<PAGE>
As filed with the Securities and Exchange Commission on February 5, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 $0.001.. $40,250,000 $11,190
</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.
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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
February , 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
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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 750 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
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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
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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."
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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 our 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 45% 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 several potential claims
We have received letters from DoubleClick Incorporated alleging that a former
employee of DoubleClick whom we hired in November 1998 as a salesperson is
violating certain agreements not to compete with DoubleClick. DoubleClick also
alleges that we are engaging in unfair competition by utilizing customer
contacts developed by this employee while he was at DoubleClick. We are in the
process of assessing DoubleClick's allegations. DoubleClick could initiate
legal action against us in an attempt to preclude such employee from performing
certain services for Flycast. We could lose this employee entirely and be
required to cease certain business activities or pay damages to DoubleClick. In
the event that we are unable to continue to utilize this employee's services,
we do not believe that this would have a material adverse effect on Flycast.
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
11
<PAGE>
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.
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
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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;
. 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
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<PAGE>
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, 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.
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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 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
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<PAGE>
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>
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;
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.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 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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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 750 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 45% 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
Source: Forrester Research, Inc.
[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 750 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 APPEARS HERE]
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 761,215 shares of common stock with a weighted average exercise price
of $0.65 had been exercised, options to purchase a total of 1,943,571 shares at
a weighted average exercise price of $1.49 per share were outstanding and
93,026 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
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<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.
50
<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,
Custodian 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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<PAGE>
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 $14,583 per month as
consideration for such consulting services until the termination of this
consulting agreement. 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, $0.001 par value per share, and 2,000,000
shares of undesignated preferred stock, $0.001 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 2,849,071
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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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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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 2,849,071
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 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 amended and
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 Amended and Restated 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 agreement.
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.
10.6 Series C Preferred Stock Purchase Agreement dated December 30, 1998,
as amended, between the Registrant and certain holders of the
Registrant's securities.
10.7 Amended and Restated Investors' Rights Agreement dated December 31,
1998, as amended, between the Registrant and certain holders of the
Registrant's securities.
10.8 Amended and Restated Right of First Refusal and Co-Sale Agreement
dated December 31, 1998, as amended, between the Registrant and
certain holders of the Registrant's securities.
10.9 Amended and Restated Voting Agreement dated December 31, 1998, as
amended, between the Registrant and certain holders of the
Registrant's securities.
10.10+* Agreement dated August 25, 1998, as amended, between the Registrant
and Intelligent Media Ventures, Inc.
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 for Comdisco, Inc. dated
September 29, 1998.
10.16+* Agreement dated January 26, 1999 between the Registrant and SBC
Interactive.
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.
+ Confidential treatment requested as to certain portions of this Exhibit.
Omitted portions will be filed separately with the Securities and Exchange
Commission.
(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 5, 1999.
FLYCAST COMMUNICATIONS CORPORATION
/s/ George R. Garrick
By: _________________________________
George R. Garrick
Chairman of the Board, Chief
ExecutiveOfficer and President
II-5
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, jointly and severally, George R. Garrick
and Ralph J. Harms, and each of them, as his attorney-in-fact, with full power
of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective
amendments), and any and all Registration Statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the Offering contemplated by this Registration Statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said Registration Statement.
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:
<TABLE>
<S> <C> <C>
Signature Title
Date
/s/ George R. Garrick Chairman of the February
- ------------------------------------ Board, Chief 5, 1999
George R. Garrick Executive Officer
and President
(Principal
Executive Officer)
/s/ Ralph J. Harms Chief Financial February
- ------------------------------------ Officer and 5, 1999
Ralph J. Harms Assistant
Secretary
(Principal
Financial and
Accounting
Officer)
/s/ David J. Cowan Director February
- ------------------------------------ 5, 1999
David J. Cowan
/s/ Ted R. Dintersmith Director February
- ------------------------------------ 5, 1999
Ted R. Dintersmith
/s/ Howard Draft Director February
- ------------------------------------ 5, 1999
Howard Draft
/s/ Gary Prophitt Director February
- ------------------------------------ 5, 1999
Gary Prophitt
/s/ Michael D. Solomon Director February
- ------------------------------------ 5, 1999
Michael D. Solomon
</TABLE>
II-6
<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 amended and
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 Amended and Restated 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 agreement.
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.
10.6 Series C Preferred Stock Purchase Agreement dated December 30, 1998,
as amended, between the Registrant and certain holders of the
Registrant's securities.
10.7 Amended and Restated Investors' Rights Agreement dated December 31,
1998, as amended, between the Registrant and certain holders of the
Registrant's securities.
10.8 Amended and Restated Right of First Refusal and Co-Sale Agreement
dated December 31, 1998, as amended, between the Registrant and
certain holders of the Registrant's securities.
10.9 Amended and Restated Voting Agreement dated December 31, 1998, as
amended, between the Registrant and certain holders of the
Registrant's securities.
10.10+* Agreement dated August 25, 1998, as amended, between the Registrant
and Intelligent Media Ventures, Inc.
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 for Comdisco, Inc. dated
September 29, 1998.
10.16+* Agreement dated January 26, 1999 between the Registrant and SBC
Interactive.
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.
+ Confidential treatment requested as to certain portions of this Exhibit.
Omitted portions will be filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT 3.1
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-
<PAGE>
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
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.
-3-
<PAGE>
(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
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
-4-
<PAGE>
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 Corpora tion 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.
-5-
<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
-6-
<PAGE>
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 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 share s 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
-7-
<PAGE>
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.
(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
-8-
<PAGE>
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 Commo n 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 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.
-9-
<PAGE>
(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 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,
-10-
<PAGE>
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 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.
-11-
<PAGE>
(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 and Series B 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 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
-12-
<PAGE>
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 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.
-13-
<PAGE>
(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.
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
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<PAGE>
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 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;
-15-
<PAGE>
(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.
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.
-16-
<PAGE>
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."
* * *
-17-
<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]
-18-
<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 __, 1998.
/s/ George Garrick
_______________________________________
George Garrick, President
/s/ Jeffrey Y. Suto
---------------------------------------
Jeffrey Y. Suto, Secretary
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF INCORPORATION
OF
FLYCAST COMMUNICATIONS CORPORATION
ARTICLE I
The name of the 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
The aggregate number of shares which the Corporation shall have authority
to issue is 100 shares of capital stock all of which shall be designated "Common
Stock" and have a par value of $0.001 per share.
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.
<PAGE>
(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.
(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.
ARTICLE VIII
The name and mailing address of the incorporator are as follows:
Scott S. Ring
Venture Law Group
2775 Sand Hill Road
Menlo Park, CA 94025
-2-
<PAGE>
Executed this 25th day of January, 1999.
/s/ Scott S. Ring
------------------------------------
Scott S. Ring, Incorporator
-3-
<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 and Series B 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.
<PAGE>
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 $0.001 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
-2-
<PAGE>
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 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
AMENDED AND RESTATED BYLAWS
OF
FLYCAST COMMUNICATIONS CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<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>
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<S> <C>
5.2 Appointment Of Officers............................................. 8
5.3 Subordinate Officers................................................ 9
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..................................................... 10
5.9 Secretary........................................................... 10
5.10 Chief Financial Officer............................................ 10
5.11 Representation Of Shares Of Other Corporations..................... 11
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...................................... 12
6.4 Indemnity Not Exclusive............................................. 12
6.5 Insurance........................................................... 12
6.6 Conflicts........................................................... 12
ARTICLE VII - RECORDS AND REPORTS............................................ 13
7.1 Maintenance And Inspection Of Records............................... 13
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.................... 14
8.3 Stock Certificates; Partly Paid Shares.............................. 14
8.4 Special Designation On Certificates................................. 14
8.5 Lost Certificates................................................... 15
8.6 Construction; Definitions........................................... 15
8.7 Dividends........................................................... 15
8.8 Fiscal Year......................................................... 15
8.9 Seal................................................................ 15
8.10 Transfer Of Stock.................................................. 15
8.11 Stock Transfer Agreements.......................................... 16
8.12 Registered Stockholders............................................ 16
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE IX - AMENDMENTS...................................................... 16
</TABLE>
<PAGE>
AMENDED AND RESTATED 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
-5-
<PAGE>
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.
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<PAGE>
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 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
-7-
<PAGE>
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 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.
-8-
<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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<PAGE>
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.
-12-
<PAGE>
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
-13-
<PAGE>
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the 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
-14-
<PAGE>
the shares of its capital stock. Dividends may be paid in cash, in property, or
in shares of the corporation's capital stock.
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 5.1
February 5, 1999
FlyCast Communications Corporation
181 Fremont Street
Suite #120
San Francisco, CA 94105
REGISTRATION STATEMENT ON FORM S-1 (FILE NO.333- )
-----------------------------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 (File No. 333-____)
(the "Registration Statement") to be filed by you with the Securities and
----------------------
Exchange Commission on February 5, 1999, in connection with the registration
under the Securities Act of 1933 of shares of your Common Stock (the "Shares").
------
As your legal counsel in connection with this transaction, we have examined the
proceedings taken and we are familiar with the proceedings proposed to be taken
by you in connection with the sale and issuance of the Shares.
It is our opinion that upon completion of the proceedings being taken in
order to permit such transactions to be carried out in accordance with the
securities laws of the various states where required, the Shares, when issued
and sold in the manner described in the Registration Statement, will be legally
and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever it appears in the
Registration Statement and in any amendment to it.
Sincerely,
VENTURE LAW GROUP
A Professional Corporation
/s/ VENTURE LAW GROUP
<PAGE>
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement (the "Agreement") is made as of
---------
____________, 1999, by and between Flycast Communications Corporation, a
Delaware corporation (the "Company"), and <<IndemniteeName>> (the "Indemnitee").
------- ----------
RECITALS
--------
The Company and Indemnitee recognize the increasing difficulty in obtaining
liability insurance for directors, officers and key employees, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance. The Company and Indemnitee further recognize the
substantial increase in corporate litigation in general, subjecting directors,
officers and key employees to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited.
Indemnitee does not regard the current protection available as adequate under
the present circumstances, and Indemnitee and agents of the Company may not be
willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them with the maximum protection
permitted by law.
AGREEMENT
---------
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
---------------
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), in each case to
the extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of such action or suit if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company and its stockholders, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudicated by court order or judgment
to be liable to the Company in the performance of Indemnitee's duty to the
Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee has
-----------------------------
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is intended
--------------------
to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
-----------------------------------
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referred to in
Section 1(a) or Section 1(b) hereof (including amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby.
-2-
<PAGE>
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
--------------------------------
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company and shall be given in accordance with the provisions of
Section 12(d) below. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for in
---------
Section 1 and this Section 3 shall be made no later than twenty (20) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within twenty (20) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Section 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the
Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice
------------------
of a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
-3-
<PAGE>
(e) SELECTION OF COUNSEL. In the event the Company shall be
--------------------
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ counsel in any such proceeding at Indemnitee's
expense; and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense or (C) the Company shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
-------------------------------------------------
(a) SCOPE. Notwithstanding any other provision of this Agreement,
-----
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested members of the Company's Board of
Directors, the General Corporation Law of the State of Delaware, or otherwise,
both as to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though he or she may have ceased
to serve in any such capacity at the time of any action, suit or other covered
proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total
-4-
<PAGE>
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion of such expenses, judgments, fines or penalties to which Indemnitee is
entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
---
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
----------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
-5-
<PAGE>
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for expenses
--------------------------
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
-------
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
-----------------
shall include employee benefit plans; references to "fines" shall include any
-----
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
-------------------------------------
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have
-6-
<PAGE>
acted in a manner "not opposed to the best interests of the Company" as referred
------------------------------------------------
to in this Agreement.
11. ATTORNEYS' FEES. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
12. 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
Delaware, without giving effect to principles of conflict 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) 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.
(d) NOTICES. Any notice, demand or request required or permitted to
-------
be given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram 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.
(e) 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>
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and inure to the benefit of Indemnitee
and Indemnitee's heirs, legal representatives and assigns.
(g) SUBROGATION. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
to effectively bring suit to enforce such rights.
[Signature Page Follows]
-8-
<PAGE>
The parties hereto have executed this Agreement as of the day and year set
forth on the first page of this Agreement.
Flycast Communications Corporation
By: _____________________________________
Title: _____________________________________
Address: 181 Fremont Street, Suite #120
San Francisco, CA 94105
AGREED TO AND ACCEPTED:
<<IndemniteeName>>
_______________________________
(Signature)
Address: <<IndemniteeAddress1>>
<<IndemniteeAddress2>>
<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>
EXHIBIT 10.3
FLYCAST COMMUNICATIONS CORPORATION
1999 STOCK OPTION PLAN
----------------------
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business. Options
granted under the Plan may be either 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 and the regulations promulgated
thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or its Committee appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Affiliate" means an entity other than a Subsidiary (as defined
---------
below) in which the Company owns an equity interest or which, together with the
Company, is under common control of a third person or entity.
(c) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans under applicable U.S. state corporate laws,
U.S. federal and applicable state securities laws, the Code, any Stock Exchange
rules or regulations and the applicable laws of any other country or
jurisdiction where Options are granted under the Plan, as such laws, rules,
regulations and requirements shall be in place from time to time.
(d) "Board" means the Board of Directors of the Company.
-----
(e) "Change of Control" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
----
(g) "Committee" means one or more committees or subcommittees of the
---------
Board appointed by the Board to administer the Plan in accordance with Section 4
below.
(g) "Common Stock" means the Common Stock of the Company.
------------
<PAGE>
(h) "Company" means FlyCast Communications Corporation, a California
-------
corporation.
(i) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent, Subsidiary or Affiliate to render services
and is compensated for such services, and any director of the Company whether
compensated for such services or not.
(j) "Continuous Service Status" means the absence of any interruption
-------------------------
or termination of service as an Employee or Consultant to the Company or a
Parent, Subsidiary or Affiliate. Continuous Service Status 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 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 Parent(s), Subsidiaries, Affiliates or their respective successors.
Unless otherwise determined by the Administrator or the Company, a change in
status from an Employee to a Consultant or from a Consultant to an Employee will
not constitute a termination of Continuous Service Status.
(k) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(l) "Director" means a member of the Board.
--------
(m) "Employee" means any person (including, if appropriate, any Named
--------
Executive, Officer or Director) employed by the Company or any Parent,
Subsidiary or Affiliate of the Company. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(o) "Fair Market Value" means, as of any date, the 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 on the date of determination (or if no trading or
bids occurred on the date of determination, on the last trading day prior to the
date 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
-2-
<PAGE>
asked prices for the Common Stock for the date of determination (or if no bids
occurred on the date of determination, on the last trading day prior to the date
of determination); 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.
(p) "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.
(q) "Listed Security" means any security of the Company that is listed
---------------
or approved for listing on a national securities exchange or designated or
approved for designation as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
(r) "Named Executive" means any individual who, on the last day of the
---------------
Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(s) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.
(t) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder.
(u) "Option" means a stock option granted pursuant to the Plan.
------
(v) "Option Agreement" means a written document, the form(s) of which
----------------
shall be approved from time to time by the Administrator, reflecting the terms
of an Option granted under the Plan and includes any documents attached to or
incorporated into such Option Agreement, including, but not limited to, a notice
of stock option grant and a form of exercise notice.
(w) "Option Exchange Program" means a program approved by the
-----------------------
Administrator whereby outstanding Options are exchanged for Options with a lower
exercise price.
(x) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(y) "Optionee" means an Employee or Consultant who receives an Option.
--------
(z) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
-3-
<PAGE>
(aa) "Plan" means this 1999 Stock Option Plan.
----
(bb) "Reporting Person" means an Officer, Director or greater than 10%
----------------
shareholder of the Company within the meaning of Rule 16a-2 of the Exchange Act,
who is required to file reports pursuant to Rule 16a-3 of the Exchange Act.
(cc) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as amended from time to time, or any successor provision.
(dd) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(ee) "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.
(ff) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
(gg) "Ten Percent Holder" means a person who owns stock representing
------------------
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of shares that may be sold under the Plan
is 2,000,000 Shares of Common Stock, plus an annual increase on the first day of
each of the Company's fiscal years beginning in 2000, 2001, 2002, 2003 and 2004
equal to the lesser of (i) 500,000 Shares, (ii) three percent (3%) of the Shares
outstanding on the last day of the immediately preceding fiscal year, or (iii)
such lesser number of Shares as the Board shall determine. 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, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares that were subject thereto shall, unless the Plan
has been terminated, become available for future grant under the Plan. In
addition, any Shares of Common Stock that are retained by the Company upon
exercise of an Option in order to satisfy the exercise 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 issued under
the Plan and later repurchased by the Company pursuant to any repurchase right
that the Company may have shall not be available for future grant under the
Plan.
4. Administration of the Plan.
--------------------------
(a) General. The Plan shall be administered by the Board or a
-------
Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the
-4-
<PAGE>
Applicable Laws, the Board may authorize one or more officers (who may (but need
not) be Officers) to grant Options to Employees and Consultants.
(b) Administration with respect to Reporting Persons. With respect to
------------------------------------------------
Options granted to Reporting Persons and Named Executives, the Plan may (but
need not) be administered so as to permit such Options to qualify for the
exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.
(c) Committee Composition. If a Committee has been appointed pursuant
---------------------
to this Section 4, 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 any 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 a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan pursuant
to Section 4(b) above, to the extent permitted or required by Rule 16b-3 and
Section 162(m) of the Code.
(d) 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, 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(o) of the Plan;
(ii) to select the Employees and Consultants to whom Options may
from time to time be granted;
(iii) to determine whether and to what extent Options are
granted;
(iv) to determine the number of Shares of Common Stock to be
covered by each such award granted;
(v) to approve forms of Option Agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise price, the time or times
when an Option may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Optioned Stock, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to determine when and under what circumstances an Option
may be settled in cash under Section 10(f) instead of Common Stock;
(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
-5-
<PAGE>
declined since the date the Option was granted and to make any other amendments
or adjustments to any Option that the Administrator determines, in its
discretion and under the authority granted to it under the Plan, to be necessary
or advisable, provided however that no amendment or adjustment to an Option that
would materially and adversely affect the rights of any Optionee shall be made
without the prior written consent of the Optionee;
(ix) to initiate an Option Exchange Program;
(x) to construe and interpret the terms of the Plan and awards
granted under the Plan; and
(xi) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to Optionees who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(e) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.
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, provided however that Employees of an Affiliate shall not be eligible
to receive Incentive Stock Options. An Employee or Consultant who has been
granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options.
(b) Type of Option. Each Option shall be designated in the 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 Shares with respect to which Incentive Stock Options are
exercisable for the first time by an 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 shall
be determined as of the time the Option with respect to such Shares is granted.
(c) No Employment Rights. 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 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.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 19 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 15 of the Plan.
-6-
<PAGE>
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided however that the term of an Option 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 and provided further that, in the case
of an Incentive Stock Option granted to a person who at the time of such grant
is a Ten Percent Holder, the term of such Incentive Stock 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. Limitation on Grants to Employees. Subject to adjustment as provided
---------------------------------
in Section 13 below, the maximum number of Shares which may be subject to
Options granted to any one Employee under this Plan for any fiscal year of the
Company shall be 1,000,000.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. 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 Administrator and set forth in the Option Agreement, but shall be subject to
the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who at the time of grant is a Ten
Percent Holder, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant; or
(B) granted to any other 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
(A) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to a person who is at the time of grant is a Ten
Percent Holder, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant if required by the Applicable
Laws and, if not so required, shall be such price as is determined by the
Administrator;
(B) granted to a person who, at the time of the grant of
such Option, is a Named Executive of the Company, the per share Exercise Price
shall be no less than 100% of the Fair Market Value on the date of grant if such
Option is intended to qualify as performance-based compensation under Section
162(m) of the Code; or
(C) granted prior to the date, if any, on which the Common
Stock becomes a Listed Security to any person other than a Named Executive or a
Ten Percent Holder, the per Share exercise price shall be no less than 85% of
the Fair Market Value per Share on the date of grant if required by Applicable
Law and, if not so required, shall be such price as is determined by the
Administrator.
-7-
<PAGE>
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price other than as required above pursuant to a merger or
other corporation transaction.
(b) Permissible Consideration. 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) delivery of Optionee's promissory note with such
recourse, interest, security and redemption provisions as the Administrator
determines to be appropriate; (4) cancellation of indebtedness; (5) other Shares
that (x) in the case of Shares acquired upon exercise of an Option either have
been owned by the Optionee for more than six months on the date of surrender or
were not acquired, directly or indirectly, from the Company, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which the Option is exercised; (6) 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; (7) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect exercise of the Option and prompt delivery
to the Company of the sale or loan proceeds required to pay the exercise price
and any applicable withholding taxes; (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 the 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 and the Administrator may refuse to
accept a particular form of consideration at the time of any Option exercise if,
in its sole discretion, acceptance of such form of consideration is not in the
best interests of the Company at such time.
10. 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, consistent with the terms of the Plan, and
reflected in the Option Agreement, including vesting requirements and/or
performance criteria with respect to the Company and/or the Optionee; provided
however that, if required by the Applicable Laws, any Option granted prior to
the date, if any, upon which the Common Stock becomes a Listed Security shall
become exercisable at a rate of at least 20% per year over five years from the
date the Option is granted. In the event that any of the Shares issued upon
exercise of an Option (which exercise occurs prior to the date, if any, upon
which the Common Stock becomes a Listed Security) should be subject to a right
of repurchase in the Company's favor, such repurchase right shall, if required
by the Applicable Laws, lapse at the rate of at least 20% per year over five
years from the date the Option is granted. Notwithstanding the above, in the
case of an Option granted to an officer (including but not limited to Officers),
Director or Consultant, the Option may become exercisable, or a repurchase
right, if any, in favor of the Company shall lapse, at any time or during any
period established by the Administrator. The Administrator shall have the
discretion
-8-
<PAGE>
to determine whether and to what extent the vesting of Options shall be tolled
during any unpaid leave of absence; provided however that in the absence of such
determination, vesting of Options shall be tolled during any such leave.
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 full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(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,
notwithstanding 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 13 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which 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 Status as an Employee or Consultant. In the event
--------------------------------------------------
of termination of an Optionee's Continuous Service Status, 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) after the date of such termination (but in no event later than the date
of expiration of the term of such Option as set forth in the Option Agreement),
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. To the extent that the Optionee was not
entitled to exercise the Option at the date of such termination, or if the
Optionee does not exercise the Option to the extent so entitled within the time
specified above, the Option shall terminate and the Optioned Stock underlying
the unexercised portion of the Option shall revert to the Plan. Unless
otherwise determined by the Administrator or the Company, no termination shall
be deemed to occur and this Section 10(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. Notwithstanding Section 10(b) above, in
----------------------
the event of termination of an Optionee's Continuous Service Status as a result
of his or her total and permanent disability (as defined in Section 22(e)(3) of
the Code), such Optionee may, but only within twelve (12) months (or such other
period of time 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) from the date of such termination (but in no event later than the date
of expiration of the term of such Option as set forth in the Option Agreement),
exercise the Option to the
-9-
<PAGE>
extent he or she was entitled to exercise it at the date of such termination. To
the extent that the Optionee was not entitled to exercise the Option at the date
of termination, or if the Optionee does not exercise the Option to the extent so
entitled within the time specified above, the Option shall terminate and the
Optioned Stock underlying the unexercised portion of the Option shall revert to
the Plan.
(d) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Service Status since the date of grant of the
Option, or within 30 days following termination of the 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 expiration
date of the term of such Option as set forth in the Option Agreement) by such
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 the
Optionee's Continuous Service Status. To the extent that the Optionee was not
entitled to exercise the Option at the date of death or termination, as the case
may be, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified above, the Option shall terminate and the
Optioned Stock underlying the unexercised portion of the Option shall revert to
the Plan.
(e) Extension of Exercise Period. The Administrator shall have full
----------------------------
power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Service
Status from the periods set forth in Sections 10(b), 10(c) and 10(d) above or in
the Option Agreement to such greater time as the Board shall deem appropriate,
provided that in no event shall such Option be exercisable later than the date
of expiration of the term of such Option as set forth in the Option Agreement.
(f) Buy-Out Provisions. The Administrator may at any time offer to
------------------
buy out for a payment in cash or Shares an Option previously granted under the
Plan based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time such offer is made.
11. Taxes.
-----
(a) As a condition of the exercise of an Option granted under the
Plan, the Optionee (or in the case of the Optionee's death, the person
exercising the Option) shall make such arrangements as the Administrator may
require for the satisfaction of any applicable federal, state, local or foreign
withholding tax obligations that may arise in connection with the exercise of
Option and the issuance of Shares. The Company shall not be required to issue
any Shares under the Plan until such obligations are satisfied.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from the Optionee's compensation an amount sufficient to
satisfy such tax obligations from the next payroll payment otherwise payable
after the date of an exercise of the Option.
-10-
<PAGE>
(c) This Section 11(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of an Optionee
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Optionee shall be deemed to have
elected 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 determined as of
the applicable Tax Date (as defined below) equal to the amount required to be
withheld. For purposes of this Section 11, 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 under the Applicable Laws (the "Tax Date").
--------
(d) If permitted by the Administrator, in its discretion, an Optionee
may satisfy his or her tax withholding obligations upon exercise of an Option 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 (6)
months on the date of surrender, and (ii) have a Fair Market Value determined as
of the applicable Tax Date equal to the amount required to be withheld.
(e) Any election or deemed election by an Optionee to have Shares
withheld to satisfy tax withholding obligations under Section 11(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by an Optionee under Section 11(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an 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 is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. Non-Transferability of Options. An Option 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; provided that, after the date,
if any, upon which the Common Stock becomes a Listed Security, the Administrator
may in its discretion grant transferable Nonstatutory Stock Options pursuant to
Option Agreements specifying (i) the manner in which such Nonstatutory Stock
Options are transferable and (ii) that any such transfer shall be subject to the
Applicable Laws. The designation of a beneficiary by an Optionee will not
constitute a transfer. An Option may be exercised, during the lifetime of the
Optionee, only by the Optionee or a transferee permitted by this Section 12.
13. Adjustments Upon Changes in Capitalization, Corporate Transactions and
----------------------------------------------------------------------
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
-11-
<PAGE>
outstanding Option, the number of Shares set forth in Sections 3(a)(i) and 8
above, 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 (including any change in the number of Shares of Common
Stock effected in connection with a change of domicile of the Company), 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 Administrator, 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, each outstanding Option shall
terminate immediately prior to the consummation of the transaction, unless
otherwise provided by the Administrator.
(c) Corporate Transactions; Change of Control. In the event of a
-----------------------------------------
Corporate Transaction, each outstanding Option shall be assumed or an equivalent
option shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation (such entity, the "Successor
---------
Corporation"), unless the Successor Corporation does not agree to assume the
- -----------
outstanding Options or to substitute equivalent options, in which case such
Options shall terminate upon the consummation of the transaction.
Notwithstanding the preceding sentence, in the event of a Change of Control, the
Administrator shall, as to outstanding Options, either (i) provide that such
Options shall be assumed by the Successor Corporation or that the Successor
Corporation shall substitute with respect to such Options equivalent options;
(ii) provide upon notice to Optionees that all Options, to the extent then
exercisable or to be exercisable as a result of the Change of Control, must be
exercised on or before a specified date (which date shall be at least five (5)
days from the date of the notice), after which the Options shall terminate; or
(iii) terminate each Option in its entirety in exchange for a payment of cash,
securities and/or other property 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.
For purposes of this Section 12(c), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon a Corporate Transaction or a Change of Control, as the case
may be, each Optionee would be entitled to receive upon exercise of the Option
the same number and kind of shares of stock or the same amount of property, cash
or securities as such holder would have been entitled to receive upon the
occurrence of the transaction if the holder had been, immediately prior to such
transaction,
-12-
<PAGE>
the holder of the number of Shares of Common Stock covered by the Option at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option as provided for in this Section 13); provided however that if the
consideration received in the transaction is not solely common stock of the
Successor Corporation, the Administrator may, with the consent of the Successor
Corporation, provide for the consideration to be received upon exercise of the
Option to be solely common stock of the Successor Corporation equal to the Fair
Market Value of the per Share consideration received by holders of Common Stock
in the transaction.
(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.
14. 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 Administrator;
provided however that in the case of an 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.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend, discontinue or terminate the Plan, but no amendment, alteration,
suspension, discontinuance or termination (other than an adjustment made
pursuant to Section 13 above) shall be made that would materially and adversely
affect the rights of any Optionee under any outstanding grant, without his or
her consent. In addition, to the extent necessary and desirable to comply with
the Applicable Laws, the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such as degree as required.
(b) Effect of Amendment or Termination. No amendment or termination
----------------------------------
of the Plan shall materially and adversely affect Options already granted and
such Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Administrator, which agreement must be in writing and signed by the Optionee
and the Company.
16. Conditions Upon Issuance of Shares. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel.
-13-
<PAGE>
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.
17. 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.
18. Option Agreement. Options shall be evidenced by Option Agreements in
----------------
such form as the Administrator shall from time to time approve.
19. Shareholder Approval. If required by the Applicable Laws, 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 manner and to the degree required
under the Applicable Laws.
20. Information and Documents to Optionees and Purchasers. Prior to the
-----------------------------------------------------
date, if any, upon which the Common Stock becomes a Listed Security and if
required by the Applicable Laws, the Company shall provide financial statements
at least annually to each Optionee and to each individual who acquired Shares
pursuant to the Plan, during the period such Optionee or purchaser 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.
-14-
<PAGE>
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:
-------
Board Approval Date: {GrantDate}
Date of Grant (Later of Board
Approval Date or
Commencement of
Employment/Consulting): {GrantDate}
Exercise Price Per Share: {PricePerShare}
Total Number of Shares Granted: {NumberofShares}
Total Price of Shares Granted: {TotalExercisePrice}
Type of Option: {NoSharesISO} Incentive Stock Option
-------------
{NoSharesNSO} Nonstatutory Stock Option
------------
Term/Expiration Date: {Expiration}
Vesting Commencement Date: {VestingCommencement}
Vesting Schedule: {VestingSchedule}
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).
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
-1-
<PAGE>
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:________________________
_________________________
-2-
<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.
-1-
<PAGE>
(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.
(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
-2-
<PAGE>
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 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.
-3-
<PAGE>
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.
(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
-4-
<PAGE>
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 28% if the Shares are held more than
one year but less than 18 months after exercise and at 20% if the Shares are
held more than 18 months 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]
-5-
<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 10.4
FLYCAST COMMUNICATIONS CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of FlyCast Communications Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of the Company.
------------
(d) "Company" means FlyCast Communications Corporation, a California
-------
corporation.
(e) "Compensation" means all regular straight time gross earnings and
------------
shall not include commissions or payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Continuous Status as an Employee" means the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee 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 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 and its Designated Subsidiaries.
(g) "Contributions" means all amounts credited to the account of a
-------------
participant pursuant to the Plan.
(h) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(i) "Designated Subsidiaries" means the Subsidiaries which have been
-----------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the
<PAGE>
Plan; provided however that the Board shall only have the discretion to
designate Subsidiaries if the issuance of options to such Subsidiary's Employees
pursuant to the Plan would not cause the Company to incur adverse accounting
charges.
(j) "Employee" means any person, including an Officer, who is
--------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Offering Date" means the first business day of each Offering
-------------
Period of the Plan.
(m) "Offering Period" means a period of twenty-four (24) months
---------------
commencing on May 1 and November 1 of each year, except for the first Offering
Period as set forth in Section 4(a).
(n) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "Plan" means this Employee Stock Purchase Plan.
----
(p) "Purchase Date" means the last day of each Purchase Period of the
-------------
Plan.
(q) "Purchase Period" means a period of six (6) months within an
---------------
Offering Period, except for the first Purchase Period as set forth in Section
4(b).
(r) "Purchase Price" means with respect to a Purchase Period an amount
--------------
equal to 85% of the Fair Market Value (as defined in Section 7(b) below) of a
Share of Common Stock on the Offering Date or on the Purchase Date, whichever is
lower; provided, however, that in the event (i) of any increase in the number of
Shares available for issuance under the Plan (including without limitation an
automatic increase pursuant to Section 13(a) below or as a result of a
shareholder-approved amendment to the Plan), and (ii) all or a portion of such
additional Shares are to be issued with respect to one or more Offering Periods
that are underway at the time of such increase ("Additional Shares"), and (iii)
-----------------
the Fair Market Value of a Share of Common Stock on the date of such increase
(the "Approval Date Fair Market Value") is higher than the Fair Market Value on
-------------------------------
the Offering Date for any such Offering Period, then in such instance the
Purchase Price with respect to Additional Shares shall be 85% of the Approval
Date Fair Market Value or the Fair Market Value of a Share of Common Stock on
the Purchase Date, whichever is lower.
(s) "Share" means a share of Common Stock, as adjusted in accordance
-----
with Section 19 of the Plan.
-2-
<PAGE>
(t) "Subsidiary" means a corporation, domestic or foreign, of which
----------
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
3. Eligibility.
-----------
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code; provided however that eligible Employees
may not participate in more than one Offering Period at a time.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Company or of any subsidiary of the Company, or (ii) if such
option would permit his or her rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) of the Fair Market Value (as defined in Section 7(b) below) of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods and Purchase Periods.
-------------------------------------
(a) Offering Periods. The Plan shall be implemented by a series of
----------------
Offering Periods of twenty-four (24) months' duration, with new Offering
Periods commencing on or about May 1 and November 1 of each year (or at such
other time or times as may be determined by the Board of Directors). The first
Offering Period shall commence on the beginning of the effective date of the
Registration Statement on Form S-1 for the initial public offering of the
Company's Common Stock (the "IPO Date") and continue until April 30, 2001. The
--------
Plan shall continue until terminated in accordance with Section 19 hereof. The
Board of Directors of the Company shall have the power to change the duration
and/or the frequency of Offering Periods with respect to future offerings
without shareholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected.
(b) Purchase Periods. Each Offering Period shall consist of four (4)
----------------
consecutive purchase periods of six (6) months' duration. The last day of each
Purchase Period shall be the "Purchase Date" for such Purchase Period. A
-------------
Purchase Period commencing on May 1 shall end on the next October 31. A
Purchase Period commencing on November 1 shall end on the next April 30. The
first Purchase Period shall commence on the IPO Date and shall end on October
31, 1999. The Board of Directors of the Company shall have the power to change
the duration and/or frequency of Purchase Periods with respect to future
purchases without shareholder approval if such change is announced at least five
(5) days prior to the scheduled beginning of the first Purchase Period to be
affected.
-3-
<PAGE>
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period. The
subscription agreement shall set forth the percentage of the participant's
Compensation (subject to Section 6(a) below) to be paid as Contributions
pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in Section
10.
6. Method of Payment of Contributions.
----------------------------------
(a) A participant shall elect to have payroll deductions made on each
payday during the Offering Period in an amount not less than one percent (1%)
and not more than ten percent (10%) (or such greater percentage as the Board may
establish from time to time before an Offering Date, which percentage shall not
exceed twenty percent (20%)) of such participant's Compensation on each payday
during the Offering Period. All payroll deductions made by a participant shall
be credited to his or her account under the Plan. A participant may not make
any additional payments into such account.
(b) A participant may discontinue his or her participation in the Plan
as provided in Section 10, or, on one occasion only during the Offering Period
may increase and on one occasion only during the Offering Period may decrease
the rate of his or her Contributions with respect to the Offering Period by
completing and filing with the Company a new subscription agreement authorizing
a change in the payroll deduction rate. The change in rate shall be effective
as of the beginning of the next calendar month following the date of filing of
the new subscription agreement, if the agreement is filed at least ten (10)
business days prior to such date and, if not, as of the beginning of the next
succeeding calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased during any Offering Period scheduled to end
during the current calendar year to 0% at such time that the aggregate of all
payroll deductions accumulated with respect to such Offering Period and any
other Offering Period ending within the same calendar year equal $21,250.
Payroll deductions shall re-commence at the rate provided in such participant's
subscription agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10.
7. Grant of Option.
---------------
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase
-4-
<PAGE>
Date a number of Shares of the Company's Common Stock determined by dividing
such Employee's Contributions accumulated prior to such Purchase Date and
retained in the participant's account as of the Purchase Date by the applicable
Purchase Price; provided however that the maximum number of Shares an Employee
may purchase during each Purchase Period shall be 2,000 Shares (subject to any
adjustment pursuant to Section 19 below), and provided further that such
purchase shall be subject to the limitations set forth in Sections 3(b) and 13.
(b) The fair market value of the Company's Common Stock on a given
date (the "Fair Market Value") shall be determined by the Board in its
-----------------
discretion based on the closing sales price of the Common Stock for such date
(or, in the event that the Common Stock is not traded on such date, on the
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market or, if such
price is not reported, the mean of the bid and asked prices per share of the
Common Stock as reported by Nasdaq or, in the event the Common Stock is listed
on a stock exchange, the Fair Market Value per share shall be the closing sales
price on such exchange on such date (or, in the event that the Common Stock is
not traded on such date, on the immediately preceding trading date), as reported
in The Wall Street Journal. For purposes of the Offering Date under the first
-----------------------
Offering Period under the Plan, the Fair Market Value of a share of the Common
Stock of the Company shall be the Price to Public as set forth in the final
prospectus filed with the Securities and Exchange Commission pursuant to Rule
424 under the Securities Act of 1933, as amended.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10, his or her option for the purchase of Shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full Shares subject to the option will be purchased at the
applicable Purchase Price with the accumulated Contributions in his or her
account. No fractional Shares shall be issued. The Shares purchased upon
exercise of an option hereunder shall be deemed to be transferred to the
participant on the Purchase Date. During his or her lifetime, a participant's
option to purchase Shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Purchase Date of each
--------
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the Shares purchased upon exercise of
his or her option. Any payroll deductions accumulated in a participant's
account which are not sufficient to purchase a full Share shall be retained in
the participant's account for the subsequent Purchase Period or Offering Period,
subject to earlier withdrawal by the participant as provided in Section 10
below. Any other amounts left over in a participant's account after a Purchase
Date shall be returned to the participant.
