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   Exhibit 4.2  

CONFIDENTIAL
AND NOT FOR DISTRIBUTION OR RECIRCULATION 

AMENDED AND RESTATED OFFER TO PURCHASE FOR CASH

SHARES OF COMMON STOCK

OF FASTCLICK.COM, INC.  

September 9, 2004  

        On August 3, 2004, Fastclick.com, Inc. (the "Company" or
"Fastclick"), delivered to its shareholders an Offer to Purchase for Cash Shares of Common Stock of Fastclick.com, Inc. (the
"Original Offer") in connection with transactions contemplated in the Recapitalization Agreement (as defined below). On August 27, 2004, the
Company extended the expiration of the Original Offer from August 31, 2004 at 5:00 p.m. to September 10, 2004 at 5:00 p.m., as a result of the Company's and the Investors'
(as defined below) continued negotiations regarding the terms of the Recapitalization Agreement and related transactions (collectively, the
"Transactions"). 

        The
Company and the Investors subsequently reached agreement on the terms of the Transactions and executed a definitive Recapitalization Agreement. Certain material terms, including the
price at which the Company will repurchase stock from its shareholders, have changed from the terms set forth in the documents sent to you on August 3, 2004. These changes were made as a result
of several factors, including current market conditions. 

        The
Board of Directors approved the changes to the Transactions and determined that it to be in the best interest of the Company and its shareholders for the Company to enter into the
Recapitalization Agreement and other Transactions. 

        WE HAVE EXTENDED THE OFFER PERIOD AS A RESULT OF CHANGES TO THE MATERIAL TERMS OF THE TRANSACTIONS. THE EXPIRATION OF THE OFFER HAS BEEN CHANGED FROM SEPTEMBER
10, 2004 AT 5:00 P.M. TO SEPTEMBER 23, 2004 AT 5:00 P.M. AS A RESULT OF THIS EXTENSION, THE DULY EXECUTED LETTER OF TRANSMITTAL MUST BE RECEIVED BY THE COMPANY BY 5:00 P.M. ON
SEPTEMBER 23, 2004.

        Certain of the material changes to the terms of the Transactions include:  

         1.     The per share price at which the Company will sell the Series A Preferred Stock has been reduced from $45.6823 per share to $35.19 per share.

         2.     The per share price at which the Company will repurchase Common Stock has been reduced from $45.6823 per share to $35.19 per share.  

        3.     The amount of shares of Common Stock that the Company must repurchase from its shareholders in order to close the Investment Transaction has been
changed from 1,200,000
to 1,136,686.  

         4.     The Escrow Holdback has been decreased from $6,500,000 to $3,000,000.  

         5.     The Company plans to pay the S election distribution on or before December 31, 2004, subject only to compliance with California Corporations Code
Section 500 et. seq.  

        In addition to the foregoing, other changes to the Transactions include modifications to the Drag-Along Agreement (as defined
below) and other changes as described in the Amended and Restated Offer to Purchase below and accompanying documents.

        THE INFORMATION SET FORTH ABOVE REGARDING THE TRANSACTIONS HIGHLIGHTS ONLY SELECTED INFORMATION. IT DOES NOT CONTAIN OR DISCUSS ALL OF THE  

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 INFORMATION THAT MAY BE IMPORTANT TO YOU REGARDING THE TRANSACTIONS, AND IS QUALIFIED IN ITS ENTIRETY BY THE AMENDED AND RESTATED OFFER TO PURCHASE BELOW AND ACCOMPANYING DOCUMENTS. YOU SHOULD READ
THE AMENDED AND RESTATED OFFER TO PURCHASE AND ACCOMPANYING DOCUMENTS IN THEIR ENTIRETY.

        As
a result of these and other changes, we are amending and restating the Original Offer and related documents sent to you on August 3, 2003 as well as extending the Offer as
described below. 

        The
Company hereby offers to repurchase outstanding shares of its Common Stock (the "Shares") upon the terms and subject to the conditions
set forth in this Amended and Restated Offer to Purchase and the related Letter of Transmittal (which together with any amendments or supplements hereto or thereto collectively constitute the
"Offer"). The Shares will be repurchased at a gross purchase price of $35.19 per share, as adjusted in accordance with the formula described below, that
will result in an approximate net purchase price of $34.79 per share. The final net purchase price will depend upon the total Fees (as defined below) and the total number of Shares purchased by the
Company pursuant to this Offer. 

        The
Company has entered into a Recapitalization Agreement dated September 9, 2004 (the "Recapitalization Agreement"), with, among
others, Highland Capital Partners VI Limited Partnership, Highland Capital Partners VI-B Limited Partnership, Highland Entrepreneurs' Fund VI Limited Partnership, Oak Investment Partners
XI, Limited Partnership, Steamboat Ventures, LLC and Steamboat Ventures Manager, LLC (collectively, the "Investors"). Pursuant to and on the terms and
conditions set forth in the Recapitalization Agreement, the Company will sell to the Investors, and the Investors will purchase from the Company, a minimum of 1,705,029 shares and a maximum of
2,131,285 shares of the Company's Series A Preferred Stock at a price per share of $35.19 for a minimum aggregate purchase price of approximately $60,000,000 and a maximum aggregate purchase
price of approximately $75,000,000. A minimum of approximately $40,000,000 and up to a maximum of approximately $55,000,000 of the proceeds from the sale of the Series A Preferred Stock (such
final amount to be determined by the Company in its sole discretion) will be used to finance the Company's purchase of a minimum of 1,136,686 (the "Minimum
Amount") shares of Common Stock and up to a maximum of 1,562,944 (the "Maximum Amount") shares of Common Stock as set forth
below. As a condition precedent to closing of any sale of the Series A Preferred Stock under the Recapitalization Agreement, the Company is required to obtain agreements from the holders of the
Company's Shares for the repurchase of the Minimum Amount of Shares. The Company anticipates repurchasing all Shares tendered pursuant to this Offer up to the Maximum Amount. 

PARTICIPATION IN THE OFFER IS COMPLETELY VOLUNTARY. NEITHER FASTCLICK NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION WHETHER YOU SHOULD ACCEPT THE OFFER AND TENDER ANY
SHARES. YOU MUST MAKE YOUR OWN DECISION WHETHER TO ACCEPT THE OFFER AND TO TENDER YOUR SHARES. IN ORDER TO ACCEPT THE OFFER, YOU MUST DULY AND TIMELY EXECUTE AND RETURN THE ENCLOSED LETTER OF
TRANSMITTAL AS EXPLAINED HEREIN.

UNLESS THE EXPIRATION DATE IS EXTENDED, THE DULY EXECUTED LETTER OF TRANSMITTAL MUST BE RECEIVED BY THE COMPANY BY 5:00 P.M. ON SEPTEMBER 23,
2004.

        Each
shareholder that elects to sell Shares pursuant to this Offer (collectively, the "Selling Shareholders") shall be required to bear
his or her equitable portion of the fees and expenses due and payable in connection with the transactions contemplated in the Recapitalization Agreement (all such transactions, collectively, the
"Recapitalization"). Therefore, the per share price at which the Company shall repurchase the Selling Shareholders' Shares shall be reduced by the per
share amount of the 

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following
approximate fees (collectively, the "Fees") per share sold: (i) $7,500 representing the fifty percent (50%) of the approximate fees and
expense of the Escrow Agent (as defined below); (ii) $50,000 representing the approximate fees and expenses of Reicker, Pfau, Pyle, McRoy & Herman, LLP
("Shareholder Counsel"), special counsel for the Selling Shareholders; and (iii) $571,740 representing approximately 73.3% of the fees of Perseus
Group, LLC(1) ("Broker") for its services in connection with the transactions contemplated in the Recapitalization Agreement. Notwithstanding the
foregoing estimated Fees, the Selling Shareholders shall be responsible for the actual amount of the Fees. 

        (1)   The
percentage shown assumes that the Company repurchases the Maximum Amount of Shares. The total fees owed the Broker are $780,000. The percentage of the total fees of
the Broker for which the shareholders are responsible is equal to a ratio, the numerator of which is the aggregate purchase price for the Shares repurchased by the Company in the Offer and the
denominator of which is the aggregate purchase price for the Series A Preferred Stock purchased by the Investors pursuant to the Recapitalization Agreement. To the extent the Company
repurchases less than the Maximum Amount of Shares, the percentage of the total fees of the Broker for which the shareholders shall be responsible shall adjusted accordingly. 

        The
Investors have placed in escrow with American Stock Transfer & Trust Company (the "Escrow Agent") an aggregate amount of up to
$75,000,000, of which up to $55,000,000 (the "Aggregate Repurchase Amount") may be used for the repurchase of Shares and funding the Escrow Holdback
described below. Upon closing of the Offer, the "net offer price" (calculated in accordance with the formula described below) (the "Net Offer Price"),
less the Escrow Holdback (as defined below), will be paid to Selling Shareholders out of the escrow for each Share purchased by the Company and the difference between the Offer Price (as defined
below) and the Net Offer Price will be paid to Escrow Agent, Shareholder Counsel and Broker to pay their Fees. 

        The
Net Offer Price for each outstanding Share will be an amount of cash equal to $35.19 per share (the "Offer Price") less an amount
representing the Fees to be paid by the Selling Shareholders per share of Common Stock sold. The Fees per share to be paid by the Selling Shareholders shall be calculated by dividing the total amount
of the Fees by the total number of Shares that the Company purchases from Selling Shareholders pursuant to this Offer. 

        For
example purposes only, assuming each Selling Shareholder of the Company sells its full Pro Rata Share (as defined below) and assuming the estimated Fees referenced above were the
actual Fees, the Net Offer Price would be: 

        $34.79
= $35.19 - ($629,240/1,562,944). 

        An
amount equal to approximately 5.5%(2) of the Offer Price for each Share purchased by the Company pursuant to this Offer (for an aggregate of $3,000,000, hereinafter, the
"Escrow Holdback"), shall be held by the Escrow Agent and not distributed to Selling Shareholders except as provided below. The Escrow Holdback shall be
used to satisfy any of the Company's indemnification obligations owed to the Investors under the Recapitalization Agreement. 

        (2)   This
assumes the Maximum Amount of Shares are repurchased by the Company pursuant to the Offer. The dollar amount of the Escrow Holdback will remain the same and will
not be reduced if less than the Maximum Amount of Shares is repurchased by the Company. Thus, if the Company repurchases less than the Maximum Amount, the percentage will be adjusted upward
accordingly. 

        Pursuant
to the Recapitalization Agreement, the Company and the Selling Shareholders are obligated to indemnify the Investors from any damages incurred by the Investors as a result of
the misrepresentation, violation or breach of any representation, warranty, covenant, agreement or 

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obligation
of the Company under the Recapitalization Agreement or the other agreements contemplated therein. The Company's representations and warranties in the Recapitalization Agreement relate to
various matters, including, without limitation, the due organization of the Company, the capitalization of the Company, required consents and approvals, the absence of undisclosed liabilities and
material claims affecting the Company, and the Company's compliance with applicable law. 

        Subject
to limited exceptions set forth in the Recapitalization Agreement, in the event the Company and the Selling Shareholders become liable to the Investors for damages pursuant to
the indemnification obligations, the Investors' sole and exclusive remedy with respect to the Selling Shareholders shall be limited to the Escrow Holdback. The Selling Shareholders shall have no
recourse against the Company if all or any portion of the Escrow Holdback is used to meet such obligations. Except as otherwise provided in the Recapitalization Agreement, the representations and
warranties of the Company set forth in the Recapitalization Agreement and its indemnification obligations will terminate at 5:00 PM (Pacific time) on April 30, 2006 and be of no further force
or effect after such time. Upon the termination of the Selling Shareholders' indemnification obligation, the Escrow Agent will distribute to each Selling Shareholder such Selling Shareholder's pro
rata share of the entire amount then-remaining in the Escrow Holdback not then subject to indemnification claims. If notice for indemnification under the Repurchase Agreement is given
prior to termination of the Selling Shareholders' indemnification obligation, the representation and warranty that is the subject of such indemnification claim will survive, and the amount of such
claim shall be retained by the Escrow Agent until the claim is finally resolved. Resolution of any indemnification claims shall be in accordance with the procedures set forth in the escrow agreement
to be entered into among the Escrow Agent, the Company and the Investors (the "Escrow Agreement"). Interest will accrue on the Escrow Holdback for the
benefit of the Selling Shareholders in accordance with the terms and conditions of the Escrow Agreement. 

        In
addition to the foregoing, pursuant to the Recapitalization Agreement, Jeff Pryor and David Gross, as founders of the Company, have agreed to additionally indemnify the Company for
certain tax matters. 

        Pursuant
to the Recapitalization Agreement, at or before the Closing under the Recapitalization Agreement, the Company will declare a distribution to its shareholders of record the day
immediately prior to the Closing Date equal to the amount of the Company's taxable income for the portion of calendar year 2004 prior to and through the end of the Closing Date less amounts of such
taxable income previously distributed. This distribution will be paid in one or more installments after the Closing Date pursuant to the terms and conditions of the Recapitalization Agreement. 

        By
agreeing to sell Shares pursuant to this Offer each Selling Shareholder agrees to execute and be bound by the enclosed Drag-Along Agreement (the
"Drag-Along Agreement") (as generally set forth in Section 2 below and more
particularly described in the Drag-Along Agreement) requiring such Selling Shareholder to vote his or her Shares in favor of certain transactions (including, without limitation, a sale or
merger involving the Company, or the amending of the Company's charter documents in connection with a public offering of the Company's securities) approved by the holders of at least
two-thirds (2/3) of the then outstanding shares of Series A Preferred Stock at any time from and after July 1, 2005. 

        The
Offer will expire on September 23, 2004, unless otherwise extended. Interest on the Offer Price will not be paid. 

        By
this Offer, and subject to the terms and conditions herein (including, without limitation, the limitations set forth in  Section 2 below and the conditions set forth in Section 13 below), the Company agrees to
purchase from the holders of Common Stock of the Company any and all Shares validly tendered, and not validly withdrawn by such Selling Shareholders. If, at the Expiration Date (as defined 

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in
Section 2 below), one or more conditions to the Offer has not been satisfied, the Company may, but shall not be required to, extend the Offer
for a period determined in its sole discretion. 

        Any
Selling Shareholder or other payee who fails to legibly complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal may be subject to a
required backup federal income tax withholding of a portion of the gross proceeds payable to such shareholder or other payee pursuant to the Offer. 

 1.    Purpose of the Offer  

        The Company has entered into the Recapitalization Agreement to obtain additional working capital from the sale of the Company's Series A Preferred Stock
contemplated therein. The consummation of the Offer, as a condition to closing the purchase and sale of the Series A Preferred Stock pursuant the Recapitalization Agreement, is therefore
necessary for the Company to obtain needed funds. The Company's Board of Directors believes that purchasing the Shares at the Offer Price is in the best interests of the Company's shareholders because
it will enable the Company to provide liquidity to existing shareholders. The Company cannot be certain it will be able to provide comparable liquidity to its shareholders at a later date. 

        Whether
or not the Company purchases Shares pursuant to the Offer, the Company may seek in the future to acquire additional Shares on terms and at prices that may be more or less
favorable than those of the Offer. The Company currently has no plans to do so. 

 2.    Terms of the Offer  

 The Offer  

        Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Company will accept for payment, and thereby purchase, at a price equal to the Offer Price, any and all Shares validly tendered and not validly withdrawn by holders of record as of
July 20, 2004 (the "Record Date") on or prior to the Expiration Date; provided, however, that the Company shall not be obligated to purchase from
any Selling Shareholder any Shares in excess of such Selling Shareholder's Pro Rata Share. As previously noted herein, as a condition precedent to the closing of the sale of the Series A
Preferred Stock to the Investors, the Company is required to obtain agreements from shareholders of the Company for the repurchase of the Minimum Amount of Shares. If the Company is unable to obtain
agreements from shareholders for the repurchase of the Minimum Amount of Shares, the closing of the sale of the Series A Preferred Stock may not occur and the Company will not be obligated to
repurchase the Shares hereunder. 

        "Pro
Rata Share" for any Selling Shareholder shall mean such number of Shares equal to (i) the Aggregate Repurchase Amount of $54,999,999.36 divided by the Offer Price, multiplied
by (ii) a fraction, the numerator of which shall equal the sum of (x) the total number of Shares outstanding held by such Selling Shareholder as of the Record Date plus (y) the
total number of Qualifying Options (as defined below) held by such Selling Shareholder, and the denominator of which shall equal the sum of (x) the total number of Shares outstanding as of the
Record Date plus (y) the total number of Qualifying Options. Assuming all shareholders of the Company tender their respective full Pro Rata Share, then at the closing of the Offer, each Selling
Shareholder will sell, and the Company will purchase, approximately 71.86%(3) of all of his or her Shares. 

        (3)   This
figure assumes that the Company repurchases the Maximum Amount of Shares. The percentage is equal to a ratio, the numerator of which is the aggregate number of
shares repurchased in the Offer, and the denominator of which is the aggregate number of Shares outstanding as of the Record Date. To the extent the Company repurchases less than the Maximum Amount of
Shares, the percentage shown would be adjusted downward accordingly. If the Company repurchases the Minimum Amount the percentage shown would be 52.26%. 

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        An "Option" is a stock option issued pursuant to the Company's 2000 Equity Participation Plan. An Option is
"Qualifying" if it is vested and is exercised after the consummation of the sale of the Series A Preferred Stock and prior to the repurchase of
Shares by the Company. 

        The
Company anticipates that as of the closing of the sale of the Series A Preferred Stock pursuant to the Recapitalization Agreement, there shall be outstanding and eligible for
participation in the Offer 2,174,988 Shares and 31,463 Qualifying Options. (See the table in Section 9 for a summary of the Company's capitalization.) 

        For
example purposes only, the Pro Rata Share of a Selling Shareholder who holds 900 Shares and 100 Qualifying Options would be (assuming an aggregate of 2,174,988 Shares outstanding as
of the Record Date and 31,463 Qualifying Options and rounded to the next lowest whole share): 

        Pro
Rata Share = 708 shares = ($54,999,999.36 / $35.19) × (1,000 / 2,206,451)) 

        To
the extent shareholders elect to sell less than their respective full Pro Rata Share and the Aggregate Repurchase Amount has not been exhausted after giving effect to purchases by the
Company of all tendered Shares not in excess of each Selling Shareholder's Pro Rata Share (such remaining amount, the "Excess Repurchase Funds"), then,
with respect to each Selling Shareholder tendering in his or her Letter of Transmittal a number of Shares in excess of such Selling Shareholder's Pro Rata Share (each such Selling Shareholder, a
"Participating Shareholder" and such excess Shares, the "Excess Shares"), the Company shall be entitled
to purchase (but without obligation to do so), and each such Participating Shareholder shall be obligated to sell to the Company, such number of such Participating Shareholder's Excess Shares as the
Company elects to purchase, in its sole discretion, up to such Participating Shareholder's Maximum Participating Share (as defined below). 

        "Maximum Participating Share" for any Participating Shareholder shall mean such number of Shares equal to (i) the Excess Repurchase
Funds divided by the Offer Price, multiplied by (ii) a fraction, the numerator of which shall be the sum of (x) the total number of outstanding Shares held by such Participating
Shareholder as of the Record Date plus (y) the total number of Qualifying Options held by such Participating Shareholder, and the denominator of which shall be the sum of (a) the total
number of outstanding Shares held by all Participating Shareholders as of the Record Date plus (b) the total number of Qualifying Options held by all Participating Shareholders. 

        To
the extent the Offer requires any Selling Shareholder to sell a fraction of a Share, the number of Shares such Selling Shareholder shall be required to sell shall be rounded to the
next lowest whole Share. 

        For
example purposes only, assuming the following: 

          (i)  shareholders
elect not to sell their respective full Pro Rata Share resulting in Excess Repurchase Funds in the amount of $1,000,000; and 

         (ii)  Participating
Shareholders own 1,000,000 shares of Common Stock and 20,000 Qualifying Options; 

        then,
the Maximum Participating Share of a Participating Shareholder owning 10,000 Shares and 1,000 Qualifying Options would be: 

        306
shares = ($1,000,000 / $35.19) × (11,000 / (1,000,000 + 20,000). 

