currently has authorized seven directors. Each director is elected
for a period of one year at Flycast's annual meeting of stockholders and serves
until the next annual meeting or until his successor is duly elected and
qualified. The executive officers serve at the discretion of the Board. There
are no family relationships among any of the directors or executive officers of
Flycast.
Board Committees
In January 1999, the Board established the Audit Committee and Compensation
Committee. The Audit Committee will review Flycast's annual audit and meet with
Flycast's independent auditors to review Flycast's internal controls and
financial management practices. The Audit Committee currently consists of
Howard C. Draft and Gary L. Prophitt. The Compensation Committee determines
compensation for certain of Flycast's personnel and administers Flycast's Stock
Plans. The Compensation Committee currently consists of David J. Cowan and
Michael D. Solomon.
Board Compensation
Except for reimbursement for reasonable travel expenses relating to
attendance at Board meetings, the issuance of common stock and the grant of
stock options, directors are not compensated for their services as directors.
In July 1997, Michael D. Solomon purchased 90,000 shares of common stock at a
purchase price of $.10 per share. Directors who are also employees are eligible
to participate in the 1997 Stock Option Plan and in the 1999 Stock Option Plan
and, following this offering, will be eligible to participate in and the 1999
Employee Stock Purchase Plan. In January 1998, Michael D. Solomon was granted
an option to purchase 50,000 shares of common stock under the 1997 Stock Option
Plan at an exercise price of $0.13 per share. In January 1999, Howard C. Draft
was granted an option to purchase 20,000 shares of common stock under the 1999
Stock Option Plan at an exercise price of $8.75 per share. Directors who are
not employees are eligible to participate in the 1999 Stock Option Plan and
1999 Directors' Stock Option Plan. The above issuances of stock and options are
subject to vesting. See "--Stock Plans" and "Certain Transactions."
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Board are currently David J.
Cowan and Michael D. Solomon. Neither Mr. Cowan nor Mr. Solomon has at any time
been an officer or employee of Flycast.
Executive Compensation
The following table provides certain summary information concerning the
compensation received for services rendered to Flycast during 1998 by Flycast's
current and former Chief Executive Officers, each of the other four most highly
compensated executive officers who were serving as executive officers at
December 31, 1998 and a former executive officer who would have been among the
four most highly compensated executive officers had he continued to serve as an
Executive Officer through
42
<PAGE>
the end of 1998 (the "Named Officers"), each of whose aggregate compensation
during Flycast's last fiscal year exceeded, or would have exceeded on an
annualized basis, $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------- -------------
Shares
Other Annual Underlying All Other
Name and Principal Position(1) Salary Bonus Compensation Options Compensation
- ------------------------------ -------- ------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
George R. Garrick........ $152,564(2) $30,417 $ 80,000(3) 880,000 $ 140(4)
Chairman of the Board,
Chief Executive Officer
and President
Miles Walsh.............. 100,861(5) -- -- 35,000 90,099(6)
Former President and
Chief Executive Officer
Larry M. Levine.......... 164,545(7) 25,000 -- 187,000 120(4)
Former Vice President,
Advertising Services
Peter T. Nicas........... 137,500(8) 20,000 -- 120,000 210(4)
Vice President, Local
Market/VAR Division
Lawrence G. Braitman..... 127,536 25,000 -- -- 219(4)
Vice President, Business
Development
Richard L. Thompson...... 127,536 25,000 -- -- 219(4)
Vice President, Client
Services
Edwin Videki............. 95,500(9) -- -- 160,000 43,465(10)
Former Chief Technology
Officer and former
Vice President,
Engineering
</TABLE>
- --------
(1) Ralph J. Harms, Flycast's Chief Financial Officer, commenced employment
with Flycast on January 4, 1999. Mr. Harms' salary on an annualized basis
for 1999 is $150,000. Frederick J. Ciaramaglia, Flycast's Vice President,
Engineering, commenced employment with Flycast on January 27, 1999. Mr.
Ciaramaglia's salary on an annualized basis for 1999 is $160,000.
(2) Represents the amount Mr. Garrick was paid in salary by Flycast during
1998. Mr. Garrick commenced employment with Flycast on May 21, 1998. His
salary on an annualized basis for 1998 was $250,000. See "Certain
Transactions--Employment and Severance Agreements."
(3) Represents budgeted allowance for reimbursement of relocation expenses. In
1998, Mr. Garrick was reimbursed for $63,130 of this budgeted amount.
(4) Represents life insurance premiums paid by Flycast on behalf of the officer
during 1998.
(5) Represents the amount Mr. Walsh was paid in salary during 1998. Mr. Walsh's
employment as President and CEO of Flycast was terminated effective May 20,
1998. Subsequently, Mr. Walsh was employed by Flycast for a period of one
month as Vice President, Business Planning. See "Certain Transactions--
Employment and Severance Agreements."
(6) Consists of $90,000 paid in conjunction with Mr. Walsh's termination and
$99 in life insurance premiums. See "Certain Transactions--Employment and
Severance Agreements."
(7) Represents the total amount Mr. Levine was paid in salary and commissions
during 1998. Mr. Levine commenced employment with Flycast on June 15, 1998.
Mr. Levine's employment with Flycast was terminated effective January 20,
1999. Subsequent to his termination, Mr. Levine entered into a consulting
arrangement with Flycast. See "Certain Transactions--Employment and
Severance Agreements."
(8) Represents the total amount Mr. Nicas was paid in salary and commissions
during 1998. Mr. Nicas commenced employment with Flycast on April 4, 1998.
(9) Represents the amount Mr. Videki was paid in salary during 1998. Mr.
Videki's salary on an annualized basis for the fiscal year ended December
31, 1998 was $130,000. Mr. Videki's employment with Flycast commenced on
March 12, 1998 and was terminated effective December 14, 1998.
(10) Consists of $43,332 paid in conjunction with Mr. Videki's termination and
$133 in life insurance premiums. See "Certain Transactions--Employment and
Severance Agreements."
Option Grants
The following table provides certain information regarding stock options
granted to the Named Officers during the fiscal year ended December 31, 1998.
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<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants(1)
---------------------------------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Shares Total Options Price Appreciation
Underlying Granted to for Option Term(6)
Options Employees in Exercise Price Expiration ---------------------
Name(2)(3) Granted Fiscal Year(4) ($/Share)(5) Date 5% 10%
- ---------- ---------- -------------- -------------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
George R. Garrick....... 880,000 34.5% $ 1.25 6/29/08 $ 691,784 $ 1,753,117
Miles Walsh(7).......... 35,000 1.4 0.13 1/28/08 2,861 7,252
Larry M. Levine(8)...... 187,000 7.3 1.25 6/29/08 147,004 372,537
Peter T. Nicas.......... 50,000 2.0 .13 3/24/08 4,088 10,359
20,000 .8 1.40 9/08/08 17,609 44,625
50,000 2.0 1.75 10/27/08 55,028 139,452
Lawrence G. Braitman.... -- -- -- -- -- --
Richard L. Thompson..... -- -- -- -- -- --
Edwin Videki(9)......... 140,000 5.5 0.13 3/24/08 11,446 29,006
20,000 .8 1.40 9/08/08 17,609 44,625
</TABLE>
- --------
(1) Consist of options granted pursuant to Flycast's 1997 Stock Option Plan.
See "--Stock Plans--1997 Stock Option Plan."
(2) Mr. Harms was granted an option to purchase 125,000 shares of common stock
on January 4, 1999 pursuant to Flycast's 1999 Stock Option Plan. The
percent of total options granted to employees represented by such option
would have been 4.7% had it been granted in 1998; the exercise price per
share is $8.50; the expiration date of the option is January 3, 2009 and
the potential realizable value at assumed rates of stock price appreciation
for the option term are $668,201 at 5% and $1,693,351 at 10%.
(3) Mr. Ciaramaglia was granted an option to purchase 185,000 shares of common
stock on January 28, 1999 pursuant to Flycast's 1999 Stock Option Plan. The
percent of total options granted to employees represented by such option
would have been 6.8% had it been granted in 1998; the exercise price per
share is $8.75; the expiration date of the option is January 27, 2009 and
the potential realizable value at assumed rates of stock appreciation for
the option term are $1,018,023 at 5% and $2,579,871 at 10%.
(4) Flycast granted options to purchase an aggregate of 2,547,250 shares of
common stock to employees and consultants, including the Named Officers, in
1998.
(5) The exercise price per share of each option was equal to the fair market
value of common stock on the date of grant as determined by the Board of
Directors. In determining the fair market value of the common stock on each
grant date, the board of directors considered, among other things,
Flycast's absolute and relative levels of revenues and operating results,
the state of Flycast's technology development, increases in operating
expenses, the absence of a public trading market for Flycast's securities,
the intensely competitive nature of Flycast's market and the appreciation
of stock values of a number of generally comparable Web advertising
companies. See "--Stock Plans" for a description of the material terms of
these options.
(6) Potential realizable value is based on the assumption that the common stock
of Flycast appreciates at the annual rate shown, compounded annually, from
the date of grant until the expiration of the ten-year term. These numbers
are calculated based on Securities and Exchange Commission requirements and
do not reflect our projection or estimate of future stock price growth.
Potential realizable values are computed by
. multiplying the number of shares of common stock subject to a given
option by the exercise price;
. assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table for the entire
ten-year term of the option; and
. subtracting from that result the aggregate option exercise price.
(7) Mr. Walsh's employment as President and Chief Executive Officer of Flycast
terminated in May 1998 and his employment as Vice President of Business
Planning terminated in June 1998.
(8) Mr. Levine's employment with Flycast terminated in January 1999.
(9) Mr. Videki was initially granted 140,000 shares at an option exercise price
of $0.13 per share ("March Option") and 20,000 shares at an option exercise
price of $1.40 per share ("September Option"). Upon termination of Mr.
Videki's employment with Flycast in December 1998, 23,333 shares of the
March Option had vested and 1,667 shares of the September Option were
deemed to have vested. The remaining shares subject to these options were
canceled. The potential realizable value of the remaining shares subject to
the March Option at assumed rates of stock appreciation for the option term
are $1,908 and $4,834 respectively. The potential realizable value of the
remaining shares subject to the September Option at assumed rates of stock
appreciation for the option term are $1,468 and $3,719 respectively.
Option Exercises and Holdings
The following table provides certain information concerning option exercises
during 1998 and the shares of common stock represented by outstanding stock
options held by each of the Named Officers as of December 31, 1998.
44
<PAGE>
Option Exercises During Last Fiscal Year and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares December 31, 1998 December 31, 1998(1)
Acquired Value ------------------------- -------------------------
Name(2) on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George R. Garrick....... 170,000 $ 0 470,000 240,000 $ 3,407,500 $ 1,740,000
Miles Walsh(3).......... 35,000 0 -- -- -- --
Larry M. Levine(4)...... 187,000 0 -- -- -- --
Peter T. Nicas.......... 50,000 63,500 70,000 -- 479,500 --
Lawrence G. Braitman.... -- -- -- -- -- --
Richard L. Thompson..... -- -- -- -- -- --
Edwin Videki(5)......... -- -- 25,000 -- 207,132 --
</TABLE>
- --------
(1) There was no public trading market for Flycast's common stock as of
December 31, 1998. Accordingly, these values have been calculated on the
basis of fair market value of common stock of $8.50 per share as determined
by the Board on January 4, 1999. Therefore, the value of options in the
table is calculated based on the $8.50 per share value, less the applicable
exercise price per share, multiplied by the number of shares underlying
such options.
(2) Since their employment with Flycast commenced in January 1999, neither Mr.
Harms nor Mr. Ciaramaglia acquired or exercised any options during 1998.
(3) Mr. Walsh's employment as President and Chief Executive Officer of Flycast
terminated in May 1998 and his employment as Vice President of Business
Planning terminated in June 1998. All of the shares acquired on exercise of
options granted to Mr. Walsh during 1998 were deemed to have vested at the
time of grant in January 1998. See "Certain Transactions--Employment and
Severance Agreements."
(4) Mr. Levine's employment with Flycast terminated in January 1999. Subsequent
to his termination, Mr. Levine entered into a consulting relationship with
Flycast. Flycast expects to repurchase any unvested shares at the
termination of the consulting arrangement. See "Certain Transactions--
Employment and Severance Agreements".
(5) Mr. Videki's employment with the Flycast terminated in December 1998.
Stock Plans
1999 Stock Option Plan. Flycast's 1999 Stock Option Plan (the "1999 Option
Plan") was adopted by the Board in January 1999 and is expected to be approved
by the stockholders in February 1999. The 1999 Stock Option Plan became
effective on January 4, 1999, the date it was adopted by the Board. A total of
2,000,000 shares of common stock has been reserved for issuance under the 1999
Option Plan, plus an automatic annual increase on the first day of Flycast's
fiscal years beginning in 2000, 2001, 2002, 2003 and 2004 equal to the lesser
of 500,000 shares, 3% of Flycast's outstanding common stock on the last day of
the immediately preceding fiscal year or a lesser number of shares as
determined by the Board. As of January 31, 1999, options to purchase 905,500
shares of common stock at a weighted average exercise price of $8.72 per share
were outstanding and 1,094,500 shares remained available for future option
grants.
The purposes of the 1999 Option Plan are to attract and retain the best
available personnel, to provide additional incentives to Flycast's employees
and consultants and to promote the success of Flycast's business. The 1999
Option Plan provides for the granting to employees, including officers and
directors, of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") and for the granting to
employees and consultants, including nonemployee directors, of nonstatutory
stock options. To the extent an optionee would have the right in any calendar
year to exercise for the first time one or more incentive stock options for
shares having an aggregate fair market value (under all plans of Flycast and
determined for each share as of the date the option to purchase the shares was
granted) in excess of $100,000, any such excess options shall be treated as
nonstatutory stock options. Unless terminated earlier, the 1999 Option Plan
will terminate in January 2009.
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<PAGE>
The 1999 Option Plan may be administered by the Board or a committee of the
Board (the "Administrator"). The 1999 Option Plan is currently administered by
the Board. The Administrator determines the terms of options granted under the
1999 Option Plan, including the number of shares subject to an option and its
exercise price, term and exercisability. In no event, however, may an
individual employee receive option grants under the 1999 Option Plan during any
one fiscal year of Flycast that would allow him or her to purchase more than
1,000,000 shares. The exercise price of all incentive stock options granted
under the 1999 Option Plan must be at least equal to the fair market value of
the common stock of Flycast on the date of grant. The exercise price of any
incentive stock option granted to an optionee who owns stock representing more
than 10% of the total combined voting power of all classes of outstanding
capital stock of Flycast or any parent or subsidiary corporation of Flycast (a
"10% Stockholder") must equal at least 110% of the fair market value of the
common stock on the date of grant. After the effective date of this offering,
the exercise price of nonstatutory stock options granted under the 1999 Option
Plan shall be such price as is determined by the Administrator; provided,
however, that the exercise price of any nonstatutory stock option granted to
Flycast's Chief Executive Officer or its four other most highly compensated
officers will generally equal at least 100% of the fair market value of the
common stock on the date of grant. Payment of the option exercise price may be
made in cash or such other consideration as determined by the Administrator.
The Administrator determines the term of options, which may not exceed ten
years (five years in the case of an incentive stock option granted to a 10%
Stockholder). No option may be transferred by the optionee other than by will
or the laws of descent or distribution, with the proviso that the Administrator
may grant nonstatutory stock options after the effective date of the offering
with limited transferability rights in certain circumstances. Generally, each
option may be exercised during the lifetime of the optionee only by such
optionee. The Administrator determines when options vest and become
exercisable. Flycast expects that options granted under the 1999 Option Plan
generally will vest at the rate of 1/8th of the total number of shares subject
to the options six months after the date of grant, and 1/48th of the total
number of shares subject to the options each month thereafter.
In the event of the sale of all or substantially all of the assets of
Flycast, or the merger or consolidation of Flycast with or into another
corporation, the Administrator shall either (i) provide that outstanding
options shall be assumed or equivalent options substituted by the successor
corporation; (ii) provide notice to optionees that all options, to the extent
then exercisable or to be exercisable as a result of the transaction, must be
exercised on or before a specified date (at least five days from the date of
the notice), after which the options terminate; or (iii) terminate each option
in its entirety in exchange for a payment equal to the excess of the fair
market value of the portion of the optioned stock that is vested and
exercisable immediately prior to the consummation of the transaction over the
aggregate exercise price thereof. The Board has the authority to amend or
terminate the 1999 Option Plan as long as such action does not materially and
adversely affect any outstanding option and provided that stockholder approval
for any amendments to the 1999 Option Plan must be obtained to the extent
required by applicable law.
1997 Stock Option Plan. Flycast's 1997 Stock Option Plan (the "1997 Option
Plan") was adopted by the Board and approved by Flycast's stockholders in March
1997. A total of 2,800,000 shares of common stock has been reserved for
issuance under the 1997 Option Plan. As of January 31, 1999, options to
purchase 763,403 shares of common stock with a weighted average exercise price
of $0.65 had been exercised (of which 761,215 shares are currently
outstanding), options to purchase a total of 1,971,242 shares at a weighted
average exercise price of $2.00 per share were outstanding and 65,355 shares
remained available for future option grants. Unless terminated earlier, the
1997 Option Plan will terminate in March 2007.
The terms of options issued under the 1997 Option Plan are generally the same
as those that may be issued under the 1999 Option Plan, except with respect to
the following features. The 1997 Option Plan does not impose an annual
limitation on the number of shares subject to options that may be
46
<PAGE>
issued to any individual employee. In addition, nonstatutory stock options
granted under the 1997 Option Plan are nontransferable in all cases and must be
granted with an exercise price equal to at least 85% of the fair market value
of the common stock on the date of grant, unless granted to a 10% Stockholder,
in which case the exercise price must be at least 110% of the fair market value
on the date of grant.
Options granted under the 1997 Option Plan generally may be exercised
immediately after the grant date, but to the extent the shares subject to the
options are not vested as of the date of such exercise, Flycast retains a right
to repurchase any shares that remain unvested at the time of the optionee's
termination of employment by paying an amount equal to the exercise price times
the number of unvested shares. Options granted under the 1997 Option Plan
generally vest at the rate of 1/8th of the total number of shares subject to
the options six months after the date of grant, and 1/48th of the total number
of shares subject to the options each month thereafter.
In addition, upon a sale of all or substantially all of the Flycast's assets,
or a merger or consolidation of Flycast with or into another corporation, all
options outstanding under the 1997 Option Plan will be assumed or equivalent
options substituted by the successor corporation, unless such successor
corporation does not agree to such assumption or substitution, in which case
the options terminate upon consummation of the transaction.
1999 Directors' Stock Option Plan. The 1999 Directors' Stock Option Plan (the
"Directors' Plan") was adopted by the Board in January 1999 and is expected to
be approved by the stockholders in February 1999. A total of 200,000 shares of
common stock has been reserved for issuance under the Directors' Plan. The
Directors' Plan becomes effective upon the effective date of the Registration
Statement for this offering. As of the date of this prospectus, no options to
purchase shares of common stock have been issued under the Directors' Plan. The
Directors' Plan provides for the grant of nonstatutory stock options to
nonemployee directors. The Directors' Plan is designed to work automatically
without administration; however, to the extent administration is necessary, it
will be performed by the Board. To the extent they arise, it is expected that
conflicts of interest will be addressed by abstention of any interested
director from both deliberations and voting regarding matters in which such
director has a personal interest. Unless terminated earlier, the Directors'
Plan will terminate in January 2009.
The Directors' Plan provides that each person who becomes a nonemployee
director after the date of this prospectus will be granted a nonstatutory stock
option to purchase 20,000 shares of common stock (the "First Option") on the
date on which the optionee first becomes a nonemployee director of Flycast. The
First Option will become exercisable as to 25% of the total number of shares
underlying the option on each of the first, second, third and fourth
anniversaries of the date of grant. In addition, on the date of Flycast's
Annual Stockholders Meeting each year, each nonemployee director will be
granted an additional option to purchase 5,000 shares of common stock (a
"Subsequent Option") if, on such date, he or she has served on the Board for at
least six months. The Subsequent Option will become exercisable as to 100% of
the shares underlying the option on the day before the fourth anniversary of
the date of grant. All options granted under the Directors' Plan shall have an
exercise price equal to 100% of the fair market value of the common stock as of
the date of grant.
The Directors' Plan sets neither a maximum nor a minimum number of shares for
which options may be granted to any one nonemployee director, but does specify
the number of shares that may be included in any grant and the method of making
a grant. No option granted under the Directors' Plan is transferable by the
optionee other than by will or the laws of descent or distribution or pursuant
to a qualified domestic relations order, and each option is exercisable, during
the lifetime of the optionee, only by such optionee. If a nonemployee director
ceases to serve as a director for any reason other than death or disability, he
or she may, but only within 90 days after the date he or she
47
<PAGE>
ceases to be a director of Flycast, exercise options granted under the
Directors' Plan to the extent that he or she was entitled to exercise such
options at the date of such termination. To the extent that he or she was not
entitled to exercise an option at the date of termination, or if he or she does
not exercise an option (which he or she was entitled to exercise) within such
90 day period, the option will terminate. If a director's service on the Board
terminates as a result of his or her disability, he or she may, but only within
12 months from the date of such termination, exercise options granted under the
Directors' Plan to the extent that he or she was entitled to exercise such
options on the date of termination. If a director's service on the Board
terminates as a result of his or her death, for a period of 12 months following
the date of death, the director's estate will have the right to exercise any
option granted under the Directors' Plan as to all shares which would have
vested if the deceased director had continued in his or her position on the
Board for an additional six months following the date of death. If a director
dies within three months after termination of service on the Board, then for a
period of 12 months following the date of death, the director's estate may
exercise the options granted under the Directors' Plan to the extent that the
director was entitled to exercise such options on the date of termination.
Options granted under the Directors' Plan have a term of ten years.
In the event of a dissolution or liquidation of Flycast, a sale of all or
substantially all of Flycast's assets, or a merger, consolidation or other
capital reorganization of Flycast with or into another corporation, each option
outstanding under the Directors' Plan will be assumed or equivalent options
substituted by the successor corporation, unless such successor corporation
does not agree to such assumption or substitution, in which case the options
will terminate upon consummation of the transaction; provided, however, that
upon a sale of all or substantially all of Flycast's assets or a merger or
consolidation of Flycast with or into another corporation in which more than
50% of the shares entitled to vote are exchanged, each director holding options
under the Directors' Plan will have the right to exercise his or her options
immediately prior to the consummation of such transaction as to all of the
shares of stock underlying such options, including shares that the director
would not otherwise be entitled to purchase.
The Board may amend or terminate the Directors' Plan at any time; provided,
however, that no such action may adversely affect any outstanding option and
provided that stockholder approval for any amendments to the Directors' Plan
must be obtained to the extent required by applicable law.
1999 Employee Stock Purchase Plan. Flycast's 1999 Employee Stock Purchase
Plan (the "Purchase Plan") was adopted by the Board in January 1999 and is
expected to be approved by the stockholders in February 1999. A total of
350,000 shares of common stock has been reserved for issuance under the
Purchase Plan, plus an automatic annual increase on the first day of each of
Flycast's fiscal years beginning in 2000, 2001, 2002, 2003 and 2004 equal to
the lesser of 75,000 shares, 1/2% of Flycast's outstanding common stock on the
last day of the immediately preceding fiscal year, or a lesser number of shares
determined by the Board. The Purchase Plan becomes effective upon the effective
date of the Registration Statement for this offering. Unless terminated earlier
by the Board, the Purchase Plan will terminate in January 2019.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, will be implemented by a series of overlapping offering periods of 24
months' duration, with new offering periods (other than the first offering
period) commencing on May 1 and November 1 of each year. Except for the first
offering period, each offering period will consist of four consecutive purchase
periods of six months' duration, at the end of which six month period (a
"purchase date") an automatic purchase will be made for participants. The
initial offering period is expected to commence on the date of this offering
and end on April 30, 2001; the initial purchase period is expected to begin on
the date of this offering and end on October 31, 1999. The Purchase Plan will
be administered by the Board or by a committee appointed by the Board.
Employees (including officers and employee directors) of Flycast, or of any
majority-owned subsidiary designated by the Board, are eligible to participate
in the Purchase Plan if they are employed by Flycast or any such subsidiary for
at least 20
48
<PAGE>
hours per week and more than five months per year. The Purchase Plan permits
eligible employees to purchase common stock through payroll deductions, which
in any event may not exceed 10% of an employee's compensation, at a price equal
to the lower of 85% of the fair market value of the common stock at the
beginning of each offering period or at the end of each purchase period. The
Board will have the discretion to increase, prior to the beginning of an
offering period, the percentage of participants' compensation that may be
withheld through the Purchase Plan, provided that such percentage may not
exceed 20%. Employees may end their participation in the Purchase Plan at any
time during an offering period, and participation ends automatically on
termination of employment.
No employee will be granted an option under the Purchase Plan if immediately
after the grant such employee would own stock and/or hold outstanding options
to purchase stock equaling 5% or more of the total voting power or value of all
classes of stock of Flycast or its subsidiaries, or if such option would permit
an employee's rights to purchase stock under all employee stock purchase plans
of Flycast and its subsidiaries to accrue at a rate that exceeds $25,000 of
fair market value of such stock for each calendar year in which the option is
outstanding at any time. In addition, no employee may purchase more than 2,000
shares of common stock under the Purchase Plan in any one purchase period. If
the fair market value of the common stock on a purchase date is less than the
fair market value at the beginning of the offering period, each participant in
the Purchase Plan will automatically be withdrawn from the offering period as
of the end of the purchase date and re-enrolled in the new 24 month offering
period beginning on the first business day following the purchase date. If the
fair market value of the common stock on April 29, 1999 is less than the public
offering price as set forth in this prospectus, participants will be
automatically withdrawn from the first offering period and enrolled in the
offering period beginning May 1, 1999 unless a participant notifies Flycast
that he or she does not wish to switch offering periods.
The Purchase Plan provides that, in the event of a merger or consolidation of
Flycast with or into another corporation or a sale of all or substantially all
of Flycast's assets, each right to purchase stock under the Purchase Plan will
be assumed or an equivalent right substituted by the successor corporation
unless the Board shortens any ongoing offering period so that employees' rights
to purchase stock under the Purchase Plan are exercised prior to the
transaction. The Board has the power to amend or terminate the Purchase Plan
and to change or terminate offering periods as long as such action does not
adversely affect any outstanding rights to purchase stock thereunder, provided,
however, that the Board may amend or terminate the Purchase Plan or an offering
period even if it would adversely affect outstanding options in order to avoid
Flycast's incurring adverse accounting charges.
401(k) Retirement Plan
Effective in October 1997, Flycast established a 401(k) defined contribution
retirement plan (the "401(k) Plan") covering all full-time employees as of
their date of hire. The 401(k) Plan provides for voluntary employee
contributions from 1% to 25% of annual compensation, subject to a maximum limit
allowed by Internal Revenue Service guidelines ($10,000 for 1999). Flycast may
contribute such amounts to the accounts of participants in the 401(k) Plan as
are determined by the Board. However, to date, Flycast has not made any
contributions to the accounts of 401(k) Plan participants.
Limitation of Liability and Indemnification Matters
To the extent permitted by the Delaware General Corporation Law, Flycast has
included in its Amended and Restated Certificate of Incorporation a provision
to eliminate the personal liability of its directors for monetary damages for
breach or alleged breach of their fiduciary duties as directors, subject to
certain exceptions. In addition, Flycast's Bylaws provide that it is required
to indemnify its officers and directors under certain circumstances, including
those circumstances in which indemnification would otherwise be discretionary,
and is required to advance expenses to its officers
49
<PAGE>
and directors as incurred in connection with proceedings against them for which
they may be indemnified. Flycast has entered into indemnification agreements
with its officers and directors containing provisions that are in some respects
broader than the specific indemnification provisions contained in Delaware law.
The indemnification agreements require Flycast, among other things, to
indemnify its officers and directors against certain liabilities that may arise
by reason of their status or service as officers and directors (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance if
available on reasonable terms. Flycast is in the process of obtaining
directors' and officers' liability insurance.
At present, Flycast is not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent in which
indemnification would be required or permitted. Flycast is not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification. Flycast believes that its charter provisions and
indemnification agreements are necessary to attract and retain qualified
persons as directors and officers.
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<PAGE>
CERTAIN TRANSACTIONS
Since January 1, 1996, there has not been any transaction or series of
similar transactions to which Flycast was or is a party in which the amount
involved exceeded or exceeds $60,000 and in which any director, or executive
officer of Flycast, any holder of more than 5% of any class of Flycast's voting
securities or any member of the immediate family of any of the foregoing
persons had or will have a direct or indirect material interest, other than the
transactions described below.
Equity and Convertible Debt Financings
In March 1994, Peter D. Olson, Flycast's then-current President, purchased
1,000 shares of Flycast's common stock for $1,000 in cash. Subsequently, Mr.
Olson transferred property totaling in the aggregate $610,295 to Flycast as a
capital contribution. His aggregate investment of $611,295 was converted into
611,295 shares of Series A Preferred Stock in connection with the stock
recapitalization and Series A Preferred Stock financing described below.
In April 1996, Mr. Olson loaned $25,000 to Flycast, which was repaid in full
by Flycast in January 1997.
In June 1996, in connection with a Convertible Note Purchase Agreement,
Flycast issued promissory notes bearing no interest to Richard L. Thompson,
Flycast's Vice President, Client Services in the aggregate amount of $110,000,
Alex Brown & Sons, Custodial fbo Richard L. Thompson in the amount of $80,000,
Alex Brown & Sons, Custodial fbo Lawrence G. Braitman, Flycast's Vice
President, Business Development, in the aggregate amount of $60,000 and Alex
Brown & Sons, Custodial fbo Howard Braitman, Lawrence G. Braitman's father, in
the aggregate amount of $40,000. The principal amounts of these notes were
converted into an aggregate of 290,000 shares of Series A Preferred Stock at a
conversion price of $1.00 per share in July 1997.
In February 1997, Flycast entered into a Convertible Note and Warrant
Purchase Agreement with Mr. Olson, Ruth Dorward, Mr. Thompson's mother, Bill
and Shirley Baughman, Mr. Thompson's uncle and aunt, and David and Beverly
Thompson, Mr. Thompson's uncle and aunt. In connection with this agreement and
in exchange for convertible promissory notes bearing interest at 8% per annum,
the principal amount of which was convertible into shares of Series B Preferred
Stock and warrants exercisable to purchase an additional number of shares of
Series B Preferred Stock equal in value to 20% of the notes' principal amount,
Mr. Olson loaned to Flycast $41,633 in February 1997, Alex Brown & Sons,
Custodial fbo Peter D. Olson loaned to Flycast $130,000 in March 1997, Ms.
Dorward loaned to Flycast an aggregate of $75,000 in February 1997, Mr. and
Mrs. David Thompson loaned to Flycast $30,000 in March 1997, and Mr. and Mrs.
Baughman loaned to Flycast $15,000 in March 1997. In July and August 1997, the
interest due under the notes was paid in cash and the notes were converted into
shares of Series B Preferred Stock and warrants exercisable to purchase Series
B Preferred Stock as described below.
In June 1997, Flycast issued a promissory note in the principal amount of
$400,000 and a warrant to purchase 33,333 shares of common stock at an exercise
price per share of $0.01 to Bessemer Venture Partners IV, L.P., a greater than
5% stockholder and an entity with which David J. Cowan, a director of Flycast,
is affiliated. The principal amount of the note was converted into shares of
Series B Preferred Stock.
In July 1997, in connection with restricted stock purchase agreements,
Flycast issued and sold 840,000 shares of common stock to Richard L. Thompson,
546,000 shares of common stock to Lawrence G. Braitman, 330,000 shares to David
Roth, a co-founder of Flycast, 349,011 shares of common stock to Miles Walsh,
the then-current President and Chief Executive Officer, 120,000 shares of
common stock to Mr. Olson and 90,000 shares of common stock to Michael D.
Solomon, a director of
51
<PAGE>
Flycast, each at a purchase price $0.10 per share. Flycast's restricted stock
purchase agreements with Messrs. Thompson, Braitman, Walsh, Olson and Solomon
provide for full acceleration of vesting in the event that within 12 months
following an acquisition or merger, the result of which is that more than 50%
of Flycast's equity ownership has changed, such individual's relationship with
Flycast is terminated (subject to certain conditions). In addition, Flycast's
restricted stock purchase agreements with Messrs. Thompson, Braitman, Walsh,
Olson and Solomon provide for payment to Flycast for such stock in the form of
promissory notes, bearing interest at 6.65% per annum, compounded annually,
with principal and interest due upon the earliest of (1) nine months after the
closing of an initial public offering of Flycast's common stock, (2) in July
2002 or (3) the termination of his service provider relationship with Flycast.
The amounts outstanding pursuant to such promissory notes are $159,600 plus
accrued interest at January 31, 1999.
In July 1997, Flycast issued and sold shares of Series A Preferred Stock at a
purchase price per share of $1.00 in a private placement transaction. As part
of this private placement Mr. Olson received 611,295 shares of Series A
Preferred Stock in connection with his previous capital contributions and a
stock recapitalization pursuant to which the shares of common stock held by him
were exchanged for an aggregate of 611,295 shares of Series A Preferred Stock.
In July and August 1997, Flycast issued and sold an aggregate of 5,324,532
shares of Series B Preferred Stock at a purchase price per share of $1.33 and
warrants to purchase an aggregate of 77,688 shares of Series B Preferred Stock
at an exercise price per share of $1.33 in a private placement transaction. In
exchange for the promissory notes described above, the following transactions
occurred: (1) Mr. Olson converted his note in the principal amount of $41,633
into 31,303 shares of Series B Preferred Stock and a warrant to purchase 6,260
shares of Series B Preferred Stock; (2) Alex. Brown & Sons, Custodial fbo Peter
D. Olson converted its note in the principal amount of $130,000 into 97,744
shares of Series B Preferred Stock and a warrant to purchase 19,549 shares of
Series B Preferred Stock; (3) Mr. and Mrs. David Thompson converted their note
in the principal amount of $30,000 into 22,556 shares of Series B Preferred
Stock and a warrant to purchase 4,511 shares of Series B Preferred Stock; (4)
Mr. and Mrs. Bill Baughman converted their note in the principal amount of
$15,000 into 11,278 shares of Series B Preferred Stock and a warrant to
purchase 2,256 shares of Series B Preferred Stock; and (5) Ms. Dorward
converted her note in the principal amount of $75,000 into 56,390 shares of
Series B Preferred Stock and a warrant to purchase 11,278 shares of Series B
Preferred Stock. Other purchasers of shares of Series B Preferred Stock
included the following: (1) entities and individuals affiliated with Bessemer
Venture Partners, which purchased 1,879,699 shares of Series B Preferred Stock,
including 300,751 shares issued upon conversion of the note in the principal
amount of $400,000 and including 15,000 shares of Series B Preferred Stock
purchased by David J. Cowan, a director of Flycast; (2) entities affiliated
with Charles River Partnership which purchased 1,879,699 shares of Series B
Preferred Stock, and with which Ted R. Dintersmith, a director of Flycast, is
affiliated; and (3) entities affiliated with St. Paul Venture Capital, which
purchased an aggregate of 1,127,820 shares of Series B Preferred Stock.
In January 1998, Flycast granted a nonstatuatory stock option to purchase an
aggregate of 50,000 shares of common stock to Michael D. Solomon, a director of
Flycast, with an exercise price of $0.13 per share. The shares under this
option vest over a four-year period. The vesting under this option accelerates
on the same terms as the common stock held by him.
In September 1998, in connection with Larry M. Levine's early exercise of his
option to purchase shares of common stock at $1.25 per share, Mr. Levine,
Flycast's former Vice President, Sales entered into a restricted stock purchase
agreement that provided for the issuance of 187,000 shares of common stock to
Mr. Levine. The restricted stock purchase agreement provides for payment to
Flycast in the form of a full recourse promissory note bearing interest at
5.54% per annum, compounded annually, with principal and interest due upon the
earlier of termination of Mr. Levine's employment or consulting relationship,
nine months after the closing of an initial public offering of the Flycast's
common stock or in September 2003. The amount currently outstanding pursuant to
such promissory
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<PAGE>
note is $233,750, plus accrued interest at January 31, 1999. Mr. Levine's
employment with Flycast terminated effective January 20, 1998. See "--
Employment and Severance Agreements."
In September 1998, in connection with George R. Garrick's early exercise of
his nonstatutory option to purchase shares of common stock at $1.25 per share,
Mr. Garrick, Flycast's Chairman of the Board, Chief Executive Officer and
President, entered into a restricted stock purchase agreement that provided for
the issuance of 170,000 shares of common stock to Mr. Garrick. The restricted
stock purchase agreement provides for payment to Flycast in the form of a
promissory note bearing interest at 5.54% per annum, compounded annually, with
principal and interest due upon the earliest of (1) nine months after the
closing of an initial public offering of Flycast's common stock, (2) in
September 2003 or (3) the termination of his service provider relationship with
Flycast. Seventy-five percent of the principal amount of the promissory note is
non-recourse and the remaining 25% of the principal amount and any accrued
interest are full recourse. The amount currently outstanding pursuant to such
promissory note is $212,500, plus accrued interest at January 31, 1999.
In December 1998, Flycast issued promissory notes that bear interest at 14%
per annum, compounded semi-annually to Bessemer Venture Partners IV LP in the
principal amount of $1,555,136, Charles River Partnership VIII, A Limited
Partnership in the principal amount of $1,528,040, St. Paul Venture Capital in
the amount of $916,819 and Comdisco in the amount of $500,000. These notes were
converted into shares of Series C Preferred Stock and warrants to purchase
Series C Preferred Stock.
In December 1998 and January 1999, Flycast issued and sold an aggregate of
1,994,132 shares of Series C Preferred Stock at a purchase price of $9.04 per
share and warrants to purchase an aggregate of 132,840 shares of Series C
Preferred Stock at an exercise price of $9.04 per share in private placement
transactions with various entities and individuals. The purchasers of such
shares included, among others: (1) entities affiliated with Bessemer Venture
Partners, which converted $1,555,136 of outstanding debt into an aggregate of
172,028 shares of Series C Preferred Stock and received warrants to purchase
45,908 shares of Series C Preferred Stock, including 3,236 shares and warrants
to purchase 863 shares purchased by David J. Cowan; (2) Charles River
Partnership VIII, A Limited Partnership, which converted $1,528,040 of
outstanding debt into 169,030 shares of Series C Preferred Stock and received
warrants to purchase 45,108 shares of Series C Preferred Stock; and (3)
entities affiliated with St. Paul Venture Capital, which converted $916,819
outstanding debt into an aggregate of 101,418 shares of Series C Preferred
Stock and received warrants to purchase 27,064 shares of Series C Preferred
Stock. In January 1999, Flycast issued and sold 442,477 shares of Series C
Preferred Stock at a purchase price of $9.04 per share in a private placement
transaction with Intelligent Media Ventures, Inc., an entity in which Gary L.