10. Voluntary Withdrawal; Termination of Employment.
-----------------------------------------------
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and
-5-
<PAGE>
his or her option for the current period will be automatically terminated, and
no further Contributions for the purchase of Shares will be made during the
Offering Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. Automatic Withdrawal. If the Fair Market Value of the Shares on the
--------------------
first Purchase Date of an Offering Period is less than the Fair Market Value of
the Shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of Shares for such Purchase Period,
and (ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period. Participants shall automatically be
withdrawn as of April 30, 1999 from the Offering Period beginning on the IPO
Date and re-enrolled in the Offering Period beginning on May 1, 1999 if the Fair
Market Value of the Shares on the IPO Date is greater than the Fair Market Value
of the Shares on April 29, 1999, unless a participant notifies the Administrator
prior to April 29, 1999 that he or she does not wish to be withdrawn and re-
enrolled.
12. Interest. No interest shall accrue on the Contributions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment as provided in Section 19, the maximum
number of Shares which shall be made available for sale under the Plan shall be
350,000 Shares, plus an annual increase on the first day of each of the
Company's fiscal years beginning in 2000, 2001, 2002, 2003 and 2004 equal to the
lesser of (i) 75,000 Shares, (ii) one-half of one percent (1/2%) of the Shares
outstanding on the last day of the immediately preceding fiscal year, or (iii)
such lesser number of Shares as is determined by the Board. If the Board
determines that, on a given Purchase Date, the number of shares with respect to
which options are to be exercised may exceed (i) the number of shares of Common
Stock that were available for sale under the Plan on the Offering Date of the
applicable Offering Period, or (ii) the number of shares available for sale
under the Plan on such Purchase Date, the Board may in its sole discretion
provide (x) that the
-6-
<PAGE>
Company shall make a pro rata allocation of the Shares of Common Stock available
for purchase on such Offering Date or Purchase Date, as applicable, in as
uniform a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Purchase Date, and continue all Offering Periods then in
effect, or (y) that the Company shall make a pro rata allocation of the shares
available for purchase on such Offering Date or Purchase Date, as applicable, in
as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Purchase Date, and terminate any or all Offering
Periods then in effect pursuant to Section 20 below. The Company may make pro
rata allocation of the Shares available on the Offering Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional Shares for issuance under the Plan by the Company's
shareholders subsequent to such Offering Date.
(b) The participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Board, or a committee named by the Board, shall
--------------
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan.
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any Shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such Shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such Shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such Shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
-7-
<PAGE>
16. Transferability. Neither Contributions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Section 10.
17. Use of Funds. All Contributions received or held by the Company under
------------
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
18. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the shareholders of
----------
the Company, the number of Shares covered by each option under the Plan which
has not yet been exercised and the number of Shares which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the maximum number of shares of
--------
Common Stock which may be purchased by a participant in a Purchase Period, the
number of shares of Common Stock set forth in Section 13(a)(i) above, and the
price per Share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of Shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares 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 issue 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 subject to an option.
(b) Corporate Transactions. In the event of a dissolution or
----------------------
liquidation of the Company, any Purchase Period and Offering Period then in
progress will terminate immediately prior to the consummation of such action,
unless otherwise provided by the Board. In the event of a Corporate
Transaction, each option outstanding under the Plan shall be assumed or an
equivalent option shall be substituted by the successor corporation or a parent
or Subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
to shorten any Purchase Period and Offering Period then in progress by setting a
new Purchase Date (the "New Purchase Date"), as of which
-----------------
-8-
<PAGE>
date any Purchase Period and Offering Period then in progress will terminate. If
the Board shortens the Purchase Period and Offering Period then in progress in
lieu of assumption or substitution in the event of a Corporate Transaction, the
Board will notify each participant in writing, at least ten (10) days prior to
the New Purchase Date, that the Purchase Date for his or her option has been
changed to the New Purchase Date and that his or her option will be exercised
automatically on the New Purchase Date, unless prior to such date he or she has
withdrawn from the Offering Period as provided in Section 10. For purposes of
this Section 19, an option granted under the Plan shall be deemed to be assumed,
without limitation, if, at the time of issuance of the stock or other
consideration upon a Corporate Transaction, each holder of an option under the
Plan would be entitled to receive upon exercise of the option the same number
and kind of shares of stock or the same amount of property, cash or securities
as such holder would have been entitled to receive upon the occurrence of the
transaction if the holder had been, immediately prior to the transaction, the
holder of the number of Shares of Common Stock covered by the option at such
time (after giving effect to any adjustments in the number of Shares covered by
the option as provided for in this Section 19); provided however that if the
consideration received in the transaction is not solely common stock of the
successor corporation or its parent (as defined in Section 424(e) of the Code),
the Board may, with the consent of the successor corporation, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in Fair Market Value to
the per Share consideration received by holders of Common Stock in the
transaction.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per Share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of Shares of its outstanding Common Stock, and
in the event of the Company's being consolidated with or merged into any other
corporation.
20. Amendment or Termination.
------------------------
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 19, no such termination of the Plan may
affect options previously granted, provided that the Plan or an Offering Period
may be terminated by the Board on a Purchase Date or by the Board's setting a
new Purchase Date with respect to an Offering Period and Purchase Period then in
progress if the Board determines that termination of the Plan and/or the
Offering Period is in the best interests of the Company and the shareholders or
if continuation of the Plan and/or the Offering Period would cause the Company
to incur adverse accounting charges as a result of a change after the effective
date of the Plan in the generally accepted accounting rules applicable to the
Plan. Except as provided in Section 19 and in this Section 20, no amendment to
the Plan shall make any change in any option previously granted which adversely
affects the rights of any participant. In addition, to the extent necessary to
comply with Rule 16b-3 under the Exchange Act, or under Section 423 of the Code
(or any successor rule or provision or any applicable law or regulation), the
Company shall obtain shareholder approval in such a manner and to such a degree
as so required.
-9-
<PAGE>
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
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 any of the
aforementioned applicable provisions of law.
23. Term of Plan; Effective Date. The Plan shall become effective upon
----------------------------
the IPO Date. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under Section 20.
24. Additional Restrictions of Rule 16b-3. The terms and conditions of
-------------------------------------
options granted hereunder to, and the purchase of Shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the Shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
-10-
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
----------------------
NEW ELECTION ______
CHANGE OF ELECTION ______
1. I, ________________________, hereby elect to participate in the FlyCast
Communications Corporation 1999 Employee Stock Purchase Plan (the "Plan") for
----
the Offering Period ______________, ____ to _______________, ____, and subscribe
to purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can increase or decrease the rate of my Contributions on one
occasion only with respect to any increase and one occasion only with respect to
any decrease during any Offering Period by completing and filing a new
Subscription Agreement with such increase or decrease taking effect as of the
beginning of the calendar month following the date of filing of the new
Subscription Agreement, if filed at least ten (10) business days prior to the
beginning of such month. Further, I may change the rate of deductions for
future Offering Periods by filing a new Subscription Agreement, and any such
change will be effective as of the beginning of the next Offering Period. In
addition, I acknowledge that, unless I discontinue my participation in the Plan
as provided in Section 10 of the Plan, my election will continue to be effective
for each successive Offering Period.
-11-
<PAGE>
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "FlyCast Communications Corporation 1999
Employee Stock Purchase Plan." I understand that my participation in the Plan
is in all respects subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
____________________________________
____________________________________
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) _____________________________________
(First) (Middle) (Last)
_____________________ _____________________________________
(Relationship) (Address)
_____________________________________
8. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Offering Date (the first day of the Offering
Period during which I purchased such shares) or within 1 year after the Purchase
Date, I will be treated for federal income tax purposes as having received
ordinary compensation income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares on the Purchase Date over
the price which I paid for the shares, regardless of whether I disposed of the
shares at a price less than their fair market value at the Purchase Date. The
remainder of the gain or loss, if any, recognized on such disposition will be
treated as capital gain or loss.
I hereby agree to notify the Company in writing within 30 days after the
------------------------------------------------------------------------
date of any such disposition, and I will make adequate provision for federal,
- -----------------------------------------------------------------------------
state or other tax withholding obligations, if any, which arise upon the
- ------------------------------------------------------------------------
disposition of the Common Stock. The Company may, but will not be obligated to,
- -------------------------------
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase
-12-
<PAGE>
price which I paid for the shares under the option, or (2) 15% of the fair
market value of the shares on the Offering Date. The remainder of the gain or
loss, if any, recognized on such disposition will be treated as capital gain or
loss.
I understand that this tax summary is only a summary and is subject to
----------------------------------------------------------------------
change. I further understand that I should consult a tax advisor concerning the
- ------
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to participate
in the Plan.
SIGNATURE: ___________________________
SOCIAL SECURITY #: ___________________
DATE: ________________________________
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
______________________________________
(Signature)
______________________________________
(Print name)
-13-
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
--------------------
I, __________________________, hereby elect to withdraw my participation in
the FlyCast Communications Corporation 1999 Employee Stock Purchase Plan (the
"Plan") for the Offering Period that began on _________ ___, _____. This
- -----
withdrawal covers all Contributions credited to my account and is effective on
the date designated below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:___________________ _________________________________
Signature of Employee
_________________________________
Social Security Number
-14-
<PAGE>
EXHIBIT 10.5
FLYCAST COMMUNICATIONS CORPORATION
1999 DIRECTORS' STOCK OPTION PLAN
---------------------------------
1. Purposes of the Plan. The purposes of this Directors' Stock Option
--------------------
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Change of Control" means a sale of all or substantially all of
-----------------
the Company's assets, or any merger or consolidation of the Company with or into
another corporation other than a merger or consolidation in which the holders of
more than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving entity,
outstanding immediately after such transaction.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Common Stock" means the Common Stock of the Company.
------------
(e) "Company" means FlyCast Communications Corporation, a California
-------
corporation.
(f) "Continuous Status as a Director" means the absence of any
-------------------------------
interruption or termination of service as a Director.
(g) "Corporate Transaction" means a dissolution or liquidation of the
---------------------
Company, a sale of all or substantially all of the Company's assets, or a
merger, consolidation or other capital reorganization of the Company with or
into another corporation.
(h) "Director" means a member of the Board.
--------
(i) "Employee" means any person, including any officer or Director,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
-1-
<PAGE>
(k) "Option" means a stock option granted pursuant to the Plan. All
------
options shall be nonstatutory stock options (i.e., options that are not intended
to qualify as incentive stock options under Section 422 of the Code).
(l) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(m) "Optionee" means an Outside Director who receives an Option.
--------
(n) "Outside Director" means a Director who is not an Employee.
----------------
(o) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(p) "Plan" means this 1999 Directors' Stock Option Plan.
----
(q) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(r) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 Shares of Common Stock (the "Pool"). 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 which were subject thereto
shall, unless the Plan has been terminated, become available for future grant
under the Plan. In addition, any Shares of Common Stock that are retained by
the Company upon exercise of an Option in order to satisfy the exercise 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. If Shares that were acquired upon exercise of an Option are subsequently
repurchased by the Company, such Shares shall not in any event be returned to
the Plan and shall not become available for future grant under the Plan.
4. Administration of and Grants of Options under the Plan.
------------------------------------------------------
(a) Administrator. Except as otherwise required herein, the Plan
-------------
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
--------------------
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
-2-
<PAGE>
(ii) Each Outside Director who becomes an Outside Director after the
effective date of this Plan shall be automatically granted an Option to purchase
20,000 Shares (the "First Option") on the date on which such person first
------------
becomes an Outside Director, whether through election by the shareholders of the
Company or appointment by the Board to fill a vacancy.
(iii) Each Outside Director shall thereafter be automatically granted
an Option to purchase 5,000 Shares (a "Subsequent Option") on the date of each
-----------------
Annual Meeting of the Company's shareholders immediately following which such
Outside Director is serving on the Board, provided that, on such date, he or she
shall have served on the Board for at least six (6) months prior to the date of
such Annual Meeting.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, in the event that a grant would cause the number of Shares subject to
outstanding Options plus the number of Shares previously purchased upon exercise
of Options to exceed the Pool, then each such automatic grant shall be for that
number of Shares determined by dividing the total number of Shares remaining
available for grant by the number of Outside Directors receiving an Option on
the automatic grant date. Any further grants shall then be deferred until such
time, if any, as additional Shares become available for grant under the Plan
through action of the shareholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any grant of an Option made before the Company has obtained shareholder
approval of the Plan in accordance with Section 17 hereof shall be conditioned
upon obtaining such shareholder approval of the Plan in accordance with Section
17 hereof.
(vi) The terms of each First Option granted hereunder shall be as
follows:
(1) the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Section 9
below;
(2) the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of the First Option, determined in
accordance with Section 8 hereof; and
(3) the First Option shall become exercisable in installments
cumulatively as to 25% of the Shares subject to the First Option on each of the
first, second, third and fourth anniversaries of the date of grant of the
Option.
(vii) The terms of each Subsequent Option granted hereunder
shall be as follows:
(1) the Subsequent Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in Section 9
below;
-3-
<PAGE>
(2) the exercise price per Share shall be 100% of the fair market
value per Share on the date of grant of the Subsequent Option, determined in
accordance with Section 8 hereof; and
(3) the Subsequent Option shall become exercisable as to one hundred
percent (100%) of the Shares subject to the Subsequent Option on the day before
the fourth anniversary of the date of grant of the Subsequent Option.
(c) Powers of the Board. Subject to the provisions and restrictions
-------------------
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per Share of Options to be granted, which exercise price
shall be determined in accordance with Section 8 of the Plan; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(d) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the Chief Executive
-----------------------------------
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, such officer may suspend the Optionee's right to
exercise any option pending a determination by the Board (excluding the Outside
Director accused of such misconduct). If the Board (excluding the Outside
Director accused of such misconduct) determines an Optionee has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition, induces any Company
customer to breach a contract with the Company or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give the
Optionee an opportunity to appear and present evidence on Optionee's behalf at a
hearing before the Board or a committee of the Board.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) above. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with
-4-
<PAGE>
any rights which the Director or the Company may have to terminate his or her
directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective on the
----------------------------
effectiveness of the registration statement under the Securities Act of 1933, as
amended, relating to the Company's initial public offering of securities. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 13 of the Plan.
7. Term of Options. The term of each Option shall be ten (10) years from
---------------
the date of grant thereof unless an Option terminates sooner pursuant to Section
9 below.
8. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be 100% of the fair market value
per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be determined by
-----------------
the Board; provided however that in the event the Common Stock is traded on the
Nasdaq National Market or listed on a stock exchange, the fair market value per
Share shall be the closing sales price on such system or exchange on the date of
grant of the Option (or, in the event that the Common Stock is not traded on
such date, on the immediately preceding trading date), as reported in The Wall
--------
Street Journal, or if there is a public market for the Common Stock but the
- --------------
Common Stock is not traded on the Nasdaq National Market or listed on a stock
exchange, the fair market value per Share shall be the mean of the bid and asked
prices of the Common Stock in the over-the-counter market on the date of grant,
as reported in The Wall Street Journal (or, if not so reported, as otherwise
------------------------
reported by the National Association of Securities Dealers Automated Quotation
("Nasdaq") System).
(c) Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which the
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) above; provided however that no Options shall be exercisable prior to
shareholder approval of the Plan in accordance with Section 17 below has been
obtained.
An Option may not be exercised for a fraction of a Share.
-5-
<PAGE>
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 full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) 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, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be
issued to the Optionee as soon as practicable after 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 which 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 Continuous Status as a Director. If an Outside
----------------------------------------------
Director ceases to serve as a Director, he or she may, but only within ninety
(90) days after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has expired.
To the extent that such Outside Director was not entitled to exercise an Option
at the date of such termination, or does not exercise such Option (to the extent
he or she was entitled to exercise) within the time specified above, the Option
shall terminate and the Shares underlying the unexercised portion of the Option
shall revert to the Plan.
(c) Disability of Optionee. Notwithstanding Section 9(b) above, in
----------------------
the event a Director is unable to continue his or her service as a Director with
the Company as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he or she may, but only within twelve (12)
months from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such termination.
Notwithstanding the foregoing, in no event may the Option be exercised after its
term set forth in Section 7 has expired. To the extent that he or she was not
entitled to exercise the Option at the date of termination, or if he or she does
not exercise such Option (to the extent he or she was entitled to exercise)
within the time specified above, the Option shall terminate and the Shares
underlying the unexercised portion of the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee:
-----------------
(i) During the term of the Option who is, at the time of his or her
death, a Director of the Company and who shall have been in Continuous Status as
Director since the date of grant of the Option, the Option may be exercised,
at any time within twelve (12) months following the date of death, by the
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
would have accrued had the Optionee continued living and remained in Continuous
Status as
-6-
<PAGE>
Director for six (6) months after the date of death. Notwithstanding the
foregoing, in no event may the Option be exercised after its term set forth in
Section 7 has expired.
(ii) Within three (3) months after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within twelve
(12) months following the date of death, by the 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
termination. Notwithstanding the foregoing, in no event may the option be
exercised after its term set forth in Section 7 has expired.
To the extent that an Optionee was not entitled to exercise the Option
at the date of death or termination, as provided in Section 9(d)(i) or (ii)
above, or if he or she does not exercise such Option (to the extent he or she
was entitled to exercise) within the time specified above, the Option shall
terminate and the Shares underlying the unexercised portion of the Option shall
revert to the Plan.
10. Nontransferability of Options. The Option 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 or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the shareholders of
----------
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of Shares of Common Stock set forth in Sections 4(b)(ii) and
(iii) above, and the number of Shares of Common Stock which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which 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 or reclassification of
the Common Stock (including any such change in the number of Shares of Common
Stock effected in connection with a change in domicile of the Company) 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) Corporate Transactions; Change of Control. In the event of a
-----------------------------------------
Corporate Transaction, each outstanding Option shall be assumed or an equivalent
option shall be substituted
-7-
<PAGE>
by the successor corporation or a Parent or Subsidiary of such successor
corporation, unless the successor corporation does not agree to assume the
outstanding Options or to substitute equivalent options, in which case the
Options shall terminate upon the consummation of the transaction; provided
however that in the event of a Change of Control, each Optionee shall have the
right to exercise his or her Option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable, immediately
prior to the consummation of such transaction.
For purposes of this Section 11(b), an Option shall be considered
assumed, without limitation, if, at the time of issuance of the stock or other
consideration upon such Corporate Transaction or Change of Control, each
Optionee would be entitled to receive upon exercise of an Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as the Optionee would have been entitled to receive upon the occurrence of such
transaction if the Optionee had been, immediately prior to such transaction, the
holder of the number of Shares of Common Stock covered by the Option at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option as provided for in this Section 11); provided however that if such
consideration received in the transaction was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon
exercise of the Option to be solely common stock of the successor corporation or
its Parent equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.
(c) 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. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the shareholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
-8-
<PAGE>
14. Conditions Upon Issuance of Shares. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the legal requirements relating to the administration
of stock option plans under applicable U.S. state corporate laws, U.S. federal
and applicable state securities laws, the Code, any stock exchange or Nasdaq
rules or regulations to which the Company may be subject and the applicable laws
of any other country or jurisdiction where Options are granted under the Plan,
as such laws, rules, regulations and requirements shall be in place from time to
time (the "Applicable Laws"). Such compliance shall be determined by the
---------------
Company in consultation with its legal counsel.
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.
15. 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.
16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. Shareholder Approval. If required by the Applicable Laws, continuance
--------------------
of the Plan shall be subject to approval by the shareholders of the Company.
Such shareholder approval shall be obtained in the manner and to the degree
required under the Applicable Laws.
-9-
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
1999 DIRECTORS' 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:
-------
Date of Grant {GrantDate}
Vesting Commencement Date {VestingStartDate}
Exercise Price per Share {ExercisePrice}
Total Number of Shares Granted {SharesGranted}
Total Exercise Price {TotalExercisePrice}
Expiration Date {ExpirDate}
Vesting Schedule This Option may be exercised, in whole
or in part, in accordance with the
following schedule: {VestingSchedule}
Termination Period This Option may be exercised for 90 days
after termination of Optionee's
Continuous Status as a Director, or such
longer period as may be applicable upon
death or Disability of Optionee as
provided in the Plan, but in no event
later than the Expiration Date as
provided above.
-1-
<PAGE>
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 1999 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
OPTIONEE: FLYCAST COMMUNICATIONS CORPORATION
BY:_______________________________
__________________________
{OPTIONEE}
TITLE:____________________________
-2-
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
-----------------------------------
1. GRANT OF OPTION. The Board of Directors of the Company hereby grants
---------------
to the Optionee named in the Notice of Stock Option Grant (the "Optionee")
--------
attached to this Agreement an option (the "Option") to purchase a number of
------
Shares, as 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 and conditions of the 1999 Directors' Stock Option Plan
(the "Plan"), which is incorporated herein by reference. Capitalized terms not
----
defined herein shall have the meanings ascribed to such terms in the Plan. In
the event of a conflict between the terms and conditions of the Plan and the
terms and conditions of this Nonstatutory Stock Option Agreement, the terms and
conditions of the Plan shall prevail.
2. EXERCISE OF OPTION.
------------------
(a) RIGHT TO EXERCISE. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and the applicable provisions of the Plan and this Nonstatutory Stock Option
Agreement. In the event of Optionee's death, disability or other termination of
Optionee's service as a Director, the exercisability of the Option is governed
by the applicable provisions of the Plan and this Nonstatutory Stock Option
Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
--------- ---------------
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
----------------
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
-3-
<PAGE>
(c) 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; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the 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 aggregate Exercise Price of the Exercised Shares.
4. 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 or
pursuant to a domestic relations order (as defined by the Code or the rules
thereunder) and may be exercised during the lifetime of Optionee only by the
Optionee or a transferee permitted by Section 10 of the Plan. The terms of the
Plan and this Nonstatutory Stock Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. 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 Nonstatutory Stock Option
Agreement.
6. TAX CONSEQUENCES. Set forth below is a brief summary of certain
----------------
federal and California tax consequences relating to this Option under the law 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 HIS OR
HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISING THE OPTION. Since this Option does not qualify as an
---------------------
incentive stock option under Section 422 of the Code, the Optionee may incur
regular federal and California income tax liability upon exercise. The 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
Exercised Shares on the date of exercise over their aggregate Exercise Price.
(b) DISPOSITION OF SHARES. If the Optionee holds the Option Shares
---------------------
for more than one year, gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and California income tax
purposes. 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.
-4-
<PAGE>
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 Plan and this Nonstatutory Stock Option Agreement.
Optionee has reviewed the Plan and this Nonstatutory Stock Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Nonstatutory Stock Option Agreement and fully understands all
provisions of the Plan and Nonstatutory Stock Option Agreement. Optionee hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan and
Nonstatutory Stock Option Agreement.
FLYCAST COMMUNICATIONS
CORPORATION
BY:_____________________________
____________________________
{OPTIONEE}
TITLE:__________________________
-5-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement. In
consideration of the Company's granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Nonstatutory Stock Option Agreement,
the undersigned hereby agrees to be irrevocably bound by the terms and
conditions of the Plan and this Nonstatutory Stock Option Agreement and further
agrees that any community property interest shall be similarly bound. The
undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the
undersigned with respect to any amendment or exercise of rights under the Plan
or this Nonstatutory Stock Option Agreement.
_______________________________________
Spouse of Optionee
-6-
<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 Directors' Stock Option Plan and the Nonstatutory 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 10.6
FLYCAST COMMUNICATIONS CORPORATION
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
DECEMBER 30, 1998
<PAGE>
FLYCAST COMMUNICATIONS CORPORATION
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
This Series C Preferred Stock Purchase Agreement (the "Agreement") is made
---------
as of the 30th day of December, 1998 by and between FlyCast Communications
Corporation, a California corporation (the "Company") and the investors listed
-------
on Exhibit A attached hereto (each a "Purchaser" and together the "Purchasers").
--------- --------- ----------
The parties hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED STOCK .
-------------------------------------
1.1 SALE AND ISSUANCE OF SERIES C PREFERRED STOCK.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State
of the State of California on or before the Closing (as defined below) the
Fourth Amended and Restated Articles of Incorporation in the form attached
hereto as Exhibit B (the "Restated Articles").
--------- -----------------
(b) Subject to the terms and conditions of this Agreement, each
Purchaser agrees to purchase at the Closing and the Company agrees to sell and
issue to each Purchaser at the Closing that number of shares of Series C
Preferred Stock indicated with respect to such Purchaser on Exhibit A attached
---------
hereto at a purchase price of $9.04 per share. The shares of Series C Preferred
Stock issued to the Purchasers pursuant to this Agreement shall be hereinafter
referred to as the "Stock." The Stock and the Common Stock issuable upon
------
conversion of the Stock shall be hereinafter referred to as the "Securities."
1.2 CLOSING; DELIVERY.
-----------------
(a) The purchase and sale of the Stock shall take place at the
offices of Venture Law Group, 2800 Sand Hill Road, Menlo Park, California, at
3:00 p.m., on January 22, 1999, or at such other time and place as the Company
and the Purchasers mutually agree upon, orally or in writing (which time and
place are designated as the "Closing").
-------
(b) At the Closing, the Company shall deliver to each Purchaser
a certificate representing the Stock being purchased thereby against payment of
the purchase price therefor by check, cancellation of indebtedness or by wire
transfer to the Company's bank account.
(c) If the full number of the authorized shares of Series C
Preferred Stock of the Company is not sold at the Closing, the Company shall
have the right, at any time prior to January 31, 1999, to sell the remaining
authorized but unissued shares of Series C Preferred Stock to one or more
additional purchasers as determined by the Company, or to any Purchaser
hereunder who wishes to acquire additional shares of Series C Preferred Stock at
the price and on the terms set forth herein, provided that any such additional
purchaser shall be
-1-
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required to execute this Agreement and all other agreements contemplated hereby.
Any additional purchaser so acquiring shares of Series C Preferred Stock shall
be considered a "Purchaser" for purposes of this Agreement, and any Series C
Preferred Stock so acquired by such additional purchaser shall be considered
"Stock" for purposes of this Agreement and all other agreements contemplated
hereby. The Purchasers and the Company agree that, after January 31, 1999,
Exhibit A may be restated to reflect the additional Purchasers that have been
- ---------
added to Exhibit A pursuant to this Section 1.2(c).
---------
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
--------------------------------------------------------
hereby represents, warrants and covenants to each Purchaser that, except as set
forth on a Schedule of Exceptions attached hereto as Exhibit C, which exceptions
---------
shall be deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.
2.2 CAPITALIZATION. The authorized capital of the Company consists,
--------------
or will consist immediately prior to the Closing, of:
(a) 9,320,000 shares of Preferred Stock, of which (i) 920,000
shares have been designated Series A Preferred Stock, 911,295 of which are
issued and outstanding immediately prior to the Closing, (ii) 5,500,000 shares
have been designated Series B Preferred Stock, 5,324,532 of which are issued and
outstanding immediately prior to the Closing, and (iii) 3,484,000 shares have
been designated Series C Preferred Stock, 1,994,132 of which are issued and
outstanding immediately prior to the Closing. The Company has reserved 7,500
shares of Series A Preferred Stock for issuance upon exercise of a warrant to
purchase 7,500 shares of Series A Preferred Stock issued to Cupertino National
Bank (the "Cupertino Warrant"), 43,854 shares of Series B Preferred Stock for
-----------------
issuance upon exercise of warrants to purchase 43,854 shares of Series B
Preferred Stock issued pursuant to the Company's July 11, 1997 Series B
Preferred Stock and Warrant Purchase Agreement (the "Series B Warrants") and
-----------------
33,834 shares of Series B Preferred Stock for issuance upon exercise of a
warrant to purchase 33,834 shares of Series B Preferred Stock issued to Venture
Lending (the "Venture Lending Warrant"). The rights, privileges and preferences
-----------------------
of the Preferred Stock are as stated in the Restated Articles. All of the
outstanding shares of Preferred Stock have been duly authorized, fully paid and
are nonassessable and issued in compliance with all applicable federal and state
securities laws.
(b) 20,000,000 shares of Common Stock, 2,487,262 shares of which
are issued and outstanding immediately prior to the Closing. All of the
outstanding shares of Common Stock have been duly authorized, fully paid and are
nonassessable and issued in compliance with all applicable federal and state
securities laws. The Company has reserved 6,321,015 shares of Common Stock for
issuance upon conversion of the Preferred Stock, 33,333
-2-
<PAGE>
shares of Common Stock for issuance upon exercise of a warrant issued to
Bessemer Venture Partners IV, LP (the "Bessemer Warrant") and an aggregate of
- ----------------
7,143 shares of Common Stock for issuance upon exercise of warrants issued to
individuals affiliated with Bialla & Associates (the "Bialla Warrants").
---------------
(c) The Company has reserved 2,800,000 shares of Common Stock
for issuance to officers, directors, employees and consultants of the Company
pursuant to its 1997 Stock Option Plan duly adopted by the Board of Directors
and approved by the Company shareholders (the "Stock Plan"). Of such reserved
----------
shares of Common Stock, options to purchase 1,715,453 shares are currently
outstanding, options to purchase 754,096 shares have been exercised and 330,451
shares of Common Stock remain available for issuance to officers, directors,
employees and consultants pursuant to the Stock Plan.
(d) Except for (i) the Warrants, (ii) conversion privileges of
the Preferred Stock, (ii) the Series B Warrants, (iii) the Cupertino Warrant,
(iv) the Venture Lending Warrant, (v) the Bessemer Warrant and (vi) the Bialla
Warrants, and except as set forth in the Investors' Rights Agreement (as defined
below), there are no outstanding options, warrants, rights (including conversion
or preemptive rights and rights of first refusal or similar rights) or
agreements, orally or in writing, for the purchase or acquisition from the
Company of any shares of its capital stock.
(e) Except as set forth in the Restated Articles, and as may be
required under its responsibility to the shareholders and creditors of the
Company with respect to repurchases of unvested shares of stock upon termination
of employees, consultants and directors, the Company is under no duty to redeem
or to repurchase any shares of any class or series of stock.
2.3 SUBSIDIARIES. The Company does not currently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity.
2.4 CORPORATE POWER; AUTHORIZATION. All corporate action on the part
------------------------------
of the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Amended and
Restated Investors' Rights Agreement, in the form attached hereto as Exhibit D
---------
(the "Investors' Rights Agreement"), the Amended and Restated Right of First
---------------------------
Refusal and Co-Sale Agreement in the form attached hereto as Exhibit E (the "Co-
--------- ---
Sale Agreement"), and the Amended and Restated Voting Agreement in the form
- --------------
attached hereto as Exhibit F (the "Voting Agreement" and collectively with this
--------- ----------------
Agreement, the Investors' Rights Agreement and the Co-Sale Agreement, the
"Agreements"), the performance of all obligations of the Company hereunder and
- -----------
thereunder and the authorization, issuance and delivery of the Securities has
been taken or will be taken prior to the Closing. The Company has all requisite
legal and corporate power to execute and deliver the Agreements, to sell and
issue the Stock and to carry out and perform all of its obligations hereunder
and under the other Agreements. The Agreements, when executed and delivered by
the Company, shall constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their terms except
(i) as limited by applicable bankruptcy, insolvency,
-3-
<PAGE>
reorganization, moratorium, fraudulent conveyance, and other laws of general
application affecting enforcement of creditors' rights generally, as limited by
laws relating to the availability of specific performance, injunctive relief, or
other equitable remedies, or (ii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws.
2.5 VALID ISSUANCE OF SECURITIES. The Stock that is being issued to
----------------------------
the Purchasers hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under this Agreement, the Investors' Rights
Agreement and applicable state and federal securities laws. Based in part upon
the representations of the Purchasers in this Agreement and subject to the
provisions of Section 2.6 below, the Stock will be issued in compliance with all
applicable federal and state securities laws. The Common Stock issuable upon
conversion of the Stock has been duly and validly reserved for issuance, and
upon issuance in accordance with the terms of the Restated Articles, shall be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions on transfer under this Agreement, the
Investors' Rights Agreement and applicable federal and state securities laws and
will be issued in compliance with all applicable federal and state securities
laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for filings pursuant to Section 25102(f)
of the California Corporate Securities Law of 1968, as amended, and the rules
thereunder, other applicable state securities laws and Regulation D of the
Securities Act of 1933, as amended (the "Securities Act").
--------------
2.7 LITIGATION. There is no action, suit, proceeding or
----------
investigation pending or, to the Company's knowledge, currently threatened
against the Company or any of its subsidiaries that questions the validity of
the Agreements or the right of the Company to enter into them, or to consummate
the transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, prospects, business or affairs of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. Neither the
Company nor any of its subsidiaries is a party or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company or any of its subsidiaries currently pending or
which the Company or any of its subsidiaries intends to initiate.
2.8 PATENTS AND TRADEMARKS. The Company owns or possesses sufficient
----------------------
legal rights to all patents, trademarks, service marks, tradenames, copyrights,
trade secrets, licenses, information and proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
without any conflict with, or infringement of, the
-4-
<PAGE>
rights of others. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, tradenames, copyrights,
trade secrets or other proprietary rights or processes of any other person or
entity. The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee's best
efforts to promote the interest of the Company or that would conflict with the
Company's business as currently conducted or as proposed to be conducted.
Neither the execution or delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the best of the Company's knowledge,
conflict with or result in a breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any such employee is now obligated. The Company does not believe it is or will
be necessary to use any inventions of any of its employees (or persons it
currently intends to hire) made prior to their employment by the Company.
2.9 COMPLIANCE WITH OTHER INSTRUMENTS.
---------------------------------
(a) The Company is not in violation, breach or default of any
provisions of its Restated Articles or Bylaws or of any instrument, judgment,
order, writ, decree license, indenture, lease, contract or other agreement to
which it is a party or by which it is bound or, to its knowledge, of any
provision of federal or state statute, rule or regulation applicable to the
Company. The execution, delivery and performance of the Agreements and the
consummation of the transactions contemplated hereby or thereby will not result
in any such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company.
(b) To its knowledge, the Company has avoided every condition,
and has not performed any act, the occurrence of which would result in the
Company's loss of any right granted under any license, distribution agreement or
other agreement.
2.10 AGREEMENTS; ACTION.
------------------
(a) There are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.
(b) Except for agreements explicitly contemplated by the
Agreements, there are no agreements, understandings, instruments, contracts or
proposed transactions to which the Company or any of its subsidiaries is a party
or by which it is bound that involve (i) obligations (contingent or otherwise)
of, or payments to, the Company or any of its subsidiaries in excess of,
$50,000, (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company or any of its subsidiaries, or (iii)
the grant of rights to manufacture, produce, assemble, license, market, or sell
its products to any other person or affect
-5-
<PAGE>
the Company's exclusive right to develop, manufacture, assemble, distribute,
market or sell its products.
(c) Neither the Company nor any of its subsidiaries has (i)
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or incurred any other liabilities individually
in excess of $50,000 or in excess of $100,000 in the aggregate, (iii) made any
loans or advances to any person, other than ordinary advances for travel
expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
(d) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Articles or Bylaws, that adversely affects its business as now
conducted or as proposed to be conducted, its properties or its financial
condition.
(e) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the merger of the Company with or into any such corporation or
corporations, (ii) with any representative of any corporation, partnership,
association or other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets of the
Company or a transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company would be disposed of, or
(iii) regarding any other form of liquidation, dissolution or winding up of the
Company.
2.11 DISCLOSURE. The Company has fully provided the Purchasers with
----------
all the information which the Purchasers have requested for deciding whether to
acquire the Stock and all information which the Company believes is reasonably
necessary to enable the Purchasers to make such a decision, including certain of
the Company's projections describing its business as currently conducted and as
proposed to be conducted (collectively, the "Business Plan"). No representation
-------------
or warranty of the Company contained in this Agreement and the exhibits attached
hereto, any certificate furnished or to be furnished to Purchasers at the
Closing, or the Business Plan (when read together) contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Business Plan and the financial
and other projections contained in the Business Plan were prepared in good
faith; however, the Company does not warrant that it will achieve such
projections.
2.12 NO CONFLICT OF INTEREST. The Company is not indebted, directly
-----------------------
or indirectly, to any of its officers or directors or to their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. To the best of the Company's knowledge, none
of the Company's officers or directors, or any members of their immediate
families, are, directly or indirectly, indebted to the Company (other than in
connection with purchases of the Company's stock) or have any direct or indirect
ownership interest in any
-6-
<PAGE>
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company except that officers, directors and/or shareholders of the
Company may own stock in (but not exceeding two percent of the outstanding
capital stock of) any publicly traded company that may compete with the Company.
None of the Company's officers or directors or any members of their immediate
families are directly or, to the Company's knowledge indirectly, interested in
any material contract with the Company. The Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
2.13 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as
----------------------------------------
contemplated in the Investors' Rights Agreement, the Company has not granted or
agreed to grant any registration rights, including piggyback rights, to any
person or entity. Except as contemplated in the Voting Agreement, the Company
is not a party to, and, to its knowledge no shareholders of the Company have
entered into, any agreements or trusts with respect to the voting of capital
shares of the Company.
2.14 PRIVATE PLACEMENT. Subject in part to the truth and accuracy of
-----------------
the Purchasers' representations set forth in this Agreement, the offer, sale and
issuance of the Securities as contemplated by this Agreement is exempt from the
registration requirements of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Company,
any liability for brokerage or finders' or agents' commissions or any similar
charges in connection with this Agreement
2.15 TITLE TO PROPERTY AND ASSETS. The Company owns its property and
----------------------------
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances. To its knowledge,
there exists no material breach of any such lease.
2.16 FINANCIAL STATEMENTS. The Company has made available to each
--------------------
Purchaser its audited financial statements (including balance sheet and income
statement) as of March 31, 1998 and for the fiscal year ended as of such date
and as of October 31, 1998 and for the seven-month period ended as of such date
(collectively, the "Financial Statements"). The Financial Statements have been
--------------------
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated, except that the unaudited
Financial Statements may not contain all footnotes required by generally
accepted accounting principles. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein, subject to normal year-end audit
adjustments. Except as set forth in the Financial Statements, the Company has
no material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to October 31, 1998 and
(ii) obligations under contracts
-7-
<PAGE>
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate are not
material to the financial condition or operating results of the Company. Except
as disclosed in the Financial Statements, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.17 CHANGES. Since October 31, 1998, there has not been:
-------
(a) any change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(c) any waiver or compromise by the Company of a valuable right
or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the business, properties,
prospects or financial condition of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(e) any material change to a material contract or agreement by
which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any officer
or key employee of the Company; and the Company does not know of any impending
termination or, to the best of its knowledge, resignation of employment of any
such officer or key employee;
(i) receipt of notice, formally or informally, or receipt of
knowledge that there has been, or will be, a loss of, or material order
cancellation by, any major customer of the Company;
-8-
<PAGE>
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) any declaration, setting aside or payment or other
distribution in respect to any of the Company's capital stock, or any direct or
indirect redemption, purchase, or other acquisition of any of such stock by the
Company;
(m) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
business, properties, prospects or condition (financial or otherwise) of the
Company (as such business is presently conducted and as it is proposed to be
conducted); or
(n) any arrangement, intention or commitment by or of the
Company to do any of the things described in this Section 2.17.