        Once
Shares are tendered, the Selling Shareholder will be able to withdraw the Shares from the Offer only by following the procedures set forth in  Section 5 below. 

        The
term "Expiration Date" means 5:00 p.m., Pacific Time, on September 23, 2004, unless the Company shall have extended the
period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the time and date at which the Offer, as so extended by the Company in 

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writing,
shall expire. The Offer Price will be paid promptly following the Expiration Date and upon satisfaction or waiver (by the Company) of each of the conditions set forth in the Offer. 

 Representations and Warranties  

        By executing the Letter of Transmittal, a shareholder will be making certain representations and warranties to the Company. These representations and warranties
include that: 

          (i)  the
shareholder has the requisite capacity and full power and authority to tender, sell, assign and transfer the Shares tendered; 

         (ii)  the
shareholder has good and valid title to the Shares, free and clear of all liens, restrictions, charges, encumbrances or other adverse claims; 

        (iii)  the
shareholder is the holder of record as of the Record Date and the beneficial owner of all Shares tendered; 

        (iv)  when
the Shares are accepted for payment by the Company, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all liens,
restrictions, voting trusts, proxies, charges and encumbrances and the same will not be subject to any adverse claim; 

         (v)  the
shareholder acknowledges that no representation has been made that the Offer Price is fair to the shareholder or equal to any purchase price that may be offered to
other parties in the future, nor that the Offer Price reflects the actual fair market value of the applicable Shares, which actual fair market value may be less or more than the Offer Price; 

        (vi)  the
shareholder acknowledges that neither the Company nor its Board of Directors expresses an opinion or makes any recommendation as to whether the shareholder should
sell the Shares to the Company pursuant to the terms of the Offer; 

       (vii)  the
shareholder has had the opportunity to review with its own tax and legal advisors the tax and legal consequences of the sale of the Shares by it pursuant to the
Offer; 

      (viii)  the
shareholder is aware that if the Shares are purchased by the Company pursuant to the Offer, it will have no future participation in any Company gains, profits or
distributions with respect to such Shares, or any appreciation in the price of such Shares; 

        (ix)  the
shareholder has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management, and has had an opportunity to
ask questions of the Company's management and has fully reviewed all materials sent to the undersigned pursuant to the Offer; 

         (x)  the
Letter of Transmittal and all other agreements contemplated hereby to which the shareholder is a party, when executed and delivered by such shareholder in accordance
with the terms hereof, shall each constitute a valid and binding obligation of such shareholder, enforceable against such shareholder in accordance with its terms (except as such enforceability may be
limited by laws of general application relating to bankruptcy, insolvency and relief of debtors and general principles of equity); 

        (xi)  the
execution and delivery by the shareholder of the Letter of Transmittal and all other agreements contemplated thereby, the repurchase of the Shares from the
shareholder and the fulfillment of and compliance with the respective terms thereof by the shareholder, do not and shall not (a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default under (whether with or without the passage of time, the giving of notice or both), (c) result in the creation of any lien, security interest,
charge or encumbrance upon the shareholder's repurchased Shares, or (d) require any authorization, consent, approval, exemption or other action by notice or declaration to, or filing with, any
court or administrative or 

7

 

governmental
body or agency, pursuant to any law, statute, rule, regulation, order or decree to which the shareholder is subject, or any agreement or instrument to which the shareholder is subject
which, in each case, would be likely to materially affect the shareholder's performance of its obligations under the Letter of Transmittal; 

       (xii)  there
are no actions, suits, proceedings (including any arbitration proceedings), orders, investigations or claims pending or, to the shareholder's knowledge,
threatened against or affecting the shareholder in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with the transactions contemplated hereby; and 

      (xiii)  notwithstanding
any discussions with the Company's management as contemplated by (ix) above, except for the statements contained in this Offer, the shareholder
has not relied upon any statements or representations made by any director, officer, employee, representative or other advisor of the Company in making his or her decision to tender his or her Shares
pursuant to the Offer. 

        Drag-Along Agreement 

        By
executing the Letter of Transmittal and agreeing to sell Shares to the Company pursuant to this Offer (and as a condition precedent to the Company's obligation to purchase Shares from
a Selling Shareholder), each Selling Shareholder also agrees to execute, deliver and be subject to and bound by the Drag-Along Agreement, a copy of which is attached hereto as  Exhibit D.
Furthermore, as a result of the uncertainty as of the date of this Offer regarding the number of Selling Shareholders that will accept
the Offer and the number of Shares that the Company will repurchase upon consummation of its purchase of the Shares, each Selling Shareholder agrees and acknowledges that the Company is authorized to
make such administrative changes, modifications or additions to the recital section and exhibits of the Drag-Along Agreement as may be necessary to complete the Drag-Along
Agreement with respect to the identity and number of Selling Shareholders and the Shares held thereby. It is a condition to the Company's sale of the Series A Preferred Stock, and therefore the
Offering, that the Drag-Along Agreement must be executed by the holders of record of at least 95% of the shares of Common Stock outstanding immediately after the closing of the Offering. 

        Pursuant
to the Drag-Along Agreement, in the event the holders of at least two-thirds (2/3) of the then outstanding shares of Series A
Preferred Stock (such approving parties referred to herein as the "Requisite Parties") approve a transaction resulting in a change of control of the
Company (such transactions include a merger or consolidation involving the Company or a sale of substantially all of the assets of the Company), at any time from and after July 1, 2005, each
Selling Shareholder must consent to and vote his, her or its Shares of voting stock of the Company in favor of such transaction. Furthermore, if such transaction is structured as (i) a merger
or consolidation of the Company, or a sale of all or substantially all of the Company's assets, each Selling Shareholder must waive any dissenters' rights, appraisal rights or similar rights in
connection with such merger, consolidation or asset sale, or (ii) a sale of the stock of a Company, each Selling Shareholder agrees to sell a pro rata portion of his, her or its Shares on the
terms and conditions approved by the Board. Under the Drag-Along Agreement, each Selling Shareholder appoints each of the holders of Series A Preferred Stock voting in favor of the
change of control, as his, her or its attorney in fact to provide any consents and to vote his, her or its Shares of voting stock of the Company in favor of the change of control and to take the other
actions, including the sale of a pro rata portion of his, her or its Share in the change of control transaction, if the Selling Shareholder fails or refuses to so act. 

        In
addition to the foregoing obligation, pursuant to the Drag-Along Agreement, in the event of, and in connection with, a proposed sale of the Company's Common Stock in an
underwritten public offering pursuant to a registration statement on Form S-1 under the Securities Act, each Selling Shareholder is obligated to vote in favor of and approve all
(i) amendments to the Company's Articles of Incorporation and Bylaws (including, without limitation, amendments to increase the number of 

8

 

authorized
shares of any class of the Company's capital stock and increase the size of the Company's Board of Directors) and (ii) other actions (including, without limitation, actions to elect
persons to serve as directors on the Company's Board of Directors, create committees of the Company's Board of Directors, fix the terms of persons serving as directors on the Company's Board of
Directors and comply with any listing requirements of a securities exchange or securities market), as are approved by the Company's Board of Directors and the Requisite Parties in connection with the
initial proposed sale of the Company's securities in the public offering. 

        Notwithstanding
the foregoing, the obligations of the Selling Shareholders under the Drag-Along Agreement are subject to the satisfaction of certain conditions with respect
to the subject transaction, including limitations on permitted representations and warranties of the Selling Shareholders, limitations on the obligation of the Selling Shareholders to enter into
covenants not to compete or not to solicit and, with respect to a merger with another private company, the treatment of the merger as a transaction that will trigger the liquidation preference of the
Series A Preferred Stock. 

 Conditions to the Offer  

        The Company's obligations to purchase Shares validly tendered and not otherwise validly withdrawn are subject to certain conditions including, without limitation,
(i) the consummation of the sale of the Series A Preferred Stock pursuant to the Recapitalization Agreement, (ii) the absence of any material adverse change in the financial
condition, business, results of operations or prospects of the Company or the Company's status under any securities laws, (iii) the satisfaction of all applicable legal requirements of
California General Corporations Law Section 500 et seq., (iv) the absence of threatened or instituted actions related to the Offer, and (v) the enactment or enforcement of laws
which may have an adverse effect on the Company or the Offer. See Section 13 for a complete explanation of the conditions to the Company's
obligation to purchase Shares validly tendered. 

        In addition to the conditions listed above, the Company's obligations to purchase Shares from each Selling Shareholder, individually, is conditioned on such
Selling Shareholder executing the Drag-Along Agreement.

        The
Company reserves the right (but shall not be obligated), in accordance with applicable state and federal law or regulation, to waive any or all of such conditions. If any or all of
such conditions have not been satisfied prior to consummation of the repurchase contemplated by this Offer, the Company may elect to (i) extend the Offer in the manner described in  Section 3 below, (ii) waive the unsatisfied conditions and, subject to complying with applicable state and federal law and regulations,
accept for payment all Shares so tendered and not extend the Offer or (iii) terminate the Offer and not accept for payment any Shares and return all tendered Shares to Selling Shareholders. If
the waiver of any condition set forth in Section 13 is deemed to constitute a material change to the information previously provided to the
shareholders, the Company may be required to keep the Offer open for an additional period of time or disseminate information concerning such waiver. 

 3.    Acceptance for Payment and Payment for Shares  

        Subject to the terms and the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the Offer as so extended or
amended), the Company will purchase, by accepting for payment, and will pay for, any and all Shares validly tendered (subject to the limitations in  Section 2) and not otherwise validly withdrawn
prior to the Expiration Date promptly after (i) the satisfaction or waiver of the
conditions to the Offer set forth in Section 13 and (ii) the Expiration Date. 

9

 

        In
all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Escrow Agent, pursuant to the procedures set forth in  Section 4, of: 

          (i)  Share
certificates for such Shares (each, a "Share Certificate") duly endorsed or accompanied by appropriate stock
powers (in form provided herewith as Exhibit A) executed by the Selling Shareholder (or an Affidavit of Lost Certificate (in the form attached
hereto as Exhibit B) duly executed by such Selling Shareholder in the event that such Selling Shareholder has lost, misplaced, had stolen or is
otherwise unable to locate the original Share Certificate); 

         (ii)  the
Letter of Transmittal, validly completed and duly executed; 

        (iii)  a
Substitute Form W-9, if applicable; 

        (iv)  the
Drag-Along Agreement, duly executed; 

         (v)  if
the Selling Shareholder is exercising Qualifying Options and tendering the Shares acquired on exercise of the Option under the Offer, the Notice of Stock Option
Exercise in the form attached hereto as Exhibit C (the "Option Notice") validly completed and
duly executed; and 

        (vi)  any
other documents required by the Instructions Forming Part of the Terms and Conditions of the Offer. 

        IF YOU HAVE ALREADY PROPERLY DELIVERED SHARE CERTIFICATES OR AN AFFIDAVIT OF LOST CERTIFICATE (IN ACCORDANCE WITH ITEM 3(i) ABOVE) REPRESENTING THE SHARES
TENDERED PURSUANT TO THE LETTER OF TRANSMITTAL, YOU DO NOT NEED TO REDELIVER SUCH CERTIFICATES OR AFFIDAVIT. HOWEVER, IN ORDER TO PARTICIPATE IN THE OFFER YOU DO NEED TO COMPLY WITH EACH OF THE
REMAINING PROCEDURES SET FORTH ABOVE.

        The
Company expressly reserves the right, at any time and from time to time, to extend the period during which the Offer is open if any of the conditions to the Offer have not been
satisfied on or before the Expiration Date. Such extension shall be effective only if notice of such extension is deposited in the United States mail, postage paid, addressed to the holders of Shares
prior to 5:00 p.m. Pacific Time on the Expiration Date. 

 Acceptance of Tendered Shares  

        For purposes of the Offer, the Company will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered as, if and when the Company
gives written notice of such acceptance to the holder(s) of the Shares to be purchased. The Company may give such notice at any time after the Shares have been validly tendered, rather than wait until
the occurrence of the Expiration Date (subject to a Selling Shareholder's right to withdraw set forth herein), but the Company shall not be obligated to pay for such Shares until the satisfaction of
the conditions set forth above in this Section 3 and elsewhere in this Offer; provided, however, that the Company may not accept the Offer with
respect to any validly tendering Selling Shareholders unless it accepts the Offer with respect to all validly tendering Selling Shareholders. 

        In
all cases, subject to the terms and conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by mailing to the holders of the Shares purchased a check
for the applicable Net Offer Price, less required withholdings and the pro rata share of the Escrow Holdback. If mailed,
the check will be mailed to the address shown below the holder's name on the Letter of Transmittal. Under no circumstances will interest on the Offer Price be paid. 

        If
any tendered Shares are not purchased pursuant to the Offer for any reason, Share Certificates representing Shares not purchased will be returned, without expense to the Selling
Shareholder, as promptly as practicable following the expiration, termination or withdrawal of the Offer. 

10

  

 4.    Procedures for Accepting the Offer and Tendering Shares  

 Valid Tender of Shares  

        In order for Shares to be validly tendered pursuant to the Offer, in all cases, the Letter of Transmittal, properly completed and duly executed, Share
Certificates, duly endorsed to the Company or accompanied by executed stock powers, together in each case with any required signature guarantees and any other documents required by the Letter of
Transmittal, including a Substitute Form W-9, if applicable, must be received by the Escrow Agent at its address set forth on the Letter of Transmittal on or prior to the Expiration
Date. 

        THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE SELLING
SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY SHEPPARD, MULLIN, RICHTER & HAMPTON, LLP. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. WE RECOMMEND YOU DELIVER ALL DOCUMENTS IN THE ENCLOSED FEDEX
ENVELOP.

 Signature Guarantees  

        No signature guarantee is required on the Letter of Transmittal if the Letter of Transmittal is signed by the registered holder of Shares tendered therewith and
payment is to be made solely to the registered holder at the address set forth in the Company's shareholder records. In all other cases, all signatures on the Letter of Transmittal must be guaranteed
by an eligible institution as provided in the Letter of Transmittal. 

        The
tendered Share Certificates must be duly endorsed or accompanied by appropriate stock powers, signed exactly as the name or names of the registered holder or holders appear on the
certificates, and, if required as provided in the preceding paragraph, with the signatures on the certificates, or stock powers guaranteed by an eligible institution as provided in the Letter of
Transmittal. 

 Backup Federal Income Tax Withholding  

        Under the backup federal income tax withholding applicable to certain shareholders (other than certain exempt shareholders, including, among others, all
corporations and certain foreign individuals), the Company may be required to withhold a portion of the amount of any payments made to such shareholders pursuant to the Offer. 

        TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING, EACH SHAREHOLDER MUST PROVIDE THE ESCROW AGENT WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER
AND CERTIFY SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 6 OF THE
LETTER OF TRANSMITTAL.

 5.    Withdrawal Rights  

        Once Shares are tendered, the shareholder will not be able to withdraw the Shares from the Offer except pursuant to the provisions of this Section 5.
Shareholders who wish to exercise their right of withdrawal with respect to previously tendered Shares must give written notice of withdrawal (a "Withdrawal
Notice") to Sheppard, Mullin, Richter & Hampton, LLP at the address set forth in the Letter of Transmittal. A Withdrawal Notice will only be effective if it
(i) is received by Sheppard, 

11

 

Mullin,
Richter & Hampton, LLP prior to 5:00 p.m. Pacific Time on the Expiration Date, (ii) specifies the name of the person who signed the Letter of Transmittal on behalf of such
shareholder and, if different, the name of the registered holder of the Shares to be withdrawn, (iii) specifies, by number, the Share Certificates to be withdrawn, and (iv) is signed
exactly as the name or names of the registered holder or holders appear on the Share Certificates to be withdrawn, with the signatures guaranteed by an eligible institution to the same extent and in
the same manner that such signatures were required by the terms of the Letter of Transmittal to be guaranteed when the applicable Share Certificates were tendered. Selling Shareholders may deliver a
Withdrawal Notice by facsimile. 

        Any
Shares properly withdrawn may thereafter be re-tendered by a Selling Shareholder by following the procedures for validly tendering shares set forth in this Offer and the
Letter of Transmittal. 

 6.    Determination of Validity  

        All questions as to the interpretation of the terms of the Letter of Transmittal or any other document included herewith, the form of documents and the validity,
eligibility and acceptance for payment of any tender of Shares or any Withdrawal Notice will be determined solely by the Company, whose determination shall be final and binding on all parties. The
Company reserves the absolute right, in accordance with applicable state and federal law or regulation, to reject any or all tenders and Withdrawal Notices determined by it not to be in proper form or
the acceptance of or payment for which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Offer or any defect
or irregularity in any tender of Shares, Withdrawal Notice or any other document hereunder delivered by any particular Selling Shareholder whether or not similar defects or irregularities are waived
in the case of other Selling Shareholders. 

        No
tender of Shares or Withdrawal Notice will be deemed to have been validly made until all defects and irregularities with respect to such tender or Withdrawal Notice have been cured or
waived by the Company. None of the Company nor any of its affiliates or assigns will be under any duty to give any notification of any defects or irregularities in tenders, Withdrawal Notices or any
other document delivered in connection with the Offer or incur any liability for failure to give any such notification. 

 7.    Certain United States Income Tax Consequences  

        Sale of Shares.    The sale of Shares pursuant to the Offer will be a taxable transaction for United States federal income tax
purposes and, as such, may be treated as either a sale or exchange transaction or a distribution taxable as a dividend. It may also be taxable under applicable state, local, foreign and other tax
laws. The discussion in this Section relates to Shares that were acquired by the Selling Shareholder other than upon exercise of stock options issued by the Company to the Selling Shareholder. The
discussion in the following Section titled "Exercise of Options and Sale of Shares" relates to Shares that were acquired by the Selling Shareholder upon
exercise of stock options issued by the Company to the Selling Shareholder. 

        A
redemption of the Shares of Common Stock by the Company will be treated as a sale or exchange if, immediately after the closing of the Offer, the holder of the Shares redeemed holds
less than 50% of the total combined voting power of all classes of stock of the Company entitled to vote and the holder's percentage stock interest in the Company is less than 80% of his or her
percentage stock interest in the Company immediately before the closing of the Offer (as such percentage stock interest is determined both with reference to voting power and fair market value of the
outstanding stock of the Company and after the application of special ownership attribution rules that treat a person as the owner of stock held by certain of the person's relatives and related
entities). If a 

12

 

repurchase
of Shares Common Stock is treated as a sale or exchange, the Selling Shareholder will recognize capital gain or loss based on the difference between the amount the Net Offer Price realized
and the tax basis of the holder in the Shares repurchased, and such capital gain or loss would be long-term capital gain or loss if the Shares were held for more than one year at the time
of repurchase. 

        If
a redemption of Shares pursuant to the Offer is not treated as a sale or exchange, then the amount received on repurchase would be considered a distribution for federal income tax
purposes that would be treated as follows: (a) first, as a distribution of any income of the Company allocable to such Shares while the Company was an S corporation and that has not yet been
distributed, (b) second, as a dividend to the extent of any C corporation earnings and profits of the Company allocable to such
Shares, (c) third, as a distribution of basis in the holder's Shares, and (d) finally as capital gain. The Company believes that it has some C corporation earnings and profits. 

        Exercise of Options and Sale of Shares. A holder who exercises a Nonqualified Stock Option will have compensation income equal to the
excess of the fair market value of the Common Stock acquired upon exercise over the exercise price paid and will be subject to income and employment taxes and withholding on such compensation income,
and the shares of Common Stock so acquired will have a tax basis equal to such fair market value. Any gain or loss upon sale of such Common Stock pursuant to the Offer will be taxed as described in
the above Section titled "Sale of Shares", provided, however, that any capital gain or loss will be treated as short-term capital gain or loss as the shareholder will not have held the
Shares for more than one year at the time of repurchase. 