Prophitt, a director of Flycast, is an executive officer.
In January 1999, Flycast granted nonstatutory stock options to purchase an
aggregate of 20,000 shares of common stock to Howard C. Draft, a director of
Flycast, with an exercise price of $8.75 per share. This option vests over a
four-year period. DF LLC, an entity in which Mr. Draft is managing partner,
also purchased 5,531 shares of Series C Preferred Stock at a purchase price of
$9.04 per share in January 1999.
For additional information regarding the grant of stock options to executive
officers and directors, see "Management--Compensation of Directors," "--
Executive Compensation," "--Stock Plans--1997 Stock Option Plan" and "Principal
Stockholders."
Registration Rights Agreement
Certain holders of common stock and preferred stock have certain registration
rights with respect to their shares of common stock (including common stock
issuable upon conversion of their preferred stock). See "Description of Capital
Stock--Registration Rights."
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Employment and Severance Agreements
In May 1998, Flycast entered into a letter agreement with George R. Garrick,
the Company's President and Chief Executive Officer, which entitles Mr. Garrick
to continued salary and benefits in the event of his termination without cause
by Flycast or its successor for a period that is the greater of (1) six months
or (2) the time between the date of termination and the first anniversary of
Mr. Garrick's initial date of employment. In addition, the agreement also
provides that, in the event that Flycast enters into a change of control
transaction, 70% of the "unvested" shares acquired or acquirable from the
exercise of options granted to Mr. Garrick on June 30, 1998 will accelerate and
become immediately exercisable upon the closing of such transaction, unless
such acceleration would prevent "pooling of interests" accounting treatment for
such transaction.
In connection with the termination of the employment of David Roth, a co-
founder of Flycast, in February 1998, Flycast reached an oral agreement with
Mr. Roth that he would receive a severance payment and three months accelerated
vesting of his stock in consideration for the execution of a Settlement
Agreement and Mutual Release. Following this agreement, Flycast attempted on
numerous occasions to contact Mr. Roth to arrange for the execution and
exchange of the appropriate documents. Mr. Roth either rejected or ignored all
attempts to consummate the agreement. Mr. Roth had purchased 330,000 shares of
common stock at a price per share of $0.10 by means of a Promissory Note (the
"Note") dated July 7, 1997 in the principal amount of $33,000, pursuant to that
certain Common Stock Purchase Agreement dated July 8, 1997. Under the agreement
reached with Mr. Roth, he would have been vested in 226,875 shares. After Mr.
Roth's failure to consummate the agreement, Flycast foreclosed on 264,560
shares of common stock previously issued to Mr. Roth in satisfaction of Mr.
Roth's obligations to Flycast under the Note using a fair market value of $0.13
per share, which was the fair market value as of the date of his termination of
employment. In connection with such foreclosure, Flycast issued to Mr. Roth a
certificate for his remaining 65,440 shares of common stock.
Flycast and Miles Walsh entered into an Employment Agreement on October 1997
under which Flycast agreed to pay Mr. Walsh $180,000 on an annualized basis in
exchange for Mr. Walsh's agreement to serve as Flycast's Chief Executive
Officer. In connection with the termination of Mr. Walsh's employment as Chief
Executive Officer in May 1998, Flycast entered into a Separation Agreement and
Mutual Release that provided for a severance payment equal to six months'
salary ($90,000) and for the employment of Mr. Walsh as Flycast's Vice
President of Business Planning at a salary of $25,000 for the period of one
month. At the time of Mr. Walsh's termination, he was vested as to 188,317
shares of common stock out of 349,011 shares of common stock he purchased in
July 1997 at a price of $.10 per share pursuant to a common stock purchase
agreement. The remaining 160,694 shares of common stock were repurchased by
Flycast. In addition, Mr. Walsh retained 35,000 shares of Flycast's common
stock that he purchased at an exercise price of $.13 per share in May 1998 from
his exercise of an option that was immediately exercisable and fully vested
when granted in January 1998. See "Management--Executive Compensation".
In connection with the termination of Edwin Videki's employment with Flycast
in December 1998, Flycast and Mr. Videki entered into a Severance Agreement and
Mutual Release. In consideration for the release of any and all claims, Flycast
agreed to pay Mr. Videki a severance payment equal to four months salary
($43,332) and provide standard employee-related benefits for four months from
Mr. Videki's date of termination. At the time of the termination of Mr.
Videki's employment, he was vested as to 23,333 shares under an option with an
exercise price of $0.13. In addition, Flycast accelerated vesting for a portion
of the unvested shares subject to an option with an exercise price of $1.40
held by Mr. Videki such that, at the time of his termination, he was deemed
vested in 1,667 of these shares. The remaining shares subject to options held
by Mr. Videki were canceled. See "Management--Executive Compensation" and "--
Option Grants".
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In June 1998, Flycast entered into a letter agreement with Larry M. Levine
that entitled Mr. Levine to continued salary and medical benefits in the event
of his termination without cause by Flycast or its successor for a period of
six months. In addition, the agreement provided that, in the event Flycast
enters into a change of control transaction prior to the 12-month anniversary
of Mr. Levine's date of commencement of employment, 25% of the "unvested"
shares acquired or acquirable by Mr. Levine at the time of such transaction
would accelerate and become immediately exercisable upon the closing of such
transaction, unless such acceleration would prevent "pooling of interests"
accounting treatment for such transaction. The agreement also provided that 50%
of the "unvested" shares would accelerate in the event that a change of control
transaction occurred after Mr. Levine's first full year of employment, unless
such acceleration would prevent "pooling of interests" accounting treatment for
such transaction.
Subsequent to the termination of Mr. Levine's employment with Flycast in
January 1999, Flycast and Mr. Levine orally agreed that he will enter into a
six-month consulting relationship with Flycast. Under the terms of this
agreement, the 187,000 shares purchased by Mr. Levine pursuant to his early
exercise of the option granted to him will continue to vest at the rate of
1/48th per month until the termination of the consulting relationship. Flycast
expects to repurchase any remaining unvested shares at the termination of the
consulting relationship. Mr. Levine will also receive $87,500 as consideration
for such consulting services. Mr. Levine is prohibited from working for a
competitor during the term of the consulting relationship. The above oral
agreement is subject to the execution of a mutually acceptable agreement
incorporating these terms and a mutual release of claims. See "Management--
Executive Compensation" and "--Option Grants."
Other Agreements
Flycast has entered into or will enter into Indemnification Agreements with
each of its officers and directors containing provisions that may require
Flycast, among other things, to indemnify its officers and directors against
certain liabilities that may arise by reason of their status or service as
officers or directors (other than liabilities arising from willful misconduct
of a culpable nature) and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified. See
"Management--Limitation of Liability and Indemnification Matters."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Flycast's common stock as of January 31, 1999 and as adjusted to
reflect the sale of the common stock offered by Flycast under this prospectus
by (i) each of Flycast's directors and Named Officers, (ii) all directors and
executive officers as a group, and (iii) each person who is known by Flycast to
own beneficially more than 5% of its common stock.
<TABLE>
<CAPTION>
Percentage of
Shares
Number of Outstanding(2)(3)
Shares ------------------
Beneficially Before After
Name of Beneficial Owner(1) Owned Offering Offering
- --------------------------- ------------ -------- ---------
<S> <C> <C> <C>
David J. Cowan
Entities affiliated with Bessemer Venture
Partners(4)................................. 2,130,968 19.2%
1400 Old Country Rd., Suite 407
Westbury, NY 11590
Ted R. Dintersmith
Entities affiliated with Charles River
Partnership(5).............................. 2,093,837 18.8
1000 Winter Street, Suite 3300
Waltham, MA 02154
Entities affiliated with St. Paul Venture
Capital(6)................................... 1,256,302 11.3
8500 Normandale Lake Blvd., Suite 1940
Bloomington, MN 55437
Richard L. Thompson(7)........................ 1,138,269 10.2
George R. Garrick(8).......................... 694,999 6.0
Lawrence G. Braitman(9)....................... 646,000 5.8
Peter D. Olson(10)............................ 599,872 5.4
992 South DeAnza Boulevard
San Jose, CA 95129
Gary L. Prophitt(11).......................... 442,477 4.0
Miles Walsh(12)............................... 223,317 2.0
Larry M. Levine(13)........................... 187,000 1.7
Michael D. Solomon............................ 140,000 1.3
Peter T. Nicas(14)............................ 120,000 1.1
Edwin Videki (15)............................. 25,000 *
Howard C. Draft(16)........................... 5,531 *
All directors and officers as a group (16
persons)(17)................................. 7,972,398 67.2
</TABLE>
- --------
* Less than one percent of the outstanding shares of common stock.
(1) Except as otherwise noted, the address of each person listed in the table
is c/o Flycast Communications Corporation, 181 Fremont Street, Suite 120,
San Francisco, CA 94105.
(2) Gives effect to the shares of common stock issuable within 60 days of
January 31, 1999 upon the exercise of all options and other rights
beneficially owned by the indicated shareholders on that date. Beneficial
ownership is determined in accordance with the rules of the SEC and
includes voting and investment power with respect to shares. To the
knowledge of Flycast, except pursuant to applicable community property
laws or as otherwise indicated, the persons named in the table have sole
voting and sole investment control with respect to all shares beneficially
owned. Assumes no exercise of the Underwriters' overallotment option.
(3) Applicable percentage of ownership for each stockholder is based on
11,110,966 shares of common stock outstanding as of January 31, 1999,
together with applicable options for that
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<PAGE>
shareholder. Shares of common stock issuable upon exercise of options and
other rights beneficially owned are deemed outstanding for the purpose of
computing the percentage ownership of the person holding such options and
other rights, but are not deemed outstanding for computing the percentage
ownership of any other person.
(4) Represents (i) 730,046 shares of outstanding common stock and 31,809
shares of common stock that the stockholder has the right to acquire
pursuant to warrants exercisable within 60 days of January 31, 1999 held
by Bessec Ventures IV, L.P., (ii) 205,171 shares of outstanding common
stock and 4,591 shares of common stock that the stockholder has the right
to acquire pursuant to warrants exercisable within 60 days of January 31,
1999 held by Bessemer Venture Investors, L.P., (iii) 730,045 shares of
outstanding common stock and 31,807 shares of common stock that the
stockholder has the right to acquire pursuant to warrants exercisable
within 60 days of January 31, 1999 held by Bessemer Venture Partners IV,
L.P. (iv) 70,060 shares of outstanding common stock and 1,824 shares of
common stock that the stockholder has the right to acquire pursuant to
warrants exercisable within 60 days of January 31, 1999 held by BVP IV
Special Situations, L.P., and (v) 316,405 shares of outstanding common
stock and 9,210 shares of common stock stockholders have the right to
acquire pursuant to warrants exercisable within 60 days of January 31,
1999 held by various other individuals or entities, including 18,236
shares of outstanding common stock held by David J. Cowan and 863 shares
of common stock that David J. Cowan has the right to acquire pursuant to a
warrant exercisable within 60 days of January 31, 1999, that are either
managers or former members of Deer IV & Co. LLC or employees of Deer II &
Co. LLC or related entities or senior officers of Bessemer Securities
Corporation. Mr. Cowan, a director of Flycast and a manager of Deer IV &
Co., LLC, which is the general partner of each of these partnerships,
shares voting and dispositive power with respect to the shares held by
each such entity, and disclaims beneficial ownership of such shares in
which he has no pecuniary interest.
(5) Represents (i) 2,011,637 shares of outstanding common stock and 44,291
shares of common stock that the stockholder has the right to acquire
pursuant to a warrant exercisable within 60 days of January 31, 1999 held
by Charles River Partnership VIII, A Limited Partnership, and
(ii) 37,092 shares of outstanding common stock and 817 shares of common
stock that the stockholder has the right to acquire pursuant to a warrant
exercisable within 60 days of January 31, 1999 held by Charles River VIII-
A, LLC. Mr. Dintersmith, a director of Flycast, is a General Partner of
Charles River Partnership VIII, A Limited Partnership and disclaims
beneficial ownership of such shares in which he has no pecuniary interest.
(6) Represents 33,804 shares of outstanding common stock and 744 shares of
common stock that the stockholder has the right to acquire pursuant to a
warrant exercisable within 60 days of January 31, 1999 held by St. Paul
Venture Capital Affiliates Fund I, LLC and 1,195,434 shares of outstanding
common stock and 26,320 shares of common stock that the stockholder has
the right to acquire pursuant to a warrant exercisable within 60 days of
January 31, 1999 held by St. Paul Venture Capital IV, LLC
(7) Represents (i) 27,067 shares of outstanding common stock held by David A.
Thompson and Beverly J. Thompson, Trustees of the Thompson Trust, created
on 11/20/96--Mr. Thompson's uncle and aunt, (ii) 11,278 shares of
outstanding common stock and 2,256 shares of common stock that the
stockholder has the right to acquire pursuant to a warrant exercisable
within 60 days of January 31, 1999 held by Bill and Shirley Baughman--Mr.
Thompson's uncle and aunt, (iii) 56,390 shares of outstanding common stock
and 11,278 shares of common stock that the stockholder has the right to
acquire pursuant to a warrant exercisable within 60 days of January 31,
1999 held by Ruth Dorward, Mr. Thompson's mother, (iv) 80,000 shares of
outstanding common stock held by Alex. Brown & Sons, Custodial fbo Richard
L. Thompson and (v) 950,000 shares of outstanding common stock held by Mr.
Thompson.
(8) Includes 134,999 shares of common stock issuable within 60 days of January
31, 1999 upon the exercise of an incentive stock option, all of which will
have vested, and 390,000 shares of common stock issuable upon the exercise
of nonstatutory stock options within 60 days of January 31, 1999, none of
which will have vested.
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<PAGE>
(9) Represents (i) 40,000 shares of common stock held by Alex. Brown & Sons,
Custodial fbo Howard Braitman (IRA)--Mr. Braitman's father, (ii) 60,000
shares of common stock held by Alex. Brown & Sons, Custodial fbo Lawrence
G. Braitman and (iii) 546,000 shares of common stock held by Mr. Braitman.
(10) Represents 3,994 shares of outstanding common stock and 19,549 shares of
common stock that the stockholder has the right to acquire pursuant to a
warrant exercisable within 60 days of January 31, 1999 held by Alex. Brown
& Sons, Custodial fbo Peter D. Olson and 570,069 shares of outstanding
common stock and 6,260 shares of common stock that Mr. Olson has the right
to acquire pursuant to a warrant exercisable within 60 days of January 31,
1999.
(11) Represents 442,477 shares of common stock held by Intelligent Media
Ventures, Inc., an entity of which Mr. Prophitt is an executive officer.
Mr. Prophitt disclaims beneficial ownership of such shares except to the
extent he has pecuniary interest in such shares.
(12) Represents 218,317 shares of common stock held by the Walsh/Emerson Family
Trust and 5,000 shares of common stock held by Donald P. Walsh, Mr.
Walsh's brother.
(13) Flycast expects to repurchase a portion of these shares of common stock
upon termination of Mr. Levine's consulting relationship with Flycast.
(14) Includes 70,000 shares of common stock issuable within 60 days of January
31, 1999 upon the exercise of stock options, 2,500 shares of which will
have vested.
(15) Represents 25,000 shares of common stock issuable within 60 days of
January 31, 1999 upon the exercise of outstanding stock options, all of
which have vested.
(16) Represents 5,531 shares of common stock held in the name of DF LLC, an
Illinois limited liability company in which Mr. Draft is a managing
partner.
(17) Represents shares listed as to all directors, current executive officers
and former executive officers that are Named Officers, notwithstanding the
fact that some directors or executive officers may disclaim beneficial
ownership of such shares, and includes 744,999 shares of common stock
issuable within 60 days of January 31, 1999 upon the exercise of
outstanding options and 137,883 shares of common stock issuable within 60
days of January 31, 1999 upon exercise of outstanding warrants. See
"Management--Executive Compensation."
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, Flycast will be authorized to issue
50,000,000 shares of common stock, $0.0001 par value per share, and 2,000,000
shares of undesignated preferred stock, $0.0001 par value per share. All
currently outstanding shares of preferred stock will be converted into common
stock upon the closing of this offering.
Common Stock
As of January 31, 1999, there were 11,110,966 shares of common stock
outstanding (as adjusted to reflect the conversion of all outstanding shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
into common stock and the exercise of warrants to purchase 212,659 shares of
common stock that terminate on the effective date of this offering), held of
record by 104 stockholders. Options to purchase an aggregate of 2,876,742
shares of common stock were also outstanding. There will be shares
of common stock outstanding (assuming no exercise of the underwriters' over-
allotment option or exercise of outstanding options under Flycast's stock
option plans after January 31, 1999) after giving effect to the sale of the
shares offered hereby.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any outstanding preferred stock, holders
of common stock are entitled to receive ratably such dividends as may be
declared by the Board out of funds legally available for that purpose. See
"Dividend Policy." In the event of liquidation, dissolution or winding up of
Flycast, the holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to the prior
distribution rights of any outstanding preferred stock. The common stock has no
preemptive or conversion rights or other subscription rights. The outstanding
shares of common stock are, and the shares of common stock to be issued upon
completion of this offering will be, fully paid and non-assessable.
Preferred Stock
Upon the closing of this offering, all outstanding shares of preferred stock
will be converted into 8,234,470 common stock and automatically retired.
Thereafter, the Board will have the authority, without further action by the
stockholders, to issue up to 2,000,000 shares of preferred stock, $0.0001 par
value, in one or more series. The Board will also have the authority to
designate the rights, preferences, privileges and restrictions of each such
series, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series.
The issuance of preferred stock might have the effect of delaying, deferring
or preventing a change in control of Flycast without further action by the
stockholders. The issuance of preferred stock with voting and conversion rights
might also adversely affect the voting power of the holders of common stock. In
certain circumstances, an issuance of preferred stock could have the effect of
decreasing the market price of the common stock. As of the closing of this
offering, no shares of preferred stock will be outstanding. Flycast currently
has no plans to issue any shares of preferred stock.
Warrants
At January 31, 1999, there were warrants outstanding to purchase an aggregate
of 212,659 shares of common and preferred stock which will expire upon the
consummation of this offering, 7,500 shares of Series A Preferred Stock that
will expire in June 2002, 33,834 shares of Series B Preferred Stock that will
expire in April 2002 and 127,733 shares of Series C Preferred Stock that will
expire two
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<PAGE>
years from the effective date of this offering. The warrants to purchase shares
of preferred stock that survive the consummation of this offering will convert
into warrants to purchase shares of common stock on the consummation of this
offering. Generally, each warrant contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of
the warrant under certain circumstances, including stock dividends, stock
splits, reorganizations, reclassifications, consolidations and certain dilutive
issuances of securities at prices below the then existing warrant exercise
price.
Registration Rights
The holders of 10,079,716 shares of common stock (assuming the conversion of
all outstanding preferred stock upon completion of this offering) and warrants
to purchase 169,067 shares of common stock (collectively, the "Registrable
Securities") or their transferees are entitled to certain rights with respect
to the registration of such shares under the Securities Act. These rights are
provided under the terms of an agreement between Flycast and the holders of the
Registrable Securities. Subject to certain limitations in the agreement, the
holders of at least 20% of the Registrable Securities then outstanding may
require, on two occasions beginning at least six months after the date of this
prospectus, that Flycast use its best efforts to register the Registrable
Securities for public resale if Form S-3 is not available. If Flycast registers
any of its common stock either for its own account or for the account of other
security holders, the holders of Registrable Securities are entitled to include
their shares of common stock in such registration, subject to the ability of
the underwriters to limit the number of shares included in the offering. The
holders of at least 20% of Registrable Securities then outstanding may also
require Flycast (not more than twice in any 12 month period) to register all or
a portion of their Registrable Securities on Form S-3 when use of such form
becomes available to Flycast, provided, among other limitations, that the
proposed aggregate selling price (net of any underwriters' discounts or
commissions) is at least $1,000,000. Flycast will be responsible for paying all
registration expenses, and the holders of Registrable Securities selling their
shares will be responsible for paying all selling expenses.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
Certain provisions of Delaware law and Flycast's charter documents could make
the acquisition of Flycast and the removal of incumbent officers and directors
more difficult. These provisions are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of Flycast to negotiate with it first.
Flycast believes that the benefits of increased protection of our potential
ability to negotiate with the proponent of an unfriendly or unsolicited
proposal to acquire or restructure Flycast outweigh the disadvantages of
discouraging such proposals because, among other things, negotiation of such
proposals could result in an improvement of their terms.
Flycast is subject to the provisions of Section 203 of the Delaware law. In
general, the statute prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the stockholder. Generally, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior, did
own) 15% or more of the corporation's voting stock. These provisions may have
the effect of delaying, deferring or preventing a change in control of Flycast
without further action by the stockholders.
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<PAGE>
Flycast's Amended and Restated Certificate of Incorporation provides that
stockholder action can be taken only at an annual or special meeting of
stockholders and may not be taken by written consent. The Bylaws provide that
special meetings of stockholders can be called only by the Board, the Chairman
of the Board, if any, the President and holders of 50% of the votes entitled to
be cast at a meeting. Moreover, the business permitted to be conducted at any
special meeting of stockholders is limited to the business brought before the
meeting by the Board, the Chairman of the Board, if any, the President or any
such 50% holder. The Bylaws set forth an advance notice procedure with regard
to the nomination, other than by or at the direction of the Board, of
candidates for election as directors and with regard to business to be brought
before a meeting of stockholders.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the common stock is U.S. Stock Transfer
Corporation. The Transfer Agent's address is 1745 Gardena Avenue, Glendale, CA
91204 and its phone number at this location is (818) 502-1404.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for Flycast common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. Furthermore, since only a limited
number of shares will be available for sale shortly after this offering because
of certain contractual and legal restrictions on resale (as described below),
sales of substantial amounts of Flycast common stock in the public market after
the restrictions lapse could adversely affect the prevailing market price and
Flycast's ability to raise equity capital in the future.
Upon completion of this offering, Flycast will have outstanding shares
of common stock. Of these shares, the shares sold in the offering (plus
any shares issued upon exercise of the underwriters' over-allotment option)
will be freely tradable without restriction under the Securities Act, unless
purchased by "affiliates" of Flycast as that term is defined in Rule 144 under
the Securities Act (generally, officers, directors or 10% stockholders).
The remaining 11,110,966 shares outstanding are "restricted securities"
within the meaning of Rule 144 under the Securities Act ("Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act, which are summarized below. Sales of the
Restricted Shares in the public market, or the availability of such shares for
sale, could adversely affect the market price of the common stock.
The stockholders of Flycast have entered into lock-up agreements generally
providing that they will not offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of Flycast common stock or any securities
exercisable for or convertible into Flycast common stock owned by them for a
period of 180 days after the effective date of the registration statement filed
pursuant to this offering without the prior written consent of BT Alex. Brown.
As a result of these contractual restrictions, notwithstanding possible earlier
eligibility for sale under the provisions of Rules 144, 144(k) and 701, shares
subject to lock-up agreements will not be salable until such agreements expire
or are waived by the designated underwriters' representative. Taking into
account the lock-up agreements, and assuming BT Alex. Brown does not release
stockholders from these agreements, the following shares will be eligible for
sale in the public market at the following times:
. Beginning on the effective date of the offering, only the shares sold in
the offering will be immediately available for sale in the public
market.
. Beginning 180 days after the effective date of the offering,
approximately 8,849,664 shares will be eligible for sale pursuant to
Rules 144, 144(k) and 701.
. An additional 2,261,302 shares will become eligible for sale pursuant to
Rule 144 beginning on December 30, 1999. Shares eligible to be sold by
affiliates pursuant to Rule 144 are subject to volume restrictions as
described below.
In general, under Rule 144 as currently in effect, and beginning after the
expiration of the lock-up agreements (180 days after the effective date), a
person (or persons whose shares are aggregated) who has beneficially owned
Restricted Shares for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of: (i)
one percent of the number of shares of common stock then outstanding (which
will equal approximately shares immediately after the offering); or
(ii) the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about Flycast. Under Rule 144(k), a
person who is not deemed to have been an affiliate of Flycast at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed
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to be sold for at least two years, is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
As a result of the lock-up agreements, persons holding stock options may not
sell shares acquired upon exercise until 180 days after the effective date of
the offering. Beginning 180 days after the effective date, any employee,
officer or director of or consultant to Flycast who purchased shares pursuant
to a written compensatory plan or contract may be entitled to rely on the
resale provisions of Rule 701. Rule 701 permits affiliates to sell their Rule
701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that non-affiliates may
sell such shares in reliance on Rule 144 without having to comply with the
holding period, public information, volume limitation or notice provisions of
Rule 144. In addition, Flycast intends to file registration statements under
the Securities Act as promptly as possible after the effective date to register
shares to be issued pursuant to Flycast's employee benefit plans. As a result,
any options exercised under the 1997 Option Plan, 1999 Option Plan or any other
benefit plan after the effectiveness of such registration statement will also
be freely tradable in the public market, except that shares held by affiliates
will still be subject to the volume limitation, manner of sale, notice and
public information requirements of Rule 144 unless otherwise resalable under
Rule 701. As of January 31, 1999, there were outstanding options under the 1997
Stock Option Plan and 1999 Stock Option Plan for the purchase of 2,876,742
shares. No shares have been issued to date under Flycast's Purchase Plan or
Directors' Plan. In addition, as of January 31, 1999, there are warrants to
purchase 169,067 shares of common stock that are exercisable following this
offering. See "Risk Factors--Shares Eligible for Future Sale," "Management--
Stock Plans" and "Description of Capital Stock--Registration Rights."
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated the
date hereof, the Underwriters named below, through their representatives BT
Alex. Brown Incorporated, Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, and Hambrecht & Quist LLC have severally agreed to purchase from
Flycast the following numbers of shares of common stock at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of this prospectus.
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- -----------
<S> <C>
BT Alex. Brown Incorporated......................................
Dain Rauscher Wessels............................................
Hambrecht & Quist LLC............................................
-----------
Total..........................................................
===========
</TABLE>
The underwriting agreement provides that the obligations of the several
Underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions. The Underwriters are obligated to purchase all of the
shares of common stock offered hereby, other than those covered by the over-
allotment option described below, if any of such shares are purchased.
The Underwriters propose to offer the shares of common stock to the public at
the public offering price set forth on the cover page of this prospectus and to
certain dealers at a price that represents a concession not in excess of $
per share under the public offering price. The Underwriters may allow, and such
dealers may re-allow, a concession not in excess of $ per share to certain
other dealers. After the initial public offering, the offering price and other
selling terms may be changed by the representatives of the Underwriters.
Flycast has granted to the Underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to
additional shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. The Underwriters may exercise such option only to cover over-
allotments made in connection with the sale of the common stock offered hereby.
To the extent that the Underwriters exercise such option, each of the
Underwriters will become obligated, subject to certain conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number of shares of common stock to be purchased by it in the above table bears
to . Flycast will be obligated, pursuant to the option, to sell
such shares to the Underwriters to the extent the option is exercised. If any
additional shares of common stock are purchased, the Underwriters will offer
additional shares on the same terms as those on which the shares are being
offered.
Flycast has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act.
Each of Flycast's officers, directors and stockholders has agreed not to
offer, sell, contract to sell or otherwise dispose of, or enter into any
transaction that is designed to, or could be expected to, result in the
disposition of any portion of, any common stock for a period of 180 days after
the effective date of the registration statement of which this prospectus is a
part without the prior written consent of BT Alex. Brown Incorporated. Such
consent may be given at any time without public notice. Flycast has entered
into a similar agreement.
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The representatives of the Underwriters have advised Flycast that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
An entity and two individuals affiliated with BT Alex. Brown Incorporated own
an aggregate of 104,977 shares of Flycast common stock.
In order to facilitate the offering of the common stock, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the common stock. Specifically, the Underwriters may over-allot shares
of the common stock in connection with this offering, thereby creating a short
position in the common stock for their own account. Additionally, to cover such
over-allotments or to stabilize the market price of the common stock, the
Underwriters may bid for, and purchase, shares of the common stock in the open
market. Finally, the representatives, on behalf of the Underwriters, also may
reclaim selling concessions allowed to an Underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that Underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
Pricing of this Offering
Prior to this offering, there has been no public market for Flycast's common
stock. Consequently, the initial public offering price for Flycast's common
stock will be determined by negotiation among Flycast and the representatives
of the Underwriters. Among the factors to be considered in determining the
public offering price will be:
. prevailing market conditions;
. Flycast's results of operations in recent periods;
. the present stage of our development;
. the market capitalizations and stages of development of other companies
that Flycast and the representatives of the Underwriters believe to be
comparable to us; and
. estimates of Flycast's business potential.
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LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Flycast by Venture Law Group, A Professional Corporation, Menlo Park,
California. Jeffrey Y. Suto, a director of Venture Law Group, is the Secretary
of Flycast. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Fenwick & West LLP, Palo Alto, California.
As of the date of this prospectus, a director of Venture Law Group owns 7,518
shares of Flycast's Series B Preferred Stock, which shares will convert into
7,518 shares of Flycast's common stock upon the completion of this offering,
and an investment partnership associated with Venture Law Group owns 11,278
shares of Flycast's Series B Preferred Stock, which shares will convert into
11,278 shares of Flycast's common stock upon the completion of this offering.
EXPERTS
The financial statements as of December 31, 1997 and December 31, 1998, and
for the period from April 14, 1996 (inception) to December 31, 1996 and for
each of the years in the two year period ended December 31, 1998 included in
the prospectus and the related financial statement schedule included elsewhere
in the Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the Registration Statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
CHANGE IN ACCOUNTANTS
In December 1998, Flycast appointed Deloitte & Touche LLP to replace the
former accountants as its principal accountants. There were no disagreements
with the former accountants during the period from inception to December 31,
1998 or during any subsequent interim period preceding their replacement on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedures, which disagreements, if not resolved to the
former accountants' satisfaction, would have caused them to make reference to
the subject matter of the disagreement in connection with their reports. The
former accountants issued an unqualified opinion on the financial statements as
of and for the year ended March 31, 1998 and the period from inception to March
31, 1997. Flycast did not consult with Deloitte & Touche LLP on any accounting
or financial reporting matters in the periods prior to their appointment. The
change in accountants was approved by the Board.
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ADDITIONAL INFORMATION
Flycast has filed with the Securities and Exchange Commission ("SEC") a
Registration Statement on Form S-1 under the Securities Act with respect to the
common stock offered hereby. This prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedule thereto. For further information with respect to Flycast and the
common stock offered hereby, reference is made to the Registration Statement
and to the exhibits and schedule thereto. Statements made in this prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved. The Registration Statement and the exhibits
and schedules thereto may be inspected without charge at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the SEC located at Seven World Trade
Center, 13th Floor, New York, New York 10048, and the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
all or any part of the Registration Statement may be obtained from the SEC's
offices upon payment of certain fees prescribed by the SEC. The SEC maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of the site is http://www.sec.gov.
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FLYCAST COMMUNICATIONS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Common Stockholders' Equity (Deficit)........................ F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Flycast Communications Corporation:
We have audited the accompanying balance sheets of Flycast Communications
Corporation (the "Company") as of December 31, 1997 and 1998, and the related
statements of operations, common stockholders' equity (deficit) and cash flows
for the period from April 14, 1996 (inception) to December 31, 1996 and for
each of the two years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Flycast Communications Corporation as of
December 31, 1997 and 1998, and the results of its operations and its cash
flows for the period from April 14, 1996 (inception) to December 31, 1996 and
for each of the two years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
February 3, 1999
F-2
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
BALANCE SHEETS
December 31, 1997 and 1998
(In Thousands, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
December 31, Pro Forma
----------------- December 31,
1997 1998 1998
------- -------- ------------
(Unaudited)
(Note 1)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................... $ 3,560 $ 5,010 $ 19,809
Investments.................................. 183 183
Accounts receivable, net of allowance for
doubtful accounts of $0, $12 and $178, re-
spectively.................................. 397 3,449 3,449
Prepaid expenses and other assets............ 39 256 256
------- -------- --------
Total current assets........................ 3,996 8,898 23,697
PROPERTY AND EQUIPMENT, NET.................... 661 1,785 1,785
OTHER ASSETS................................... 18 108 108
------- -------- --------
TOTAL ASSETS................................... $ 4,675 $ 10,791 $ 25,590
======= ======== ========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED
STOCK AND COMMON STOCKHOLDERS' EQUITY (DEFI-
CIT)
CURRENT LIABILITIES:
Accounts payable............................. $ 326 $ 2,521 $ 2,521
Accrued liabilities.......................... 78 369 369
Accrued compensation and benefits............ 63 460 460
Short-term capital lease obligations......... 31 477 477
Short-term debt.............................. 983 983
------- -------- --------
Total current liabilities................... 498 4,810 4,810
LONG-TERM CAPITAL LEASE OBLIGATIONS............ 40 1,022 1,022
LONG-TERM DEBT................................. 3,682 3,682
------- -------- --------
Total liabilities........................... 538 9,514 9,514
------- -------- --------
MANDATORILY REDEEMABLE PREFERRED STOCK:
Mandatorily redeemable convertible preferred
stock, $0.0001 par value, 9,904,000 shares
authorized:
Series A, 920,000 shares designated, 911,295
shares issued and outstanding (none pro
forma) (aggregate liquidation preference
$911)....................................... 951 1,027
Series B, 5,500,000 shares designated,
5,324,532 shares issued and outstanding
(none pro forma) (aggregate liquidation
preference $7,082).......................... 7,244 7,824
Series C, 3,484,000 shares designated,
497,785 shares issued and outstanding in
1998 (none pro forma) (aggregate liquidation
preference $4,500).......................... 5,004
------- -------- --------
Total mandatorily redeemable preferred
stock...................................... 8,195 13,855
------- -------- --------
COMMON STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $0.0001 par value, 20,000,000
shares authorized, 2,352,031, 2,656,635 and
11,103,764 shares issued and outstanding in
1997, 1998 and pro forma, respectively...... 237 912 29,566
Common stock options......................... 2,837 2,837
Deferred stock compensation.................. (1,690) (1,690)
Notes receivable from stockholders........... (227) (606) (606)
Accumulated deficit.......................... (4,068) (14,031) (14,031)
------- -------- --------
Total common stockholders' equity (defi-
cit)....................................... (4,058) (12,578) 16,076
------- -------- --------
TOTAL LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND COMMON STOCKHOLDERS'
EQUITY (DEFICIT).............................. $ 4,675 $ 10,791 $ 25,590
======= ======== ========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
STATEMENTS OF OPERATIONS
Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Period from Years Ended
April 14, 1996 December 31,
(Inception) to ----------------
December 31, 1996 1997 1998
----------------- ------- -------
<S> <C> <C> <C>
REVENUE................................... $ $ 630 $ 8,029
COST OF REVENUE........................... 556 5,945
-------- ------- -------
GROSS PROFIT.............................. 74 2,084
-------- ------- -------
OPERATING EXPENSES:
Sales and marketing..................... 103 1,384 5,180
Research and development................ 201 1,376 2,621
General and administrative.............. 141 725 2,031
Stock-based compensation................ 1,147
-------- ------- -------
Total operating expenses.............. 445 3,485 10,979
-------- ------- -------
OPERATING LOSS............................ (445) (3,411) (8,895)
INTEREST INCOME........................... 92 92
INTEREST EXPENSE.......................... (98) (504)
-------- ------- -------
NET LOSS.................................. $ (445) $(3,417) $(9,307)
-------- ------- -------
ACCRETION OF MANDATORILY REDEEMABLE
PREFERRED STOCK.......................... 206 656
-------- ------- -------
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS.. $ (445) $(3,623) $(9,963)
======== ======= =======
BASIC AND DILUTED LOSS PER COMMON SHARE... $(445.00) $(31.80) $(11.93)
======== ======= =======
SHARES USED IN BASIC AND DILUTED LOSS PER
COMMON SHARE............................. 1 114 835
======== ======= =======
PRO FORMA BASIC AND DILUTED LOSS PER
COMMON SHARE (Note 1).................... $ (1.40)
=======
SHARES USED IN PRO FORMA BASIC AND DILUTED
LOSS PER COMMON SHARE (Note 1)........... 7,113
=======
</TABLE>
See notes to financial statements.
F-4
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIT)
Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
(In Thousands)
<TABLE>
<CAPTION>
Common Stock Common Deferred
-------------- Stock Stock Notes Accumulated
Shares Amount Options Compensation Receivable Deficit Total
------ ------ ------- ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK
FOR CASH AND NOTES
RECEIVABLE............. 1 $ 611 $ $ $ (16) $ $ 595
NET LOSS................ (445) (445)
----- ----- ------ ------- ----- -------- --------
BALANCE, DECEMBER 31,
1996................... 1 611 (16) (445) 150
CONVERSION OF COMMON
STOCK TO SERIES A
PREFERRED STOCK........ (1) (611) 16 (595)
ISSUANCE OF COMMON STOCK
FOR CASH AND NOTES
RECEIVABLE............. 2,284 228 (227) 1
EXERCISE OF COMMON STOCK
OPTIONS................ 68 7 7
ISSUANCE OF COMMON
WARRANTS IN CONNECTION
WITH ISSUANCE OF DEBT.. 2 2
ACCRETION OF MANDATORILY
REDEEMABLE PREFERRED
STOCK.................. (206) (206)
NET LOSS................ (3,417) (3,417)
----- ----- ------ ------- ----- -------- --------
BALANCE, DECEMBER 31,
1997................... 2,352 237 (227) (4,068) (4,058)
EXERCISE OF COMMON STOCK
OPTIONS................ 686 492 (446) 46
REPURCHASE OF COMMON
STOCK.................. (425) (42) 42
PAYMENT ON NOTES
RECEIVABLE............. 25 25
ISSUANCE OF COMMON STOCK
FOR SERVICES........... 44 47 47
COMPENSATORY STOCK
ARRANGEMENTS........... 2,837 2,837
AMORTIZATION OF DEFERRED
STOCK COMPENSATION..... (1,690) (1,690)
ISSUANCE OF COMMON STOCK
OPTIONS AND WARRANTS
FOR SERVICES........... 178 178
ACCRETION OF MANDATORILY
REDEEMABLE PREFERRED
STOCK.................. (656) (656)
NET LOSS................ (9,307) (9,307)
----- ----- ------ ------- ----- -------- --------
BALANCE, DECEMBER 31,
1998................... 2,657 $ 912 $2,837 $(1,690) $(606) $(14,031) $(12,578)
===== ===== ====== ======= ===== ======== ========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
STATEMENTS OF CASH FLOWS
Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
(In Thousands)
<TABLE>
<CAPTION>
Period from
April 14, 1996 Years Ended
(Inception) to December 31,
December 31, ----------------
1996 1997 1998
-------------- ------- -------
<S> <C> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss.................................... $(445) $(3,417) $(9,307)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization............. 18 184 531
Provision for doubtful accounts........... 12 236
Loss on sale of property and equipment.... 5
Stock and warrants issued for services.... 225
Noncash interest expense.................. 71 248
Stock-based compensation expense.......... 1,147
Changes in operating assets and
liabilities:
Accounts receivable..................... (409) (3,288)
Prepaid expenses and other assets....... (3) (54) (307)
Accounts payable........................ 40 286 2,195
Accrued liabilities..................... 24 116 688
----- ------- -------
Net cash used in operating
activities........................... (366) (3,211) (7,627)
----- ------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment......... (218) (544) (11)
Proceeds from sale of property and
equipment.................................. 4
Purchases of short-term investments......... (183)
----- ------- -------
Net cash used in investing
activities........................... (218) (544) (190)
----- ------- -------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from long-term debt................ 5,100
Payments on long-term debt.................. (179)
Payments on capital leases.................. (28) (225)
Proceeds from payment of notes receivable
from stockholders.......................... 16 25
Proceeds from issuance of common stock...... 595 8 46
Proceeds from issuance of preferred stock... 7,308 4,500
----- ------- -------
Net cash provided by financing
activities........................... 595 7,304 9,267
----- ------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS..... 11 3,549 1,450
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD....................................... 11 3,560
----- ------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD...... $ 11 $ 3,560 $ 5,010
===== ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest...................... $ 27 $ 256
======= =======
Noncash financing and investing activities:
Purchase of equipment under capital
leases................................... $ 100 $ 1,653
======= =======
Issuance of common stock for notes
receivable............................... $ 16 $ 228 $ 446
===== ======= =======
Repurchase of common stock for
extinguishment of debt................... $ 42
=======
Conversion of common stock to preferred
stock.................................... $ 611
=======
</TABLE>
See notes to financial statements.