2.18 EMPLOYEE BENEFIT PLANS; STOCK PLANS. The Company does not have
-----------------------------------
any Employee Benefit Plan as defined in the Employee Retirement Income Security
Act of 1974. The Company's stock and option agreements with its employees
provide for four year vesting of such stock or options.
2.19 TAX RETURNS AND PAYMENTS. The Company has filed all tax returns
------------------------
and reports as required by law. These returns and reports are true and correct
in all material respects. The Company has paid all taxes and other assessments
due.
2.20 INSURANCE. The Company has in full force and effect fire and
---------
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed.
2.21 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
-----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The employment of each
officer and employee of the Company is terminable at the will of the Company.
To its knowledge, the Company has complied in all material respects with
-9-
<PAGE>
all applicable state and federal equal employment opportunity laws and with
other laws related to employment.
2.22 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each
--------------------------------------------------
employee, consultant and officer of the Company has executed an agreement with
the Company regarding confidentiality and proprietary information substantially
in the form or forms delivered to the counsel for the Purchasers. The Company,
after reasonable investigation, is not aware that any of its employees or
consultants is in violation thereof, and the Company will use its best efforts
to prevent any such violation. All consultants to or vendors of the Company
with access to confidential information of the Company are parties to a written
agreement substantially in the form or forms provided to counsel for the
Purchasers under which, among other things, each such consultant or vendor is
obligated to maintain the confidentiality of confidential information of the
Company. The Company, after reasonable investigation, is not aware that any of
its consultants or vendors are in violation thereof, and the Company will use
its best efforts to prevent any such violation.
2.23 PERMITS. The Company has all franchises, permits, licenses and
-------
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes that it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
2.24 CORPORATE DOCUMENTS. The Restated Articles and Bylaws of the
-------------------
Company are in the form provided to counsel for the Purchasers. The copy of the
minute books of the Company provided to the Purchasers' counsel contains minutes
of all meetings of directors and shareholders and all actions by written consent
without a meeting by the directors and shareholders since the date of
incorporation and reflects all actions by the directors (and any committee of
directors) and shareholders with respect to all transactions referred to in such
minutes accurately in all material respects.
2.25 REAL PROPERTY HOLDING CORPORATION. The Company is not a United
---------------------------------
States real property holding corporation within the meaning of Internal Revenue
Code Section 897(c)(2) and any regulations promulgated thereunder.
2.26 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is
-----------------------------
not in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to the best of its knowledge,
no material expenditures are or will be required in order to comply with any
such existing statute, law or regulation.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
------------------------------------------------
severally and not jointly, hereby represents and warrants to the Company for
itself only and not in relation to any other Purchaser that:
-10-
<PAGE>
3.1 AUTHORIZATION. The Agreements, when executed and delivered by
-------------
the Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies, or (b)
to the extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities to be acquired
---------------------------------
by the Purchaser will be acquired for investment for the Purchaser's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The Purchaser does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. The Purchaser has full power and authority to enter into this
Agreement. The Purchaser has not been formed for the specific purpose of
acquiring the Securities.
3.3 DISCLOSURE OF INFORMATION. The Purchaser has had an opportunity
-------------------------
to discuss the Company's business, management, financial affairs and the terms
and conditions of the offering of the Stock with the Company's management and
has had an opportunity to review the Company's facilities. The Purchaser
understands that such discussions, as well as the written information issued by
the Company, were intended to describe the aspects of the Company's business
which it believes to be material.
3.4 RESTRICTED SECURITIES. The Purchaser understands that the
---------------------
Securities have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Purchaser's representations as
expressed herein. The Purchaser understands that the Securities are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, the Purchaser must hold the Securities 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. The Purchaser acknowledges that the
Company has no obligation to register or qualify the Securities for resale
except as set forth in the Investors' Rights Agreement. The 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 Securities,
and on 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.
3.5 NO PUBLIC MARKET. The Purchaser understands that no public
----------------
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for the
Securities.
-11-
<PAGE>
3.6 LEGENDS. The Purchaser understands that the Securities, and any
-------
securities issued in respect thereof or exchange therefor, may bear one or all
of the following legends:
(a) "THE SECURITIES 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 IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 ACCREDITED INVESTOR. The Purchaser is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Act.
3.8 FOREIGN INVESTORS. If the Purchaser is not a United States
-----------------
person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended), such Purchaser hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Securities or any use of this Agreement,
including (i) the legal requirements within its jurisdiction for the purchase of
the Securities, (ii) any foreign exchange restrictions applicable to such
purchase, (iii) any governmental or other consents that may need to be obtained,
and (iv) the income tax and other tax consequences, if any, that may be relevant
to the purchase, holding, redemption, sale, or transfer of the Securities. Such
Purchaser's subscription and payment for and continued beneficial ownership of
the Securities, will not violate any applicable securities or other laws of the
Purchaser's jurisdiction.
4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The
-----------------------------------------------------
obligations of each Purchaser to the Company under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
4.2 PERFORMANCE. The Company shall have performed and complied with
-----------
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
-12-
<PAGE>
4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
----------------------
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.
4.4 QUALIFICATIONS. All authorizations, approvals or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock and the Warrants pursuant to this Agreement shall be obtained and
effective as of the Closing.
4.5 OPINION OF COMPANY COUNSEL. The Purchasers shall have received
--------------------------
from Venture Law Group, counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of Exhibit G.
---------
4.6 BOARD OF DIRECTORS. As of the Closing, the Bylaws of the Company
------------------
shall reflect that the size of the Board of Directors shall be set at six (6)
members, and the Board shall be comprised of David Cowan, Ted Dintersmith,
George Garrick, Peter Olson and Michael Solomon, with one vacancy.
4.7 INVESTORS' RIGHTS AGREEMENT. The Company, each Purchaser, the
---------------------------
holders of the Series A Preferred Stock and the holders of the Series B
Preferred Stock shall have executed and delivered the Investors' Rights
Agreement in substantially the form attached as Exhibit D.
---------
4.8 RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT. The Company, each
--------------------------------------------
Purchaser, certain holders of Common Stock, certain holders of the Series A
Preferred Stock and the holders of the Series B Preferred Stock shall have
executed and delivered the Co-Sale Agreement in substantially the form attached
as Exhibit E.
---------
4.9 VOTING AGREEMENT. The Company, each Purchaser, certain holders
----------------
of Common Stock, the holders of the Series A Preferred Stock and the holders of
the Series B Preferred Stock shall have executed and delivered the Voting
Agreement in substantially the form attached as Exhibit F.
---------
4.10 RESTATED ARTICLES. The Company shall have filed the Restated
-----------------
Articles with the Secretary of State of California on or prior to the Closing
Date, which shall continue to be in full force and effect as of the Closing
Date.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
--------------------------------------------------
obligations of the Company to each Purchaser under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of each Purchaser contained in Section 3 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the Closing.
-13-
<PAGE>
5.2 PERFORMANCE. All covenants, agreements and conditions contained
-----------
in this Agreement to be performed by the Purchasers on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 QUALIFICATIONS. All authorizations, approvals or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Stock and the Warrants pursuant to this Agreement shall be obtained and
effective as of the Closing.
6. MISCELLANEOUS.
-------------
6.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
-----------------------
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
6.2 TRANSFER; SUCCESSORS AND ASSIGNS. 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. 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.
6.3 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.
6.4 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.
6.5 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.
6.6 NOTICES. 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, addressed to the party to be notified at such
party's address as set forth below or on Exhibit A hereto, or as subsequently
---------
modified by written notice, and (a) if to the Company, with a copy to Venture
Law Group, Attn: Jeffrey Y. Suto, 2775 Sand Hill Road, Menlo Park, CA 94025 or
(b) if to the Purchasers, with a copy to Wilson Sonsini Goodrich & Rosati, Attn:
John V. Roos, 650 Page Mill Road, Palo Alto, CA 94304-1050.
-14-
<PAGE>
6.7 FINDER'S FEE. Each party represents that it neither is nor will
------------
be obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Purchaser or any of its officers, employees,
or representatives is responsible (but not for which any other Purchaser is
responsible). The Company agrees to indemnify and hold harmless each Purchaser
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible.
6.8 FEES AND EXPENSES. The Company shall pay the reasonable fees and
-----------------
expenses of Wilson Sonsini Goodrich & Rosati, the counsel for the Purchasers,
incurred with respect to this Agreement, the documents referred to herein and
the transactions contemplated hereby and thereby, provided such fees and
expenses do not exceed $10,000.
6.9 ATTORNEY'S FEES. If any action at law or in equity (including
---------------
arbitration) is necessary to enforce or interpret the terms of any of the
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
6.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
----------------------
amended with the written consent of the Company and the holders of at least two-
thirds (2/3) of the Common Stock issued or issuable upon conversion of the
Stock. Any amendment or waiver effected in accordance with this Section 6.10
shall be binding upon the Purchasers and each transferee of the Securities, each
future holder of all such Securities, and the Company. Any such amendment or
waiver that adversely affects any party hereto requires written consent of such
adversely-affected party.
6.11 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 (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
6.12 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of any of the Securities, upon any breach
or default of the Company under this Agreement, shall impair any such right,
power or remedy of such holder nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
-15-
<PAGE>
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
6.13 ENTIRE AGREEMENT. This Agreement, the Agreement to Amend of even
----------------
date herewith, and the documents referred to herein, constitute the entire
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements existing between the parties
hereto are expressly canceled.
6.14 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 THE
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.
6.15 CONFIDENTIALITY. Each party hereto agrees that, except with the
---------------
prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder, except to business, accounting and legal
advisors who have been informed of the foregoing obligation of confidentiality.
The provisions of this Section 6.15 shall be in addition to, and not in
substitution for, the provisions of any separate nondisclosure agreement
executed by the parties hereto with respect to the transactions contemplated
hereby.
6.16 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that
----------------------------
it is not relying upon any person, firm or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Securities.
6.17 WAIVER OF CONFLICTS. Each party to this Agreement acknowledges
-------------------
that Venture Law Group, counsel for the Company, has in the past performed and
may continue to perform legal services for certain of the Purchasers in matters
unrelated to the transactions described in this Agreement, including the
representation of such Purchasers in venture capital financings and other
matters. Accordingly, each party to this Agreement hereby (a) acknowledges that
they have had an opportunity to ask for information relevant to this disclosure;
and (b) gives its informed consent to Venture Law Group's representation of
certain of the Purchasers in such unrelated matters and to Venture Law Group's
representation of the Company in connection with this Agreement and the
transactions contemplated hereby.
-16-
<PAGE>
[Signature Pages Follow]
-17-
<PAGE>
The parties have executed this Series C Preferred Stock Purchase Agreement
as of the date first written above.
COMPANY:
FLYCAST COMMUNICATIONS
CORPORATION
By: /s/ George Garrick
_______________________________________
George Garrick, President
Address: 181 Fremont Street; Suite 120
San Francisco, CA 94105
<PAGE>
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
<PAGE>
CHARLES RIVER PARTNERSHIP
VIII, A LIMITED PARTNERSHIP
By: Charles River VIII GP Limited
Partnership, General Partner
By: /s/
____________________________________
General Partner
Address: 1000 Winter Street, Suite 3300
Waltham, MA 02154
<PAGE>
COMDISCO, INC.
By: /s/
Name:
Title:
Address: 3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
Attn: Christine Fera
<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
<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
<PAGE>
U.S. DEVELOPMENT CAPITAL INVESTMENT COMPANY
By: /s/
________________________________________
Name:
Title:
Address:
<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
<PAGE>
FRANK L. WALTERS
By: /s/ Frank L. Walters
________________________________________
Name: Frank L. Walters
Address: 23 Fairview Ave.
Atherton, CA 94027
Facsimile: 650-321-0157
<PAGE>
By: ________________________________________
Address:
Facsimile:
<PAGE>
ABS EMPLOYEE VENTURE FUND, LP
By: /s/
Name: ______________________________________
Title: _____________________________________
Address:
Facsimile:
<PAGE>
U.S. DEVELOPMENT CAPITAL INVESTMENT COMPANY
By: /s/
________________________________________
Name:
Title:
Address:
<PAGE>
HOWARD DRAFT
By: /s/ Howard Draft
________________________________________
Name: Howard Draft
Address: 633 N. St. Clair Street
20/th/ Floor
Chicago, IL 60611
<PAGE>
EXHIBITS
--------
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Amended and Restated Articles of Incorporation
Exhibit C - Schedule of Exceptions to Representations and Warranties
Exhibit D - Form of Amended and Restated Investors' Rights Agreement
Exhibit E - Form of Amended and Restated Right of First Refusal and Co-
Sale Agreement
Exhibit F - Form of Amended and Restated Voting Agreement
Exhibit G - Form of Legal Opinion of Venture Law Group
<PAGE>
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
<PAGE>
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
[TO BE MODIFIED]
<TABLE>
<CAPTION>
INVESTOR TOTAL DOLLAR AMOUNT SHARES ACCRUED INTEREST
<S> <C> <C> <C>
Intelligent Media Ventures $3,999,992.08 442,477
59 Executive Park Dr. South N.E.
Atlanta, GA 30329
Bessemer Venture Partners IV LP $1,555,136.41 172,028
1025 Old Country Road, Suite 205
Westbury, NY 11590 (*)
Charles River Partnership VIII $1,528,039.44 169,030
1000 Winter Street, Suite 3300
Waltham, MA 02154 (*)
St. Paul Venture Capital IV, LLC (*) $ 891,611.53 98,629
St. Paul Venture Capital Affiliates $ 25,212.62 2,789
Fund I, LLC (*)
8500 Normandale Lake Blvd.
Suite 1940
Bloomington, MN 55437
Attn: James R. Simons
Comdisco $ 499,993.36 55,309
Pacific Telesis Group $4,999,996.88 553,097
Frank L. Walters $ 24,995.60 2,765
US West Dex Holdings, Inc. $2,999,996.32 331,858
DF L.L.C. $ 50,000.24 5,531
Attn: Howard Draft
ABS Employee Venture Fund, LP $ 452,000 50,000
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
US Development Capital Investment Company $ 999,995.76 110,619
</TABLE>
(*) Indicates conversion of debt.
<PAGE>
EXHIBIT B
---------
FORM OF AMENDED AND RESTATED_
ARTICLES OF INCORPORATION
<PAGE>
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS TO
REPRESENTATIONS AND WARRANTIES
<PAGE>
EXHIBIT D
---------
FORM OF AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT E
---------
FORM OF AMENDED AND RESTATED
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE>
EXHIBIT F
---------
FORM OF AMENDED AND RESTATED VOTING AGREEMENT
<PAGE>
EXHIBIT G
---------
FORM OF LEGAL OPINION
OF__
VENTURE LAW GROUP
<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
-1-
<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 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
-2-
<PAGE>
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;
(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;
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<PAGE>
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 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
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<PAGE>
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 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.
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<PAGE>
(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 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
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<PAGE>
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 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
-7-
<PAGE>
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 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
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<PAGE>
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 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,
-9-
<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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.
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;
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(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.
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:
-13-
<PAGE>
(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 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
-14-
<PAGE>
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. 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,
-15-
<PAGE>
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 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]
-16-
<PAGE>
The 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
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
CHARLES RIVER PARTNERSHIP
VIII, A LIMITED PARTNERSHIP
By: Charles River VIII GP Limited
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: H3D Entertainment
20195 Stevens Creek Blvd.
Cupertino, CA 95014
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
/s/ Richard L. Thompson
--------------------------------------
Richard L. Thompson
Address: 123 Townsend Street, Suite 226
San Francisco, CA 94107
--------------------------------------
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
/s/ Rhona Rogers
--------------------------------------
Rhona Rogers
Address: 1906 South Forst Hill Place
Danville, CA 94526
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 AMEND 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
-----------
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
William T. Burgin
BRIMSTONE ISLAND CO. L.P.
By: /s/
Name:
Its:
/s/
Neill B. Brownstein
/s/
Robert H. Buescher
/s/
G. Felda Hardymon
/s/
Christropher Gabrieli
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
GABRIELI FAMILY FOUNDATION
By: /s/
Name:
Its:
/s/
Michael I. Barach
/s/
David J. Cowan
/s/
Bruce K. Graham
/s/
Diane N. McPartlin
/s/
Ravi B. Mhatre
/s/
Gautam A. Prakash
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/
Robi L. Soni
/s/
Joanna A. Strober
/s/
William R. Wasik
/s/
Rodney A. Cohen
/s/
Richard R. Davis
/s/
Adam P. Godfrey
LINDSAY 1994 FAMILY PARTNERSHIP, L.P.
By: /s/
Name:
Its:
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/
John G. MacDonald
/s/
Howard S. Markowitz
/s/
Robert J. S. Roriston
/s/
Steven L. Williamson
WOODS 1994 FAMILY PARTNERSHIP, L.P.
By: /s/
Name:
Its:
BVP IV SPECIAL SITUATIONS L.P.
By: /s/
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
/s/ Jeff Goodman
Jeff Goodman
Address: 665 Silver Ave.
Half Moon Bay, CA 94019
/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/
Name:
Title:
Address: 3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
Attn: Christine Fera
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
By:___________________________________
Address:
Facsimile:
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
HOWARD DRAFT
By: /s/ Howard Draft
___________________________________
Name: Howard Draft
Address: 633 N. St. Clair Street
20/th/ Floor
Chicago, IL 60611
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
ABS EMPLOYEE VENTURE FUND, LP
By: /s/
Name:______________________________
Title:_______________________________
Address:
Facsimile:
SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>
U.S. DEVELOPMENT CAPITAL INVESTMENT COMPANY
By: /s/
___________________________________
Name:
Title:
Address:
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
---------------------------------------
Intelligent Media Ventures, Inc.
Address: 59 Executive Park Dr. South
N.E. Atlanta, GA 30329
Pacific Telesis Group
Address: 175 E. Houston
11/th/ Floor
San Antonio, TX 78025
Attn: General Attorney, M&A
Legal
Frank L. Walters.
Address: 23 Fairview Ave.
Atherton, CA 94027
<PAGE>
EXHIBIT B
---------
FOUNDERS
Lawrence G. Braitman
Peter D. Olson
David W. Roth
Michael Solomon
Richard L. Thompson
Miles Walsh
-6-
<PAGE>
EXHIBIT 10.8
AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND
-----------------------------------------------
CO-SALE AGREEMENT
-----------------
This AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
(the "Agreement") is made as of December 30, 1998, by and among Flycast
Communications Corporation, a California corporation (the "Company"); the
-------
persons listed on the Schedule of Investors attached hereto as Schedule A (the
"Investors") and Lawrence G. Braitman, David W. Roth, Richard L. Thompson, Miles
---------
Walsh and George Garrick (the "Founders").
--------
1. Certain of the Investors are parties to that certain Series C
Preferred Stock Purchase Agreement of even date herewith between the Company and
such Investors (the "Purchase Agreement");
------------------
2. The execution of this Agreement by the parties hereto is a
condition to the closing of the transactions contemplated by the Purchase
Agreement;
3. The Company and each Founder have entered into a Common Stock
Purchase Agreement with respect to the purchase of shares of Common Stock by the
Founder from the Company, which agreement provides for a right of first refusal
of the Company with respect to certain transfers of the Common Stock by the
Founder.
4. The parties hereto desire to have this Agreement govern certain
transfers of shares of the Company by the Founders;
5. 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 Right of First Refusal and Co-Sale 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.
The parties agree as follows:
1. Definitions.
-----------
(a) "Stock" shall mean shares of the Company's Common Stock or
-----
Preferred Stock now owned or subsequently acquired by the Founders.
(b) "Preferred Stock" shall mean the Company's outstanding Series
---------------
A, Series B and Series C Preferred Stock.
(c) "Common Stock" shall mean the Company's Common Stock,
------------
including (i) shares of Common Stock issued or issuable upon conversion of the
Company's outstanding Preferred Stock, (ii) shares of Common Stock issuable upon
exercise of outstanding options and (iii) shares of Common Stock issuable upon
conversion of any outstanding convertible securities.
<PAGE>
2. Sales by Founder.
----------------
(a) Notice of Sales; Assignment of Company Right of First
-----------------------------------------------------
Refusal.
- -------
(i) If a Founder (the "Selling Founder") proposes to sell or
---------------
transfer any shares in a transaction or series of related transactions whereby
the Company would have a right of first refusal on such sale or transfer
pursuant to the Common Stock Purchase Agreement between the Selling Founder and
the Company, then the Selling Founder shall promptly give written notice (the
"Notice") to the Company and the Investors at least thirty (30) days prior to
------
the closing of such sale or transfer. The Notice shall describe in reasonable
detail the proposed sale or transfer including, without limitation, the number
of shares of Stock to be sold or transferred, the nature of such sale or
transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee.
(ii) In the event that the Company declines to exercise in
full its right of first refusal set forth in the Selling Founder's Common Stock
Purchase Agreement with the Company in connection with the proposed transfer by
the Founder, the Company will provide each Investor with notice of such
determination at least fifteen (15) days prior to the end of the period in which
the right of first refusal expires under such Founder's Common Stock Purchase
Agreement. Each Investor shall then have the right, exercisable by notice prior
to the end of such period, to exercise such right of first refusal as the
Company's assignee on a pro rata basis (based upon the number of shares of
Common Stock held by such Investor relative to the aggregate number of shares of
Common Stock held by all Investors); provided that if fewer than all Investors
elect to participate, the Stock that would otherwise be allocated to non-
participating Investors shall be allocated to each participating Investor in a
manner such that each participating Investor is entitled to purchase at least
such Investor's pro rata portion of such unallocated Stock (based upon the
number of Common Stock held by all participating Investors) or such different
number of shares as the participating Investors shall mutually agree. The
Company agrees to assign its right of first refusal as applicable pursuant to
this Section 2(a) and the Founders hereby grant their consent for such
assignment. Upon expiration or exercise of the right of first refusal, the
Company will provide notice to all Investors as to whether or not the right of
first refusal has been exercised by the Company or the Investors.
(b) Co-Sale Right. To the extent that the right of first refusal
-------------
under Section 2(a) or the Founders Common Stock Purchase Agreement is not
exercised by the Company, each Investor shall have the right, exercisable upon
written notice to the Selling Founder within fifteen (15) days after receipt of
the notice indicating whether or not the right of first refusal has been
exercised by the Company or the Investors, to participate in such sale of Stock
on the same terms and conditions, whether to the Investors pursuant to Section
2(a)(ii) or to individuals or entities that are not Investors. To the extent
one or more of the Investors exercises such right of participation in accordance
with the terms and conditions set forth below, the number of shares of Stock
that the Selling Founder may sell in the transaction shall be correspondingly
reduced. The co-sale right of each Investor shall be subject to the following
terms and conditions:
-2-
<PAGE>
(i) Each Investor may sell all or any part of that number
of shares of Common Stock held by such Investor that is equal to the product
obtained by multiplying (x) the aggregate number of shares of Stock covered by
the Notice and not being purchased by the Company pursuant to Section 2(a) by
(y) a fraction, the numerator of which is the number of Common Stock owned by
the Investor at the time of the sale or transfer and the denominator of which is
the combined number of shares of Common Stock of the Company at the time owned
by all Investors and the Selling Founder.
(ii) Each Investor shall effect its participation in the
sale by promptly delivering to the Selling Founder for transfer to the
prospective purchaser one or more certificates, properly endorsed for transfer,
which represent:
(A) the type and number of shares of Common Stock which
such Investor elects to sell; or
(B) that number of shares of Preferred Stock which is
at such time convertible into the number of shares of Common Stock that such
Investor elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Investor shall convert such Preferred Stock into Common Stock and deliver Common
Stock as provided in Section 2(b)(ii)(A) above. The Company agrees to make any
such conversion concurrent with the actual transfer of such shares to the
purchaser.
(c) The stock certificate or certificates that the Investor
delivers to the Selling Founder pursuant to Section 2(b) shall be transferred to
the prospective purchaser in consummation of the sale of the Stock pursuant to
the terms and conditions specified in the Notice, and the Selling Founder shall
concurrently therewith remit to such Investor that portion of the sale proceeds
to which such Investor is entitled by reason of its participation in such sale.
To the extent that any prospective purchaser or purchasers prohibits such
assignment or otherwise refuses to purchase shares or other securities from an
Investor exercising its rights of co-sale hereunder, the Selling Founder shall
not sell to such prospective purchaser or purchasers any Stock unless and until,
simultaneously with such sale, the Selling Founder shall purchase such shares or
other securities from such Investor upon the substantially similar terms as for
the purchase of stock by such prospective purchaser.
(d) The exercise or non-exercise of the rights of the Investors
hereunder to participate in one or more sales of Stock made by any of the
Founders shall not adversely affect the Investors' rights to participate in
subsequent sales of Stock subject to Section 2(a).
(e) To the extent the Investors do not elect to participate in the
sale of Stock subject to the Notice, the Selling Founder may conclude a transfer
of the Stock covered by the Notice and not elected to be purchased by the
Investors on terms and conditions subject to the terms of the Selling Founder's
Common Stock Purchase Agreement. Any subsequent transfer of any Stock by the
Selling Founder shall again be subject to the right of first refusal right of
the Company and the Investors (as applicable) and the co-sale right of the
Investors.
-3-
<PAGE>
3. Exempt Transfers. Notwithstanding the foregoing, the right of
----------------
first refusal and the co-sale rights of the Investors shall not apply to any
transfer of Stock that is not subject to the Company's Right of First Refusal
under the Common Stock Purchase Agreements with the Founders. This Agreement
shall in no manner limit the right of the Company to repurchase securities from
a Founder at cost pursuant to any Stock Purchase Agreement between the Company
and such Founder.
4. Prohibited Transfers.
--------------------
(a) In the event any of the Founders should sell any Stock in
contravention of the right of first refusal and the co-sale rights of the
Investors under this agreement (a "Prohibited Transfer"), the Investors, in
addition to such other remedies as may be available at law, in equity or
hereunder, shall have the put option provided below, and such Founder (the
"Transferring Founder") shall be bound by the applicable provisions of such
option.
(b) In the event of a Prohibited Transfer, each Investor shall
have the right to sell to the Transferring Founder the type and number of shares
of Stock equal to the number of shares each Investor would have been entitled to
transfer to the purchaser under Section 2(b) hereof had the Prohibited Transfer
been effected pursuant to and in compliance with the terms hereof. Such sale
shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold
to the Transferring Founder shall be equal to the price per share paid by the
purchaser to the Transferring Founder in the Prohibited Transfer. The
Transferring Founder shall also reimburse each Investor for any and all fees and
expenses, including legal fees and expenses, incurred pursuant to the exercise
or the attempted exercise of the Investor's rights under Section 2.
(ii) Within ninety (90) days after the later of the dates
on which the Investor (A) received notice of the Prohibited Transfer or (B)
otherwise become aware of the Prohibited Transfer, the Investor shall, if
exercising the option created hereby, deliver to the Transferring Founder the
certificate or certificates representing shares to be sold, each certificate to
be properly endorsed for transfer.
(iii) The Transferring Founder shall, upon receipt of the
certificate or certificates for the shares to be sold by an Investor, pursuant
to this Section 4(b)(iii), pay the aggregate purchase price therefor and the
amount of reimbursable fees and expenses, as specified in Section 4(b)(i), in
cash or by other means acceptable to the Stockholder.
(iv) Notwithstanding the foregoing, any attempt by a
Founder to transfer Stock in violation of Section 2 hereof shall be void and the
Company agrees it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of at least
a majority-in-interest of the Common Stock held by the Investors.
-4-
<PAGE>
5. Legend.
------
(a) Each certificate representing shares of Stock now or
hereafter owned by a Founder or issued to any person in connection with a
transfer pursuant to Section 3(a) hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND
CO-SALE AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE
CORPORATION AND CERTAIN HOLDERS OF STOCK OF THE CORPORATION.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE CORPORATION."
(b) Each Founder agrees that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in Section 5(a) above to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
6. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California.
(b) Amendment; Termination of Prior Agreement. Any provision may
-----------------------------------------
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only by the
written consent of (i) as to the Company, only by the Company, (ii) as to the
Investors, by persons or entities holding more than at least two-thirds (2/3) of
the Common Stock, issued or issuable, held by the Investors and their assignees
pursuant to Section 6.3 hereof; provided, however, that any Investor may waive
any of its rights hereunder without obtaining the consent of any other Investor;
(iii) as to a Founder, by such Founder or his respective assignee, pursuant to
Section 6(c) hereof. Any amendment or waiver effected in accordance with clauses
(i), (ii) and (iii) of this Section shall be binding upon each Investor, its
successors and assigns, the Company and the Founder. Notwithstanding the
foregoing, the provisions of Section 2(b)(ii) may be waived only with the
unanimous consent of the Board of Directors. Notwithstanding the foregoing, in
the event that the Board of Directors of the Company approves the addition of an
individual as a Founder, such individual may be added as a party to this
Agreement, considered a Founder and become subject to the provisions of this
Agreement by executing a signature page. The Company, the Existing Investors
constituting a majority in interest of the Common Stock, issued and issuable,
held by the Investors and their assignees (as defined in the Prior Agreement)
now outstanding, and the Founders, agree that the Prior Agreement has been
amended and restated in its entirety by this Agreement.
-5-
<PAGE>
(c) Assignment of Rights. This Agreement and the rights and
--------------------
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
Notwithstanding the foregoing, the rights of the Investors hereunder are only
assignable (i) by each of such Investors to any other Investor or (ii) to an
assignee or transferee who acquires all of the Common Stock purchased by a
Investor.
(d) Term. This Agreement shall terminate upon the earlier of (i)
----
the closing of a firm commitment underwritten public offering pursuant to an
effective registration statement on Form S-1 under the Securities Act, covering
the offer and sale of the Company's Common Stock with a per share price to the
public of $8.00 per share (adjusted for stock splits, dividends,
recapitalizations and the like) and aggregate cash proceeds to the Corporation
of $15,000,000 (net of underwriting discounts and commissions), (ii) a sale of
all or substantially all of the assets of the Company, or a merger or
consolidation of the Company, unless the Company'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 Company'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, (iii) such time as the Investors hold and aggregate of less than
1,000,000 shares of Common Stock and (iv) the execution by the Company of a
general assignment for the benefit of creditors or the appointment of a receiver
or trustee to take possession of the property and assets of the Company.
(e) Ownership. Each Founder represents and warrants, severally but
---------
not jointly, that he is the sole legal and beneficial owner of the shares of
stock subject to this Agreement and that no other person has any interest (other
than a community property interest) in such shares.
(f) Notices. All notices required or permitted hereunder shall be in
-------
writing and shall be deemed effectively given upon personal delivery to the
party to be notified or five (5) days after deposit in the United States mail,
by registered or certified mail, postage prepaid and properly addressed to the
party to be notified as set forth on the signature page hereof or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties hereto.
(g) Severability. In the event one or more of the provisions of this
------------
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(h) Attorney Fees. In the event that any dispute among the parties
-------------
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such
-6-
<PAGE>
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
(i) 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.
(j) Stock Split. All references to numbers of shares in this
-----------
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.
(k) Aggregation of Stock. All shares of Common 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.
[REST OF PAGE LEFT INTENTIONALLY BLANK]
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Right of First Refusal and Co-Sale 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
SIGNATURE PAGE TO AMENDED AND RESTATED RIGHT OF
FIRST REFUSAL AND CO-SALE AGREEMENT
<PAGE>
CHARLES RIVER PARTNERSHIP
VIII, A LIMITED PARTNERSHIP
By: Charles River VIII GP Limited
Partnership, General Partner
By: /s/
----------------------------------
General Partner
Address: 1000 Winter Street, Suite 3300
Waltham, MA 02154
INTELLIGENT MEDIA VENTURES, INC.
By: /s/ Bradley Greene
----------------------------------
Bradley Greene
Attorney in Fact
Address: 59 Executive Park Dr. South
N. E. Atlanta, GA 30329
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
/s/ Peter D. Olson
--------------------------------------
Peter D. Olson
Address: H3D Entertainment
20195 Stevens Creek Blvd.
Cupertino, CA 95014
ALEX BROWN & SONS, CUSTODIAN
FBO PETER D. OLSON
By: /s/ Peter D. Olson
-----------------------------------
Peter D. Olson
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
--------------------------------------
Ruth C. Dorward
Address: 14200 1st Avenue South, #366
Burien, WA 98168
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
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 RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
--------------------------------------
Dave Thompson
--------------------------------------
Beverly Thompson
Address: 23850 Star Court
Auburn, CA 95603
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
ALEX BROWN & SONS, CUSTODIAN
FBO HOWARD BRAITMAN
By: /s/ Howard Braitman
-----------------------------------
Howard Braitman
Address: 5225 Clearbrook Drive
Concord, CA 94521
/s/ Rhona Rogers
--------------------------------------
Rhona Rogers
Address: 1906 South Forst Hill Place
Danville, CA 94526
/s/ Richard L. Thompson
--------------------------------------
Richard L. Thompson
Address: 123 Townsend Street, Suite 226
San Francisco, CA 94107
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
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 RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
VLG INVESTMENTS 1997
By: /s/ Joshua Pickus
-------------------
Title: General Partner
---------------
Print Name: Joshua Pickus
-------------
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
FOUNDERS:
/s/ Lawrence G. Braitman
--------------------------------------
Lawrence G. Braitman
David W. Roth
/s/ Richard L. Thompson
--------------------------------------
Richard L. Thompson
--------------------------------------
Miles Walsh
/s/ George Garrick
--------------------------------------
George Garrick
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
WESTERN INVESTMENTS CAPITAL, LLC
By: /s/ Tania Modic
--------------------
Title: Managing Member
---------------
Print Name: Tania Modic
-----------
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
/s/
--------------------------------------
William T. Burgin
BRIMSTONE ISLAND CO. L.P.
By: /s/
-----------------------------------
Name:
Its:
/s/
--------------------------------------
Neill B. Brownstein
/s/
--------------------------------------
Robert H. Buescher
/s/
--------------------------------------
G. Felda Hardymon
/s/
--------------------------------------
Christropher Gabrieli
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
GABRIELI FAMILY FOUNDATION
By: /s/
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
/s/
--------------------------------------
Michael I. Barach
/s/
--------------------------------------
David J. Cowan
/s/
--------------------------------------
Bruce K. Graham
/s/
--------------------------------------
Diane N. McPartlin
/s/
--------------------------------------
Ravi B. Mhatre
/s/
--------------------------------------
Gautam A. Prakash
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
/s/
--------------------------------------
Robi L. Soni
/s/
--------------------------------------
Joanna A. Strober
/s/
--------------------------------------
William R. Wasik
/s/
--------------------------------------
Rodney A. Cohen
/s/
--------------------------------------
Richard R. Davis
/s/
--------------------------------------
Adam P. Godfrey
LINDSAY 1994 FAMILY PARTNERSHIP, L.P.
By: /s/
-----------------------------------
Name:
---------------------------------
Its:
---------------------------------
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
/s/
--------------------------------------
John G. MacDonald
/s/
--------------------------------------
Howard S. Markowitz
/s/
--------------------------------------
Robert J. S. Roriston
/s/
--------------------------------------
Steven L. Williamson
WOODS 1994 FAMILY PARTNERSHIP, L.P.
By: /s/
-----------------------------------
Name:
---------------------------------
Its:
---------------------------------
BVP IV SPECIAL SITUATIONS L.P.
By:
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 RIGHT OF FIRST
REFUSAL AND CO-SALE
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
/s/ Jeff Goodman
Jeff Goodman
Address: 665 Silver Ave.
Half Moon Bay, CA 94019
/s/ Rob Coneybeer
Rob Coneybeer
Address: 1971 Broadway
San Francisco, CA 94109
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
AGREEMENT
<PAGE>
COMDISCO, INC.
By: /s/
Name:
Title:
Address: 3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
Attn: Christine Fera
SIGNATURE PAGE TO AMENDED
AND RESTATED RIGHT OF FIRST
REFUSAL AND CO-SALE
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 RIGHT OF FIRST
REFUSAL AND CO-SALE
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
<PAGE>
FRANK L. WALTERS
By: /s/ Frank L. Walters
______________________________
Name: Frank L. Walters
Address: 23 Fairview Ave.
Atherton, CA 94027
Facsimile: 650-321-0157
By: ______________________________
Address:
Facsimile:
<PAGE>
HOWARD DRAFT
By: /s/ Howard Draft
__________________________________
Name: Howard Draft
Address: 633 N. St. Clair Street
20/th/ Floor
Chicago, IL 60611
<PAGE>
ABS EMPLOYEE VENTURE FUND, LP
By: /s/
Name:______________________________
Title:_____________________________
Address:
Facsimile:
<PAGE>
U.S. DEVELOPMENT CAPITAL
INVESTMENT COMPANY
By: /s/
____________________________________
Name:
Title:
Address:
<PAGE>
SCHEDULE 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
---------------------------------------
Intelligent Media Ventures, Inc.
Address: 59 Executive Park Dr. South
N.E. Atlanta, GA 30329
Pacific Telesis Group
Address: 175 E. Houston
11/th/ Floor
San Antonio, TX 78025
Attn: General Attorney, M&A
Legal
Frank L. Walters.
Address: 23 Fairview Ave.
Atherton, CA 94027
<PAGE>
EXHIBIT 10.9
FLYCAST COMMUNICATIONS CORPORATION
AMENDED AND RESTATED VOTING AGREEMENT
-------------------------------------
This Amended and Restated Voting 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
--------
The Company and the Investors have entered into a Series C Preferred Stock
Purchase 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 for the
purpose of setting forth the terms and conditions pursuant to which the
Investors and the Founders shall vote their shares of the Company's voting stock
in favor of certain designees to the Company's Board of Directors. The Company,
the Investors and the Founders each desire to facilitate the voting arrangements
set forth in this Agreement, and the sale and purchase of shares of Series C
Preferred Stock pursuant to the Purchase Agreement, by agreeing to the terms and
conditions set forth herein.