        The
tax treatment of a holder who exercises an Incentive Stock Option will vary depending on whether the holder tenders in the Offer the shares acquired upon exercise of the Option or
continues to hold such shares. A holder who exercises an Incentive Stock Option and continues to hold the acquired shares will not have compensation income as a result of such exercise, but will have
alternative minimum taxable income equal to the excess of the fair market value of the Common Stock acquired upon exercise of the Option over the exercise price paid. A holder who exercises an
Incentive Stock Option and tenders the acquired shares in the Offer will be deemed to have made a "disqualifying disposition" of the shares and will have compensation income equal to the excess of the
fair market value of the Common Stock acquired upon exercise over the exercise price paid and will be subject to income and employment taxes and withholding on such compensation income. In addition,
upon the holder's sale of the acquired shares in the Offer, any gain or loss realized by the holder upon sale of the acquired shares will be taxed as described in the above Section titled "Sale of
Shares", provided, however, that any capital gain or loss will be treated as short-term capital gain or loss as the shareholder will not have held the Shares for more than one year at the
time of repurchase. 

        THE
FOREGOING DOES NOT PURPORT TO BE AN ANALYSIS OF ALL OF THE POTENTIAL TAX CONSIDERATIONS RELATING TO PARTICIPATION IN THE OFFER, AND IS NOT TAX ADVICE. IN ADDITION, THE FOREGOING
ASSUMES THAT ALL SHARES ARE HELD AS CAPITAL ASSETS AND THE HOLDER HAS NOT ENGAGED IN ANY SHORT SALE, HEDGE OR OTHER TRANSACTION THAT COULD AFFECT THE TAX CONSEQUENCES OF THE REPURCHASE OF THE SHARES
PURSUANT TO THE OFFER. ALL SHAREHOLDERS DESIRING TO PARTICIPATE IN THIS OFFER ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF TENDERING INTO THE OFFER, INCLUDING
THE APPLICABILITY OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. 

 8.    Certain Information Concerning the Company  

Description of Business 

        The
Company is a leader in online advertising services, providing cost-effective customer acquisition and brand awareness solutions for direct marketers, brand marketers and
advertising 

13

 

agencies.
The Company provides these services through its growing network of over 7,500 small to medium-sized websites ("SMWs"), delivering more than
6.5 billion advertisements, and reaching over 68 million unique Internet users each month. Fastclick's proprietary optimization technology enables advertisers to improve advertising
campaign performance, while maximizing the media value of publishers' websites. Fastclick brings together advertisers and publishers creating a highly valuable network effect, where both groups
benefit through Fastclick's transparent "managed market bidding system." 

        With
one of the highest average payouts in the industry (65% net to publishers), consistent 25-day payment terms, a lucrative referral program and detailed activity
reporting, Fastclick has created a loyal and rapidly growing network of publishers. Additionally, through its proprietary optimization technology, Fastclick increases the performance, and therefore
revenue, generated by the publisher's website. This comprehensive service has positioned Fastclick as one of the premier revenue programs for the Internet publisher community. 

        Similarly,
Fastclick's offerings and return-on-investment ("ROI") driven results have created a growing and
recurring group of advertising clients. Fastclick's technology automatically tracks, optimizes and reports the results of advertising campaigns, thereby maximizing performance. Advertisers have the
option to change the creative and targeting of their campaigns to enhance performance, as well as further optimize results based on click-through-rate
("CTR") or cost-per-acquisition ("CPA"). As advertising campaigns deliver better
performance, advertisers can scale their media buys through the Company's managed-market bidding system, and control pricing and subsequent volume. With conservative frequency of delivery, automated
optimization technology and an intense focus on ROI, Fastclick has developed a reputation for delivering consistently high levels of advertising performance that meet or exceed client expectations. 

Fastclick Solutions 

        Fastclick
enables advertising customers and Internet publishers to deliver advertising on websites and manage the campaign planning, execution, analysis and optimization. 

        Fastclick Ad Network.    The Fastclick Ad Network has aggregated more than 7,500 active websites and delivers over
6.5 billion advertisements per month. This network enables web publishers to maximize revenues from advertisement inventories, while maintaining control and flexibility to choose which
advertising campaigns they run. For advertisers, Fastclick provides a cost-effective platform for reaching and building large online audiences, as well as the option to manage Internet
campaigns actively by personally managing the campaign or passively by utilizing Fastclick's automated optimization technology. 

        The
Company's web-based technology platform enables advertisers to manage and optimize online advertising campaigns. It offers the following features and functionalities: 

        •    Performance Targeting.    Advertisers can maximize their ROI, with an array of simultaneous targeting
filters, including content channel or category, visitor geography, time of day, bandwidth, internet service provider ("ISP") and browser. The Company
also provides the ability to manage advertising campaigns through a variety of pricing models, such as by impressions ("CPM"), clicks
("CPC"), actions, leads or sales ("CPA"). Additionally, advertisers can employ conservative frequency of
delivery to ensure that campaigns generate the desired reach in a cost-effective manner. 

        •    Proprietary Optimization Technology.    The Company's automated optimization technology enables
advertisers to easily and cost-effectively test a campaign's site placement and creative to meet the specific advertising campaign objectives. Campaign optimization is achieved by
automatically (or manually) selecting only the publishers that are performing well for a particular campaign based on CTR and/or CPA. Impressions, clicks and actions are tracked by category,
sub-category and individual 

14

 

website,
as well as ad format. Performance is tracked back to the source of the inventory and the creative used. Through this feedback, advertisers can automatically (or manually) refine the campaign
to maximize their ROI. 

        •    Interactive Reporting/Management Interface.    Fastclick's user-friendly interface offers
a variety of interactive features with reporting, analytics and decision support tools so that advertising campaigns can be managed entirely online. Hourly updates disclose impressions, clicks and
actions by campaign, creative and website in both tabular and graphical formats. Through this interface, advertisers can optimize their campaigns with the click of a mouse and publishers can choose
which campaigns they want to run on their websites. Other key interactive features include the ability to pause campaigns, the flexibility to upload creative content and purchase ad inventory via
credit card. 

        •    Ad Format Flexibility.    Fastclick offers a variety of creative formats and rich media ads,
including banners, pop-unders, interstitials and InVues, as well as new larger formats like leaderboards, skyscrapers and rectangles. These ads can also incorporate rich audio and video
content. 

        •    Managed-Market Bidding System.    Through Fastclick's "managed-market bidding system" advertisers and
publishers receive a high degree of pricing transparency, with true marketplace timing based on current supply and demand levels of ad inventories. Advertisers select appropriate price levels, based
on campaign objectives and in the context of historical inventory and pricing information. The value of publisher inventory is maximized using delivery algorithms that focus on preference by effective
CPM (eCPM). 

        •    Scalable, Automated Platform.    The Company's serving engine and back-end network
designs combine with fully redundant content delivery to provide an ad serving and management system currently delivering more than 250 million impressions per day. The sales and service
infrastructure is grounded in fundamental principles of efficiency and automation, allowing the Company to pay publishers more and charge advertisers less, and to provide excellent customer service
and achieve industry leading margins. 

        AdServer®.    Fastclick's AdServer currently serves over 4.5 billion ads per month (i.e.,
non-Fastclick network ads) and accounting for approximately 2% of Fastclick's revenues, AdServer is a third-party ad-serving solution enabling advertisers, publishers and
agencies to manage their advertising activity across all of their online media. The web-based solution enables the implementation, management, optimization and reporting of online
advertising campaigns through a highly interactive user interface. AdServer offers the following features: 

        •    Customization and Support.    AdServer accounts are highly customized to provide unique functionality
and tailored reporting for each customer. AdServer provides the ability to manage advertising using any and all campaign pricing models: impressions, clicks, actions, leads, sales, or any other
user-defined event. The flexibility to incorporate multiple pricing points in the same campaign enables accurate accounting for the value of various metrics. Additionally, AdServer allows
users to create new ad formats in minutes, based on their own definition of size, structure and frequency cap. AdServer's customer support is included with the contracted CPM and content delivery
rates. 

        •    Automated Optimization.    Similar to the Ad Network, AdServer provides a suite of optimization
techniques that automatically select the best creative and placements to attain the highest possible ROI. Impressions, clicks, and multiple post-click events can be tracked and assigned a
CPM, CPC or CPA value. Performance is then tracked back to the source of the inventory and the creative used, closing the loop and providing the algorithm with the necessary data to deliver a higher
ROI for the campaign. 

15

 

[Financial Highlights Table] 

Strategy 

        Broaden Base of High Quality Inventory on the Network.    Fastclick has become one of the fastest growing advertising networks
on the Internet for SMWs because it offers an industry leading payment program, easy-to-use online advertising campaign control and superior customer service. The Company will
continue to build its network to increase available inventory for its advertisers, adding more branded website representation as well as a broader catalog of specialty sites to reach desired
demographics. The Company maintains its commitment to quality content by carefully reviewing each network applicant site to ensure they meet specific standards. 

        Increase the Value of Media by Delivering High ROI to Advertisers.    The Company has maintained premium pricing on its network
by focusing on delivering a superior ROI to its clients. Fastclick continually upgrades its technology to improve its performance through new filtering, targeting and optimization methods, such as
demographic filters, contextual targeting and local advertising. Moreover, the Company is constantly working with new creative ad formats to maximize the success of advertising campaigns. For example,
it provides a variety of media options to reach the consumer, including banners, pop-unders, interstitials and InVues, as well as new larger in-page formats like leaderboards,
skyscrapers and rectangles. These ads can incorporate rich audio and video content to further enhance their effectiveness. 

        Target Advertisers through Agency and Direct Marketing Channels.    The Company attracts advertisers to its network through
relationships with direct marketers and advertising agencies. The Company works primarily with direct marketers, which it supports with a fast-growing internal team of account managers.
The Company also works with approximately 50 advertising agencies to bring advertisers into its network and intends to grow this channel by adding new agency relationships and deepening existing ones.
The Company recently added sales representatives in New York, San Francisco and Chicago to increase traction and focus towards advertising agencies. 

        Expand the Set of Marketing Programs Offered.    The Company intends to generate additional revenue from its network of
publishers and advertisers by creating additional marketing programs. The Company will extend its existing online advertising inventory business to complimentary areas such as a representation model,
international expansion, search engine marketing and other services enabling the Company to generate additional revenue from its current and future user base. 

        Further Develop AdServer's Features and Functionality.    Fastclick is further developing its AdServer product to add new
features and functionality, including an enhanced reporting suite and inventory management. 

Competitive Landscape 

        The
domestic online advertising market is made up of a number of direct and indirect competitors including: Advertising.com (under agreement to be purchased by America
Online, Inc.), Tribal Fusion, ValueClick, DoubleClick, Burst Media, TrafficMarketPlace (Vendare Group) and AdvertismentBanners.com. Fastclick believes it competes favorably with these companies
because of its automated optimization technology and large, loyal network of website publishers. The Company has in excess of 6,000 active websites, whereas competitors such as Burst! (2,000 sites)
and Tribal Fusion (500 sites) have far fewer sites. Moreover, Fastclick has a highly efficient operating model resulting in industry leading operating margins in excess of 19%, outpacing larger
competitors such as ValueClick (8%) and DoubleClick (1%). Fastclick's competitive advantage is sustained through its proprietary automation and optimization technologies, outstanding service and
value-driven approach to the advertiser-publisher relationship. 

16

 

Management 

        Kurt Johnson, Chief Executive Officer.    Kurt brings 18 years of management and investment banking experience to
Fastclick. Most recently Kurt served as Chief Financial Officer for ValueClick from 1999 to 2002. During that period, Kurt was instrumental in leading ValueClick through an $85 million
pre-IPO financing, the company's $76 million IPO and $280 million of strategic acquisitions, including OnResponse, MediaPlex and BeFree, to position ValueClick as a global
provider of Internet advertising solutions. 

        Fred Krupica, Chief Financial Officer.    Prior to joining Fastclick, Fred was Chief Financial Officer of WJ Communications, a
developer and manufacturer of microwave devices for government electronics and space communications systems. Fred was responsible for directing WJ Communications' accounting, finance and information
technology organizations. Fred also previously served as Chief Financial Officer of Magnetic Data Technologies LLC, an international repair manufacturer that was acquired by Solectron Corporation in
June 2002. Prior to that, he was chief financial officer and chief operating officer at Patel Ventures and founder, president and chief financial officer of F&G Financial Services. 

        Dave Gross, Director.    As co-founder of Fastclick, Dave has successfully led the Company from inception. During
the first years of the Company's existence, Dave filled all executive roles, developing the business model, company practices and overall infrastructure to support the growing organization. Dave has
12 years of management and technical experience in online advertising, aerospace and automotive industries. 

        Jeffrey Hirsch, Chief Revenue Officer.    Jeff brings to Fastclick 25 years of media, advertising, marketing and
management experience. Jeff has successfully led the strategic planning, sales channel development, product development and corporate marketing activities for companies ranging from
start-up to international in scope. Prior to joining Fastclick, Jeff was the VP of Business Development for ValueClick where he expanded the company's media network, more than doubling the
available inventory prior to ValueClick's IPO. 

        James Aviani, Chief Technology Officer.    James brings more than 16 years of experience in both technology innovation
and engineering management to Fastclick. Prior to joining Fastclick, James led technology development for new business ventures at Cisco Systems, where he was responsible for a multitude of corporate
initiatives and managed a team of 40 engineers. In addition to his extensive experience, James has authored five patents based on Internet content delivery. 

        Shayne Mihalka, Executive Vice President, Strategic Development.    Shayne is a 5-year veteran of the Internet
advertising industry and played a key role in the evolution of online advertising
networks. Prior to joining Fastclick, Shayne was the VP of Business Operations and Network Development for ValueClick, where he was instrumental in the growth of the company from a startup to a
publicly-traded corporation. 

        Barry Anderson, Executive Vice President and General Counsel.    Barry brings to Fastclick over 30 years of international
human resources, administration and legal experience. Prior to joining Fastclick, Barry served as SVP of Global Human Resources at VeriSign, Inc., where he managed all human resources,
facilities and security functions for over 3,000 employees in 11 countries. 

        Alexis Weaver, EVP Operations.    Alexis has 6 years of experience. Prior to joining Fastclick, Alexis managed the
advertising and publicity for an international publishing company, ABC/CLIO, after having held general marketing positions in that company. 

17

 

 Recent Developments  

Chief Financial Officer 

        Pursuant
to an employment agreement effective as of September 9, 2004, the Company hired Fred Krupica as its new Chief Financial Officer. 

Amendment and Restatement of Articles of Incorporation 

        Contemporaneous
with this Offer, the Company will submit to its shareholders for their consent a proposal to amend and restate its Articles of Incorporation in order to
(i) increase the authorized number of shares of capital stock to 5,856,285, (ii) increase the authorized number of shares of Common Stock to 3,725,000, (iii) increase the
authorized number of shares of preferred stock to
2,131,285, (iv) designate 2,131,285 shares of Series A Preferred Stock, and (v) designate the rights and preferences of the Series A Preferred Stock. Written shareholder
consents approving the amendments from the holders of more than 50% of the outstanding shares of the Company's Common Stock are required to duly approve the amendment and restatement of the Company's
Articles of Incorporation in accordance with Sections 902 and 903 of the California Corporations Code. Upon obtaining the requisite written consents, the Company shall amend and restate its Articles
of Incorporation by filing with the California Secretary of State its Amended and Restated Articles of Incorporation. 

Equity Incentive Plans 

        The
Company anticipates that, prior to closing the repurchase of the Shares, it will terminate its 2003 Ownership Equivalency Plan, cease issuing stock options under its 2000 Equity
Participation Plan and adopt a new 2004 Stock Incentive Plan and reserve up to 499,839 shares of Common Stock for issuance thereunder. 

18

  

Board of Directors 

        Upon
consummation of the Recapitalization, the Company's Board of Directors shall consist of seven directors. Pursuant to a Voting Agreement to be entered into by the Company, the
Investors, the Founders and certain employees of the Company, the Investors shall have the right to nominate and elect three directors, who shall initially be Dan Nova, Bob Davis and Fredric W.
Harman, the Chief Executive Officer of the Company, Kurt Johnson currently, shall be a director, the holders of a majority of the outstanding Common Stock shall have the right to nominate and elect a
director, who shall initially be David Gross, and the remaining two directors shall be mutually acceptable to the Investors holding two-thirds of the outstanding shares of Series A
Preferred Stock and the holders of a majority of the outstanding Common Stock. As of the date hereof the two remaining directors have not been identified. 

        Bob Davis is a Venture Partner at Highland Capital Partners focusing on information technology investments and specializing in digital
media and software start-ups. He represents Highland on the boards of Navic Networks, Performix Technologies, Quigo and Turbine Entertainment. Prior to joining Highland, Bob served as the
Chief Executive Officer of Terra Lycos and was responsible for the day-to-day operations of the company. Before the combination of Terra and Lycos in October 2000, Bob
was President and Chief Executive Officer of Lycos, Inc., and was the company's first employee in June of 1995. 

        Dan Nova is a Managing General Partner at Highland Capital Partners focusing on technology with specific experience and interest in
emerging broadband, interactive television and media technologies. Dan currently serves on the boards of CMI Marketing, Coremetrics, GlobalStreams, Gotuit Media, N2 Broadband, Navic Networks, Topica
and Whole Body. His portfolio also includes Ask Jeeves (Nasdaq:ASKJ), Be Free (Nasdaq:BFRE), Digital Market (acquired by Agile Software), eToys (Nasdaq:ETYS), Gamesville (acquired by Lycos),
MapQuest.com (acquired by AOL), New York Times Digital, NextCard (Nasdaq:NXCD), Quote.com (acquired by Lycos) Raindance Communications (Nasdaq:RNDC), RoweCom (Nasdaq:ROWE) and Terra Lycos (Nasdaq:
TRLY). Prior to joining Highland in 1996, Dan was a Partner at CMG@Ventures where he co-led the partnership's investment activities in early-stage Internet companies. While at
CMG@Ventures, Dan co-founded Lycos, Inc. in June of 1995, and played an integral role from its inception to its IPO in April of 1996, and finally through its sale to Terra Networks
in 2000. 

        Fredric W. Harman joined Oak Investment Partners as a General Partner in July 1994 after seven years with Morgan Stanley's Venture
Capital Group where he was a General Partner. Fred's primary focus is
on Internet/Enterprise software and services. While at Oak, Fred has led Internet infrastructure investments in Aventail, Exodus, Inktomi (Yahoo) and Internap. Other Internet service companies include
aQuantive, Campus Pipeline (SCT), Cobalt, NetBlue, and Qpass. Enterprise application investments include Business Engine, Captura (Concur), Knowledge Networks, Concerto (merged with Melita), Pivotal,
Primus Knowledge Solutions, Quintus (Avaya), Securant (RSA), and Talisma. He also has led outsourced services investments in Sutherland Global Services and in International Manufacturing Services
("IMS") and VXI Electronics (both acquired by Celestica). Prior to joining Morgan Stanley, Fred worked in Business Development at Hughes Communications where he was involved in the formation of the
predecessor to DirectTV. 

 Value of the Company  

        As of July 31, 2004, the Company's cash balance was approximately $3,030,696.00. The Company anticipates receiving a gross amount of up to $75,000,000 from
the sale of its Series A Preferred Stock, up to $55,000,000 (less the Fees) of which will be set aside in an escrow account to fund this Offer. The sale of the Series A Preferred Stock
pursuant to the Recapitalization Agreement implies an equity valuation of approximately $100,000,000 immediately prior to the Recapitalization, and approximately 

19

 

$120,000,000
immediately after the closing of the Recapitalization (assuming full participation by all shareholders up to their respective Pro Rata Share). 

        The Company's estimated value was not determined with the help of, or reviewed or analyzed by, a professional appraiser or similar valuation expert at the
Company's request. As a result of the foregoing, the actual value of the Company's outstanding stock may vary, perhaps materially, from the estimate given herein. The Company cannot be certain that it
is aware of all information that is material to a determination of the value of any of its holdings. You are strongly cautioned not to put undue reliance on these estimates in making a decision about
whether or not to tender any or all of your Shares.