F-6
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Period from April 14, 1996 (Inception) to December 31, 1996
and Years Ended December 31, 1997 and 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization--Flycast Communications Corporation (the "Company"), a
California corporation, commenced operations on April 14, 1996 (inception). The
Company is a provider of Web-based advertising solutions designed to maximize
the return on investment for direct response advertisers and e-commerce
companies. The Company is headquartered in San Francisco.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash equivalents consist of money market funds and certificates of deposit
with original maturities of three months or less at the time of acquisition.
Investments consist of certificates of deposit with an original maturity date
of greater than three months at the time of acquisition. Such investments are
considered available for sale and have carrying values which approximate fair
value.
Property and Equipment--Property and equipment are stated at cost. Equipment
held under capital leases is stated at the present value of minimum lease
payments. Depreciation on property and equipment is calculated on the straight-
line method over the estimated useful lives of the assets. Equipment held under
capital leases is amortized on the straight-line method over the shorter of the
lease term or the estimated useful life of the asset.
Revenue Recognition--Revenue is derived primarily from the delivery of
advertising impressions through third-party Web sites comprising the Flycast
Network. Revenue is recognized in the period the advertising impressions are
delivered provided collection of the resulting receivable is probable. Amounts
payable to third-party Web sites for advertisements displayed on such sites are
recorded as cost of revenue in the period the advertising impressions are
delivered.
Research and development expenses are charged to operations as incurred.
Income Taxes--Deferred tax liabilities are recognized for future taxable
amounts, and deferred tax assets are recognized for future deductions, net of a
valuation allowance to reduce net deferred tax assets to amounts that are more
likely than not to be realized.
Concentration of Credit Risk--Financial instruments that potentially subject
the Company to concentration of credit risk consist of trade receivables. The
Company's credit risk is mitigated by the Company's credit evaluation process
and the reasonably short collection terms. The Company does not require
collateral or other security to support accounts receivable and maintains
reserves for potential credit losses.
Financial instruments--The Company's financial instruments include cash and
cash equivalents, short-term investments, notes receivable from stockholders
and long-term debt. At December 31, 1997 and 1998, the fair values of these
instruments approximated their financial statement carrying amounts.
F-7
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
Stock-Based Compensation--The Company accounts for its employee stock option
plan in accordance with the provisions of Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no
accounting recognition is given to stock options granted at fair market value
until they are exercised. Upon exercise, the net proceeds are credited to
stockholders' equity (deficit).
Impairment of Long-Lived Assets and Long-Lived Assets To Be Disposed Of--The
Company evaluates its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets or
intangibles may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
Loss per Common Share--Basic loss per common share excludes dilution and is
computed by dividing loss attributable to common stockholders by the weighted-
average number of common shares outstanding for the period (excluding shares
subject to repurchase). Diluted loss per common share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock. Common share equivalents
are excluded from the computation in loss periods as their effect would be
antidilutive.
Pro Forma Net Loss per Common Share--Pro forma basic and diluted loss per
common share is computed by dividing loss attributable to common stockholders
by the weighted average number of common shares outstanding for the period
(excluding shares subject to repurchase) and the weighted average number of
common shares resulting from the assumed conversion of outstanding shares of
mandatorily redeemable preferred stock.
Unaudited Pro Forma Information--The unaudited pro forma balance sheet
presents the Company's balance sheet as if the following had occurred at
December 31, 1998: (i) the issuance of 1,496,347 shares of Series C preferred
stock in exchange for cash of $13,527,000 (which occurred in January 1999),
(ii) the exercise of warrants to acquire 43,854 shares of Series B preferred
stock, 132,840 shares of Series C preferred stock, and 40,476 shares of common
stock, which must be exercised or expire upon the closing of the initial public
offering contemplated by the Company and (iii) the conversion upon the closing
of such initial public offering of each share of preferred stock to one share
of common stock. Estimated proceeds from the common shares to be issued as a
result of such initial public offering are excluded.
Recently Issued Accounting Standards--In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income," which requires an enterprise
to report, by major components and as a single total, the change in its net
assets during the period from nonowner sources; and SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," which establishes
annual and interim reporting standards for an enterprise's business segments
and related disclosures about its products, services, geographic areas and
major customers. The Company had no comprehensive income items to report for
the period from April 14, 1996 (inception) to December 31, 1996, or for either
of the two years in the period ended December 31, 1998. The Company currently
operates one
F-8
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
reportable segment under SFAS No. 131. Adoption of these statements in 1998 did
not impact the Company's financial position, results of operations or cash
flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which defines derivatives, requires that
all derivatives be carried at fair value, and provides for hedge accounting
when certain conditions are met. SFAS No. 133 is effective for the Company in
fiscal 2000. Although the Company has not fully assessed the implications of
SFAS No. 133, the Company does not believe that adoption of this statement will
have a material impact on the Company's financial position or results of
operations.
2. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1997 and 1998 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1998
---- ------
<S> <C> <C>
Computer equipment and purchased software.................... $736 $ 746
Computer equipment held under capital lease.................. 100 1,752
Furniture and office equipment............................... 26 13
---- ------
Total...................................................... 862 2,511
Less accumulated depreciation................................ (201) (726)
---- ------
Net.......................................................... $661 $1,785
==== ======
</TABLE>
The accumulated depreciation associated with computer equipment held under
capital lease was $24,000 and $302,000 at December 31, 1997 and 1998,
respectively.
3. DEBT
In 1998, the Company borrowed $600,000 from a lending institution at an 8%
interest rate. Principal and interest payments are due in monthly installments
through July 2001. As of December 31, 1998, the outstanding obligation was
$445,000.
In 1998, the Company obtained a $175,000 letter of credit as a security
deposit on office space leased. The letter of credit is collateralized by all
assets of the Company.
In 1998, the Company entered into a financing agreement with a preferred
stockholder and lender for $2,500,000, due in April 2002 with interest at 11%
per annum, and for an additional $5,000,000, due in August 2001 with interest
at 14%. The Company granted this lender Series C preferred stock warrants to
purchase 55,409 shares at $4.51 per share, and 72,324 shares at $4.42 per
share. The estimated fair value allocated to the warrants of $304,000 is being
accreted over the life of the financing agreements. As of December 31, 1998,
the recorded obligation totaled $4,220,000, and $3,000,000 is available for
future borrowing.
Debt outstanding excluding capital lease obligations (Note 7) as of December
31, 1998 will be due in annual principal payments of $983,000, $1,876,000,
$1,646,000 and $160,000 in 1999, 2000, 2001 and 2002, respectively.
F-9
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
4. INCOME TAXES
The Company's deferred income tax assets as of December 31, 1997 and 1998
are comprised of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................... $1,368 $4,239
Reserves and accruals not currently deductible......... 28 807
Research and development tax credit.................... 40 135
Other.................................................. 23 28
------ ------
Total gross deferred tax assets before valuation
allowance........................................... 1,459 5,209
Valuation allowance.................................... (1,452) (4,945)
------ ------
7 264
Deferred tax liabilities:
Accrual to cash adjustments............................ (264)
Other.................................................. (7)
------ ------
Total gross deferred liabilities..................... (7) (264)
------ ------
Net deferred tax assets................................ $ -- $ --
====== ======
</TABLE>
The Company established a 100% valuation allowance at December 31, 1996, 1997
and 1998 due to the uncertainty of realizing future tax benefits from its net
operating loss carryforwards and other deferred tax assets.
At December 31, 1998, the Company had net operating loss ("NOL")
carryforwards of approximately $11,000,000 for federal and state income tax
purposes. These carryforwards begin to expire in 2004 for state and 2011 for
federal purposes. The Company also has available federal and state research and
development tax credit carryforwards of $77,000 and $58,000, respectively,
which had no expiration date as of December 31, 1998.
Internal Revenue Code Section 382 and similar California rules place a
limitation on the amount of taxable income which can be offset by NOL
carryforwards after a change in control (generally greater than 50% change in
ownership). Due to these provisions, utilization of the NOL and tax credit
carryforwards may be limited.
F-10
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
5. STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock Reserved For Future Issuance
At December 31, 1998, the Company has reserved the following shares of common
stock for issuance in connection with:
<TABLE>
<S> <C>
Conversion of Series A preferred stock............................. 911,295
Conversion of Series B preferred stock............................. 5,324,532
Conversion of Series C preferred stock............................. 497,785
Common stock warrants issued and outstanding....................... 40,476
Preferred stock warrants issued and outstanding.................... 345,761
Options issued and outstanding..................................... 1,934,199
Options available under the 1997 Stock Option Plan................. 111,705
---------
Total.............................................................. 9,165,753
=========
</TABLE>
Mandatorily Redeemable Preferred Stock
In July 1997, the Company issued 611,295 shares of Series A preferred stock
in exchange for all 1,000 shares of outstanding common stock. Additionally, in
July 1997, 300,000 shares of Series A preferred stock were issued upon
conversion of $300,000 of convertible notes. In July, August and December 1997,
the Company issued 5,324,532 shares of Series B preferred stock for $1.33 per
share. In December 1998, the Company issued 497,785 shares of Series C
preferred stock for $9.04 per share.
Significant terms of the Series A, B and C preferred stock are as follows
(see Note 8):
. At the option of the holder, each share of preferred stock is
convertible at any time into one share of common stock, subject to
adjustment for certain dilutive issuances. As of December 31, 1998, no
such adjustments had occurred. Shares automatically convert into common
stock upon the earlier of (a) completion of an initial public offering
with aggregate proceeds greater than $15,000,000 at not less than $8.00
per share or (b) upon the consent of more than 50% of the holders of the
preferred stock, voting together as a single class.
. Series A, B and C preferred stock are entitled to annual noncumulative
cash dividends of $0.08, $0.106 and $0.723 per share, respectively, when
and if declared by the Board of Directors.
. In the event of any liquidation of the Company (which includes the
acquisition of the Company by another entity), the holders of Series B
and Series C preferred stock have a liquidation preference over common
stock and Series A preferred stock of $1.33 per share and $9.04 per
share, respectively, plus all declared but unpaid dividends. After such
payment, the holders of Series A preferred stock have a liquidation
preference of $1.00 per share plus any declared but unpaid dividends.
Upon payment of all preferred stock liquidation preferences, any
remaining proceeds will be allocated to the common stockholders.
F-11
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
. Any time after May 31, 2002, upon the vote of at least two-thirds of the
then outstanding preferred stock, the Company will be required to redeem
all of the preferred stock at the liquidation preference plus an amount
equal to $0.08, $0.106 and $0.723 per share per year compounded annually
for Series A, B and C preferred stock, respectively, less any cash
dividends paid. As a result, the Company has recorded an increase to the
carrying values by the accretion of the mandatorily redeemable preferred
stock of $206,000 in 1997 and $656,000 in 1998.
. Holders of preferred stock have the same voting rights as the holders of
common stock.
Preferred Stock Warrants
In 1997, in connection with certain loan arrangements, the Company issued
five year warrants to purchase 33,834 shares of Series B preferred stock at
$1.33 per share and 7,500 shares of Series A preferred stock at $1.00 per share
to a bank. The warrants expire in 2002. The fair value of these warrants of
$33,000 was recognized as interest expense in 1997.
Also in 1997, in connection with a bridge loan arrangement, the Company
issued a five year warrant to purchase 43,854 shares of Series B preferred
stock at $1.33 per share. The warrant expires in 2002 or upon closing of an
underwritten public offering. The fair value of these warrants of $36,000 was
recognized as interest expense in 1997.
As discussed in Note 3, in 1998, the Company granted a lender Series C
preferred stock warrants to purchase 55,409 shares at $4.51 per share, and
72,324 shares at $4.42 per share. The warrants expire upon the earlier of five
years from the grant date or two years from closing of an underwritten public
offering. The fair value of the warrants of $304,000 is being accreted to
interest expense over the life of the financing agreements.
In 1998, in connection with certain bridge loan arrangements, the Company
issued warrants to purchase 132,840 shares of Series C preferred stock at $9.04
per share to various lenders. The warrants expire in 2003 or upon closing of an
underwritten public offering. The fair value of these warrants of $200,000 was
recognized as interest expense in 1998.
Notes Receivable from Stockholders
In July 1997, the Company issued an aggregate of 2,275,011 shares of common
stock to members of the Board of Directors. In connection with such issuance,
the Company's board members paid for the stock by issuing notes payable
(secured by the shares of the Company's common stock purchased) to the Company.
The secured notes payable bear interest at 6.65% per annum with the entire
principal balance of the notes, together with all accrued and unpaid interest,
due and payable on the earlier of (a) nine months after the closing of an
initial public offering of the Company's common stock or (b) July 2002. The
shares vest over a four year period. Any unvested shares purchased are subject
to repurchase rights by the Company upon occurrence of certain events or
conditions, such as employment termination, at the original purchase price. Of
such shares, there were 1,990,635 and 997,500 shares subject to repurchase at
December 31, 1997 and 1998, respectively.
F-12
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
Additionally, in September 1998, two officers of the Company exercised options
to purchase 357,000 shares with an exercise price of $1.25 by issuing notes
payable (secured by the shares of the Company's common stock purchased). The
secured notes payable bear interest at 5.54% per annum with the entire
principal balances of the notes, together with all accrued and unpaid interest,
due and payable on the earlier of (a) nine months after the closing of an
underwritten public offering or (b) September 2003.
Stock Option Plan
The Company's 1997 Stock Option Plan (the "Plan") provides for the grant of
up to 2,800,000 incentive or nonstatutory options to employees, directors and
consultants of the Company at the fair market value of the common stock on the
date of grant as determined by the Board of Directors. Options granted under
the Plan generally vest ratably over a period of four years and expire ten
years from the date of grant. The Plan also provides for early exercise of
options prior to full vesting. Any unvested shares purchased are subject to
repurchase by the Company upon occurrence of certain events or conditions, such
as employment termination, at the original purchase price. There were 528,289
shares subject to repurchase at December 31, 1998.
Options and Warrants Granted to Nonemployees
In 1998, the Company granted options and warrants for common stock to
nonemployees for services performed and to be performed through 2002. In
connection with these awards, the Company recognized $178,000 in stock-based
compensation expense related to such options which vested during 1998. At
December 31, 1998, unvested options granted to nonemployees totaled 24,479
shares.
Deferred Stock Compensation
At December 31, 1998, the Company had $1,690,000 in deferred stock
compensation related to options granted to employees. This amount will be
amortized to stock-based compensation expense through 2002.
A summary of the Company's stock option activity follows:
<TABLE>
<CAPTION>
Weighted
Average
Outstanding Exercise
Options Price
----------- --------
<S> <C> <C>
Balance, January 1, 1997.................................
Granted................................................ 497,125 $0.11
Exercised.............................................. (68,020) 0.10
Canceled............................................... (27,605) 0.10
---------
Balance, December 31, 1997 (68,503 shares vested at a
weighted average exercise price of $0.11)............... 401,500 0.11
Granted................................................ 2,547,250 1.61
Exercised.............................................. (686,076) 0.73
Canceled............................................... (328,475) 0.24
---------
Balance, December 31, 1998............................... 1,934,199 $1.85
=========
Available for grant at December 31, 1998................. 111,705
=========
</TABLE>
F-13
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
The following table summarizes information about currently outstanding and
vested stock options at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Vested
---------------------------------------------- ---------------------------
Weighted
Outstanding at Average Weighted Vested at Weighted
Range of December 31, Remaining Average December 31, Average
Exercise Price 1998 Contractual Life Exercise Price 1998 Exercise Price
-------------- -------------- ---------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$0.10 to $0.13 416,799 8.76 $0.12 333,348 $0.12
1.25 866,500 9.46 1.25 176,135 1.25
1.40 270,400 9.67 1.40 24,871 1.40
1.75 156,050 9.75 1.75 9,753 1.75
8.00 224,450 9.92 8.00 4,676 8.00
--------- ----- ------- -----
1,934,199 $1.85 548,783 $ .64
========= ===== ======= =====
</TABLE>
Additional Stock Plan Information
As discussed in Note 1, the Company accounts for its stock-based awards to
employees using the intrinsic value method in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees," and its related
interpretations.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires the
disclosure of pro forma net income (loss) and earnings (loss) per share had the
Company adopted the fair value method since the Company's inception. Under SFAS
No. 123, the fair value of stock-based awards to employees is calculated
through the use of option pricing models, even though such models were
developed to estimate the fair value of freely tradeable, fully transferable
options without vesting restrictions, which significantly differ from the
Company's stock option awards.
The Company's calculations for employee grants were made using the minimum
value option pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Dividend yield............................................... None None
Risk free interest rate...................................... 6.1% 5.3%
Expected term, in years...................................... 2.5 2.5
</TABLE>
The weighted average minimum value per option as of the date of grant for
options granted during 1997 and 1998 was $0.02 and $1.31, respectively.
F-14
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
If the computed minimum values of the Company's stock-based awards to
employees had been amortized to expense over the vesting period of the awards
as specified under SFAS No. 123, loss attributable to common stockholders and
basic and diluted loss per share on a pro forma basis (as compared to such
items as reported) would have been:
<TABLE>
<CAPTION>
Years Ended
December 31,
-----------------
1997 1998
------- --------
<S> <C> <C>
Loss attributable to common stockholders (in
thousands):
As reported.......................................... $(3,623) $ (9,963)
Pro forma............................................ $(3,625) $(10,086)
Basic and diluted net loss per share:
As reported.......................................... $(31.80) $ (11.93)
Pro forma............................................ $(31.83) $ (12.08)
</TABLE>
6. NET LOSS PER SHARE
The following is a reconciliation of the denominators used in computing basic
and diluted net loss per share.
<TABLE>
<CAPTION>
1996 1997 1998
----- ---------- ----------
<S> <C> <C> <C>
Shares (denominator):
Weighted average common shares outstand-
ing....................................... 1,000 1,168,469 2,359,397
Weighted average common shares outstanding
subject to repurchase..................... -- (1,054,562) (1,524,202)
----- ---------- ----------
Shares used in computation, basic and
diluted..................................... 1,000 113,907 835,195
----- ---------- ----------
</TABLE>
For the period from April 14, 1996 (inception) to December 31, 1996 and for
1997 and 1998, the Company had securities outstanding which could potentially
dilute basic earnings per share in the future, but were excluded in the
computation of diluted net loss per share in the periods presented, as their
effect would have been antidilutive. Such outstanding securities consist of the
following at December 31, 1998: 6,733,612 shares of preferred stock, warrants
to purchase 345,761 shares of preferred stock, and options and warrants to
purchase 1,974,675 shares of common stock. There were 1,990,635 and 1,525,789
shares subject to repurchase by the Company at December 31, 1997 and 1998,
respectively.
F-15
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
7. COMMITMENTS AND CONTINGENCIES
Leases
Future minimum net lease payments under noncancellable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
Year ending December 31:
1999.................................................. $ 583 $ 324
2000.................................................. 546 324
2001.................................................. 458 324
2002.................................................. 34 322
2003.................................................. 319
Thereafter............................................ 346
------ ------
Total............................................... 1,621 $1,959
======
Less amount representing interest....................... (122)
------
Present value of net minimum capital lease payments..... 1,499
Less current installments of obligations under capital
leases................................................. (477)
------
Obligations under capital leases, excluding current
installments........................................... $1,022
======
</TABLE>
Total rent expense under operating leases for the period from April 14, 1996
(inception) to December 31, 1996 and for the years ended 1997 and 1998 was
$14,000, $119,000 and $377,000, respectively.
Legal Matters
In connection with the termination of employment of an officer, the Company
foreclosed on 264,560 shares of the Company's common stock securing a
promissory note from that officer. If that officer should elect to legally
contest the number of shares issued to him, and if additional shares are
ultimately issued, the Company could incur a charge equal to the fair market
value of such shares. The ultimate outcome of this matter cannot be determined
at this time.
Additionally, the Company is involved in various other claims and legal
actions. Management does not expect that the outcome of these other claims and
actions will have a material effect on the Company's financial position or
results of operations.
8. SUBSEQUENT EVENTS
In January 1999, the Company sold 1,496,347 shares of Series C preferred
stock at $9.04 per share for proceeds of $13,527,000.
On January 4, 1999, the Board of Directors adopted, subject to stockholder
approval, the 1999 Stock Option Plan (the "1999 Stock Plan"). The 1999 Stock
Plan will serve as the successor equity
F-16
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the Period from April 14, 1996 (Inception) to December 31, 1996 and
Years Ended December 31, 1997 and 1998
incentive program to the Company's existing 1997 Stock Option Plan. A total of
2,000,000 shares of common stock have initially been reserved for issuance
under the 1999 Stock Plan, and the number of shares reserved will increase for
each of the next five years by the lesser of 375,000 or 3% of the number of
shares of common stock outstanding at the beginning of the year.
Additionally, on January 28, 1999, the Board of Directors adopted, subject to
stockholder approval, the 1999 Employee Stock Purchase Plan (the "Purchase
Plan"). Under the Purchase Plan, eligible employees are allowed to have salary
withholdings of up to 10% of their base compensation to purchase shares of
common stock at a price equal to 85% of the lower of the market value of the
stock at the beginning or end of defined purchase periods. The initial purchase
period commences upon the execution of the underwriting agreement for the
initial public offering of the Company's common stock. The Company has
initially reserved 350,000 shares of common stock for issuance under this plan,
and the number of shares reserved will increase for each of the next five years
by the lesser of 75,000 shares or 0.5% of the shares of common stock
outstanding at the beginning of the year.
On January 28, 1999, the Board of Directors adopted, subject to stockholder
approval, the 1999 Directors' Stock Option Plan (the "Directors' Plan"). Under
the Directors' Plan, each person who becomes a nonemployee director after the
effective date of the Directors' Plan may be granted nonstatutory stock
options. A total of 200,000 shares of common stock have initially been reserved
for issuance under the Directors' Plan.
On January 28, 1999, the Board of Directors approved, subject to stockholder
approval, the reincorporation of the Company in the State of Delaware and the
associated exchange of one share of common stock or preferred stock of the
Company for every share of common stock or preferred stock, as the case may be,
of the Company's California predecessor. Such reincorporation and stock
exchange will become effective prior to the effective date of the initial
public offering contemplated by the Company.
F-17
<PAGE>
Title: Advertising partners
Subtitle: Flycast maintains marketing relationships with leading advertisers
and agencies.
Series of rectangular Web banner advertisements under heading "Advertiser",
including:
* Text reading "30 Minutes Free Calling Per Month" and "10 cents a Minute
AnyTime.'' In lower right corner: "Sprint Sense AnyTime(TM) click here!"
Sprint Logo. Agency: Eagle River.
* Text reading: "THE NEW VAIO 505 SUPERSLIM NOTEBOOK." "Sony VAIODirect,"
"Click Here." Intel logo. Agency: In-House
* GOTO.com logo on left. Text reading: "Type in what you're looking for..."
above rectangular box. Go logo on right. Text reading: "Idealab." Agency: In-
House
* Disney.com Cupid's Corner logo on left. Text reading: "Send a FREE Disney
Valentine" below four pictures of Disney characters. Agency: ITraffic.
* Picture of smiling woman on left. Text reading: "Search more than
4,000 Mutual Funds." E*Trade logo. Agency: In-House
* Text reading: "Click here to buy beanie babies." eBay logo on right. Agency:
In-House
* Text reading: Shop@Toyota. Picture of car on right. Agency: Saatchi & Saatchi.
-----------
* Text reading: "Upgrading your Internet experience is as easy as clicking on
this button," "New Netscape Communicator 4.5 -- Free Download" and "Install
Now." Netscape logo on right. Agency: iBalls.
* Wells Fargo logo on left. Text reading: "Apply Online" in upper left and
"America's FASTEST Home Equity Loan Approvals!" Agency: Bozell.
* Jenny Craig logo on left. Text reading: "Jenny Craig has a Free Program for
you!" Additional text reading: "Plus the cost of food. Click here to learn
more." Agency: Interactive Agency.
* Text reading: "at the center of a great PC experience is an Intel(c) Pentium
processor" and "click here to see what your PC can really do." Intel logo on
right. Agency: In-House
* Picture of star with Macy's logo on left. Text reading: "Click here to shop
online." Macys.com logo. Picture balloon. Agency: Left Field.
* Picture of letter on left addressed to Grandma with address. Text reading:
"Order personalized holiday cards online" and "only $19.95 click here." Kodak
logo on right. Agency: Ogilvy One.
* Text reading: "World Offers," "New York to London $114" and "*One-way fares
based on round-trip purchase." Additional text reading: "Need a vacation?
Click for Details." British Airways logo on right. Agency: Agency.com
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in the
prospectus. Neither the delivery of this prospectus nor sale of common stock
means that information contained in this prospectus is correct after the date
of this prospectus. This prospectus is not an offer to sell or solicitation of
an offer to buy these shares in any circumstances under which the offer or so-
licitation is unlawful.
----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
The Company.............................................................. 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 29
Management............................................................... 39
Certain Transactions..................................................... 51
Principal Stockholders................................................... 56
Description of Capital Stock............................................. 59
Shares Eligible for Future Sale.......................................... 62
Underwriting............................................................. 64
Legal Matters............................................................ 66
Experts.................................................................. 66
Change in Accountants.................................................... 66
Additional Information................................................... 67
Index to Financial Statements............................................ F-1
</TABLE>
----------
Until , 1999 (25 days after the date of this prospectus), all deal-
ers that buy, sell or trade in these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. Deal-
ers are also obligated to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
[FLYCAST LOGO]
Common Stock
-------------
PROSPECTUS
-------------
BT Alex. Brown
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
Hambrecht & Quist
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of common stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fee, the Nasdaq National
Market listing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC registration fee.............................................. $11,190
NASD filing fee................................................... 4,525
Nasdaq National Market listing fee................................ *
Printing and engraving expenses................................... *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
NASD and Blue Sky qualification fees and expenses................. *
Transfer Agent and Registrar fees................................. *
Miscellaneous fees and expenses................................... *
-------
Total.......................................................... $ *
=======
</TABLE>
- --------
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's board of directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). The Registrant's Bylaws (Exhibit 3.3 hereto)
provide for indemnification of the Registrant's directors, officers, employees
and other agents to the maximum extent permitted by Delaware Law. In addition,
the Registrant has entered into Indemnification Agreements (Exhibit 10.1
hereto) with its officers and directors. The Underwriting Agreement (Exhibit
1.1) also provides for cross-indemnification among the Registrant and the
Underwriters with respect to certain matters, including matters arising under
the Securities Act.
Item 15. Recent Sales of Unregistered Securities
Since January 1996, the Registrant has sold and issued the following
securities:
(1) In June 1996, the Registrant issued promissory notes in the aggregate
principal amount of $300,000 to a total of five investors. In July 1997,
the principal amounts of these notes were converted into 300,000 shares of
Series A Preferred Stock at a conversion price of $1.00 per share in
connection with the Series A Preferred Stock financing discussed in item
(7).
(2) In February 1997, the Registrant issued to four investors promissory notes
in the aggregate principal amount of $291,633 that were convertible into
shares of Series B Preferred Stock and warrants exercisable to purchase an
additional number of shares of Series B Preferred Stock equal in value to
20% of the notes' aggregate principal amount. In July and August 1997, the
principal amounts of these notes were converted into shares of Series B
Preferred Stock at a conversion price of $1.33 per share and warrants
exercisable at $1.33 per share to purchase shares of Series B Preferred
Stock in connection with the Series B Preferred Stock financing discussed
in item (8).
II-1
<PAGE>
(3) In April 1997, the Registrant issued a promissory note to a bank in the
amount of $300,000 and a warrant to purchase shares of the Registrant's
stock, the class and exercise price of which was contingent upon the value
and timing of the Registrant's next financing. In July 1997, it was
determined that the warrant would be exercisable to purchase 33,834 shares
of Series B Preferred Stock at an exercise price of $1.33 per share.
(4) In June 1997, the Registrant issued a promissory note in the principal
amount of $400,000 and a warrant to purchase 33,333 shares of common stock
at an exercise price per share of $0.01 to an investor.
(5) In June 1997, the Registrant issued a warrant to purchase 7,500 shares of
Series A Preferred Stock at an exercise price per share of $1.00 to an
investor in connection with the investor's agreement to extend the terms of
the note described in item (3) above.
(6) In July 1997, the Registrant issued and sold an aggregate of 2,284,011
shares of common stock to a total of nine individuals, including five
officers and directors and one consultant, at a purchase price of $0.10 per
share. Sales to officers and directors of the Registrant were made pursuant
to restricted stock purchase agreements which provided for payment to the
Registrant for such stock in the form of promissory notes, with interest,
due upon the earlier of nine months after the closing of an initial public
offering of the Registrant's common stock or July 2002.
(7) In July 1997, the Registrant issued 611,295 shares of Series A Preferred
Stock to one director in connection with a stock recapitalization purchase
to which all shares of common stock held by such individual were exchanged
for 611,295 shares of Series A Preferred Stock.
(8) In July and August 1997, the Registrant issued and sold an aggregate of
5,324,532 shares of Series B Preferred Stock to 44 investors, including
those investors who converted their notes as described in item (2) above,
at an aggregate purchase price of $7,081,628, of which $291,633 represented
conversion of debt and the remainder was paid in cash. In conjunction with
such financing and in connection with certain loan arrangements, the
Registrant also issued warrants, including the warrant described in item
(3) above, to purchase an aggregate of 77,688 shares of Series B Preferred
Stock at an exercise price of $1.33 per share to six investors.
(9) In April 1998, the Registrant entered into a financing agreement with a
preferred stock shareholder and lender for $2,500,000 due in April 2002
with interest at 11% per annum. In May 1998, the Registrant, in connection
with this financing, issued warrants to purchase 55,409 shares of Series C
Preferred Stock at $4.51 per share. In August 1998, the Registrant entered
into a financing agreement with the same preferred stock shareholder and
lender for $5,000,000, due in August 2001 with interest at 14% per annum.
In September 1998, the Registrant, in connection with this financing,
issued warrants to purchase 72,324 shares of Series C Preferred Stock at
$4.42 per share. As of December 31, 1998, $3,000,000 was available for
future borrowing.
(10) In September 1998, the Registrant issued warrants to purchase an aggregate
of 7,143 shares of common stock at an exercise price per share of $1.40 to
three entities and individuals in connection with an executive search
agreement.
(11) In December 1998 and January 1999, the Registrant issued and sold an
aggregate of 1,994,132 shares of Series C Preferred Stock at a purchase
price of $9.04 per share to a total of 42 investors for an aggregate
purchase price of $18,026,953, of which $4,499,995 represented conversion
of debt and the remainder was paid in cash. In conjunction with such
financing and the issuance of the convertible debt, the Registrant also
issued warrants to purchase an aggregate of 132,840 shares of Series C
Preferred Stock at an exercise price of $9.04 per share to thirty-five
investors.
(12) From March 1997, when the 1997 Stock Option Plan was adopted, to January
31, 1999, 761,215 shares of common stock have been issued pursuant to
exercises of options by thirty employees at a weighted average exercise
price of $.65.
II-2
<PAGE>
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) or Regulation
D of such Securities Act as transactions by an issuer not involving any public
offering. In addition, certain issuances described in Item 12 were deemed
exempt from registration under the Securities Act in reliance upon Rule 701
promulgated under the Securities Act. The recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and warrants issued in such transactions. All recipients had
adequate access, through their relationships with the Registrant, to
information about the Registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ ----------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement (subject to negotiation).
2.1 Form of Agreement and Plan of Merger between the Registrant and
Flycast Communications Corporation, a California corporation.
3.1 Fourth Amended and Restated Articles of Incorporation of Flycast
Communications Corporation, a California corporation, as currently in
effect.
3.2** Certificate of Incorporation of Flycast Communications Corporation, a
Delaware corporation, as currently in effect.
3.3 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and become effective prior to the effective
date of the offering.
3.4 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and become effective upon completion of the
offering.
3.5 Bylaws of the Registrant.
4.1* Specimen Stock Certificate.
5.1** Opinion of Venture Law Group, a Professional Corporation.
10.1** Form of Indemnification Agreement between the Registrant and each of
its officers and directors.
10.2 1997 Stock Option Plan and form of option agreements.
10.3 1999 Stock Option Plan and form of option agreement.
10.4** 1999 Employee Stock Purchase Plan and form of subscription agreement.
10.5** 1999 Directors' Stock Option Plan.
10.7 Amended and Restated Investors' Rights Agreement dated December 30,
1998 between the Registrant and certain holders of the Registrant's
securities.
10.11** Standard Office Lease dated February 1, 1998 between the Registrant
and Ray Corporation.
10.12** Master Lease Agreement dated December 30, 1997, as amended, between
the Registrant and Comdisco, Inc.
10.13** Subordinated Loan and Security Agreement dated May 22, 1998, as
amended, between the Registrant and Comdisco, Inc.
10.14** Warrant Agreement to Purchase Shares of the Series C Preferred Stock
of Flycast Communications Corporation between the Registrant and
Comdisco, Inc. dated May 22, 1998.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ --------------------------------------------------------------------
<C> <S>
10.15** Warrant Agreement to Purchase Shares of the Series C Preferred Stock
of Flycast Communications Corporation between the Registrant and
Comdisco, Inc. dated September 29, 1998.
23.1 Independent Auditors' Consent.
23.2** Consent of Counsel (included in Exhibit 5.1).
24.1** Power of Attorney (see page II-6).
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
** Represents exhibits previously filed.
(b) Financial Statement Schedules
(i) Schedule II. Valuation and Qualifying Accounts.
Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of San Francisco, State of
California on February 26, 1999.
FLYCAST COMMUNICATIONS CORPORATION
/s/ George R. Garrick
By: __________________________________
George R. Garrick
Chairman of the Board, Chief
ExecutiveOfficer and President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
Signature Title Date
/s/ George R. Garrick Chairman of the
- ------------------------------------ Board, Chief
George R. Garrick Executive Officer
and President
(Principal
Executive Officer)
Chief Financial February 26, 1999
* Officer and
- ------------------------------------ Assistant
Ralph J. Harms Secretary
(Principal
Financial and
Accounting
Officer)
* Director February 26, 1999
- ------------------------------------
David J. Cowan
* Director February 26, 1999
- ------------------------------------
Ted R. Dintersmith
* Director February 26, 1999
- ------------------------------------
Howard Draft
* Director February 26, 1999
- ------------------------------------
Gary Prophitt
* Director February 26, 1999
- ------------------------------------
Michael D. Solomon
/s/ George R. Garrick February 26, 1999
*By:________________________________
George R. Garrick
Attorney-in-fact
II-5
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors and Stockholders of
Flycast Communications Corporation
Our audits of the financial statements of Flycast Communications Corporation
for the period from April 14, 1996 (inception) to December 31, 1996 and for the
years ended December 31, 1997 and 1998 also include the financial statement
schedule of Flycast Communications Corporation, listed in Item 16 (b). The
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
February 3, 1999
S-1
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Charged
Balance at to cost Balance at
Beginning and Deductions/ end of
of period expenses write-offs period
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Period from April 14, 1996 (incep-
tion) to
December 31, 1996
Allowance for doubtful accounts.. $ -- $ -- $ -- $ --
Year ended December 31, 1997
Allowance for doubtful accounts.. $ -- $ 12,000 $ -- $ 12,000
Year ended December 31, 1998
Allowance for doubtful accounts.. $12,000 $236,000 $70,000 $178,000
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ ----------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement (subject to negotiation).
2.1 Form of Agreement and Plan of Merger between the Registrant and
Flycast Communications Corporation, a California corporation.
3.1 Fourth Amended and Restated Articles of Incorporation of Flycast
Communications Corporation, a California corporation, as currently in
effect.
3.2** Certificate of Incorporation of Flycast Communications Corporation, a
Delaware corporation, as currently in effect.
3.3 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and become effective prior to the effective
date of the offering.
3.4 Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be filed and become effective upon completion of the
offering.
3.5 Bylaws of the Registrant.
4.1* Specimen Stock Certificate.
5.1** Opinion of Venture Law Group, a Professional Corporation.
10.1** Form of Indemnification Agreement between the Registrant and each of
its officers and directors.
10.2 1997 Stock Option Plan and form of option agreements.
10.3 1999 Stock Option Plan and form of option agreement.
10.4** 1999 Employee Stock Purchase Plan and form of subscription agreement.
10.5** 1999 Directors' Stock Option Plan.
10.7 Amended and Restated Investors' Rights Agreement dated December 30,
1998 between the Registrant and certain holders of the Registrant's
securities.
10.11** Standard Office Lease dated February 1, 1998 between the Registrant
and Ray Corporation.
10.12** Master Lease Agreement dated December 30, 1997, as amended, between
the Registrant and Comdisco, Inc.
10.13** Subordinated Loan and Security Agreement dated May 22, 1998, as
amended, between the Registrant and Comdisco, Inc.
10.14** Warrant Agreement to Purchase Shares of the Series C Preferred Stock
of Flycast Communications Corporation between the Registrant and
Comdisco, Inc. dated May 22, 1998.
10.15** Warrant Agreement to Purchase Shares of the Series C Preferred Stock
of Flycast Communications Corporation between the Registrant and
Comdisco, Inc. dated September 29, 1998.
23.1 Independent Auditors' Consent.
23.2** Consent of Counsel (included in Exhibit 5.1).