The Fourth Amended and Restated Articles of Incorporation of the Company
(the "Restated Articles") provide that (a) 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; (b) the holders of the Series B and
Series C Preferred Stock, voting together as a 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; and (c)
any additional directors shall be elected by all of the holders of outstanding
stock of the Corporation.
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 Voting 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:
<PAGE>
1. Board Representation.
(a) So long as at least 300,000 shares of Series A Preferred Stock (as
adjusted for stock splits, stock dividends, recapitalizations and the like) are
outstanding, the parties hereto agree to vote or act with respect to their
shares so as to elect one (1) member of the Company's Board of Directors
designated by holders of the majority of the Series A Preferred Stock, whose
initial designee shall be Peter Olson,
(b) So long as at least 3,000,000 shares of Series B and Series C
Preferred Stock (as adjusted for stock splits, stock dividends,
recapitalizations and the like) are outstanding, the parties hereto agree to
vote or act with respect to their shares so as to elect (i) two (2) members of
the Company's Board of Directors designated by the holders of the majority of
then-outstanding Series B and Series C Preferred Stock (the "Series B and Series
-------------------
C Directors"), whose initial designees shall be David Cowan and Ted Dintersmith;
- -----------
and (ii) one (1) member of the Company's Board of Directors nominated by the
Series B and Series C Directors and approved by a majority of the Company's
Board of Directors other than the Series B and Series C Directors, whose initial
designee shall be Michael Solomon.
(c) So long as Bell South holds at least 75% of the Series C Preferred
Stock purchased by it, the parties hereto agree to vote or act with regard to
their shares so as to elect one member of the Company's Board of Directors as
designated by BellSouth.
(d) The parties hereto agree to vote or act with respect to their
shares so as to elect the Chief Executive Officer of the Company, who is George
Garrick as of the date of this Agreement, provided, however, that such person
shall resign as director upon termination or resignation as Chief Executive
Officer, such resignation to be effective upon termination or resignation from
such office, without further action by such person.
2. CHANGE IN NUMBER OF DIRECTORS. The Founders and the Investors will
-----------------------------
not vote for any amendment or change to the Bylaws or Restated Articles
providing for the election of more or less than five (5) directors, or any other
amendment or change to the Bylaws inconsistent with the terms of this Agreement.
3. COMPENSATION COMMITTEE. So long as at least 1,000,000 shares of
----------------------
Series B and Series C Preferred Stock (as adjusted for stock splits, stock
dividends, recapitalizations and the like) are outstanding, the Company's Board
of Directors shall establish and maintain a Compensation Committee consisting of
at least two members of the Board of Directors that are not employees of the
Company.
4. LEGENDS. Each certificate representing Founders' or Investor's Shares
-------
shall be endorsed by the Company with a legend reading as follows:
THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT BY AND AMONG
THE COMPANY, THE FOUNDERS AND THE INVESTORS (A COPY OF WHICH MAY BE
OBTAINED FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN
-2-
<PAGE>
SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO
AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SAID VOTING AGREEMENT.
5. TERMINATION. This Agreement shall terminate upon the earlier of (a)
-----------
the consummation of the Company'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 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
Company of $15,000,000 (net of underwriting discounts and commissions), (b) the
acquisition of the Company 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 Company), the sale
of all or substantially all of the assets of the Company) unless the Company's
shareholders of record as constituted immediately prior to such acquisition
will, immediately after such acquisition (by virtue of securities issued as
consideration for the Company's acquisition or sale or otherwise) hold at least
50% of the voting power of the surviving or acquiring entity, or (c) ten (10)
years from the date hereof.
6. AMENDMENTS; WAIVERS; TERMINATION OF PRIOR AGREEMENT. Any term hereof
---------------------------------------------------
may be amended or waived only with the written consent of the Company, holders
of at least two-thirds (2/3) of the Preferred Stock, voting together as a single
class, and holders of at least a majority of the Founders' shares (or their
respective successors and assigns); provided, however, that any such amendment
or waiver that adversely affects any series or class of stock of the Company
requires the written consent of the holders of at least two-thirds (2/3) of such
series or class of stock of the Company. Section 1(c) of this Agreement shall
only be amended with the written consent of BellSouth, so long as BellSouth
holds at least 75% of the Series C Preferred Stock purchased by it. Any
amendment or waiver effected in accordance with this Section 6 shall be binding
upon the Company, the holders of Series A Preferred Stock, the holders of Series
B Preferred Stock, the holders of Series C Preferred Stock and any holder of
Founders' Shares, and each of their respective successors and assigns. The
Company, the Existing Investors, constituting the holders of at least a majority
of the Series A and Series B Preferred Stock held by the Investors and their
assignees now outstanding, and the Founders, agree that the Prior Agreement has
been amended and restated in its entirety by this Agreement.
7. NOTICES. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed sufficient on the date of 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 to the party to be notified
at such party's address as set forth below or on Exhibit A hereto or on Exhibit
--------- -------
B hereto, or as subsequently modified by written notice.
- -
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
-3-
<PAGE>
such provision, then (a) such provision shall be excluded from this Agreement,
(b) the balance of the Agreement shall be interpreted as if such provision were
so excluded and (c) the balance of the Agreement shall be enforceable in
accordance with its terms.
9. 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.
10. 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.
11. SUCCESSORS AND ASSIGNS. 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. 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.
[Signature Page Follows]
-4-
<PAGE>
The parties hereto have executed this Amended and Restated Voting Agreement
as of the date first written above.
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
<PAGE>
CHARLES RIVER PARTNERSHIP VIII, A LIMITED
PARTNERSHIP
By: Charles River VIII GP Limited
Partnership, General Partner
By: /s/
___________________________________
General Partner
Address: 1000 Winter Street, Suite 3300
Waltham, MA 02154
<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
<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
<PAGE>
/s/ Peter D. Olson
Peter D. Olson
Address: H3D Entertainment
20195 Stevens Creek Blvd.
Cupertino, CA 95014
ALEX BROWN & SONS, CUSTODIAN FBO PETER D.
OLSON
By: /s/ Peter D. Olson
Peter D. Olson
<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
<PAGE>
Ruth C. Dorward
Address: 14200 1st Avenue South, #366
Burien, WA 98168
<PAGE>
Bill Baughman
Shirley Baughman
Address: c/o Haigh, Patty Baughman
4408 216th S.W., Unit A
Mount Lake Terrace, WA 98043
<PAGE>
Dave Thompson
Beverly Thompson
Address: 23850 Star Court
Auburn, CA 95603
<PAGE>
ALEX BROWN & SONS, CUSTODIAN
FBO HOWARD BRAITMAN
By: /s/ Howard Braitman
Howard Braitman
Address: 5225 Clearbrook Drive
Concord, CA 94521
<PAGE>
/s/ Rhona Rogers
Rhona Rogers
Address: 1906 South Forst Hill Place
Danville, CA 94526
<PAGE>
/s/ Richard L. Thompson
Richard L. Thompson
Address: 123 Townsend Street, Suite 226
San Francisco, CA 94107
<PAGE>
/s/ Jeffrey Y. Suto
Jeffrey Y. Suto
Address: c/o Venture Law Group
2775 Sand Hill Road
Menlo Park, CA 94025
<PAGE>
VLG INVESTMENTS 1997
By: /s/ Joshua Pickus
Title: General Partner
---------------
Print Name: Joshua Pickus
-------------
<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
<PAGE>
WESTERN INVESTMENTS CAPITAL, LLC
By: /s/ Tania Modic
Title: Managing Member
---------------
Print Name: Tania Modic
-----------
<PAGE>
/s/
William T. Burgin
BRIMSTONE ISLAND CO. L.P.
By: /s/
Name:
Its:
/s/
Neill B. Brownstein
/s/
Robert H. Buescher
/s/
G. Felda Hardymon
/s/
Christropher Gabrieli
/s/
Gautam A. Prakash
Name:
Its:
<PAGE>
GABRIELI FAMILY FOUNDATION
By: /s/
Name:
Its:
/s/
Michael I. Barach
/s/
David J. Cowan
/s/
Bruce K. Graham
/s/
Diane N. McPartlin
/s/
Ravi B. Mhatre
/s/
Robi L. Soni
/s/
Joanna A. Strober
/s/
William R. Wasik
/s/
Rodney A. Cohen
/s/
Richard R. Davis
/s/
Adam P. Godfrey
LINDSAY 1994 FAMILY PARTNERSHIP, L.P.
By: /s/
John G. MacDonald
/s/
Howard S. Markowitz
/s/
Robert J. S. Roriston
/s/
Steven L. Williamson
WOODS 1994 FAMILY PARTNERSHIP, L.P.
By: /s/
Name:
Its:
BVP IV SPECIAL SITUATIONS L.P.
By: /s/
Name:
Its:
Address: c/o Bessemer Partners IV L.P.
<PAGE>
1400 Old Country Road, Suite 407
Westbury, NY 11590
<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
<PAGE>
/s/ Jeff Goodman
Jeff Goodman
Address: 665 Silver Ave.
Half Moon Bay, CA 94019
<PAGE>
/s/ Rob Coneybeer
Rob Coneybeer
Address: 1971 Broadway
San Francisco, CA 94109
<PAGE>
COMDISCO, INC.
By: /s/
Name:
Title:
Address: 3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
Attn: Christine Fera
<PAGE>
BESSEC VENTURES IV L.P.
By: Deer IV & Co. LLC, It's General Partner
By: /s/ ROBERT H. BUESCHER
Robert H. Buescher, Manager
<PAGE>
FRANK L. WALTERS
By: /s/ FRANK L. WALTERS
_____________________________
Name: Frank L. Walters
Address: 23 Fairview Ave.
Atherton, CA 94027
Facsimile: 650-321-0157
<PAGE>
By:______________________________
Address:
Facsimile:
<PAGE>
HOWARD DRAFT
By: /s/ HOWARD DRAFT
_____________________________
Name: Howard Draft
Address: 633 N. St. Clair Street
20/th/ Floor
Chicago, IL 60611
<PAGE>
ABS EMPLOYEE VENTURE FUND, LP
By: /s/
Name:____________________________
Title:___________________________
Address:
Facsimile:
<PAGE>
U.S. DEVELOPMENT CAPITAL INVESTMENT COMPANY
By: /s/
_____________________________
Name:
Title:
Address:
<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
---------------------------------------
Intelligent Media Ventures, Inc.
Address: 59 Executive Park Dr. South
N.E. Atlanta, GA 30329
Pacific Telesis Group
Address: 175 E. Houston
11/th/ Floor
San Antonio, TX 78025
Attn: General Attorney, M&A
Legal
Frank L. Walters.
Address: 23 Fairview Ave.
Atherton, CA 94027
<PAGE>
EXHIBIT B
---------
FOUNDERS
Lawrence G. Braitman
Peter D. Olson
David W. Roth
Michael Solomon
Richard L. Thompson
Miles Walsh
<PAGE>
EXHIBIT 10.11
STANDARD OFFICE LEASE--GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC LEASE PROVISIONS ("Basic Lease Provisions").
1.1 PARTIES: This Lease, dated, for reference purposes only, January 9,
1998 is made by and between RAY CORPORATION, a California corporation (herein
called "Lessor") and FLYCAST COMMUNICATIONS CORPORATION, a California
corporation doing business under the name of __________________, (herein called
"Lessee").
1.2 PREMISES: Suite Number(s) Portion 1st Floor/Mezzanine floors,
consisting of approximately 11,800 feet, more or less, as defined in paragraph 2
and as shown on Exhibit "A" hereto (the "Premises").
1.3 BUILDING: Commonly described as being located at Ray Building 181
Fremont Street in the City of San Francisco County of San Francisco State of
California, as more particularly described in Exhibit ___ hereto, and as defined
in paragraph 2.
1.4 USE: General Office Space, subject to paragraph 6.
1.5 TERM: 7 Years commencing February 1, 1998 ("Commencement Date") and
ending January 31, 2005, as defined in paragraph 3.
1.6 BASE RENT: $22,625 per month, payable on the 1st day of each month,
per paragraph 4.1.
1.7 BASE RENT INCREASE: On ____________ the monthly Base Rent payable
under paragraph 1.6 above shall be adjusted as provided in paragraph 4.3 below.
1.8 RENT PAID UPON EXECUTION: $22,625 for the month of February rent.
1.9 SECURITY DEPOSIT: $35,000 upon execution.
1.10 LESSEE'S SHARE OF OPERATING EXPENSE INCREASE: 30% as defined in
paragraph 4.2.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. The Premises, the Building, the Common Areas, the land upon which
the same are located, along with all other buildings and improvements thereon or
thereunder, are herein collectively referred to as the "Office Building
Project." Lessor hereby leases to Lessee and Lessee leases from Lessor for the
term, at the rental, and upon all of the conditions set forth herein, the real
property referred to in
<PAGE>
the Basic Lease Provisions, paragraph 1.2, as the "Premises," including rights
to the Common Areas as hereinafter specified.
2.3 COMMON AREAS--DEFINITION: The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Office Building Project that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other lessees of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including but not limited to common
entrances, lobbies, corridors, stairways and stairwells, elevators.
2.4 COMMON AREAS--RULES AND REGULATIONS: Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.
2.5 COMMON AREAS--CHANGES: Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Building interior and exterior and Common
Areas, including, without limitation, changes in the location, size, shape,
number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, restrooms;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(d) To add additional building and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof;
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Office Building Project as Lessor
may, in the exercise of sound business judgment deem to be appropriate.
3. TERM.
3.1 TERM: The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 DELAY IN POSSESSION: Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefor, nor shall such failure affect
<PAGE>
the validity of the Lease or the obligations of Lessee hereunder or extend the
term hereof; but, in such case, Lessee shall not be obligated to pay rent or
perform any other obligation of Lessee under the terms of this Lease, except as
may be otherwise provided in this Lease, until possession of the Premises is
tendered to Lessee, as hereinafter defined; provided, however, that if Lessor
shall not have delivered possession of the Premises within sixty (60) days
following said Commencement Date, as the same may be extended under the terms of
a Work Letter executed by Lessor and Lessee, Lessee may, at Lessee's option, by
notice in writing to Lessor within ten (10) days thereafter, cancel this Lease.
In which event the parties shall be discharged from all obligations hereunder;
provided, however, that, as to Lessee's obligations, Lessee first reimburses
Lessor for all costs incurred for improvements and, as to Lessor's obligations,
Lessor shall return any money previously deposited by Lessee (less any offsets
due Lessor for Improvements); and provided further, that if such written notice
by Lessee is not received by Lessor within said the (10) day period, Lessee's
right to cancel this Lease hereunder shall terminate and be of no further force
or effect.
3.2.1 POSSESSION TENDERED--DEFINED: Possession of the Premises shall
be deemed tendered to Lessee ("Tender of Possession") when (1) the improvements
to be provided by Lessor under this Lease are substantially completed, (2) the
Building utilities are ready for use in the Premises, (3) Lessee has reasonable
access to the Premises, and (4) ten (10) days shall have expired following
advance written notice to Lessee of the occurrence of the matters described in
(1), (2) and (3), above of this paragraph 3.2.1
3.2.2 DELAYS CAUSED BY LESSEE: There shall be no abatement of rent,
and the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under paragraph 3.2, shall be deemed
extended to the extent of any delays caused by acts or omissions of Lessee,
Lessee's agents, employees and contractors.
3.3 EARLY POSSESSION: If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.
3.4 UNCERTAIN COMMENCEMENT: In the event commencement of the Lease term
is defined as the completion of the improvements, Lessee and Lessor shall
execute an amendment to this Lease establishing the date of Tender of Possession
(as defined in paragraph 3.2.1) or the actual taking of possession by Lessee,
whichever first occurs, as the Commencement Date.
4. RENT.
4.1 BASE RENT: Subject to adjustment as hereinafter provided in paragraph
4.3, and except as may be otherwise expressly provided in this Lease, Lessee
shall pay to Lessor the Base Rent of the Premises set forth in paragraph 1.6 of
the Basic Lease Provisions, without offset or deduction. Lessee shall pay
Lessor upon execution hereof the advance Base Rent described in paragraph 1.8 of
the Basic Lease Provisions. Rent for any period during the term hereof which is
for less than one month shall be prorated based upon the actual number of days
of the calendar month involved. Rent shall be payable in lawful money of the
United States to Lessor at the
<PAGE>
address stated herein or to such other persons or at such other places as Lessor
may designate in writing.
4.2 OPERATING EXPENSE INCREASE: Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter
defined, of the amount by which all Operating Expenses, as hereinafter defined,
for each Comparison Year exceeds the amount of all Operating Expenses for the
Base Year, such excess being hereinafter referred to as the "Operating Expense
Increase," in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease, as the
percentage set forth in paragraph 1.10 of the Basic Lease Provisions, which
percentage has been determined by dividing the approximate square footage of the
Premises by the total approximate square footage of the rentable space contained
in the Office Building Project. It is understood and agreed that the square
footage figures set forth in the Basic Lease Provisions are approximations which
Lessor and Lessee agree are reasonable and shall not be subject to revision
except in connection with an actual change in the size of the Premises or a
change in the space available for lease in the Office Building Project.
(b) "Base Year" is defined as the calendar year in which the Lease
term commences.
(d) "Operating Expenses" is defined, for purposes of this Lease, to
include all costs, if any, incurred by Lessor in the exercise of its reasonable
discretion, for:
(i) The operation, repair, maintenance, and replacement, in
neat, clean safe, good order and condition, of the Office Building Project
including but not limited to, the following:
(aa) The Common Areas, including their surfaces,
coverings, decorative items, carpets, drapes and window coverings, and including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, stairways, landscaped areas, irrigation systems, Common Area lighting
facilities, building exteriors and roofs, fences and gates;
(bb) All heating, air conditioning, plumbing, electrical
systems, life safety equipment, telecommunication and other equipment used in
common by, or for the benefit of, lessees or occupants of the Office Building
Project, including elevators and escalators, tenant directories, fire detection
systems including sprinkler system maintenance and repair.
(ii) Trash disposal, janitorial and security services;
(iii) Any other service to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating Expense";
(iv) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof;
<PAGE>
(v) The amount of the real property taxes to be paid by Lessor
under paragraph 10.1 hereof;
(vi) The cost of water, sewer, gas, electricity, and other
publicly mandated services to the Office Building Project;
(vii) Labor, salaries and applicable fringe benefits and costs,
materials, supplies and tools, used in maintaining and/or cleaning the Office
Building Project and accounting and a management fee attributable to the
operation of the Office Building Project;
(viii) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby amortized;
(ix) Replacements of equipment or improvements.
(f) Operating Expenses shall not include any expenses paid by any
lessee directly to third parties, or as to which Lessor is otherwise reimbursed
by any third party, other tenant, or by insurance proceeds.
(g) Lessee's Share of Operating Expense Increase shall be payable by
Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time in advance of Lessee's Share
of the Operating Expense Increase for any Comparison Year, and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each Comparison
Year of the Lease term, on the same day as the Base Rent is due hereunder. In
the event that Lessee pays Lessor's estimate of Lessee's Share of Operating
Expense Increase as aforesaid, Lessor shall deliver to Lessee within sixty (60)
days after the expiration of each Comparison Year a reasonably detailed
statement showing Lessee's Share of the actual Operating Expense Increase
incurred during such year. If Lessee's payments under this paragraph 4.2(e)
during said Comparison Year exceed Lessee's Share as indicated on said
statement, Lessee shall be entitled to credit the amount of such overpayment
against Lessee's Share of Operating Expense Increase next falling due. If
Lessee's payments under this paragraph during said Comparison Year were less
than Lessee's Share as indicated on said statement, Lessee shall pay to Lessor
the amount of the deficiency within ten (10) days after delivery by Lessor to
Lessee of said statement. Lessor and Lessee shall forthwith adjust between them
by cash payment any balance determined to exist with respect to that portion of
the last Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.
4.3 RENT INCREASE.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease Provisions as
security for Lessee's faithful performance of Lessee's obligations hereunder.
If Lessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may use, apply or
retain all or any portion of said deposit for the payment of any rent or other
charge in default for the payment of any other sum to which Lessor may become
obligated by reason of
<PAGE>
Lessee's default, or to compensate Lessor for any loss or damage which Lessor
may suffer thereby. If Lessor so uses or applies all or any portion of said
deposit, Lessee shall within then (10) days after written demand therefor
deposit cash with Lessor in an amount sufficient to restore said deposit to the
full amount then required of Lessee. If the monthly Base Rent shall, from time
to time, increase during the term of this Lease, Lessee shall, at the time of
such increase, deposit with Lessor additional money as a security deposit so
that the total amount of the security deposit held by Lessor shall at all times
bear the same proportion to the then current Base Rent as the initial security
deposit bears to the initial Base Rent set forth in paragraph 1.6 of the Basic
Lease Provisions. Lessor shall not be required to keep said security deposit
separate from its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not heretofore
been applied by Lessor, shall be returned, without payment of interest or other
increment for its use, to Lessee (or, at Lessor's option, to the last assignee,
if any, of Lessee's interest hereunder) at the expiration of the term hereof,
and after Lessee has vacated the Premises. No trust relationship is created
herein between Lessor and Lessee with respect to said Security Deposit.
6. USE.
6.1 USE: The Premises shall be used and occupied only for the purpose set
forth in paragraph 1.4 of the Basic Lease Provisions or any other use which is
reasonably comparable to that use and for no other purpose.
6.2 COMPLIANCE WITH LAW: Lessee shall, at Lessee's expense, promptly
comply with all applicable statutes, ordinances, rules, regulations, orders,
covenants and restrictions of record, and requirements of any fire insurance
underwriters or rating bureaus, now in effect or which may hereafter come into
effect, whether or not they reflect a change in policy from that now existing,
during the term or any part of the term hereof, relating in any manner to the
Premises and the occupation and use by Lessee of the Premises. Lessee shall
conduct its business in a lawful manner and shall not use or permit the use of
the Premises or the Common Areas in any manner that will tend to create waste or
a nuisance or shall tend to disturb other occupants of the Office Building
Project.
6.3 CONDITION OF PREMISES:
(a) Lessor shall deliver the Premises to Lessee in a clean condition
on the Lease Commencement Date (unless Lessee is already in possession) and
Lessor warrants to Lessee that the plumbing, lighting, air conditioning, and
heating system in the Premises shall be in good operating condition. In the
event that it is determined that this warranty has been violated, then it shall
be the obligation of Lessor, after receipt of written notice from Lessee setting
forth with specificity the nature of the violation, to promptly, at Lessor's
sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts
the Premises and the Office Building Project in their condition existing as of
the Lease Commencement Date or the date that Lessee takes possession of the
Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and
<PAGE>
regulations governing and regulating the use of the Premises, and any easements,
covenants or restrictions of record, and accepts this Lease subject thereto and
to all matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that it has satisfied itself by its own independent investigation
that the Premises are suitable for its intended use, and that neither Lessor nor
Lessor's agent or agents has made any representation or warranty as to the
present or future suitability of the Premises, Common Areas, or Office Building
Project for the conduct of Lessee's business.
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1 LESSOR'S OBLIGATIONS: Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof, and common areas, and
the equipment whether used exclusively for the Premises or in common with other
premises, in good condition and repair; provided, however, Lessor shall not be
obligated to paint, repair or replace wall coverings, or to repair or replace
any improvements that are not ordinarily a part of the Building or are above
then Building standards. Except as provided in paragraph 9.5, there shall be no
abatement of rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project or any part
thereof, Lessee expressly waives the benefits of any statute now or hereafter in
effect which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Premises in good order, condition and repair.
7.2 LESSEE'S OBLIGATIONS:
(a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
serves only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear. Lessee shall be responsible for the cost of
painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may, at its option, upon reasonable
notice, elect to have Lessee perform any particular such maintenance or repairs
the cost of which is otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as received,
ordinary wear and tear excepted, clean and free of debris. Any damage or
deterioration of the Premises shall not be deemed ordinary wear and tear if the
same could have been prevented by good maintenance practices by Lessee. Lessee
shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, alterations, furnishings and equipment.
Except as otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings, wall coverings, carpets, wall paneling, ceilings
and plumbing on the Premises and in good operating condition.
<PAGE>
7.3 ALTERATIONS AND ADDITIONS:
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, Utility Installations or repairs in, on or
about the Premises, or the Office Building Project. As used in this paragraph
7.3 the term "Utility Installation" shall mean carpeting, window and wall
coverings, power panels, electrical distribution systems, lighting fixtures, air
conditioning, plumbing, and telephone and telecommunication wiring and
equipment. At the expiration of the term, Lessor may require the removal of any
or all of said alterations, improvements, additions or Utility Installations,
and the restoration of the Premises and the Office Building Project to their
prior condition, at Lessee's expense. Should Lessor permit Lessee to make its
own alterations, improvements, additions or Utility Installations, Lessee shall
use only such contractor as has been expressly approved by Lessor, and Lessor
may require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien
and completion bond in an amount equal to one and one-half times the estimated
cost of such improvements, to insure Lessor against any liability for mechanic's
and materialmen's liens and to insure completion of the work. Should Lessee
make any alterations, improvements, additions or Utility Installations without
the prior approval of Lessor, or use a contractor not expressly approved by
Lessor, Lessor may, at any time during the term of this Lease, require that
Lessee remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility Installations
in or about the Premises or the Office Building Project that Lessee shall desire
to make shall be presented to Lessor in written form, with proposed detailed
plans. If Lessor shall give its consent to Lessee's making such alteration,
improvement, addition or Utility Installation, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from the applicable
governmental agencies, furnishing a copy thereof to Lessor prior to the
commencement of the work, and compliance by Lessee with all conditions of said
permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises by Lessee, and Lessor
shall have the right to post notices on non-responsibility in or on the Premises
or the Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, the Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, the Building or the Office Building
Project, upon the condition that if Lessor shall require, Lessee shall furnish
to Lessor a surety bond satisfactory to Lessor in an amount equal to such
contested lien claim or demand indemnifying Lessor against liability for the
same and holding the Premises, the Building and the Office Building Project free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's reasonable attorney's fees
<PAGE>
and costs in participating in such action if Lessor shall decide it is to
Lessor's best interest so to do.
(e) All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee, which may be made to the Premises by Lessee, including but
not limited to, floor coverings, paneling, doors, drapes, built-ins, moldings,
sound attenuation, and lighting and telephone or communication systems, conduit,
wiring and outlets, shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
Lease term, unless Lessor requires their removal pursuant to paragraph 7.3(a).
Provided Lessee is not in default, notwithstanding the provisions of this
paragraph 7.3(e), Lessee's personal property and equipment, other than that
which is affixed to the Premises so that it cannot be removed without material
damage to the Premises or the Building, and other than Utility Installations,
shall remain the property of Lessee and may be removed by Lessee subject to the
provisions of paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or Utility
Installations.
7.4 UTILITY ADDITIONS: Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, communication systems, and fire protection and detection systems, so
long as such installations do not unreasonably interfere with Lessee's use of
the Premises.
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE--LESSEE: Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Comprehensive
General Liability insurance utilizing an Insurance Services Office standard form
with Broad Form General Liability Endorsement (GL0404), or equivalent, in an
amount of not less than $1,000,000 per occurrence of bodily injury and property
damage combined or in a greater amount as reasonably determined by Lessor and
shall insure Lessee with Lessor as an additional insured against liability
arising out of the use, occupancy or maintenance of the Premises. Compliance
with the above requirement shall not, however, limit the liability of Lessee
hereunder.
8.2 LIABILITY INSURANCE--LESSOR: Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily Injury
and Broad Form Property Damage Insurance, plus coverage against such other risks
Lessor deems advisable from time to time, insuring Lessor, but not Lessee,
against liability arising out of the ownership, use, occupancy or maintenance of
the Office Building Project in an amount not less that ___________ per
occurrence.
8.3 PROPERTY INSURANCE--LESSEE: Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease for the benefit of Lessee,
replacement cost fire and extended coverage insurance, with vandalism and
malicious mischief, sprinkler leakage and
<PAGE>
earthquake sprinkler leakage endorsements, in an amount sufficient to cover not
less that 100% of the full replacement cost, as the same may exist from time to
time, of all of Lessee's personal property, fixtures, equipment and tenant
improvements.
8.4 PROPERTY INSURANCE--LESSOR: Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the Office Building Project Improvements, but not Lessee's personal
property, fixtures, equipment or tenant improvements, in the amount of the full
replacement cost thereof, as the same may exist from time to time, utilizing
Insurance Services Office standard form, or equivalent, providing protection
against all perils included within the classification of fire, extended
coverage, vandalism, malicious mischief, and such other perils as Lessor deems
advisable or may be required by a lender having a lien on the Office Building
Project. In addition, Lessor shall obtain and keep in force, during the term of
this Lease, a policy of rental value insurance covering a period of one year,
with loss payable to Lessor, which insurance shall also cover all Operating
Expenses for said period. Lessee will not be named in any such policies carried
by Lessor and shall have no right to any proceeds therefrom. The policies
required by these paragraphs 8.2 and 8.4 shall contain such deductibles as
Lessor or the aforesaid lender may determine. In the event that the Premises
shall suffer an insured loss as defined in paragraph 9.1(f) hereof, the
deductible amounts under the applicable insurance policies shall be deemed an
Operating Expense. Lessee shall not do or permit to be done anything which
shall invalidate the insurance policies carried by Lessor. Lessee shall pay the
entirety of any increase in the property insurance premium for the Office
Building Project over what it was immediately prior to the commencement of the
term of this Lease if the increase is specified by Lessors insurance carrier as
being caused by the nature of Lessee's occupancy or any act or omission of
Lessee.
8.5 INSURANCE POLICIES: Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be cancellable
or subject to reduction of coverage or other modification except after thirty
(30) days prior written notice to Lessor. Lessee shall, at least thirty (30)
days prior to the expiration of such policies, furnish Lessor with renewals
thereof.
8.6 WAIVER OF SUBROGATION: Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this
Lease shall be endorsed to so provide.
8.7 INDEMNITY: Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and against
any and all claims for damage to the person or property of anyone or any entity
arising from Lessee's use of the Office Building Project, or from the conduct of
Lessee's business or from any activity, work or things done, permitted or
suffered by Lessee in or about the Premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all claims, costs
and expenses arising from any breach or default in the performance of any
obligation on Lessee's part to be
<PAGE>
performed under the terms of this Lease, or arising from any act or omission of
Lessee, or any of Lessee's agents, contractors, employees, or invitees, and from
and against all costs, attorney's fees, expenses and liabilities incurred by
Lessor as the result of any such use, conduct, activity, work, things done,
permitted or suffered, breach default or negligence, and in dealing reasonably
therewith, including but not limited to the defense or pursuit of any claim or
any action or proceeding involved therein; and in case any action or proceeding
be brought against Lessor by reason of any such matter, Lessee upon notice from
Lessor shall defend the same at Lessee's expense by counsel reasonably
satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense.
Lessor need not have first paid nay such claim in order to be so indemnified.
Lessee, as a material part of the consideration to Lessor, hereby assumes all
risk of damage to property of Lessee or injury to persons, in, upon or about the
Office Building Project arising from any cause and Lessee hereby waives all
claims in respect thereof against Lessor.
8.8 EXEMPTION OF LESSOR FROM LIABILITY: Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from theft,
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible, Lessor shall not be liable
for any damages arising from any act or neglect of any other lessee, occupant or
user of the Office Building Project, nor from the failure of Lessor to enforce
the provisions of any other lease of any other lessee of the Office Building
Project.
8.9 NO REPRESENTATION OF ADEQUATE COVERAGE: Lessor makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS:
(a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.
(b) "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is less than __________ of the then Replacement Cost of the
building.
<PAGE>
(c) "Premises Building Total Destruction" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is ___________ or more of the then Replacement Cost of the
Building.
(d) "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.
(e) "Office Building Project Building Total Destruction" shall mean
if the Office Building Project Buildings are damaged or destroyed to the extent
that the cost of repair is _________ or more of the then Replacement Cost of the
Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was caused
by an event required to be covered by the insurance described in paragraph 8.
The fact that an Insured Loss has a deductible amount shall not make the loss an
uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to be
spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other that those installed by Lessor at Lessee's expense.
9.2 PREMISES DAMAGE; PREMISES BUILDING PARTIAL DAMAGE:
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises Damage
or Premises Building Partial Damage, then Lessor shall, as soon as reasonably
possible and to the extent the required materials and labor are readily
available through usual commercial channels, at Lessor's expense, repair such
damage (but not Lessee's fixtures, equipment or tenant improvements originally
paid for by Lessee) to its condition existing at the time of the damage, and
this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is not
an Insured Loss and which falls within the classification of Premises Damage or
Premises Building Partial Damage, unless caused by a negligent or willful act of
Lessee in which event Lessee shall make the repairs at Lessee's expense), which
damage prevents Lessee from making any substantial use of the Premises, Lessor
may at Lessor's option either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee within thirty (30) days
after the date of the occurrence of such damage of Lessor's intention to cancel
and terminate this Lease as of the date of the occurrence of such damage, in
which event this Lease shall terminate as of the date of the occurrence of such
damage.
9.3 PREMISES BUILDING TOTAL DESTRUCTION; OFFICE BUILDING PROJECT TOTAL
DESTRUCTION: Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage, whether or not it is an
Insured Loss, which falls into the classifications of either (i) Premises
Building Total Destruction or (ii) Office Building Project
<PAGE>
Total Destruction, then Lessor may at Lessor's option either (i) repair such
damage or destruction as soon as reasonably possible at Lessor's expense (to the
extent the required materials are readily available through usual commercial
channels) to its conditions existing at the time of the damage, but not Lessee's
fixtures, equipment or tenant improvements, and this Lease shall continue in
full force and effect, or (ii) give written notice to Lessee within thirty (30)
days after the date of occurrence of such damage of Lessor's intention to cancel
and terminate this Lease, in which case this Lease shall terminate as of the
date of the occurrence of such damage.
9.4 DAMAGE NEAR END OF TERM:
(a) Subject to paragraph 9.4(b), if at any time during the last
twelve (12) months of the term of this Lease there is substantial damage to the
Premises, Lessor may at Lessor's option cancel and terminate this Lease as of
the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which said option may
be exercised has not yet expired, Lessee shall exercise such option, if it is to
be exercised at all, no later than twenty (20) days after the occurrence of an
Insured Loss falling within the classification of Premises Damage during the
last twelve (12) months of the term of this Lease. If Lessee duly exercises
such option during said twenty (20) day period, Lessor shall, at Lessor's
expense, repair such damage, but not Lessee's fixtures, equipment or tenant
improvements, as soon as reasonably possible and this Lease shall continue in
full force and effect. If Lessee fails to exercise such option during said
twenty (20) day period, then Lessor may at Lessor's option terminate and cancel
this Lease as of the expiration of said twenty (20) day period by giving written
notice to Lessee of Lessor's election to do so within ten (10) days after the
expiration of said twenty (20) day period, notwithstanding any term or provision
in the grant of option to the contrary.
9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES:
(a) In the event Lessor repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of the Premises are
not usable (including loss of use due to loss of access or essential services),
the rent payable hereunder (including Lessee's Share of Operating Expense
Increase) for the period during which such damage, repair or restoration
continues shall be abated, provided (1) the damage was not the result of the
negligence of Lessee, and (2) such abatement shall only be to the extent the
operation and profitability of Lessee's business as operated from the Premises
is adversely affected. Except for said abatement of rent, if any, Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises or
the Building under the provisions of this Paragraph 9 and shall not commence
such repair or restoration within ninety (90) days after such occurrence, or if
Lessor shall not complete the restoration and repair within six (6) months after
such occurrence, Lessee may at Lessee's option
<PAGE>
cancel and terminate this Lease by giving Lessor written notice of Lessee's
election to do so at any time prior to the commencement or completion,
respectively, of such repair or restoration. In such event this Lease shall
terminate as of the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any
such restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.
9.6 TERMINATION--ADVANCE PAYMENTS: Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall,
in addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.7 WAIVER: Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES: Lessor shall pay the real property tax, as defined
in paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.
10.2 ADDITIONAL IMPROVEMENTS: Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 DEFINITION OF "REAL PROPERTY TAX": As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Office Building Project or any portion thereof
by any authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage or other improvement district thereof, as against any
legal or equitable interest of Lessor in the Office Building Project or in any
portion thereof, as against Lessor's right to rent or other income therefrom,
and as against Lessor's business of leasing the Office Building Project. The
term "real property tax" shall also include any tax, fee, levy, assessment or
charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of "real
property tax," or (ii) the nature of which was hereinbefore included within the
definition of "real property tax," or (iii) which is imposed for a service or
right not charged prior to June 1, 1978, or, if previously charged, has been
increased since June 1, 1978, or
<PAGE>
(iv) which is imposed as a result of a change in ownership, as defined by
applicable local statutes for property tax purposes, of the Office Building
Project or which is added to a tax or charge hereinbefore included within the
definition of real property tax by reason of such change of ownership, or (v)
which is imposed by reason of this transaction, any modifications or changes
hereto, or any transfers hereof.
10.4 JOINT ASSESSMENT: If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.5 PERSONAL PROPERTY TAXES:
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessee's property.
11. UTILITIES.
11.1 SERVICES PROVIDED BY LESSOR: Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines, water
for reasonable and normal drinking and lavatory use, and replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures.
11.2 SERVICES EXCLUSIVE TO LESSEE: Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately
metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's
Share or a reasonable proportion to be determined by Lessor of all charges
jointly metered with other premises in the Building.
11.3 HOURS OF SERVICE: Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours as
may hereafter be set forth. Utilities and services required at other times
shall be subject to advance request and reimbursement by Lessee to Lessor of the
cost thereof.
11.4 EXCESS USAGE BY LESSEE: Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Lessor shall require
Lessee to reimburse Lessor for
<PAGE>
any excess expenses or costs that may arise out of a breach of this subparagraph
by Lessee. Lessor may, in its sole discretion, install at Lessee's expense
supplemental equipment and/or separate metering applicable to Lessee's excess
usage or loading.
11.5 INTERRUPTIONS: There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED: Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall
include the transfer or transfers aggregating: (a) if Lessee is a corporation,
more than twenty-five percent (25%) of the voting stock of such corporation, or
(b) if Lessee is a partnership, more that twenty-five percent (25%) of the
profit and loss participation is such partnership.