 Fastclick.com, Inc. Capitalization  

        As of July 30, 2004, the fully diluted Common Stock ownership of the Company prior to the Recapitalization is as follows (assuming an expansion of the
Option Pool by 264,385 shares of Common
Stock and the purchase or termination by the Company of all outstanding Ownership Equivalent Rights granted under the 2003 Ownership Equivalency Plan): 

	Owner
 
	 	Shares
	 	Percentage (approx.)
	 
	Common Stock	 	2,174,988	 	76.5	%
	Options Granted (vested and unvested)	 	170,913	 	6.0	%
	Option Pool Available	 	495,585	 	17.5	%
	Total	 	2,841,486	 	100	%

        Assuming
the Company repurchases the Minimum Amount of Shares in the Offer, the fully diluted Common Stock ownership of the Company immediately following the consummation of the
Recapitalization shall be as follows: 

	Owner
 
	 	Shares
	 	Percentage (approx.)
	 
	Common Stock	 	1,038,302	 	30.5	%
	Options Granted (vested and unvested)	 	170,913	 	5.0	%
	Option Pool Available	 	495,585	 	14.5	%
	Series A Preferred	 	1,705,029	 	50.0	%
	Total	 	3,409,829	 	100	%

        Assuming
the Company repurchases the Maximum Amount of Shares in the Offer, the fully diluted Common Stock ownership of the Company immediately following the consummation of the
Recapitalization shall be as follows: 

	Owner
 
	 	Shares
	 	Percentage (approx.)
	 
	Common Stock	 	612,044	 	18.0	%
	Options Granted (vested and unvested)	 	170,913	 	5.0	%
	Option Pool Available	 	495,585	 	14.5	%
	Series A Preferred	 	2,131,285	 	62.5	%
	Total	 	3,409,827	 	100	%

 9.    Determination of Net Offer Price  

        The Net Offer Price shall be calculated as follows: (a) $35.19 (the Offer Price) minus (b) the quotient of (i) the amount of the Fees
estimated to be approximately $629,240 and (ii) the total number of Shares that the Company purchases from Selling Shareholders pursuant to this Offer. 

20

 

        NOTWITHSTANDING THE FOREGOING, NO REPRESENTATION IS MADE BY ANY PARTY THAT THE OFFER PRICE OR NET OFFER PRICE IS FAIR TO THE HOLDERS OF THE SHARES. THE OFFER
PRICE OR NET OFFER PRICE MAY BE LESS OR MORE THAN THE ACTUAL FAIR MARKET VALUE OF THE SHARES. THE COMPANY'S MANAGEMENT AND BOARD MAKE NO RECOMMENDATION AS TO WHETHER SHAREHOLDERS SHOULD TENDER SHARES
PURSUANT TO THE OFFER AND TAKE NO POSITION WITH RESPECT TO THE FAIRNESS OF THE OFFER PRICE OR NET OFFER PRICE OR ANY OTHER TERMS OF THE OFFER. THE COMPANY'S BOARD OF DIRECTORS DID NOT REQUEST, AND DID
NOT RECEIVE, A FAIRNESS OPINION FROM ANY FINANCIAL ADVISOR WITH RESPECT TO THE OFFER PRICE OR NET OFFER PRICE.

        The
most recent price at which the Company granted compensatory Common Stock options to Company employees was $12.75 per share on June 2, 2004. This value was determined in good
faith by the Company's Board of Directors. The Company has not issued any shares of Common Stock or options or rights to acquire shares of Common Stock after June 2, 2004. The Company expects
that the fair market value of the Company's Common Stock will increase as a result of the closing of the transactions contemplated in the Recapitalization Agreement. The fair market value of the
Company's Common Stock may also be affected, positively or negatively, as a result of this Offer. 

 10.    Shareholder Access to Company Information  

        Together with the Offer, the Company has included the unaudited financial statements of the Company as of and for the year ended December 31, 2003 and the
unaudited financial statements of the Company as of and for the six (6) months ended June 30, 2004, all of which are incorporated by reference into the Offer. The Company is not subject
to the public information and reporting requirements of the Exchange Act and is not required to file periodic reports, proxy statements and other information with the Securities and Exchange
Commission relating to its business, financial condition and other matters. However, we invite you to call Kurt Johnson, the Company's Chief Executive Officer, at (805) 568-5334 to
further discuss the Company's business, management and financial affairs before you make a decision whether or not to sell us your Shares. Reicker, Pfau, Pyle, McRoy & Herman LLP
("Shareholder Counsel") has been retained to act as special counsel to the shareholders in connection with this Offer. If you have any legal questions
regarding this Offer or its terms please call Bruce McRoy, Esq. of Reicker Pfau, at (805) 966-2440. 

        NOTHING IN THIS DOCUMENT CONSTITUTES SPECIFIC LEGAL ADVICE TO ANY SHAREHOLDER WITH RESPECT TO HIS OR HER PARTICIPATION IN THE OFFER OR THE TAX CONSEQUENCES OF
SUCH PARTICIPATION IN THE OFFER. SHAREHOLDER COUNSEL HAS NO OBLIGATION TO INVESTIGATE ANY MATTERS RELATING TO THE COMPANY OR THE OFFER OCCURRING AFTER THE DATE OF THIS DOCUMENT OR TO ADVICE ANY
SHAREHOLDER WITH RESPECT TO ANY SUCH EVENT.

 11.    Risk Factors  

        Shareholders should carefully consider the risks described below before making a decision whether or not to tender Shares. The Offer
contains forward-looking statements based on current expectations which involve risks and uncertainties. The Company's results of operations could differ materially from those anticipated in these
forward-looking statements as a result of many factors, including the risk factors set forth below and elsewhere in the Offer. The cautionary statements made in the Offer should be read as being
applicable to all forward-looking statements wherever they appear in the Offer.  

21

 
  
 

    Consequences and Risks of Tendering Shares  
    

        The Investors will have significant control of our management and affairs.

        Following
the completion of this Offer, the Investors will beneficially own a substantial percentage of the outstanding capital stock of the Company. As a result, the Investors may be
able to control our management and affairs and matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions, such as mergers,
consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger,
consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control. In addition, pursuant to the
Drag-Along Agreement, the Investors could require the shareholders of the Company to approve a transaction resulting in a change of control of the Company. Furthermore, depending on the
structure of the transaction, such transaction could also require a sale of such shareholders' Shares. 

        Shareholders who tender Shares will have no future participation in Company gains or profits with respect to Shares sold.

        The
sale of Shares pursuant to the Offer will mean that, with respect to Shares sold, Selling Shareholders will no longer have the opportunity to continue their interests in the Company
and therefore will not share in the Company's future earnings, if any, and potential growth. In the event that the Company's business significantly increases in value, any Selling Shareholder would
forfeit the opportunity to share in any resulting increase in value of the Company's capital stock or distributions thereon with respect to the Shares sold in the Offer. The industry in which the
Company is operating is new and rapidly evolving and therefore it is difficult to predict the future growth rate, if any, and size of the market. If the size of the market were to experience
significant growth, and the Company gains significant acceptance for its services and offerings in the market, the value of the Company's capital stock may consequently rise. 

        Certain Tax Consequences

        Set
forth in Section 7 above is a discussion of the income tax consequences of a Selling Shareholder's sale of Shares in the Offer.
While the Company believes that it is more likely than not that the tax treatment of a Selling Shareholder's sale of Shares in the Offer will be as described in such Section, the Company has not
requested a ruling from the Internal Revenue Service as to such tax treatment and it
is possible that the Internal Revenue Service will attempt to tax a Selling Shareholder's sale of Shares in the Offer in a manner different from that described in such Section. In addition, the tax
treatment of any particular Selling Shareholder's sale of Shares in the Offer will depend upon that Shareholder's particular tax and financial position and may differ from the treatment described in
such Section. Also, any distribution of the Company's taxable income for the portion of calendar year 2004 prior to and through the end of the Closing Date is subject to compliance with California
Corporations Code Section 500 et. seq. at the time of such distribution. As a result, it is possible that Shareholders may not ultimately receive distributions for such portion of calendar year
2004 equal to the amount of the Company's taxable income allocated to them for that period, or the Shareholders may receive such distributions later than the time or times they are required to make
estimated or final income tax payments for 2004. 

        ALL
SHAREHOLDERS DESIRING TO PARTICIPATE IN THIS OFFER ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF TENDERING INTO THE OFFER, INCLUDING THE
APPLICABILITY OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. 

22

 

        There is no guarantee of any future offer to purchase Shares or other market for Shares.  

        Shareholders who decide not to tender their Shares pursuant to this Offer should be aware that the Company is under no obligation to extend this Offer or make a
similar offer at any time in the future and that there is no commitment on the part of the Company ever to offer to purchase any Shares in the future. However, in the event the Company does seek to
acquire additional Shares through private purchases, additional tender or exchange offers or otherwise offers to purchase any Shares in the future, which it currently does not have any plans to do,
the terms and prices offered may be more or less favorable than, or the same as, those of the Offer. Shareholders who do not tender their Shares may have no opportunity to realize a liquidity event
with respect to their Shares and face substantial risks and uncertainties with respect to the value of their Shares. 

 
 

Risks Affecting the Company  
    

        The Company's growth could be impaired if it remains or becomes more difficult for the Company to raise capital.

        The
Company may require access to capital markets to fund its operations. If the market for the securities of technology companies in its industry were to deteriorate for an extended
period of time, or at a time when the Company needed to raise capital, the Company may not be able to raise any required capital and the Company's business and financial condition could be seriously
harmed. 

        The
Company may need to raise additional funds at a later date and cannot be certain that additional financing will be available to it on favorable terms when required, or at all. The
Company's ability to issue debt securities or to service any debt it does issue may also be limited by the Company's ability to generate cash flow. If the Company issues equity or securities
convertible into equity, its shareholders will be diluted. 

        The Company's key personnel may leave which could disrupt its operations and harm its business.

        The
Company's future success depends upon the continued service of its executive officers and other key personnel. Other than Kurt Johnson (Chief Executive Officer), Fred Krupica (Chief
Financial Officer) and James Aviani (Chief Technology Officer), none of the Company's officers or key employees is bound by an employment agreement for any specific term (though the Company may elect
to enter into employment agreements with one or more officers or key employees in the future). If the Company lost the services of one or more of its key employees, or if one or more of its executive
officers or employees decided to join a competitor or otherwise compete directly or indirectly with the Company, the Company's business could be harmed. The Company cannot assure that it will be able
to successfully retain its key personnel or, in the event the Company were to lose the services of any key personnel, to replace such personnel. 

        Misappropriation of the Company's intellectual property and proprietary rights could impair the Company's competitive position. Claims of intellectual property
infringement by third parties could cause the Company to incur expenses or become involved in litigation.

        The
Company regards its trade secrets, patentable inventions and similar intellectual property as critical to its success, and it relies on copyright law, trade secret protection,
trademark and patent law and confidentiality and/or license agreements with employees, contractors, companies, partners and others to protect its proprietary rights. The Company may not, however,
apply for or be issued patents covering all of its patentable inventions. Moreover, the laws of some foreign countries may not provide protection of the Company's intellectual property rights to the
same extent as those of the United States. Unauthorized third parties might copy or reverse engineer and use information or technology that the Company regards as proprietary. If proprietary
information were misappropriated, the Company might have to litigate to protect it. The Company may also face claims made against it, either 

23

 

directly
or through contractual indemnification provisions with other companies. The Company may not have insurance to cover the claims, or its insurance may not provide sufficient coverage. If the
Company incurs substantial costs because of this type of liability, its expenses will increase and its profits, if any, will decrease. Intellectual property litigation is expensive and
time-consuming. The outcome of any such litigation will be uncertain, and the litigation could divert management's attention away from running its business. The Company cannot assure that
the Company's products and services do not infringe on the intellectual property rights of third parties. Royalty or licensing agreements, if required, may not be available on acceptable terms, if at
all. A successful claim of infringement against the Company, and its failure or inability to license the infringed or similar technology could adversely affect the Company's business. 

        The Company may fail if its products and services are not commercially successful or if competitors provide superior offerings.

        The
development efforts of the Company may not result in commercially successful products and services or products and services may be rendered obsolete by changing technology, new
industry standards or new products introduced by competitors. Barriers to entry may not be high enough to discourage new competitors. Many well-established companies offer solutions that
compete with those offered by the Company. The Company expects that additional companies will offer competing solutions in the future. Rapid technological changes make it difficult for technology
companies to remain current with their technical resources in order to maintain competitive product and service offerings. Significant technological changes could render the Company's existing
technology or other products and services rapidly obsolete. If the Company does not successfully respond to continuing technological developments or does not respond in a cost-effective
way, the Company's business, financial condition and operating results will be adversely affected. The Company's competitors may develop products or services that are superior to, or have greater
market acceptance than the products and services offered by the Company. The Company's competitors may have greater brand recognition and greater financial, marketing and other resources than does the
Company. This may place the Company at a disadvantage in responding to its competitors' pricing strategies, technological advances, advertising campaigns, strategic partnerships and other initiatives.
If the Company is unable to compete successfully against its competitors, it may fail. 

        From time to time, we may be subject to a variety of claims and lawsuits and it is possible that one or more of those matters could be resolved in a manner that
ultimately would have a material adverse impact on our business.

        From
time to time, we may be subject to a variety of claims and lawsuits in the ordinary course of business. Adverse outcomes in any such claims or lawsuits could result in significant
monetary damages or injunctive relief against us. If there occurs an unfavorable final outcome in any litigation against us, our financial position and results of operations may be materially
adversely impacted. 

        The enactment of new laws or changes in government regulations could adversely affect the businesses of the Company.

        Government
regulations and legal uncertainties may place financial burdens on the Company's business. The adoption or modification of laws or regulations relating to the areas in which
the Company operates could adversely affect the Company's business by increasing costs and administrative burdens or otherwise disrupting its business. Compliance with any newly adopted laws may prove
difficult for the Company to comply with, may increase the Company's compliance and operating costs and may reduce the Company's net income and negatively affect its business. For example, the
government has adopted and may adopt additional laws and regulations with respect to such areas as online advertising, user privacy, pricing, content, taxation, intellectual property protection,
governance and disclosure. 

24

 

        If we fail to manage our growth effectively, our expenses could increase and our management's time and attention could be diverted.

        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
Internet advertising market. Our business, results of operations and financial condition will be substantially harmed if we are unable to manage our expanding operations effectively. 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 will likely need to continue to improve our financial and managerial controls and our reporting systems and procedures. In addition, we will need to expand,
train and manage our work force. Our failure to manage our growth effectively could increase our expenses and divert management's time and attention. 

        We have a limited operating history and therefore our business may be difficult to evaluate.

        Because
we have a relatively limited operating history, it may be difficult to evaluate our business and prospects. You should consider our prospects in light of the risks, expenses and
difficulties frequently encountered by early-stage companies in the rapidly-changing Internet market. These risks include, but are not limited to, our ability to: 

        •    maintain
and increase the number of advertisers that use our products and services; 

        •    continue
to expand the number of products and services we offer and the capacity of our systems; 

        •    adapt
to changes in Internet advertisers' promotional needs and policies, and the technologies used to generate Internet advertisements; 

        •    respond
to challenges presented by the large number of competitors in the industry; 

        •    adapt
to changes in legislation regarding Internet usage, advertising and commerce; 

        •    adapt
to changes in technology related to online advertising filtering software; and 

        •    adapt
to changes in the competitive landscape. 

        If
we are unsuccessful in addressing these risks and uncertainties, our business, results of operations and financial condition could be materially and adversely affected. 

        Our revenue growth could be negatively impacted if Internet usage and the development of Internet infrastructure do not continue to grow.

        Our
business and financial results will depend on continued growth in the use of the Internet. Internet usage may be inhibited for a number of reasons, such as inadequate network
infrastructures; security concerns; inconsistent quality of service and unavailability of cost-effective, high-speed service. If Internet usage grows, our infrastructure may
not be able to support the demands placed on it and our performance and reliability may decline. In addition, web sites have experienced interruptions in their service as a result of outages, other
delays occurring throughout the Internet infrastructure or sabotage. The Internet could lose its viability as a commercial medium due to delays in the development or adoption of new technology
required to accommodate increased levels of Internet activity. If use of the Internet does not continue to grow, or if the Internet infrastructure does not effectively support our growth, our revenue
could be materially and adversely affected. 

25

   
        Our long-term success may be materially adversely affected if e-commerce does not grow or grows slower than
expected.

        Because
many of our customers' advertisements encourage online purchasing, our long-term success may depend in part on the growth and market acceptance of
e-commerce. Our business will be adversely affected if e-commerce does not continue to grow or grows slower than now expected. A number of factors outside of our control could
hinder the future growth of e-commerce, including the following: 

        •    the
network infrastructure necessary for substantial growth in Internet usage may not develop adequately or our performance and reliability may decline; 

        •    insufficient
availability of telecommunication services or changes in telecommunication services could result in inconsistent quality of service or slower
response times on the Internet; 

        •    negative
publicity and consumer concern surrounding the security of e-commerce could impede our acceptance and growth; and 

        •    financial
instability of e-commerce customers. 

        In
particular, any well-publicized compromise of security involving web-based transactions could deter people from purchasing items on the Internet, clicking on
advertisements, or using the Internet generally, any of which could cause us to lose clients and advertising inventory and could materially, adversely affect our revenue. 

 12.    Source and Amount of Funds/Effect on Future Operations  

        The Offer is expressly conditioned upon the consummation of the sale of the Series A Preferred Stock pursuant to the Recapitalization Agreement. Subject to
compliance with California Corporations Code Section 500 et. esq., the Company will pay a distribution of taxable income allocable to the shareholders for the portion of calendar year 2004
during which the Company was a subchapter S corporation. The amount paid by the Company in termination of the Ownership Equivalents granted under its 2003 Ownership Equivalency Plan will be treated as
an expense of the Company and has been included in calculating the foregoing approximate amount to be distributed to the shareholders. As of July 31, 2004, the Company's cash balance was
approximately $3,030,696.00. The Company anticipates receiving approximately $75,000,000 from the sale of its Series A Preferred Stock pursuant to the Recapitalization Agreement, up to
$55,000,000 of which (less the Fees) will be set aside in an escrow account to fund the Offer. The Company intends to use the cash from the sale of the Series A Preferred Stock remaining after
the completion of the Offer for general operations. The Company does not believe that consummation of the Offer will adversely impact its future operations. 

 13.    Certain Conditions of the Offer  

        Notwithstanding any other provision of the Offer, the Company shall not be required to accept for payment or, subject to any applicable state or federal law or
regulation, to pay for any Shares tendered and may postpone the acceptance for payment or, subject to the restriction referred to above, payment for any Shares tendered, and may amend the Offer or
terminate the Offer if, at any time on or after the date of this Offer and before acceptance for payment of, or payment for, such Shares, any of the following events shall have occurred and be
continuing: 

        (a)   the
consummation of the sale of the Series A Preferred Stock pursuant to the Recapitalization Agreement has not occurred; 

        (b)   one
or more conditions to the Offer has not been satisfied; 

26

 

        (c)   the
Company in its sole discretion determines that there has occurred a material adverse change in (i) the financial condition, business, results of operations or
prospects of the Company or (ii) or the Company's status under any securities laws; 

        (d)   there
shall have been threatened, instituted or pending any suit, action, proceeding, inquiry, application, claim or counterclaim (collectively,
"Actions") by or before any court, government, or governmental, regulatory or administrative agency, authority or tribunal, domestic, foreign or
supranational of competent jurisdiction (each, a "Governmental Entity"), which (i) challenges the acquisition by the Company of the Shares (or
any of them), or seeks to obtain any damages in connection with the foregoing, (ii) challenges the Company's amendment and restatement of the Company's articles of incorporation,
(iii) makes or seeks to make the purchase of or payment for some or all of the Shares pursuant to the Offer otherwise illegal, or results in or may reasonably be expected to result in a delay
in the ability of the Company to accept for payment or pay for some or all of the Shares, (iv) imposes or seeks to impose voting, procedural, price or other requirements in addition to those
under California law and federal securities laws (each as in effect on the date of this Offer) in connection with the transactions contemplated by the Offer or any material condition to the Offer that
is unacceptable to the Company, or (v) otherwise relates to the Offer, or which otherwise may reasonably be expected to materially and adversely affect the Company or the value of the Shares; 

        (e)   any
statute, rule, regulation, judgment, decree, order or injunction shall have been proposed, sought, promulgated, enacted, entered, enforced or deemed applicable to
the Offer or any other action shall have been taken, by any Governmental Entity that may reasonably be expected to, directly or indirectly, result in any of the consequences referred to in clauses
(i) through (v) of paragraph (c) above; or 

        (f)    the
purchase of Shares tendered pursuant to the Offer does not satisfy the limitations set forth in the California General Corporation Law (the
"CGCL") Sections 500 et seq. (as described in more detail in Section 14 below); 

and
such event or events, in the judgment of the Company, in its sole discretion, makes it inadvisable to proceed with such acceptance of Shares for payment or the payment for such at any scheduled
Expiration Date. 