24.1** Power of Attorney (see page II-6).
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
** Represents exhibits previously filed.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
OF FLYCAST COMMUNICATIONS CORPORATION,
A DELAWARE CORPORATION,
AND
FLYCAST COMMUNICATIONS CORPORATION,
A CALIFORNIA CORPORATION
This Agreement and Plan of Merger dated as of March __, 1999 (the
"Agreement") is between Flycast Communications Corporation, a California
---------
corporation ("Flycast-California"), and Flycast Communications Corporation, a
------------------
Delaware corporation ("Flycast-Delaware"). Flycast-Delaware and Flycast-
----------------
California are sometimes referred to in this Agreement as the "Constituent
-----------
Corporations."
- ------------
RECITALS
--------
A. Flycast-Delaware is a corporation duly organized and existing
under the laws of the State of Delaware and has an authorized capital of
29,904,000 shares, 20,000,000 of which are designated "Common Stock," $0.0001
------------
par value, and 9,904,000 of which are designated "Preferred Stock," $0.0001 par
---------------
value. The authorized Preferred Stock is divided into series, 920,000 shares of
which are designated Series A Preferred Stock, 5,500,000 shares of which are
designated Series B Preferred Stock, and 3,484,000 shares of which are
designated Series C Preferred Stock. As of the date hereof, 100 shares of
Flycast-Delaware Common Stock were issued and outstanding, all of which are held
by Flycast-California, and no shares of Preferred Stock were issued and
outstanding.
B. Flycast-California is a corporation duly organized and existing
under the laws of the State of California and has an authorized capital of
29,904,000 shares, 20,000,000 of which are designated "Common Stock," $0.0001
------------
par value, and 9,904,000 of which are designated "Preferred Stock," $0.0001 par
---------------
value. The authorized Preferred Stock is divided into series, 920,000 shares of
which are designated Series A Preferred Stock, 5,500,000 shares of which are
designated Series B Preferred Stock, and 3,484,000 shares of which are
designated Series C Preferred Stock. As of the date hereof, 2,663,837 shares
of Common Stock were issued and outstanding, 911,295 shares of Series A
Preferred Stock were issued and outstanding, 5,329,043 shares of Series B
Preferred Stock were issued and outstanding and 1,996,344 shares of Series C
Preferred Stock were issued and outstanding.
C. The Board of Directors of Flycast-California has determined that,
for the purpose of effecting the reincorporation of Flycast-California in the
State of Delaware, it is advisable and in the best interests of Flycast-
California that Flycast-California merge with and into Flycast-Delaware upon the
terms and conditions provided in this Agreement.
D. The respective Boards of Directors of Flycast-Delaware and
Flycast-California have approved this Agreement and have directed that this
Agreement be submitted to a vote of their respective stockholders and executed
by the undersigned officers.
-1-
<PAGE>
AGREEMENT
---------
In consideration of the mutual agreements and covenants set forth
herein, Flycast-Delaware and Flycast-California hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
1. MERGER.
------
1.1 MERGER. In accordance with the provisions of this Agreement,
------
the Delaware General Corporation Law and the California General Corporation Law,
Flycast-California shall be merged with and into Flycast-Delaware (the
"Merger"), the separate existence of Flycast-California shall cease and Flycast-
------
Delaware shall be, and is sometimes referred to below as, the "Surviving
---------
Corporation," and the name of the Surviving Corporation shall be Flycast
- -----------
Communications Corporation.
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective upon
------------------------
completion of the following actions:
(a) Adoption and approval of this Agreement and the Merger by the
stockholders of each Constituent Corporation in accordance with the applicable
requirements of the Delaware General Corporation Law and the California General
Corporation Law;
(b) The satisfaction or waiver of all of the conditions precedent
to the consummation of the Merger as specified in this Agreement; and
(c) The filing with the Secretary of State of Delaware of an
executed Certificate of Merger or an executed counterpart of this Agreement
meeting the requirements of the Delaware General Corporation Law.
The date and time when the Merger becomes effective is referred to in
this Agreement as the "Effective Date of the Merger."
----------------------------
1.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger, the
--------------------
separate existence of Flycast-California shall cease and Flycast-Delaware, as
the Surviving Corporation, (a) shall continue to possess all of its assets,
rights, powers and property as constituted immediately prior to the Effective
Date of the Merger, (b) shall be subject to all actions previously taken by its
and Flycast-California's Board of Directors, (c) shall succeed, without other
transfer, to all of the assets, rights, powers and property of Flycast-
California in the manner more fully set forth in Section 259 of the Delaware
General Corporation Law, (d) shall continue to be subject to all of the debts,
liabilities and obligations of Flycast-Delaware as constituted immediately prior
to the Effective Date of the Merger, and (e) shall succeed, without other
transfer, to all of the debts, liabilities and obligations of Flycast-California
in the same manner as if Flycast-Delaware had itself incurred them, all as more
fully provided under the applicable provisions of the Delaware General
Corporation Law and the California General Corporation Law.
-2-
<PAGE>
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
-----------------------------------------
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
----------------------------
of Flycast-Delaware as in effect immediately prior to the Effective Date of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.2 BYLAWS. The Bylaws of Flycast-Delaware as in effect immediately
------
prior to the Effective Date of the Merger shall continue in full force and
effect as the Bylaws of the Surviving Corporation until duly amended in
accordance with the provisions thereof and applicable law.
2.3 DIRECTORS AND OFFICERS. The directors and officers of Flycast-
----------------------
Delaware immediately prior to the Effective Date of the Merger shall be the
directors and officers of the Surviving Corporation until their successors shall
have been duly elected and qualified or as otherwise provided by law, the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
3. MANNER OF CONVERSION OF STOCK
-----------------------------
3.1 FLYCAST-CALIFORNIA COMMON STOCK. Upon the Effective Date of the
-------------------------------
Merger, each one share of Flycast-California Common Stock issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by the Constituent Corporations, the holder of such share or any other person,
be converted into and exchanged for one fully paid and nonassessable share of
Common Stock, $0.0001 par value, of the Surviving Corporation. No fractional
share interests of the Surviving Corporation shall be issued. Any fractional
share interests to which a holder would otherwise be entitled shall be
aggregated so that no Flycast-California shareholder shall receive cash in an
amount greater than the value of one (1) full share of Flycast-Delaware Common
Stock.
3.2 FLYCAST-CALIFORNIA PREFERRED STOCK. Upon the Effective Date of
----------------------------------
the Merger, each share of Flycast-California Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock issued and outstanding immediately
prior thereto, which shares are convertible into such number of shares of
Flycast-California Common Stock as set forth in the Flycast-California Articles
of Incorporation, as amended, shall, by virtue of the Merger and without any
action by the Constituent Corporations, the holder of such shares or any other
person, be converted into and exchanged for one fully paid and non-assessable
share of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock of the Surviving Corporation, $0.0001 par value, respectively,
having such rights, preferences and privileges as set forth in the Certification
of Incorporation of the Surviving Corporation, which shares of Preferred Stock
shall be convertible into the same number of shares of the Surviving
Corporation's Common Stock, $0.0001 par value as such share of Flycast-
California Preferred Stock was convertible into shares of Flycast-California
common stock immediately prior to the Effective Date of the Merger, subject to
adjustment pursuant to the terms of the Certificate of Incorporation of the
Surviving Corporation.
-3-
<PAGE>
3.3 FLYCAST-CALIFORNIA OPTIONS, STOCK PURCHASE RIGHTS AND CONVERTIBLE
-----------------------------------------------------------------
SECURITIES.
- ----------
(a) Upon the Effective Date of the Merger, the Surviving
Corporation shall assume the obligations of Flycast-California under Flycast-
California's Amended and Restated Investors' Rights Agreement, dated December
30, 1998, 1997 Stock Option Plan, 1999 Stock Option Plan, 1999 Employee Stock
Purchase Plan and 1999 Directors' Stock Option Plan and all other employee
benefit plans of Flycast-California. Each outstanding and unexercised option,
other right to purchase, or security convertible into, Flycast-California Common
Stock or Preferred Stock (a "Right") shall become, subject to the provisions in
-----
paragraph (c) hereof, an option, right to purchase, or a security convertible
into the Surviving Corporation's Common Stock or Preferred Stock, respectively,
on the basis of one share of the Surviving Corporation's Common Stock or
Preferred Stock, as the case may be, for each one share of Flycast-California
Common Stock or Preferred Stock, issuable pursuant to any such Right, on the
same terms and conditions and at an exercise price equal to the exercise price
applicable to any such Flycast-California Right at the Effective Date of the
Merger. This paragraph 3.3(a) shall not apply to Flycast-California Common Stock
or Preferred Stock. Such Common Stock and Preferred Stock are subject to
paragraph 3.1 and 3.2 hereof, respectively.
(b) A number of shares of the Surviving Corporation's Common
Stock and Preferred Stock shall be reserved for issuance upon the exercise or
conversion of Rights equal to the number of shares of Flycast-California Common
Stock and Preferred Stock so reserved immediately prior to the Effective Date of
the Merger.
(c) The assumed Rights shall not entitle any holder thereof to a
fractional share upon exercise or conversion unless the holder was entitled to a
fractional interest immediately prior to the Merger. In lieu thereof, any
fractional share interests to which a holder of an assumed Right (other than an
option issued pursuant to Flycast-Delaware's 1997 Stock Option Plan, 1999 Stock
Option Plan or 1999 Directors' Stock Option Plan) would otherwise be entitled
upon exercise or conversion shall be aggregated (but only with other similar
Rights which have the same per share terms). To the extent that after such
aggregation, the holder would still be entitled to a fractional share with
respect thereto upon exercise or conversion, the holder shall be entitled upon
the exercise or conversion of all such assumed Rights pursuant to their terms
(as modified herein), to one full share of Common Stock or Preferred Stock in
lieu of such fractional share. With respect to each class of such similar
Rights, no holder will be entitled to more than one full share in lieu of a
fractional share upon exercise or conversion.
Notwithstanding the foregoing, with respect to options issued under
the Flycast-California 1997 Stock Option Plan or 1999 Stock Option Plan that are
assumed in the Merger, the number of shares of Common Stock to which the holder
would be otherwise entitled upon exercise of each such assumed option following
the Merger shall be rounded down to the nearest whole number and the exercise
price shall be rounded up to the nearest whole cent. In addition, no
"additional benefits" (within the meaning of Section 424(a)(2) of the Internal
Revenue Code of 1986, as amended) shall be accorded to the optionees pursuant to
the assumption of their options.
-4-
<PAGE>
3.4 FLYCAST-DELAWARE COMMON STOCK. Upon the Effective Date of the
-----------------------------
Merger, each share of Common Stock, $0.0001 par value, of Flycast-Delaware
issued and outstanding immediately prior thereto shall, by virtue of the Merger
and without any action by Flycast-Delaware, the holder of such shares or any
other person, be canceled and returned to the status of authorized but unissued
shares.
3.5 EXCHANGE OF CERTIFICATES. After the Effective Date of the
------------------------
Merger, each holder of an outstanding certificate representing shares of
Flycast-California Common Stock or Preferred Stock may be asked to surrender the
same for cancellation to an exchange agent, whose name will be delivered to
holders prior to any requested exchange (the "Exchange Agent"), and each such
--------------
holder shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of the appropriate class and
series of the Surviving Corporation's capital stock into which the surrendered
shares were converted as herein provided. Until so surrendered, each
outstanding certificate theretofore representing shares of Flycast-California
capital stock shall be deemed for all purposes to represent the number of whole
shares of the appropriate class and series of the Surviving Corporation's
capital stock into which such shares of Flycast-California capital stock were
converted in the Merger.
The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to the Surviving Corporation or the Exchange Agent, have
and be entitled to exercise any voting and other rights with respect to and to
receive dividends and other distributions upon the shares of capital stock of
the Surviving Corporation represented by such outstanding certificate as
provided above.
Each certificate representing capital stock of the Surviving
Corporation so issued in the Merger shall bear the same legends, if any, with
respect to the restrictions on transferability as the certificates of Flycast-
California so converted and given in exchange therefor, unless otherwise
determined by the Board of Directors of the Surviving Corporation in compliance
with applicable laws.
If any certificate for shares of Surviving Corporation's stock is to
be issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
the Exchange Agent any transfer or other taxes payable by reason of the issuance
of such new certificate in a name other than that of the registered holder of
the certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
4. GENERAL
-------
4.1 COVENANTS OF FLYCAST-DELAWARE. Flycast-Delaware covenants and
-----------------------------
agrees that it will, on or before the Effective Date of the Merger:
-5-
<PAGE>
(a) Qualify to do business as a foreign corporation in the State of
California and irrevocably appoint an agent for service of process as required
under the provisions of Section 2105 of the California General Corporation Law.
(b) File any and all documents with the California Franchise Tax
Board necessary for the assumption by Flycast-Delaware of all of the franchise
tax liabilities of Flycast-California; and
(c) Take such other actions as may be required by the California
General Corporation Law.
4.2 FURTHER ASSURANCES. From time to time, as and when required by
------------------
Flycast-Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Flycast-California such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions,
as shall be appropriate or necessary in order to vest or perfect in or conform
of record or otherwise by Flycast-Delaware the title to and possession of all
the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Flycast-California and otherwise to carry out the
purposes of this Agreement, and the officers and directors of Flycast-Delaware
are fully authorized in the name and on behalf Flycast-California or otherwise
to take any and all such action and to execute and deliver any and all such
deeds and other instruments.
4.3 ABANDONMENT. At any time before the Effective Date of the
-----------
Merger, this Agreement may be terminated and the Merger may be abandoned for any
reason whatsoever by the Board of Directors of either Flycast-California or
Flycast-Delaware, or both, notwithstanding the approval of this Agreement by the
shareholders of Flycast-California or by the sole stockholder of Flycast-
Delaware, or by both.
4.4 AMENDMENT. The Boards of Directors of the Constituent Corporations
---------
may amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretary of State of the State of
Delaware, provided that an amendment made subsequent to the adoption of this
Agreement by the stockholders of either Constituent Corporation shall not: (a)
alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of such Constituent Corporation, (b) alter
or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (c) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class of shares or series of capital stock
of such Constituent Corporation.
4.5 REGISTERED OFFICE. The registered office of the Surviving
-----------------
Corporation in the State of Delaware is located at The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware, 19801, and The Corporation
Trust Company is the registered agent of the Surviving Corporation at such
address.
-6-
<PAGE>
4.6 FIRPTA NOTIFICATION.
-------------------
(a) On the Effective Date of the Merger, Flycast-California shall
deliver to Flycast-Delaware, as agent for the shareholders of Flycast-
California, a properly executed statement (the "Statement") in substantially the
---------
form attached hereto as Exhibit A. Flycast-Delaware shall retain the Statement
---------
for a period of not less than seven years and shall, upon request, provide a
copy thereof to any person that was a shareholder of Flycast-California
immediately prior to the Merger. In consequence of the approval of the Merger
by the shareholders of Flycast-California, (i) such shareholders shall be
considered to have requested that the Statement be delivered to Flycast-Delaware
as their agent and (ii) Flycast-Delaware shall be considered to have received a
copy of the Statement at the request of Flycast-California shareholders for
purposes of satisfying Flycast-Delaware's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
(b) Flycast-California shall deliver to the Internal Revenue
Service a notice regarding the Statement in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2).
4.7 AGREEMENT. Executed copies of this Agreement will be on file at
---------
the principal place of business of the Surviving Corporation at Flycast
Communications Corporation, 181 Fremont Street, Suite 120, San Francisco,
California 94105 and copies thereof will be furnished to any stockholder of
either Constituent Corporation, upon request and without cost.
4.8 GOVERNING LAW; JURISDICTION. This Agreement and all acts and
---------------------------
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the exclusive
jurisdiction and venue of the courts of the state and federal courts of San
Francisco County, California.
4.9 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
-7-
<PAGE>
The undersigned authorized representatives of the Constituent
Corporation have executed and acknowledged this Agreement as of the date first
set forth above.
Flycast Communications Corporation, a
Delaware corporation
___________________________________
George R. Garrick,
President and Chief Executive Officer
Flycast Communications Corporation, a
California corporation
___________________________________
George R. Garrick,
President and Chief Executive Officer
-8-
<PAGE>
EXHIBIT A -- FORM OF FIRPTA CERTIFICATE
March __, 1999
Assistant Commissioner (International)
Director, Office of Compliance
OP:I:C:E:666
950 L'Enfant Plaza South, S.W.
COMSAT Building
Washington, D.C. 20024
NOTICE TO THE INTERNAL REVENUE SERVICE OF FLYCAST COMMUNICATIONS
CORPORATION, UNITED STATES REAL PROPERTY HOLDING CORPORATION STATUS UNDER
TREASURY REGULATION 1..897-2(H)(2)
Dear Sir:
1. This Notice is being filed by Flycast Communications Corporation, a
California Corporation, ("Target") pursuant to section 1.897-2(h)(2) of the
Treasury Regulations promulgated under the Internal Revenue Code of 1986, as
amended (the "Code").
2. The undersigned, on behalf of Target hereby declares that stock of
Target is not a United States real property interest within the meaning of
section 897 of the Code because Target is not and has not been a United States
real property holding corporation as that term is defined in section 897(c) (2)
of the Code during the applicable period specified in section 897(c) (1) (A)
(ii) of the Code.
3. Target's United States taxpayer identifying number is: 77-0431028
4. Target's address is:
181 Fremont Street
Suite 120
San Francisco, CA 94105
5. In connection with the acquisition of Target by Flycast Communications
Corporation, a Delaware Corporation ("Acquiror"), the undersigned provided the
attached statement to Acquiror declaring that an interest in Target is not a
United States real property interest. The statement was voluntarily provided in
response to a request from the transferee, Acquiror under Regulation 1.1445-2(c)
(3) (i).
Acquiror's United States taxpayer identifying number is: 77-0431028
<PAGE>
Acquiror's address is:
181 Fremont Street
Suite 120
San Francisco, CA 94105
6. No supplemental statements pursuant to Treasury Regulations section
1.897-2(h) (5) are required to be filed herewith.
7. Under penalties of perjury the undersigned declares that he has
examined this certification, and the attachment hereto, and to the best of his
knowledge and belief they are true, correct and complete. The undersigned
further declares that he is a responsible officer and that he has authority to
sign this document on behalf of Target.
A copy of the statement provided pursuant to Treasury Regulation
(S)(S)1.897-2(h)(2) and 1.1445-2(c)(3)(i) is attached.
Flycast Communications Corporation,
a California Corporation
___________________________
George R. Garrick, President and Chief
Executive Officer
<PAGE>
NOTICE OF NON U.S. REAL PROPERTY HOLDING CORPORATIONS STATUS
PURSUANT TO TREASURY REGULATION SECTION 1.897-2(H) AND
CERTIFICATION OF NON-FOREIGN STATUS
Pursuant to a certain Agreement and Plan of Merger (the "Agreement"), dated
as of March __ 1999, among Flycast Communications Corporation, a California
corporation ("Flycast California") and Flycast Communications Corporation, a
Delaware corporation ("Flycast Delaware"), Flycast California will be merged
with and into Flycast Delaware, with Flycast Delaware being the surviving
corporation. In completing such merger, Flycast Delaware will receive all of the
outstanding shares of Flycast California capital stock ("Flycast California
Capital Stock") in exchange for the consideration provided for in such
Agreement.
Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code"),
provides that a transferee of a U.S. Real Property Interest must withhold tax if
the transferor is a foreign person. In order to confirm that Flycast Delaware,
as a transferee, is not required to withhold tax upon the receipt of Flycast
California Capital Stock in exchange for the consideration for such shares of
Flycast California Capital Stock, the undersigned, in his capacity as Secretary
of Flycast California, hereby certifies as follows:
1. The Flycast California Capital Stock to be received by Flycast
Delaware pursuant to the Agreement does not constitute a U.S. Real Property
Interest as that term is defined in Section 897(c)(1)(A)(ii) of the Code;
2. The determination in Paragraph 1 above is based on a determination by
Flycast California that Flycast California is not and has not been a U.S. Real
Property Holding Corporation as that term is defined in Section 897(c)(2) of the
code during the five (5) year period preceding the date of this Notice, as
indicated below;
3. Flycast California is not a foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in the Code and the
Income Tax Regulations);
4. Flycast California's U.S. taxpayer identification number is 77-
0431028; and
5. Flycast California's office address is 181 Fremont Street, Suite 120,
San Francisco, CA 94105.
This Notice is made in accordance with the requirements of Treasury
Regulation Section 1.897-2(h). Flycast California understands that any false
statement contained herein could be punished by fine, imprisonment or both.
<PAGE>
Under penalties of perjury, I declare that I have examined this Notice and
to the best of my knowledge and belief it is true, correct and complete, and I
further declare that I have authority to sign this document on behalf of Flycast
California.
Flycast Communications Corporation, a
California corporation
_____________________________________
Dated: March ___, 1999 Jeffrey Y. Suto
Secretary
<PAGE>
Flycast Communications Corporation
A California Corporation
OFFICERS' CERTIFICATE OF APPROVAL OF THE MERGER
George R. Garrick and Jeffrey Y. Suto certify that:
1. They are the President and Chief Executive Officer and the Secretary,
respectively, of Flycast Communications Corporation, a corporation organized
under the laws of the State of California.
2. The corporation has authorized two classes of stock, designated
"Common Stock" and "Preferred Stock," respectively.
3. There were 2,663,837 shares of Common Stock and 8,236,682 shares of
Preferred Stock outstanding as of the record date (the "Record Date") and
entitled to vote by written consent of the shareholders whereby the Agreement
and Plan of Merger attached hereto (the "Merger Agreement") was approved.
4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of a number of shares of each class and series of
stock which equaled or exceeded the vote required.
5. The percentage vote required was more than 50% of the outstanding
shares of Common Stock and more than 50% of the outstanding shares of Preferred
Stock, voting as separate classes.
George R. Garrick and Jeffrey Y. Suto further declare under penalty of
perjury under the laws of the States of California and Delaware that each has
read the foregoing certificate and knows the contents thereof and that the same
is true and correct of his own knowledge.
Executed in Menlo Park, California on March __, 1999.
_______________________________________
George R. Garrick, President and
Chief Executive Officer
_______________________________________
Jeffrey Y. Suto, Secretary
<PAGE>
FOURTH AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FLYCAST COMMUNICATIONS CORPORATION
The undersigned, George Garrick and Jeffrey Y. Suto, hereby certify
that:
1. They are the duly elected and acting President and Secretary,
respectively, of Flycast Communications Corporation, a California corporation.
2. The Articles of Incorporation of this corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Flycast Communications Corporation
(the "Corporation").
-----------
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
(A) CLASSES OF STOCK. The Corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
------------ ---------
Stock." The total number of shares which the Corporation is authorized to issue
- -----
is Twenty-Nine Million Nine Hundred Four Thousand (29,904,000) shares, each with
a par value of $0.0001 per share. Twenty Million (20,000,000) shares shall be
Common Stock and Nine Million Nine Hundred Four Thousand (9,904,000) shares
shall be Preferred Stock.
(B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
-------------------------------------------------------
Preferred Stock authorized by these Restated Articles of Incorporation may be
issued from time to time in one or more series. The first series of Preferred
Stock shall be designated "Series A Preferred Stock" and shall consist of Nine
------------------------
Hundred Twenty Thousand (920,000) shares. The second series of Preferred Stock
shall be designated "Series B Preferred Stock" and shall consist of Five Million
------------------------
Five Hundred Thousand (5,500,000) shares. The third series of Preferred Stock
shall be designated "Series C Preferred Stock" and shall consist of Three
------------------------
Million Four Hundred Eighty Four Thousand (3,484,000) shares. The rights,
preferences, privileges, and restrictions granted to
<PAGE>
and imposed on the Series A, Series B and Series C Preferred Stock are as set
forth below in this Article III(B).
1. DIVIDEND PROVISIONS. Subject to the rights of any series of
-------------------
Preferred Stock which may from time to time come into existence, the holders of
shares of Series A, Series B or Series C Preferred Stock shall be entitled to
receive dividends, out of any assets legally available therefor, prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of the Corporation) on the Common Stock of the Corporation, at the rate of
(a) $0.08 per share per annum on each outstanding share of Series A Preferred
Stock (adjusted for any stock splits, dividends, combinations and the like), (b)
$0.106 per share per annum on each outstanding share of Series B Preferred Stock
(adjusted for any stock splits, dividends, combinations and the like) and (c)
$0.723 per share per annum on each outstanding share of Series C Preferred Stock
(adjusted for any stock splits, dividends, combinations and the like), payable
quarterly when, as and if declared by the Board of Directors. Such dividends
shall not be cumulative. After payment of all dividends of the Preferred Stock,
the holders of the Preferred Stock shall be entitled to participate with the
holders of the outstanding Common Stock as to any dividends payable on such
Common Stock, as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such dividends.
2. LIQUIDATION.
-----------
(a) PREFERENCE. In the event of any liquidation, dissolution or
----------
winding up of the Corporation, either voluntary or involuntary, subject to the
rights of any series of Preferred Stock that may from time to time come into
existence, the holders of Series B and Series C Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of the Corporation to the holders of Series A Preferred Stock and the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to $1.33 and $9.04 per share of Series B and Series C Preferred
Stock, respectively, (adjusted for any stock splits, dividends, combinations and
the like) plus all declared but unpaid dividends. If, upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series B and Series C Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then,
subject to the rights of any series of Preferred Stock that may from time to
time come into existence, the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series B and Series C Preferred Stock in proportion to the preferential amount
each such holder is otherwise entitled to receive. After such payment, the
holders of Series A Preferred shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the Corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to $1.00 per share (adjusted for any stock splits, dividends,
combinations and the like) plus any declared but unpaid dividends. If, upon the
occurrence of such event, the remaining assets and funds thus distributed among
the holders of the Series A Preferred Stock shall be insufficient to
<PAGE>
permit the payment to such holders of the full aforesaid preferential amounts,
then, subject to the rights of any series of Preferred Stock that may from time
to time come into existence, the entire remaining assets and funds of the
Corporation legally available for distribution after distribution to the holders
of Series B and Series C Preferred Stock shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the preferential amount
each such holder is otherwise entitled to receive.
(b) REMAINING ASSETS. Upon the completion of the distribution
----------------
required by Section 2(a) above and any other distribution that may be required
with respect to series of Preferred Stock that may from time to time come into
existence, the remaining assets of the Corporation available for distribution to
shareholders shall be distributed among the holders of the Series A and Series B
Preferred Stock and the Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A, and Series
B Preferred Stock) until (i) with respect to the holders of Series A Preferred
Stock, such holders shall have received an aggregate of $7.00 per share
(adjusted for any stock splits, dividends, combinations and the like) (including
amounts paid pursuant to Section 2(a) above) and (ii) with respect to the
holders of Series B Preferred Stock, such holders shall have received an
aggregate of $9.31 per share (adjusted for any stock splits, dividends,
combinations and the like) (including amounts paid pursuant to Section 2(a)
above); thereafter, subject to the rights of series of Preferred Stock that may
from time to time come into existence, if assets remain in the Corporation, the
holders of the Common Stock of the Corporation shall receive all of the
remaining assets of the Corporation pro rata based on the number of shares of
Common Stock held by each.
(c) CERTAIN ACQUISITIONS.
--------------------
(i) DEEMED LIQUIDATION. For purposes of this Section 2, a
------------------
liquidation, dissolution or winding up of the Corporation shall be deemed to be
occasioned by, or to include, (A) the acquisition of the Corporation by another
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation, but excluding
any merger effected exclusively for the purpose of changing the domicile of the
Corporation); or (B) a sale of all or substantially all of the assets of the
Corporation, unless the Corporation's shareholders of record as constituted
------
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
Corporation's acquisition or sale or otherwise) hold at least 50% of the voting
power of the surviving or acquiring entity in approximately the same relative
percentages after such acquisition or sale as before such acquisition or sale.
(ii) VALUATION OF CONSIDERATION. In the event of a deemed
--------------------------
liquidation as described in Section 2(c)(i) above, if the consideration received
by the Corporation is other than cash, its value will be deemed its fair market
value. Any securities to be delivered to the shareholders pursuant to this
Article III(B)(2)(c) shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
<PAGE>
(1) If traded on a securities exchange or the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty-day period ending
three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(3) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Corporation and the
holders of at least a majority of the voting power of all then outstanding
shares of Preferred Stock.
(B) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than restrictions
arising solely by virtue of a shareholder's status as an affiliate or former
affiliate of the Corporation) shall be to make an appropriate discount from the
market value determined as above in Section 2(c)(ii)(A) to reflect the
approximate fair market value thereof, as mutually determined by the Corporation
and the holders of at least a majority of the voting power of all then
outstanding shares of Preferred Stock.
(iii) NOTICE OF TRANSACTION. The Corporation shall give each holder
---------------------
of record of Series A, Series B or Series C Preferred Stock written notice of
such impending transaction not later than twenty (20) days prior to the
shareholders' meeting called to approve such transaction, or twenty (20) days
prior to the closing of such transaction, whichever is earlier, and shall also
notify such holders in writing of the final approval of such transaction. The
first of such notices shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 2, and the Corporation
shall thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
Corporation has given the first notice provided for herein or sooner than ten
(10) days after the Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of Preferred Stock that are entitled to such
notice rights or similar notice rights and that represent at least a majority of
the voting power of all then outstanding shares of such Preferred Stock.
(iv) EFFECT OF NONCOMPLIANCE. In the event the requirements of this
-----------------------
Section 2(c) are not complied with, the Corporation shall forthwith either cause
the closing of the transaction to be postponed until such time as the
requirements of this Section 2 have been complied with, or cancel such
transaction, in which event the rights, preferences and privileges of the
holders of the Series A, Series B and Series C Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in Section 2(c)(iii) hereof.
<PAGE>
3. REDEMPTION.
----------
(a) Subject to the rights of any series of Preferred Stock which
may from time to time come into existence, at any time after May 31, 2002, but
within thirty (30) days (the "Redemption Date") after the receipt by the
---------------
Corporation of a written request (a "Redemption Election") from the holders of
---------- --------
not less than sixty-six and two-thirds percent (66-2/3%) of the then outstanding
Series A and Series B Preferred Stock (on an as-converted basis), voting
together as a single class, that all or some of such holders' shares be redeemed
(the "Redemption Shares"), and concurrently with surrender by such holders of
-----------------
the certificates representing such shares, the Corporation shall, as provided in
this Section 3 and to the extent it may lawfully do so, redeem the shares
specified in such request by paying in cash therefor a sum per share equal to
$1.00 and $1.33 per share of Series A and Series B Preferred Stock,
respectively, (as adjusted for any stock dividends, combinations or splits with
respect to such shares) plus an accrued but unpaid per share amount equal to
$0.08 and $0.106 per year, respectively (as adjusted for any stock splits,
dividends, combinations and the like with respect to such shares), compounded
annually from the "Purchase Date" (as defined in Section 4(d)(i)(A) of this
Section (B)) with respect to each such series of Preferred Stock (the term
"Redemption Price" shall refer to the respective Redemption Price of each series
----------------
of Preferred Stock, as applicable). In the event of the receipt by the
Corporation of a Redemption Election, the Corporation shall fix a date for the
redemption of the shares of Series A Preferred Stock and Series B Preferred
Stock requested to be redeemed by the holders thereof, which date shall in no
event be later than sixty (60) days following the receipt of the Redemption
Election by the Corporation (the "Redemption Date"). Any redemption effected
---------------
pursuant to this subsection 3(a) shall be made on a pro rata basis among the
holders of the Series A and Series B Preferred Stock in proportion to the
Redemption Price for the shares to be redeemed from such holders.
(b) Subject to the rights of any series of Preferred Stock which
may from time to time come into existence, at any time after May 31, 2002, but
within thirty (30) days (the "Redemption Date") after the receipt by the
---------------
Corporation of a written request (a "Redemption Election") from the holders (the
-------------------
"Electing Shareholders") of not less than sixty-six and two-thirds percent (66-
---------------------
2/3%) of the then outstanding Series C Preferred Stock (on an as-converted
basis), voting together as a single class, that all or some of such holders'
shares be redeemed, and concurrently with surrender by such holders of the
certificates representing such shares, the Corporation shall, as provided in
this Section 3 and to the extent it may lawfully do so, redeem the shares
specified in such request by paying in cash therefor a sum per share equal to
$9.04 per share (as adjusted for any stock dividends, combinations or splits
with respect to such shares) plus an accrued but unpaid per share amount equal
to $0.723 per year (as adjusted for any stock splits, dividends, combinations
and the like with respect to such shares), compounded annually from the
"Purchase Date" (as defined in Section 4(d)(i)(A) of this Section (B)) with
respect to each such series of Preferred Stock (the term "Redemption Price"
----------------
shall refer to the respective Redemption Price of each series of Preferred
Stock, as applicable). In the event of the receipt by the Corporation of a
Redemption Election, the Corporation shall fix a date for the redemption of the
shares of Series C Preferred Stock requested to be redeemed by the holders
thereof, which date shall in no event be later than sixty (60) days following
the receipt of the Redemption Election by the Corporation (the "Redemption
----------
Date").
- ----
<PAGE>
(c) Subject to the rights of series of Preferred Stock which may
from time to time come into existence, within fifteen (15) days following its
receipt of the Redemption Election, the Corporation shall mail a written notice
first class postage prepaid, to each holder of record (at the close of business
on the business day next preceding the day on which notice is given) of
Preferred Stock to be redeemed, at the address last shown on the records of the
Corporation for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares which the holder could elect to have
redeemed the Redemption Date, the Redemption Price, the place at which payment
may be obtained and where such holder should surrender to the Corporation, his,
her or its certificate or certificates representing the shares to be redeemed
(the "Redemption Notice"). The holder of any shares of Preferred Stock may
-----------------
exercise such holders' redemption rights as to such shares or any part thereof,
subject to the limitations set forth in Section 3(d) hereof, by delivering to
the Corporation during regular business hours, at the office of any transfer
agent of the Corporation for the Preferred Stock or at such other place as may
designated by the Corporation in the Redemption Notice, at any time within 30
days following the date of receipt of such Redemption Notice by the holder, a
written notice (each a "Holder's Notice") stating that such holder elects to
---------------
have redeemed all or part of the shares of Preferred Stock held by the holder
which are eligible for redemption in accordance with the Redemption Notice. On
or after the Redemption Date, each holder of Series A, Series B or Series C
Preferred Stock that has elected to have shares of Preferred Stock redeemed
shall surrender to the Corporation the certificate or certificates representing
such shares, in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price of such shares shall be payable to the order
of the person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be cancelled. As promptly
as practicable after receipt of the surrendered certificate or certificates (and
in no event more than 10 days following the Redemption Date) the Corporation
shall issue and deliver to or upon the written order of such holder, at such
office or other place designated by the holder, a check for cash with respect
the shares so redeemed. In the event less than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares.
(d) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Series A, Series B or Series C Preferred Stock designated for
redemption in each Holder's Notice as holders of Series A, Series B or Series C
Preferred Stock (except the right to receive the Redemption Price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. Subject to the rights of series of Preferred Stock which may from
time to time come into existence, if the funds of the Corporation legally
available for redemption of the Redemption Shares on any Redemption Date are
insufficient to redeem the total number of the Redemption Shares on such date,
those funds which are legally available will be used to redeem the maximum
possible number of such shares ratably among the Electing Shareholders based
upon the proportion of the Redemption Shares held by each Electing Shareholder.
The shares of Series A, Series B or Series C Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. Subject to the rights of any series of Preferred Stock which may from
time to time come
<PAGE>
into existence, at any time thereafter when additional funds of the Corporation
are legally available for the redemption of shares of Series A and Series B, or
Series C Preferred Stock, such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obliged to redeem on any
Redemption Date but which it has not redeemed.
(e) At least 10 days prior to each Redemption Date, the
Corporation shall deposit the Redemption Price of all shares of Series A and
Series B, or Series C Preferred Stock designated for redemption in the Holders'
Notices, and not yet redeemed or converted, with a bank or trust corporation
having aggregate capital and surplus in excess of $100,000,000 as a trust fund
for the benefit of the respective holders of the shares designated for
redemption and not yet redeemed, with irrevocable instructions and authority to
the bank or trust corporation to publish the notice of redemption thereof and
pay the Redemption Price for such shares to their respective holders on or after
the Redemption Date, upon receipt of notification from the Corporation that such
holder has surrendered his, her or its share certificate to the Corporation
pursuant to Section (3)(c) above. As of the date of such deposit (even if prior
to the Redemption Date), the deposit shall constitute full payment of the shares
to their holders, and from and after the date of the deposit the shares so
called for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be shareholders with respect
to such shares and shall have no rights with respect thereto except the rights
to receive from the bank or trust corporation payment of the Redemption Price of
the shares, without interest, upon surrender of their certificates therefor, and
the right to convert such shares as provided in Article III(B)(4) hereof. Such
instructions shall also provide that any moneys deposited by the Corporation
pursuant to this Section (3)(e) for the redemption of shares thereafter
converted into shares of the Corporation's Common Stock pursuant to Section
III(B)(4) hereof prior to the Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any moneys deposited
by the Corporation pursuant to this Section (3)(e) remaining unclaimed at the
expiration of two (2) years following the Redemption Date shall thereafter be
returned to the Corporation upon its request expressed in a resolution of its
Board of Directors.
4. CONVERSION. The holders of the Series A, Series B and Series C
----------
Preferred Stock shall have conversion rights as follows (the "Conversion
----------
Rights"):
- ------
(a) RIGHT TO CONVERT. Subject to Section 4(c), each share of
----------------
Series A, Series B and Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share and, in respect of any share which is the subject of a Redemption Notice,
on or prior to the Redemption Date as has been fixed in such Redemption Notice,
at the office of the Corporation or any transfer agent for such stock, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing (i) $1.00 in the case of the Series A Preferred Stock, (ii) $1.33 in
the case of the Series B Preferred Stock and (iii) $9.04 in the case of the
Series C Preferred Stock by the Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. The initial Conversion Price per share shall be
$1.00 for shares of Series A Preferred Stock, $1.33 for shares of Series B
Preferred Stock and $9.04 for shares of Series C Preferred Stock. Such initial
Conversion Price shall be subject to adjustment as set forth in Section 4(d)
below.
<PAGE>
(b) AUTOMATIC CONVERSION. Each share of Series A, Series B or
--------------------
Series C Preferred Stock shall automatically be converted into shares of Common
Stock at the Conversion Price at the time in effect for such share immediately
upon the earlier of (i) except as provided below in Section 4(c), the
Corporation's sale of its Common Stock in a firm commitment underwritten public
offering pursuant to a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), the public offering price of which is not
less than $8.00 per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalization) and which results in aggregate cash proceeds to the
Corporation of $15,000,000 (net of underwriting discounts and commissions) (a
"Qualified Public Offering") or (ii) the date specified by written consent or
agreement of the holders of a majority of the then outstanding shares of Series
A, Series B and Series C Preferred Stock, voting together as a class.