12.3 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING:
(a) Regardless of Lessor's consent, no assignment or subletting
shall release Lessee of Lessee's obligations hereunder or alter the primary
liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expense increase, and to perform all other
obligations to be performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a waiver
of estoppel of Lessor's right to exercise its remedies for the breach of any of
the terms or conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto
shall not be effective unless said guarantors give their written consent to such
sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without
<PAGE>
obtaining their consent and such action shall not relieve such persons from
liability under this Lease or said sublease; however, such persons shall not be
responsible to the extent any such amendment or modification enlarges or
increases the obligations of the Lessee or sublessee under this Lease or such
sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or anyone else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied
upon by Lessor in giving its consent to an assignment or subletting was
materially false shall, at Lessor's election, render Lessor's said consent null
and void.
12.4 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING: Regardless
of Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or part of the Premises and shall be deemed included
in all subleases under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and apply
same toward Lessee's obligations under this Lease; provided, however, that until
a default shall occur in the performance of Lessee's obligations under this
Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee or Lessor for any such rents
so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into any sublease,
Lessee shall use only such form of sublessee as is satisfactory to Lessor, and
once approved by Lessor, such sublease shall not be changed or modified without
Lessor's prior written consent. Any sublease shall, by reason of entering into
a sublease under this Lease, be deemed, for the benefit of Lessor, to have
<PAGE>
assumed and agreed to conform and comply with each and every obligation herein
to be performed by Lessee other that such obligations as are contrary to or
inconsistent with provisions contained in a sublease to which Lessor has
expressly consented in writing.
(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any obligation to
do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such sublease from the time of
the exercise of said option to the termination of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to Lessee or for any other prior defaults of Lessee under
such sublease.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset from
and against Lessee for any such defaults cured by the sublessee.
12.5 LESSOR'S EXPENSES: In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys', architects', engineers' or other
consultants' fees.
12.6 CONDITIONS TO CONSENT: Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the proposed
assignee or sublessee shall conduct a business on the Premises of a quality
substantially equal to that of Lessee and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee or sublessee be at least as financially responsible as Lessee was
expected to be at the time of the execution of this Lease or of such assignment
or subletting, whichever is greater.
13. DEFAULT; REMEDIES.
13.1 DEFAULT: The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee. Vacation
of the Premises shall include the failure to occupy the Premises for a
continuous period of sixty (60) days or more, whether or not the rent is paid.
(b) The breach of Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b)
<PAGE>
(subordination), 33 (auctions), or 41.1 (easements), all of which are hereby
deemed to be material, non-curable defaults without the necessity of any notice
by Lessor to Lessee thereof.
(c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, there such
failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessors serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(d) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee other than those referenced in subparagraphs (b) and (c), above, where
such failure shall continue for a period of thirty (30) days after written
notice thereof from Lessor to Lessee; provided, however, that if the nature of
Lessee's noncompliance is such that more than thirty (30) days are reasonably
required for its cure, then Lessee shall not b deemed to be in default if Lessee
commenced such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion. To the extent permitted by law, such thirty
(30) day notice shall constitute the sole and exclusive notice required to be
given to Lessee under applicable Unlawful Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors; (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. (S)101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within sixty (60)
days; (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee' assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1(e) is contrary to
any applicable law, such provision shall be of no force or effect.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was materially false.
13.2 REMEDIES: In the event of any material default or breach of this
Lease by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee all damages incurred
by Lessor by reason of Lessee's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and any real estates commission actually paid; the worth at the time of award by
the court having jurisdiction
<PAGE>
thereof of the amount by which the unpaid rent for the balance of the term after
the time of such award exceeds the amount of such rental loss for the same
period that Lessee proves could be reasonably avoided; that portion of the
leasing commission paid by Lessor pursuant to paragraph 15 applicable to the
unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have vacated or abandoned
the Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 DEFAULT BY LESSOR: Lessors shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently pursues the same to completion.
13.4 LATE CHARGES: Lessee hereby acknowledges that late payment by Lessee
to Lessor of Base Rent, Lessee's Share of Operating Expense increase or other
sums due hereunder will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting charges, and
late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Office Building Project. Accordingly, if any
installment of Base Rent, Operating Expense increase, or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within ten (10) days
after such amount shall be due, then, without any requirement for notice to
Lessee, Lessee shall pay to Lessor a late charge equal to 6% of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's default with respect to such overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies granted hereunder.
14. CONDEMNATION. If the Premises or any portion thereof or the Office
Building Project are taken under the power of eminent domain, or sold under the
threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first occurs;
provided that if so much of the Premises or the Office Building Project are
taken by such condemnation as would substantially and adversely affect the
operation and profitability of Lessee's business conducted from the Premises,
Lessee shall have the option, to be exercised only in writing within
<PAGE>
STANDARD OFFICE LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
ADDENDUM
(PARAGRAPH NUMBERS REFER TO PRINTED LEASE)
This Addendum is an integral part of the Lease, and, in the event of any
inconsistency between this Addendum and the Lease Form, the terms of this
Addendum shall control. The sections of this Addendum set forth below are
numbered to correspond to the Paragraph numbers of the Lease Form for
convenience of reference only and such numbering should not be construed as a
limitation on the scope or effect of such section of this Addendum, and each
such section of this Addendum shall be deemed to modify all portions of the
Lease Form or the First Addendum to which such section has relevance. Unless
otherwise defined, all terms used in this Addendum shall have the same meanings
as given them in the Lease Form, and where stated the addendum is meant to
supplement and not replace.
1.5 The premises herein being leased is presently under lease to Microsoft
Corporation. Pursuant to the terms of said lease the Landlord, Ray Corporation
has given notice of lease termination by a letter dated December 19,1997 and
sent to Microsoft Corporation by certified mail on that date, which was received
no later than December 23, 1997. In accordance with the terms of the lease,
that lease will terminate 60 days from the date of said notice. Ray Corporation
will use its best efforts to terminate or to reach an agreement with Microsoft
terminating the lease as soon as possible, after the signing of this lease
instrument. Ray Corporation will specifically request Microsoft to vacate the
premises (except for furniture) before February 1, 1998. This lease will
commence on February 1,1998 or, if later, on the date possession is obtained by
Lessor. If Lessor is unable to deliver possession of the premises by April 1,
1998 Lessee may terminate the lease by giving written notice by April 5, 1998.
If notice of termination is given each party shall be released of all
liabilities under this lease.
1.9 If Lessor calls upon the irrevocable letter of credit Lessor agrees
that the portion of the letter of credit payment not utilized by it for lease
purposes shall be kept in a separate bank account and said unused funds will be
refunded to Lessee when a new $175,000 irrevocable line of credit is given to
Lessor as a replacement. (Addition only)
4.2(c) "Comparison Year" is defined as each calendar year during the term
of this lease subsequent to the base year.
4.2(d)(viii) ... over a five (5) year period. (Addition only)
4.2(d)(ix) ... amortized over a five (5) year period unless the dollar
amount is small enough to be written off for Federal Income Tax purposes in the
year in which the money was expended, in which event it will be expensed.
(Addition only)
4.2(e) Operating expenses shall not include the costs incurred by Lessor
to bring the building into conformity with required seismic upgrading. Lessee
acknowledges that the seismic upgrading is likely to cause minor interference
with Lessee's quiet enjoyment of the premises.
<PAGE>
Lessor will use its best efforts to keep the disruption caused by the seismic
upgrading to a minimum, but will have no liability to Lessee for said
disruption. If the seismic upgrading prohibits the full occupancy of the leased
premises by Lessee for more than thirty (30) consecutive days Lessee shall have
the right to terminate the lease by giving Lessor a thirty (30) day notice.
Lessor intends to install or is in the process of installing an electronic
card reader system for building access and premises access. Lessor is also in
the process of installing an electronic current
***PAGE 2 MISSING***
if said assessment is reasonable, said formula will then be used to
calculate the additional rent, in addition to the actual additional expenses,
for the balance of the term. This includes Lessee's right to audit said costs
at any reasonable time during the term within one year after assessment at
Lessee's cost. Nothing herein contained shall prohibit Lessor from making these
additional charges during the first year of the lease. (Addition only)
12. Section 12 relating to Assignment and Subletting is supplemented by
adding the following items to said section:
(a) As used in this section subletting or assignment also includes
occupancy.
(b) If Lessee desires Lessor to consider a particular person or
entity for possible subletting he must first give Lessor in writing the
particulars of the proposed assignment, transfer or subletting including: (i)
the name and addresses of the proposed assignee or subtenant and its
relationship, if any, with the person requesting Lessor's consent; (ii) the
terms and conditions of the proposed assignment and subletting; (iii) the nature
and character of the business of the proposed assignee or subtenant; and (iv)
the proposed subtenants financial statements. Lessor shall then have twenty (20)
days to exercise its option to terminate the lease after receipt of written
notice of intent to sublet or assign and the information above required. The
exercise of said option shall be at Lessor's sole discretion. Lessor shall
exercise this option by giving written notice of the same to Lessee. Lessee
shall have five (5) days after receiving notice of Lessee's exercising of this
option to withdraw its request to sublet the premises which withdraw will cancel
Lessor's termination of the lease. If Lessor exercises said option the lease
shall terminate at the end of sixty (60) days from the date of the exercise of
the option. Said termination will place upon the Lessor and the Lessee the same
obligations as if said date were the normal termination date of the lease. Upon
Lessor's demand Lessee shall be responsible for the removal of any alterations
additions or improvements installed by Lessor or Lessee in or to these premises
at the request of Lessee. In the event that Lessor exercises said option Lessee
shall also reimburse Lessor for all unamortized legal, lease sales costs and
premises remodeling costs incurred regarding this lease if any.
(c) If Lessor accepts the proposed sublease or assignment, a part of
the consideration for said monthly rental of the premises shall be that Lessor
shall be entitled to receive and shall receive 80% of all gross profits (fiat
fee, increase in rentals or other similar
<PAGE>
consideration) received or to be received by Lessee from said assignment
transfer sublet or occupation without offset.
12.1 The sub-paragraph (a) of 12.1 shall be interpreted to mean a change
by sale or transfer of (i) a 50% interest in the voting stock of Lessee. Lessee
may not make a significant or substantial change in the use of the space, from
that permissible under this lease, without such a change creating a default.
(25% is deleted and 50% is inserted in this sub-paragraph.) The issuance of new
stock does not change the control of Lessee for the purpose of this sub-
paragraph. (Addition only)
13.4 The late charge of six percent (6%) of such over-due amount is
deleted and a late charge of $80.00 per month for each month or fraction thereof
that such over due amount is delinquent. (Substitution of a flat rate instead of
percent.)
17. LESSOR'S LIABILITY. "Lessor" as used herein shall mean the Ray
Corporation, a California Corporation, holder of the master lease on the
property and building situated at 181 Fremont Street, San Francisco, California.
(Substitution of paragraph.)
19. Unless otherwise limited by this paragraph the interest payable on
past due obligations shall be ten percent (10%) per annum. (Addition only)
26. HOLDING OVER. If Lessee holds possession of the premises after the
term of this lease, Lessee shall, at the option of Lessor, to be exercised by
Lessor's giving written notice to Lessee and not otherwise, become a tenant from
month to month upon the terms and conditions herein specified, so far as
applicable, at a monthly rental stated by Lessor in the written notice, or if no
rental is stated in the amount of the last month's rent, together with
applicable escalations of rent for increases in taxes and building services,
etc., which have occurred, payable in advance, in lawful money, and shall
continue to be such tenant until thirty (30) days after a written notice is
given of intention to terminate such monthly tenancy. Unless Lessor shall
exercise the option hereby given him, Lessee shall be a tenant at sufferance
only, whether or not Lessor shall accept any rent from Lessee while Lessee is so
holding over.
39. Lessee shall have the right to exercise an option to extend the term
of this lease for an additional 5 year period under the same terms and
conditions except for the rent which shall be adjusted to the fair market value
as of the date of the commencement of the extended term. The option notice must
be in writing and given to Lessor between twelve (12) months to six months prior
to the termination of the original term. If the parties are able to agree on
the fair market value for the extended term they shall immediately execute an
amendment to the lease stating the base rent. If the parties are unable to
agree on a minimum monthly base rent for the extended term, within sixty (60)
days of the date of notice, the fair market value will be decided by a single
arbitrator appointed by the American Arbitration Association, San Francisco,
California and arbitrated in accordance with their Commercial Arbitration Rules.
Arbitrator may award costs of arbitration to the prevailing party including
attorney fees. This amplifies but does not supersede the printed section
referred to (39), unless in direct conflict.
-3-
<PAGE>
Lessee shall also have the option of the right of first refusal (two
separate rights and premises) to lease the remainder of the leased first floor
space not covered by this lease and the second floor of the building when the
same becomes available for lease. The present Lessee of the occupied space
shall be given the opportunity to re-lease their existing premises before this
option of the right of first refusal is exercisable. Lessee's right of first
refusal is the right to enter into a lease with Lessor, for said premises within
30 days after Lessor gives notice to Lessee that said space will be available
for lease. If Lessor and Lessee do not enter into a signed lease for said space
during said 30 day period, rent to be market rent, then Lessor is free to lease
the premises to anyone and the option for a right of first refusal is terminated
as to those premises. (This amplifies but does not supersede the printed
paragraphs referred to.)
51. TRANSFER OF LESSOR'S INTEREST. Lessor has the right to transfer all
or part of its interest in the building and real property and in this lease. On
such transfer Lessor shall automatically be released from all liability accruing
under this lease, and Lessee shall look solely to that transferee for the
performance of Lessor's obligations under this lease after the date of transfer.
Lessee shall continue to look to Lessor for past lease obligations if written
notice of Lessor's default was given to Lessor prior to the date of transfer,
but only as to those items of default contained in said notice. Lessor shall
deliver or credit Lessee's security deposit to Lessor's successor in interest in
the premises and thereupon is relieved from further responsibility with respect
to said security deposit. Lessor may assign its interest in this lease to a
mortgage lender as additional security this assignment shall not release Lessor
from its obligations under this lease, and Lessee shall continue to look to
Lessor for performance of its obligations under this lease.
If Lessor or the owner of the property sells or transfers all of its
interest in the building and real property to a non-related third party or
entity, the new owner may after the third anniversary of this lease or within
sixty (60) days of the date of the closing of the transfer, whichever event is
latter in period of time, have the right to cancel and terminate this lease
before the expiration of its original term or any extended term by giving
written notice to Lessee within ninety (90) days of said date and by giving to
Lessee six (6) months written notice of said cancellation or termination of this
lease.
If the sale or transfer of the real property pursuant to this paragraph
results in a tax increase which will raise Lessor's rent by five (5%) percent or
more, Lessee may terminate the lease within thirty (30) days of its determining
the amount of the projected tax increase by giving written notice to the new
Lessor of its election to terminate the lease on the sixtieth (60th) day after
the date of said notice
If this lease is terminated pursuant to the provisions of this article it
shall be null and void as of the termination date set forth in Transferee's
notice of termination or as of the date Lessee actually surrenders possession of
the leased premises to Transferee whichever is later. Before that time the
parties shall be bound by all the terms covenants and conditions of this lease.
52. Lessor does not warrant compliance of the entire space with
requirements of the Americans With Disabilities Act. The premises are rented in
an "as-is" condition.
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53. Lessee agrees that in addition to all other lease charges it will pay
an additional $10,000 for the installation of an electronic card reader system
controlling access to the building and to Lessee's individual premises provided
that said $10,000 does not exceed 30% of the cost to Lessor of said installation
for the entire building. Lessee's obligation will be the lesser of $10,000 or
30% of the cost of said installation. In addition, and as for additional rent,
Lessee agrees to pay its proportionate share (30%) of the installation of a
meter system which will meter the delivery of heat and/or air and electricity to
the premises.
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RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
Date: ______________________________
By and Between __________________________________________________________
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in
good faith judges to be a threat to the safety, reputation, or property of the
Office Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Office
Building Project.
4. Lessee shall not keep animals or birds within the Office Building
Project, and shall not bring bicycles, motorcycles or other vehicles into areas
not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts.
7. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the
premises or Office Building Project.
9. Lessee shall not suffer or permit any thing in or around the Premises
or Building that causes excessive vibration or floor loading in any part of the
Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or
out of the building only with the Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
Lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services or work
to be performed in the Building, except as approved by Lessor.
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12. Lessor reserves the right to close and lock the Building on Saturdays,
Sundays and legal holidays, and on other days between the hours of _____ P.M.
and ____ A.M. of the following day. If Lessee uses the Premises during such
periods, Lessee shall be responsible for security locking any doors it may have
opened for entry.
13. Lessee shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used by
Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
17. Lessee shall not use any method of heating or air conditioning other
than as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking
or food preparation.
20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall to
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to keep
its Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants. Lessee
agrees to abide by these and such rules and regulations.
4(a) Living plants will be allowed for only decorative use in
offices. Plants when allowed must be handled and cared for in a manner to
prevent soiling, water damage, or other damage of any kind to the floor covering
or any part of the premises or the common areas and prevent any nuisance.
8(a) This included nails, screws or holders placed into the
partitions, woodwork or planters.
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10(a) No furniture, freight or equipment of any kind, including any
supplies which weigh over 100 pounds or any item which requires the use of a
handtruck or other equipment which would roll over the building carpets, shall
be brought into or removed from the building without the prior consent of Lessor
or Lessor's agent. If Lessee hires a mover for moving equipment or furniture in
or out of the premises all such moving, unless specifically exempted in writing
by Lessor, must be scheduled during non office ours (i.e. after 5:30 p.m. or on
weekends or holidays). Lessee must give Lessor five (5) days written notice
prior to such move. Lessee shall cause the company doing the moving to contact
the building office at least ten (10) days in advance of the move so that the
moving company will be apprised of the building requirements which include
providing written evidence of adequate bonding and proper insurance.
13(a) If Lessee or Lessee's employees or other person having
possession of building keys to Lessee's action shall lose any said building key
or fail to return all of said keys at the termination of the lease. Lessor and
Lessor's sole discretion may cause the building lock to be changed for the
security of the building in which event Lessee shall be responsible for the cost
of changing said lock and making new keys for all the tenants of the building.
16(a) There are no smoking areas in or about the premises.
19(a) Lodging includes over night sleeping.
24. Lessee shall see that the windows, transoms and doors of the premises
are closed and securely locked before leaving the building and must observe
strict care not to leave windows open when it rains. Lessee shall exercise
extraordinary care and caution that all water faucets or other water apparatus
are entirely shut off before Lessee or Lessee's employees leave the building,
and that all electricity, gas or air conditioning shall likewise be carefully
shut off so as to prevent waste or damage, and for any default or carelessness
Lessee shall make good all injuries or damages sustained by Lessor or by other
tenants or occupants of the building.
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EXHIBIT 10.12
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated December 30, 1997 by and
between COMDISCO, INC. ("Lessor") and FlyCast Communications Corporation
("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. PROPERTY LEASED.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. TERM.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. RENT AND PAYMENT.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment is Lessee is not then in default. No interest
will be paid on the Advance.
4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES.
4.1 SELECTION. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee
that, so long as Lessee is not in default, Lessor will not disturb Lessee's
quiet and peaceful possession, and unrestricted use of the Equipment. To the
extent permitted by the manufacturer, Lessor assigns to Lessee during the term
of the Summary Equipment Schedule any manufacturer's warranties for the
Equipment. LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT
OR ITS FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any
liability, claim, loss, damage or expense of any kind (including strict
liability in tort) caused by the Equipment except for any loss or damage caused
by the willful misconduct or negligent acts of Lessor. In no event is Lessor
responsible for special, incidental or consequential damages.
5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT.
5.1 TITLE. Lessee holds the Equipment subject and subordinate to the
rights of the Owner, Lessor, any Assignee and any Secured Party. Lessee
authorizes Lessor, as Lessee's agent, and at Lessor's expense, to prepare,
execute and file in Lessee's name precautionary Uniform Commercial Code
financing statements showing the interest of the Owner, Lessor, and any Assignee
or Secured Party in the Equipment and to insert serial numbers in Summary
Equipment Schedules as appropriate. Lessee will, at its expense, keep the
Equipment free and clear from any liens or encumbrances of any kind (except any
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caused by Lessor) and will indemnify and hold the Owner, Lessor, any Assignee
and Secured Party harmless from and against any loss caused by Lessee's failure
to do so, except where such is caused by Lessor.
5.2 RELOCATION OR SUBLEASE. Upon prior written notice, Lessee may
relocate Equipment to any location within the continental United States provided
(i) the Equipment will not be used by an entity exempt from federal income tax,
and (ii) all additional costs (including any administrative fees, additional
taxes and insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor
and the Secured Party. Such consent to sublease will be granted if: (i) Lessee
meets the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations
under this Master Lease and the relevant Schedule.
5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule have
been fixed by Lessor in order to permit Lessor to sell and/or assign or transfer
its interest or grant a security interest in each Schedule and/or the Equipment
to a Secure Party or Assignee. In that event, the term Lessor will mean the
Assignee and any Secured Party. However, any assignment, sale, or other
transfer by Lessor will not relieve Lessor of its obligations to Lessee and will
not materially change Lessee's duties or materially increase the burdens or
risks imposed on Lessee. The Lessee consents to and will acknowledge such
assignments in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's
rights, but will not be obligated to perform any of the obligations of Lessor.
The Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and the
Secured Party continues to receive all Rent payable under the Schedule;
(b) Lessee will pay all Rent and all other amounts payable to the
Secured Party despite any defense or claim which it has against Lessor. Lessee
reserves its right to have recourse directly against Lessor for any defense or
claim; and
(c) Subject to and without impairment of Lessee's leasehold rights in
the Equipment, Lessee holds the Equipment for the Secured Party to the extent of
the Secured Party's rights in that Equipment.
6. NET LEASE; TAXES AND FEES.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease.
Lessee's obligation to pay Rent and all other amounts due hereunder is absolute
and unconditional and is not subject to any abatement, reduction, set-off,
defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever.
6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for all
taxes, fees or any other charges (together with any related interest or
penalties not arising from the negligence of Lessor) accrued for or arising
during the term of each Summary Equipment Schedule against Lessor, Lessee or the
Equipment by any governmental authority (except only Federal, state, local and
franchise taxes on the capital or the net income of Lessor). Lessor will file
all personal property tax returns for the Equipment
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and pay all such property taxes due. Lessee will reimburse Lessor for property
taxes within thirty (30) days of receipt of an invoice.
7. CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR.
7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until re-certification has been
obtained.
7.2 INSPECTION BY LESSOR. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
lessor for inspection.
8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents,
warrants and covenants that with respect to the Master Lease and each Schedule
executed hereunder:
(a) The Lessee is a corporation duly organized and validly existing
in good standing under the laws of the jurisdiction of its incorporation, is
duly qualified to do business in each jurisdiction (including the jurisdiction
whom the Equipment is, or is to be, located) where its ownership or lease of
property or the conduct of its business requires such qualification, except for
where such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and
each Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which It is bound, and the Master Lease and each Schedule
constitute legal, valid and binding agreements of the Lessee, enforceable in
accordance with their terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and rules of law
concerning equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending
or, to the knowledge of the Lessee, threatened against or affecting the Lessee
in any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by
the Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute
or contingent (individually or in the aggregate) except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
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business, and which have not been, In any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns,
possesses, has access to, or can become licensed on reasonable terms under all
patents, patent applications, trademarks, trade names, inventions, franchises,
licenses, permits, computer software and copyrights necessary for the operations
of Its business as now conducted, with no known infringement of, or conflict
with, the rights of others.
(g) All material contracts, agreements and instruments to which the
Lessee is a party are in full force and effect in all material respects, and are
valid, binding and enforceable by the Lessee in accordance with their respect
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally, and rules of law concerning
equitable remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. INDEMNITY.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on Equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each
item of Equipment in an amount not less than the Casualty Value. All policies
for such insurance will name the Lessor and any Secured Party as additional
insured and as loss payee and will provide for
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at least thirty (30) days prior written notice to the Lessor of cancellation or
expiration, and will insure Lessors interests regardless of any breach or
violation by Lessee of any representation, warranty or condition contained in
such policies and will be primary without right of contribution from any
insurance effected by Lessor. Upon the execution of any Schedule, the Lessee
will furnish appropriate evidence of such insurance acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee
when due if that failure continues for five (5) business days after written
notice; or
(b) Lessee's failure to perform any other term or condition of the
Schedule or the material inaccuracy of any representation or warranty made by
the Lessee in the Schedule or in any document or certificate furnished to the
Lessor hereunder if that failure or inaccuracy continues for ten (10) business
days after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the
failure by Lessee to pay its debts when due, the insolvency of Lessee, the
filing by Lessee or the filing against Lessee of any petition under any
bankruptcy or insolvency law or for the appointment of a trustee or other
officer with similar powers, the adjudication of Lessee as insolvent, the
liquidation of Lessee, or the taking of any action for the purpose of the
foregoing; or
(d) The occurrence of an Event of Default under any Schedule,
Summary Equipment Schedule or other agreement between Lessee and Lessor or its
Assignee or Secured Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's penalty of the provisions of the applicable
Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including
Default Costs;
(c) with notice and demand, recover all sums due and accelerate and
recover the present value of the remaining payment stream of all Rent due under
the defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's
security requirements, Lessor may enter on Lessee's premises to remove and
repossess the Equipment without being liable to Lessee for damages due to the
repossession, except these resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
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(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by
law, are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of
Section 13.2, Lessor will use its best efforts in accordance with its normal
business procedures (and without obligation to give any priority to such
Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET FORTH
IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY
STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY
ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or
otherwise dispose of all or any part of the Equipment at a public or private
sale for cash or credit with the privilege of purchasing the Equipment. The
proceeds from any sale, lease or other disposition of the Equipment are defined
as either:
(a) if sold or otherwise disposed of, the cash proceeds less the
Fair Market Value of the Equipment at the expiration of the Initial Term less
the Default Costs; or
(b) if leased, the present value (discounted at three percent (3%)
over the U.S. Treasury Notes of comparable maturity to the term of the release)
of the rentals for a term not to exceed the Initial Term less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums
due to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor
may recover the amount by which the proceeds are less than the liquidated
damages and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
14.1 BOARD ATTENDANCE. Upon invitation of Lessee, one representative of
Lessor will have the right to attend Lessee's corporate Board of Directors
meetings and Lessee will give Lessor reasonable notice in advance of any special
Board of Directors meeting, which notice will provide an agenda of the subject
matter to be discussed at such board meeting. Lessee will provide Lessor with a
certified copy of the minutes of each Board of Directors meeting within thirty
(30) days following the date of such meeting held during the term of this Master
Lease.
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month
(and in any event within thirty (30) days), Lessee will provide to Lessor the
same information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
Information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee,
Lessor will not be obligated to lease any Equipment which would have a
Commencement Date after said notice if (i) Lessee is in default under this
Master Lease or any Schedule; (ii) Lessee is in default under any loan
agreement, the result of which would allow the tender or any secured party to
demand immediate payment of any material indebtedness; (iii) there is a material
adverse change in Lessee's credit standing; or (iv) Lessor
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determines (in reasonable good faith) that Lessee will be unable to perform its
obligations und er this Master Lease or any Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any
proposed Merger at least sixty (60) days prior to the closing date. Lessor may,
in its discretion, either (i) consent to the assignment of the Master Lease and
all relevant Schedules to the successor entity, or (ii) terminate the Lease and
all relevant Schedules. If Lessor elects to consent to the assignment, Lessee
and its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and
Summary Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to
constitute a waive of compliance with any representation, warranty or covenant
contained in this Master Lease or a Schedule. The Waiver by Lessor or Lessee of
a breach of any provision of this Master Lease or a Schedule will not operate or
be construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the
benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR
OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but
not limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party
by the other party will be given in writing and deemed received upon the earlier
of (1) actual receipt or (2) three days after mailing if mailed postage prepaid
by regular or airmail to Lessor (to the attention of the "Comdisco Venture
Group") or Lessee, at the address set out the Schedule or (3) one day after it
is sent by courier or (4) on the same day as sent facsimile transmission,
provided that the original is sent by personal delivery or mail by the sending
party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL
HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE
GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master
Lease or any Schedule is for any reason held invalid, illegal or unenforceable,
the remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid legal and enforceable provision that is closest to the
original intention of the parties.
-7-
<PAGE>
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in
any number of counterparts, each of which will be deemed an original, but all
such counterparts together constitute one and the same instrument. If Lessor
grants a security interest in all or any part of a Schedule, the Equipment or
sums payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products
which will at all times remain the properly of the owner of the Licensed
Products. A license from the owner may be required and it is Lessee's
responsibility to obtain any required license before the use of the Licensed
Products. Lessee agrees to treat the Licensed Products as confidential
information of the owner, to observe all copyright restrictions, and not to
reproduce or sell the Licensed Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master
Lease, provide Lessor with a secretary's certificate of incumbency and
authority. Upon the execution of each Schedule with a purchase price in excess
of $1,000,000, Lessee will provide Lessor with an opinion from Lessee's counsel
in a form acceptable to Lessor regarding the representations and warranties in
Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with
the other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be
in a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby
agrees that Lessor shall not, by virtue of its entering into this Master Lease,
be required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS.
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution
-------
of each Schedule.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights
--------
as owner and Lessor of Equipment.
CASUALTY LOSS - means the irreparable loss or destruction of Equipment.
-------------
CASUALTY VALUE - means the greater of the aggregate Rent remaining to be
--------------
paid for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
COMMENCEMENT DATE - is defined in each Schedule.
-----------------
DEFAULT COSTS - means reasonable attorney's fees and remarketing costs
-------------
resulting from a Lessee default or Lessor's enforcement of its remedies.
DELIVERY DATE - means date of delivery of Inventory Equipment to Lessee's
-------------
address.
EQUIPMENT - means the property described on a Summary Equipment Schedule
---------
and any replacement for that property required or permitted by this Master Lease
or a Schedule.
EVENT OF DEFAULT - means the events described in Subsection 13.1.
----------------
-8-
<PAGE>
FAIR MARKET VALUE - means the aggregate amount which would be obtainable in
-----------------
an arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the
------------
first full Rent Interval following the Commencement Date for all terms of
Equipment and continuing for the number of Rent Intervals indicated on a
Schedule.
INTERIM RENT - means the pro rata portion of Rent due for the period from
------------
the Commencement Date through but not including the first day of the first full
Rent Interval included in the Initial Term.
LATE CHARGE - means the lesser of five percent (5%) of the payment due or
-----------
the maximum amount permitted by the law of the state where the Equipment is
located.
LICENSED PRODUCTS - means any software or other licensed products attached
-----------------
to the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the
--------------
same model, type, configuration and manufacture as Equipment.
MERGER - means any consolidation or merger of the Lessee with or into any
------
other corporation or entity, any sale or conveyance of all or substantially all
of the assets or stock of the Lessee by or to any other person or entity in
which Lessee is not the surviving entity.
NOTICE PERIOD - means not less than ninety (90) days no more than twelve
-------------
(12) months prior to the expiration of the lease term.
OWNER - means the owner of Equipment.
-----
RENT - means the rent Lessee will pay for each item of Equipment expressed
----
in a Summary Equipment Schedule either as a specific amount or an amount equal
to the amount which Lessor pays for an item of Equipment multiplied by a lease
rate factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
-------------
Schedule.
SCHEDULE - means either an Equipment Schedule or a Licensed Products
--------
Schedule which incorporates all of the terms and conditions of this Master
Lease.
SECURED PARTY - means an entity to whom Lessor has granted a security
-------------
interest for the purpose of securing a loan.
SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor
--------------------------
summarizing all of the Equipment for which Lessor has received Lessee-approved
vendor invoices, purchase documents and/or evidence of delivery during a
calendar quarter which will incorporate all of the terms and conditions of the
related Schedule and this Master Lease and will constitute a separate lease for
the Equipment leased thereunder.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
FLYCAST COMMUNICATIONS CORPORATION COMDISCO, INC.,
as Lessee as Lessor
By: /s/ By: /s/
______________________________ _____________________________
Title:___________________________ Title:__________________________
-10-
<PAGE>
ADDENDUM TO THE
MASTER LEASE AGREEMENT DATED AS OF DECEMBER 30,1997
BETWEEN FLYCAST COMMUNICATIONS CORPORATION, AS LESSEE
AND COMDISCO, INC., AS LESSOR
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease are hereby modified and amended as follows:
1) 5.1., "TITLE"
-----
Insert the words "or such Assignee or such Secured Party or Owner." to the
end of the last sentence of the paragraph.
2) 7.1., "CARE, USE AND MAINTENANCE"
-------------------------
Insert the word "reasonable" after the word "any" in the third sentence and
delete the phrase "for the manufacturer to bring the Equipment to then
current release, revision and engineering change levels, and" from the same
sentence.
3) 8., "REPRESENTATIONS AND WARRANTIES OF LESSEE"
----------------------------------------
Subparagraph (b), insert the words "to Lessee's knowledge" before the word
"contravene" in the fifth line of the first sentence and insert the words
"in any material aspects" after the word "contravene" in the same line.
Subparagraph (g), insert the words "to the best of Lessee's knowledge" at
the beginning of the sentence.
4) 11., "INDEMNITY"
---------
Insert the words ", reckless or intentional" after the word "negligent" in
the third line of the second sentence; and change the word "such" to "any"
in the same line, before the word "indemnified".
Add the following language to the end of the section:
IN NO EVENT WILL LESSOR OR LESSEE BE LIABLE FOR ANY SPECIAL, INCIDENTAL
DAMAGES OR OTHER CONSEQUENTIAL DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.
<PAGE>
(5) 13.1., "DEFAULTS"
--------
Subparagraph (b), in the last line, change the words "ten (10)" to "twenty
(20)". Subparagraph (d), insert the following phrase at the end of the
sentence:
", if such Event of Default continues uncured during the cure period
provided for such occurrence in the applicable Schedule, Summary Equipment
Schedule or other agreement."
6) 13.2., "REMEDIES"
--------
Subparagraph (d), insert the phrase "reckless or willful misconduct" after
the word "negligence" in the last line.
7) 14.1., "BOARD ATTENDANCE"
----------------
In the first sentence, insert the words "at least one of" after the word
"attend" on in the first line and insert the word "annually" after the word
"meetings" in the second line. In the third line, replace "any special"
with "such"; after "meeting" delete the rest of the sentence.
Delete the last sentence of the existing paragraph in its entirety.
Insert the following sentence at the end thereof:
"Notwithstanding anything to the contrary contained herein, Lessor's right
to attend Board of Directors meetings shall cease upon the effective date
of Lessee's registration statement in connection with an initial public
offering of its securities."
8) 14.2., "FINANCIAL STATEMENTS"
--------------------
In the first sentence, change the words "thirty (30)" to "forty-five (45)".
In the second sentence, change the words "ninety (90)" to "one hundred
twenty (120)". In the last sentence of the section, change the first word
"After" to the phrase "This obligation shall terminate upon the" and delete
the last portion of the sentence which reads "the term "Financial
Statements" shall be deemed to refer to only those statements required by
the Securities and Exchange Commission."
-2-
<PAGE>
9) 14.4., "MERGER AND SALE PROVISIONS"
--------------------------
In the first sentence, change the words "sixty (60)" to "twenty (20)". In
the last sentence, insert the phrase "and assignment of the Master Lease"
after the word "Merger", insert the phrase ", a measure of credit
worthiness at least as
good as that of Lessee, as reasonably determined by Lessor" after the word
"better" in the second line and change the word "acquiring" to the word
"successor" in the same line.
10) 14.8., "NO WAIVER"
---------
Insert the phrase "(other than a written waiver)" after the word "Lessee"
in the first line of the first sentence.
11) 14.9., "NOTICES"
-------
Insert the phrase "a facsimile confirmation is received by the sending
party and" after the words "provided that" in the last full line of the
section.
12) 14.10., "APPLICABLE LAW"
--------------
Change both occurrences of the word "ILLINOIS" to "CALIFORNIA" in this
paragraph. In the second section of the paragraph, change "ARTICLE 2 OF
THE UNIFORM COMMERCIAL CODE" to "CALIFORNIA UNIFORM
COMMERCIAL CODE SECTIONS 10508-10522".
13) 14.14., "SECRETARY'S CERTIFICATE"
-----------------------
Delete the last sentence of this section.
14) 14.18., "DEFINITIONS"
-----------
LIKE EQUIPMENT - insert the phrase "or other property reasonably acceptable
--------------
to Lessor" at the end of the definition.
FLYCAST COMMUNICATIONS CORPORATION COMDISCO, INC.
AS LESSEE AS LESSOR
By:_______________________ By:______________________
__________________________
Title:____________________ Title:___________________
__________________________
Date:_____________________ Date:____________________
-3-
<PAGE>
EQUIPMENT SCHEDULE VL-2
DATED AS OF DECEMBER 30,1997
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 30,1997 (THE "MASTER LEASE")
LESSEE: FLYCAST COMMUNICATIONS LESSOR: COMDISCO, INC.
CORPORATION
ADMIN. CONTACT/PHONE NO.: ADDRESS FOR ALL NOTICES:
- ------------------------ -----------------------
_____________________ 6111 North River Road
Phone: _______________________ Rosemont, Illinois 60018
Fax: _________________________ Attn.: Venture Group
Address for Notices:
- -------------------
123 Townsend Street Suite 226
San Francisco, CA 94107
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.: ______________
(24 digits maximum)
Location of Equipment: Initial Term: 42 months
- --------------------- ------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 2.720%
Attn.: -----------------
EQUIPMENT (as defined below): Advance: $3,264.00
-------
Software and tenant improvements specifically approved by Lessor, which shall be
delivered to and accepted by Lessee during the period December 30, 1997 through
December 30, 1998 ("Equipment Delivery Period"), for which Lessor receives
vendor invoices approved for payment, up to an aggregate purchase price of
$120,000.00 ("Commitment Amount"). Equipment shall exclude custom use
equipment, leasehold improvements, installation costs and delivery costs,
rolling stock, special tooling, hand held items, molds and fungible items.
<PAGE>
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii), (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual
net appraised Equipment value.
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for saIe-Ieaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800
Number Equipment shall be fifteen (15) days from the ship date, such ship date
to be set forth on the vendor invoice or if unavailable on the vendor invoice
the ship date will be determined by Lessor upon other supporting shipping
documentation. Lessor will summarize all approved invoices, purchase
documentation and evidence of delivery, as applicable, received in the same
calendar quarter into a Summary Equipment Schedule in the form attached to this
Schedule as Exhibit 1, and the Initial Term will begin the first day of the
calendar quarter thereafter. Each Summary Equipment Schedule will contain the
Equipment location, description, serial number(s) and cost and will incorporate
the terms and conditions of the Master Lease and this Schedule and will
constitute a separate lease.