        The
foregoing conditions are for the sole benefit of the Company and may be waived by the Company in whole or in part at any time and from time to time in its sole discretion. The
failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time
prior to the Expiration Date. If the Company closes the Offer and accepts the tender of any Shares, the Company shall be deemed to have waived its right to postpone the acceptance for payment or
payment for any Shares tendered or amend or terminate the Offer by reason of the occurrence of any of the foregoing events. 

        If
the Company terminates the Offer by reason of the occurrence of any of the foregoing events, the obligations of the Selling Shareholders who have tendered Shares shall terminate and
the Company shall promptly return to such Selling Shareholders all stock certificates and other documents delivered by them in connection with the Offer. 

 14.    Certain Legal Matters  

        Because the Offer contemplates that the Company will pay cash for any and all Shares tendered, the purchase and sale of Shares pursuant to the Offer will qualify
as a distribution under Section 166 of the CGCL and therefore will be lawful only if the distribution satisfies three general limitations, set 

27

 

forth
in CGCL Sections 500 et seq., that are intended to protect the interests of creditors of the Company. These general limitations are described below. 

        First,
the consideration for Shares tendered must either be paid out of the Company's retained earnings or, alternatively, after giving effect to the purchase of Shares pursuant to the
Offer, the Company must maintain certain minimum ratios of assets to liabilities. More specifically, any distribution that results from the purchase of Shares must not reduce the Company's total
assets below 1.25 times its total liabilities, nor its current assets below current liabilities. Second, the purchase of Shares pursuant to the Offer must not impair the Company's ability to pay its
debts as they mature. Finally, the purchase of Shares pursuant to the Offer must not impair any liquidation or dividend priorities on outstanding preferred shares that are senior to the Shares. 

        Under
CGCL Section 506(a), any Selling Shareholder who receives payment for Shares pursuant to the Offer with knowledge of facts indicating that such transaction is improper under
the distribution limitations of CGCL Sections 500 et seq. may be liable to the Company for the amount received by such Selling Shareholder, plus interest, until such amounts are repaid. Actions to
enforce Section 506(a) may be brought in the Company's name by creditors of the Company. 

        Given
the Company's current financial position, the Company believes that it will be able to purchase Shares tendered pursuant to the Offer (subject to the limitations set forth in
Section 2 above) without violating the distribution limitations of CGCL Sections 500 et seq.; however, if the Company in its sole discretion determines that any purchase or purchases of Shares
pursuant to the Offer would lead the Company to violate such provisions of the CGCL, the Company shall not be required to accept for payment or, subject to any applicable state or federal law or
regulation, to pay for any Shares tendered and may postpone the acceptance for payment or, subject to the restriction referred to above, payment for any Shares tendered and may amend the Offer or
terminate the Offer. 

 15.    Miscellaneous  

        The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares residing in any jurisdiction in which the making of the Offer
or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. However, the Company may, in its discretion, take such action as it may deem
necessary to make the Offer in any such jurisdiction and extend the Offer to holders of Shares in such jurisdiction. The Company presently believes that it may make the Offer in all jurisdictions in
which it is currently aware that any of the Selling Shareholders reside. 

        EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS OFFER, NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION AND NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. Neither the delivery of the Offer nor any purchase pursuant to the Offer shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company or its affiliates since the date as of which information is furnished or the date of this Offer. 

28

  

 
 

EXHIBIT A  
    
    IRREVOCABLE STOCK POWER  
    

        FOR VALUE RECEIVED, the undersigned,
                        , does hereby sell, assign and transfer to  FASTCLICK.COM,
 INC., a California corporation (the "Company"),                          shares of the Common
Stock of the
Company, represented by Certificate(s) No(s).                         , inclusive, standing in the name of the undersigned
on the books of the Company. 

        The
undersigned does hereby irrevocably constitute and appoint Secretary of the Company to transfer said stock on the books of the Company, with full power of substitution in the
premises. 

	

Dated:	
 	

    
	
 	

, 2004	
 	

 	
 	

 
	

 	
 	

 	
 	

 	
 	

Signed by:	
 	

    

	

 	
 	

 	
 	

 	
 	

Print name:	
 	

    

29

  

 
 

EXHIBIT B  
    
    AFFIDAVIT OF LOST CERTIFICATE  
    

        The undersigned ("Shareholder") hereby declares under penalty of perjury under the laws of the State of California as follows: 

        Shareholder
is the true and lawful, present and sole owner of the following certificate(s) (the "Lost Certificate(s)") evidencing
                        
(                        ) shares of Common Stock (the "Shares") issued by Fastclick.com, Inc., a California
corporation (the "Company"): 

	Certificate No.
	 	Principal Amount
	 	Name in Which Issued

	

	
 	

	
 	

	

	
 	

	
 	

	

	
 	

	
 	

        Shareholder
believes the Lost Certificate(s) to be lost. Shareholder believes that the Lost Certificate(s) has/have been lost because Shareholder has searched all of its records and made
appropriate inquiries regarding the Lost Certificate(s) and remains unable to locate the Lost Certificate(s). 

        A
new certificate representing the Shares has not previously been issued to Shareholder. The Lost Certificate(s) was/were not endorsed, has/have not been pledged, sold, delivered,
transferred or
assigned, and Shareholder hereby agrees that in the event of recovery of the Lost Certificate(s) at any time, Shareholder will cause the same to be returned to the Company for cancellation. 

        Shareholder
agrees to indemnify and hold free and harmless the Company and its other equity holders from and against all manner of loss, damage and liability arising from, or in
connection with, the loss of the Lost Certificate(s) or any person or entity claiming any rights or privileges in respect thereof. 

	

Date:	
 	

    
	
 	

, 2004	
 	

By:	
 	

    

	 	 	 	 	 	 	 	 	Name:
	 	 	 	 	 	 	 	 	Title:

30

  

 
 

EXHIBIT C  
    
    NOTICE OF EXERCISE OF STOCK OPTIONS  
    

31

  

 
 

EXHIBIT D  
    
    DRAG-ALONG AGREEMENT  
    

32

 
 
 

EXHIBIT E  
    
    FINANCIAL STATEMENTS  
    

33

QuickLinks

Consequences and Risks of Tendering Shares

Risks Affecting the Company

EXHIBIT A IRREVOCABLE STOCK POWER

EXHIBIT B AFFIDAVIT OF LOST CERTIFICATE

EXHIBIT C NOTICE OF EXERCISE OF STOCK OPTIONS

EXHIBIT D DRAG-ALONG AGREEMENT

EXHIBIT E FINANCIAL STATEMENTSQuickLinks
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Exhibit 10.1  

 

RECAPITALIZATION AGREEMENT  

 BY AND AMONG  

 FASTCLICK.COM, INC.,  

 THE PURCHASERS NAMED HEREIN  

 AND  

 JEFF PRYOR AND DAVID GROSS  

 

  

September 9, 2004  

  

 
 

TABLE OF CONTENTS  
    

	 
	 	 
	 	Page

	

Section 1.	
 	

Recapitalization	
 	

1
	

(a)	
 	

Authorization	
 	

1
	

(b)	
 	

Investment Transaction	
 	

1
	

(c)	
 	

Repurchase Transaction	
 	

2
	

(d)	
 	

Funding	
 	

2
	

(e)	
 	

Closing	
 	

2
	

Section 2.	
 	

Representations and Warranties of the Company	
 	

3
	

(a)	
 	

Organization, Good Standing and Qualification	
 	

3
	

(b)	
 	

Capitalization	
 	

3
	

(c)	
 	

Subsidiaries	
 	

4
	

(d)	
 	

Authorization	
 	

4
	

(e)	
 	

Valid Issuance of Preferred and Common Stock	
 	

5
	

(f)	
 	

Governmental Consents	
 	

5
	

(g)	
 	

Offering	
 	

5
	

(h)	
 	

Litigation	
 	

5
	

(i)	
 	

Compliance with Laws and Instruments	
 	

6
	

(j)	
 	

Intellectual Property	
 	

6
	

(k)	
 	

Registration Rights, Rights to Acquire Company Securities and Voting Obligations	
 	

8
	

(l)	
 	

Title to Property and Assets	
 	

8
	

(m)	
 	

Employees	
 	

8
	

(n)	
 	

Employee Benefit Plans	
 	

9
	

(o)	
 	

Tax Returns and Payments	
 	

9
	

(p)	
 	

Permits	
 	

10
	

(q)	
 	

Environment and Safety Laws	
 	

11
	

(r)	
 	

Corporate Documents	
 	

11
	

(s)	
 	

Foreign Corrupt Practices Act	
 	

11
	

(t)	
 	

Insurance	
 	

11
	

(u)	
 	

Related-Party Transactions	
 	

11
	

(v)	
 	

Financial Statements; Material Liabilities	
 	

12
	

(w)	
 	

Absence of Changes	
 	

12
	 	 	 	 	 

i

 

	

(x)	
 	

Agreements; Action	
 	

12
	

(y)	
 	

Brokerage	
 	

14
	

(z)	
 	

No Insolvency	
 	

14
	

(aa)	
 	

Computer Programs	
 	

14
	

(bb)	
 	

Disclosure; Reliance	
 	

15
	

Section 3.	
 	

Representations and Warranties of the Purchasers	
 	

15
	

(a)	
 	

Organization, Power and Authority	
 	

15
	

(b)	
 	

Authorization	
 	

15
	

(c)	
 	

Noncontravention	
 	

16
	

(d)	
 	

Brokerage	
 	

16
	

(e)	
 	

Investment Representations	
 	

16
	

Section 4.	
 	

Covenants and Other Agreements	
 	

17
	

(a)	
 	

Press Release and Announcements	
 	

17
	

(b)	
 	

Further Assurances	
 	

17
	

(c)	
 	

Certain Tax Matters	
 	

17
	

(d)	
 	

Use of Proceeds	
 	

17
	

(e)	
 	

Key-Man Life Insurance	
 	

17
	

(f)	
 	

Post-Closing Distributions	
 	

17
	

(g)	
 	

Exclusivity	
 	

18
	

(h)	
 	

S Corporation Status	
 	

19
	

(i)	
 	

Vesting of Reserved Employee Shares	
 	

19
	

(j)	
 	

Inventions Assignment and Confidentiality Agreement	
 	

19
	

(k)	
 	

Voting Agreement; Drag-Along Agreement; Investors' Rights Agreement	
 	

19
	

(l)	
 	

Payment of Taxes and Trade Debt	
 	

20
	

(m)	
 	

Preservation of Corporate Existence	
 	

20
	

(n)	
 	

Compliance with Laws	
 	

20
	

(o)	
 	

Keeping of Records and Books of Account	
 	

20
	

(p)	
 	

Maintenance of Properties	
 	

20
	

(q)	
 	

Budget Approval	
 	

20
	

(r)	
 	

By-laws	
 	

21
	

(s)	
 	

Expenses of Directors	
 	

21
	

(t)	
 	

Continued Business Operations	
 	

21
	

(u)	
 	

Restrictions on Indebtedness	
 	

21
	 	 	 	 	 

ii

 

	

(v)	
 	

Dealings with Affiliates and Others	
 	

21
	

(w)	
 	

Cancellation of Treasury Stock	
 	

21
	

Section 5.	
 	

Conditions to Closing	
 	

21
	

(a)	
 	

Conditions to Closing of the Purchasers	
 	

21
	

(b)	
 	

Conditions to the Company's Obligations at Closing	
 	

23
	

Section 6.	
 	

Definitions	
 	

23
	

Section 7.	
 	

Indemnification and Survival	
 	

26
	

Section 8.	
 	

Miscellaneous	
 	

27
	

(a)	
 	

Expenses; Attorneys' Fees	
 	

27
	

(b)	
 	

Remedies	
 	

28
	

(c)	
 	

Consent to Amendments	
 	

28
	

(d)	
 	

Successors and Assigns	
 	

28
	

(e)	
 	

Severability	
 	

28
	

(f)	
 	

Counterparts	
 	

28
	

(g)	
 	

Descriptive Headings; Interpretation	
 	

28
	

(h)	
 	

Entire Agreement	
 	

29
	

(i)	
 	

No Third-Party Beneficiaries	
 	

29
	

(j)	
 	

Cooperation on Tax Matters	
 	

29
	

(k)	
 	

Governing Law	
 	

29
	

(l)	
 	

Notices	
 	

29
	

(m)	
 	

No Strict Construction	
 	

30
	

(n)	
 	

No Waiver; Cumulative Remedies	
 	

30
	

(o)	
 	

Understanding Among the Purchasers	
 	

30
	

(p)	
 	

Termination	
 	

31

iii

 
 
 

EXHIBITS AND SCHEDULES  

	Exhibit A	 	Restated Articles
	Exhibit B	 	Investors' Rights Agreement
	Exhibit C-1	 	Voting Agreement
	Exhibit C-2	 	Drag-Along Agreement
	Exhibit D	 	Form of Repurchase Agreement
	Exhibit E	 	Escrow Agreement
	Exhibit F	 	Indemnification Escrow Agreement
	Exhibit G	 	Opinion of Counsel for the Company
	Exhibit H	 	Opinion of Counsel for the Sellers
	Exhibit I	 	Management Rights Letter

Schedules 

Schedule
of Purchasers

Schedule 1(b)Disbursement Schedule

Schedule 2 Disclosure Schedule

Schedule 5(a) 

iv

  

 
 

RECAPITALIZATION AGREEMENT  
    

        THIS RECAPITALIZATION AGREEMENT (this "Agreement") is made and entered into as of September 9, 2004 by and
among Fastclick.com, Inc., a California corporation (the "Company"), the Persons listed on the Schedule of Purchasers  attached hereto (each, a
"Purchaser" and collectively, the "Purchasers") and
Jeff Pryor, an individual, and David Gross, an individual (each, a "Founder" and collectively the
"Founders"). The Company, the Purchasers and the Founders are sometimes collectively referred to herein as the
"Parties" and individually as a "Party." Capitalized terms used herein and not otherwise defined herein
have the meanings given to such terms in Section 6 below. 

        WHEREAS,
the Company desires to reconstitute its capital structure through the sale of certain newly issued equity securities and the repurchase of certain of its outstanding equity
securities, in each case on the terms set forth herein; 

        WHEREAS,
the Purchasers, severally, desire to purchase certain newly issued equity securities of the Company on the terms set forth herein; and 

        WHEREAS,
concurrently with the issuance of such equity securities, certain shareholders of the Company (each a "Seller" and collectively,
the "Sellers"), each of whom will be listed on the Disbursement Schedule (as defined below), desire the Company to repurchase certain equity securities
of the Company owned by the Sellers. 

        NOW,
THEREFORE, in consideration of the mutual covenants, agreements and understandings herein contained and intending to be legally bound, the Parties hereby agree as follows: 

        Section 1.    Recapitalization.    

        (a)    Authorization.    

          (i)  The
Company shall authorize and the shareholders of the Company shall approve the amendment and restatement of the Company's current Articles of Incorporation (the
"Articles of Incorporation") in the form of Exhibit A attached hereto (as so amended and restated, the
"Restated Articles"). The Restated Articles shall be duly executed by the Company on the Closing Date and shall be in full force and effect under the
laws of the State of California as of the Closing. 

         (ii)  The
Company shall authorize the issuance and sale to the Purchasers of an aggregate of up to 2,131,285 shares of its Series A Convertible Preferred Stock (the
"Preferred Securities") having the rights and preferences set forth in the Restated Articles. 

        (iii)  The
Company shall authorize the repurchase from the Sellers of a minimum of 1,136,686 shares of its Common Stock up to a maximum of 1,562,944 shares of its Common
Stock (collectively, the "Repurchased Shares") at a price per share of $35.19 for an aggregate repurchase price of $39,999,980.34 for the repurchase of
the minimum number of Repurchased Shares up to $54,999,999.36 for the repurchase of the maximum number of Repurchased Shares (the "Repurchase Price"). 

        (b)    Investment Transaction.    On the basis of the representations, warranties,
covenants and agreements set forth herein, each of the Purchasers and the Company agrees to and shall consummate, at the Closing, the following transaction (the "Investment
Transaction"): the Company shall issue and sell to each Purchaser, and each Purchaser shall purchase from the Company, that number of shares of Preferred Securities as is
determined pursuant to this Section 1(b), up to the maximum number set forth opposite such Purchaser's name on the Schedule of Purchasers
attached hereto, upon payment of immediately available funds in a maximum amount as set forth opposite such Purchaser's name on the Schedule of Purchasers attached hereto, payable in the manner set
forth in Section 1(d) below. The price per share of the Preferred Securities shall be $35.19, resulting in a maximum aggregate purchase 

1

 

price
for such Preferred Securities of up to $74,999,919.15 (the "Preferred Securities Purchase Price"). Each Purchaser shall purchase that number of
shares of Preferred Securities as is equal to such Purchaser's pro rata portion (based upon the amount of the Preferred Securities Purchase Price set forth opposite such Purchaser's name on the
Schedule of Purchasers relative to the aggregate maximum amount of the Preferred Securities Purchase Price) of the sum of (A) 568,341 plus (B) that number of Repurchased Shares that the
Company has determined to accept for repurchase pursuant to the Repurchase Transaction, as reflected in a disbursement schedule in the form attached hereto as  Schedule 1(b) executed at the Closing
by the Company and the Purchasers (the "Disbursement
Schedule"). In connection with the Investment Transaction the Company, the Purchasers, the Founders, certain key employees and other shareholders of the Company shall enter
into an Investors' Rights Agreement in the form of Exhibit B attached hereto (the "Investors' Rights
Agreement"), a Voting Agreement in the form attached hereto as Exhibit C-1 (the "Voting
Agreement") and a Drag-Along Agreement in the form attached hereto as Exhibit C-2 (the
"Drag-Along Agreement"). 

        (c)    Repurchase Transaction.    Immediately subsequent to the Investment Transaction
pursuant to the terms of one or more repurchase agreements or letters of transmittal in the form attached hereto as Exhibit D (collectively, the
"Repurchase Agreements"), the terms of the Paying Agent Escrow Agreement attached hereto as Exhibit E  (the "Escrow
Agreement") and the terms of the Indemnification Escrow Agreement attached hereto as
Exhibit F (the "Indemnification Escrow Agreement"), the Company and each of the Sellers shall
consummate, at the Closing, the following transaction: the Company shall repurchase from each Seller and each Seller shall sell to the Company the number of Repurchased Shares set forth opposite such
Seller's name on the Disbursement Schedule (the "Repurchase Transaction"). The Company and the Escrow Agent shall be entitled to deduct and withhold
from the Repurchase Price otherwise payable to any Seller such amounts as the Company or the Escrow Agent determines it is required to deduct and withhold with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "Code"), or any other provision of state, local or foreign Tax law. To the extent that amounts
are so withheld, such amounts shall be treated for all purposes of this Agreement and the Repurchase Agreements as having been paid to the Seller with respect to which such deduction or withholding
was made. 