(c) MECHANICS OF CONVERSION. Before any holder of Series A, Series
-----------------------
B or Series C Preferred Stock shall be entitled to convert the same into shares
of Common Stock, he shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for the
Series A, Series B or Series C Preferred Stock, and shall give written notice to
the Corporation at its principal corporate office, of the election to convert
the same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Series A, Series B or Series C Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A, Series B or
Series C Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act,
the conversion may, at the option of any holder tendering Series A, Series B or
Series C Preferred Stock for conversion, be conditioned upon the closing with
the underwriters of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive Common Stock upon conversion of such
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR CERTAIN
-----------------------------------------------------------
DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of the Series
- -------------------------------------------
A, Series B and Series C Preferred Stock shall be subject to adjustment from
time to time as follows:
(i) (A) If the Corporation shall issue, after the date upon
which any shares of Series A, Series B or Series C Preferred Stock were first
issued (the "Purchase Date" with respect to such series), any Additional Stock
-------------
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for such series in effect immediately prior to the
issuance of such Additional Stock, the Conversion Price for such series in
effect immediately prior to each such issuance shall automatically (except as
otherwise provided in this clause (i)) be adjusted to a price determined by
multiplying such Conversion
<PAGE>
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance (the "Outstanding
-----------
Common") plus the number of shares of Common Stock that the aggregate
- ------
consideration received by the Corporation for such issuance would purchase at
such Conversion Price; and the denominator of which shall be the number of
Outstanding Common plus the number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price for the Series A, Series B
and Series C Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for in Sections
4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of such Conversion Price pursuant
to this Section 4(d)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by the Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or after the
applicable Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this Section 4(d)(i) and Section 4(d)(ii):
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in Sections
4(d)(i)(C) and 4(d)(i)(D)), if any, received by the Corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without limitation,
the passage of time,
<PAGE>
but without taking into account potential antidilution adjustments) for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the Corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by the Corporation
(without taking into account potential antidilution adjustments) upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in Sections 4(d)(i)(C) and 4(d)(i)(D)).
(3) In the event of any change in the number of shares of Common
Stock deliverable or in the consideration payable to the Corporation upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not limited to, a change
resulting from the antidilution provisions thereof, the Conversion Price of each
of the Series A, Series B and Series C Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Conversion Price of each of the Series A, Series B and Series C Preferred Stock,
to the extent in any way affected by or computed using such options, rights or
securities or options or rights related to such securities, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities which remain in effect) actually issued
upon the exercise of such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to Sections 4(d)(i)(E)(1) and (2)
shall be appropriately adjusted to reflect any change, termination or expiration
of the type described in either Section 4(d)(i)(E)(3) or 4(d)(i)(E)(4).
(ii) "Additional Stock" shall mean any shares of Common Stock issued
----------------
(or deemed to have been issued pursuant to Section 4(d)(i)(E)) by the
Corporation after the Purchase Date) other than
(A) Common Stock issued pursuant to a transaction described in
Section 4(d)(iii) hereof,
(B) Up to 4,702,310 shares of Common Stock issuable or issued to
employees, consultants, officers or directors of the Corporation directly or
pursuant
<PAGE>
to a stock option plan or restricted stock plan (including shares issued under
such plans) approved by the Board of Directors of the Corporation, which number
is inclusive of all issuances since the date of incorporation of the
Corporation, net of any cancellations or repurchases,
(C) Capital stock, or options or warrants to purchase capital stock,
issued to financial institutions or lessors in connection with commercial credit
arrangements, equipment financings or similar transactions,
(D) Shares of Common Stock or Preferred Stock issuable upon exercise
of warrants outstanding as of the date of these Amended and Restated Articles of
Incorporation,
(E) Capital stock or warrants or options to purchase capital stock
issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board of Directors of the
Corporation,
(F) Shares of Common Stock issued or issuable upon conversion of the
Series A, Series B or Series C Preferred Stock,
(G) Warrants to purchase up to 7,143 shares of Common Stock issued
to three individuals that are not subject to the categories set forth above, and
(H) Shares of Common Stock issued or issuable in a Qualified Public
Offering.
(iii) In the event the Corporation should at any time or from time to
time after the Purchase Date fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
- -------------------------
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of each of the Series A, Series B and Series C Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number of shares
issuable with respect to Common Stock Equivalents determined from time to time
in the manner provided for deemed issuances in Section 4(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at any time
after the Purchase Date is decreased by a combination of the outstanding shares
of
<PAGE>
Common Stock, then, following the record date of such combination, the
Conversion Price for each of the Series A, Series B and Series C Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event the Corporation shall declare a
-------------------
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in Section 4(d)(iii), then, in each such case
for the purpose of this Section 4(e), the holders of Series A, Series B and
Series C Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or in Section 2 hereby) provision shall be made so that the
holders of the Series A, Series B and Series C Preferred Stock shall thereafter
be entitled to receive upon conversion of the Series A, Series B and Series C
Preferred Stock the number of shares of stock or other securities or property of
the Company or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of the Series A, Series
B and Series C Preferred Stock after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Conversion Price then
in effect and the number of shares purchasable upon conversion of the Series A,
Series B and Series C Preferred Stock) shall be applicable after that event and
be as nearly equivalent as practicable.
(g) NO IMPAIRMENT. The Corporation will not, by amendment of its
-------------
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
------------------------------------------------------
(i) No fractional shares shall be issued upon the conversion of
any share or shares of the Series A, Series B or Series C Preferred Stock, and
the number of shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Series A, Series B or Series C Preferred Stock the holder is at the time
<PAGE>
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series A, Series B or Series C Preferred Stock pursuant to
this Section 4, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A, Series B or Series C Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A, Series B
or Series C Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price for such series of Preferred Stock at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of a share of
such series of Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A, Series B or Series C Preferred Stock, at
least 20 days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A, Series B and Series C Preferred Stock, such number
of its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of Series A, Series B and Series C
Preferred Stock; and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Series A, Series B and Series C Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including, without limitation, engaging in best efforts to obtain the
requisite shareholder approval of any necessary amendment to these articles.
(k) NOTICES. Any notice required by the provisions of this Section 4
-------
to be given to the holders of shares of Series A, Series B or Series C Preferred
Stock shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of the Corporation.
<PAGE>
5. VOTING RIGHTS.
-------------
(a) Except as otherwise expressly provided herein or by law, the
holder of each share of Series A, Series B and Series C Preferred Stock shall
have the right to one vote for each share of Common Stock into which such
Preferred Stock could then be converted, and with respect to such vote, such
holder shall have full voting rights and powers equal to the voting rights and
powers of the holders of Common Stock, and shall be entitled, notwithstanding
any provision hereof, to notice of any shareholders' meeting in accordance with
the bylaws of the Corporation, and shall be entitled to vote, together with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote. Fractional votes shall not, however, be
permitted and any fractional voting rights available on an as-converted basis
(after aggregating all shares into which shares of Series A, Series B and Series
C Preferred Stock, respectively, held by each holder could be converted) shall
be rounded to the nearest whole number (with one-half being rounded upward).
(b) The holders of the Series A Preferred Stock, as a class, shall
be entitled to elect one (1) member of the Board of Directors at each meeting or
pursuant to each consent of the Corporation's shareholders for the election of
directors. The holders of the Series B and Series C Preferred Stock, voting
together as a single class, shall be entitled to elect two (2) members of the
Board of Directors at each meeting or pursuant to each consent of the
Corporation's shareholders for the election of directors.
(c) In the case of any vacancy in the office of a director elected
by the holders of Series A Preferred Stock in accordance with the provisions of
subsection (5)(b) above, the holders of a majority of the outstanding shares of
Series A Preferred Stock shall elect a successor to serve for the unexpired term
of the director whose office is vacant. In the case of any vacancy in the office
of a director occurring among the directors elected by the holders of Series B
and Series C Preferred Stock in accordance with the provisions of subsection
(5)(b) above, the remaining director so elected by the holders of the
outstanding shares of Series B and Series C Preferred Stock (or, if there is no
remaining director, the holders of a majority of the outstanding shares of
Series B and Series C Preferred Stock) shall elect a successor or successors to
serve for the unexpired term of the director whose office is vacant. In the case
of any vacancy in the office of a director elected by the holders of Common
Stock in accordance with the provisions of subsection (5)(d) above, the holders
of a majority of the outstanding shares of Common Stock shall elect a successor
to serve for the unexpired term of the director whose office is vacant.
(d) Any additional directors shall be elected by all of the
holders of outstanding stock of the Corporation.
6. PROTECTIVE PROVISIONS. Subject to the rights of any series of
---------------------
Preferred Stock which may from time to time come into existence, so long as any
shares of Series A, Series B or Series C Preferred Stock are outstanding, the
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least
<PAGE>
two-thirds (2/3) of the then outstanding shares of Series A, Series B and Series
C Preferred Stock, voting together as a class:
(a) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any other transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Corporation is disposed of,
provided that this Section 6(a)(ii) shall not apply to a merger effected
- --------
exclusively for the purpose of changing the domicile of the Corporation;
(b) alter or change the rights, preferences or privileges of the
shares of Series A, Series B or Series C Preferred Stock so as to affect
adversely the shares of such series;
(c) increase or decrease (other than by redemption or conversion) the
total number of authorized shares of Series A, Series B or Series C Preferred
Stock;
(d) authorize or issue, or obligate itself to issue, any other equity
security, including any other security convertible into or exercisable for any
equity security having a preference over, or being on a parity with, the Series
A, Series B or Series C Preferred Stock with respect to any preferences, rights
or privileges of such Preferred Stock;
(e) redeem, purchase or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose) any share or shares of Preferred Stock or
Common Stock; provided, however, that this restriction shall not apply to the
-------- -------
repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for the Company or any
subsidiary pursuant to agreements under which the Company has the option to
repurchase such shares at cost or at cost upon the occurrence of certain events,
such as the termination of employment;
(f) pay or declare any dividend on the Common Stock or other
securities junior to the Series A, Series B or Series C Preferred Stock with
respect to dividends;
(g) amend Section 5 hereof;
(h) amend the authorized number of members of the Board of Directors;
or
(i) amend the Articles of Incorporation or Bylaws of the Corporation.
Notwithstanding the foregoing, in the event a proposed amendment or
proposed waiver of provisions of the Articles of Incorporation of the
Corporation would adversely affect one or more series of Preferred Stock (the
"Affected Series") in a different manner than other series of Preferred Stock,
---------------
such amendment or waiver shall require the approval (by vote or written consent,
as provided by law) of the holders of at least two-thirds (2/3) of the then
outstanding shares of each of the Affected Series, each voting together as a
class.
<PAGE>
7. STATUS OF REDEEMED OR CONVERTED STOCK. In the event any shares of
-------------------------------------
Preferred Stock shall be redeemed pursuant to Section 3 or converted pursuant to
Section 4 hereof, the shares so redeemed or converted shall be canceled and
shall not be issuable by the Corporation. The Articles of Incorporation of the
Corporation shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
8. REPURCHASE OF SHARES. In connection with repurchases by the
--------------------
Corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
(C) COMMON STOCK.
------------
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
------------------
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 2 of Division (B) of this Article III.
3. REDEMPTION. The Common Stock is not redeemable.
----------
4. VOTING RIGHTS. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE IV
(A) The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
(B) The Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) to the fullest
extent permissible under California law.
(C) Any amendment or repeal or modification of the foregoing provisions of
this Article IV by the shareholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification."
* * *
<PAGE>
3. The foregoing amendment has been approved by the Board of Directors of
this corporation.
4. The foregoing amendment was approved by the holders of the requisite
number of shares of this corporation in accordance with Sections 902 and 903 of
the California General Corporation Law. The total number of outstanding shares
entitled to vote with respect to the foregoing amendment was 2,656,406 shares of
Common Stock, 911,295 shares of Series A Preferred Stock and 5,324,532 shares of
Series B Preferred Stock. The number of shares voting in favor of the foregoing
amendment equaled or exceeded the vote required. The percentage vote required
was a majority of the outstanding shares of Common Stock, voting separately as a
class, a majority of the outstanding shares of Series A and Series B Preferred
Stock, voting together as a class and a majority of the outstanding shares of
Series A Preferred Stock, voting separately as a class.
[Signature Page Follows]
<PAGE>
The undersigned certify under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Executed at San Francisco, California, on December 21, 1998.
/s/ George Garrick
------------------
George Garrick, President
/s/ Jeffrey Y. Suto
-------------------
Jeffrey Y. Suto, Secretary
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FLYCAST COMMUNICATIONS CORPORATION
The undersigned, George Garrick and Jeffrey Y. Suto, hereby certify
that:
1. They are the duly elected and acting President and Secretary,
respectively, of Flycast Communications Corporation, a Delaware corporation.
2. The Certificate of Incorporation of this corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Flycast Communications Corporation
(the "Corporation").
-----------
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Delaware General
Corporation Law.
ARTICLE IV
(A) CLASSES OF STOCK. The Corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
------------ ---------
Stock." The total number of shares which the Corporation is authorized to issue
- -----
is Twenty-Nine Million Nine Hundred Four Thousand (29,904,000) shares, each with
a par value of $0.0001 per share. Twenty Million (20,000,000) shares shall be
Common Stock and Nine Million Nine Hundred Four Thousand (9,904,000) shares
shall be Preferred Stock.
(B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
-------------------------------------------------------
Preferred Stock authorized by these Restated Certificate of Incorporation may be
issued from time to time in one or more series. The first series of Preferred
Stock shall be designated "Series A Preferred Stock" and shall consist of Nine
------------------------
Hundred Twenty Thousand (920,000) shares. The second series of Preferred Stock
shall be designated "Series B Preferred Stock" and shall consist of Five Million
------------------------
Five Hundred Thousand (5,500,000) shares. The third series of Preferred Stock
shall be designated "Series C Preferred Stock" and shall consist of Three
------------------------
Million Four Hundred Eighty Four Thousand (3,484,000) shares. The rights,
preferences, privileges, and restrictions granted to and imposed on the Series
A, Series B and Series C Preferred Stock are as set forth below in this Article
III(B).
<PAGE>
1. DIVIDEND PROVISIONS. Subject to the rights of any series of
-------------------
Preferred Stock which may from time to time come into existence, the holders of
shares of Series A, Series B or Series C Preferred Stock shall be entitled to
receive dividends, out of any assets legally available therefor, prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of the Corporation) on the Common Stock of the Corporation, at the rate of
(a) $0.08 per share per annum on each outstanding share of Series A Preferred
Stock (adjusted for any stock splits, dividends, combinations and the like), (b)
$0.106 per share per annum on each outstanding share of Series B Preferred Stock
(adjusted for any stock splits, dividends, combinations and the like) and (c)
$0.723 per share per annum on each outstanding share of Series C Preferred Stock
(adjusted for any stock splits, dividends, combinations and the like), payable
quarterly when, as and if declared by the Board of Directors. Such dividends
shall not be cumulative. After payment of all dividends of the Preferred Stock,
the holders of the Preferred Stock shall be entitled to participate with the
holders of the outstanding Common Stock as to any dividends payable on such
Common Stock, as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such dividends.
2. LIQUIDATION.
-----------
(a) PREFERENCE. In the event of any liquidation, dissolution or
----------
winding up of the Corporation, either voluntary or involuntary, subject to the
rights of any series of Preferred Stock that may from time to time come into
existence, the holders of Series B and Series C Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets of the Corporation to the holders of Series A Preferred Stock and the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to $1.33 and $9.04 per share of Series B and Series C Preferred
Stock, respectively, (adjusted for any stock splits, dividends, combinations and
the like) plus all declared but unpaid dividends. If, upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series B and Series C Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then,
subject to the rights of any series of Preferred Stock that may from time to
time come into existence, the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series B and Series C Preferred Stock in proportion to the preferential amount
each such holder is otherwise entitled to receive. After such payment, the
holders of Series A Preferred shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the Corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to $1.00 per share (adjusted for any stock splits, dividends,
combinations and the like) plus any declared but unpaid dividends. If, upon the
occurrence of such event, the remaining assets and funds thus distributed among
the holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then,
subject to the rights of any series of Preferred Stock that may from time to
time come into existence, the entire remaining assets and funds of the
Corporation legally available for distribution after distribution to the holders
of Series B and Series C Preferred Stock shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the preferential amount
each such holder is otherwise entitled to receive.
(b) REMAINING ASSETS. Upon the completion of the distribution
----------------
required by Section 2(a) above and any other distribution that may be required
with respect to series of Preferred Stock that may from time to time come into
existence, the remaining assets of the Corporation available for distribution to
shareholders shall be distributed among the holders of the Series A and Series B
<PAGE>
Preferred Stock and the Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A, and Series
B Preferred Stock) until (i) with respect to the holders of Series A Preferred
Stock, such holders shall have received an aggregate of $7.00 per share
(adjusted for any stock splits, dividends, combinations and the like) (including
amounts paid pursuant to Section 2(a) above) and (ii) with respect to the
holders of Series B Preferred Stock, such holders shall have received an
aggregate of $9.31 per share (adjusted for any stock splits, dividends,
combinations and the like) (including amounts paid pursuant to Section 2(a)
above); thereafter, subject to the rights of series of Preferred Stock that may
from time to time come into existence, if assets remain in the Corporation, the
holders of the Common Stock of the Corporation shall receive all of the
remaining assets of the Corporation pro rata based on the number of shares of
Common Stock held by each.
(c) CERTAIN ACQUISITIONS.
--------------------
(i) DEEMED LIQUIDATION. For purposes of this Section 2, a
------------------
liquidation, dissolution or winding up of the Corporation shall be deemed to be
occasioned by, or to include, (A) the acquisition of the Corporation by another
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation, but excluding
any merger effected exclusively for the purpose of changing the domicile of the
Corporation); or (B) a sale of all or substantially all of the assets of the
Corporation, unless the Corporation's shareholders of record as constituted
------
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
Corporation's acquisition or sale or otherwise) hold at least 50% of the voting
power of the surviving or acquiring entity in approximately the same relative
percentages after such acquisition or sale as before such acquisition or sale.
(ii) VALUATION OF CONSIDERATION. In the event of a deemed
--------------------------
liquidation as described in Section 2(c)(i) above, if the consideration received
by the Corporation is other than cash, its value will be deemed its fair market
value. Any securities to be delivered to the shareholders pursuant to this
Article III(B)(2)(c) shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or the Nasdaq
National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty-day period ending
three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(3) If there is no active public market, the value shall
be the fair market value thereof, as mutually determined by the Corporation and
the holders of at least a majority of the voting power of all then outstanding
shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate of the Corporation) shall be to make an appropriate discount
from the market value determined as above in Section 2(c)(ii)(A) to reflect the
<PAGE>
approximate fair market value thereof, as mutually determined by the Corporation
and the holders of at least a majority of the voting power of all then
outstanding shares of Preferred Stock.
(iii) NOTICE OF TRANSACTION. The Corporation shall give each
---------------------
holder of record of Series A, Series B or Series C Preferred Stock written
notice of such impending transaction not later than twenty (20) days prior to
the shareholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 2, and the
Corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after the Corporation has given the first notice provided for herein or
sooner than ten (10) days after the Corporation has given notice of any material
changes provided for herein; provided, however, that such periods may be
shortened upon the written consent of the holders of Preferred Stock that are
entitled to such notice rights or similar notice rights and that represent at
least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
(iv) EFFECT OF NONCOMPLIANCE. In the event the requirements of
-----------------------
this Section 2(c) are not complied with, the Corporation shall forthwith either
cause the closing of the transaction to be postponed until such time as the
requirements of this Section 2 have been complied with, or cancel such
transaction, in which event the rights, preferences and privileges of the
holders of the Series A, Series B and Series C Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in Section 2(c)(iii) hereof.
3. REDEMPTION.
----------
(a) Subject to the rights of any series of Preferred Stock which may
from time to time come into existence, at any time after May 31, 2002, but
within thirty (30) days (the "Redemption Date") after the receipt by the
---------------
Corporation of a written request (a "Redemption Election") from the holders of
---------- --------
not less than sixty-six and two-thirds percent (66-2/3%) of the then outstanding
Series A and Series B Preferred Stock (on an as-converted basis), voting
together as a single class, that all or some of such holders' shares be redeemed
(the "Redemption Shares"), and concurrently with surrender by such holders of
-----------------
the certificates representing such shares, the Corporation shall, as provided in
this Section 3 and to the extent it may lawfully do so, redeem the shares
specified in such request by paying in cash therefor a sum per share equal to
$1.00 and $1.33 per share of Series A and Series B Preferred Stock,
respectively, (as adjusted for any stock dividends, combinations or splits with
respect to such shares) plus an accrued but unpaid per share amount equal to
$0.08 and $0.106 per year, respectively (as adjusted for any stock splits,
dividends, combinations and the like with respect to such shares), compounded
annually from the "Purchase Date" (as defined in Section 4(d)(i)(A) of this
Section (B)) with respect to each such series of Preferred Stock (the term
"Redemption Price" shall refer to the respective Redemption Price of each series
- -----------------
of Preferred Stock, as applicable). In the event of the receipt by the
Corporation of a Redemption Election, the Corporation shall fix a date for the
redemption of the shares of Series A Preferred Stock and Series B Preferred
Stock requested to be redeemed by the holders thereof, which date shall in no
event be later than sixty (60) days following the receipt of the Redemption
Election by the Corporation (the "Redemption Date"). Any redemption effected
---------------
pursuant to this subsection 3(a) shall be made on a pro rata basis among the
holders of the Series A and Series B Preferred Stock in proportion to the
Redemption Price for the shares to be redeemed from such holders.
<PAGE>
(b) Subject to the rights of any series of Preferred Stock which may
from time to time come into existence, at any time after May 31, 2002, but
within thirty (30) days (the "Redemption Date") after the receipt by the
---------------
Corporation of a written request (a "Redemption Election") from the holders (the
-------------------
"Electing Shareholders") of not less than sixty-six and two-thirds percent (66-
---------------------
2/3%) of the then outstanding Series C Preferred Stock (on an as-converted
basis), voting together as a single class, that all or some of such holders'
shares be redeemed, and concurrently with surrender by such holders of the
certificates representing such shares, the Corporation shall, as provided in
this Section 3 and to the extent it may lawfully do so, redeem the shares
specified in such request by paying in cash therefor a sum per share equal to
$9.04 per share (as adjusted for any stock dividends, combinations or splits
with respect to such shares) plus an accrued but unpaid per share amount equal
to $0.723 per year (as adjusted for any stock splits, dividends, combinations
and the like with respect to such shares), compounded annually from the
"Purchase Date" (as defined in Section 4(d)(i)(A) of this Section (B)) with
respect to each such series of Preferred Stock (the term "Redemption Price"
----------------
shall refer to the respective Redemption Price of each series of Preferred
Stock, as applicable). In the event of the receipt by the Corporation of a
Redemption Election, the Corporation shall fix a date for the redemption of the
shares of Series C Preferred Stock requested to be redeemed by the holders
thereof, which date shall in no event be later than sixty (60) days following
the receipt of the Redemption Election by the Corporation (the "Redemption
----------
Date").
- ----
(c) Subject to the rights of series of Preferred Stock which may from
time to time come into existence, within fifteen (15) days following its receipt
of the Redemption Election, the Corporation shall mail a written notice first
class postage prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of Preferred Stock
to be redeemed, at the address last shown on the records of the Corporation for
such holder, notifying such holder of the redemption to be effected, specifying
the number of shares which the holder could elect to have redeemed the
Redemption Date, the Redemption Price, the place at which payment may be
obtained and where such holder should surrender to the Corporation, his, her or
its certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). The holder of any shares of Preferred Stock may exercise
- ------------------
such holders' redemption rights as to such shares or any part thereof, subject
to the limitations set forth in Section 3(d) hereof, by delivering to the
Corporation during regular business hours, at the office of any transfer agent
of the Corporation for the Preferred Stock or at such other place as may
designated by the Corporation in the Redemption Notice, at any time within 30
days following the date of receipt of such Redemption Notice by the holder, a
written notice (each a "Holder's Notice") stating that such holder elects to
---------------
have redeemed all or part of the shares of Preferred Stock held by the holder
which are eligible for redemption in accordance with the Redemption Notice. On
or after the Redemption Date, each holder of Series A, Series B or Series C
Preferred Stock that has elected to have shares of Preferred Stock redeemed
shall surrender to the Corporation the certificate or certificates representing
such shares, in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price of such shares shall be payable to the order
of the person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be cancelled. As promptly
as practicable after receipt of the surrendered certificate or certificates (and
in no event more than 10 days following the Redemption Date) the Corporation
shall issue and deliver to or upon the written order of such holder, at such
office or other place designated by the holder, a check for cash with respect
the shares so redeemed. In the event less than all the shares represented by
any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(d) From and after the Redemption Date, unless there shall have been
a default in payment of the Redemption Price, all rights of the holders of
shares of Series A, Series B or Series C Preferred Stock designated for
redemption in each Holder's Notice as holders of Series A,
<PAGE>
Series B or Series C Preferred Stock (except the right to receive the Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. Subject to the rights of series of Preferred Stock which
may from time to time come into existence, if the funds of the Corporation
legally available for redemption of the Redemption Shares on any Redemption Date
are insufficient to redeem the total number of the Redemption Shares on such
date, those funds which are legally available will be used to redeem the maximum
possible number of such shares ratably among the Electing Shareholders based
upon the proportion of the Redemption Shares held by each Electing Shareholder.
The shares of Series A, Series B or Series C Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. Subject to the rights of any series of Preferred Stock which may from
time to time come into existence, at any time thereafter when additional funds
of the Corporation are legally available for the redemption of shares of Series
A and Series B, or Series C Preferred Stock, such funds will immediately be used
to redeem the balance of the shares which the Corporation has become obliged to
redeem on any Redemption Date but which it has not redeemed.
(e) At least 10 days prior to each Redemption Date, the Corporation
shall deposit the Redemption Price of all shares of Series A and Series B, or
Series C Preferred Stock designated for redemption in the Holders' Notices, and
not yet redeemed or converted, with a bank or trust corporation having aggregate
capital and surplus in excess of $100,000,000 as a trust fund for the benefit of
the respective holders of the shares designated for redemption and not yet
redeemed, with irrevocable instructions and authority to the bank or trust
corporation to publish the notice of redemption thereof and pay the Redemption
Price for such shares to their respective holders on or after the Redemption
Date, upon receipt of notification from the Corporation that such holder has
surrendered his, her or its share certificate to the Corporation pursuant to
Section (3)(c) above. As of the date of such deposit (even if prior to the
Redemption Date), the deposit shall constitute full payment of the shares to
their holders, and from and after the date of the deposit the shares so called
for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be shareholders with respect
to such shares and shall have no rights with respect thereto except the rights
to receive from the bank or trust corporation payment of the Redemption Price of
the shares, without interest, upon surrender of their certificates therefor, and
the right to convert such shares as provided in Article III(B)(4) hereof. Such
instructions shall also provide that any moneys deposited by the Corporation
pursuant to this Section (3)(e) for the redemption of shares thereafter
converted into shares of the Corporation's Common Stock pursuant to Section
III(B)(4) hereof prior to the Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any moneys deposited
by the Corporation pursuant to this Section (3)(e) remaining unclaimed at the
expiration of two (2) years following the Redemption Date shall thereafter be
returned to the Corporation upon its request expressed in a resolution of its
Board of Directors.
4. CONVERSION. The holders of the Series A, Series B and Series C
----------
Preferred Stock shall have conversion rights as follows (the "Conversion
----------
Rights"):
- ------
(a) RIGHT TO CONVERT. Subject to Section 4(c), each share of
----------------
Series A, Series B and Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share and, in respect of any share which is the subject of a Redemption Notice,
on or prior to the Redemption Date as has been fixed in such Redemption Notice,
at the office of the Corporation or any transfer agent for such stock, into such
number of fully paid and nonassessable shares of Common Stock as is determined
by dividing (i) $1.00 in the case of the Series A Preferred Stock, (ii) $1.33 in
the case of the Series B Preferred Stock and (iii) $9.04 in the case of the
Series C
<PAGE>
Preferred Stock by the Conversion Price applicable to such share, determined as
hereafter provided, in effect on the date the certificate is surrendered for
conversion. The initial Conversion Price per share shall be $1.00 for shares of
Series A Preferred Stock, $1.33 for shares of Series B Preferred Stock and $9.04
for shares of Series C Preferred Stock. Such initial Conversion Price shall be
subject to adjustment as set forth in Section 4(d) below.
(b) AUTOMATIC CONVERSION. Each share of Series A, Series B or Series
--------------------
C Preferred Stock shall automatically be converted into shares of Common Stock
at the Conversion Price at the time in effect for such share immediately upon
the earlier of (i) except as provided below in Section 4(c), the Corporation's
sale of its Common Stock in a firm commitment underwritten public offering
pursuant to a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), the public offering price of which is not less
than $8.00 per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalization) and which results in aggregate cash proceeds to the
Corporation of $15,000,000 (net of underwriting discounts and commissions) (a
"Qualified Public Offering") or (ii) the date specified by written consent or
agreement of the holders of a majority of the then outstanding shares of Series
A, Series B and Series C Preferred Stock, voting together as a class.
(c) MECHANICS OF CONVERSION. Before any holder of Series A, Series B
-----------------------
or Series C Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A, Series B or Series C Preferred Stock, and shall give written notice to
the Corporation at its principal corporate office, of the election to convert
the same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series A, Series B or Series C Preferred Stock, or to the nominee
or nominees of such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Series A, Series B or
Series C Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act,
the conversion may, at the option of any holder tendering Series A, Series B or
Series C Preferred Stock for conversion, be conditioned upon the closing with
the underwriters of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive Common Stock upon conversion of such
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR CERTAIN
-----------------------------------------------------------
DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of the Series
- -------------------------------------------
A, Series B and Series C Preferred Stock shall be subject to adjustment from
time to time as follows:
(i) (A) If the Corporation shall issue, after the date upon
which any shares of Series A, Series B or Series C Preferred Stock were first
issued (the "Purchase Date" with respect to such series), any Additional Stock
-------------
(as defined below) without consideration or for a consideration per share less
than the Conversion Price for such series in effect immediately prior to the
issuance of such Additional Stock, the Conversion Price for such series in
effect immediately prior to each such issuance shall automatically (except as
otherwise provided in this clause (i)) be adjusted to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance (the "Outstanding
-----------
<PAGE>
Common") plus the number of shares of Common Stock that the aggregate
- ------
consideration received by the Corporation for such issuance would purchase at
such Conversion Price; and the denominator of which shall be the number of
Outstanding Common plus the number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price for the Series A, Series B
and Series C Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for in Sections
4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of such Conversion Price pursuant
to this Section 4(d)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by the Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined by the Board of
Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or after the
applicable Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this Section 4(d)(i) and Section 4(d)(ii):
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in Sections
4(d)(i)(C) and 4(d)(i)(D)), if any, received by the Corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without limitation,
the passage of time, but without taking into account potential antidilution
adjustments) for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the
consideration, if any, received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation (without taking into account
<PAGE>
potential antidilution adjustments) upon the conversion or exchange of such
securities or the exercise of any related options or rights (the consideration
in each case to be determined in the manner provided in Sections 4(d)(i)(C) and
4(d)(i)(D)).
(3) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to the Corporation upon
exercise of such options or rights or upon conversion of or in exchange for such
convertible or exchangeable securities, including, but not limited to, a change
resulting from the antidilution provisions thereof, the Conversion Price of each
of the Series A, Series B and Series C Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Conversion Price of each of the Series A, Series B and Series C Preferred Stock,
to the extent in any way affected by or computed using such options, rights or
securities or options or rights related to such securities, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities which remain in effect) actually issued
upon the exercise of such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed issued and
the consideration deemed paid therefor pursuant to Sections 4(d)(i)(E)(1) and
(2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either Section 4(d)(i)(E)(3) or
4(d)(i)(E)(4).
(ii) "Additional Stock" shall mean any shares of Common Stock issued
----------------
(or deemed to have been issued pursuant to Section 4(d)(i)(E)) by the
Corporation after the Purchase Date) other than
(A) Common Stock issued pursuant to a transaction described in
Section 4(d)(iii) hereof,
(B) Up to 4,702,310 shares of Common Stock issuable or issued to
employees, consultants, officers or directors of the Corporation directly or
pursuant to a stock option plan or restricted stock plan (including shares
issued under such plans) approved by the Board of Directors of the Corporation,
which number is inclusive of all issuances since the date of incorporation of
the Corporation, net of any cancellations or repurchases,
(C) Capital stock, or options or warrants to purchase capital
stock, issued to financial institutions or lessors in connection with commercial
credit arrangements, equipment financings or similar transactions,
(D) Shares of Common Stock or Preferred Stock issuable upon
exercise of warrants outstanding as of the date of these Amended and Restated
Certificate of Incorporation,
<PAGE>
(E) Capital stock or warrants or options to purchase capital
stock issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board of Directors of the
Corporation,
(F) Shares of Common Stock issued or issuable upon conversion of
the Series A, Series B or Series C Preferred Stock,
(G) Warrants to purchase up to 7,143 shares of Common Stock
issued to three individuals that are not subject to the categories set forth
above, and
(H) Shares of Common Stock issued or issuable in a Qualified
Public Offering.
(iii) In the event the Corporation should at any time or from time to
time after the Purchase Date fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
- -------------------------
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of each of the Series A , Series B and Series C Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number of shares
issuable with respect to Common Stock Equivalents determined from time to time
in the manner provided for deemed issuances in Section 4(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at any time
after the Purchase Date is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date of such combination, the
Conversion Price for each of the Series A, Series B and Series C Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event the Corporation shall declare a
-------------------
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in Section 4(d)(iii), then, in each such case
for the purpose of this Section 4(e), the holders of Series A, Series B and
Series C Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(f) RECAPITALIZATIONS. If at any time or from time to time there shall be a
-----------------
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 4 or
in Section 2 hereby) provision shall be made so that the holders of the Series
A, Series B and Series C Preferred Stock shall thereafter be entitled to
<PAGE>
receive upon conversion of the Series A, Series B and Series C Preferred Stock
the number of shares of stock or other securities or property of the Company or
otherwise, to which a holder of Common Stock deliverable upon conversion would
have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Series A, Series B and Series C
Preferred Stock after the recapitalization to the end that the provisions of
this Section 4 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Series A, Series B and
Series C Preferred Stock) shall be applicable after that event and be as nearly
equivalent as practicable.
(g) NO IMPAIRMENT. The Corporation will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
------------------------------------------------------
(i) No fractional shares shall be issued upon the conversion of
any share or shares of the Series A, Series B or Series C Preferred Stock, and
the number of shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Series A, Series B or Series C Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
the Conversion Price of Series A, Series B or Series C Preferred Stock pursuant
to this Section 4, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A, Series B or Series C Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A, Series B
or Series C Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price for such series of Preferred Stock at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of a share of
such series of Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A, Series B or Series C Preferred Stock, at
least 20 days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock,
<PAGE>
solely for the purpose of effecting the conversion of the shares of the Series
A, Series B and Series C Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Series A, Series B and Series C Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of Series
A, Series B and Series C Preferred Stock, in addition to such other remedies as
shall be available to the holder of such Preferred Stock, the Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to these articles.
(k) NOTICES. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A, Series B or Series C
Preferred Stock shall be deemed given if deposited in the United States mail,
postage prepaid, and addressed to each holder of record at his address appearing
on the books of the Corporation.
5. VOTING RIGHTS.
-------------
(a) Except as otherwise expressly provided herein or by law, the
holder of each share of Series A, Series B and Series C Preferred Stock shall
have the right to one vote for each share of Common Stock into which such
Preferred Stock could then be converted, and with respect to such vote, such
holder shall have full voting rights and powers equal to the voting rights and
powers of the holders of Common Stock, and shall be entitled, notwithstanding
any provision hereof, to notice of any shareholders' meeting in accordance with
the bylaws of the Corporation, and shall be entitled to vote, together with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote. Fractional votes shall not, however, be
permitted and any fractional voting rights available on an as-converted basis
(after aggregating all shares into which shares of Series A, Series B and Series
C Preferred Stock, respectively, held by each holder could be converted) shall
be rounded to the nearest whole number (with one-half being rounded upward).
(b) The holders of the Series A Preferred Stock, as a class,
shall be entitled to elect one (1) member of the Board of Directors at each
meeting or pursuant to each consent of the Corporation's shareholders for the
election of directors. The holders of the Series B and Series C Preferred Stock,
voting together as a single class, shall be entitled to elect two (2) members of
the Board of Directors at each meeting or pursuant to each consent of the
Corporation's shareholders for the election of directors.
(c) In the case of any vacancy in the office of a director
elected by the holders of Series A Preferred Stock in accordance with the
provisions of subsection (5)(b) above, the holders of a majority of the
outstanding shares of Series A Preferred Stock shall elect a successor to serve
for the unexpired term of the director whose office is vacant. In the case of
any vacancy in the office of a director occurring among the directors elected by
the holders of Series B and Series C Preferred Stock in accordance with the
provisions of subsection (5)(b) above, the remaining director so elected by the
holders of the outstanding shares of Series B and Series C Preferred Stock (or,
if there is no remaining director, the holders of a majority of the outstanding
shares of Series B and Series C Preferred Stock) shall elect a successor or
successors to serve for the unexpired term of the director whose office is
vacant. In the case of any vacancy in the office of a director elected by the
holders of Common Stock in accordance with the provisions of subsection (5)(d)
above, the holders of a majority of the outstanding
<PAGE>
shares of Common Stock shall elect a successor to serve for the unexpired term
of the director whose office is vacant.
(d) Any additional directors shall be elected by all of the holders of
outstanding stock of the Corporation.
6. PROTECTIVE PROVISIONS. Subject to the rights of any series of
---------------------
Preferred Stock which may from time to time come into existence, so long as any
shares of Series A, Series B or Series C Preferred Stock are outstanding, the
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least two-thirds (2/3) of the
then outstanding shares of Series A, Series B and Series C Preferred Stock,
voting together as a class:
(a) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any other transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Corporation is disposed of,
provided that this Section 6(a)(ii) shall not apply to a merger effected
- --------
exclusively for the purpose of changing the domicile of the Corporation;
(b) alter or change the rights, preferences or privileges of the
shares of Series A, Series B or Series C Preferred Stock so as to affect
adversely the shares of such series;
(c) increase or decrease (other than by redemption or conversion) the
total number of authorized shares of Series A, Series B or Series C Preferred
Stock;
(d) authorize or issue, or obligate itself to issue, any other equity
security, including any other security convertible into or exercisable for any
equity security having a preference over, or being on a parity with, the Series
A, Series B or Series C Preferred Stock with respect to any preferences, rights
or privileges of such Preferred Stock;
(e) redeem, purchase or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose) any share or shares of Preferred Stock or
Common Stock; provided, however, that this restriction shall not apply to the
-------- -------
repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for the Company or any
subsidiary pursuant to agreements under which the Company has the option to
repurchase such shares at cost or at cost upon the occurrence of certain events,
such as the termination of employment;
(f) pay or declare any dividend on the Common Stock or other
securities junior to the Series A, Series B or Series C Preferred Stock with
respect to dividends;
(g) amend Section 5 hereof;
(h) amend the authorized number of members of the Board of Directors;
or
(i) amend the Certificate of Incorporation or Bylaws of the
Corporation.