-2-
<PAGE>
3. MISCELLANEOUS
In consideration of Lessor financing software and tenant improvements
hereunder, Lessee agrees in addition to its last Monthly Rent Payment to remit
to Lessor an amount equal to 15% of Lessor's aggregate cost of software and
tenant improvements provided hereunder.
4. OPTION AMOUNT
So long as no Event of Default shall have occurred and is continuing and
upon Lessee's written request and upon payment of an additional Advance in the
amount of $4,896.00, subject to final review by Lessor, at any time during the
Equipment Delivery Period, an additional amount of $180,000.00 shall be
available to Lessee under the same terms and conditions as stated herein. Such
additional amount shall thereafter be considered an addition to the Commitment
Amount referenced above.
5. SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
a) Section 9, Delivery and Return of Equipment
-------------------------------------------
Delete second, third and fourth sentences in their entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
FLYCAST COMMUNICATIONS COMDISCO, INC.
CORPORATION AS LESSOR
AS LESSEE
By:________________________ By:________________________
Title:_____________________ Title:_____________________
Date:______________________ Date:______________________
-3-
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- ------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
<PAGE>
EQUIPMENT SCHEDULE VL-1
DATED AS OF DECEMBER 30, 1997
TO MASTER LEASE AGREEMENT
DATED AS OF DECEMBER 30, 1997 (THE "MASTER LEASE")
LESSEE: FLYCAST COMMUNICATIONS LESSOR: COMDISCO, INC.
CORPORATION
Admin. Contact/Phone No.: ADDRESS FOR ALL NOTICES:
- ------------------------ -----------------------
__________________ 6111 North River Road
Phone:______________________ Rosemont, Illinois 60018
Fax:________________________ Attn.: Venture Group
Address for Notices:
- -------------------
123 Townsend Street Suite 226
San Francisco, CA 94107
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.: ______________
(24 digits maximum)
Location of Equipment: Initial Term: 42 months
- --------------------- ------------
same as above (Number of Rent Intervals)
Attn.: Lease Rate Factor: 2.720%
-----------------
EQUIPMENT (as defined below): Advance: $7,616.00
-------
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period December 30, 1997 through December 30, 1998
("Equipment Delivery Period"), for which Lessor receives vendor invoices
approved for payment, up to an aggregate purchase price of $280,000.00
("Commitment Amount"). Equipment shall exclude custom use equipment, leasehold
improvements,
<PAGE>
installation costs and delivery costs, rolling stock, special tooling, "stand-
alone" software, application software bundled into computer hardware, hand held
items, molds and fungible items.
-2-
<PAGE>
1. EQUIPMENT PURCHASE
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii), (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual
net appraised Equipment value.
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. COMMENCEMENT DATE
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800
Number Equipment shall be fifteen (15) days from the ship date, such ship date
to be set forth on the vendor invoice or if unavailable on the vendor invoice
the ship date will be determined by Lessor upon other supporting shipping
documentation. Lessor will summarize all approved invoices, purchase
documentation and evidence of delivery, as applicable, received in the same
calendar quarter into a Summary Equipment Schedule in the form attached to this
Schedule as Exhibit 1, and the Initial Term will begin the first day of the
calendar quarter thereafter. Each Summary Equipment Schedule will contain the
Equipment location, description, serial
-3-
<PAGE>
number(s) and cost and will incorporate the terms and conditions of the Master
Lease and this Schedule and will constitute a separate lease.
3. OPTION TO EXTEND
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event,
the rent to be paid during said extended period shall be mutually agreed upon
and if the parties cannot mutually agree, then the Summary Equipment Schedule
shall continue in full force and effect pursuant to the existing terms and
conditions until terminated in accordance with its terms. The Summary Equipment
Schedule will continue in effect following said extended period until terminated
by either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
4. PURCHASE OPTION
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term of the Summary Equipment Schedule to
purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 15% of the Equipment cost and upon terms and
conditions to be mutually agreed upon by the parties following Lessee's written
notice, plus any taxes applicable at time of purchase. Said purchase price
shall be paid to Lessor at least thirty (30) days before the expiration date of
the Initial Term or extended term. Title to the Equipment shall automatically
pass to Lessee upon payment in full of the purchase price but, in no event,
earlier than the expiration of the fixed Initial Term or extended term, if
applicable. If the parties are unable to agree on the purchase price or the
terms and conditions with respect to said purchase, then the Summary Equipment
Schedule with respect to this Equipment shall remain in full force and effect.
Notwithstanding the exercise by Lessee of this option and payment of the
purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
5. OPTION AMOUNT
So long as no Event of Default shall have occurred and is continuing and
upon Lessee's written request and upon payment of an additional Advance in the
amount of $11,424.00, subject to final review by Lessor, at any time during the
Equipment Delivery Period, an additional amount of $420,000.00 shall be
available to Lessee under the same terms and conditions as stated herein. Such
additional amount shall thereafter be considered an addition to the Commitment
Amount referenced above.
6. EQUITY CONSIDERATION
In consideration of the Lessor executing and delivering such Leases, Lessee
has allowed Lessor the right to purchase 187,970 shares of Lessee's Series B
Preferred Stock at $1.33 per share for an aggregate purchase price of
$250,000.10.
-4-
<PAGE>
7. TECHNOLOGY EXCHANGE OPTION
If Lessee is not in default, and there is no material adverse change in
Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option to replace any of the Equipment
subject to such summary Equipment Schedule with new technology equipment ("New
Technology Equipment") utilizing the following guidelines:
A. Equipment being replaced with New Technology Equipment shall have an
aggregate original cost equal to or greater than $20,000 and be comprised of
full configurations of equipment.
B. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software.
C. The cost of the New Technology Equipment must be equal to or greater than
the original equipment cost of the replaced equipment, but in no event shall
exceed 150% of the original equipment cost.
D. The remaining lease payments applicable to the equipment being replaced by
the New Technology Equipment will be discounted to present value at 6%.
The wholesale market value of the equipment being replaced will be established
by Comdisco based upon then current market conditions. Upon the return of the
replaced equipment, the wholesale price will be deducted from the present value
of the remaining rentals and the differential will be added to the cost of the
New Technology Equipment in calculating the new rental. The lease for the New
Technology Equipment will contain terms and conditions substantially similar to
those for the replaced equipment and will have an Initial Term not less than the
balance of the remaining Initial Term for the replaced equipment.
8. SPECIAL TERMS
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
a) 14.16. Landlord/Mortgagee Waiver: Delete this section in its entirety.
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
FLYCAST COMMUNICATIONS
CORPORATION
AS LESSEE
By: /s/
____________________________
Title:_________________________
Date:__________________________
COMDISCO, INC.
AS LESSOR
-5-
<PAGE>
By:____________________________
Title:_________________________
Date:__________________________
-6-
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
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2. Initial Term Starts on: Initial Term:
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(Number of Rent Intervals)
3. Total Summary Equipment Cost:
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4. Lease Rate Factor:
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5. Rent:
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6. Acceptance Doc Type:
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MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated December 30, 1997 by and
between COMDISCO, INC. ("Lessor") and FlyCast Communications Corporation
("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties
agree as follows (all capitalized terms are defined in Section 14.18):
1. PROPERTY LEASED.
Lessor leases to Lessee all of the Equipment described on each Summary
Equipment Schedule. In the event of a conflict, the terms of the applicable
Schedule prevail over this Master Lease.
2. TERM.
On the Commencement Date, Lessee will be deemed to accept the Equipment,
will be bound to its rental obligations for each item of Equipment and the term
of a Summary Equipment Schedule will begin and continue through the Initial Term
and thereafter until terminated by either party upon prior written notice
received during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. RENT AND PAYMENT.
Rent is due and payable in advance on the first day of each Rent Interval
at the address specified in Lessor's invoice. Interim Rent is due and payable
when invoiced. If any payment is not made when due, Lessee will pay a Late
Charge on the overdue amount. Upon Lessee's execution of each Schedule, Lessee
will pay Lessor the Advance specified on the Schedule. The Advance will be
credited towards the final Rent payment is Lessee is not then in default. No
interest will be paid on the Advance.
4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES.
4.1 SELECTION. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee
that, so long as Lessee is not in default, Lessor will not disturb Lessee's
quiet and peaceful possession, and unrestricted use of the Equipment. To the
extent permitted by the manufacturer, Lessor assigns to Lessee during the term
of the Summary Equipment Schedule any manufacturer's warranties for the
Equipment. LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT
OR ITS FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any
liability, claim, loss, damage or expense of any kind (including strict
liability in tort) caused by the Equipment except for any loss or damage caused
by the willful misconduct or negligent acts of Lessor. In no event is Lessor
responsible for special, incidental or consequential damages.
5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT.
5.1 TITLE. Lessee holds the Equipment subject and subordinate to the
rights of the Owner, Lessor, any Assignee and any Secured Party. Lessee
authorizes Lessor, as Lessee's agent, and at Lessor's expense, to prepare,
execute and file in Lessee's name precautionary Uniform Commercial Code
financing statements showing the interest of the Owner, Lessor, and any Assignee
or Secured Party in the Equipment and to insert serial numbers in Summary
Equipment Schedules as appropriate. Lessee will, at its expense, keep the
Equipment free and clear from any liens or encumbrances of any kind (except any
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caused by Lessor) and will indemnify and hold the Owner, Lessor, any Assignee
and Secured Party harmless from and against any loss caused by Lessee's failure
to do so, except where such is caused by Lessor.
5.2 RELOCATION OR SUBLEASE. Upon prior written notice, Lessee may
relocate Equipment to any location within the continental United States provided
(i) the Equipment will not be used by an entity exempt from federal income tax,
and (ii) all additional costs (including any administrative fees, additional
taxes and insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor
and the Secured Party. Such consent to sublease will be granted if: (i) Lessee
meets the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations
under this Master Lease and the relevant Schedule.
5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule have
been fixed by Lessor in order to permit Lessor to sell and/or assign or transfer
its interest or grant a security interest in each Schedule and/or the Equipment
to a Secure Party or Assignee. In that event, the term Lessor will mean the
Assignee and any Secured Party. However, any assignment, sale, or other
transfer by Lessor will not relieve Lessor of its obligations to Lessee and will
not materially change Lessee's duties or materially increase the burdens or
risks imposed on Lessee. The Lessee consents to and will acknowledge such
assignments in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's
rights, but will not be obligated to perform any of the obligations of Lessor.
The Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and the
Secured Party continues to receive all Rent payable under the Schedule;
(b) Lessee will pay all Rent and all other amounts payable to the
Secured Party despite any defense or claim which it has against Lessor. Lessee
reserves its right to have recourse directly against Lessor for any defense or
claim; and
(c) Subject to and without impairment of Lessee's leasehold rights in
the Equipment, Lessee holds the Equipment for the Secured Party to the extent of
the Secured Party's rights in that Equipment.
6. NET LEASE; TAXES AND FEES.
6.1 NET LEASE. Each Summary Equipment Schedule constitutes a net lease.
Lessee's obligation to pay Rent and all other amounts due hereunder is absolute
and unconditional and is not subject to any abatement, reduction, set-off,
defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever.
6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for all
taxes, fees or any other charges (together with any related interest or
penalties not arising from the negligence of Lessor) accrued for or arising
during the term of each Summary Equipment Schedule against Lessor, Lessee or the
Equipment by any governmental authority (except only Federal, state, local and
franchise taxes on the capital or the net income of Lessor). Lessor will file
all personal property tax returns for the Equipment
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and pay all such property taxes due. Lessee will reimburse Lessor for property
taxes within thirty (30) days of receipt of an invoice.
7. CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR.
7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until re-certification has been
obtained.
7.2 INSPECTION BY LESSOR. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
lessor for inspection.
8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents,
warrants and covenants that with respect to the Master Lease and each Schedule
executed hereunder:
(a) The Lessee is a corporation duly organized and validly existing
in good standing under the laws of the jurisdiction of its incorporation, is
duly qualified to do business in each jurisdiction (including the jurisdiction
whom the Equipment is, or is to be, located) where its ownership or lease of
property or the conduct of its business requires such qualification, except for
where such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and
each Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which It is bound, and the Master Lease and each Schedule
constitute legal, valid and binding agreements of the Lessee, enforceable in
accordance with their terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and rules of law
concerning equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending
or, to the knowledge of the Lessee, threatened against or affecting the Lessee
in any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by
the Lessee will not be or become fixtures under applicable law.
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(e) The Lessee has no material liabilities or obligations, absolute
or contingent (individually or in the aggregate) except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, In any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns,
possesses, has access to, or can become licensed on reasonable terms under all
patents, patent applications, trademarks, trade names, inventions, franchises,
licenses, permits, computer software and copyrights necessary for the operations
of Its business as now conducted, with no known infringement of, or conflict
with, the rights of others.
(g) All material contracts, agreements and instruments to which the
Lessee is a party are in full force and effect in all material respects, and are
valid, binding and enforceable by the Lessee in accordance with their respect
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally, and rules of law concerning
equitable remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. INDEMNITY.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on Equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
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12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each
item of Equipment in an amount not less than the Casualty Value. All policies
for such insurance will name the Lessor and any Secured Party as additional
insured and as loss payee and will provide for at least thirty (30) days prior
written notice to the Lessor of cancellation or expiration, and will insure
Lessors interests regardless of any breach or violation by Lessee of any
representation, warranty or condition contained in such policies and will be
primary without right of contribution from any insurance effected by Lessor.
Upon the execution of any Schedule, the Lessee will furnish appropriate evidence
of such insurance acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following Events
of Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee
when due if that failure continues for five (5) business days after written
notice; or
(b) Lessee's failure to perform any other term or condition of the
Schedule or the material inaccuracy of any representation or warranty made by
the Lessee in the Schedule or in any document or certificate furnished to the
Lessor hereunder if that failure or inaccuracy continues for ten (10) business
days after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the
failure by Lessee to pay its debts when due, the insolvency of Lessee, the
filing by Lessee or the filing against Lessee of any petition under any
bankruptcy or insolvency law or for the appointment of a trustee or other
officer with similar powers, the adjudication of Lessee as insolvent, the
liquidation of Lessee, or the taking of any action for the purpose of the
foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's penalty of the provisions of the applicable
Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including
Default Costs;
(c) with notice and demand, recover all sums due and accelerate and
recover the present value of the remaining payment stream of all Rent due under
the defaulted Schedule (discounted
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at the same rate of interest at which such defaulted Schedule was discounted
with a Secured Party plus any prepayment fees charged to Lessor by the Secured
Party or, if there is no Secured Party, then discounted at 6%) together with all
Rent and other amounts currently due as liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's
security requirements, Lessor may enter on Lessee's premises to remove and
repossess the Equipment without being liable to Lessee for damages due to the
repossession, except these resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by
law, are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of
Section 13.2, Lessor will use its best efforts in accordance with its normal
business procedures (and without obligation to give any priority to such
Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET FORTH
IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY
STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY
ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or
otherwise dispose of all or any part of the Equipment at a public or private
sale for cash or credit with the privilege of purchasing the Equipment. The
proceeds from any sale, lease or other disposition of the Equipment are defined
as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair
Market Value of the Equipment at the expiration of the Initial Term less the
Default Costs; or
(b) if leased, the present value (discounted at three percent (3%)
over the U.S. Treasury Notes of comparable maturity to the term of the release)
of the rentals for a term not to exceed the Initial Term less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums
due to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor
may recover the amount by which the proceeds are less than the liquidated
damages and other sums due to Lessor from Lessee.
14. ADDITIONAL PROVISIONS.
14.1 BOARD ATTENDANCE. Upon invitation of Lessee, one representative of
Lessor will have the right to attend Lessee's corporate Board of Directors
meetings and Lessee will give Lessor reasonable notice in advance of any special
Board of Directors meeting, which notice will provide an agenda of the subject
matter to be discussed at such board meeting. Lessee will provide Lessor with a
certified copy of the minutes of each Board of Directors meeting within thirty
(30) days following the date of such meeting held during the term of this Master
Lease.
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each
month (and in any event within thirty (30) days), Lessee will provide to Lessor
the same information which Lessee provides to its Board of Directors, but which
will include not less than a monthly income statement, balance sheet and
statement of cash flows prepared in accordance with generally accepted
accounting principles, consistently applied (the "Financial Statements"). As
soon as practicable at the end of each fiscal year, Lessee will provide to
Lessor audited Financial Statements setting forth in comparative form the
corresponding figures for the fiscal year (and in any event within ninety (90)
days), and accompanied by
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an audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
Information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee,
Lessor will not be obligated to lease any Equipment which would have a
Commencement Date after said notice if (i) Lessee is in default under this
Master Lease or any Schedule; (ii) Lessee is in default under any loan
agreement, the result of which would allow the tender or any secured party to
demand immediate payment of any material indebtedness; (iii) there is a material
adverse change in Lessee's credit standing; or (iv) Lessor determines (in
reasonable good faith) that Lessee will be unable to perform its obligations
under this Master Lease or any Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any
proposed Merger at least sixty (60) days prior to the closing date. Lessor may,
in its discretion, either (i) consent to the assignment of the Master Lease and
all relevant Schedules to the successor entity, or (ii) terminate the Lease and
all relevant Schedules. If Lessor elects to consent to the assignment, Lessee
and its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and
Summary Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to
constitute a waive of compliance with any representation, warranty or covenant
contained in this Master Lease or a Schedule. The Waiver by Lessor or Lessee of
a breach of any provision of this Master Lease or a Schedule will not operate or
be construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the
benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR
OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but
not limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party
by the other party will be given in writing and deemed received upon the earlier
of (1) actual receipt or (2) three days after mailing if mailed postage prepaid
by regular or airmail to Lessor (to the attention of the "Comdisco Venture
Group") or Lessee, at the address set out the Schedule or (3) one day after it
is sent by courier or (4) on the same day as sent facsimile transmission,
provided that the original is sent by personal delivery or mail by the sending
party.
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14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL
HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE
GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master
Lease or any Schedule is for any reason held invalid, illegal or unenforceable,
the remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid legal and enforceable provision that is closest to the
original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in
any number of counterparts, each of which will be deemed an original, but all
such counterparts together constitute one and the same instrument. If Lessor
grants a security interest in all or any part of a Schedule, the Equipment or
sums payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products
which will at all times remain the properly of the owner of the Licensed
Products. A license from the owner may be required and it is Lessee's
responsibility to obtain any required license before the use of the Licensed
Products. Lessee agrees to treat the Licensed Products as confidential
information of the owner, to observe all copyright restrictions, and not to
reproduce or sell the Licensed Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master
Lease, provide Lessor with a secretary's certificate of incumbency and
authority. Upon the execution of each Schedule with a purchase price in excess
of $1,000,000, Lessee will provide Lessor with an opinion from Lessee's counsel
in a form acceptable to Lessor regarding the representations and warranties in
Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with
the other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be
in a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby
agrees that Lessor shall not, by virtue of its entering into this Master Lease,
be required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS.
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution
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of each Schedule.
ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights
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as owner and Lessor of Equipment.
CASUALTY LOSS - means the irreparable loss or destruction of Equipment.
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CASUALTY VALUE - means the greater of the aggregate Rent remaining to be
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paid for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
COMMENCEMENT DATE - is defined in each Schedule.
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DEFAULT COSTS - means reasonable attorney's fees and remarketing costs
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resulting from a Lessee default or Lessor's enforcement of its remedies.
DELIVERY DATE - means date of delivery of Inventory Equipment to Lessee's
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address.
EQUIPMENT - means the property described on a Summary Equipment Schedule
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and any replacement for that property required or permitted by this Master Lease
or a Schedule.
EVENT OF DEFAULT - means the events described in Subsection 13.1.
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FAIR MARKET VALUE - means the aggregate amount which would be obtainable in
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an arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
INITIAL TERM - means the period of time beginning on the first day of the
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first full Rent Interval following the Commencement Date for all terms of
Equipment and continuing for the number of Rent Intervals indicated on a
Schedule.
INTERIM RENT - means the pro rata portion of Rent due for the period from
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the Commencement Date through but not including the first day of the first full
Rent Interval included in the Initial Term.
LATE CHARGE - means the lesser of five percent (5%) of the payment due or
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the maximum amount permitted by the law of the state where the Equipment is
located.
LICENSED PRODUCTS - means any software or other licensed products attached
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to the Equipment.
LIKE EQUIPMENT - means replacement Equipment which is lien free and of the
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same model, type, configuration and manufacture as Equipment.
MERGER - means any consolidation or merger of the Lessee with or into any
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other corporation or entity, any sale or conveyance of all or substantially all
of the assets or stock of the Lessee by or to any other person or entity in
which Lessee is not the surviving entity.
NOTICE PERIOD - means not less than ninety (90) days no more than twelve
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(12) months prior to the expiration of the lease term.
OWNER - means the owner of Equipment.
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RENT - means the rent Lessee will pay for each item of Equipment expressed
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in a Summary Equipment Schedule either as a specific amount or an amount equal
to the amount which Lessor pays for an item of Equipment multiplied by a lease
rate factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
RENT INTERVAL - means a full calendar month or quarter as indicated on a
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Schedule.
SCHEDULE - means either an Equipment Schedule or a Licensed Products
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Schedule which incorporates all of the terms and conditions of this Master
Lease.
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SECURED PARTY - means an entity to whom Lessor has granted a security
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interest for the purpose of securing a loan.
SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor
--------------------------
summarizing all of the Equipment for which Lessor has received Lessee-approved
vendor invoices, purchase documents and/or evidence of delivery during a
calendar quarter which will incorporate all of the terms and conditions of the
related Schedule and this Master Lease and will constitute a separate lease for
the Equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on
or as of the day and year first above written.
FLYCAST COMMUNICATIONS CORPORATION COMDISCO, INC.,
as Lessee as Lessor
By: /s/ By: /s/
_________________________________ _____________________________
Title:______________________________ Title:__________________________
-10-
<PAGE>
EXHIBIT 10.13
SUBORDINATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of May 22, 1998, is entered into
by and between FlyCast Communications Corporation, a California corporation,
----------------------------------
with its chief executive office, and principal place of business located at 181
Fremont Street, Suite 120, San Francisco, California 94105 (the "Borrower") and
Comdisco, Inc., a Delaware corporation, with its principal place of business
located at 6111 North River Road, Rosemont, Illinois 60018 (the "Lender" or
sometimes, "Comdisco"). In consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
RECITALS
WHEREAS, Borrower has requested Lender to make available to Borrower a loan
in the aggregate principal amount of TWO MILLION FIVE HUNDRED THOUSAND and
00/100 DOLLARS ($2,500,000.00) in minimum installments of FIVE HUNDRED THOUSAND
DOLLARS ($500,000.00) each (as the same may from time to time be amended,
modified, supplemented or revised, the "Loan"), which would be evidenced by
Subordinated Promissory Note(s) executed by Borrower substantially in the form
of Exhibit A hereto (as the same may from time to time be amended, modified,
supplemented or restated the "Note(s)").
WHEREAS, Lender is willing to make the Loan on the terms and conditions set
forth in this Agreement, and
WHEREAS, Lender and Borrower agree any Loan hereunder shall be subordinate
to Senior Debt (as defined herein) to the extent set forth in the Subordination
Agreement (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
Unless otherwise defined herein, the following capitalized terms shall have
the following meanings (such meanings being equally applicable to both the
singular and plural form of the terms defined);
1.1 "Account" means any "account," as such term is defined in Section 9106
of the UCC, now owned or hereafter acquired by Borrower or in which Borrower now
holds or hereafter acquires any interest and, in any event, shall include,
without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Borrower (including, without limitation, under any trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Borrower or from any other transaction, whether or not the same
involves the sale of goods or services by Borrower (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Borrower's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Borrower's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to Borrower under all
purchase orders and contracts for the sale of goods or the performance of
services or both by
<PAGE>
Borrower (whether or not yet earned by performance on the part of Borrower or in
connection with any other transaction), now in existence or hereafter occurring,
including, without limitation, the right to receive the proceeds of said
purchase orders and contracts, and all collateral security and guarantees of any
kind given by any Person with respect to any of the foregoing.
1.2 "Account Debtor" means any "account debtor," as such term is defined
in Section 9105(1)(a) of the UCC.
1.3 "Advance" means each installment made by the Lender to Borrower
pursuant to the Loan to be evidenced by the Note(s) secured by the Collateral.
1.4 "Advance Date" means the funding date of any Advance of the Loan.
1.5. "Advance Request" means the request by Borrower for an Advance under
the Loan, each to be substantially in the form of Exhibit C attached hereto, as
submitted by Borrower to Lender from time to time.
1.6 "Chattel Paper" means any "chattel paper," as such term is defined in
Section 9105(1)(b) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.
1.7 "Closing Date" means the date hereof.
1.8 "Collateral" shall have the meaning assigned to such term in Section 3
of this Agreement.
1.9 "Contracts" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Borrower may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
1.10 "Copyrights" means all of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (i) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or of any other country;
(ii) registrations, applications and recordings in the United States Copyright
Office or in any similar office or agency of the United States, any state
thereof or any other country; (iii) any continuations, renewals or extensions
thereof; and (iv) any registrations to be issued in any pending applications.
1.11 "Copyright License" means any written agreement granting any right to
use any Copyright or Copyright registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.12 "Documents" means any "documents," as such term is defined in Section
9105(1)(f) of the UCC, now owned or hereafter acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest.
1.13 "Equipment" means any "equipment," as such term is defined in Section
9109(2) of the UCC, now or hereafter owned or acquired by Borrower or in which
Borrower now holds or hereafter acquires any interest and any and all additions,
substitutions and replacements of any of the foregoing,
<PAGE>
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto.
1.14 "Excluded Agreements" means (i) the Warrant Agreement executed
hereunder, and any other warrants to acquire, or agreements governing the rights
of the holders of, any equity security of Borrower, (ii) any stock of the
Borrower issued or purchased pursuant to the Warrant Agreement and 187,970
shares of Series B Preferred Stock and Warrant Agreement issued pursuant to the
Series B Preferred Stock and Warrant Purchase Agreement originally dated July
11, 1997, as amended, (iii) the Loan and Security Agreement dated December 30,
1997 and Secured Promissory Note dated January 6, 1998 and (iv) the Master Lease
Agreement dated as of between Borrower, as lessee, and Lender, as lessor,
including, without limitation, any Equipment Schedules and Summary Equipment
Schedules to the Master Lease Agreement executed or delivered by Borrower
pursuant thereto and any other modifications or amendments thereof, whereby
Borrower (as lessee) leases equipment, software, or goods from Lender (as
lessor) to Borrower (as lessee).
1.15 "Facility Fee" means one percent (1.00%) of the principal amount of
the Loan due at the Closing Date.
1.16 "Fixtures" means any "fixtures," as such term is defined in Section
9313(1)(a) of the UCC, now or hereafter owned or acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest and, now or
hereafter attached or affixed to or constituting a part of, or located in or
upon, real property wherever located, together with all right, title and
interest of Borrower in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all conversions of the security
constituted thereby, immediately upon any acquisition or release thereof or any
such conversion, as the case may be.
1.17 "General Intangibles" means any "general intangibles," as such term
is defined in Section 9106 of the UCC, now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest and,
in any event, shall include, without limitation, all right, title and interest
which Borrower may now or hereafter have in or under any contract, all customer
lists, Copyrights, Trademarks, Patents, rights to Intellectual Property,
interests in partnerships, joint ventures and other business associations,
Licenses, permits, trade secrets, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, recipes, experience, processes, models, drawings, materials and
records, goodwill (including, without limitation, the goodwill associated with
any Trademark, Trademark registration or Trademark licensed under any Trademark
License), claims in or under insurance policies, including unearned premiums,
uncertificated securities, cash and other forms of money or currency, deposit
accounts (including as defined in Section 9105(e) of the UCC), rights to sue for
past, present and future infringement of Copyrights, Trademarks and Patents,
rights to receive tax refunds and other payments and rights of indemnification.
1.18 "Instruments" means any "instrument," as such term is defined in
Section 9105(1)(i) of the UCC, now owned or hereafter acquired by Borrower or in
which Borrower now holds or hereafter acquires any interest.
1.19 "Intellectual Property" means all Copyrights, Trademarks, Patents,
trade secrets, source codes, customer lists, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
skill, expertise, experience, processes, models, drawings, materials and
records.
<PAGE>
1.20 "Inventory" means any "inventory," as such term is defined in Section
9109(4) of the UCC, wherever located, now or hereafter owned or acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest, and,
in any event, shall include, without limitation, all inventory, goods and other
personal property which are held by or on behalf of Borrower for sale or lease
or are furnished or are to be furnished under a contract of service or which
constitute raw materials, work in process or materials used or consumed or to be
used or consumed in Borrower's business, or the processing, packaging,
promotion, delivery or shipping of the same, and all furnished goods whether or
not such inventory is listed on any schedules, assignments or reports furnished
to Lender from time to time and whether or not the same is in transit or in the
constructive, actual or exclusive occupancy or possession of Borrower or is held
by Borrower or by others for Borrower's account, including, without limitation,
all goods covered by purchase orders and contracts with suppliers and all goods
billed and held by suppliers and all inventory which may be located on premises
of Borrower or of any carriers, forwarding agents, truckers, warehousemen,
vendors, selling agents or other persons.
1.21 "License" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest
and any renewals or extensions thereof.
1.22 "Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment for security, security interest, encumbrance, levy, lien or charge of
any kind, whether voluntarily incurred or arising by operation of law or
otherwise, against any property, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the filing of any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the UCC or
comparable law of any jurisdiction.
1.23 "Loan Documents" shall mean and include this Agreement, the Note(s),
and any other documents executed in connection with the Secured Obligations or
the transactions contemplated hereby, as the same may from time to time be
amended, modified, supplemented or restated, provided that the Loan Documents
shall not include any of the Excluded Agreements.
1.24 "Material Adverse Effect" means a material adverse effect upon: (i)
the business, operations, properties, assets or conditions (financial or
otherwise) of Borrower; or (ii) the ability of Borrower to perform, or of Lender
to enforce, the Secured Obligations.
1.25 "Maturity Date" means the date forty-two (42) months from the Advance
Date of each installment of the Loan.
1.26 "Patent License" means any written agreement granting any right with
respect to any invention on which a Patent is in existence now owned or
hereafter acquired by Borrower or in which Borrower now holds or hereafter
acquires any interest.
1.27 "Patents" means all of the following now owned or hereafter acquired
by Borrower or in which Borrower now holds or hereafter acquires any interest:
(a) letters patent of, or rights corresponding thereto in, the United States or
any other county, all registrations and recordings thereof, and all applications
for letters patent of, or rights corresponding thereto in the United States or
any other country, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country;
(b) all reissues, continuations, continuations-in-part or extensions thereof;
(c) all petty patents, divisionals, and patents of addition; and (d) all patents
to issue in any such applications.
<PAGE>
1.28 "Permitted Liens" means any and all of the following: (i) liens in
favor of Lender, (ii) liens related to, or arising in connection with, Senior
Debt.
1.29 "Proceeds" means "proceeds," as such term is defined in Section
9306(1) of the UCC and, in any event, shall include, without limitation, (a) any
and all Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to Borrower from time to time in respect of
the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to Borrower from time to time with respect to any of the
Collateral, (c) any and all payments (in any form whatsoever) made or due and
payable to Borrower from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority (or any Person acting under color of
governmental authority), (d) any claim of Borrower against third parties (i) for
past, present or future infringement of any Copyright, Patent or Patent License
or (ii) for past, present or future infringement or dilution of any Trademark or
Trademark License or for injury to the goodwill associated with any Trademark,
Trademark registration or Trademark licensed under any Trademark License and (e)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
1.30 "Receivables" shall mean and include all of the Borrowers accounts,
instruments, documents, chattel paper and general intangibles whether secured or
unsecured, whether now existing or hereafter created or arising, and whether or
not specifically sold or assigned to Lender hereunder.
1.31 "Secured Obligations" shall mean and include all principal, interest,
fees, costs, or other liabilities or obligations for monetary amounts owed by
Borrower to Lender, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all covenants and
duties regarding such amounts, of any kind of nature, present or future, arising
under this Agreement, the Note(s), or any of the other Loan Documents, whether
or not evidenced by any Note(s), Agreement or other instrument, as the same may
from time to time be amended, modified, supplemented or restated, provided, that
the Secured Obligations shall not include any indebtedness or obligations of
Borrower arising under or in connection with the Excluded Agreements.
1.32 "Senior Creditor" means a bank, insurance company, pension fund, or
other institutional lender to be determined, or a syndication of such
institutional lenders that provides Senior Debt financing to Borrower; provided,
that Senior Creditor shall not include any officer, director, shareholder,
venture capital investor, or insider of Borrower, or any affiliate of the
foregoing persons, except upon the express written consent of Lender.
1.33 "Senior Debt" means any and all indebtedness and obligations for
borrowed money (including, without limitation, principal, premium (if any),
interest, fees charges, expenses, costs, professional fees and expenses, and
reimbursement obligations) at any time owing by Borrower to Senior Creditor
under the Senior Loan Documents, including, but not limited to such amounts as
may accrue or be incurred before or after default or workout or the commencement
of any liquidation, dissolution, bankruptcy, receivership or reorganization by
or against Borrower.
1.34 "Senior Loan Documents" means the loan agreement between Borrower and
Senior Creditor and any other agreement, security agreement, document,
promissory note, UCC financing statement, or instrument executed by Borrower in
favor of Senior Creditor pursuant to or in connection with the Senior Debt or
the loan agreement, as the same may from time to time be amended, modified,
supplemented, extended, renewed, restated or replaced.
<PAGE>
1.35 "Subordination Agreement" means the Subordination Agreement of even
date herewith, entered into between Borrower and Lender for the benefit of
Senior Creditor.
1.36 "Trademark License" means any written agreement granting any right to
use any Trademark or Trademark registration now owned or hereafter acquired by
Borrower or in which Borrower now holds or hereafter acquires any interest.
1.37 "Trademarks" means any of the following now owned or hereafter
acquired by Borrower or in which Borrower now holds or hereafter acquires any
interest: (a) any and all trademarks, tradenames, corporate names, business
names, trade styles, service marks, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, designs
and general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and any applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof and (b) any reissues, extensions or
renewals thereof.
1.38 "UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois. Unless otherwise defined
herein, terms that are defined in the UCC and used herein shall have the
meanings given to them in the UCC.
1.39 "Warrant Agreement(s)" shall mean those agreements entered into in
connection with the Loan, substantially in the form attached hereto as Exhibit B
pursuant to which Borrower granted Lender the right to purchase that number of
shares of Series B Preferred Stock of Borrower as more particularly set forth
therein.
SECTION 2. THE LOAN
2.1 The outstanding principal amount of the Loan, together with interest
thereon precomputed at the rate of eleven (11.00%) percent per annum, shall be
due and payable in six (6) equal monthly installments of interest only, payable
on the first day of each month, followed by thirty-six (36) equal monthly
installments of principal and interest, payable on the first day of each month,
to and including the Maturity Date (each, a "Payment Date"). If any payment
under the Note(s) shall be payable on a day other than a business day, then such
payment shall be due and payable on the next succeeding business day.
2.2 Borrower shall have the option to prepay the Loan, in whole or in
part, as of any Payment Date after the Advance Date by paying to Lender such
principal amount being prepaid together with all accrued and unpaid interest
with respect to such principal amount, as of the date of such prepayment. In
the event Borrower prepays any Note(s) within the first 12 months of any Advance
Date, such prepayment shall include a prepayment premium equal to one percent
(1.0%) of the outstanding principal amount as of the date of such prepayment.
In the event Borrower elects to prepay any Note(s) in accordance herewith,
Borrower shall have no further rights to request Advances hereunder.
2.3 (a) Notwithstanding any provision in this Agreement, the Note(s), or
any other Loan Document, it is not the parties' intent to contract for, charge
or receive interest at a rate that is greater than the maximum rate permissible
by law which a court of competent jurisdiction shall deem applicable hereto
(which under the laws of the State of Illinois shall be deemed to be the laws
relating to permissible rates of interest on commercial loans) (the "Maximum
Rate"). If the Borrower actually pays
<PAGE>
Lender an amount of interest, chargeable on the total aggregate principal
Secured Obligations of Borrower under this Agreement and the Note(s) (as said
rate is calculated over a period of time from the date of this Agreement through
the end of time that any principal is outstanding on the Note(s)), which amount
of interest exceeds interest calculated at the Maximum Rate on said principal
chargeable over said period of time, then such excess interest actually paid by
Borrower shall be applied first, to the payment of principal outstanding on the
Note(s); second, after all principal is repaid, to the payment of Lender's out
of pocket costs, expenses, and professional fees which are owed by Borrower to
Lender under this Agreement or the Loan Documents; and third, after all
principal, costs, expenses, and professional fees owed by Borrower to Lender are
repaid, the excess (if any) shall be refunded to Borrower, and the effective
rate of interest will be automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rate set forth in Section 2.1.
(c) Upon and during the continuation of an Event of Default hereunder,
all Secured Obligations, including principal, interest, compounded interest, and
professional fees, shall bear interest at a rate per annum equal to the rate set
forth in Section 2.1. plus five percent (5%) per annum ("Default Rate").
SECTION 3 SECURITY INTEREST
As security for the prompt, complete and indefeasible payment when due
(whether at stated payment dates or otherwise) of all the Secured Obligations
and in order to induce Lender to make the Loan upon the terms and subject to the
conditions of the Note(s), Borrower hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to Lender for security purposes only, and hereby
grants to Lender a security interest in, all of Borrower's right, title and
interest in, to and under each of the following (all of which being hereinafter
collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether tangible
or intangible and whether now or hereafter owned or existing, leased, consigned
by or to, or acquired by, Borrower and wherever located; and
(g) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of each of the foregoing.
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that;
4.1 Borrower owns all right title and interest in and to the Collateral,
free of all liens, security interests, encumbrances and claims whatsoever,
except for Permitted Liens.