        (d)    Funding.    Upon execution of this Agreement, each of the Purchasers shall deliver
to American Stock Transfer & Trust Company (or such other escrow agent acceptable to the Company and the Purchasers), as escrow agent (the "Escrow
Agent") such Purchaser's portion of the Preferred Securities Purchase Price set forth opposite such Purchaser's name on the Schedule of Purchasers attached hereto by wire
transfer of immediately available funds to be held by the Escrow Agent pursuant to the terms of the Escrow Agreement and released in accordance with the terms of the Escrow Agreement upon the Closing
pursuant to the Disbursement Schedule. 

        (e)    Closing.    The closing of each of the Investment Transaction and the Repurchase
Transaction (the "Closing") shall take place at the offices of Sheppard, Mullin, Richter & Hampton LLP, 800 Anacapa Street, Santa Barbara,
California 93101, at 10:00 a.m., local time, on the second business day after the date on which the last condition set forth in Section 5 hereof shall have been satisfied or waived, or upon
such other date as the Purchasers purchasing at least two-thirds (2/3) of the Preferred Securities to be sold hereunder and the Company may agree (the
"Closing Date"). The Investment Transaction and the Repurchase Transaction shall each constitute a separate transaction hereunder. At the Closing, the
Parties shall consummate the transactions contemplated by this Agreement in the following order: 

          (i)  Pursuant
to the Disbursement Schedule the Escrow Agent, on behalf of each Purchaser, shall deliver to the Company the amounts set forth opposite the Company's name on
the Disbursement Schedule by wire transfer of immediately available funds and the Company shall issue and sell to each Purchaser the number of Preferred Securities set forth opposite such Purchaser's
name on the Schedule of Purchasers attached hereto. 

2

 

         (ii)  Pursuant
to the Disbursement Schedule the Escrow Agent, shall deliver (A) to the Sellers in immediately available funds an amount equal to the Repurchase Price
(less the Indemnification Escrow Amount and the Sellers' portion of the applicable fees and expenses related to the Repurchase Transaction as set forth in the Disbursement Schedule), and (B) on
behalf of the Sellers, to the escrow agent pursuant to the Indemnification Escrow Agreement, an amount equal to the Indemnification Escrow Amount. Pursuant to the Escrow Agreement, at the Closing the
Escrow Agent shall deliver to the Company and the Company shall repurchase from each Seller the number of Repurchased Shares set forth opposite such Seller's name on the Disbursement Schedule. The
Escrow Agent shall pay to each of the Sellers by draft or check the portion of the Repurchase Price set forth opposite such Seller's name on the Disbursement Schedule (less such Sellers' pro rata
portion of the Indemnification Escrow Amount and the applicable fees and expenses related to the Repurchase Transaction as set forth in the Disbursement Schedule). 

        (iii)  Pursuant
to the Disbursement Schedule the Escrow Agent shall deliver to the other parties set forth on the Disbursement Schedule the amounts set forth opposite such
parties names by wire transfer of immediately available funds. 

        (iv)  To
the extent that the Company repurchases less than 1,562,944 Repurchased Shares for an aggregate repurchase price of $54,999,999.36 pursuant to the Repurchase
Transaction, pursuant to the Disbursement Schedule the Escrow Agent shall refund to each Purchaser, such Purchaser's portion of the difference (determined in proportion to such Purchaser's portion of
the Preferred Securities Purchase Price set forth opposite such Purchaser's name on the Schedule of Purchasers attached hereto) between $54,999,999.36 and the aggregate Repurchase Price actually paid
for the Repurchased Shares. 

        Section 2.    Representations and Warranties of the Company.    The Company hereby
represents and warrants to each Purchaser that the following statements are true and correct as of the date hereof, except as set forth on the Disclosure Schedule attached hereto as Schedule 2
(the "Disclosure Schedule"): 

        (a)    Organization, Good Standing and Qualification.    The Company is a corporation
duly organized, validly existing, 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 licensed or qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such license or qualification is
required, except where the failure to be so qualified would not have a material adverse effect on the Company's assets, properties, liabilities, financial condition, affairs, business, prospects or
results of operations (a "Material Adverse Effect"). 

        (b)    Capitalization.    The authorized capital stock of the Company consists of
4,000,000 shares of common stock, no par value per share (the "Common Stock"), of which 2,174,988 shares are issued and outstanding prior to giving
effect to the Repurchase Transaction and 800,000 shares of preferred stock, no par value per share (the "Preferred Stock"), of which no shares are
issued and outstanding. Pursuant to the Restated Articles, and assuming issuance of the maximum number of Preferred Securities pursuant to the Investment Transaction, the authorized capital of the
Company consists of 3,750,000 shares of Common Stock, no par value, and 2,131,285 shares of Preferred Stock, no par value, of which a series of Preferred Stock has been created consisting of shares
which are designated as the "Series A Convertible Preferred Stock" (the "Preferred Securities"),
of which none are issued and outstanding prior to the consummation of the transactions contemplated by this Agreement. The rights, powers, preferences, qualifications, limitations and restrictions of
the Preferred Securities are as stated in the Restated Articles. Except for (i) the conversion privileges of the Preferred Securities to be issued under this Agreement, (ii) the rights
provided for in the Investors' Rights Agreement, (iii) restricted stock grants and outstanding options that have been granted under the Company's 2000 Equity Participation 

3

 

Plan,
as such may be amended from time to time (collectively the "2000 Plan"), (iv) the Company's 2004 Equity Participation Plan (the
"2004 Plan") and (v) as set forth on Section 2(b) of the Disclosure Schedule, there are no
outstanding options, warrants, rights (including conversion or preemptive rights) or other agreements for the purchase or acquisition from the Company of any shares of its capital stock or securities
exercisable or exchangeable for or convertible into its capital stock. Other than as set forth in the Investors' Rights Agreement and the Voting Agreement, the Company is not a party to or bound by
any agreement or understanding between any persons and/or entities with respect to any shares of its capital stock and the Company has not granted or agreed to grant any registration rights to any
person or entity. The 2000 Plan and the 2004 Plan have been duly adopted by the Board of Directors and approved by the shareholders of the Company. An aggregate of 600,000 shares of Common Stock have
been reserved for issuance under the 2000 Plan of which no shares of Common Stock have been issued pursuant to restricted stock grants, and options to purchase 485,585 shares of Common Stock have been
granted, 170,912 of which are currently outstanding, and no shares of Common Stock are available for future issuance. An aggregate of 200,000 share equivalents have been allocated to the 2003
Ownership Equivalency Plan, of which 82,900 have been granted. Prior to the Closing, all grants under the 2003 Ownership Equivalency Plan will be terminated. An aggregate of 495,585 shares of Common
Stock have been reserved for issuance under the 2004 Plan of which no shares of Common Stock have been issued pursuant to restricted stock grants, and no options to purchase shares of Common Stock
have been granted. Except as set forth on Schedule 2(b) of the Disclosure Schedule, the vesting of restricted stock grants or options to purchase shares of Common Stock under the 2000 Plan or
the 2004 Plan is not subject to acceleration. All outstanding shares of Common Stock and Preferred Stock are all duly and validly authorized and issued, fully paid and nonassessable, and were issued
in accordance with the registration or qualification provisions of the Securities Act and from any applicable state securities laws or pursuant to valid exemptions therefrom. The Company is not a
party or subject to any agreement or understanding, and, to knowledge of the Company, there is no agreement or understanding between any persons and/or entities, which affects or relates to the voting
or giving of written consents with respect to any security of the Company or by a director of the Company. A complete list of the capital stock of the Company which has been previously issued and the
names in which such capital stock is registered on the stock transfer books of the Company is set forth in Section 2(b) of the Disclosure
Schedule. Upon delivery to the Company at the Closing of certificates representing the Repurchased Shares and the payment of the Repurchase Price as provided in this Agreement, the Company will
acquire all of the Sellers' right, title and interest in and to the Repurchased Shares and will receive good and valid title to the Repurchased Shares, free and clear of any and all pledges, claims,
liens, charges, encumbrances and security interests of any kind
or nature whatsoever. 

        (c)    Subsidiaries.    The Company does not own or control, directly or indirectly, any
Subsidiary. The Company does not (i) own of record or beneficially, directly or indirectly, (A) any shares of capital stock or securities exercisable or exchangeable for or convertible into
capital stock of any other corporation or (B) any participating interest in any partnership, joint venture or other non-corporate business enterprise, or (C) any assets comprising
the business or obligations of any other corporation, partnership, joint venture or other non-corporate business enterprise or (ii) control, directly or indirectly, any other
entity. 

        (d)    Authorization.    The Restated Articles have been approved by the Board of
Directors of the Company and the shareholders of the Company. The Company has all requisite corporate power to enter into and perform the Investment Transaction, the Repurchase Transaction and its
other obligations under this Agreement, the Investors' Rights Agreement, the Voting Agreement, the Drag-Along Agreement, the Repurchase Agreements, the Escrow Agreement, the
Indemnification Escrow Agreement and all other agreements contemplated hereby and thereby and to issue the shares of Preferred Securities and repurchase the Repurchase Shares in accordance with the
terms hereof. All corporate action on the part of the Company, its officers, directors and shareholders necessary for the 

4

 

authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement, the Voting Agreement, the Drag-Along Agreement, the Repurchase Agreements, the Escrow Agreement,
the Indemnification Escrow Agreement and all other agreements and obligations contemplated hereby and thereby, the performance of all obligations of the Company hereunder and thereunder, and the
authorization, issuance (or reservation for issuance), sale and delivery of the Preferred Securities to be issued hereunder and of the Common Stock issuable upon conversion of the Preferred Securities
(collectively, the "Conversion Stock"), and the repurchase of the Repurchased Shares, has been taken. This Agreement constitutes, and at the Closing,
the Restated Articles, the Investors' Rights Agreement, the Drag-Along Agreement, the Escrow Agreement, the Indemnification Escrow Agreement, the Repurchase Agreement and the Voting
Agreement will constitute, valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by general principles of equity, including
concepts of materiality, reasonableness, good faith and fair dealing and by the possible unavailability of specific performance, injunctive relief or other equitable remedies and (iii) to the
extent the indemnification provisions contained in the Investors' Rights Agreement may be limited by applicable federal or state securities laws. 

        (e)    Valid Issuance of Preferred and Common Stock.    The Preferred Securities being
issued hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable
and will be free of restrictions on transfer other than restrictions on transfer under this Agreement, the Investors' Rights Agreement, the Voting Agreement, the Drag-Along Agreement, and
applicable state and federal securities laws. The Conversion Stock has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Articles, will be duly and validly issued, fully paid and nonassessable and will be free of restrictions on transfer other than restrictions under
this Agreement, the Investors' Rights Agreement, the Voting Agreement, the Drag-Along Agreement, and applicable state and federal securities laws. 

        (f)    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 valid execution
of this Agreement, the Investors' Rights Agreement, the Voting Agreement, the Drag-Along Agreement, the Repurchase Agreements, the Indemnification Escrow Agreement and the Escrow Agreement
and the consummation of the transactions contemplated by this Agreement, the Investors' Rights Agreement, the Voting Agreement, the Drag-Along Agreement, the Repurchase Agreements, the
Indemnification Escrow Agreement and the Escrow Agreement except for filings pursuant to applicable state and federal securities laws in connection with the issuance and sale of the Preferred
Securities which will be made following the Closing. 

        (g)    Offering.    Subject in part to the truth and accuracy of each Purchaser's
representations set forth in Section 3 of this Agreement, the offer, sale and issuance of the Preferred Securities and Conversion Stock as
contemplated by this Agreement are exempt from the registration requirements of the Securities Act and will not result in the violation of the qualification or registration requirements of any
applicable state securities laws subject to filings pursuant to applicable federal and California securities laws that may be made following the Closing. Neither the Company nor any authorized agent
acting on its behalf (including, without limitation, the Agent) will take any action that would cause the loss of such exemptions. 

        (h)    Litigation.    There is no action, suit, proceeding or investigation pending or
currently threatened against the Company, or any of its officers, directors or shareholders, that questions the validity of this Agreement, the Investors' Rights Agreement, the Voting Agreement, the
Drag-Along Agreement, the Repurchase Agreements, the Escrow Agreement, the Indemnification Escrow 

5

 

Agreement
or the Restated Articles, or the right of the Company to enter into such agreements, or to consummate the transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any (i) Material Adverse Effect, (ii) any material adverse change in the assets of any shareholder (iii) any liability on the part of the
Company or its shareholders or (iv) the current equity ownership of the Company. The foregoing includes, without limitation, (i) actions, suits, proceedings or investigations (pending or
threatened) involving the prior employment of any of the Company's employees, (ii) the use, in connection with the Company's business, of any information or techniques allegedly proprietary to
any of the former employers of the Company's employees, or (iii) obligations of the Company's employees under any agreements with former employers. Neither the Company nor (with respect to
matters relating to the Company) any of its officers, directors or shareholders 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 currently pending or that the Company intends to initiate. 

        (i)    Compliance with Laws and Instruments.    The Company is not in violation or
default of its Articles of Incorporation or Bylaws, or of any instrument, judgment, order, writ, decree, mortgage, agreement, statute or contract to which it is a party or by which it is bound, or of
any provision of any federal or state statute, rule or regulation applicable to the Company. The execution, delivery, compliance with and the performance of the Company's obligations under this
Agreement, the Investors' Rights Agreement, the Voting Agreement, the Drag-Along Agreement, the Repurchase Agreements, the Escrow Agreement, the Indemnification Escrow Agreement and the
other agreements, documents and transactions contemplated hereby and thereby, will not and do not (A) violate or conflict with, with or without the passage of time and giving of notice,
(i) any provision of the Company's Articles of Incorporation or Bylaws, (ii) any instrument, judgment, order, writ, decree, mortgage, contract or agreement to which the Company is a
party or by which it is bound, or (iii) any provision of any federal or state statute, rule or regulation applicable to the Company, the violation of or conflict with which could reasonably be
anticipated to have a Material Adverse Effect or (B) result in the creation of any material lien, charge or encumbrance upon any assets or properties of the Company or the suspension,
revocation, impairment, forfeiture or non-renewal of any material permit, license, authorization or approval applicable to the Company, its business or operations, any of its assets or
properties, or any of its officers, directors or shareholders. 

        (j)    Intellectual Property.    

          (i)  Intellectual
Property Rights Owned or Exclusively Licensed by the Company.    Except for those Intellectual Property Rights
expressly identified in Section 2(j)(i) of the Disclosure Schedule, the Company owns, possesses perpetual irrevocable exclusive licenses or otherwise has the legally enforceable
perpetual irrevocable exclusive right to use, and has the right to bring actions for infringement of, all Intellectual Property Rights necessary for the conduct of its business as now conducted or as
now proposed to be conducted in its written business documents. The consummation of the transactions contemplated herein will not result in the loss or impairment of the Company's right to own,
license or use any Intellectual Property Rights, and, except as set forth in Section 2(j)(i) of the Disclosure Schedule, will not require the
consent of any governmental authority or third party in respect of any such Intellectual Property Rights. 

         (ii)  Intellectual
Property Rights Licensed to Company.    All licensors of Intellectual Property Rights that are material to the
operation of the Company's business are listed in Section 2(j)(ii) of the Disclosure Schedule, along with the title and date of the license
agreement and a brief description of the Intellectual Property Rights licensed and the applicable jurisdiction, registration number (or application number), and date issued (or date filed), and
whether the license is assignable or non-assignable, exclusive or non-exclusive, perpetual or term, and revocable or irrevocable. To the knowledge of the Company, the
Intellectual Property Rights licensed to the Company, are valid, in full force and effect, and have not been canceled, expired, or abandoned. 

6

 

To
the knowledge of the Company, there is no threatened opposition, interference or cancellation proceeding before any court or registration authority in any jurisdiction against the applications and
registrations listed in Section 2(j)(ii) of the Disclosure Schedule. 

        (iii)  List
of Company Intellectual Property Rights.    Set forth in Section 2(j)(iii) of the Disclosure Schedule is a
list and brief description of all: 

         (I)  Patents
(including without limitation patent applications), 

        (II)  Trademarks
(including without limitation trademark, service mark and domain name applications), 

      (III)  registered
copyrights, and applications for such that are in the process of being prepared, and 

      (IV)  registered
mask works and applications for such that are in the process of being prepared, 

that
are owned by or registered in the name of the Company in any jurisdiction worldwide, and in each case a brief description of the nature of such right and indicating for each, the applicable
jurisdiction, registration number (or application number), and date issued (or date filed). The Company is listed in the records of the appropriate United States, state or foreign agency as the sole
or joint owner of record for each application and registration listed in Section 2(j)(iii) of the Disclosure Schedule, and all joint owners, if
applicable, are listed in Section 2(j)(iii) of the Disclosure Schedule and identified as joint owners. The Intellectual Property Rights owned by
the Company are valid and subsisting, in full force and effect, and have not been canceled, expired, or abandoned. There is no pending or, to the knowledge of the Company, threatened, opposition,
interference, re-examination, or cancellation proceeding before any court or registration authority in any jurisdiction against the applications and registrations listed in  Section 2(j)(iii) of the
Disclosure Schedule. 

        (iv)  Intellectual
Property Rights Licensed by Company.    A list of all licensees of the Company are listed in  Section 2(j)(iv) of the Disclosure Schedule, along with the title and date of
the license agreement and a brief description of the Intellectual
Property Rights licensed. 

         (v)  No
Claims Against Company.    To the knowledge of Company, the conduct of the Company's business as now conducted, all products
and processes now manufactured, marketed, licensed, distributed, offered or used by the Company and the Company's Intellectual Property Rights do not and will not violate any license, misappropriate
any Trade Secrets, or infringe (either directly or indirectly, including without limitation through contributory infringement or inducement to infringe) any Intellectual Property Rights of any other
Person. No claim is pending or, to the Company's knowledge, threatened, to the effect that any Intellectual Property Right owned or licensed by the Company, or which the Company otherwise has the
right to use, is invalid or unenforceable by the Company. The Company
has no reason to believe that any Intellectual Property Rights owned or used by the Company may be invalid or unenforceable. 

        (vi)  No
Third Party Infringement of Company Intellectual Property Rights.    To the knowledge of the Company, no third party is
misappropriating, infringing, diluting or violating any Intellectual Property Rights owned or exclusively licensed by the Company; and no such claims have been brought against any third party by the
Company. 

       (vii)  No
Obligations, Grants or Agreements.    Except as set forth in Section 2(j)(vii)  of the Disclosure Schedule, the Company has no obligation to compensate any Person for the use
of any Intellectual Property Rights, and, except as set forth in  Section 2(j)(vii) of the Disclosure Schedule, the Company has not granted any Person any license to any Intellectual Property
Right(s) of the
Company, whether requiring the payment of royalties or not. The Company has not entered into 

7

 

any
agreement to indemnify any other Person against any claim of infringement or misappropriation of any Intellectual Property Right. Except as set forth in  Section 2(j)(vii) of the Disclosure Schedule,
 there are no settlements, covenants not to sue, consents, judgments, or orders or similar
obligations that: (1) restrict the Company's rights to use any Intellectual Property Right(s), (2) restrict the Company's business as now conducted or as now proposed to be conducted in
its written business documents, in order to accommodate a third party's Intellectual Property Rights, or (3) permit third parties to use any Intellectual Property Right(s) owned or controlled
by the Company. 

      (viii)  Trade
Secrets.    The Company has taken and takes reasonable measures to protect the confidentiality of Trade Secrets that are
material to the operating of the Company's business, including requiring its current and former personnel, including without limitation employees, agents, consultants and contractors, having access
thereto, to execute written non-disclosure agreements. To the knowledge of the Company, no Trade Secret that is material to the operation of the Company's business has been disclosed or
authorized to be disclosed to any third party other than pursuant to a non-disclosure agreement that protects the Company's proprietary interests in and to such Trade Secrets. Neither the
Company nor, to the knowledge of the Company, any other party to any non-disclosure agreement relating to the Company's Trade Secrets is in breach or default thereof. 