Notwithstanding the foregoing, in the event a proposed amendment or
proposed waiver of provisions of the Certificate of Incorporation of the
Corporation would adversely affect one or more series of Preferred Stock (the
"Affected Series") in a different manner than other series of Preferred Stock,
- ----------------
such amendment or waiver shall require the approval (by vote or written consent,
as provided by
<PAGE>
law) of the holders of at least two-thirds (2/3) of the then outstanding shares
of each of the Affected Series, each voting together as a class.
7. STATUS OF REDEEMED OR CONVERTED STOCK. In the event any shares of
-------------------------------------
Preferred Stock shall be redeemed pursuant to Section 3 or converted pursuant to
Section 4 hereof, the shares so redeemed or converted shall be canceled and
shall not be issuable by the Corporation. The Certificate of Incorporation of
the Corporation shall be appropriately amended to effect the corresponding
reduction in the Corporation's authorized capital stock.
(C) COMMON STOCK.
------------
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
------------------
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 2 of Division (B) of this Article III.
3. REDEMPTION. The Common Stock is not redeemable.
----------
4. VOTING RIGHTS. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation.
ARTICLE VI
Elections of directors need not be by written ballot unless otherwise
provided in the Bylaws of the Corporation.
ARTICLE VII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(B) The Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
Corporation or any predecessor of the Corporation, or serves or served at any
other enterprise as a director or officer at the request of the Corporation or
any predecessor to the Corporation.
<PAGE>
(C) Neither any amendment nor repeal of this Article VII, nor the
adoption of any provision of the Corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision."
* * *
The foregoing Amended and Restated Certificate of Incorporation has
been duly adopted by this corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
The undersigned certify under penalty of perjury under the laws of the
State of Delaware that the matters set forth in this Certificate are true and
correct of our own knowledge.
Executed at San Francisco, California, on ___________, 1999.
___________________________________
George Garrick, President
___________________________________
Jeffrey Y. Suto, Secretary
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FLYCAST COMMUNICATIONS CORPORATION
The undersigned, George R. Garrick and Jeffrey Y. Suto, hereby certify
that:
1. They are the duly elected and acting President and Secretary,
respectively, of Flycast Communications Corporation, a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on January 25, 1999.
3. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:
ARTICLE I
"The name of this corporation is Flycast Communications Corporation (the
"Corporation").
-----------
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
------------ ---------------
number of shares which the Corporation is authorized to issue is fifty-two
million (52,000,000) shares, each with a par value of $0.0001 per share. Fifty
million (50,000,000) shares shall be Common Stock and two million (2,000,000)
shares shall be Preferred Stock.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of such
series then outstanding. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
<PAGE>
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, adopt, alter, amend or
repeal the Bylaws of the Corporation, subject to the right of the stockholders
entitled to vote with respect thereto to amend or repeal Bylaws made by the
Board of Directors as provided for in this Restated Certificate of
Incorporation. The affirmative vote of 66-2/3% of the total number of votes of
the then outstanding shares of capital stock of this Corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required for the adoption, amendment or repeal of sections 2.4 (Notice
of Stockholders' Meetings) and 2.5 (Manner of Giving Notice) of the
Corporation's Bylaws.
ARTICLE VII
The number of directors which shall constitute the whole Board of Directors
of the Corporation shall be as specified in the Bylaws of the Corporation.
ARTICLE VIII
The election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statute) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
If at any time this Corporation shall have a class of stock registered
pursuant to the provisions of the Securities Exchange Act of 1934, for so long
as such class is so registered, any action by the stockholders of such class
must be taken at an annual or special meeting of stockholders and may not be
taken by written consent. This provision shall supersede any provision to the
contrary in the Bylaws of the Corporation.
ARTICLE XI
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Corporation.
ARTICLE XII
Notwithstanding any other provisions of this Restated Certificate of
Incorporation or the Bylaws (and notwithstanding the fact that a lesser
percentage may be specified by law, this Restated Certificate of Incorporation
or the Bylaws of this Corporation), the affirmative vote of 66-2/3% of the total
number of
-2-
<PAGE>
the then outstanding shares of capital stock of this Corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to amend or repeal, or to adopt any provision inconsistent
with the purpose or intent of, Articles VI through XIV. Notice of any such
proposed amendment, repeal or adoption, shall be contained in the notice of the
meeting at which it is to be considered. Subject to the provisions set forth
herein, this Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ARTICLE XIII
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or as may hereafter be amended, a director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. Neither any
amendment nor repeal of this Article XIII, nor the adoption of any provision of
this Restated Certificate of Incorporation inconsistent with this Article XIII,
shall eliminate or reduce the effect of this Article XIII in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article XIII, would accrue or arise, prior to such amendment, repeal or adoption
of any inconsistent provision.
ARTICLE XIV
"Listing Event" as used in this Restated Certificate of Incorporation shall
-------------
mean the Corporation becoming a "Listed Corporation" within the meaning of
------------------
Section 301.5 of the California Corporations Code. For the management of the
business and for the conduct of the affairs of the Corporation, and in further
definition, limitation and regulation of the powers of the Corporation, its
directors and its stockholders or any class thereof, as the case may be, it is
further provided that, effective upon the occurrence of the Listing Event:
(i) Each of the Corporation's director shall serve until his or her
successor is duly elected and qualified or until his or her death, resignation,
or removal. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal, or other causes shall be filled by either (i) the
affirmative vote of the holders of a majority of the voting power of the then-
outstanding shares of voting stock of the corporation entitled to vote generally
in the election of directors (the "Voting Stock") voting together as a single
------------
class; or (ii) by the affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board of Directors. Newly
created directorships resulting from any increase in the number of directors
shall, unless the Board of Directors determines by resolution that any such
newly created directorship shall be filled by the stockholders, be filled only
by the affirmative vote of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified.
(ii) There shall be no right with respect to shares of stock of the
Corporation to cumulate votes in the election of directors.
-3-
<PAGE>
(iii) Any director, or the entire Board of Directors, may be removed
from office at any time (i) with cause by the affirmative vote of the holders of
at least a majority of the voting power of the then-outstanding shares of the
Voting Stock, voting together as a single class; or (ii) without cause by the
affirmative vote of the holders of at least 66-2/3% of the voting power of the
then-outstanding shares of the Voting Stock."
-4-
<PAGE>
Pursuant to Section 242 and 245 of the General Corporation Law of the State
of Delaware, this Restated Certificate of Incorporation restates and integrates,
but does not further amend, the provisions of this Corporation's Certificate of
Incorporation, and there is no discrepancy between those provisions and the
provisions of this Restated Certificate of Incorporation. Pursuant to Section
242 and 245 of the General Corporation Law of the State of Delaware, this
Restated Certificate of Incorporation has been duly adopted by written consent
of the Board of Directors of this Corporation without a vote of the
stockholders.
Executed at San Francisco, California, on _______________, 1999.
________________________________________
George R. Garrick, President
________________________________________
Jeffrey Y. Suto, Secretary
-5-
<PAGE>
EXHIBIT 3.5
BYLAWS
OF
FLYCAST COMMUNICATIONS CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - CORPORATE OFFICES...................................................... 1
1.1 Registered Office........................................................ 1
1.2 Other Offices............................................................ 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.............................................. 1
2.1 Place Of Meetings........................................................ 1
2.2 Annual Meeting........................................................... 1
2.3 Special Meeting.......................................................... 1
2.4 Notice Of Stockholders' Meetings......................................... 2
2.5 Manner Of Giving Notice; Affidavit Of Notice............................. 2
2.6 Quorum................................................................... 2
2.7 Adjourned Meeting; Notice................................................ 2
2.8 Conduct Of Business...................................................... 2
2.9 Voting................................................................... 3
2.10 Waiver Of Notice......................................................... 3
2.11 Record Date For Stockholder Notice; Voting; Giving Consents.............. 3
2.12 Proxies.................................................................. 4
ARTICLE III - DIRECTORS............................................................ 4
3.1 Powers................................................................... 4
3.2 Number Of Directors...................................................... 4
3.3 Election, Qualification And Term Of Office Of Directors.................. 4
3.4 Resignation And Vacancies................................................ 4
3.5 Place Of Meetings; Meetings By Telephone................................. 5
3.6 Regular Meetings......................................................... 5
3.7 Special Meetings; Notice................................................. 5
3.8 Quorum................................................................... 6
3.9 Waiver Of Notice......................................................... 6
3.10 Board Action By Written Consent Without A Meeting........................ 6
3.11 Fees And Compensation Of Directors....................................... 7
3.12 Approval Of Loans To Officers............................................ 7
3.13 Removal Of Directors..................................................... 7
3.14 Chairman Of The Board Of Directors....................................... 7
ARTICLE IV - COMMITTEES............................................................ 7
4.1 Committees Of Directors.................................................. 7
4.2 Committee Minutes........................................................ 8
4.3 Meetings And Action Of Committees........................................ 8
ARTICLE V - OFFICERS............................................................... 8
5.1 Officers................................................................. 8
</TABLE>
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.2 Appointment Of Officers.................................................. 8
5.3 Subordinate Officers..................................................... 8
5.4 Removal And Resignation Of Officers...................................... 9
5.5 Vacancies In Offices..................................................... 9
5.6 Chief Executive Officer.................................................. 9
5.7 President................................................................ 9
5.8 Vice Presidents.......................................................... 9
5.9 Secretary................................................................ 10
5.10 Chief Financial Officer.................................................. 10
5.11 Representation Of Shares Of Other Corporations........................... 10
5.12 Authority And Duties Of Officers......................................... 11
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS... 11
6.1 Indemnification Of Directors And Officers................................ 11
6.2 Indemnification Of Others................................................ 11
6.3 Payment Of Expenses In Advance........................................... 11
6.4 Indemnity Not Exclusive.................................................. 11
6.5 Insurance................................................................ 12
6.6 Conflicts................................................................ 12
ARTICLE VII - RECORDS AND REPORTS.................................................. 12
7.1 Maintenance And Inspection Of Records.................................... 12
7.2 Inspection By Directors.................................................. 13
7.3 Annual Statement To Stockholders......................................... 13
ARTICLE VIII - GENERAL MATTERS..................................................... 13
8.1 Checks................................................................... 13
8.2 Execution Of Corporate Contracts And Instruments......................... 13
8.3 Stock Certificates; Partly Paid Shares................................... 13
8.4 Special Designation On Certificates...................................... 14
8.5 Lost Certificates........................................................ 14
8.6 Construction; Definitions................................................ 14
8.7 Dividends................................................................ 14
8.8 Fiscal Year.............................................................. 15
8.9 Seal..................................................................... 15
8.10 Transfer Of Stock........................................................ 15
8.11 Stock Transfer Agreements................................................ 15
8.12 Registered Stockholders.................................................. 15
ARTICLE IX - AMENDMENTS............................................................ 15
</TABLE>
<PAGE>
BYLAWS
OF
FLYCAST COMMUNICATIONS CORPORATION
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE.
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES.
-------------
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS.
-----------------
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING.
--------------
The annual meeting of stockholders shall be held on such date, time
and place, either within or without the State of Delaware, as may be designated
by resolution of the Board of Directors each year. At the meeting, directors
shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING.
---------------
A special meeting of the stockholders may be called at any time by the
Board of Directors, the chairman of the board, the president or by one or more
stockholders holding shares in the aggregate entitled to cast not less than
fifty percent (50%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors, the president or the chairman of the board, the request
shall be in writing, specifying the time of such meeting and the general nature
of the business proposed to be transacted, and shall be delivered personally or
sent by registered mail to the chairman of the board, the president, any vice
president, or the secretary of the corporation. No business may be transacted
at such special meeting otherwise than specified in such notice. The officer
receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5 of this Article II,
<PAGE>
that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after the receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing, or affecting the time when a meeting
of stockholders called by action of the Board of Directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.
--------------------------------
All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM.
------
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (a) the chairman of the meeting or (b)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE.
-------------------------
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS.
-------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including the manner of voting and
the conduct of business.
-2-
<PAGE>
2.9 VOTING.
------
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements). Except as may be
otherwise provided in the certificate of incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
2.10 WAIVER OF NOTICE.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the Board of Directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(b) The record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is delivered to the corporation.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
-3-
<PAGE>
2.12 PROXIES.
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
---------
3.1 POWERS.
------
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
3.2 NUMBER OF DIRECTORS.
-------------------
Upon the adoption of these bylaws, the number of directors
constituting the entire Board of Directors shall be one. Thereafter, this
number may be changed by a resolution of the Board of Directors or of the
stockholders, subject to Section 3.4 of these Bylaws. No reduction of the
authorized number of directors shall have the effect of removing any director
before such director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
-------------------------------------------------------
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Elections of
directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES.
-------------------------
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
Bylaws:
-4-
<PAGE>
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
----------------------------------------
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS.
----------------
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE.
------------------------
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each
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director at that director's address as it is shown on the records of the
corporation. If the notice is mailed, it shall be deposited in the United States
mail at least four (4) days before the time of the holding of the meeting. If
the notice is delivered personally or by telephone or by telegram, it shall be
delivered personally or by telephone or to the telegraph company at least forty-
eight (48) hours before the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated either to the director or
to a person at the office of the director who the person giving the notice has
reason to believe will promptly communicate it to the director. The notice need
not specify the purpose or the place of the meeting, if the meeting is to be
held at the principal executive office of the corporation.
3.8 QUORUM.
------
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee. Written consents representing actions taken by the
board or committee may be executed by telex, telecopy or other facsimile
transmission, and such facsimile shall be valid and binding to the same extent
as if it were an original.
3.11 FEES AND COMPENSATION OF DIRECTORS.
----------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall
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preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
3.12 APPROVAL OF LOANS TO OFFICERS.
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS.
--------------------
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that if the stockholders of the corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS.
----------------------------------
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS.
-----------------------
The Board of Directors may designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate 1 or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors, or in these Bylaws,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to the following matters: (i) approving or adopting, or recommending to the
stockholders, any action or matter expressly required
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by this chapter to be submitted to stockholders for approval or (ii) adopting,
amending or repealing any Bylaw of the corporation.
4.2 COMMITTEE MINUTES.
-----------------
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS.
--------
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the Board of Directors, a chief executive officer, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by the same
person.
5.2 APPOINTMENT OF OFFICERS.
-----------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS.
--------------------
The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in these
Bylaws or as the Board of Directors may from time to time determine.
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<PAGE>
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the Secretary of the corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the corporation under any
contract to which the officer is a party.
5.5 VACANCIES IN OFFICES.
--------------------
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER.
-----------------------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if any, the chief executive
officer of the corporation (if such an officer is appointed) shall, subject to
the control of the Board of Directors, have general supervision, direction, and
control of the business and the officers of the corporation. He or she shall
preside at all meetings of the stockholders and, in the absence or nonexistence
of a chairman of the board, at all meetings of the Board of Directors and shall
have the general powers and duties of management usually vested in the office of
chief executive officer of a corporation and shall have such other powers and
duties as may be prescribed by the Board of Directors or these bylaws.
5.7 PRESIDENT.
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board (if any) or the chief executive
officer, the president shall have general supervision, direction, and control of
the business and other officers of the corporation. He or she shall have the
general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.8 VICE PRESIDENTS.
---------------
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
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<PAGE>
5.9 SECRETARY.
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show
the time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law or
by these Bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.10 CHIEF FINANCIAL OFFICER.
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the bylaws.
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
----------------------------------------------
The chairman of the board, the chief executive officer, the president,
any vice president, the chief financial officer, the secretary or assistant
secretary of this corporation, or any other person authorized by the Board of
Directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by the person having such
authority.
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<PAGE>
5.12 AUTHORITY AND DUTIES OF OFFICERS.
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
- -------------------------------------------------------------------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
-----------------------------------------
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (a) who is or was
a director or officer of the corporation, (b) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was a director
or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS.
-------------------------
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (a) who is or was an employee or
agent of the corporation, (b) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE.
------------------------------
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE.
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
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action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation
6.5 INSURANCE.
---------
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.6 CONFLICTS.
---------
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the certificate
of incorporation, these Bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS.
-------------------------------------
The corporation shall, either at its principal executive offices or at
such place or places as designated by the Board of Directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
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7.2 INSPECTION BY DIRECTORS.
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and records,
the stock ledger, and the stock list and to make copies or extracts therefrom.
The Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.
--------------------------------
The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 CHECKS.
------
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
------------------------------------------------
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
--------------------------------------
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the Board
of Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the
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corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
-----------------------------------
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES.
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate previously issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS.
-------------------------
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS.
---------
The directors of the corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
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The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR.
-----------
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.9 SEAL.
----
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK.
-----------------
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS.
-------------------------
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS.
-----------------------
The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The Bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal Bylaws.
-15-
<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
FLYCAST COMMUNICATIONS CORPORATION
ADOPTION BY INCORPORATOR
------------------------
The undersigned person appointed in the certificate of incorporation to act
as the Incorporator of FlyCast Communications Corporation hereby adopts the
foregoing bylaws as the Bylaws of the corporation.
Executed this 25th day of January 1999.
/s/ Scott S. Ring
------------------------------
Scott S. Ring, Incorporator
CERTIFICATE BY SECRETARY OF ADOPTION BY INCORPORATOR
----------------------------------------------------
The undersigned hereby certifies that the undersigned is the duly elected,
qualified, and acting Secretary of FlyCast Communications Corporation, and that
the foregoing Bylaws were adopted as the Bylaws of the corporation on January
25, 1999, by the person appointed in the certificate of incorporation to act as
the Incorporator of the corporation.
Executed this 25th day of January 1999.
/s/ Jeff Suto
------------------------------
Jeff Suto, Secretary
<PAGE>
EXHIBIT 10.2
FLYCAST COMMUNICATIONS CORPORATION
1997 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1997 Stock Option Plan
--------------------
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall
-----------
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
-----
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
----
(d) "COMMITTEE" means the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
------------
(f) "COMPANY" means FlyCase Communications Corporation, a California
-------
corporation.
(g) "CONSULTANT" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the absence
----------------------------------------------
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other
leave of absence approved by the Administrator, provided that such leave is for
a period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or (iv)
in the case of transfers between locations of the Company or between the
Company, its Subsidiaries or their respective successors. For purposes of this
Plan, a change in status from an Employee to a Consultant or from a Consultant
to an Employee will not constitute an interruption of Continuous Status as an
Employee or Consultant.
<PAGE>
(i) "EMPLOYEE" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee to a
Director shall not be sufficient to constitute "employment" of such Director by
the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "FAIR MARKET VALUE" means, as of any date, the fair market value
-----------------
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
------
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
(m) "NONSTATUTORY STOCK OPTION" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "OPTION" means a stock option granted pursuant to the Plan.
------
(o) "OPTIONED STOCK" means the Common Stock subject to an Option.
--------------
(p) "OPTIONEE" means an Employee or Consultant who receives an Option.
--------
(q) "PARENT" means a "parent corporation," whether now or hereafter
------ ------------------
existing, as defined in Section 424(e) of the Code, or any successor provision.
-2-
<PAGE>
(r) "PLAN" means this 1997 Stock Option Plan.
----
(s) "REPORTING PERSON" means an officer, director, or greater than ten
----------------
percent shareholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.
(t) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as the same may be amended from time to time, or any successor provision.
(u) "SHARE" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(v) "STOCK EXCHANGE" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(w) "SUBSIDIARY" means a "subsidiary corporation," whether now or
---------- ----------------------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section
-------------------------
11 of the Plan, the maximum aggregate number of shares that may be optioned and
sold under the Plan is 1,300,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase price for
such Option or any withholding taxes due with respect to such exercise shall be
treated as not issued and shall continue to be available under the Plan. Shares
repurchased by the Company pursuant to any repurchase right which the Company
may have shall not be available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
--------------------------
(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.
(b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE COMPANY
-------------------------------------------------------------
BECOMES SUBJECT TO THE EXCHANGE ACT.
- -----------------------------------
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3,
------------------------------
grants under the Plan may be made by different bodies with respect to directors,
non-director officers and Employees or Consultants who are not Reporting
Persons.
(ii) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With
------------------------------------------------
respect to grants of Options to Employees who are Reporting Persons, such grants
shall be made by (A) the Board if the Board may make grants to Reporting Persons
under the Plan in compliance with Rule 16b-3, or (B) a committee designated by
the Board to make grants to
-3-
<PAGE>
Reporting Persons under the Plan, which committee shall be constituted in such a
manner as to permit grants under the Plan to comply with Rule 16b-3. Once
appointed, such committee shall continue to serve in its designated capacity
until otherwise directed by the Board. From time to time the Board may increase
the size of the committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the committee and
thereafter directly make grants to Reporting Persons under the Plan, all to the
extent permitted by Rule 16b-3.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
----------------------------------------------------
EMPLOYEES. With respect to grants of Options to Employees or Consultants who
- ---------
are not Reporting Persons, the Plan shall be administered by (A) the Board or
(B) a committee designated by the Board, which committee shall be constituted in
such a manner as to satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of California corporate
and securities laws, of the Code and of any applicable Stock Exchange (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
---------------
its designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options or any
combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any option granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock;
-4-
<PAGE>
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(ix) to construe and interpret the terms of the Plan and
Options granted under the Plan; and
(x) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options.
5. ELIGIBILITY.
-----------
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options may be granted
--------------------
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if he
or she is otherwise eligible, be granted additional Options.
(b) TYPE OF OPTION. Each Option shall be designated in the written
--------------
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) EMPLOYMENT RELATIONSHIP. The Plan shall not confer upon any
-----------------------
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier
------------
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated
--------------
in the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the
-5-
<PAGE>
Option is granted, owns stock representing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any Parent
or Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall
be no less than 85% of the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
-6-
<PAGE>
income or employment taxes, (7) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment, or (9) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. EXERCISE OF OPTION.
------------------
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan; provided that such Option shall become exercisable at the rate of
at least twenty percent (20%) per year over five (5) years from the date the
Option is granted. In the event that any of the Shares issued upon exercise of
an Option should be subject to a right of repurchase in the Company's favor,
such repurchase right shall lapse at the rate of at least twenty percent (20%)
per year over five (5) years from the date the Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. Subject to
----------------------------------------------------
Section 9(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement),
-7-
<PAGE>
exercise his or her Option to the extent that the Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of such termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate. No termination shall be deemed to
occur and this Section 9(b) shall not apply if (i) the Optionee is a Consultant
who becomes an Employee; or (ii) the Optionee is an Employee who becomes a
Consultant.
(c) DISABILITY OF OPTIONEE.
----------------------
(i) Notwithstanding Section 9(b) above, in the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his or her total and permanent disability (within the
meaning of Section 22(e)(3) of the Code), Optionee may, but only within twelve
(12) months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of death or, if earlier,
the date of termination of Optionee's Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
-8-
<PAGE>
(e) RULE 16B-3. Options granted to Reporting Persons shall comply
----------
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At
--------------------------------------------------------
the discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax liability
in connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
--------
Any surrender by a Reporting Person of previously owned Shares to satisfy
tax withholding obligations arising upon exercise of this Option must comply
with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option
-9-
<PAGE>
is exercised but such Optionee shall be unconditionally obligated to tender back
to the Company the proper number of Shares on the Tax Date.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
-------------------------------------------------------------------
TRANSACTIONS.
- ------------
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) MERGER OR SALE OF ASSETS. In the event of a proposed sale of all
------------------------
or substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's shareholders, each outstanding Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, in which case such Option shall terminate upon the consummation of the
merger or sale of assets.
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to the
---------------------
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee, only by the Optionee.
-10-
<PAGE>
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the determination
shall be given to each Employee or Consultant to whom an Option is so granted
within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time amend,
-------------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 or with Section 422
of the Code (or any other applicable law or regulation, including the
requirements of any Stock Exchange), the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination
----------------------------------
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.
16. RESERVATION OF SHARES. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. AGREEMENTS. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
-11-
<PAGE>
18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any Stock Exchange upon which the Common Stock is listed. All Options
issued under the Plan shall become void in the event such approval is not
obtained.
19. INFORMATION AND DOCUMENTS TO OPTIONEES. The Company shall provide
--------------------------------------
financial statements at least annually to each Optionee during the period such
Optionee has one or more Options outstanding, and in the case of an individual
who acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of Options under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information.
In addition, at the time of issuance of any securities under the Plan, the
Company shall provide to the Optionee a copy of the Plan and a copy of any
agreement(s) pursuant to which securities under the Plan are issued.
-12-
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
1997 STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
"Optionee"
"OptioneeAddress1"
"OptioneeAddress2"
You have been granted an option to purchase Common Stock ("Common Stock") of
------------
Flycast Communications Corporation (the "Company") as follows:
-------
Board Approval Date: "BoardApproveDate"
Date of Grant (Later of Board
Approval Date or
Commencement of
Employment/Consulting): "GrantDate"
Vesting Commencement Date: "VestingCommenceDate"
Exercise Price Per Share: "ExercisePrice"
Total Number of Shares Granted: "NoofShares"
Total Exercise Price: "TotalExercisePrice"
Type of Option: ________Incentive Stock Option ("ISO")
---
________Nonstatutory Stock Option ("NSO")
---
Term/Expiration Date: "ExpirDate"
Vesting Schedule: This Option may be exercised, in whole or
in part, in accordance with the following
schedule: 6.25% of the Shares subject to
the Option shall vest on the six (6) month
anniversary of the Vesting Commencement
Date and 1/48 of the total number of Shares
subject to the Option shall vest each month
thereafter.
<PAGE>
Termination Period: Option may be exercised for 90 days after
termination of employment or consulting
relationship except as set out in Sections
6 and 7 of the Stock Option Agreement (but
in no event later than the Expiration
Date).
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1997 Stock Option Plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
"Optionee": FLYCAST COMMUNICATIONS CORPORATION:
By:__________________________
____________________________
Signature
____________________________ ____________________________
Print Name Print Name and Title
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
----------------------
1. Grant of Option. Flycast Communications Corporation, a California
---------------
corporation (the "Company"), hereby grants to "Optionee" ("Optionee") an option
------- --------
(the "Option") to purchase a total number of shares of Common Stock (the
------
"Shares") set forth in the Notice of Stock Option Grant, at the exercise price
------
per share set forth in the Notice of Stock Option Grant (the "Exercise Price")
--------------
subject to the terms, definitions and provisions of the Flycast Communications
Corporation 1997 Stock Option Plan (the "Plan") adopted by the Company, which is
----
incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its Term
------------------
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and with the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
-----------------
(i) This Option may be exercised in whole or in part at any time
after the Date of Grant, as to Shares which have not yet vested under the
vesting schedule indicated on the Notice of Stock Option Grant; provided,
--------
however, that Optionee shall execute as a condition to such exercise of this
- -------
Option, the Early Exercise Notice and Restricted Stock Purchase Agreement
attached hereto as Exhibit A (the "Early Exercise Agreement"). If Optionee
--------- ------------------------
chooses to exercise this Option solely as to Shares which have vested under the
vesting schedule indicated on the Notice of Stock Option Grant, Optionee shall
complete and execute the form of Exercise Notice and Restricted Stock Purchase
Agreement attached hereto as Exhibit B (the "Exercise Agreement").
--------- ------------------
Notwithstanding the foregoing, the Company may in its discretion prescribe or
accept a different form of notice of exercise and/or stock purchase agreement if
such forms are otherwise consistent with this Agreement, the Plan and then-
applicable law.
(ii) This Option may not be exercised for a fraction of a share.
(iii) In the event of Optionee's death, disability or other
termination of employment or consulting relationship, the exercisability of the
Option is governed by Sections 5, 6 and 7 below, subject to the limitation
contained in Section 2(a)(iv) below.
(iv) In no event may this Option be exercised after the date of
expiration of the Term of this Option as set forth in the Notice of Stock Option
Grant.
<PAGE>
(b) Method of Exercise. This Option shall be exercisable by execution
------------------
and delivery of the Early Exercise Agreement or the Exercise Agreement,
whichever is applicable, or of any other written notice approved for such
purpose by the Company which shall state the election to exercise the Option,
the number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's investment intent with
respect to such shares of Common Stock as may be required by the Company
pursuant to the provisions of the Plan. Such written notice shall be signed by
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
Exercise Price. This Option shall be deemed to be exercised upon receipt by the
Company of such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
applicable law, including the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which (i)
in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by Optionee for more than six (6) months on the date of
surrender, and (ii) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised;
(d) if there is a public market for the Shares and they are registered
under the Securities Act, delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds required to pay the exercise price;
or
(e) a promissory note in the form attached to this Agreement as
Exhibit C, or in any other form approved by the Company.
- ---------
4. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
<PAGE>
5. Termination of Relationship. In the event of termination of Optionee's
---------------------------
Continuous Status as an Employee or Consultant, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
----------------
exercise this Option during the Termination Period set forth in the Notice of
Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at such Termination Date, or if Optionee does not exercise this
Option within the Termination Period, the Option shall terminate.
6. Disability of Optionee.
----------------------
(a) Notwithstanding the provisions of Section 5 above, in the event of
termination of Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (as defined in Section
22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the
Termination Date (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant and in Section 9 below), exercise this Option
to the extent he or she was entitled to exercise it at such Termination Date.
To the extent that Optionee was not entitled to exercise the Option Termination
Date, or if Optionee does not exercise such Option to the extent so entitled
within the time specified in this Section 6(a), the Option shall terminate.
(b) Notwithstanding the provisions of Section 5 above, in the event of
termination of Optionee's consulting relationship or Continuous Status as an
Employee as a result of a disability not constituting a total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six (6) months from the Termination Date (but in no event later than
the Expiration Date set forth in the Notice of Stock Option Grant and in Section
9 below), exercise the Option to the extent Optionee was entitled to exercise it
as of such Termination Date; provided, however, that if this is an Incentive
Stock Option and Optionee fails to exercise this Incentive Stock Option within
three (3) months from the Termination Date, this Option will cease to qualify as
an Incentive Stock Option (as defined in Section 422 of the Code) and Optionee
will be treated for federal income tax purposes as having received ordinary
income at the time of such exercise in an amount generally measured by the
difference between the Exercise Price for the Shares and the fair market value
of the Shares on the date of exercise. To the extent that Optionee was not
entitled to exercise the Option at the Termination Date, or if Optionee does not
exercise such Option to the extent so entitled within the time specified in this
Section 6(b), the Option shall terminate.
7. Death of Optionee. In the event of the death of Optionee (a) during
-----------------
the Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within thirty (30) days after Optionee's Termination
Date, the Option may be exercised at any time within six (6) months following
the date of death (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant and in Section 9 below), by Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had accrued at
the Termination Date.
<PAGE>
8. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him or her. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. Term of Option. This Option may be exercised only within the Term set
--------------
forth in the Notice of Stock Option Grant, subject to the limitations set forth
in Section 7 of the Plan.
10. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock Option. If this Option qualifies as
----------------------------------
an Incentive Stock Option, there will be no regular federal or California income
tax liability upon the exercise of the Option, although the excess, if any, of
the fair market value of the Shares on the date of exercise over the Exercise
Price will be treated as an adjustment to the alternative minimum tax for
federal tax purposes and may subject Optionee to the alternative minimum tax in
the year of exercise.
(b) Exercise of Nonstatutory Stock Option. If this Option does not
-------------------------------------
qualify as an Incentive Stock Option, there may be a regular federal income tax
liability and a California income tax liability upon the exercise of the Option.
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise Price. If Optionee is
an employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(c) Disposition of Shares. In the case of a Nonstatutory Stock
---------------------
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an Incentive Stock Option,
if Shares transferred pursuant to the Option are held for at least one year
after exercise and are disposed of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. If Shares
purchased under an Incentive Stock Option are disposed of within such one-year
period or within two years after the Date of Grant, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the difference between the Exercise Price and the lesser
of (i) the fair market value of the Shares on the date of exercise, or (ii) the
sale price of the Shares.
(d) Notice of Disqualifying Disposition of Incentive Stock Option
-------------------------------------------------------------
Shares. If the Option granted to Optionee herein is an Incentive Stock Option,
- ------
and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to the Incentive Stock Option on or
<PAGE>
before the later of (i) the date two years after the Date of Grant, or (ii) the
date one year after the date of exercise, Optionee shall immediately notify the
Company in writing of such disposition. Optionee acknowledges and agrees that he
or she may be subject to income tax withholding by the Company on the
compensation income recognized by Optionee from the early disposition by payment
in cash or out of the current earnings paid to Optionee.
11. Withholding Tax Obligations. Optionee understands that, upon
---------------------------
exercising a Nonstatutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the Exercise Price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If Optionee
------------
is an employee, the Company will be required to withhold from Optionee's
compensation, or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income.
Additionally, Optionee may at some point be required to satisfy tax withholding
obligations with respect to the disqualifying disposition of an Incentive Stock
Option. Optionee shall satisfy his or her tax withholding obligation arising
upon the exercise of this Option by one or some combination of the following
methods: (a) by cash payment, (b) out of Optionee's current compensation, (c)
if permitted by the Administrator, in its discretion, by surrendering to the
Company Shares which (i) in the case of Shares previously acquired from the
Company, have been owned by Optionee for more than six months on the date of
surrender, and (ii) have a fair market value on the date of surrender equal to
or greater than Optionee's marginal tax rate times the ordinary income
recognized, or (d) by electing to have the Company withhold from the Shares to
be issued upon exercise of the Option that number of Shares having a fair market
value equal to the amount required to be withheld. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
--------
If Optionee is subject to Section 16 of the Exchange Act (an "Insider"),
-------
any surrender of previously owned Shares to satisfy tax withholding obligations
arising upon exercise of this Option must comply with the applicable provisions
of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").
----------
All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
12. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any
<PAGE>
underwritten offering of the Company's securities, Optionee hereby agrees not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Shares (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) from the effective
date of such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be
requested by the underwriters at the time of the public offering.
[Signature Page Follows]
<PAGE>
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
document.
FLYCAST COMMUNICATIONS CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
(print)
Title:
----------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: ____________________ ______________________________
"Optionee"
<PAGE>
EXHIBIT A
---------
FLYCAST COMMUNICATIONS CORPORATION
1997 STOCK OPTION PLAN
EARLY EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------------
This Agreement ("Agreement") is made as of ______________, by and between
---------
Flycast Communications Corporation, a California corporation (the "Company"),
-------
and "Optionee" ("Purchaser"). To the extent any capitalized terms used in this
---------
Agreement are not defined, they shall have the meaning ascribed to them in the
1997 Stock Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof,
------------------
Purchaser hereby elects to exercise his or her option to purchase ______________
shares of the Common Stock (the "Shares") of the Company under and pursuant to
------
the Company's 1997 Stock Option Plan (the "Plan") and the Stock Option Agreement
----
dated ______________ (the "Option Agreement"). Of these Shares, Purchaser has
----------------
elected to purchase _______________ of those Shares which have become vested as
of the date hereof under the Vesting Schedule set forth in the Notice of Stock
Option Grant (the "Vested Shares") and _____________ Shares which have not yet
-------------
vested under such Vesting Schedule (the "Unvested Shares"). The purchase price
---------------
for the Shares shall be "ExercisePrice" per Share for a total purchase price of
$_______________. The term "Shares" refers to the purchased Shares and all
------
securities received in replacement of the Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under
--------------------------
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, (d) delivery of a promissory note in the form attached as
Exhibit C to the Option Agreement (or in any form acceptable to the Company), or
- ---------
(e) by a combination of the foregoing. If Purchaser delivers a promissory note
as partial or full payment of the purchase price, Purchaser will also deliver a
Pledge and Security Agreement in the form attached to Exhibit D to the Option
---------
Agreement (or in any form acceptable to the Company).
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from such Repurchase Option,
<PAGE>
Purchaser shall not assign, encumber or dispose of any interest in such Shares
except in compliance with the provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") for a period of 60 days from such
-----------------
date to repurchase all or any portion of the Unvested Shares held by Purchaser
as of the Termination Date which have not yet been released from the Company's
Repurchase Option at the original purchase price per Share specified in Section
1 (adjusted for any stock splits, stock dividends and the like).
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor with such notice of
a check in the amount of the purchase price for the Shares being purchased, or
(B) in the event Purchaser is indebted to the Company, by cancellation by the
Company of an amount of such indebtedness equal to the purchase price for the
Shares being repurchased, or (C) by a combination of (A) and (B) so that the
combined payment and cancellation of indebtedness equals such purchase price.
Upon delivery of such notice and payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by
Purchaser.
(iii) One hundred percent (100%) of the Unvested Shares shall
initially be subject to the Repurchase Option. The Unvested Shares shall be
released from the Repurchase Option in accordance with the Vesting Schedule set
forth in the Notice of Stock Option Grant until all Shares are released from the
Repurchase Option. Fractional shares shall be rounded to the nearest whole
share.
(b) Right of First Refusal. Before any Shares held by Purchaser or
----------------------
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
- -------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "Right of First Refusal").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
-------------------
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "Offered Price") and upon the same
-------------
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
<PAGE>
(ii) Exercise of Right of First Refusal. At any time within
----------------------------------
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price") for
-------------- --------------
the Shares purchased by the Company or its assignee(s) under this Section 3(b)
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at
-------
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in
--------------------------
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section 3(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 60 days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's immediate family or a trust for the benefit of
Purchaser's immediate family shall be exempt from the provisions of this Section
3(b). "Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In the
-----------------------------------------------------
event, at any time after the date of this Agreement, of any transfer by
operation of law or
<PAGE>
other involuntary transfer (including death or divorce, but excluding a transfer
to Immediate Family as set forth in Section 3(b)(vi) above) of all or a portion
of the Shares by the record holder thereof, the Company shall have an option to
purchase all of the Shares transferred at the greater of the purchase price paid
by Purchaser pursuant to this Agreement or the fair market value of the Shares
on the date of transfer. Upon such a transfer, the person acquiring the Shares
shall promptly notify the Secretary of the Company of such transfer. The right
to purchase such Shares shall be provided to the Company for a period of thirty
(30) days following receipt by the Company of written notice by the person
acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
------------------------------
to be transferred pursuant to Section 3(c)(i), the price per Share shall be a
price set by the Board of Directors of the Company that will reflect the current
value of the stock in terms of present earnings and future prospects of the
Company. The Company shall notify Purchaser or his or her executor of the price
so determined within thirty (30) days after receipt by it of written notice of
the transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Board of Directors of the Company,
the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
-------- -------
assignee, other than a corporation that is the parent or a 100% owned subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and fair market value, if
the original purchase price is less than the fair market value of the Shares
subject to the assignment.