4.2 Borrower has the full power and authority to, and does hereby grant
and convey to the Lender, a perfected security interest in the Collateral as
security for the Secured Obligations, free of all liens, security interests,
encumbrances and claims , other than Permitted Liens and shall execute such
Uniform Commercial Code financing statements in connection herewith as the
Lender may reasonably request. Except as set forth herein, no other lien,
security interest, adverse claim or encumbrance has been created by Borrower or
is known by Borrower to exist with respect to any Collateral.
4.3 Borrower is a corporation duly organized, legally existing and in good
standing under the laws of the State of California, and is duly qualified as a
foreign corporation in all jurisdictions in which the nature of its business or
location of its properties require such qualifications and where the failure to
be qualified would have a material adverse effect.
4.4 Borrower's execution, delivery and performance of the Note(s), this
Agreement, all financing statements, all other Loan Documents required to be
delivered or executed in connection herewith, and the Warrant Agreement(s) have
been duly authorized by all necessary corporate action of Borrower, the
individual or individuals executing the Loan Documents and the Warrant
Agreement(s) were duly authorized to do so; and the Loan Documents and the
Warrant Agreement(s) constitute legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization or other similar laws
generally affecting the enforcement of the rights of creditors.
4.5 This Agreement, the other Loan Documents and the Warrant Agreement(s)
do not and will not violate any provisions of Borrower's Articles of
Incorporation, bylaws or any contract, agreement, law, regulation, order,
injunction, judgment, decree or writ to which the Borrower is subject, or result
in the creation or imposition of any lien, security interest or other
encumbrance upon the Collateral, other than those created by this Agreement.
4.6 The execution, delivery and performance of this Agreement, the other
Loan Documents and the Warrant Agreement do not require the consent or approval
of any other person or entity including, without limitation, any regulatory
authority or governmental body of the United States or any state thereof or any
political subdivision of the United States or any state thereof.
4.7 No event which has had or could reasonably be expected to have a
Material Adverse Effect has occurred and is continuing.
4.8 No fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute a default under the Loan
Agreement between Borrower and Senior Creditor.
4.9 Borrower has filed and will file all tax returns, federal, state and
local, which it is required to file and has duly paid or fully reserved for all
taxes or installments thereof (including any interest or penalties) as and when
due, which have or may become due pursuant to such returns or pursuant to any
assessment received by Borrower for the three (3) years preceding the Closing
Date, if any (including any taxes being contested in good faith and by
appropriate proceedings).
<PAGE>
SECTION 5. INSURANCE
5.1 So long as there are any Secured Obligations outstanding, Borrower
shall cause to be carried and maintained comprehensive general liability
insurance against risks customarily insured against in Borrower's line of
business. Such risks shall include, without limitation, the risks of death,
bodily injury and property damage. So long as there are any Secured Obligations
outstanding, Borrower shall also cause to be carried and maintained insurance
upon the Collateral and Borrower's business, covering casualty, hazard and such
other property risks customarily insured against in Borrower's line of business.
Borrower shall deliver to Lender lender's loss payable endorsements (Form BFU
438 or equivalent) naming Lender as loss payee or additional insured, as
appropriate. Borrower shall use commercially reasonable efforts to cause all
policies evidencing such insurance to provide for at least thirty (30) days
prior written notice by the underwriter or insurance company to Lender in the
event of cancellation or expiration. Such policies shall be issued by such
insurers and in such amounts as are reasonably acceptable to Lender.
5.2 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including, without limitation, such claims, costs,
expenses, damages and liabilities based on liability in tort, including without
limitation, strict liability in tort), including reasonable attorneys' fees,
arising out of the disposition or utilization of the Collateral, other than
claims arising at or caused by Lender's gross negligence or willful misconduct
SECTION 6. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Secured Obligations remain outstanding:
6.1 Borrower shall furnish to Lender the financial statements listed
hereinafter, each prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within forty-five (45)
days) after the end of each month, unaudited interim financial statements as of
the end of such month (prepared on a consolidated and consolidating basis, if
applicable), including balance sheet and related statements of income and cash
flows accompanied by a report detailing any material contingencies (including
the commencement of any material litigation by or against Borrower) or any other
occurrence that could reasonably be expected to have a Material Adverse Effect,
all certified by Borrower's Chief Executive Officer or Chief Financial Officer
to be true and correct;
(b) as soon as practicable (and in any event within one hundred twenty
(120) days) after the end of each fiscal year, unqualified audited financial
statements as of the end of such year (prepared on a consolidated and
consolidating basis, if applicable), including balance sheet and related
statements of income and cash flows, and setting forth in comparative form the
corresponding figures for the preceding fiscal year, certified by a firm of
independent certified public accountants selected by Borrower and reasonably
acceptable to Lender, accompanied by any management report from such
accountants;
(c) promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports which Borrower
has made available to its shareholders
<PAGE>
and copies of any regular, periodic and special reports or registration
statements which Borrower files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or any national
securities exchange; and
(d) promptly, any additional information, financial or otherwise
(including, but not limited, to tax returns and names of principal creditors) as
Lender reasonably believes necessary to evaluate Borrower's continuing ability
to meet its financial obligations
6.2 Borrower shall permit any authorized representative of Lender and its
attorneys and accountants on reasonable notice to inspect, examine and make
copies and abstracts of the books of account and records of Borrower at
reasonable times during normal business hours. In addition, such representative
of Lender and its attorneys and accountants shall have the right to meet with
management and officers of the Company to discuss such books of account and
records.
6.3 Borrower will from time to time execute, deliver and file, alone or
with Lender, any financing statements, security agreements or other documents;
procure any instruments or documents as may be requested by Lender; and take all
further action that may be necessary or desirable, or that Lender may request,
to confirm, perfect, preserve and protect the security interests intended to be
granted hereby, and in addition, and for such purposes only, Borrower hereby
authorizes Lender to execute and deliver on behalf of Borrower and to file such
financing statements, security agreement and other documents without the
signature of Borrower either in Lender's name or in the name of Borrower as
agent and attorney-in-act for Borrower. The parties agree that a carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any appropriate office in lieu thereof.
6.4 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any legal process, liens or encumbrances whatsoever (except any placed
thereon by Lender) and shall give Lender immediate written notice thereof.
6.5 Without Lender's prior written consent, Borrower shall not (a) grant
any material extension of the time of payment of any of the Receivables, (b) to
any material extent, compromise, compound or settle the same for less than the
full amount thereof, (c) release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
trade discounts granted in the ordinary course of business of Borrower.
6.6 Borrower shall maintain and protect its properties, assets and
facilities, including without limitation, its Equipment and Fixtures, in good
order and working repair and condition (taking into consideration ordinary wear
and tear) and from time to time make or cause to be made all necessary and
proper repairs, renewals and replacements thereto and shall competently manage
and care for its property in accordance with prudent industry practices.
6.7 Borrower shall not merge with and into any other entity; or sell or
convey all or substantially all of its assets or stock to any other person or
entity without notifying Lender a minimum of thirty (30) days prior to the
closing date and requesting Lender's consent to the assignment of all of
Borrower's Secured Obligations hereunder to the successor entity in form and
substance satisfactory to Lender. In the event Lender does not consent to such
assignment the parties agree Borrower shall prepay the Loan in accordance with
Section 2.2 hereof.
<PAGE>
6.8 Borrower shall not, without the prior written consent of Lender, such
consent not to be unreasonably withheld, declare or pay any cash dividend or
make a distribution on any class of stock, other than pursuant to employee
repurchase plans upon an employee's death or termination of employment or
transfer, sell, lease, lend or in any other manner convey any equitable,
beneficial or legal interest in any material portion of the assets of Borrower
(except inventory sold in the normal course of business).
6.9 Upon the request of Lender, Borrower shall, during business hours,
make the Inventory and Equipment available to Lender for inspection at the place
where it is normally located and shall make Borrower's log and maintenance
records pertaining to the Inventory and Equipment available to Lender for
inspection. Borrower shall take all action necessary to maintain such logs and
maintenance records in a correct and complete fashion.
6.10 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Collateral or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom. Borrower shall file on or before the due date therefor all personal
property tax returns in respect of the Collateral. Notwithstanding the
foregoing, Borrower may contest, in good faith and by appropriate proceedings,
taxes for which Borrower maintains adequate reserves therefor.
6.11 Borrower shall not relocate any item of the Collateral (other than
sale of inventory in the ordinary course of business) except: (i) with the prior
written consent of the Lender not to be unreasonably withheld; and (ii) if such
relocation shall be within the continental United States. If permitted to
relocate Collateral pursuant to the foregoing sentence, unless otherwise agreed
in writing by Lender, Borrower shall first (a) cause to be filed and/or
delivered to the Lender all Uniform Commercial Code financing statements,
certificates or other documents or instruments necessary to continue in effect
the perfected security interest of the Lender in the Collateral, and (b) have
given the Lender no less than thirty (30) days prior written notice of such
relocation.
6.12 Lender shall have the right to invest a minimum of $100,000 and a
maximum of $200,000 in Borrower's next round of equity financing.
SECTION 7. CONDITIONS PRECEDENT TO LOAN
The obligation of Lender to fund the Loan on each Advance Date shall be
subject to Lender's discretion and satisfactory completion of its due diligence
and approval process, and satisfaction by Borrower or waiver by Lender, in
Lender's sole discretion, of the following conditions:
7.1 (a) The Advance Date for any installment shall occur on or before
September 30, 1998.
7.2 Document Delivery. Borrower, on or prior to the Closing Date, shall
have delivered to Lender the following:
(a) executed originals of the Agreement, Note, and any documents
reasonably required by Lender to effectuate the liens of Lender, with respect to
all Collateral;
<PAGE>
(b) certified copy of resolutions of Borrower's board of directors
evidencing approval of the borrowing and other transactions evidenced by the
Loan Documents and the Warrant Agreement(s);
(c) certified copies of the Articles of Incorporation and the Bylaws,
as amended through the Closing Date, of Borrower;
(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in which it
does business and where the failure to the qualified would have a Material
Adverse Effect;
(e) payment of the Facility Fee;
(f) such other documents as Lender may reasonably request.
7.3 Advance Request. Borrower shall:
(a) deliver to Lender, at least forty-eight (48) hours prior to the
Advance Date, written notice in the form of an Advance Request, or as otherwise
specified by Lender from time to time, specifying the date and amount of such
Advance.
(b) deliver executed original Note(s) as set forth in Section 2, as
applicable.
(c) such other documents as Lender may reasonably request.
7.4 Perfection of Security Interests. Borrower shall have taken or caused
to be taken such actions requested by Lender to grant Lender a first priority
perfected security interest in the Collateral, subject only to Permitted Liens.
Such actions shall include, without limitation, the delivery to Lender of all
appropriate financing statements, executed by Borrower, as to the Collateral
granted by Borrower for all jurisdictions as may be necessary or desirable to
perfect the security interest of Lender in such Collateral
7.5 Absence of Events of Defaults. As of the Closing Date or the Advance
Date, no fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute an Event of Default under this
Agreement or any of the Loan Documents and no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute a default under the Senior Loan Documents between Borrower and Senior
Creditor.
7.6 Material Adverse Effect. As of the Closing Date or the Advance Date,
no event which has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing.
SECTION 8. DEFAULT
The occurrence of any one or more of the following events (herein called
"Events of Default") shall constitute a default hereunder and under the Note(s)
and other Loan Documents:
8.1 Borrower defaults in the payment of any principal, interest or other
Secured Obligation involving the payment of money under this Agreement, the
Note(s) or any of the other Loan Documents, and such default continues for more
than five (5) days after the due date thereof; or
<PAGE>
8.2 Borrower defaults in the performance of any other covenant or Secured
Obligation of Borrower hereunder or under the Note(s) or any of the other Loan
Documents, and such default continues for more than twenty (20) days after
Lender has given notice of such default to Borrower.
8.3 Any representation or warranty made herein by Borrower shall prove to
have been false or misleading in any material respect; or
8.4 Borrower shall make an assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they become due, or
shall file a voluntary petition in bankruptcy, or shall file any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation pertinent to such circumstances, or shall seek
or consent to or acquiesce in the appointment of any trustee, receiver, or
liquidator of Borrower or of all or any substantial part (33-1/3% or more) of
the properties of Borrower; or Borrower or its directors or majority
shareholders shall take any action initiating the dissolution or liquidation of
Borrower; or
8.5 Sixty (60) days shall have expired after the commencement of an action
by or against Borrower seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, without such action being dismissed or all
orders or proceedings thereunder affecting the operations or the business of
Borrower being stayed; or a stay of any such order or proceedings shall
thereafter be set aside and the action setting it aside shall not be timely
appealed; or Borrower shall file any answer admitting or not contesting the
material allegations of a petition filed against Borrower in any such
proceedings; or the court in which such proceedings are pending shall enter a
decree or order granting the relief sought in any such proceedings; or
8.6 Sixty (60) days shall have expired after the appointment, without the
consent or acquiescence of Borrower, of any trustee, receiver or liquidator of
Borrower or of all or any substantial part of the properties of Borrower without
such appointment being vacated; or
8.7 The default by Borrower under any Excluded Agreement(s), any other
promissory note or agreement for borrowed money, or any other agreement between
Borrower and Lender; or
8.8 The occurrence of any default under any lease or other agreement or
obligation of Borrower involving an amount in excess of $100,000.00 or having a
Material Adverse Effect; or the entry of any judgment against Borrower involving
an award in excess of $100,000.00 that would have a Material Adverse Effect,
that has not been bonded or stayed on appeal within thirty (30) days; or
8.9 The occurrence of any material default under the Senior Loan
Documents; or
SECTION 9. REMEDlES
Upon the occurrence of any one or more Events of Default, Lender, at its
option, may declare the Note and all of the other Secured Obligations to be
accelerated and immediately due and payable (provided, that upon the occurrence
of an Event of Default of the type described in Sections 8.4 or 8.5, the Note(s)
and all of the other Secured Obligations shall automatically be accelerated and
made due and payable without any further act), whereupon the unpaid principal of
and accrued interest on such Note(s) and all other outstanding Secured
Obligations shall become immediately due and payable, and shall thereafter bear
interest at the Default Rate set forth in, and calculated according to, Section
2.3 (c) of this
<PAGE>
Agreement. Lender may exercise all rights and remedies with respect to the
Collateral under the Loan Documents or otherwise available to it under
applicable law, including the right to release, hold or otherwise dispose of all
or any part of the Collateral and the right to occupy, utilize, process and
commingle the Collateral.
Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere. Borrower agrees that any such public or private sale may occur upon
five (5) calendar days' prior written notice to Borrower. Lender may require
Borrower to assemble the Collateral and make it available to Lender at a place
designated by Lender which is reasonably convenient to Lender and Borrower. The
proceeds of any sale, disposition or other realization upon all or any part of
the Collateral shall be distributed by Lender in the following order of
priorities:
First, to Lender in an amount sufficient to pay in full Lender's costs and
professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Secured Obligations in such order and priority as Lender may choose in its sole
discretion; and
Finally, upon payment in full of all of the Secured Obligations, to
Borrower or its representatives or as a court of competent jurisdiction may
direct.
Lender shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under Section 9207 of the UCC.
Lender's rights and remedies hereunder are subject to the terms of the
Subordination Agreement.
SECTION 10. MISCELLANEOUS
10.1 Continuation of Security Interest. This is a continuing Agreement
and the grant of a security interest hereunder shall remain in full force and
effect and all the rights, powers and remedies of Lender hereunder shall
continue to exist until the Secured Obligations are paid in full as the same
become due and payable and until Lender has executed a written termination
statement (which Lender shall execute within a reasonable time after full
payment of the Secured Obligations hereunder), reassigning to Borrower, without
recourse, the Collateral and all rights conveyed hereby and returning possession
of the Collateral to Borrower. The rights, powers and remedies of Lender
hereunder shall be in addition to all rights, powers and remedies given by
statute or rule of law and are cumulative. The exercise of any one or more of
the rights, powers and remedies provided herein shall not be construed as a
waiver of or election of remedies with respect to any other rights, powers and
remedies of Lender.
10.2 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
<PAGE>
10.3 Notice. Except as otherwise provided herein, all notices and service
of process required, contemplated, or permitted hereunder or with respect to the
subject matter hereof shall be in writing and shall be deemed to have been
validly served, given or delivered upon the earlier of: (i) the first business
day after transmission by facsimile or hand delivery or deposit with an
overnight express service or overnight mail delivery service; or (ii) the third
calendar day after deposit in the United States mails, with proper first class
postage prepaid, and shall be addressed to the party to be notified as follows:
(a) If to Lender:
------------
COMDISCO, INC.
Legal Department
Attention: General Counsel
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5088
With a copy to:
--------------
COMDISCO, INC.
COMDISCO VENTURES
6111 North River Road
Rosemont, IL 60018
Facsimile: (847) 518-5465
(b) If to Borrower:
--------------
FLYCAST COMMUNICATIONS CORPORATION
Attention: Chief Executive Officer
181 Fremont Street, Suite 120
San Francisco, CA 94105
Facsimile: (415) 977-1009
Phone: (415) 977-1000
or to such other address as each party may designate for itself by like notice.
10.4 Entire Agreement; Amendments. This Agreement, the Note(s), and the
other Loan Documents, and the Warrant Agreement(s) constitute the entire
agreement and understanding of the parties hereto in respect of the subject
matter hereof and thereof, and supersede and replace in their entirety any prior
proposals, term sheets, letters, negotiations or other documents or agreements,
whether written or oral, with respect to the subject matter hereof or thereof
(including, without limitation, Lender's proposal letter dated April 27,1998,
all of which are merged herein and therein. None of the terms of this
Agreement, the Note(s), any of the other Loan Documents or Warrant Agreement(s)
may be amended except by an instrument executed by each of the parties hereto.
10.5 Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
10.6 No Waiver. The powers conferred upon Lender by this Agreement are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. No
<PAGE>
omission, or delay, by Lender at any time to enforce any right or remedy
reserved to it, or to require performance of any of the terms, covenants or
provisions hereof by Borrower at any time designated, shall be a waiver of any
such right or remedy to which Lender is entitled, nor shall it in any way affect
the right of Lender to enforce such provisions thereafter.
10.7 Survival. All agreements, representations and warranties contained
in this Agreement, the Note(s), the other Loan Documents and the Warrant
Agreement(s) or in any document delivered pursuant hereto or thereto shall be
for the benefit of Lender and shall survive the execution and delivery of this
Agreement and the expiration or other termination of this Agreement.
10.8 Successor and Assigns. The provisions of this Agreement, the other
Loan Documents and the Warrant Agreement(s) shall inure to the benefit of and be
binding on Borrower and its permitted assigns (if any). Borrower shall not
assign its obligations under this Agreement, the Note(s), any of the other Loan
Documents or the Warrant Agreement(s), without Lender's express written consent,
and any such attempted assignment shall be void and of no effect. Lender may
assign, transfer, or endorse its rights hereunder and under the other Loan
Documents or Warrant Agreement(s) without prior notice to Borrower, and all of
such rights shall inure to the benefit of Lender's successors and assigns.
10.9 Further Indemnification. Borrower agrees to pay, and to save Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
10.10 Governing Law. This Agreement, the Note(s), the other Loan
Documents and the Warrant Agreement(s) have been negotiated and delivered to
Lender in the State of Illinois, and shall not become effective until accepted
by Lender in the State of Illinois. Payment to Lender by Borrower of the
Secured Obligations is due in the State of Illinois. This Agreement, the
Note(s), the other Loan Documents and the Warrant Agreement(s) shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Illinois, excluding conflict of laws principles that would cause the application
of laws of any other jurisdiction.
10.11 Consent To Jurisdiction And Venue. All judicial proceedings arising
in or under or related to this Agreement, the Note(s), any of the other Loan
Documents or Warrant Agreement(s) maybebrought in any state or federal court of
competent jurisdiction located in the State of Illinois. By execution and
delivery of this Agreement, each party hereto generally and unconditionally: (a)
consents to personal jurisdiction in Cook County, State of Illinois; (b) waives
any objection as to jurisdiction or venue in Cook County, State of Illinois; (c)
agrees not to assert any defense based on lack of jurisdiction or venue in the
aforesaid courts; and (d) irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement, the Note(s), the other Loan
Documents or Warrant Agreement(s). Service of process on any party hereto in
any action arising out of or relating to this agreement shall be effective if
given in accordance with the requirements for notice set forth in Section 10.3,
above and shall be deemed effective and received as set forth in Section 10.3,
above. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of either party to bring
proceedings in the courts of any other jurisdiction.
10.12 Mutual Waiver Of Jury Trial. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced and expert person and the parties wish applicable state and
federal laws to apply (rather than arbitration rules), the parties desire that
their disputes be resolved by a judge applying such applicable laws. EACH OF
BORROWER
<PAGE>
AND LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY
CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY
OTHER CLAIM (COLLECTIVELY, "CLAIMS") ASSERTED BY BORROWER AGAINST LENDER OR ITS
ASSIGNEE AND/OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER. This waiver extends
to all such Claims, including, without limitation, Claims which involve persons
or entities other than Borrower and Lender; Claims which arise out of or are in
any way connected to the relationship between Borrower and Lender; and any
Claims for damages, breach of contract arising out of this Agreement, any other
Loan Document or any of the Excluded Agreements, specific performance, or any
equitable or legal relief of any kind.
10.13 Confidentiality. Lender acknowledges that certain items of
Collateral, including, but not limited to trade secrets, source codes, customer
lists and certain other items of Intellectual Property and any Financial
Statements provided pursuant to Section 6 hereof, constitute proprietary and
confidential information of the Borrower (the "Confidential Information").
Accordingly, Lender agrees that any Confidential Information it may obtain in
the course of acquiring perfecting or foreclosing on the Collateral or otherwise
provided under this Agreement, provided such Confidential Information is marked
as confidential by Borrower at the time of disclosure shall be received in the
strictest confidence and will not be disclosed to any other person or entity in
any manner whatsoever, in whole or in part, without the prior written consent of
the Borrower, unless and until Lender has acquired indefeasible title thereto.
10.14 Counterparts. This Agreement and any amendments, waivers, consents
or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and
delivered this Agreement as of this day and year first above written.
BORROWER:
FLYCAST COMMUNICATIONS CORPORATION
Signature: /s/
----------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
Accepted in Rosemont, Illinois:
LENDER:
COMDISCO, INC.
Signature: /s/
----------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
<PAGE>
Amendment Number One to Subordinated Loan and Security Agreement
dated as of May 22, 1998 between
FlyCast Communications Corporation, as Borrower and Comdisco, Inc. as Lender
This Amendment ("Amendment") is entered into this 29th day of September,
1998 by and between FlyCast Communications Corporation, a California
corporation, with its chief executive offices and principal place of business at
181 Fremont Street, Suite 120, San Francisco, California 94105 ("Borrower") and
Comdisco, Inc., a Delaware corporation, with its chief executive offices and
principal place of business at 6111 North River Road, Rosemont, IL 60018
("Lender").
RECITALS
WHEREAS, Borrower and Lender have entered into that certain Subordinated
Loan and Security Agreement dated as of May 22, 1998, (the "Agreement") whereby
Borrower requested Lender make available to Borrower a loan in the principal
amount of TWO MILLION FIVE HUNDRED THOUSAND and 00/100 DOLLARS ($2,500,000.00);
WHEREAS, Borrower has requested Lender make available to Borrower an
additional loan to Borrower in the principal amount of FIVE MILLION and 00/100
DOLLARS ($5,000,000.00); TWO MILLION DOLLARS ($2,000,000.00) of which shall be
available immediately ("Loan II") and THREE MILLION of which shall be available
upon the closing of an equity round of financing ("Loan III") available in
minimum installments of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) each (as the
same may from time to time be amended, modified, supplemented or revised) which
would be evidenced by Subordinated Promissory Note(s) executed by Borrower
substantially in the form of Exhibit A hereto (as the same may from time to time
be amended, modified, supplemented or restated the "Note(s)");
WHEREAS, the Secured Obligations hereunder shall be expressly subordinated,
to the extent and in the manner set forth in the Amendment to Subordination
Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Except as expressly set forth herein, all terms used herein shall have the
meanings set forth in the Agreement.
1.2 The definition of "Closing Date" as set forth in Section 1.4 of the
Agreement shall be amended to include the date of execution of this Amendment.
1.3 The definition of "Excluded Agreements" as set forth in Section 1.11 of the
Agreement shall be amended to additionally include the Warrant Agreement
executed hereunder.
1.4 The definition of "Facility Fee" as set forth in Section 1.15 of the
Agreement shall be amended to include a payment equal to one percent (1.0%) of
the principal amount of Loan II due at the Closing Date of this Amendment or one
percent (1.00%) of the principal amount of Loan III, due upon the closing of an
equity financing of at least three million dollars ($3,000,000.00).
<PAGE>
1.5 The definition of "Subordination Agreement" as set forth in Section 1.32
shall be amended to include the Amendment to Subordination Agreement of even
date herewith, entered into between Borrower, Lender, and Senior Creditor.
1.6 The definition of "Warrant Agreement" as set forth in Section 1.36 shall be
amended to include the agreement entered into in connection with Loan II and
Loan III, substantially in the form attached hereto as Exhibit B-1 and B-2
pursuant to which Borrower granted to Lender the right to purchase that number
of shares of Series B Preferred Stock and Series C Preferred Stock of Borrower
as more particularly set forth therein.
SECTION 2. THE LOAN
2.1 (a) Loan II:
The outstanding principal amount of the Loan II, together with
interest thereon precomputed at the rate of fourteen (14.00%) percent per annum,
shall be due and payable in nine (9) equal monthly installments of interest
only, payable on the first day of each month, followed by twenty-four (24) equal
monthly installments of principal and interest, payable on the first day of each
month, to and including the Maturity Date (each, a "Payment Date"). If any
payment under the Note(s) shall be payable on a day other than a business day,
then such payment shall be due and payable on the next succeeding business day.
In consideration for Loan II, Borrower shall issue Lender a Warrant
Agreement for the purchase of a number of shares of Borrower's Series B
Preferred Stock, in the form of Exhibit B-1 attached hereto.
(b) Loan III:
Loan III shall be available upon the closing of an equity round of
financing with proceeds to Borrower of at least THREE MILLION DOLLARS
($3,000,000.00). The outstanding principal amount of the Loan III, together
with interest thereon precomputed at the rate of fourteen (14.00%) percent per
annum, shall be due and payable in nine (9) equal monthly installments of
interest only, payable on the first day of each month, followed by twenty-four
(24) equal monthly installments of principal and interest, payable on the first
day of each month, to and including the Maturity Date (each, a "Payment Date").
If any payment under the Note(s) shall be payable on a day other than a business
day, then such payment shall be due and payable on the next succeeding business
day.
In consideration for Loan III, Borrower shall issue Lender a Warrant
Agreement for the purchase of a number of shares of Borrower's Series C
Preferred Stock equal to $480,000.00 divided by the price per share paid by
investors in the Series C Preferred Stock financing ("the Exercise Price"), in
the form of Exhibit B-2 attached hereto.
2.2. Borrower shall have the option to prepay the Loan, without penalty or
premium, in whole or in part, as of any Payment Date after the Closing Date by
paying to Lender such principal amount being prepaid together with all accrued
and unpaid interest with respect to such principal amount, as of the date of
such prepayment. Notwithstanding the foregoing, in the event the Loan is
prepaid within the twelve (12) months from the date hereof, Borrower shall pay
Lender an additional fee equal to one (1.00%) percent of the outstanding
principal amount of the Loan.
2.3. (a) Notwithstanding any provision in this Agreement, the Note, or any
other Loan Document, it is not the parties' intent to contract for, charge or
receive interest at a rate that is greater than the maximum rate permissible by
law which a court of competent jurisdiction shall deem applicable
<PAGE>
hereto (which under the laws of the State of Illinois shall be deemed to be the
laws relating to permissible rates of interest on commercial loans) (the
"Maximum Rate"). If the Borrower actually pays Lender an amount of interest,
chargeable on the total aggregate principal Secured Obligations of Borrower
under this Agreement and the Note (as said rate is calculated over a period of
time from the date of this Agreement though the end of time that any principal
is outstanding on the Note), which amount of interest exceeds interest
calculated at the Maximum Rate on said principal chargeable over said period of
time, then such excess interest actually paid by Borrower shall be applied
first, to the payment of principal outstanding on the Note; second, after all
principal is repaid, to the payment of Lender's out of pocket costs, expenses,
and professional fees which are owed by Borrower to Lender under this Agreement
or the Loan Documents; and third, after all principal, costs, expenses, and
professional fees owed by Borrower to Lender are repaid, the excess (if any)
shall be refunded to Borrower, and the effective rate of interest will be
automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rate set forth in Paragraph 1.
(c) Upon and during the continuation of an Event of Default hereunder,
all Secured Obligations, including principal, interest, compounded interest, and
professional fees, shall bear interest at a rate per annum equal to the rate set
forth in Paragraph 1. plus five percent (5%) per annum ("Default Rate").
2.4. If the Borrower has not repaid the outstanding principal amount under the
Loan in its entirety within thirty (30) days of the Maturity Date (as defined in
the applicable Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding principal is not paid, Lender shall have the
right to purchase from the Borrower, at the Exercise Price (adjusted, as set
forth and defined in the Warrant Agreement), an additional number of shares of
Preferred Stock which number shall be determined by (i) multiplying the
outstanding principal amount which is due but unpaid by 1% and (ii) dividing the
product thereof by the Exercise Price.
SECTION 3. COVENANTS OF BORROWER
Borrower covenants and agrees that Lender, at its sole discretion, shall
have the right to invest up to ONE MILLION DOLLARS ($1,000,000.00) in Borrower's
next equity financing, at a price per share paid by other investors.
SECTION 4. CONDITIONS PRECEDENT TO LOAN
The obligation of Lender to fund the Loan on each Advance Date shall be
subject to Borrower's request, and Lender's satisfactory completion of its due
diligence and approval process, and satisfaction by Borrower or waiver by
Lender, in Lender's sole discretion, of the following conditions:
4.1. The Closing Date shall occur on or before September 29, 1999.
<PAGE>
4.2. Document Delivery. Borrower, on or prior to the Closing Date, shall have
delivered to Lender the following:
(a) executed originals of the Amendment, (the Note), and all other
Loan Documents, and the Warrant Agreement, including any documents
reasonably required by Lender to effectuate the liens of Lender, with
respect to all Collateral;
(b) certified copy of resolutions of Borrower's board of directors
evidencing approval of the borrowing and other transactions evidenced by
the Loan Documents and the Warrant Agreement;
(c) certified copies of the Certificate of Incorporation and the
Bylaws, as amended through the Closing Date, of Borrower;
(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in
which it does business and where the failure to be qualified would have a
Material Adverse Effect;
(e) payment of the Facility Fee for Loan II;
(f) Borrower's written instructions to Lender regarding the manner of
disbursement of the Loan, which must be reasonably satisfactory to Lender;
and
(g) such other documents as Lender may reasonably request.
4.3. Advance Request. Borrower shall:
With respect to Loan II:
- -----------------------
(a) deliver to Lender, at least forty-eight (48) hours prior to the
Advance Date, written notice in the form of an Advance Request, or as
otherwise specified by Lender from time to time, specifying the date and
amount of such Advance.
(b) deliver executed original Note(s) as set forth in Section 2.1
(a), as applicable.
(c) such other documents as Lender may reasonably request.
<PAGE>
With respect to Loan III:
- ------------------------
(a) deliver to Lender, at least forty-eight (48) hours prior to the
Advance Date, written notice in the form of an Advance Request, or as
otherwise specified by Lender from time to time, specifying the date and
amount of such Advance.
(b) deliver executed original Note(s) as set forth in Section 2.1(b),
as applicable;
(c) payment of the Facility Fee as set forth in Section 1.4 above;
(d) deliver executed Warrant Agreement as set forth in Section
2.1(b);
(e) such other documents as Lender may reasonably request.
4.4. Perfection of Security Interests. Borrower shall have taken or caused to
be taken such actions requested by Lender to grant Lender a second priority
perfected security interest in the Collateral, subject only to Permitted Liens.
Such actions shall include, without limitation, the delivery to Lender of all
appropriate financing statements, executed by Borrower, as to the Collateral
granted by Borrower for all jurisdictions as may be necessary or desirable to
perfect the security interest of Lender in such Collateral
4.5. Absence of Events of Defaults. As of the Closing Date, no fact or
condition exists that would (or would, with the passage of time, the giving of
notice, or both) constitute an Event of Default under this Agreement or any of
the Loan Documents and no fact or condition exists that would (or would, with
the passage of time, the giving of notice, or both) constitute a default under
the Senior Loan Documents between Borrower and Senior Creditor.
4.6. Material Adverse Effect. As of the Closing Date, no event which has had
or could reasonably be expected to have a Material Adverse Effect has occurred
and is continuing.
4.7. Representations and Warranties of Borrower. As of the Closing date, the
representations and warranties made by Borrower in Section 4 of the Agreement
remain in full force and effect.
4.8. Borrower covenants and agrees to take such other actions as the Lender may
reasonably request in order to effectuate the intention of the parties hereunder
and under the Agreement, including without limitation, the execution of Uniform
Commercial Code financing statements or other similar documents, in order to
confirm, perfect, preserve and protect the security interests of the Lender in
the Collateral.
SECTION 5. MISCELLANEOUS
5.1. Except as specifically amended hereby, the terms and conditions of the
Agreement are hereby reaffirmed and remain in full force and effect, and from
and after the date hereof the "Agreement" shall mean the "Agreement" as amended
by this Amendment.
5.2. This Amendment may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have duly executed and delivered
this Amendment as of the day and year first above written.
BORROWER FLYCAST COMMUNICATIONS CORPORATION
Signature: /s/
______________________
Print Name:
_____________________
Title:
__________________________
ACCEPTED IN ROSEMONT, ILLINOIS
LENDER COMDISCO, INC.
Signature: /s/ JAMES P. LABE
______________________
Print Name:
_____________________
Title:
__________________________
JAMES P. LABE
PRESIDENT
COMDISCO VENTURES DIVISION
<PAGE>
Exhibit A
SUBORDINATED PROMISSORY NOTE
$2,500,000.00 Date: May 27,1998
Due: November 1, 2001
FOR VALUE RECEIVED, FlyCast Communications Corporation, a California corporation
(the "Borrower") hereby promises to pay to the order of Comdisco, Inc., a
Delaware corporation (the "Lender") at P.O. Box 91744, Chicago, IL 60693 or such
other place of payment as the holder of this Secured Promissory Note (this
"Note") may specify from time to time in writing, in lawful money of the United
States of America, the principal amount of Two Million Five Hundred Thousand and
00/100 Dollars ($2,500,000.00) together with interest at eleven percent (11.00%)
per annum from the date of this Note to maturity of each installment on the
principal hereof remaining from time to time unpaid, such principal and interest
to be paid in 1 monthly installment of interest only of $3,055.56 each,
commencing June 1, 1998, followed by 5 equal monthly installments of interest
only of $22,916.67 each, commencing July 1, 1998 and on the same day of each
month thereafter to and including November 1,1998 ,followed by 36 equal monthly
installments of principal and interest of $81,846.79 commencing December 1, 1998
and on the same day of each month thereafter to and including November 1, 2001,
such installments to be applied first to accrued and unpaid interest and the
balance to unpaid principal. Interest shall be computed on the basis of a year
consisting of twelve months of thirty days each.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Subordinated Loan and Security Agreement of even
date herewith by and between Borrower and Lender (as the same may from time to
time be amended, modified or supplemented in accordance with its terms, the
"Loan Agreement"), and is entitled to the benefit and security of the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement), to
which reference is made for a statement of all of the terms and conditions
thereof. All terms defined in the Loan Agreement shall have the same
definitions when used herein, unless otherwise defined herein.
THIS NOTE IS EXPRESSLY SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION
AGREEMENT BY AND BETWEEN LENDER AND BORROWER FOR THE BENEFIT OF SENIOR CREDITOR.
IN THE EVENT OF ANY CONTRADICTION OR INCONSISTENCY BETWEEN THIS NOTE AND THE
SUBORDINATION AGREEMENT, THE TERMS OF THE SUBORDINATION AGREEMENT SHALL CONTROL.
The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.
<PAGE>
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and
enforced in accordance with, the laws of the State of Illinois, excluding any
conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.
BORROWER: FLYCAST COMMUNICATIONS CORPORATION
181 Fremont Street, Suite 120, San Francisco, CA 94105
Signature:/s/
--------------------------------------------
Print Name:
-------------------------------------------
Title:
------------------------------------------------
<PAGE>
Exhibit B
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
FLYCAST COMMUNICATIONS CORPORATION
Dated as of May 22,1998 (the "Effective Date")
WHEREAS, Flycast communications corporation, a California corporation (the
"Company") has entered into a Subordinated Loan and Security Agreement dated as
of May 22, 1998, and related Subordinated Promissory Note(s) (collectively, the
"Loans") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series B Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
For value received, the Company hereby grants to the Warrantholder, and the
Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from the Company that
number of fully paid and assessable shares of the Company's Series C Preferred
Stock ("Preferred Stock") equal to Two Hundred Fifty Thousand Dollars
($250,000.00) ("Aggregate Purchase Price") divided by the Exercise Price
("Exercise Price"). The Exercise Price shall equal to the sum of $1.33 per
share (the "Last Round") plus the product of (a) the difference between the
price per share of the next round of equity financing (the "Next Round") and the
Last Round, multiplied by (b) the fraction resulting from dividing (x) the
number of days from the date of closing of the Last Round to the date of
execution of the Leases, by (y) the number of days from the date of the closing
of the Last Round to the date of closing of the Next Round; provided however, if
the Next Round is not successfully completed by December 31, 1998, then the
Exercise Price shall be equal to $1.33 per share. For purposes of the
calculation above, Next Round shall include (i) any equity financing, (ii)
Merger Event (as further defined herein) or (iii) the initial "Price to Public"
specified in the final prospectus with respect to the offering of the Company's
Common Stock, pursuant to a Registration Statement relating to such public
offering declared effective by the SEC. The number and purchase price of such
shares available hereunder are subject to adjustment as provided in Section 8
hereof.
<PAGE>
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) five (5) years
or (ii) two (2) years from the effective date of the Company's initial public
offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be
issued to the Warrantholder.
Y = the number of shares of Preferred Stock
requested to be exercised under this Warrant
Agreement.