        (ix)  Personnel.    All
current personnel, including without limitation, employees, agents, consultants and contractors, who have
contributed to or participated in the creation, conception, reduction to practice or development of any of the Intellectual Property Rights of Company either (i) have been party to a
"work-for-hire" arrangement or agreement with the Company, in accordance with applicable federal and state law, that has accorded the Company full, effective, exclusive and
original ownership of all copyrightable works thereby arising, or (ii) have executed appropriate instruments of assignment in favor of the Company as assignee that have conveyed to the Company
full, effective and exclusive ownership of all rights such person may have in the Intellectual Property Rights. 

        (k)    Registration Rights, Rights to Acquire Company Securities and Voting
Obligations.    Except as set forth in the Investors' Rights Agreement and Section 2(k) of the Disclosure Schedule, as of the Closing, the Company shall not be under
any contractual obligation to register any of its presently outstanding securities or any of its securities that may hereafter be issued. Except as set forth in the Investors' Rights Agreement, the
Voting Agreement, the Drag-Along Agreement and Section 2(k) of the Disclosure Schedule, there are no agreements, written or oral,
between the Company and any of its shareholders or among any shareholders, relating to the acquisition or disposition of the capital stock of the Company. Other than the Voting Agreement and the
Drag-Along Agreement, to the knowledge of the Company, no shareholder of the Company has entered into any agreements with respect to the voting of capital shares of the Company. 

        (l)    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 holds a valid leasehold interest free of any liens, claims or
encumbrances. 

        (m)    Employees.    Except as set forth in Section 2(m)  of the Disclosure Schedule, the employment of each officer and
employee of the Company is terminable at will. The Company is not aware of any key employee of the Company who
has any plans to terminate his or her employment with the Company nor does the Company have a present intention to terminate the employment of any employee. Except as set forth in  Section 2(m) of
the Disclosure Schedule, the Company is not a party to or obligated in connection with its business with respect to
(i) outstanding contracts with employees, 

8

 

agents,
consultants, advisers, sales representatives, distributors, sales agents or dealers or (ii) collective bargaining agreements or contracts with any labor union or other representative of
employees or any employee benefits provided for by any such agreement. The Company has complied in all material respects with all applicable laws relating to wages, hours and collective bargaining. To
the knowledge of the Company, no officer or key employee of the Company is in violation of any term of any employment contract, patent disclosure agreement, proprietary information agreement,
noncompetition agreement, or any other contract or agreement or any restrictive covenant relating to the right of any such officer or key employee to be employed by the Company because of the nature
of the business conducted or to be conducted by the Company or relating to the use of trade secrets or proprietary information of others, and the continued employment of the Company's officers and key
employees does not subject the Company or any Purchaser to any liability to third parties. 

        (n)    Employee Benefit Plans.    Section 2(n)  of the Disclosure Schedule sets forth a complete list of all "employee
benefit plans" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, ("ERISA") which are maintained or contributed to for past or present employees of the
Company (the "Company Benefit Plans") and copies of any such Company Benefit Plans have been provided to the Purchasers and their counsel along with the
three most recent annual reports (Form Series 5500 and all schedules, financial statements and accountant opinions attached thereto), if any,
required under ERISA or the Code in connection with each Company Benefit Plan and the most recent Internal Revenue Service determination or opinion letter issued with respect to each Company Benefit
Plan intended to be qualified under Section 401(a) of the Code. Neither the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in or contributed to, any
Company Benefit Plan in which stock of the Company or any ERISA Affiliate is or was held as a plan asset. Each Company Benefit Plan which is intended to be qualified under Section 401(a) of the Code
is so qualified and has been so qualified during the period from its adoption to date, and each trust forming a part thereof is exempt from tax pursuant to Sections 401(a) and 501(a) of the Code.
Neither the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in, or contributed to any multiemployer plan as defined in Section 4001(a)(3) of ERISA, a
multiple employer plan as defined in Section 210 of ERISA, a plan subject to Title IV of ERISA or Section 412 of the Code, or except as set forth in  Section 2(n) of the Disclosure
Schedule any plan subject to the laws of any jurisdiction outside the United States. Except as set forth in  Section 2(n) of the Disclosure Schedule, the Company does not maintain or contribute to
any deferred compensation, bonus, stock option, severance
or other similar employee benefit plan or arrangement for past or present employees of the Company (the "Company Benefit Arrangements"), and copies of
documents relating to any such Company Benefit Arrangements have been provided to or made available to the Purchasers. Each Company Benefit Plan and Company Benefit Arrangement has been established
and maintained substantially in accordance with its terms and in all material respects in compliance with all applicable laws. The Company has made all contributions and other payments required by and
due under the terms of each Company Benefit Plan and Company Benefit Arrangement. No Company Benefit Plan nor any agreement establishes (except at no cost to the Company)any liability of the Company
to provide, retiree life insurance, retiree health benefits or other retiree employee welfare benefits to any person for any reason, except as may be required by law. 

        (o)    Tax Returns and Payments.    

          (i)  The
Company has timely filed all Tax returns and reports as required by law, and these returns and reports were true and correct in all material respects. 

         (ii)  The
Company has paid all Taxes and other assessments due. The provision for Taxes of the Company as shown in the Financial Statements (as defined below) is adequate for
Taxes due or accrued as of the date thereof. No deficiency for Taxes has been proposed or assessed against the Company, and there is no Tax audit or proceeding by any Tax authority pending with
respect to any Tax return of the Company. There is no lien or encumbrance for Taxes on any assets of the 

9

 

Company,
except for liens and encumbrances imposed by law for Taxes not yet due. There is no settlement, closing or collection agreement in effect for taxes imposed on the Company. 

        (iii)  The
Company has complied in all material respects with provisions of Tax law relating to withholding and remittance of Taxes on amounts paid to employees, independent
contractors, creditors, stockholders or other third parties. Except as set forth on Section 2(o) of the Disclosure Schedule, none
of the shares of outstanding capital stock of the Company (including without limitation the Repurchased Shares) is subject to a "substantial risk of forfeiture" within the meaning of Section 83
of the Code. 

        (iv)  The
Company is not a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the Code (without regard to the exceptions set forth in Sections 280G(b)(4) and
280G(b)(5) of the Code). 

         (v)  The
Company is not a party to any Tax sharing or tax indemnity agreement. 

        (vi)  No
property owned by the Company is Tax exempt use property within the meaning of Section 168(h)(1) of the Code or Tax-exempt bond financed property
within the meaning of Section 168(g) of the Code. 

       (vii)  The
Company does not have and has never had any obligation to register a Tax shelter under Section 6111 of the Code or to file any disclosure or maintain any
list pursuant to Sections 6011 or 6112 of the Code and regulations promulgated thereunder. 

      (viii)  The
Company has not made or agreed to make any adjustment under Section 481(a) of the Code (or any corresponding provision of state, local or foreign Tax law)
by reason of a change in accounting method that will result in recognition of income by the Company after the Closing, and the amount of any adjustments required to be made by the Company as a result
of the transactions contemplated by this Agreement is set forth on Schedule 2(o). 

        (ix)  The
Company and its shareholders made (i) a valid election for the Company to be treated as an "S corporation," as that term is defined in Section 1361(a) of the
Code, for federal income tax purposes, and (ii) a similar valid election under the laws of California and such elections will be in effect at the Closing Date (such elections in (i) and
(ii) are collectively referred to herein as "S Elections"). The S Elections have been in effect with respect to the Company for each of its
current and all prior taxable years since the beginning of its 2002 taxable year (the "S Effective Date"). There are no grounds for the revocation of
any S Election and no such election will be revoked retroactively or otherwise without the consent of the Purchasers except at the Closing Date by reason of the transactions contemplated by this
Agreement. Neither the Company nor any Founder nor, to the knowledge of the Company, any other of its shareholders has taken any action that would cause, or would result in, the termination of the S
corporation status of the Company, other than pursuant to this Agreement. 

         (x)  No
Tax will be imposed under Section 1374 of the Code or any corresponding provisions of the laws of California or any other applicable jurisdiction as a result of the
transactions contemplated by this Agreement. 

        (p)    Permits.    The Company has all franchises, permits, licenses and any similar
authority necessary for the conduct of its business, and the lack of which would have a Material Adverse Effect. All of such franchises, permits, licenses or other similar authority are in full force
and effect. The Company is not in default under any of such franchises, permits, licenses or other similar authority. 

10

   
        (q)    Environment and Safety Laws.    To the knowledge of the Company, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, the violation of which would have a Material Adverse Effect, and to the knowledge of the Company, no material expenditures are
required in order to comply with any such existing statute, law or regulation. 

        (r)    Corporate
Documents.    The Bylaws and the Restated Articles of the Company are in the form provided to counsel for the
Purchasers. The minute books of the Company contain 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 fully and accurately reflect all actions by the directors (and any committee of directors) and shareholders with respect to all transactions referred to in such minutes
in all material respects. 

        (s)    Foreign
Corrupt Practices Act.    None of the activities or types of conduct below has been or may have been engaged in by the
Company, either directly or indirectly: 

          (i)  Any
bribes or kickbacks to government officials or their relatives, or any other payments to such persons, whether or not legal, to obtain or retain business or to
receive favorable treatment with regard to business; or 

         (ii)  Any
bribes or kickbacks to persons other than government officials, or to relatives of such persons, or any other payments to such persons or their relatives, whether
or not legal, to obtain or retain business or to receive favorable treatment with regard to business; or 

        (iii)  Any
illegal contributions made to any political party, political candidate or holder of governmental office; or 

        (iv)  Any
bank accounts, funds or pools of funds created or maintained without being reflected on the corporate books of account, or as to which the receipts and
disbursements therefrom have not been reflected on such books; or 

         (v)  Any
receipts or disbursements, the actual nature of which has been "disguised" or intentionally misrecorded on the corporate books of account; or 

        (vi)  Fees
paid to consultants or commercial agents which exceeded the reasonable value of the services purported to have been rendered. 

        (t)    Insurance.    The
Company maintains valid insurance policies, with extended coverage, in commercially reasonable amounts (subject
to reasonable deductibles) to allow it to replace any of its properties that might be damaged or destroyed. Set forth on Section 2(t) of the
Disclosure Schedule is a true and complete list of all material insurance policies maintained by the Company in force as of the date of this Agreement (including name of insurer, agent, annual
premium, coverage, deductible amounts and expiration date). All premiums due from the Company with respect to the insurance policies listed on Section 2(t)  of the Disclosure Schedule have been
paid. 

        (u)    Related-Party
Transactions.    Except as set forth in Section 2(u) of the
Disclosure Schedule, no employee, officer, director or shareholder of the Company or member of his or her immediate family (or any corporation or other entity controlled by any employee, officer,
director or shareholder of the Company or member of his or her immediate family) is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to
any of them, and except as contemplated hereby or consented to by the Purchasers in accordance with this Agreement, there are no leases, royalty agreements or other continuing transactions between the
Company and any employee, officer, director or shareholder of the Company or member of his or her immediate family (or any corporation or other entity controlled by any employee, officer, director or
shareholder of the Company or member of his or her immediate family). Except as set forth in Section 2(u) of the Disclosure Schedule, to the
knowledge of the Company, none of such persons has any direct or indirect 

11

 

ownership
interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company,
except that employees, officers, directors or shareholders of the Company and members of their immediate families may own stock in publicly-traded companies that may compete with the Company. No
member of the immediate family of any officer or director of the Company is directly or indirectly interested in any material contract with the Company. 

        (v)    Financial
Statements; Material Liabilities.    The Company has delivered to the Purchasers true, correct and complete copies of
its audited balance sheet and income statement at and for the years ended December 31, 2002 and December 31, 2003, and its unaudited balance sheet and income statement at and for the
seven-month period ended July 31, 2004, which have been in each case prepared in accordance with generally accepted accounting principles consistently applied, except, in the case of the
unaudited balance sheet and income statement, for the absence of footnotes not customarily included in such interim statements and normal recurring year-end adjustments (collectively, the
"Financial Statements"). The Financial Statements are set forth in Section 2(v) of the Disclosure
Schedule. The Financial Statements fairly and accurately present the Company's financial position as of such date and the results of operations and changes in its financial position for such period
ended. Except as otherwise disclosed in the Financial Statements, the Company has no material liability or obligation, absolute or contingent (individually or in the aggregate), other than
(i) liabilities incurred after December 31, 2003, in the ordinary course of business, that are not material, individually or in the aggregate, and (ii) obligations under contracts
and commitments incurred in the ordinary course of business consistent with past practices and that would not be required to be reflected in financial statements prepared in accordance with generally
accepted accounting principles. 

        (w)    Absence
of Changes.    Except as set forth in the Section 2(w) of the
Disclosure Schedule or as contemplated by this Agreement, since December 31, 2003, (a) the Company has not entered into any transaction which was not in the ordinary course of business
consistent with past practices, (b) there has been no adverse change in the condition (financial or otherwise) of the business, property, assets, liabilities or prospects of the Company other
than changes in the ordinary course of business consistent with past practices, none of which, individually or in the aggregate, has had a Material Adverse Effect, (c) there has been no damage
to, destruction of or loss of physical property (whether or not covered by insurance) having a Material Adverse Effect, (d) the Company has not declared or paid any dividend or made any
distribution on its capital stock, or redeemed, purchased or otherwise acquired any of its capital stock, (e) the Company has not, other than the declaration or payment of bonuses to the
Company's executive officers, changed any compensation arrangement or agreement with any of its key employees or officers, or changed the rate of pay of its employees as a group, (f) the
Company has not changed or amended any material contract by which the Company or any of its assets is bound or subject, (g) there has been no resignation or termination of employment of any key
officer or service provider of the Company, and the Company does not know of any impending resignation or termination of employment of any such officer or service provider that if consummated would
have a Material Adverse Effect, and (h) there has been no other event or condition of any character having a Material Adverse Effect. 

        (x)    Agreements;
Action.    

          (i)  Except
as set forth in Section 2(x)(i) of the Disclosure Schedule and for agreements contemplated hereby and by
the Drag-Along Agreement, there are no material agreements between the Company and any of its officers, directors, affiliates or any affiliate thereof. 

         (ii)  Except
as set forth herein, in Section 2(x)(ii) of the Disclosure Schedule, there are no agreements (whether
written or oral), understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is a party or by which it is bound that may involve
(I) obligations (contingent or otherwise) of, or payments to the Company 

12

 

in
excess of $100,000 or (II) the license of any patent, copyright, trade secret or other proprietary right to or from the Company, except for off-the-shelf software, or
(III) provisions restricting the development, manufacture or distribution of the Company's products or services, including, without limitation: 

         (I)  distributor,
dealer or manufacturer's representative contract or agreement which is not terminable on less than ninety (90) days' notice without cost or other
liability to the Company (except for contracts which, in the aggregate, are not material to the business of the Company); 

        (II)  sales
agreement which entitles any customer to a rebate or right of set-off, to return any product to the Company after acceptance thereof or to delay the
acceptance thereof, or which varies in any material respect from the Company's standard form contracts (except for contracts which, in the aggregate, are not material to the business of the Company); 

      (III)  agreement
with any supplier containing any provision permitting any party other than the Company to renegotiate the price or other terms, or containing any
pay-back or other similar provision, upon the occurrence of a failure by the Company to meet its obligations under the agreement when due or the occurrence of any other event (except for
contracts which, in the aggregate, are not material to the business of the Company); 

      (IV)  agreement
for the future purchase of fixed assets or for the future purchase of materials, supplies or equipment in excess of its normal operating requirements; 

        (V)  agreement
or indenture relating to the borrowing of money or to the mortgaging or pledging of, or otherwise placing a lien or security interest on, any material asset of
the Company; 

      (VI)  agreement,
or group of related agreements with the same party or any group of affiliated parties, under which the Company has advanced or agreed to advance money, has
agreed to lease any real property as lessee or lessor, or has agreed to lease any personal property as lessee or lessor if such lease for personal property was not entered into in the ordinary course
of business; 

     (VII)  agreement
or obligation (contingent or otherwise) to issue, sell or otherwise distribute or to repurchase or otherwise acquire or retire any shares of its capital
stock or any of its other equity securities (other than in connection with the transactions contemplated by this Agreement); 

     (VII)  agreement
under which it has limited or restricted its right to compete with any person in any respect; 

   (VIII)  except
as set forth above, any other agreement or group of related contracts with the same party involving more than $100,000 or continuing over a period of more than
six months from the date or dates thereof (including renewals or extensions of options with another party), which agreement or group of agreements is not terminable by the Company without penalty upon
notice of thirty (30) days or less, but excluding any agreement or group of agreements with a customer of the Company for the sale, lease or rental of the Company's products or services if such
agreement or group of agreements was entered into by the Company in the ordinary course of business; or 

      (IX)  other
contract, instrument, commitment, plan or arrangement, a copy of which would be required to be filed with the Securities and Exchange Commission as an exhibit to
a registration statement on Form S-1 if the Company were registering securities under the Securities Act. 

13

 

        (iii)  Except
as set forth in Section 2(x)(iii) of the Disclosure Schedule, the Company has not (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 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,
(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, or (V) assumed, guaranteed, endorsed
or otherwise become directly or contingently liable on (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, supply funds
to or otherwise invest in the debtor or otherwise to assure the creditor against loss), any indebtedness of any other Person. 

        (y)    Brokerage.    Except
for the fee of $780,000 payable to the Agent in connection with the transactions contemplated by this
Agreement of which up to $572,000 will be paid by the Sellers, there are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement to which the Company is a party. The Company shall pay and hold the Purchasers harmless against, any liability, loss or expense (including
reasonable attorneys' fees and out-of-pocket expenses) arising in connection with any such claim. 

        (z)    No
Insolvency.    The Company is not a party to any insolvency proceeding of any character, including, without limitation,
bankruptcy, receivership, reorganization, voluntary or involuntary, affecting any of its assets or properties and, to the knowledge of the Company, no such insolvency proceeding is threatened. The
Company has not taken any action in contemplation of, or that would constitute the basis for, the institution of any such insolvency proceedings. After giving effect to the Repurchase Transaction,
including, without limitation, the payment by the Company of the Repurchase Price, the Company will not (i) be insolvent (either because the sum of its debts is greater than the value of its
assets at a fair valuation or because the present fair saleable value of its assets will be less than the amount required to pay its probable liability on its debts as they become absolute and
matured), (ii) be unable to generally pay its debts as they become due, (iii) have unreasonably small capital with which to engage in its existing and anticipated businesses and perform
its obligations under this Agreement and any agreements contemplated hereby, (iv) have assets that are unreasonably small in relation to the business in which the Company engages or intends to
engage, and (v) have incurred, and does not believe, it would incur debts beyond its ability to pay such debts as they become due, mature or both, or (vi) have violated California
General Corporate Law Sections 500 et seq. 

        (aa)    Computer
Programs.    

          (i)  List
of Computer Programs.    Set forth in Section 2(aa) of the Disclosure
Schedule is a list and brief description of the Computer Programs (other than generally available commercial off-the-shelf Computer Programs used internally by the Company in
accordance with the applicable license agreement) which are in whole or in part owned, licensed, distributed, copied, modified, displayed, sublicensed or otherwise used by the Company and which are
material to the operation of its business as now conducted or as now proposed to be conducted in its written business documents (such Computer Programs being referred to herein as the
"Company Software"), identifying with respect to each such Computer Program whether it is owned or licensed by the Company. 

         (ii)  Software
Contracts.    Each and every Computer Program included in whole or in part in the Company Software is either: (i) owned
by the Company, (ii) currently in the public domain or otherwise available for use, modification and distribution by the Company without a license from or the approval or consent of any third party,
or (iii) licensed or otherwise used by the Company pursuant to the terms of a valid, binding written agreement ("Software Contract").  Section 2(aa) of

14

 

the
Disclosure Schedule identifies all Software Contracts and classifies each such Software Contract under one or more of the following categories: (A) license to use third party software;
(B) development contract, work-for-hire agreement, or consulting agreement; (C) distributor, dealer or value-added reseller agreement; (D) license or
sublicense to a third party (including agreements with end-users); (E) maintenance, support or enhancement agreement; or (F) other. No Software Contract creates, or purports
to create, obligations or immunities with respect to any Intellectual Property Rights of the Company, including but not limited to, obligations requiring the disclosure or distribution of all or a
portion of the source code for any Company Software. For example, except as set forth in Section 2(aa) of the Disclosure Schedule, no portion of
the Company software is licensed to the Company pursuant to any version of the General Public License, Lesser General Public License or Common Public License. 