(e) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Company's option to repurchase under Section 3(a). Any sale or transfer of the
Company's Shares shall be void unless the provisions of this Agreement are
satisfied.
(f) Termination of Rights. The right of first refusal granted the
---------------------
Company by Section 3(b) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(c) above shall
terminate upon the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act. Upon
termination of the right of first refusal described in Section 3(b) and the
expiration or exercise of the Company's repurchase option described in Section
3(a) above, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) herein and delivered to Purchaser.
<PAGE>
4. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Company's
Repurchase Option described in Section 3(a), to deliver such certificate(s),
together with an Assignment Separate from Certificate in the form attached to
this Agreement as Attachment A executed by Purchaser and by Purchaser's spouse
------------
(if required for transfer), in blank, to the Secretary of the Company, or the
Secretary's designee, to hold such certificate(s) and Assignment Separate from
Certificate in escrow and to take all such actions and to effectuate all such
transfers and/or releases as are in accordance with the terms of this Agreement.
Purchaser hereby acknowledges that the Secretary of the Company, or the
Secretary's designee, is so appointed as the escrow holder with the foregoing
authorities as a material inducement to make this Agreement and that said
appointment is coupled with an interest and is accordingly irrevocable.
Purchaser agrees that said escrow holder shall not be liable to any party hereof
(or to any other party). The escrow holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine and may resign
at any time. Purchaser agrees that if the Secretary of the Company, or the
Secretary's designee, resigns as escrow holder for any or no reason, the Board
of Directors of the Company shall have the power to appoint a successor to serve
as escrow holder pursuant to the terms of this Agreement.
5. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Purchaser is
purchasing these securities for investment for his or her own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the securities. Purchaser understands that the certificate(s)
evidencing the securities will be imprinted with a legend which prohibits the
transfer of the securities unless they are registered or such registration is
not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
<PAGE>
securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities
exempt under Rule 701 may be resold by the Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain public
information about the Company, and the amount of securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
if applicable. Notwithstanding this paragraph (d), Purchaser acknowledges and
agrees to the restrictions set forth in paragraph (f) hereof.
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the securities may be resold by the Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (1) the availability of certain public information about
the Company; (2) the resale occurring not less than two years after the party
has purchased, and made full payment of (within the meaning of Rule 144), the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (3) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable. PURCHASER UNDERSTANDS THAT PAYMENT FOR THE SHARES WITH A PROMISSORY
NOTE IS NOT DEEMED TO BE FULL PAYMENT UNDER RULE 144 UNLESS THE NOTE IS SECURED
BY ASSETS OTHER THAN THE SHARES.
(e) Purchaser further understands that at the time he or she wishes to
sell the securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the securities
under Rule 144 or 701 even if the two-year minimum holding period had been
satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that
<PAGE>
Purchaser has consulted any tax consultants Purchaser deems advisable in
connection with the purchase or disposition of the Shares and that Purchaser is
not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of
----------------------
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
----
income for a nonstatutory
<PAGE>
stock option and as alternative minimum taxable income for an incentive stock
option the difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" means the right of the Company to buy back the Shares
-----------
pursuant to the Repurchase Option set forth in Section 3(a) of this Agreement.
Purchaser understands that Purchaser may elect to be taxed at the time the
Shares are purchased, rather than when and as the Repurchase Option expires, by
filing an election under Section 83(b) (an "83(b) Election") of the Code with
--------------
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income and alternative minimum tax treatment under Section 83(a) in the
future. Purchaser understands that failure to file such an election in a timely
manner may result in adverse tax consequences for Purchaser. Purchaser further
understands that an additional copy of such election form should be filed with
his or her federal income tax return for the calendar year in which the date of
this Agreement falls. Purchaser acknowledges that the foregoing is only a
summary of the effect of United States federal income taxation with respect to
purchase of the Shares hereunder, and does not purport to be complete. Purchaser
further acknowledges that the Company has directed Purchaser to seek independent
advice regarding the applicable provisions of the Code, the income tax laws of
any municipality, state or foreign country in which Purchaser may reside, and
the tax consequences of Purchaser's death.
Purchaser agrees that he or she will execute and deliver to the Company
with this executed Agreement a copy of the Acknowledgment and Statement of
Decision Regarding Section 83(b) Election (the "Acknowledgment") attached hereto
--------------
as Attachment B. Purchaser further agrees that he or she will execute and
------------
submit with the Acknowledgment a copy of the 83(b) Election attached hereto as
Attachment C (for income tax purposes in connection with the early exercise of a
- ------------
nonstatutory stock option) or Attachment D (for alternative minimum tax purposes
------------
in connection with the early exercise of an incentive stock option) if Purchaser
has indicated in the Acknowledgment his or her decision to make such an
election.
9. Market Stand-off Agreement. In connection with the initial public
--------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
10. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
<PAGE>
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
COMPANY:
FLYCAST COMMUNICATIONS CORPORATION
By:
-------------------------------------
Name:
----------------------------------
(print)
Title:
----------------------------------
Address:
181 Fremont Street, Suite 120
San Francisco, CA 94105
PURCHASER:
"OPTIONEE"
-------------------------------------
(SIGNATURE)
____________________________________
(PRINT NAME)
ADDRESS:
"OPTIONEEADDRESS1"
"OPTIONEEADDRESS2"
I, ______________________, SPOUSE OF "OPTIONEE", HAVE READ AND HEREBY APPROVE
THE FOREGOING AGREEMENT. IN CONSIDERATION OF THE COMPANY'S GRANTING MY SPOUSE
THE RIGHT TO PURCHASE THE SHARES AS SET FORTH IN THE AGREEMENT, I HEREBY AGREE
TO BE IRREVOCABLY BOUND BY THE AGREEMENT AND FURTHER AGREE THAT ANY COMMUNITY
PROPERTY OR OTHER SUCH INTEREST SHALL HEREBY BY SIMILARLY BOUND BY THE
AGREEMENT. I HEREBY APPOINT MY SPOUSE AS MY ATTORNEY-IN-FACT WITH RESPECT TO
ANY AMENDMENT OR EXERCISE OF ANY RIGHTS UNDER THE AGREEMENT.
-------------------------------------
SPOUSE OF "OPTIONEE"
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Early Exercise Notice
and Restricted Stock Purchase Agreement between the undersigned ("Purchaser")
--------
and Flycast Communications Corporation (the "Company") dated _________________
-------
(the "Agreement"), Purchaser hereby sells, assigns and transfers unto the
---------
Company _______________________________ (________) shares of the Common Stock of
the Company, standing in Purchaser's name on the books of the Company and
represented by Certificate No. ___, and hereby irrevocably appoints
_____________________________ to transfer said stock on the books of the Company
with full power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE
USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS THERETO.
Dated: _____________________
Signature:
-------------------------------------
"Optionee"
-------------------------------------
Spouse of "Optionee" (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
Repurchase Option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
ATTACHMENT B
------------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
-----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned (which term includes the undersigned's spouse), a purchaser
of ___________ shares of Common Stock of Flycast Communications Corporation, a
California corporation (the "Company") by exercise of an option (the "Option")
------- ------
granted pursuant to the Company's 1997 Stock Option Plan (the "Plan"), hereby
----
states as follows:
1. The undersigned acknowledges receipt of a copy of the Plan relating to
the offering of such shares. The undersigned has carefully reviewed the Plan
and the option agreement pursuant to which the Option was granted.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the undersigned's
own tax advisor, _____________________________________, whose business
address is ______________________________, regarding the federal,
state and local tax consequences of purchasing shares under the Plan,
and particularly regarding the advisability of making elections
pursuant to Section 83(b) of the Internal Revenue Code of 1986, as
amended (the "Code") and pursuant to the corresponding provisions, if
----
any, of applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed
Early Exercise Notice and Restricted Stock Purchase Agreement, an
executed form entitled "Election Under Section 83(b) of the Internal
Revenue Code of 1986;"
(b) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed
Early Exercise Notice and Restricted Stock Purchase Agreement, an
executed form entitled "Election Under Section 83(b) of the Internal
Revenue Code of 1986 for purposes of the Alternative Minimum Tax"; or
(c) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the Company
has made any warranty or representation to the undersigned with respect to the
tax consequences of the undersigned's purchase of shares under the Plan or of
the making or failure to make an election pursuant to Section 83(b) of the Code
or the corresponding provisions, if any, of applicable state law.
Date:
---------------------- -----------------------
"Optionee"
Date:
---------------------- -----------------------
Spouse of "Optionee"
<PAGE>
ATTACHMENT C
------------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: "Optionee"
NAME OF SPOUSE: ________________
ADDRESS: "OptioneeAddress1"
"OptioneeAddress2"
IDENTIFICATION NO. OF TAXPAYER: "SSN"
IDENTIFICATION NO. OF SPOUSE: "SpouseSSN"
TAXABLE YEAR: __________
2. The property with respect to which the election is made is described as
follows:
______________ shares of the Common Stock (the "Shares"), no par value, of
------
Flycast Communications Corporation, a California corporation (the
"Company").
-------
3. The date on which the property was transferred is: _______________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $____________
6. The amount (if any) paid for such property: $____________
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ____________ __________________________
"Optionee"
Dated: ____________ __________________________
Spouse of "Optionee"
<PAGE>
ATTACHMENT D
------------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
FOR PURPOSES OF THE ALTERNATIVE MINIMUM TAX
-------------------------------------------
The undersigned taxpayer hereby elects, pursuant to the above-referenced
Internal Revenue Code Section, to include in his or her alternative minimum
taxable income for the current taxable year, as compensation for services, the
excess, if any, of the fair market value of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: "Optionee"
NAME OF SPOUSE: ________________
ADDRESS: "OptioneeAddress1"
"OptioneeAddress2"
IDENTIFICATION NO. OF TAXPAYER: "SSN"
IDENTIFICATION NO. OF SPOUSE: "SpouseSSN"
TAXABLE YEAR: __________
2. The property with respect to which the election is made is described as
follows:
________________ shares of the Common Stock (the "Shares"), no par value,
------
of Flycast Communications Corporation, a California corporation (the
"Company").
--------
3. The date on which the property was transferred is: _______________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $_______________.
6. The amount (if any) paid for such property: $_______________
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ____________ ______________________
"Optionee"
Dated: ____________ ______________________
Spouse of "Optionee"
<PAGE>
EXHIBIT B
---------
FLYCAST COMMUNICATIONS CORPORATION
1997 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
This Agreement ("Agreement") is made as of ______________, by and between
---------
Flycast Communications Corporation, a California corporation (the "Company"),
-------
and "Optionee" ("Purchaser"). To the extent any capitalized terms used in this
---------
Agreement are not defined, they shall have the meaning ascribed to them in the
1997 Stock Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof,
------------------
Purchaser hereby elects to exercise his or her option to purchase __________
shares of the Common Stock (the "Shares") of the Company under and pursuant to
------
the Company's 1997 Stock Option Plan (the "Plan") and the Stock Option Agreement
----
dated ______________, (the "Option Agreement"). The purchase price for the
----------------
Shares shall be "ExercisePrice" per Share for a total purchase price of
$_______________. The term "Shares" refers to the purchased Shares and all
------
securities received in replacement of the Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under
--------------------------
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, (d) delivery of a promissory note in the form attached as
Exhibit C to the Option Agreement (or in any form acceptable to the Company), or
- ---------
(e) by a combination of the foregoing. If Purchaser delivers a promissory note
as partial or full payment of the purchase price, Purchaser will also deliver a
Pledge and Security Agreement in the form attached as Exhibit D to the Option
---------
Agreement (or in any form acceptable to the Company).
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
(a) Right of First Refusal. Before any Shares held by Purchaser or
----------------------
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
- -------
operation of law), the Company or its
<PAGE>
assignee(s) shall have a right of first refusal to purchase the Shares on the
terms and conditions set forth in this Section 3(a) (the "Right of First
--------------
Refusal").
- ----------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
-------------------
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "Offered Price") and upon the same
-------------
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price") for the
-------------- --------------
Shares purchased by the Company or its assignee(s) under this Section 3(a) shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(a), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 60 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section 3(a) notwithstanding, the transfer of any or all of
the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate
<PAGE>
Family or a trust for the benefit of Purchaser's Immediate Family shall be
exempt from the provisions of this Section 3(a). "Immediate Family" as used
----------------
herein shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister. In such case, the transferee or other recipient shall receive
and hold the Shares so transferred subject to the provisions of this Section,
and there shall be no further transfer of such Shares except in accordance with
the terms of this Section 3.
(b) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to Immediate Family as set forth in Section 3(a)(vi) above)
of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of
the purchase price paid by Purchaser pursuant to this Agreement or the fair
market value of the Shares on the date of transfer. Upon such a transfer, the
person acquiring the Shares shall promptly notify the Secretary of the Company
of such transfer. The right to purchase such Shares shall be provided to the
Company for a period of thirty (30) days following receipt by the Company of
written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
------------------------------
to be transferred pursuant to Section 3(b)(i), the price per Share shall be a
price set by the Board of Directors of the Company that will reflect the current
value of the stock in terms of present earnings and future prospects of the
Company. The Company shall notify Purchaser or his or her executor of the price
so determined within thirty (30) days after receipt by it of written notice of
the transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Board of Directors of the Company,
the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(c) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
-------- -------
assignee, other than a corporation that is the parent or a 100% owned subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and fair market value, if
the original purchase price is less than the fair market value of the Shares
subject to the assignment.
(e) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement. Any sale or transfer of the Company's Shares
shall be void unless the provisions of this Agreement are satisfied.
(f) Termination of Rights. The right of first refusal granted the
---------------------
Company by Section 3(a) above and the option to repurchase the Shares in the
event of an involuntary transfer
<PAGE>
granted the Company by Section 3(b) above shall terminate upon the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act. Upon termination of the right of first
refusal described in Section 3(a) above, a new certificate or certificates
representing the Shares not repurchased shall be issued, on request, without the
legend referred to in Section 6(a)(ii) herein and delivered to Purchaser.
4. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Purchaser is
purchasing these securities for investment for his or her own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the securities
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Purchaser
further acknowledges and understands that the Company is under no obligation to
register the securities. Purchaser understands that the certificate(s)
evidencing the securities will be imprinted with a legend which prohibits the
transfer of the securities unless they are registered or such registration is
not required in the opinion of counsel for the Company.
(d) Purchaser is familiar with the provisions of Rules 144 and 701,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the securities
exempt under Rule 701 may be resold by the Purchaser ninety (90) days
thereafter, subject to the satisfaction of certain of the conditions specified
by Rule 144, including, among other things: (1) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain public
information about the Company, and the amount of securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
if applicable. Notwithstanding this paragraph (d), Purchaser acknowledges and
agrees to the restrictions set forth in paragraph (f) hereof.
<PAGE>
In the event that the Company does not qualify under Rule 701 at the time
of purchase, then the securities may be resold by the Purchaser in certain
limited circumstances subject to the provisions of Rule 144, which requires,
among other things: (1) the availability of certain public information about
the Company; (2) the resale occurring not less than two years after the party
has purchased, and made full payment of (within the meaning of Rule 144), the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (3) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable. PURCHASER UNDERSTANDS THAT PAYMENT FOR THE SHARES WITH A PROMISSORY
NOTE IS NOT DEEMED TO BE FULL PAYMENT UNDER RULE 144 UNLESS THE NOTE IS SECURED
BY ASSETS OTHER THAN THE SHARES.
(e) Purchaser further understands that at the time he or she wishes to
sell the securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 or 701, and
that, in such event, Purchaser would be precluded from selling the securities
under Rule 144 or 701 even if the two-year minimum holding period had been
satisfied.
(f) Purchaser further understands that in the event all of the
applicable requirements of Rule 144 or 701 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(g) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
5. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
<PAGE>
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
7. Market Stand-off Agreement. In connection with the initial public
--------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
8. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and
<PAGE>
interpreted in accordance with the laws of the State of California, without
giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION
<PAGE>
25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
COMPANY:
FLYCAST COMMUNICATIONS CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
(print)
Title:
-------------------------------------
Address:
181 Fremont Street, Suite 120
San Francisco, CA 94105
PURCHASER:
"OPTIONEE"
----------------------------------------
(SIGNATURE)
____________________________________
(PRINT NAME)
ADDRESS:
"OPTIONEEADDRESS1"
"OPTIONEEADDRESS2"
I, ______________________, SPOUSE OF "OPTIONEE", HAVE READ AND HEREBY APPROVE
THE FOREGOING AGREEMENT. IN CONSIDERATION OF THE COMPANY'S GRANTING MY SPOUSE
THE RIGHT TO PURCHASE THE SHARES AS SET FORTH IN THE AGREEMENT, I HEREBY AGREE
TO BE IRREVOCABLY BOUND BY THE AGREEMENT AND FURTHER AGREE THAT ANY COMMUNITY
PROPERTY OR OTHER SUCH INTEREST SHALL HEREBY BY SIMILARLY BOUND BY THE
AGREEMENT. I HEREBY APPOINT MY SPOUSE AS MY ATTORNEY-IN-FACT WITH RESPECT TO
ANY AMENDMENT OR EXERCISE OF ANY RIGHTS UNDER THE AGREEMENT.
----------------------------------------
SPOUSE OF "OPTIONEE"
<PAGE>
EXHIBIT C
---------
PROMISSORY NOTE
---------------
$__________ __________, California
_______________, 19__
For value received, the undersigned promises to pay FlyCast Communications
Corporation, a California corporation (the "Company"), at its principal office
-------
the principal sum of $__________ together with interest, compounded annually,
from the date of this Note on the unpaid principal balance from time to time
outstanding hereunder at a rate equal to the minimum rate necessary to avoid the
imputation of interest income to the Company and compensation income to the
Maker under the Internal Revenue Code. The entire unpaid principal amount of
this Note, together with accrued interest and unpaid interest to date, shall be
due and payable on the earlier of (i) nine (9) months after the closing of an
initial public offering of the Company's Common Stock pursuant to a Registration
Statement on Form S-l, or (ii) five (5) years after the date of this Note. This
Note is being delivered in partial payment of the purchase price of "NoofShares"
shares of the Company's Common Stock (the "Purchased Shares") acquired by the
Maker pursuant to that certain Early Exercise Notice and Restricted Stock
Purchase Agreement dated ___________________, 199__.
If the undersigned's employment or consulting relationship with the Company
is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT
INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest, and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company and is subject to the terms of a Pledge and
Security Agreement between the undersigned and the Company of even date
herewith.
_________________________________
"Optionee"
<PAGE>
EXHIBIT D
---------
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (the "Agreement") is entered into this
---------
_____ day of ____________ by and between Flycast Communications Corporation, a
California corporation (the "Company") and "Optionee" ("Purchaser").
------- ---------
RECITALS
--------
In connection with Purchaser's exercise of an option to purchase certain
shares of the Company's Common Stock (the "Shares") pursuant to an Option
------
Agreement dated __________ between Purchaser and the Company, Purchaser is
delivering a promissory note of even date herewith (the "Note") in full or
----
partial payment of the exercise price for the Shares. The company requires that
the Note be secured by a pledge of the Shares or the terms set forth below.
AGREEMENT
---------
In consideration of the Company's acceptance of the Note as full or partial
payment of the exercise price of the Shares, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. The Note shall become payable in full upon the voluntary or involuntary
termination or cessation of employment of Purchaser with the Company, for any
reason, with or without cause (including death or disability).
2. Purchaser shall deliver to the Secretary of the Company, or his or her
designee (hereinafter referred to as the "Pledge Holder"), all certificates
-------------
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Purchaser and
------------
by Purchaser's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Purchaser is married,
Purchaser's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension or
modification of the Note, Purchaser hereby grants to the Company a security
interest in and pledges with and delivers to the Company Purchaser's Shares
(sometimes referred to herein as the "Collateral").
----------
4. In the event that Purchaser prepays all or a portion of the Note, in
accordance with the provisions thereof, Purchaser intends, unless written notice
to the contrary is delivered to the Pledge Holder, that the Shares represented
by the portion of the Note so repaid, including annual interest thereon, shall
continue to be so held by the Pledge Holder, to serve as independent collateral
for the outstanding portion of the Note for the purpose of commencing the
holding period set forth in Rule 144(d) promulgated under the Securities Act of
1933, as amended (the "Securities Act").
--------------
<PAGE>
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the
establishment of a public market for the Shares of the Company, the securities
laws affecting sale of the Shares make a public sale of the Shares commercially
unreasonable. The parties further agree that the repurchasing of such Shares by
the Company, or by any person to whom the Company may have assigned its rights
under this Agreement, is commercially reasonable if made at a price determined
by the Board of Directors in its discretion, fairly exercised, representing what
would be the fair market value of the Shares reduced by any limitation on
transferability, whether due to the size of the block of shares or the
restrictions of applicable securities laws.
6. In the event of default in payment when due of any indebtedness under
the Note, the Company may elect then, or at any time thereafter, to exercise all
rights available to a secured party under the California Commercial Code
including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy any
remaining indebtedness under Purchaser's Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
6. Upon full payment by Purchaser of all amounts due under the Note,
Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations under this Agreement; provided, however,
-------- -------
that Pledge Holder shall nevertheless retain the Shares as escrow agent if at
the time of full payment by Purchaser said Shares are still subject to a
Repurchase Option in favor of the Company.
<PAGE>
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
FLYCAST COMMUNICATIONS CORPORATION
By:
------------------------------------
Name:
----------------------------------
(print)
Title:
---------------------------------
Address:
181 Fremont Street, Suite 120
San Francisco, CA 94105
PURCHASER:
"OPTIONEE"
------------------------------------
(SIGNATURE)
____________________________________
(PRINT NAME)
ADDRESS:
"OPTIONEEADDRESS1"
"OPTIONEEADDRESS2"
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Purchaser") and Flycast Communications
--------
Corporation, dated _____________, (the "Agreement"), Purchaser hereby sells,
---------
assigns and transfers unto _______________________________ (________) shares of
the Common Stock of Flycast Communications Corporation, standing in Purchaser's
name on the books of said corporation represented by Certificate No. ___
herewith and hereby irrevocably appoints _____________________________ to
transfer said stock on the books of the within-named corporation with full power
of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED
BY THE AGREEMENT.
Dated: ____________
Signature:
------------------------------------
"Optionee"
------------------------------------
Spouse of "Optionee" (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to perfect the security interest of the
Company pursuant to the Agreement.
<PAGE>
[FORM FOR GRANT OF OPTIONS THAT ARE EXERCISABLE ONLY AS THE OPTIONS VEST.]
FLYCAST COMMUNICATIONS CORPORATION
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
----------------------
1. Grant of Option. Flycast Communications Corporation, a California
---------------
corporation (the "Company"), hereby grants to "Optionee" ("Optionee"), an option
------ --------
(the "Option") to purchase a total number of shares of Common Stock (the
------
"Shares") set forth in the Notice of Stock Option Grant, at the exercise price
------
per share set forth in the Notice of Stock Option Grant (the "Exercise Price")
--------------
subject to the terms, definitions and provisions of the Flycast Communications
Corporation 1997 Stock Option Plan (the "Plan") adopted by the Company, which is
----
incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its Term
------------------
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and with the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
-----------------
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 5, 6 and 7 below, subject to the limitation contained in Section
2(a)(i).
(iii) In no event may this Option be exercised after the Expiration
Date of this Option as set forth in the Notice of Stock Option Grant.
(b) Method of Exercise. This Option shall be exercisable by execution
------------------
and delivery of the Exercise Notice and Restricted Stock Purchase Agreement
attached hereto as Exhibit A (the "Exercise Agreement") or of any other form of
--------- ------------------
written notice approved for such purpose by the Company which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by Optionee and shall be delivered in person or
by certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
<PAGE>
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of
applicable law and the requirements of any stock exchange upon which the Shares
may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of Optionee:
(a) cash or check;
(b) cancellation of outstanding indebtedness;
(c) surrender of other shares of Common Stock of the Company which (i)
in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by Optionee for more than six months on the date of surrender,
and (ii) have a Fair Market Value on the date of surrender equal to the Exercise
Price of the Shares as to which the Option is being exercised;
(d) if there is a public market for the Shares and they are registered
under the Exchange Act, delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds required to pay the Exercise Price; or
(e) a promissory note in the form attached to this Agreement as
Exhibit B, or in any other form approved by the Company.
- ---------
4. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
5. Termination of Relationship. In the event of termination of Optionee's
---------------------------
Continuous Status as an Employee or Consultant, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
----------------
exercise this Option during the Termination Period set forth in the Notice of
Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at such Termination Date, or if Optionee does not exercise this
Option within the Termination Period, the Option shall terminate.
<PAGE>
6. Disability of Optionee.
----------------------
(a) Notwithstanding the provisions of Section 5 above, in the event of
termination of Optionee's Continuous Status as an Employee or Consultant as a
result of Optionee's total and permanent disability (as defined in Section
22(e)(3) of the Code), Optionee may, but only within twelve months from the
Termination Date (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant), exercise this Option to the extent Optionee
was entitled to exercise it as of such Termination Date. To the extent that
Optionee was not entitled to exercise the Option as of the Termination Date, or
if Optionee does not exercise such Option (to the extent so entitled) within the
time specified in this Section 6(a), the Option shall terminate.
(b) Notwithstanding the provisions of Section 5 above, in the event of
termination of Optionee's consulting relationship or Continuous Status as an
Employee as a result of disability not constituting a total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six months from the Termination Date (but in no event later than the
Expiration Date set forth in the Notice of Stock Option Grant), exercise the
Option to the extent Optionee was entitled to exercise it as of such Termination
Date; provided, however, that if this is an Incentive Stock Option and Optionee
fails to exercise this Incentive Stock Option within three months from the
Termination Date, this Option will cease to qualify as an Incentive Stock Option
(as defined in Section 422 of the Code) and Optionee will be treated for federal
income tax purposes as having received ordinary income at the time of such
exercise in an amount generally measured by the difference between the Exercise
Price for the Shares and the Fair Market Value of the Shares on the date of
exercise. To the extent that Optionee was not entitled to exercise the Option
at the Termination Date, or if Optionee does not exercise such Option to the
extent so entitled within the time specified in this Section 6(b), the Option
shall terminate.
7. Death of Optionee. In the event of the death of Optionee (a) during
-----------------
the Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within 30 days after Optionee's Termination Date,
the Option may be exercised at any time within six months following the date of
death (but in no event later than the Expiration Date set forth in the Notice of
Stock Option Grant), by Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the Termination Date.
8. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him or her. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. Term of Option. This Option may be exercised only within the Term set
--------------
forth in the Notice of Stock Option Grant, subject to the limitations set forth
in Section 7 of the Plan.
<PAGE>
10. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock Option. If this Option qualifies as
----------------------------------
an Incentive Stock Option, there will be no regular federal or California income
tax liability upon the exercise of the Option, although the excess, if any, of
the Fair Market Value of the Shares on the date of exercise over the Exercise
Price will be treated as an adjustment to the alternative minimum tax for
federal tax purposes and may subject Optionee to the alternative minimum tax in
the year of exercise.
(b) Exercise of Nonstatutory Stock Option. If this Option does not
-------------------------------------
qualify as an Incentive Stock Option, there may be a regular federal income tax
liability and a California income tax liability upon the exercise of the Option.
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is
an employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(c) Disposition of Shares. In the case of a Nonstatutory Stock
---------------------
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an Incentive Stock Option,
if Shares transferred pursuant to the Option are held for at least one year
after exercise and are disposed of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. In either case,
the long-term capital gain will be taxed for federal income tax and alternative
minimum tax purposes at a maximum rate of 20% if the Shares are held more than
one year after exercise. If Shares purchased under an Incentive Stock Option
are disposed of within one year after exercise or within two years after the
Date of Grant, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the Fair Market
Value of the Shares on the date of exercise, or (ii) the sale price of the
Shares.
(d) Notice of Disqualifying Disposition of Incentive Stock Option
-------------------------------------------------------------
Shares. If the Option granted to Optionee herein is an Incentive Stock Option,
- ------
and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to the Incentive Stock Option on or before the later of (i) the date
two years after the Date of Grant, or (ii) the date one year after the date of
exercise, Optionee shall immediately notify the Company in writing of such
disposition. Optionee acknowledges and agrees that he or she may be subject to
income tax withholding by the Company on the compensation income recognized by
Optionee from the early disposition by payment in cash or out of the current
earnings paid to Optionee.
<PAGE>
11. Withholding Tax Obligations. Optionee understands that, upon
---------------------------
exercising a Nonstatutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then Fair Market Value of the
Shares over the Exercise Price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Exchange Act. If Optionee is an employee, the Company will be required to
withhold from Optionee's compensation, or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income. Additionally, Optionee may at some point be required to
satisfy tax withholding obligations with respect to the disqualifying
disposition of an Incentive Stock Option. Optionee shall satisfy his or her tax
withholding obligation arising upon the exercise of this Option by one or some
combination of the following methods: (a) by cash payment, (b) out of
Optionee's current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares which (i) in the case of
Shares previously acquired from the Company, have been owned by Optionee for
more than six months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to or greater than Optionee's marginal tax rate
times the ordinary income recognized, or (d) by electing to have the Company
withhold from the Shares to be issued upon exercise of the Option that number of
Shares having a Fair Market Value equal to the amount required to be withheld.
For this purpose, the Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
--------
If Optionee is subject to Section 16 of the Exchange Act (an "Insider"),
-------
any surrender of previously owned Shares to satisfy tax withholding obligations
arising upon exercise of this Option must comply with the applicable provisions
of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").
----------
All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
12. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Optionee agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such
<PAGE>
managing underwriters and to execute an agreement reflecting the foregoing as
may be requested by the underwriters at the time of the Company's initial public
offering.
[Signature Page Follows]
<PAGE>
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
document.
Flycast Communications Corporation
By:-------------------------------
--------------------------------
(Print name and title)
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated:______________________________ _______________________________
"Optionee"
<PAGE>
EXHIBIT A
---------
FLYCAST COMMUNICATIONS CORPORATION
1997 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
This Agreement ("Agreement") is made as of ______________, by and between
---------
Flycast Communications Corporation, a California corporation (the "Company"),
-------
and "Optionee" ("Purchaser"). To the extent any capitalized terms used in this
---------
Agreement are not defined, they shall have the meaning ascribed to them in the
1997 Stock Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof,
------------------
Purchaser hereby elects to exercise his or her option to purchase __________
shares of the Common Stock (the "Shares") of the Company under and pursuant to
------
the Company's 1997 Stock Option Plan (the "Plan") and the Stock Option Agreement
----
dated ______________, (the "Option Agreement"). The purchase price for the
----------------
Shares shall be $___ per Share for a total purchase price of $_______________.
The term "Shares" refers to the purchased Shares and all securities received in
------
replacement of the Shares or as stock dividends or splits, all securities
received in replacement of the Shares in a recapitalization, merger,
reorganization, exchange or the like, and all new, substituted or additional
securities or other properties to which Purchaser is entitled by reason of
Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under
--------------------------
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
exercise price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, (d) delivery of a promissory note in the form attached as
Exhibit B to the Option Agreement (or in any form acceptable to the Company), or
- ---------
(e) a combination of the foregoing. If Purchaser delivers a promissory note as
partial or full payment of the purchase price, Purchaser will also deliver a
Pledge and Security Agreement in the form attached as Exhibit C to the Option
---------
Agreement (or in any form acceptable to the Company).
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
(a) Right of First Refusal. Before any Shares held by Purchaser or
----------------------
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
- -------
operation of law), the Company or its
<PAGE>
assignee(s) shall have a right of first refusal to purchase the Shares on the
terms and conditions set forth in this Section 3(a) (the "Right of First
--------------
Refusal").
- -------
(i) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
-------------------
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "Offered Price") and upon the same
-------------
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) Exercise of Right of First Refusal. At any time within 30 days
----------------------------------
after receipt of the Notice, the Company and/or its assignee(s) may, by giving
written notice to the Holder, elect to purchase all, but not less than all, of
the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price") for the
-------------- --------------
Shares purchased by the Company or its assignee(s) under this Section 3(a) shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(a), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 60 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section 3(a) notwithstanding, the transfer of any or all of
the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate
<PAGE>
Family (as defined below) or a trust for the benefit of Purchaser's Immediate
Family shall be exempt from the provisions of this Section 3(a). "Immediate
---------
Family" as used herein shall mean spouse, lineal descendant or antecedent,
- ------
father, mother, brother or sister. In such case, the transferee or other
recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(b) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer.
-----------------------------------------------------
In the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding, in the event of death, a transfer to Immediate Family as set forth in
Section 3(a)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the Fair Market Value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock
------------------------------
to be transferred pursuant to Section 3(b)(i), the price per Share shall be a
price set by the Board of Directors of the Company that will reflect the current
value of the stock in terms of present earnings and future prospects of the
Company. The Company shall notify Purchaser or his or her executor of the price
so determined within 30 days after receipt by it of written notice of the
transfer or proposed transfer of Shares. However, if the Purchaser does not
agree with the valuation as determined by the Board of Directors of the Company,
the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(c) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations.
(d) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement. Any sale or transfer of the Shares shall be
void unless the provisions of this Agreement are satisfied.
(e) Termination of Rights. The Right of First Refusal and the
---------------------
Company's right to repurchase the Shares in the event of an involuntary transfer
pursuant to Section 3(b) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act").
--------------
<PAGE>
(f) Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the Company's initial public offering.
4. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted securities"
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, Purchaser must hold the Shares indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
5. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
<PAGE>
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to this Agreement.]
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
(d) Removal of Legend. When all of the following events have
-----------------
occurred, the Shares then held by Purchaser will no longer be subject to the
legend referred to in Section 5(a)(ii): (i) the termination of the Right of
First Refusal; and (ii) the expiration or termination of the market standoff
provisions of Section 3(f) (and of any agreement entered pursuant to Section
3(f)). After such time, and upon Purchaser's request, a new certificate or
certificates representing the Shares not repurchased shall be issued without the
legend referred to in Section 5(a)(ii), and delivered to Purchaser.
6. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
<PAGE>
7. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL,
<PAGE>
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100,
25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
The parties have executed this Exercise Notice and Restricted Stock
Purchase Agreement as of the date first set forth above.
COMPANY:
FLYCAST COMMUNICATIONS CORPORATION
By:-------------------------------------
Name:-----------------------------------
(print)
Title:----------------------------------
181 FREMONT STREET, SUITE 120
SAN FRANCISCO, CA 94105
PURCHASER:
"OPTIONEE"
(Signature)
____________________________________
(Print name)
Address:
-------------------------------
-------------------------------
I, ______________________, spouse of _______, have read and hereby approve the
foregoing Agreement. In consideration of the Company's granting my spouse the
right to purchase the Shares as set forth in the Agreement, I hereby agree to be
bound irrevocably by the Agreement and further agree that any community property
or similar
<PAGE>
interest that I may have in the shares shall hereby be similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any
amendment or exercise of any rights under the Agreement.
----------------------------------
Spouse of___________
<PAGE>
EXHIBIT B
---------
PROMISSORY NOTE
---------------
$__________ __________, California
_______________,______
For value received, the undersigned promises to pay Flycast Communications
Corporation, a California corporation (the "Company"), at its principal office
-------
the principal sum of $__________ with interest from the date hereof at a rate of
_____% per annum, compounded semiannually, on the unpaid balance of such
principal sum. Such principal and interest shall be due and payable on
__________.
If the undersigned's employment or consulting relationship with the Company
is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT PREMIUM
OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company and is subject to the terms of a Pledge and
Security Agreement between the undersigned and the Company of even date
herewith.
_____________________________
<PAGE>
EXHIBIT C
---------
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (the "Agreement") is entered into this
---------
_____ day of __________________________ by and between Flycast Communications
Corporation, a California corporation (the "Company") and "Optionee"
-------
("Purchaser").
---------
RECITALS
--------
In connection with Purchaser's exercise of an option to purchase certain
shares of the Company's Common Stock (the "Shares") pursuant to an Option
------
Agreement dated __________ between Purchaser and the Company, Purchaser is
delivering a promissory note of even date herewith (the "Note") in full or
----
partial payment of the exercise price for the Shares. The company requires that
the Note be secured by a pledge of the Shares on the terms set forth below.
AGREEMENT
---------
In consideration of the Company's acceptance of the Note as full or partial
payment of the exercise price of the Shares, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. The Note shall become payable in full upon the voluntary or involuntary
termination or cessation of employment of Purchaser with the Company, for any
reason, with or without cause (including death or disability).
2. Purchaser shall deliver to the Secretary of the Company, or his or her
designee (hereinafter referred to as the "Pledge Holder"), all certificates
-------------
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as Attachment A executed by Purchaser and
------------
by Purchaser's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Purchaser is married,
Purchaser's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension or
modification of the Note, Purchaser hereby grants to the Company a security
interest in and pledges with and delivers to the Company Purchaser's Shares
(sometimes referred to herein as the "Collateral").
----------
4. In the event that Purchaser prepays all or a portion of the Note, in
accordance with the provisions thereof, Purchaser intends, unless written notice
to the contrary is delivered to the Pledge Holder, that the Shares represented
by the portion of the Note so repaid, including annual interest thereon, shall
continue to be so held by the Pledge Holder, to serve as independent collateral
for the outstanding portion of the Note for the purpose of commencing the
holding period set forth in Rule 144(d) promulgated under the Securities Act of
1933, as amended (the "Securities Act").
--------------
<PAGE>
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the
establishment of a public market for the Shares of the Company, the securities
laws affecting sale of the Shares make a public sale of the Shares commercially
unreasonable. The parties further agree that the repurchasing of such Shares by
the Company, or by any person to whom the Company may have assigned its rights
under this Agreement, is commercially reasonable if made at a price determined
by the Board of Directors in its discretion, fairly exercised, representing what
would be the Fair Market Value of the Shares reduced by any limitation on
transferability, whether due to the size of the block of shares or the
restrictions of applicable securities laws.
6. In the event of default in payment when due of any indebtedness under
the Note, the Company may elect then, or at any time thereafter, to exercise all
rights available to a secured party under the California Commercial Code
including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy any
remaining indebtedness under Purchaser's Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
7. Upon full payment by Purchaser of all amounts due under the Note,
Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations under this Agreement.
<PAGE>
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
FLYCAST COMMUNICATIONS CORPORATION
BY: _______________________________________
NAME: _____________________________________
(print)
TITLE: ____________________________________
181 FREMONT STREET, SUITE 120
SAN FRANCISCO, CA 94105
PURCHASER:
"OPTIONEE"
____________________________________
(Signature)
____________________________________
(Print Name)
Address:
____________________________________
____________________________________
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Purchaser") and Flycast Communications
--------
Corporation the ("Company") dated _____________ (the "Agreement"), Purchaser
------- ---------
hereby sells, assigns and transfers unto the Company
_______________________________ (________) shares of the Common Stock of the
Company, standing in Purchaser's name on the books of the Company and
represented by Certificate No. ____, and hereby irrevocably appoints
_____________________________ to transfer said stock on the books of the Company
with full power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE
USED AS AUTHORIZED BY THE AGREEMENT.