A = the fair market value of one (1) share of
Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC, then
the fair market value per share shall be the product of (x) the initial "Price
to Public" specified in the final prospectus with respect to the offering and
(y) the number of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
<PAGE>
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing prices over
a twenty-one (21) day period ending three days before the day the current fair
market value of the securities is being determined and (y) the number of shares
of Common Stock into which each share of Preferred Stock is convertible at the
time of such exercise; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing bid and
asked prices quoted on the NASDAQ system (or similar system) over the twenty-one
(21) day period ending three days before the day the current fair market value
of the securities is being determined and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time of
such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x) the
highest price per share which the Company could obtain from a willing buyer (not
a current employee or director) for shares of Common Stock sold by the Company,
from authorized but unissued shares, as determined in good faith by its Board of
Directors and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise, unless the Company
shall become subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the fair market
value of Preferred Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
<PAGE>
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and
<PAGE>
(ii) the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If the Company has not paid any
----------------------------------
Subordinated Promissory Note(s) entered into pursuant to the Loan(s) in its
entirety by the Maturity Date (as defined in the applicable Subordinated
Promissory Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding principal is not paid, Warrantholder shall have
the right to purchase from the Company, at the Exercise Price (adjusted as set
forth herein), an additional number of shares of Preferred Stock which number
shall be determined by (i) multiplying the outstanding principal amount which
due but unpaid by 1% and (ii) dividing the product thereof by the Exercise
Price.
(f) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
<PAGE>
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall
begin on the date Warrantholder actually receives a written notice containing
all the information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
and the issuance and delivery of any certificate in a name other than that of
the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Loans and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Loans and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 10,000,000
shares of Common Stock, of which 2,373,516 shares are issued and outstanding,
and (B) 920,000 shares of Series A Preferred Stock, of which 911,295 shares are
issued and outstanding and are convertible into 911,295 shares of Common Stock
at $1.00 per share, and (C) 5,500,000 shares of Series B Preferred Stock, of
<PAGE>
which 5,324,532 shares are issued and outstanding and are convertible into
5,324,532 shares of Common Stock at $1.33 per share.
(ii) The Company has reserved 1,300,000 shares of Common Stock for
issuance under its Nonqualified/Incentive Stock Option Plan, under which 928,816
options are outstanding at an average price of $0.10 or $0.13 per share. There
are no other options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities of the Company.
(iii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant the terms of any other contract or agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
-------------
Preferred Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be
<PAGE>
exempt from the registration and qualifications requirements thereof, and (ii)
that the Company's reliance on such exemption is predicated on the
representations set forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and
--------------
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if
-----------------------
the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1934 Act (the "1934 Act"), or file reports
pursuant to Section 15(d), of the 1934 Act", or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrartholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
-------------------
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. REQUESTS FOR REGISTRATION.
-------------------------
Warrantholder and Company agree that all shares of Preferred Stock subject
to the Warrant Agreement shall have the same registration rights and be subject
to the same terms and conditions with
<PAGE>
respect to the registration and sale of such stock as possessed by the Series B
Shareholders as provided for in the Investors' Rights Agreement dated July
11,1997, as amended, by and among the Company and those certain Purchasers
identified therein, attached thereto as Exhibit A.
12. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
13. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: Venture Lease
Administration, cc: Legal Department, attn.: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847)518-5088 and (ii) to the Company at 181
Fremont Street, Suite 120, San Francisco, California, 94105, attention: (and/or
if by facsimile, (415) 977-1009 or at such other address as any such party may
--- --------
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific
<PAGE>
performance of any or all provisions hereof or enjoining the Company from
continuing to commit any such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Loans referenced in the preamble of this Warrant Agreement exceeds
$1,000,000, the Company will also provide Warrantholder with an opinion from the
Company's counsel with respect to those same representations, warranties and
covenants. The Company shall also supply such other documents as the
Warrantholder may from time to time reasonably request.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: FLYCAST COMMUNICATIONS CORPORATION
By:/s/
--------------------------------------------
Title:
-----------------------------------------
Warrantholder: COMDISCO, INC.
By:/s/
--------------------------------------------
Title:
-----------------------------------------
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: ____________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series ____ Preferred Stock of __________________, pursuant to the
terms of the Warrant Agreement dated the ______ day of
_______________________, 19__ (the "Warrant Agreement") between
__________________________ ______________________________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series ____ Preferred Stock of
____________________________ ___________________________________________
the undersigned hereby confirms and acknowledges the investment
representations and warranties made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ____ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
- --------------------------------------
(Name)
- --------------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
-----------------------------------
Title:
--------------------------------
Date:
---------------------------------
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ______________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Series ____ Preferred Stock of __________________ pursuant to the terms
of the Warrant Agreement, and further acknowledges that _______ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company:
By:
----------------------------------------
Title:
-------------------------------------
Date:
--------------------------------------
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
____________________________________
(Please Print)
whose address is____________________________________
____________________________________________________
Dated:
____________________________________
Holder's Signature:
_______________________
Holder's Address:
_______________________
Signature Guaranteed:
__________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
<PAGE>
Exhibit B-1
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
FLYCAST COMMUNICATIONS CORPORATION
Dated as of September 29, 1998 (the "Effective Date")
WHEREAS, FlyCast Communications Corporation, a California corporation (the
"Company") has entered into a Subordinated Loan and Security Agreement dated as
of May 22,1998 as amended by Amendment Number One to the Subordinated Loan and
Security Agreement dated September 29, 1998, and related Subordinated Promissory
Note(s) (collectively, the "Loans") with Comdisco, Inc., a Delaware corporation
(the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series B Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
For value received, the Company hereby grants to the Warrantholder, and the
Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from the Company that
number of fully paid and assessable shares of the Company's Series C Preferred
Stock ("Preferred Stock") equal to Three Hundred Twenty Thousand Dollars
($320,000.00) ("Aggregate Purchase Price") divided by the Exercise Price
("Exercise Price"). The Exercise Price shall equal to the sum of $1.33 per
share (the "Last Round") plus the product of (a) the difference between the
price per share of the next round of equity financing (the "Next Round") and the
Last Round, multiplied by (b) the fraction resulting from dividing (x) the
number of days from the date of closing of the Last Round to the date of
execution of the Leases, by (y) the number of days from the date of the closing
of the Last Round to the date of closing of the Next Round; provided however, if
the Next Round is not successfully completed by December 31, 1998, then the
Exercise Price shall be equal to $1.33 per share. Notwithstanding the
foregoing, the Next Round price shall be capped at a pre-money valuation of
Sixty Million Dollars ($60,000,000.00). For purposes of the calculation above,
Next Round shall include (i) any equity financing, (ii) Merger Event (as further
defined herein) or (iii) the initial "Price to Public"
<PAGE>
specified in the final prospectus with respect to the offering of the Company's
Common Stock, pursuant to a Registration Statement relating to such public
offering declared effective by the SEC. The number and purchase price of such
shares available hereunder are subject to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for heroin, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) five (5) years
or (ii) two (2) years from the effective date of the Company's initial public
offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC, then
the fair market value per share shall be the product of (x) the initial "Price
to Public" specified in the final prospectus with respect to the offering and
(y) the number of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise;
<PAGE>
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall be
deemed to be the product of (x) the average of the closing prices over a twenty-
one (21) day period ending three days before the day the current fair market
value of the securities is being determined and (y) the number of shares of
Common Stock into which each share of Preferred Stock is convertible at the time
of such exercise; or
(b) if actively traded over-the-counter, the fair market value shall
be deemed to be the product of (x) the average of the closing bid and asked
prices quoted on the NASDAQ system (or similar system) over the twenty-one (21)
day period ending three days before the day the current fair market value of the
securities is being determined and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x) the
highest price per share which the Company could obtain from a willing buyer (not
a current employee or director) for shares of Common Stock sold by the Company,
from authorized but unissued shares, as determined in good faith by its Board of
Directors and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise, unless the Company
shall become subject to a merger, acquisition or other consolidation pursuant to
which the Company is not the surviving party, in which case the fair market
value of Preferred Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
<PAGE>
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
<PAGE>
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution.
The Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If the Company has not paid any
----------------------------------
Subordinated Promissory Note(s) entered into pursuant to the Loan(s) in its
entirety by the Maturity Date (as defined in the applicable Subordinated
Promissory Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding principal is not paid, Warrantholder shall have
the right to purchase from the Company, at the Exercise Price (adjusted as set
forth herein), an additional number of shares of Preferred Stock which number
shall be determined by (i) multiplying the outstanding principal amount which
due but unpaid by 1% and (ii) dividing the product thereof by the Exercise
Price.
(f) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit ~ (the "Charter"). The
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
<PAGE>
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall
begin on the date Warrantholder actually receives a written notice containing
all the information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
and the issuance and delivery of any certificate in a name other than that of
the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Loans and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Loans and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
<PAGE>
(i) The authorized capital of the Company consists of (A) 10,000,000
shares of Common Stock, of which 2,373,516 shares are issued and outstanding,
and (B) 920,000 shares of Series A Preferred Stock, of which 911,295 shares are
issued and outstanding and are convertible into 911,295 shares of Common Stock
at $1.00 per share, and (C) 5,500,000 shares of Series B Preferred Stock, of
which 5,324,532 shares are issued and outstanding and are convertible into
5,324,532 shares of Common Stock at $1.33 per share.
(ii) The Company has reserved 1,300,000 shares of Common Stock for
issuance under its Nonqualified/Incentive Stock Option Plan, under which 928,816
options are outstanding at an average price of $0.10 or $0.13 per share. There
are no other options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of the Company's capital stock or other securities of the Company.
(iii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant the terms of any other contract or agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
<PAGE>
(b) Private Issue. The Warrantholder understands (i) that the
-------------
Preferred Stock issuable upon exercise of this Warrant is not registered under
the 1933 Act or qualified under applicable state securities laws on the ground
that the issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and
--------------
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, and has the ability to bear the economic
risks of its investment.
(e) Risk of No Registration. The Warrantholder understands that if
-----------------------
the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1934 Act (the "1934 Act"), or file reports
pursuant to Section 15(d), of the 1934 Act", or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
-------------------
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
<PAGE>
11. REQUESTS FOR REGISTRATION.
-------------------------
Warrantholder and Company agree that all shares of Preferred Stock subject
to the Warrant Agreement shall have the same registration rights and be subject
to the same terms and conditions with respect to the registration and sale of
such stock as possessed by the Series B Shareholders as provided for in the
Investors' Rights Agreement dated July 11,1997, as amended, by and among the
Company and those certain Purchasers identified therein, attached thereto as
Exhibit A.
12. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
13. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: Venture Lease
Administration, cc: Legal Department, attn.: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847)518-5088 and (ii) to the Company at 181
Fremont Street, Suite 120, San Francisco, California, 94105, attention: (and/or
if by facsimile, (415) 977-1009 or at such other address as any such party may
--- --------
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
<PAGE>
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Loans referenced in the preamble of this Warrant Agreement exceeds
$1,000,000, the Company will also provide Warrantholder with an opinion from the
Company's counsel with respect to those same representations, warranties and
covenants. The Company shall also supply such other documents as the
Warrantholder may from time to time reasonably request.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: FLYCAST COMMUNICATIONS CORPORATION
By:/s/
---------------------------------
Title:
------------------------------
Warrantholder: COMDISCO, INC.
By:/s/
--------------------------------
Title:
-----------------------------
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: ____________________
(1) The undersigned Warrantholder hereby ejects to purchase _______ shares of
the Series ____ Preferred Stock of __________________, pursuant to the
terms of the Warrant Agreement dated the ______ day of
_______________________, 19__ (the "Warrant Agreement") between
_________________________ ______________________________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series ____ Preferred Stock of
___________________________ ___________________________________________ the
undersigned hereby confirms and acknowledges the investment representations
and warranties made in Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing Said shares of
Series ____ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
- --------------------------------
(Name)
- --------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
-----------------------------
Title:
--------------------------
Date:
---------------------------
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ______________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Series ____ Preferred Stock of __________________ pursuant to the terms
of the Warrant Agreement, and further acknowledges that _______ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company:
-------------------------------
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
____________________________________
(Please Print)
whose address is____________________________________
____________________________________________________
Dated:
_______________________________
Holder's Signature:
__________________
Holder's Address:
__________________
Signature Guaranteed:
_______________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
<PAGE>
Exhibit C
Advance Request
Name: FlyCast Communications Corporation ("Borrower") Date:
__________
Address: 181 Fremont Street, Suite 120
San Francisco, CA 94105
Borrower hereby requests from Comdisco, Inc. ("Lender") an Advance in the
amount of $________________ on _________________, 1998 (the "Advance Date")
under that Subordinated Loan and Security Agreement between Borrower and Lender
dated May __, 1998 (the "Agreement").
Please:
(a) Issue a check payable to Borrower _________________
or
(b) Wire Funds to Borrower's account _________________
Bank:
-------------------------------
Address:
----------------------------
ABA Number:
-------------------------
Account Number:
---------------------
Account Name:
----------------------
Borrower hereby affirms that all Representations and Warranties of Borrower
set forth in Section 4 and all Conditions Precedent to Loan set forth in Section
7 of the Agreement remain true and correct as of the date hereof.
Executed this ___ day of ________________, 1998 by:
BORROWER: FLYCAST COMMUNICATIONS CORPORATION
BY:
---------------------------------
TITLE:
------------------------------
PRINT:
-----------------------------
<PAGE>
Amendment Number One to Subordinated Loan and Security Agreement
dated as of May 22, 1998 between
FlyCast Communications Corporation, as Borrower and Comdisco, Inc. as Lender
This Amendment ("Amendment") is entered into this 29th day of September,
1998 by and between FlyCast Communications Corporation, a California
corporation, with its chief executive offices and principal place of business at
181 Fremont Street, Suite 120, San Francisco, California 94105 ("Borrower") and
Comdisco, Inc., a Delaware corporation, with its chief executive offices and
principal place of business at 6111 North River Road, Rosemont, IL 60018
("Lender").
RECITALS
WHEREAS, Borrower and Lender have entered into that certain Subordinated
Loan and Security Agreement dated as of May 22, 1998, (the "Agreement") whereby
Borrower requested Lender make available to Borrower a loan in the principal
amount of TWO MILLION FIVE HUNDRED THOUSAND and 00/100 DOLLARS ($2,500,000.00);
WHEREAS, Borrower has requested Lender make available to Borrower an
additional loan to Borrower in the principal amount of FIVE MILLION and 00/100
DOLLARS ($5,000,000.00); TWO MILLION DOLLARS ($2,000,000.00) of which shall be
available immediately ("Loan II") and THREE MILLION of which shall be available
upon the closing of an equity round of financing ("Loan III") available in
minimum installments of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) each (as the
same may from time to time be amended, modified, supplemented or revised) which
would be evidenced by Subordinated Promissory Note(s) executed by Borrower
substantially in the form of Exhibit A hereto (as the same may from time to time
be amended, modified, supplemented or restated the "Note(s)");
WHEREAS, the Secured Obligations hereunder shall be expressly subordinated,
to the extent and in the manner set forth in the Amendment to Subordination
Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, Borrower and Lender hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Except as expressly set forth herein, all terms used herein shall have the
meanings set forth in the Agreement.
1.2 The definition of "Closing Date" as set forth in Section 1.4 of the
Agreement shall be amended to include the date of execution of this Amendment.
1.3 The definition of "Excluded Agreements" as set forth in Section 1.11 of the
Agreement shall be amended to additionally include the Warrant Agreement
executed hereunder.
1.4 The definition of "Facility Fee" as set forth in Section 1.15 of the
Agreement shall be amended to include a payment equal to one percent (1.0%) of
the principal amount of Loan II due at
<PAGE>
the Closing Date of this Amendment or one percent (1.00%) of the principal
amount of Loan III, due upon the closing of an equity financing of at least
three million dollars ($3,000,000.00).
1.5 The definition of "Subordination Agreement" as set forth in Section 1.32
shall be amended to include the Amendment to Subordination Agreement of even
date herewith, entered into between Borrower, Lender, and Senior Creditor.
1.6 The definition of "Warrant Agreement" as set forth in Section 1.36 shall be
amended to include the agreement entered into in connection with Loan II and
Loan III, substantially in the form attached hereto as Exhibit B-1 and B-2
pursuant to which Borrower granted to Lender the right to purchase that number
of shares of Series B Preferred Stock and Series C Preferred Stock of Borrower
as more particularly set forth therein.
SECTION 2. THE LOAN
2.1 (a) Loan II:
The outstanding principal amount of the Loan II, together with
interest thereon precomputed at the rate of fourteen (14.00%) percent per annum,
shall be due and payable in nine (9) equal monthly installments of interest
only, payable on the first day of each month, followed by twenty-four (24) equal
monthly installments of principal and interest, payable on the first day of each
month, to and including the Maturity Date (each, a "Payment Date"). If any
payment under the Note(s) shall be payable on a day other than a business day,
then such payment shall be due and payable on the next succeeding business day.
In consideration for Loan II, Borrower shall issue Lender a Warrant
Agreement for the purchase of a number of shares of Borrower's Series B
Preferred Stock, in the form of Exhibit B-1 attached hereto.
(b) Loan III:
Loan III shall be available upon the closing of an equity round of
financing with proceeds to Borrower of at least THREE MILLION DOLLARS
($3,000,000.00). The outstanding principal amount of the Loan III, together
with interest thereon precomputed at the rate of fourteen (14.00%) percent per
annum, shall be due and payable in nine (9) equal monthly installments of
interest only, payable on the first day of each month, followed by twenty-four
(24) equal monthly installments of principal and interest, payable on the first
day of each month, to and including the Maturity Date (each, a "Payment Date").
If any payment under the Note(s) shall be payable on a day other than a business
day, then such payment shall be due and payable on the next succeeding business
day.
In consideration for Loan III, Borrower shall issue Lender a Warrant
Agreement for the purchase of a number of shares of Borrower's Series C
Preferred Stock equal to $480,000.00 divided by the price per share paid by
investors in the Series C Preferred Stock financing ("the Exercise Price"), in
the form of Exhibit B-2 attached hereto.
2.2. Borrower shall have the option to prepay the Loan, without penalty or
premium, in whole or in part, as of any Payment Date after the Closing Date by
paying to Lender such principal amount being prepaid together with all accrued
and unpaid interest with respect to such principal amount, as of the date of
such prepayment. Notwithstanding the foregoing, in the event the Loan is
prepaid within the twelve (12) months from the date hereof, Borrower shall pay
Lender an additional fee equal to one (1.00%) percent of the outstanding
principal amount of the Loan.
<PAGE>
2.3. (a) Notwithstanding any provision in this Agreement, the Note, or any
other Loan Document, it is not the parties' intent to contract for, charge or
receive interest at a rate that is greater than the maximum rate permissible by
law which a court of competent jurisdiction shall deem applicable hereto (which
under the laws of the State of Illinois shall be deemed to be the laws relating
to permissible rates of interest on commercial loans) (the "Maximum Rate"). If
the Borrower actually pays Lender an amount of interest, chargeable on the total
aggregate principal Secured Obligations of Borrower under this Agreement and the
Note (as said rate is calculated over a period of time from the date of this
Agreement though the end of time that any principal is outstanding on the Note),
which amount of interest exceeds interest calculated at the Maximum Rate on said
principal chargeable over said period of time, then such excess interest
actually paid by Borrower shall be applied first, to the payment of principal
outstanding on the Note; second, after all principal is repaid, to the payment
of Lender's out of pocket costs, expenses, and professional fees which are owed
by Borrower to Lender under this Agreement or the Loan Documents; and third,
after all principal, costs, expenses, and professional fees owed by Borrower to
Lender are repaid, the excess (if any) shall be refunded to Borrower, and the
effective rate of interest will be automatically reduced to the Maximum Rate.
(b) In the event any interest is not paid when due hereunder, delinquent
interest shall be added to principal and shall bear interest on interest,
compounded at the rate set forth in Paragraph 1.
(c) Upon and during the continuation of an Event of Default hereunder,
all Secured Obligations, including principal, interest, compounded interest, and
professional fees, shall bear interest at a rate per annum equal to the rate set
forth in Paragraph 1. plus five percent (5%) per annum ("Default Rate").
2.4. If the Borrower has not repaid the outstanding principal amount under the
Loan in its entirety within thirty (30) days of the Maturity Date (as defined in
the applicable Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding principal is not paid, Lender shall have the
right to purchase from the Borrower, at the Exercise Price (adjusted, as set
forth and defined in the Warrant Agreement), an additional number of shares of
Preferred Stock which number shall be determined by (i) multiplying the
outstanding principal amount which is due but unpaid by 1% and (ii) dividing the
product thereof by the Exercise Price.
SECTION 3. COVENANTS OF BORROWER
Borrower covenants and agrees that Lender, at its sole discretion, shall
have the right to invest up to ONE MILLION DOLLARS ($1,000,000.00) in Borrower's
next equity financing, at a price per share paid by other investors.
SECTION 4. CONDITIONS PRECEDENT TO LOAN
The obligation of Lender to fund the Loan on each Advance Date shall be
subject to Borrower's request, and Lender's satisfactory completion of its due
diligence and approval process, and satisfaction by Borrower or waiver by
Lender, in Lender's sole discretion, of the following conditions:
4.1. The Closing Date shall occur on or before September 29, 1999.
<PAGE>
4.2. Document Delivery. Borrower, on or prior to the Closing Date, shall have
delivered to Lender the following:
(a) executed originals of the Amendment, (the Note), and all other
Loan Documents, and the Warrant Agreement, including any documents
reasonably required by Lender to effectuate the liens of Lender, with
respect to all Collateral;
(b) certified copy of resolutions of Borrower's board of directors
evidencing approval of the borrowing and other transactions evidenced by
the Loan Documents and the Warrant Agreement;
(c) certified copies of the Certificate of Incorporation and the
Bylaws, as amended through the Closing Date, of Borrower;
(d) certificate of good standing for Borrower from its state of
incorporation and similar certificates from all other jurisdictions in
which it does business and where the failure to be qualified would have a
Material Adverse Effect;
(e) payment of the Facility Fee for Loan II;
(f) Borrower's written instructions to Lender regarding the manner of
disbursement of the Loan, which must be reasonably satisfactory to Lender;
and
(g) such other documents as Lender may reasonably request.
4.3. Advance Request. Borrower shall:
With respect to Loan II:
- -----------------------
(a) deliver to Lender, at least forty-eight (48) hours prior to the
Advance Date, written notice in the form of an Advance Request, or as
otherwise specified by Lender from time to time, specifying the date and
amount of such Advance.
(b) deliver executed original Note(s) as set forth in Section 2.1
(a), as applicable.
(c) such other documents as Lender may reasonably request.
With respect to Loan III:
- ------------------------
(a) deliver to Lender, at least forty-eight (48) hours prior to the
Advance Date, written notice in the form of an Advance Request, or as
otherwise specified by Lender from time to time, specifying the date and
amount of such Advance.
(b) deliver executed original Note(s) as set forth in Section 2.1(b),
as applicable;
(c) payment of the Facility Fee as set forth in Section 1.4 above;
<PAGE>
(d) deliver executed Warrant Agreement as set forth in Section
2.1(b);
(e) such other documents as Lender may reasonably request.
4.4. Perfection of Security Interests. Borrower shall have taken or caused to
be taken such actions requested by Lender to grant Lender a second priority
perfected security interest in the Collateral, subject only to Permitted Liens.
Such actions shall include, without limitation, the delivery to Lender of all
appropriate financing statements, executed by Borrower, as to the Collateral
granted by Borrower for all jurisdictions as may be necessary or desirable to
perfect the security interest of Lender in such Collateral
4.5. Absence of Events of Defaults. As of the Closing Date, no fact or
condition exists that would (or would, with the passage of time, the giving of
notice, or both) constitute an Event of Default under this Agreement or any of
the Loan Documents and no fact or condition exists that would (or would, with
the passage of time, the giving of notice, or both) constitute a default under
the Senior Loan Documents between Borrower and Senior Creditor.
4.6. Material Adverse Effect. As of the Closing Date, no event which has had
or could reasonably be expected to have a Material Adverse Effect has occurred
and is continuing.
4.7. Representations and Warranties of Borrower. As of the Closing date, the
representations and warranties made by Borrower in Section 4 of the Agreement
remain in full force and effect.
4.8. Borrower covenants and agrees to take such other actions as the Lender may
reasonably request in order to effectuate the intention of the parties hereunder
and under the Agreement, including without limitation, the execution of Uniform
Commercial Code financing statements or other similar documents, in order to
confirm, perfect, preserve and protect the security interests of the Lender in
the Collateral.
SECTION 5. MISCELLANEOUS
5.1. Except as specifically amended hereby, the terms and conditions of the
Agreement are hereby reaffirmed and remain in full force and effect, and from
and after the date hereof the "Agreement" shall mean the "Agreement" as amended
by this Amendment.
5.2. This Amendment may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have duly executed and delivered
this Amendment as of the day and year first above written.
BORROWER FLYCAST COMMUNICATIONS CORPORATION
Signature:/s/
______________________
Print Name:
_____________________
Title:
__________________________
ACCEPTED IN ROSEMONT, ILLINOIS
LENDER COMDISCO, INC.
Signature:/s/ JAMES P. LABE
______________________
Print Name: _____________________
Title: __________________________
JAMES P. LABE
PRESIDENT
COMDISCO VENTURES DIVISION
<PAGE>
EXHIBIT A
SUBORDINATED PROMISSORY NOTE
___________$ Date: _____________
Due: _____________
FOR VALUE RECEIVED, FlyCast Communications Corporation, a California corporation
(the "Borrower") hereby promises to pay to the order of Comdisco, Inc., a
Delaware corporation (the "Lender") at P. O. Box 91744, Chicago, IL 60693 or
such other place of payment as the holder of this Secured Promissory Note (this
"Note") may specify from time to time in writing, in lawful money of the United
States of America, the principal amount of _____________and 00/100 Dollars
($___________) together with interest at fourteen percent (14.00%) per annum
from the date of this Note to maturity of each installment on the principal
hereof remaining from time to time unpaid, such principal and interest to be
paid in 9 monthly installment of interest only of $_______ each, commencing
_________, , followed by 24 equal monthly installments of principal and interest
of $__________ commencing __________ and on the same day of each month
thereafter to and including ____________, such installments to be applied first
to accrued and unpaid interest and the balance to unpaid principal. Interest
shall be computed on the basis of a year consisting of twelve months of thirty
days each.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Subordinated Loan and Security Agreement dated May
22, 1998, as amended by Amendment Number One to the Subordinated Loan and
Security Agreement dated September 29,1998 by and between Borrower and Lender
(as the same may from time to time be amended, modified or supplemented in
accordance with its terms, the "Loan Agreement"), and is entitled to the benefit
and security of the Loan Agreement and the other Loan Documents (as defined in
the Loan Agreement), to which reference is made for a statement of all of the
terms and conditions thereof. All terms defined in the Loan Agreement shall
have the same definitions when used herein, unless otherwise defined herein.
THIS NOTE IS EXPRESSLY SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION
AGREEMENT BY AND BETWEEN LENDER AND BORROWER FOR THE BENEFIT OF SENIOR CREDITOR.
IN THE EVENT OF ANY CONTRADICTION OR INCONSISTENCY BETWEEN THIS NOTE AND THE
SUBORDINATION AGREEMENT, THE TERMS OF THE SUBORDINATION AGREEMENT SHALL CONTROL.
The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.
<PAGE>
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and
enforced in accordance with, the laws of the State of Illinois, excluding any
conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.
BORROWER: FLYCAST COMMUNICATIONS CORPORATION
181 Fremont Street, Suite 120
San Francisco, CA 94105
Signature:_______________________________
Print Name:_____________________________
Title:__________________________________
<PAGE>
EXHIBIT 10.14
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
FLYCAST COMMUNICATIONS CORPORATION
Dated as of May 22, 1998 (the "Effective Date")
WHEREAS, FlyCast Communications Corporation, a California corporation (the
"Company") has entered into a Subordinated Loan and Security Agreement dated as
of May 22, 1998, and related Subordinated Promissory Note(s) (collectively, the
"Loans") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 55,409 fully paid and non-
assessable shares of the Company's Series B Preferred Stock ("Preferred Stock")
at a purchase price of $4.51 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) five (5) years
or (ii) two (2) years from the effective date of the Company's initial public
offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
-1-
<PAGE>
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market
value shall be deemed to be the product of (x) the average of the
closing prices over a twenty-one (21) day period ending three days
before the day the current fair market value of the securities is
being determined and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise; or
(b) if actively traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or similar
system) over the twenty-one (21) day period ending three days before
the day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the current fair market value of Preferred Stock shall be the
product of (x) the highest price per share which the Company could obtain
from a willing buyer (not a current employee or director) for shares of
Common Stock sold by the Company, from authorized but unissued shares, as
determined in good faith by its Board of Directors and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise, unless the Company shall become
subject to a merger, acquisition or other consolidation pursuant to which
the Company is not the surviving party, in which case the fair market value
of Preferred Stock shall be deemed to be the value received by the holders
of the Company's Preferred Stock on a common equivalent basis pursuant to
such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal
-2-
<PAGE>
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution.
The Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Preferred Stock
-3-
<PAGE>
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If the Company has not paid any
----------------------------------
Subordinated Promissory Note(s) entered into pursuant to the Loan(s) in its
entirety by the Maturity Date (as defined in the applicable Subordinated
Promissory Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding principal is not paid, Warrantholder shall have
the right to purchase from the Company, at the Exercise Price (adjusted as set
forth herein), an additional number of shares of Preferred Stock which number
shall be determined by (I) multiplying the outstanding principal amount which
due but unpaid by 1% and (ii) dividing the product thereof by the Exercise
Price.
(f) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
--
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
-4-
<PAGE>
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Loans and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Loans and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 10,000,000
shares of Common Stock, of which 2,373,516 shares are issued and
outstanding, and (B) 920,000 shares of Series A Preferred Stock, of which
911,295 shares are issued and outstanding and are convertible into 911,295
shares of Common Stock at $1.00 per share, and (C) 5,500,000 shares of
Series B Preferred Stock, of which 5,324,532 shares are issued and
outstanding and are convertible into 5,324,532 shares of Common Stock at
$1.33 per share.
(ii) The Company has reserved 1,300,000 shares of Common Stock for
issuance under its Nonqualified/Incentive Stock Option Plan, under which
928,816 options are outstanding at an average price of $0.10 or $0.13 per
share. There are no other options, warrants, conversion privileges or other
rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of the Company's capital stock or other
securities of the Company.
(iii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances
of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
-5-
<PAGE>
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. REQUESTS FOR REGISTRATION
-------------------------
Warrantholder and Company agree that all shares of Preferred Stock subject to
the Warrant Agreement shall have the same registration rights and be subject to
the same terms and conditions with respect to the registration and sale of such
stock as possessed by the Series B Shareholders as provided for in the
Investors' Rights Agreement dated July 11, 1997, as amended, by and among the
Company and those certain Purchasers identified therein, attached thereto as
Exhibit A.
-6-
<PAGE>
12. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
13. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: Venture Lease
Administration, cc: Legal Department, attn.: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847)518-5088 and (ii) to the Company at 181
Fremont Street, Suite 120, San Francisco, California, 94105, attention: (and/or
if by facsimile, (415) 977-1009 or at such other address as any such party may
--- --------
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
-7-
<PAGE>
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Loans referenced in the preamble of this Warrant Agreement exceeds
$1,000,000, the Company will also provide Warrantholder with an opinion from the
Company's counsel with respect to those same representations, warranties and
covenants. The Company shall also supply such other documents as the
Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: FLYCAST COMMUNICATIONS CORPORATION
By:/s/
_______________________
Title: ____________________
Warrantholder: COMDISCO, INC.
By:/s/
_______________________
Title: ____________________
-8-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series ____ Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series ____ Preferred Stock of
________________________________________, the undersigned hereby confirms
and acknowledges the investment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ____ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: ____________________________
Title: _________________________
Date: __________________________
-9-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Series ____ Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement, and further acknowledges that ______ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company:
By: ___________________________
Title: _________________________
Date: _________________________
-10-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
___________________________________________________________________
(Please Print)
whose address is___________________________________________________
___________________________________________________________________
Dated: ______________________________________
Holder's Signature: _________________________
Holder's Address: _________________________
Signature Guaranteed: ____________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
-11-
<PAGE>
EXHIBIT 10.15
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OpeggylparkerFinancial Printing GroupTHESE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
FLYCAST COMMUNICATIONS CORPORATION
Dated as of September 29, 1998 (the "Effective Date")
WHEREAS, FlyCast Communications Corporation, a California corporation (the
"Company") has entered into a Subordinated Loan and Security Agreement dated as
of May 22, 1998 as amended by Amendment Number One to the Subordinated Loan and
Security Agreement dated September 29, 1998, and related Subordinated Promissory
Note(s) (collectively, the "Loans") with Comdisco, Inc., a Delaware corporation
(the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 72,324 fully paid and non-
assessable shares of the Company's Series B Preferred Stock ("Preferred Stock")
at a purchase price of $4.42 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) five (5) years
or (ii) two (2) years from the effective date of the Company's initial public
offering, whichever is shorter.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
-1-
<PAGE>
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(ii) if this Warrant is exercised after, and not in connection
with the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market
value shall be deemed to be the product of (x) the average of the
closing prices over a twenty-one (21) day period ending three days
before the day the current fair market value of the securities is
being determined and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise; or
(b) if actively traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or similar
system) over the twenty-one (21) day period ending three days before
the day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
-2-
<PAGE>
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon conversion, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior
-3-
<PAGE>
to such dividend or distribution, and (ii) the denominator of which shall be the
total number of all shares of the Company's stock outstanding immediately after
such dividend or distribution. The Warrantholder shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Preferred Stock (calculated to the nearest whole share) obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Preferred Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(e) Right to Purchase Additional Stock. If the Company has not paid any
----------------------------------
Subordinated Promissory Note(s) entered into pursuant to the Loan(s) in its
entirety by the Maturity Date (as defined in the applicable Subordinated
Promissory Note(s)), then for each additional month, or portion thereof,
thereafter that the outstanding principal is not paid, Warrantholder shall have
the right to purchase from the Company, at the Exercise Price (adjusted as set
forth herein), an additional number of shares of Preferred Stock which number
shall be determined by (I) multiplying the outstanding principal amount which
due but unpaid by 1% and (ii) dividing the product thereof by the Exercise
Price.
(f) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
--
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the
-4-
<PAGE>
Company in connection with such exercise and the related issuance of shares of
Preferred Stock. The Company shall not be required to pay any tax which may be
payable in respect of any transfer involved and the issuance and delivery of any
certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Loans and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Loans and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 10,000,000
shares of Common Stock, of which 2,423,516 shares are issued and
outstanding, and (B) 920,000 shares of Series A Preferred Stock, of which
911,295 shares are issued and outstanding and are convertible into 911,295
shares of Common Stock at $1.00 per share, and (C) 5,500,000 shares of
Series B Preferred Stock, of which 5,324,532 shares are issued and
outstanding and are convertible into 5,324,532 shares of Common Stock at
$1.33 per share.
(ii) The Company has reserved 1,300,000 shares of Common Stock for
issuance under its Nonqualified/Incentive Stock Option Plan, under which
928,816 options are outstanding at an average price of $0.10 or $0.13 per
share. There are no other options, warrants, conversion privileges or other
rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of the Company's capital stock or other
securities of the Company.
(iii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances
of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in this
----------------------------------------
Warrant Agreement, the Company is not, pursuant to the terms of any other
agreement currently in existence, under any obligation to register under the
1933 Act any of its presently outstanding securities or any of its securities
which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
-5-
<PAGE>
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
-------------
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. REQUESTS FOR REGISTRATION
-------------------------
Warrantholder and Company agree that all shares of Preferred Stock subject to
the Warrant Agreement shall have the same registration rights and be subject to
the same terms and conditions with respect to the registration and sale of such
stock as possessed by the Series B Shareholders as provided for in the
Investors' Rights Agreement dated
-6-
<PAGE>
July 11, 1997, as amended, by and among the Company and those certain Purchasers
identified therein, attached thereto as Exhibit A.
12. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
13. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: Venture Lease
Administration, cc: Legal Department, attn.: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088 and (ii) to the Company at 181
Fremont Street, Suite 120, San Francisco, California, 94105, attention: (and/or
if by facsimile, (415) 977-1009) or at such other address as any such party may
--- ---------
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
-7-
<PAGE>
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Loans referenced in the preamble of this Warrant Agreement exceeds
$1,000,000, the Company will also provide Warrantholder with an opinion from the
Company's counsel with respect to those same representations, warranties and
covenants. The Company shall also supply such other documents as the
Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: FLYCAST COMMUNICATIONS CORPORATION
By:/s/
____________________
Title: ____________________
Warrantholder: COMDISCO, INC.
By:/s/
____________________
Title: ____________________
-8-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
TO: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series ____ Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement dated the ______ day of ________________________,
19__ (the "Warrant Agreement") between
_____________________________________ and the Warrantholder, and tenders
herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series ____ Preferred Stock of
________________________________________, the undersigned hereby confirms
and acknowledges the investment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ____ Preferred Stock in the name of the undersigned or in such other
name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
-9-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Series ____ Preferred Stock of _________________, pursuant to the terms
of the Warrant Agreement, and further acknowledges that ______ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company:
By: _________________________
Title: _________________________
Date: _________________________
-10-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is___________________________________________________
___________________________________________________________________
Dated: ____________________________________
Holder's Signature: _______________________
Holder's Address: _______________________
___________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
-11-
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Flycast
Communications Corporation on Form S-1 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 3, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,010
<SECURITIES> 183
<RECEIVABLES> 3,627
<ALLOWANCES> 178
<INVENTORY> 0<F1>
<CURRENT-ASSETS> 8,898
<PP&E> 2,510
<DEPRECIATION> 725
<TOTAL-ASSETS> 10,791
<CURRENT-LIABILITIES> 4,810
<BONDS> 4,704
13,855
0
<COMMON> 912
<OTHER-SE> (13,490)
<TOTAL-LIABILITY-AND-EQUITY> 10,791
<SALES> 0
<TOTAL-REVENUES> 8,029
<CGS> 0
<TOTAL-COSTS> 5,945
<OTHER-EXPENSES> 10,743
<LOSS-PROVISION> 236
<INTEREST-EXPENSE> 412
<INCOME-PRETAX> (9,307)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,307)
<EPS-PRIMARY> 11.93
<EPS-DILUTED> 11.93
<FN>
<F1>Current assets: prepaid expenses and other assets are $256. Long-term
assets: other assets are $108.
</FN>
</TABLE>