Dated: _________________
Signature:
_________________
_________________
Spouse of ___________ (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to perfect the security interest of the
Company pursuant to the Agreement.
<PAGE>
EXHIBIT 10.3
FLYCAST COMMUNICATIONS CORPORATION
1999 STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
((Optionee))
You have been granted an option to purchase Common Stock of FlyCast
Communications Corporation, (the "Company") as follows:
-------
<TABLE>
<S> <C>
Board Approval Date: ((Grant Date))
Date of Grant (Later of Board
Approval Date or Commencement of
Employment/Consulting): ((Grant Date))
Exercise Price Per Share: ((Price Per Share))
Total Number of Shares Granted: ((Number of Shares))
Total Price of Shares Granted: ((Total Exercise Price))
Type of Option: ((No Shares ISO)) Incentive Stock Option
-------------
((No Shares NSO)) Nonstatutory Stock Option
-------------
Term/Expiration Date: ((Expiration))
Vesting Commencement Date: ((Vesting Commencement))
Vesting Schedule: ((Vesting Schedule))
Termination Period: Option may be exercised for a period of
90 days after termination of employment
or consulting relationship except as set
out in Sections 7 and 8 of the Stock
Option Agreement (but in no event later
than the Expiration Date).
</TABLE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the FlyCast Communications Corporation 1999 Stock Option
Plan and the Stock Option Agreement, all of which are attached and made a part
of this document.
((OPTIONEE)) FLYCAST COMMUNICATIONS
CORPORATION
By:_________________________
________________________
Signature
Address:________________ Title:______________________
________________________
-1-
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
STOCK OPTION AGREEMENT
----------------------
1. GRANT OF OPTION. FlyCast Communications Corporation, a Delaware
---------------
corporation (the "Company"), hereby grants to the Optionee named in the Notice
-------
of Stock Option Grant attached to this Agreement ("Optionee"), an option (the
--------
"Option") to purchase the total number of shares of Common Stock (the "Shares")
------ ------
set forth in the Notice of Stock Option Grant, at the exercise price per share
set forth in the Notice of Stock Option Grant (the "Exercise Price") subject to
--------------
the terms, definitions and provisions of the 1999 Stock Option Plan (the "Plan")
----
adopted by the Company, which is incorporated in this Agreement by reference.
In the event of a conflict between the terms of the Plan and the terms of this
Agreement, the terms of the Plan shall govern. Unless otherwise defined in this
Agreement, the terms used in this Agreement shall have the meanings defined in
the Plan.
To the extent designated an Incentive Stock Option in the Notice of Stock
Option Grant and except as provided in Section 2(a)(iv) below, this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") and, to the extent
----
not so designated, this Option is intended to be a Nonstatutory Stock Option.
2. EXERCISE OF OPTION. This Option shall be exercisable during its term
------------------
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and with the provisions of Sections 9 and 10 of the Plan as follows:
(a) RIGHT TO EXERCISE.
-----------------
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitations contained in paragraphs
(iii) and (iv) below.
(iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Stock Option
Grant.
(iv) If designated an Incentive Stock Option in the Notice of
Stock Option Grant, in the event that the Shares subject to this Option (and all
other Incentive Stock Options granted to Optionee by the Company or any Parent
or Subsidiary) that vest in any calendar year have an aggregate fair market
value (determined for each Share as of the Date of Grant of the option covering
such Share) in excess of $100,000, the Shares in excess of $100,000 shall be
treated as subject to a Nonstatutory Stock Option, in accordance with Section 5
of the Plan.
(b) METHOD OF EXERCISE.
------------------
(i) This Option shall be exercisable by delivering to the
Company a written notice of exercise (in the form attached as Exhibit A) which
---------
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such Shares of
Common Stock as may be required by the Company pursuant to the provisions of the
Plan. Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written notice
shall be accompanied by payment of the Exercise Price. This Option shall be
deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
<PAGE>
(ii) As a condition to the exercise of this Option, Optionee
agrees to make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the exercise of the Option or disposition
of Shares, whether by withholding, direct payment to the Company, or otherwise.
(iii) No Shares will be issued pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
--------------------------
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), at the time this
--------------
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the Company
an investment representation statement in customary form, a copy of which is
available for Optionee's review from the Company upon request.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination of the following, at the election of Optionee:
(a) cash; (b) check; (c) surrender of other Shares of Common Stock of the
Company that (i) either have been owned by Optionee for more than six (6) months
on the date of surrender or were not acquired, directly or indirectly, from the
Company, and (ii) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised; (d) authorization from the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised; or (e) if there is a
public market for the Shares and they are registered under the Securities Act,
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
------------
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination of
---------------------------
Optionee's Continuous Service Status, Optionee may, to the extent otherwise so
entitled at the date of such termination (the "Termination Date"), exercise this
----------------
Option during the Termination Period set out in the Notice of Stock Option
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified in the Notice of Stock Option Grant, the Option shall
terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
----------------------
above, in the event of termination of Optionee's Continuous Service Status as a
result of total and permanent disability (as defined in Section 22(e)(3) of the
Code), Optionee may, but only within twelve (12) months from the date of
termination of employment (but in no event later than the date of expiration of
the term of this Option
<PAGE>
as set forth in Section 10 below), exercise the Option to the extent otherwise
so entitled at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified in this Agreement, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of the death of Optionee (a)
-----------------
during the term of this Option and while an Employee of the Company and having
been in Continuous Status as an Employee or Consultant since the date of grant
of the Option, or (b) within thirty (30) days after the termination of
Optionee's Continuous Service Status, the Option may be exercised, at any time
within twelve (12) months following the date of death (but in no event later
than the date of expiration of the term of this Option as set forth in Section
10 below), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued had accrued at the date of death or
termination, as applicable. To the extent that Optionee was not entitled to
exercise this Option at the date of death or termination, as applicable, or if
Optionee's estate or the person who acquired the right to exercise the Option as
a result of Optionee's death does not exercise this Option within the time
specified in the Notice of Stock Option Grant, the Option shall terminate
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution.
The designation of a beneficiary does not constitute a transfer. An Option may
be exercised during the lifetime of Optionee only by Optionee or a transferee
permitted by this section. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term set
--------------
out in the Notice of Stock Option Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
11. NO ADDITIONAL EMPLOYMENT RIGHTS. Optionee understands and agrees that
-------------------------------
the vesting of Shares pursuant to the Vesting Schedule is earned only by
continuing as an Employee or Consultant at the will of the Company (not through
the act of being hired, being granted this Option or acquiring Shares under this
Agreement). Optionee further acknowledges and agrees that nothing in this
Agreement, nor in the Plan which is incorporated in this Agreement by reference,
shall confer upon Optionee any right with respect to continuation as an Employee
or Consultant with the Company, nor shall it interfere in any way with his or
her right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
12. TAX CONSEQUENCES. Optionee acknowledges that he or she has read the
----------------
brief summary set forth below of certain federal tax consequences of exercise of
this Option and disposition of the Shares under the law in effect as of the date
of grant. OPTIONEE UNDERSTANDS THAT THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS
OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF INCENTIVE STOCK OPTION. If this Option is an
----------------------------------
Incentive Stock Option, there will be no regular federal income tax liability
upon the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an item of alternative minimum taxable income for federal tax
purposes and may subject Optionee to the alternative minimum tax in the year of
exercise.
<PAGE>
(b) EXERCISE OF NONSTATUTORY STOCK OPTION. If this Option does not
-------------------------------------
qualify as an Incentive Stock Option, Optionee may incur regular federal income
tax liability upon the exercise of the Option. Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the fair market value of the Shares on the date of
exercise over the Exercise Price. In addition, if Optionee is an employee of
the Company, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(c) DISPOSITION OF SHARES. If this Option is an Incentive Stock
---------------------
Option and if Shares transferred pursuant to the Option are held for more than
one year after exercise and more than two years after the Date of Grant, any
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes. If Shares purchased under an Incentive
Stock Option are disposed of before the end of either of such two holding
periods, then any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the lesser of (i) the fair market value of the Shares on the
date of exercise, or (ii) the sales proceeds, over the Exercise Price. If this
Option is a Nonstatutory Stock Option, then gain realized on the disposition of
Shares will be treated as long-term or short-term capital gain depending on
whether or not the disposition occurs more than one year after the exercise
date. In the case of either an Incentive Stock Option or a Nonstatutory Stock
Option, the long-term capital gain will be taxed for federal income tax and
alternative minimum tax purposes as a maximum rate of 20% if the Shares are held
more than one year after exercise.
(d) NOTICE OF DISQUALIFYING DISPOSITION. If the Option granted to
-----------------------------------
Optionee in this Agreement is an Incentive Stock Option, and if Optionee sells
or otherwise disposes of any of the Shares acquired pursuant to the Incentive
Stock Option on or before the later of (i) the date two years after the Date of
Grant, or (ii) the date one year after transfer of such Shares to Optionee upon
exercise of the Incentive Stock Option, Optionee shall notify the Company in
writing within thirty (30) days after the date of any such disposition.
Optionee agrees that Optionee may be subject to income tax withholding by the
Company on the compensation income recognized by Optionee from the early
disposition by payment in cash or out of the current earnings paid to Optionee.
13. SIGNATURE. This Stock Option Agreement shall be deemed executed by
---------
the Company and Optionee upon execution by such parties of the Notice of Stock
Option Grant attached to this Stock Option Agreement.
[Remainder of page left intentionally blank]
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
To: FlyCast Communications Corporation
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
--------------------------------------------
This is official notice that the undersigned ("Optionee") intends to
--------
exercise Optionee's option to purchase __________ shares of FlyCast
Communications Corporation Common Stock, under and pursuant to the Company's
1999 Stock Option Plan and the Stock Option Agreement dated ___________, as
follows:
Grant Number: ______________________________
Date of Purchase: ______________________________
Number of Shares: ______________________________
Purchase Price: ______________________________
Method of Payment
of Purchase Price: ______________________________
Social Security No.: ________________________________
The shares should be issued as follows:
Name: _________________________
Address: _________________________
_________________________
_________________________
Signed: _________________________
Date: _________________________
<PAGE>
EXHIBIT 10.7
FLYCAST COMMUNICATIONS CORPORATION
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
DECEMBER 30, 1998
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------------
This Amended and Restated Investors' Rights Agreement (the
"Agreement") is made as of the 30th day of December, 1998, by and among FlyCast
---------
Communications Corporation, a California corporation (the "Company"), the
-------
investors listed on Exhibit A hereto, each of which is herein referred to as an
---------
"Investor," and the holders of Common Stock listed on Exhibit B hereto, each of
-------- ---------
whom is herein referred to as a "Founder".
-------
RECITALS
--------
A. The Company and certain of the Investors have entered into a
Series C Preferred Stock Agreement (the "Purchase Agreement") of even date
------------------
herewith pursuant to which the Company desires to sell to the Investors and the
Investors desire to purchase from the Company shares of the Company's Series C
Preferred Stock. A condition to the Investors' obligations under the Purchase
Agreement is that the Company, the Founders and the Investors enter into this
Agreement in order to provide the Investors with (i) certain rights to register
shares of the Company's Common Stock issuable upon conversion of the Preferred
Stock held by the Investors, (ii) certain rights to receive or inspect
information pertaining to the Company, and (iii) a right of first offer with
respect to certain issuances by the Company of its securities. The Company and
the Founders each desire to induce the Investors to purchase shares of Series C
Preferred Stock pursuant to the Purchase Agreement by agreeing to the terms and
conditions set forth herein. The Company and certain of the Investors that are
holders of the Company's Series A and Series B Preferred Stock (the "Existing
--------
Investors") also desire to amend that certain Investors' Rights Agreement (the
- ---------
"Prior Agreement") dated as of July 11, 1997, by and among the Company, certain
- ----------------
of the Founders and the Existing Investors and restate it in its entirety with
this Agreement.
AGREEMENT
---------
The parties hereby agree as follows:
1. REGISTRATION RIGHTS. The Company and the Investors covenant
-------------------
and agree as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
-----------
(a) The terms "register," "registered," and
-------- ----------
"registration" refer to a registration effected by preparing and filing a
------------
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Act"), and the declaration or ordering of
---
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the
----------------------
shares of Common Stock issuable or issued upon conversion of the Series A,
Series B and Series C
<PAGE>
Preferred Stock, including 7,500 shares of Series A Preferred Stock issued or
issuable upon exercise of the warrant to purchase 7,500 shares of Series A
Preferred Stock issued to Cupertino National Bank ("Cupertino" and the
---------
"Cupertino Warrant") and 33,834 shares of Series B Preferred Stock issued or
- ------------------
issuable upon exercise of a warrant to purchase 33,834 shares of Series B
Preferred Stock issued to Venture Lending ("Venture Lending" and the "Venture
--------------- -------
Lending Warrant"), (ii) the shares of Common Stock issued to the Founders (the
- ---------------
"Founders' Stock"), provided, however, that for the purposes of Section 1.2, 1.4
- ---------------- -------- -------
or 1.13 the Founders' Stock shall be deemed not to be Registrable Securities and
(iii) any other shares of 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 described in (i) and (ii) above, and provided,
--------
further, that the foregoing definition shall exclude in all cases any
- -------
Registrable Securities sold by a person in a transaction in which his or her
rights under this Agreement are not assigned. Notwithstanding the foregoing,
Common Stock or other securities shall only be treated as Registrable Securities
if and so long as they have not been (A) sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, or
(B) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Act under Section 4(1) thereof so that all transfer
restrictions, and restrictive legends with respect thereto, if any, are removed
upon the consummation of such sale;
(c) 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;
(d) The term "Holder" means any person owning or having the
------
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.12 hereof;
(e) The term "Form S-3" means such form under the Act as in
--------
effect on the date hereof or any successor form under the Act; and
(f) The term "SEC" means the Securities and Exchange
---
Commission.
1.2 REQUEST FOR REGISTRATION.
------------------------
(a) If the Company shall receive at any time after the
earlier of: (i) December 10, 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 an SEC Rule 145 transaction), a written request from
the Holders of at least twenty percent (20%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of Registrable Securities with an anticipated
aggregate offering price, before deduction of underwriting discounts and
commissions, of $10,000,000, then the Company shall, within ten (10) days of the
<PAGE>
receipt thereof, give written notice of such request to all Holders and shall,
subject to the limitations of subsection 1.2(b), use its best efforts to effect
as soon as practicable, and in any event within sixty (60) days of the receipt
of such request, the registration under the Act of all Registrable Securities
which the Holders request to be registered within twenty (20) days of the
mailing of such notice by the Company in accordance with Section 3.5.
(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 this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include such Holder's 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 1.5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders. 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
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.
(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 President 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 such filing
for a period of not more than sixty (60) days after receipt of the request of
the Initiating Holders; provided, however, that the Company may not utilize this
-------- -------
right more than once in any twelve-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:
(i) After the Company has effected two (2) registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
<PAGE>
(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending 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
(iii) 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 1.4 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 under the 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 or a transaction covered by
Rule 145 under the Act, a registration in which the only stock being registered
is Common Stock issuable upon conversion of debt securities which are also being
registered, or any registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), 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 FORM S-3 REGISTRATION. In case the Company shall receive
---------------------
from any Holder or Holders of not less than twenty percent (20%) of the
Registrable Securities then outstanding 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 twenty (20) 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 1.4: (i) if
Form S-3 is not available for such offering by the Holders; (ii) 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
<PAGE>
less than $1,000,000; (iii) if the Company shall furnish to the Holders a
certificate signed by the President 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 Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than one hundred twenty (120) days after receipt of the request of the Holder or
Holders under this Section 1.4; provided, however, that the Company shall not
utilize this right more than once in any twelve month period; (iv) if the
Company has, within the twelve (12) month period preceding the date of such
request, already effected two (2) registrations on Form S-3 for the Holders
pursuant to this Section 1.4; (v) during the period ending one hundred eighty
(180) days after the effective date of a registration subject to Section 1.3
hereof or (vi) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(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. Registrations effected pursuant to this
Section 1.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 1.2 or 1.3, respectively.
1.5 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 up to one hundred twenty (120) days.
The Company shall not be required to file, cause to become effective or maintain
the effectiveness of any registration statement that contemplates a distribution
of securities on a delayed or continuous basis pursuant to Rule 415 under the
Act.
(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 for up to one hundred twenty (120) days.
(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
<PAGE>
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.
(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, such
obligation to continue for one hundred twenty (120) days.
(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) Use its best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities 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.
1.6 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 required to effect the registration of such Holder's
Registrable Securities. The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.2 or Section 1.4 of this
Agreement if, as a result of the application of the preceding sentence, the
number of shares or the anticipated aggregate offering
<PAGE>
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company's obligation to initiate such
registration as specified in subsection 1.2(a) or subsection 1.4(b)(2),
whichever is applicable.
1.7 EXPENSES OF REGISTRATION.
------------------------
(a) DEMAND REGISTRATION. All expenses other than
-------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders
selected by them with the approval of the Company, which approval shall not be
unreasonably withheld, shall be borne by the Company; 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 participating Holders
shall bear such expenses), unless the Holders of a majority of the Registrable
Securities 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 Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the 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
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2.
(b) 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 1.12),
including (without limitation) all registration, filing, and qualification fees,
printers' and accounting fees relating or apportionable thereto, and the
reasonable fees and disbursements of one counsel for the selling Holders
selected by them with the approval of the Company, which approval shall not be
unreasonably withheld, but excluding underwriting discounts and commissions
relating to Registrable Securities.
(c) REGISTRATION ON FORM S-3. 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
requested pursuant to Section 1.4, including (without limitation) all
registration, filing, qualification, printers' and accounting fees, fees of
counsel for the Company and the reasonable fees and disbursements of one counsel
for the selling Holders selected by them with the approval of the Company, which
approval shall not be unreasonably withheld, but excluding any underwriters'
discounts or commissions relating to the 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
<PAGE>
required under Section 1.3 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 (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 twenty percent (20%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's securities in which case 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 or (iii) any securities held by a Founder be included if any
securities held by any selling Holder are excluded. 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 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 Securities Exchange Act of 1934, as amended
(the "Exchange Act"), against any losses, claims, damages, or liabilities (joint
-------------
or several) to which they may become subject under the Act, the Exchange 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
---------
<PAGE>
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 Exchange Act, any state
securities law or any rule or regulation promulgated under the Act, the Exchange
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, 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, 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, except in the case of
willful fraud 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
<PAGE>
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the reasonable 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; provided, that, in no event shall any contribution by a Holder
under this Subsection 1.10(d) exceed the net proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. 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.
(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
<PAGE>
date of the first registration statement filed by the Company for the offering
of its securities to the general public so long as the Company remains subject
to the periodic reporting requirements under Sections 13 or 15(d) of the
Exchange Act;
(b) take such action, including the voluntary registration
of its Common Stock under Section 12 of the Exchange 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 Exchange 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 Exchange 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 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 at least 200,000 shares of such securities, provided 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; and provided,
further, that 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 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 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 Section 1.
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 at least two-thirds of the outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would (a) allow
<PAGE>
such holder or prospective holder (i) 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, or (ii) 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 (b) provide such holder or prospecter holder registration rights superior to
those granted herein to the Holders.
1.14 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby
----------------------------
agrees that, during the period of duration (up to, but not exceeding, 180 days
for the Company's initial public offering and 90 days for any subsequent
offerings) 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; provided, however, that all officers and directors of the Company,
all one-percent securityholders, and all other persons with registration rights
(whether or not pursuant to this Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 1.14.
Notwithstanding the foregoing, the obligations described in this
Section 1.14 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 an SEC Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
1.15 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be
----------------------------------
entitled to exercise any right provided for in this Section 1 after the earlier
of (i) ten (10) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of its
securities to the general public, or (ii) such time as Rule 144 or another
similar exemption under the Act is available for the sale of all of such
Holder's shares during a three (3)-month period without registration.
<PAGE>
2. COVENANTS OF THE COMPANY.
------------------------
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver
--------------------------------
to each member of the Board of Directors, and to each Investor holding, and to
transferees of, at least 300,000 shares of Registrable Securities (a "Major
-----
Investor"):
- --------
(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 an independent public accounting firm of nationally
recognized standing selected by the Company;
(b) as soon as practicable, but in any event within thirty
(30) 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, a statement of cash
flows for such fiscal quarter and an unaudited balance sheet as of the end of
such fiscal quarter;
(c) within twenty (20) days of the end of each month, an
unaudited income statement and a statement of cash flows and balance sheet for
and as of the end of such month, in reasonable detail;
(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
sources and applications of funds statements 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 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, provided that the foregoing shall not restrict the right of the
Company to change its accounting principles consistent with GAAP, if the Board
of Directors determines that it is in the best interest of the Company to do so;
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 reasonably
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.
<PAGE>
2.2 INSPECTION. The Company shall permit each Major Investor,
----------
at such Major 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.
2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS. The
---------------------------------------------------
covenants set forth in Sections 2.1 and 2.2 shall terminate as to Investors and
be of no further force or effect when the Company first becomes subject to the
periodic reporting requirements of Sections 13 or 15(d) of the Exchange Act.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
--------------------
specified in this Section 2.4, the Company hereby grants to each Investor a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). An Investor who chooses to exercise the right of
first offer may designate as purchasers under such right itself or its partners
or affiliates in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
------
Shares to each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the 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 30 calendar days after delivery of the Notice,
the 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 and exercise of all convertible or exercisable
securities then held, by such Investor bears to the total number of shares of
Common Stock then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities). The Company shall promptly, in writing,
inform each Investor that purchases all the shares available to it (each, a
"Fully-Exercising Investor") of any other Investor's failure to do likewise.
- -------------------------
During the 15 calendar day period commencing after receipt of such information,
each Fully-Exercising Investor shall be entitled to obtain that portion of the
Shares for which Investors were entitled to subscribe but which were not
subscribed for by the Investors that is equal to the proportion that the number
of shares of Common Stock issued and held, or issuable upon conversion and
exercise of all convertible or exercisable securities then held, by such Fully-
Exercising Investor bears to the total number of shares of Common Stock then
outstanding (assuming full conversion and exercise of all convertible or
exercisable securities).
(c) The Company may, during the 45-day period following the
expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed
<PAGE>
portion of the 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 the Shares
within such period, or if such agreement is not consummated within 60 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
Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not
be applicable (i) to the issuance or sale of shares of Common Stock (or options
therefor) to employees, consultants and directors, pursuant to plans or
agreements approved by the Board of Directors for the primary purpose of
soliciting or retaining their services, (ii) to or after consummation of a bona
fide, firmly underwritten public offering of shares of Common Stock, registered
under the Act pursuant to a registration statement (except as provided in
paragraph 2.5) (iii) to the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities, (iv) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, (v) to the issuance of securities to financial institutions
or lessors in connection with commercial credit arrangements, equipment
financings, or similar transactions, or (vi) to the issuance or sale of the
Series C Preferred Stock.
(e) The Existing Investors hereby waive their rights of
first offer, including the notice provisions thereof, set forth in Section 2.4
of the Prior Agreement.
2.5 IPO ALLOCATION. In the event of a bona fide, firm
--------------
commitment underwritten initial public offering of the capital stock of the
Company (the "IPO"), the Company shall, or shall require that the managing
underwriters of the IPO, establish a directed share program (the "Program") in
connection with the IPO. The Program shall consist of at least that number of
shares of capital stock (the "Program Shares") equal to nine percent (9%) of the
shares offered in the IPO (exclusive of shares subject to any overallotment
option on behalf of the underwriters). The Company shall cause the managing
underwriters to give priority to the Investors with respect to the Program
Shares in allocating the shares available for purchase in the Program. The
Investors shall have the option, but not the obligation, to purchase all or any
portion of the Program Shares at the initial price to public set forth on the
cover page of the final prospectus distributed in connection with the IPO.
2.6 OBSERVER RIGHTS . So long as 500,000 shares of Series C
----------------
Preferred Stock shall remain outstanding, the Series C Preferred Stock, voting
together as a class, shall be entitled to appoint one individual to observe
meetings of the Company's Board of Directors. Such observer will have the right
to attend at least two Board meetings in 1999, specifically, those meetings
where the forecast and the annual budget for the Company's 2000 fiscal year are
discussed. Beginning January 1, 2000, such observer shall be entitled to attend
all meetings of the Company's Board of Directors and Board Committees as an
active participant and shall be welcomed and invited to make comments and
suggestions. Such observer shall not be entitled to participate in portions of
meetings where such observer's presence would in the opinion of the Company's
counsel, adversely affect the Company's attorney-client privilege.
<PAGE>
Such observer shall also, upon request, execute the Company's standard non-
disclosure agreement concerning its proprietary information.
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 transferees of any of the Series A, Series B or Series C Preferred
Stock or any Common Stock issued upon conversion thereof). 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 and all acts and transactions
-------------
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of California, without giving effect to principles of
conflicts of laws.
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 by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed (a)
if to the Company, at its principal office and (b) if to an Investor, at such
party's address as set forth on Exhibit A hereto or as subsequently modified by
---------
written notice and (c) if to a Founder, at such party's address as set forth on
Exhibit B hereto or subsequentially modified by written notice.
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; TERMINATION OF PRIOR AGREEMENT. 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 the Company
and the holders of at least two-thirds of the Registrable Securities then
outstanding, not including the Founders' Stock; provided that if such amendment
has the effect of affecting the Founders' Stock (i) in a manner different than
securities issued to the Investors and (ii) in a manner adverse to the interests
of the holders
<PAGE>
of the Founders' Stock, then such amendment shall require the consent of the
holder or holders of a majority of the Founders' Stock. 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. The Company and the Existing Investors,
constituting the holders of a majority of the Registrable Securities (as defined
in the Prior Agreement) now outstanding, not including the Founders' Stock,
agree that the Prior Agreement has been amended and restated in its entirety by
this Agreement.
3.8 SEVERABILITY. If one or more provisions of this Agreement
------------
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(x) such provision shall be excluded from this Agreement, (y) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (z) the
balance of the Agreement shall be enforceable in accordance with its terms.
3.9 AGGREGATION OF STOCK. All shares of the Preferred Stock
--------------------
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.
[Signature Page Follows]
<PAGE>
The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above writtenLPLFinancial Printing GroupThe
parties have executed this Amended and Restated Investors' Rights Agreement as
of the date first above written.
COMPANY:
FLYCAST COMMUNICATIONS CORPORATION
By: /s/ George Garrick
------------------------------
George Garrick, President
Address: 181 Fremont Street; Suite 120
San Francisco, CA 94105
INVESTORS:
BESSEMER VENTURE PARTNERS IV LP
By: Deer IV & Co. LLC
Its General Partner
By: /s/ Robert H. Buescher
------------------------------
Robert H. Buescher, Manager
BESSEMER VENTURE INVESTORS LP
By: Deer IV & Co. LLC
Its General Partner
By: /s/ Robert H. Buescher
------------------------------
Robert H. Buescher, Manager
Address: 1400 Old Country Road, Suite 407
Westbury, NY 11590
CHARLES RIVER PARTNERSHIP VIII, A LIMITED
PARTNERSHIP
By: Charles River VIII GP Limited
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
Partnership, General Partner
By: /s/
------------------------------
General Partner
Address: 1000 Winter Street, Suite 3300
Waltham, MA 02154
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
INTELLIGENT MEDIA VENTURES, INC.
By: /s/ Bradley Greene
------------------------------
Bradley Greene
Attorney in Fact
Address: 59 Executive Park Dr. South,
N.E. Atlanta, GA 30329
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
PACIFIC TELESIS GROUP
By: /s/ Donald E. Kiernan
------------------------------
Donald E. Kiernan,
Executive Vice President, Chief
Financial Officer
Address: Pacific Telesis Group
175 E. Houston
11th Floor
San Antonio, TX 78205
ATTN: General Attorney, M & A
Legal
Facsimile: 210-351-3488
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/ Peter D. Olson
-----------------------------
Peter D. Olson
Address: MachOne Communications, Inc.
992 South DeAnza Boulevard
San Jose, CA 95129
ALEX BROWN & SONS, CUSTODIAN FBO PETER D.
OLSON
By: /s/ Peter D. Olson
--------------------------
Peter D. Olson
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
ALEX BROWN & SONS, CUSTODIAN FBO LAWRENCE G.
BRAITMAN
By: /s/ Lawrence G. Braitman
------------------------------
Lawrence G. Braitman
Address: 123 Townsend Street, Suite 226
San Francisco, CA 94107
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
ALEX BROWN & SONS, CUSTODIAN FBO RICHARD L.
THOMPSON
By:_______________________________
Richard L. Thompson
Address: 123 Townsend Street, Suite 226
San Francisco, CA 94107
__________________________________
Richard L. Thompson
Address: 123 Townsend Street, Suite 226
San Francisco, CA 94107
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
_________________________________
Ruth C. Dorward
Address: 14200 1st Avenue South, #366
Burien, WA 98168
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
_______________________________
Bill Baughman
_______________________________
Shirley Baughman
Address: c/o Haigh, Patty Baughman
4408 216th S.W., Unit A
Mount Lake Terrace, WA 98043
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
_______________________________
Dave Thompson
_______________________________
Beverly Thompson
Address: 23850 Star Court
Auburn, CA 95603
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
ALEX BROWN & SONS, CUSTODIAN FBO HOWARD
BRAITMAN
By: /s/ Howard Braitman
--------------------------------
Howard Braitman
Address: 5225 Clearbrook Drive
Concord, CA 94521
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/ Rhona Rogers
-------------------------------
Rhona Rogers
Address: 333 Bush Street West
Apt. # 3704
San Francisco, CA 95104
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/ Jeffrey Y. Suto
--------------------------------
Jeffrey Y. Suto
Address: c/o Venture Law Group
2775 Sand Hill Road
Menlo Park, CA 94025
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
VLG INVESTMENTS 1997
By: /s/ Joshua Pickus
----------------------------
Title: General Partner
-------------------------
Print Name: Joshua Pickus
--------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
FOUNDERS:
/s/ Lawrence G. Braitman
----------------------------------
Lawrence G. Braitman
/s/ Peter D. Olson
----------------------------------
Peter D. Olson
----------------------------------
David W. Roth
/s/ Michael Solomon
----------------------------------
Michael Solomon
/s/ Richard L. Thompson
----------------------------------
Richard L. Thompson
----------------------------------
Miles Walsh
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
WESTERN INVESTMENTS CAPITAL, LLC
By: /s/ Tania Modic
----------------------------------
Title: Managing Member
-------------------------------
Print Name: Tania Modic
--------------------------
Address: 774 Mays Street #10
Incline Village, NV 894451
Attn: Tania Modic
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
William T. Burgin
BRIMSTONE ISLAND CO. L.P.
By: /s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Neill H. Brownstein
/s/ Robert H. Buescher
-------------------------------------
Robert H. Buescher
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
G. Felda Hardymon
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Christropher Gabrieli
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
GABRIELI FAMILY FOUNDATION
By: /s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Michael I. Barach
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
David J. Cowan
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Bruce K. Graham
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Diane N. McPartlin
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Ravi B. Mhatre
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Gautam A. Prakash
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Robi L. Soni
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Joanna A. Strober
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
William R. Wasik
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Rodney A. Cohen
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Richard R. Davis
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Adam P. Godfrey
LINDSAY 1994 FAMILY PARTNERSHIP, L.P.
By: /s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
John G. MacDonald
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Howard S. Markowitz
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Robert J. S. Roriston
/s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Steven L. Williamson
WOODS 1994 FAMILY PARTNERSHIP, L.P.
By: /s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
BVP IV SPECIAL SITUATIONS L.P.
By: /s/ Robert H. Buescher (Atty-In-Fact)
-------------------------------------
Name:
------------------------------------
Its:
-------------------------------------
Address: c/o Bessemer Partners IV L.P.
1400 Old Country Road, Suite 407
Westbury, NY 11590
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
ST. PAUL VENTURE CAPITAL IV, LLC
By: /s/ James R. Simons
---------------------------------
James R. Simons, General Partner
ST. PAUL VENTURE CAPITAL AFFILIATES FUND I,
LLC
By: St. Paul Venture Capital, Inc.
Its: Manager
By: /s/ James R. Simons
---------------------------------
James R. Simons, Executive Vice
President
Address: St. Paul Venture Capital
8500 Normandale Lake Blvd.
Suite 1940
Bloomington, MN 1940
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/ Jeff Goodman
------------------------------
Jeff Goodman
Address: 707 Continental Circle, #732
Mountain View, CA 94040
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/ Rob Coneybeer
-----------------------------
Rob Coneybeer
Address: 1971 Broadway
San Francisco, CA 94109
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
COMDISCO, INC.
By: /s/ James Labe
---------------------------------
Name: James Labe
-------------------------------
Title: President, Comdisco Ventures
------------------------------
Division
------------------------------
Address: 3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
Attn: Christine Fera
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
BESSEC VENTURES IV L.P.
By: Deer IV & Co. LLC, It's General Partner
By: /s/ Robert H. Buescher
-----------------------------------
Robert H. Buescher, Manager
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
FRANK L. WALTERS
By: /s/ Frank L. Walters
-------------------------------
Name: Frank L. Walters
Address: 23 Fairview Ave.
Atherton, CA 94027
Facsimile: 650-321-0157
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
D.F.L.L.C.
By: /s/ Howard Draft
------------------------------
Name: Howard Draft
Address: 633 N. St. Clair Street
20th Floor
Chicago, IL 60611
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
ABS EMPLOYEE VENTURE FUND, LP
By: /s/ Margaret-Mary V. Preston
------------------------------
Name: Margaret-Mary V. Preston
----------------------------
Title: VP of Alex. Brown Investments, Inc.
-----------------------------------
GP of the Partnership
------------------------------------------
Address:
Facsimile:
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
U.S. DEVELOPMENT CAPITAL INVESTMENT COMPANY
By: /s/ Raymond Moss
--------------------------
Name: Raymond Moss
Title: Secretary
Address: Sims Moss Kline & Davis LLP
400 Northpark Town Center,
Suite 310
Atlanta GA 30328
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
US WEST DEX HOLDINGS
By: /s/ James A. Smith
---------------------------
Address: 1801 California, Suite 5200
Denver, CO 80202
Facsimile: 303-308-0835
c/o Henry Pickens
<PAGE>
SHAUN ANDRIKOPOULOS
By: /s/ Shaun Andrikopoulos
-----------------------------
Name: Shaun Andrikopoulos
Title: Principal
Address: 1112 Cole
San Francisco, CA 94117
Facsimile: (415) 241-3109
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT A
---------
INVESTORS
Investor
Bessemer Venture Partners IV LP
1400 Old Country Road, Suite 407
Westbury, NY 11590
Bessemer Venture Investors LP
1400 Old Country Road, Suite 407
Westbury, NY 11590
Charles River Partnership VIII
1000 Winter Street, Suite 3300
Waltham, MA 02154
Peter D. Olson
H3D Entertainment
20195 Stevens Creek Blvd.
Cupertino, CA 95014
Ruth Dorward
14200 1st Avenue South, #366
Burien, WA 98168
Bill and Shirley Baughman
c/o Haigh, Patty Baughman
4408 216th S.W., Unit A
Mount Lake Terrace, WA 98043
Dave and Beverly Thompson
23850 Star Court
Auburn, CA 95603
<PAGE>
SECOND CLOSING - Additional Investors
-------------------------------------
Second Closing - Bessemer Investors
Investor
- --------
William T. Burgin
Brimstone Island Co. L.P.
Neill H. Brownstein
Robert H. Buescher
G. Felda Hardymon
Christopher Gabrieli
Gabrieli Family Foundation
Michael I. Barach
David J. Cowan
Bruce K. Graham
Diane N. McPartlin
Ravi B. Mhatre
Gautam A. Prakash
Robi L. Soni
Joanna A. Strober
William R. Wasik
Rodney A. Cohen
Richard R. Davis
Adam P. Godfrey
Lindsay 1994 Family Partnership, L.P.
John G. MacDonald
Howard S. Markowitz
Robert J. S. Roriston
Steven L. Williamson
Woods 1994 Family Partnership, L.P.
Bessemer Venture Partners IV L.P.
BVP IV Special Situations L.P.
Address: c/o Bessemer Partners IV L.P.
1400 Old Country Road
Suite 407
Westbury, NY 11590
Attn. Robert H. Buescher
<PAGE>
Second Closing - Friends of the Company:
- ----------------------------------------
Investor
- --------
VLG Investments 1997
Address: c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attn. Linda K. Glisson
UMB, N.A., as Trustee For Brobeck, Phleger &
Harrison Savings Trust FBO Jeffrey Y. Suto
Address: 1010 Grand Blvd.
Kansas City, MO 64106
Attn. Susan Longrace
Third Closing - Additional Corporate Investors
- ----------------------------------------------
and Friends of the Company
--------------------------
St. Paul Venture Capital IV, LLC
St. Paul Venture Capital Affiliates Fund I, LLC
Address: 8500 Normandale Lake Blvd.
Suite 1940
Bloomington, MN 55437
Attn: James R. Simons
Jeff Goodman
Address: 665 Silver Ave.
Half Moon Bay, CA 94019
Rob Coneybeer
Address: 1971 Broadway
San Francisco, CA 94109
<PAGE>
Comdisco Closing:
- -----------------
Comdisco, Inc.
Address: 3000 Sand Hill Road.
Building 1, Suite 155
Menlo Park, CA 94025
Attn: Christine Fera
<PAGE>
Series C Closings--Additional Investors
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ABS Employee Venture Fund, LP
Address: BT Alex. Brown
375 West Padonia Road
Timonium, MD 21093
Shaun Andrikopoulos
Address: 1112 Cole
San Francisco, CA 94117
Intelligent Media Ventures, Inc.
Address: 59 Executive Park Dr. South
N.E. Atlanta, GA 30329
Pacific Telesis Group
Address: 175 E. Houston
11th Floor
San Antonio, TX 78025
Attn: General Attorney, M&A
Legal
Frank L. Walters.
Address: 23 Fairview Ave.
Atherton, CA 94027
US West Dex Holding, Inc.
Address: 1801 California
Suite 5200
Denver, CO 80202
<PAGE>
U.S. Development Capital Investment Company
Address: Sims Moss Kline & Davis LLP
400 Norhtpark Town Center
Suite 310
Atlanta, GA 30328
<PAGE>
EXHIBIT B
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FOUNDERS
Lawrence G. Braitman
Peter D. Olson
David W. Roth
Michael Solomon
Richard L. Thompson
Miles Walsh
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment 1 to Registration Statement No. 333-
71909 of Flycast Communications Corporation of our report dated February 3,
1999, appearing in the Prospectus, which is part of this Registration
Statement, and of our report dated February 3, 1999 relating to the financial
statement schedule appearing elsewhere in this Registration Statement.
We also consent to the references to us under the headings "Experts" and
"Change in Accountants" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
February 26, 1999