        (iii)  Conformity
to Technical Specifications.    The Company Software conforms in all material respects to the technical
specifications for the design, performance, operation, test, support and maintenance of the Company Software, and to all other documentation relating to such technical specifications. No portion of
Company Software: 

         (I)  sold
or licensed by the Company directly or indirectly to end users contained, on the date of shipment by the Company; 

        (II)  currently
for sale or license directly or indirectly to end users contains; and, 

      (III)  other
than that specified in the preceding (I) and (II) in this sentence, to the knowledge of the Company, contains; 

any
software routines or hardware components designed to permit unauthorized access; to disable or erase software, hardware or data; or to perform any other such actions. Company uses industry
standard methods to detect and prevent viruses and other code covered by the preceding sentence (and subsequently to correct or remove such viruses) that may be present in Company Software. Company
Software does not include or install any spyware, adware, or other similar software which monitors the use of any remote computer without the knowledge and express consent of the users of such remote
computer. 

        (iv)  Policies
and Procedures.    The Company has adopted policies and procedures to control the use of (i) Computer Programs,
including without limitation object code and source code portions thereof available for download on the internet; and (ii) any other Computer Programs not introduced into the Company's
development environment through a formal procurement process and pursuant to a license agreement determined to be appropriate for establishing the Company's rights and obligations with respect to
Computer Programs. 

        (bb)    Disclosure;
Reliance.    To the knowledge of the Company, there is no fact that has not been disclosed herein or in writing to
the Purchasers that would have a Material Adverse Effect. The representations and warranties in this Section 2 are made with the knowledge and
expectation that the Purchasers are placing reliance thereon. 

        Section 3.    Representations
and Warranties of the Purchasers.    Each Purchaser, severally with respect to itself only and not
jointly with respect to any of the other Purchasers, hereby represents and warrants to the Company as of the date hereof as follows: 

        (a)    Organization,
Power and Authority.    Such Purchaser (if not a natural person) is a duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Such Purchaser possesses all requisite power and authority necessary to enter into and carry out the transactions contemplated by this
Agreement. 

        (b)    Authorization.    The
execution, delivery and performance of this Agreement and all of the other agreements contemplated hereby to
which such Purchaser is a party and the purchase of the 

15

 

Preferred
Securities by such Purchaser have been duly authorized by such Purchaser. This Agreement and all other agreements contemplated hereby to which such Purchaser is a party when executed and
delivered by such Purchaser in accordance with the terms hereof, shall each constitute a valid and binding obligation of such Purchaser, enforceable in accordance with its terms. 

        (c)    Noncontravention.    The
execution, delivery, compliance with and performance of such Purchaser's obligations pursuant to this
Agreement and the other agreements, documents and transactions contemplated hereby will not and do not violate or conflict with, with or without the passage of time and giving or notice, the
organizational documents of such Purchaser. 

        (d)    Brokerage.    There
are no claims against such Purchaser for brokerage commissions, finders' fees or similar compensation in
connection with the purchase of the Preferred Securities by such Purchaser
contemplated by this Agreement. Such Purchaser shall pay and hold the Company and the other Purchasers harmless against, any liability, loss or expense (including reasonable attorneys' fees and
out-of-pocket expenses) arising in connection with any such claim. 

        (e)    Investment
Representations    

          (i)  Such
Purchaser understands that (I) the Preferred Securities and the Conversion Stock have not been registered under the Securities Act on the basis that the sale
provided for in this Agreement is exempt from the registration provisions thereof and that the Company's reliance on such exemption is predicated in part upon the representations of such Purchaser set
forth herein and (II) there is no public trading market for the Preferred Securities or Conversion Stock, that none may develop and that the Preferred Securities or Conversion Stock must be held
indefinitely unless such Preferred Securities or Conversion Stock are registered under the Securities Act or an exemption from registration is available. 

         (ii)  Such
Purchaser acknowledges that the offer and sale of the Preferred Securities to such Purchaser has not been accomplished by the publication of any advertisement and
that such Purchaser has had access to such information concerning the Company and its business as such Purchaser has requested in connection with the transactions contemplated hereby. 

        (iii)  Such
Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. 

        (iv)  Such
Purchaser will acquire the Preferred Securities to be acquired by it for its own account and that the Preferred Securities are being and will be acquired by it for
the purpose of investment and not with a view to distribution or resale thereof. 

         (v)  Such
Purchaser understands that the Preferred Securities and the Conversion Stock are characterized as "restricted securities" under the federal securities laws inasmuch
as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Preferred Securities and Conversion Stock may be
resold without registration under the Securities Act only in certain limited circumstances. Such Purchaser has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act as presently in effect and understands the resale limitations imposed thereby and by the Securities Act. 

        (vi)  Such
Purchaser understands that the certificates evidencing the Preferred Securities to be purchased hereunder shall have endorsed upon them a legend substantially as
follows: 

"THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED EXCEPT IN COMPLIANCE WITH SUCH
ACT AND ALL APPLICABLE SECURITIES LAWS." 

16

   
        Section 4.    Covenants and Other Agreements.    

        (a)    Press
Release and Announcements.    Unless required by law (in which case each Party agrees to consult with the other Parties
prior to any such disclosure as to the form and content of such disclosure), no press releases or other releases of information related to this Agreement or the transactions contemplated hereby will
be issued or released at the Closing by any Purchaser without the consent of the Company or by the Company or any Founder without the consent of the Purchasers holding two-thirds
(2/3) in interest of the Preferred Securities. 

        (b)    Further
Assurances.    In case at any time after the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement or the transactions contemplated hereby, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents)
as any other Party may reasonably request. 

        (c)    Certain
Tax Matters.    The Company shall make a timely election under Treasury Regulations
§1.1368-1(g)(2) to treat the taxable year of the Company within which the Closing occurs as if it consisted of separate taxable years, the first of which ends at the close of
the date of the Closing. Each Purchaser (i) hereby consents to an election by the Company pursuant to Section 1362(e)(3) of the Code not to have paragraph (2) of
Section 1362(e) of the Code apply and (ii) agrees to execute such documents and instruments to evidence such consent as the Company reasonably may request. 

        (d)    Use
of Proceeds.    As further set forth on the Disbursement Schedule, the proceeds of the Investment Transaction shall be used as
follows: (i) up to $55,000,000.00 to consummate the Repurchase Transaction and pay expenses and fees related thereto, (ii) to pay expenses in connection with the transactions
contemplated hereunder and other expenses related to the Closing (including attorneys' fees and the fees of Agent), including, without limitation, those expenses contemplated by  Section 8(a) and
(iii) for working capital and general corporate purposes. 

        (e)    Key-Man
Life Insurance.    The Company shall within 60 days of Closing obtain from, and at all times thereafter
maintain with, a responsible and reputable insurance company or association a term life insurance policy on the life of the Company's chief executive officer in the amount of not less than $2,000,000,
with proceeds payable to the Company. The Company shall add each of Highland Capital Partners VI Limited Partnership and Oak Investment Partners XI, Limited Partnership as a
notice party to such policy and will request that the issuer(s) of such policy provide such designee with at least ten (10) days' notice before such policy is terminated (for failure to pay
premiums or otherwise) or assigned, or before any change is made in the designation of the beneficiary thereof. 

        (f)    Post-Closing
Distributions.    

          (i)  At
or before the Closing, the Company shall declare a distribution (the "2004 S Period Distribution") to its
shareholders of record on the day immediately prior to the Closing Date in an amount equal to the Distributable S Period Taxable Income, payable subject to the satisfaction of the conditions set forth
in Section 4(f)(ii) below. For purposes of this Section 4(f), the
"Distributable S Period Taxable Income" means (i) the sum (without duplication) of the items of income, gain, loss, deduction and expense that
are required to be reflected on Internal Revenue Service Form 1120S, Schedule K, Lines 1, 2, 3, 4a through 4f, 5 through 11a and 16b, for the period beginning on January 1, 2004
and ending on (and through) the Closing Date minus (ii) the aggregate amount of distributions made during the period beginning on January 1, 2004
and ending on the day immediately prior to the Closing Date that are not attributable to taxable income of the Company generated prior to January 1, 2004. 

         (ii)  At
any time, and from time to time, after the Determination Date (as defined below) and prior to December 31, 2004, the Company shall pay, in one or more
installments, the 2004 S Period Distribution, subject only to compliance, at all times, with California Corporations Code Section 500 et. seq. provided, however, that if all or part of the 2004
S Period Distributions are 

17

 

delayed
as a result of such compliance with California Corporations Code Section 500 et. seq., such 2004 S Period Distributions shall be made as soon as thereafter possible prior to the end of
the Company's "post-termination transition period" (as defined in Section 1377(b) of the Code, subject only to compliance with California Corporations Code Section 500 et.
seq. Each installment of the 2004 S Period Distribution paid after Closing shall be treated in the manner described in Section 1371(e)(1) of the Code, and the Company shall not make the election
provided for in Section 1371(e)(2) of the Code. 

        (iii)  As
soon as practicable following the Closing Date, and in any event within 30 days thereof, the Company shall prepare and deliver to the Purchasers a
calculation of Distributable S Period Taxable Income (and all supporting financial statements and information on which such calculation is based or from which such calculation is derived, directly or
indirectly), which shall be reviewed and certified in writing by Ernst & Young LLP (or such other independent, nationally-recognized accounting firm reasonably acceptable to Purchasers). The
supporting financial statements shall be prepared in accordance with generally accepted accounting principals consistently applied and shall fairly present the Company's results of operation for the
applicable period, and the calculation of Distributable S Period Taxable Income shall be prepared in accordance with the income tax accounting principles consistently applied. The Purchasers may
dispute any element of the calculation of Distributable S Period Taxable Income (or supporting financial statements and information on which such calculation is based or from which such calculation is
delivered, directly or indirectly) by notifying the Company of
such disagreement in writing, setting forth in reasonable detail the particulars of such disagreement, within 15 days after its receipt of the calculation. In the event that the Purchasers do
not provide such a notice of disagreement within such 15-day period, the Purchasers shall be deemed to have accepted, for purposes of this Section 4(f), the calculation of
Distributable S Period Taxable Income delivered by the Company, which shall be final, binding and conclusive for all purposes hereunder. In the event any such notice of disagreement is timely
provided, the Company and the Purchasers shall use their commercially reasonable efforts for a period of ten (10) days (or such longer period as they may mutually agree) to resolve any
disagreements with respect to the calculation of Distributable S Period Taxable Income (or supporting financial statements and information on which such calculation is based or from which such
calculation is derived, directly or indirectly). If, at the end of such 10-day period, the Company and the Purchasers are unable to resolve such disagreements, then an independent
nationally recognized accounting firm, other than the firm that reviewed and certified the calculation, reasonably acceptable to the Company and the Purchasers (the "Accounting Referee"), shall
resolve any remaining disagreements. The Accounting Referee shall determine as promptly as practicable, but in any event within 15 days of the date on which such dispute is referred to the
Accounting Referee, whether the calculation of Distributable S Period Taxable Income (or supporting financial statements and information on which such calculation is based or from which such
calculation is derived, directly or indirectly), as the case may be, was properly prepared in accordance with the standards set forth in this Section 4(f)(iii) and shall deliver to the
Company and the Purchasers a written report setting forth its findings, which shall be final, conclusive and binding on the Company and the Purchasers for purposes of this Section 4(f). The
date on which the calculation of Distributable S Period Taxable Income (or supporting financial statements and information on which such calculation is based or from which such calculation is derived,
directly or indirectly) is finally determined in accordance with this Section 4(f)(iii) shall be the "Determination Date." Each Party shall, and shall cause its representatives to,
cooperate with the other and provide timely access to information for purposes of verifying the calculation of Distributable S Period Taxable Income resolving any dispute pursuant to this
Section 4(f)(iii). 

        (g)    Exclusivity.    From
and after the date hereof through the earlier of the Closing, and the termination of this Agreement, the
Company agrees not to initiate any contacts or negotiate with or 

18

 

provide
information to or otherwise aid in the due diligence of any other potential investor or strategic investor or acquirer. The Company shall promptly notify the Purchasers if any potential
financial or strategic investor or acquirer contacts the Company. 

        (h)    S
Corporation Status.    The Founders jointly and severally agree that, if it is determined by a finding or order in connection
with any governmental or judicial audit or proceeding, including any settlement of such a proceeding to which any of the parties hereto are parties, that any of the Company's S Elections was not
validly in effect, or the S corporation status of the Company was otherwise terminated, in each case for any period after such election was purportedly made, then the Founders shall promptly remit to
the Company in cash any federal, state and/or local Tax liability (including any penalties, additions to Tax or interest assessed with respect thereto) of the Company in connection with Taxes that are
imposed on the Company as a result of such invalid election or termination of S corporation status; provided, however, that the maximum liability of any Founder under this  Section 4(h) shall not
exceed 50% of the Repurchase Price set forth opposite such Founder's name, or the name of the Seller affiliated with such
Founder, on the Disbursement Schedule. Such payment shall be made
within 30 days after the date on which the Company delivers to the Founders written notice that such Tax liability has been so determined. The obligations to remit such cash to Company as
described in this Section shall be treated as separate from and in addition to the Sellers' other indemnification obligations hereunder, including, without limitation, indemnification obligations
under Section 7. Notwithstanding anything to the contrary contained in this Agreement, the provisions of this Section
4(h) shall remain in effect as personal obligations of the Founders until the until the expiration of the applicable statutes of limitations (taking into account all extensions
thereof). The Company shall promptly notify the Founders of its agreement to or filing for any extension with respect to any Tax liability described in this  Section 4(h). The Company shall promptly
deliver to the Founders and the Founders shall promptly deliver to the Company, if applicable, written
notice of the commencement of any governmental or judicial audit or proceeding questioning or investigating whether any of the Company's S Elections was validly in effect or the S corporation status
of the Company was otherwise terminated and each of the Founders, or the Company, if applicable, shall have the right to participate in any such audit or proceeding. The Company shall not settle any
such audit or proceeding on a basis that would subject the Founders to liability under this Section 4(h) without the prior written consent of the
Founders, which consent shall not be unreasonably withheld. If the Company or the Founders pay any federal, state and/or local Tax liability (including any penalties, additions to Tax or interest
assessed with respect thereto) of the Company in connection with Taxes that are imposed on the Company as a result of an invalid election or termination of S corporation status and it is subsequently
determined that the Company is entitled to a refund of all or any portion of the such amount, the amount of the refund (including any interest with respect thereto) shall be paid to the Founders
within thirty (30) days after the Company's receipt thereof. 

        (i)    Vesting
of Reserved Employee Shares.    Except as set forth in  Section 4(i) of the Disclosure Schedule, from and after the date hereof, without the written consent of a
majority of the Series A
Directors, the Company shall not grant to any of its current or future employees, consultants, directors or advisors options to purchase shares of Common Stock which will become exercisable, or awards
of Common Stock which will vest, at a rate in excess of 25% at the first anniversary of such grant or award and 6.25% per quarter thereafter. 

        (j)    Inventions
Assignment and Confidentiality Agreement.    The Company will obtain a duly executed Inventions Assignment and
Confidentiality Agreement, in a form agreed upon by the Board of Directors, from each employee and consultant. 

        (k)    Voting
Agreement; Drag-Along Agreement; Investors' Rights Agreement.    From and after the date hereof, the Company
shall, as a condition to the award of common stock, or the issuance of common stock upon exercise of options to purchase, to its employees, consultants, directors or advisors, cause such Persons
receiving such awards or exercising such options to become a party to the Investors' 

19

 

Rights
Agreement and become subject to the restrictions set forth therein including, without limitation, pursuant to Section 3 thereof. From and after the date hereof, the Company shall use its best
efforts to cause its employees, consultants, directors or advisors that receive common stock, upon the exercise of options or otherwise, to become a party to the Voting Agreement and the
Drag-Along Agreement and become subject to the restrictions set forth therein, provided, however, that the Company shall not be required to take any action that would result in the loss of
its exemption under California Code Section 25102(o) related to its employee stock option plans. 

        (l)    Payment
of Taxes and Trade Debt.    The Company shall pay and discharge all taxes, assessments and governmental charges or levies
imposed upon it or upon its income, profits or business, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might
become a lien or charge upon any properties of the Company; provided, however, that the Company shall not be required to pay any such Tax, assessment, charge, levy or claim which is being contested in
good faith and by appropriate proceedings if the Company shall have set aside on its books sufficient reserves with respect thereto. The Company shall pay when due, or in conformity with customary
trade terms, all lease obligations, all trade debt, and all other Indebtedness incident to the operations of the Company, except such as are being contested in good faith and by proper proceedings if
the Company shall have set aside on its books sufficient reserves with respect thereto. The Company shall withhold and remit, or cause to be withheld and remitted, any portion of the Repurchase Price
that is subject to the Tax withholding provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the Code or of any other provision of law. 

        (m)    Preservation
of Corporate Existence.    The Company shall preserve and maintain, and, unless the Company deems it not to be in its
best interests, cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each of its Subsidiaries to qualify and remain qualified, as a foreign corporation in each jurisdiction in which such qualification is necessary or desirable in view of its
business and operations or the ownership or lease of its properties. The Company shall secure, preserve and maintain, and cause each of its Subsidiaries to secure, preserve and maintain, all licenses
and other rights to use Intellectual Property Rights owned or possessed by it and deemed by the Company to be necessary to the conduct of its business and the businesses of its Subsidiaries, taken as
a whole. 

        (n)    Compliance
with Laws.    The Company shall comply, and cause each of its Subsidiaries to comply, with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority, where noncompliance would have a Material Adverse Effect. 

        (o)    Keeping
of Records and Books of Account.    The Company shall keep, and cause each of its Subsidiaries to keep, adequate records
and books of account in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and
any of its Subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, returns of merchandise, obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made. 

        (p)    Maintenance
of Properties.    The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and
preserve, all of its properties and assets, necessary for the proper conduct of its business, in good repair, working order and condition, ordinary wear and tear excepted. 

        (q)    Budget
Approval.    The Company shall not later than 30 days prior to the commencement of each fiscal year, prepare and submit to,
and obtain the approval of the Board of Directors of the Company of, a business plan and monthly operating budgets in detail for the upcoming fiscal year, including capital and operating expense
budgets, cash flow projections and profit and loss projections, all itemized in reasonable detail (including itemization of provisions for officers' compensation). The 

20

 

Company
shall review the budget and business plan periodically, and resubmit all material changes therein and all material deviations therefrom to the Board of Directors of the Company. 

        (r)    By-laws.    The
Company shall, at all times, cause its bylaws to provide that, unless otherwise required by the laws
of the State of California, (i) any two directors and (ii) any holder or holders of at least 25% the then outstanding Series A Preferred Stock shall have the right to call a meeting of the
Board of Directors or shareholders of the Company. At all times maintain provisions in the bylaws or articles of incorporation of the applicable Company indemnifying all directors against liability to
the maximum extent permitted under the applicable laws. 

        (s)    Expenses
of Directors.    The Company shall promptly reimburse in full each director of the Company who is not an employee of the
Company for all of his or her reasonable out-of-pocket expenses incurred in attending each meeting of the Board of Directors or any committee thereof. 

        (t)    Continued
Business Operations.    The Company shall use commercially reasonable efforts to cause its officers and Key Employees to
refrain from carrying on any for-profit business activity outside of the Company. 

        (u)    Restrictions
on Indebtedness.    The Company shall not, and shall cause each of its Subsidiaries not to, create, incur, assume or
suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to
exist, any liability with respect to any indebtedness for money borrowed without the consent of a majority of the Company's Board of Directors. The Company shall not, and shall cause each of its
Subsidiaries not to, assume, guarantee, endorse or otherwise become directly or contingently liable on (including without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss) any indebtedness of any other Person, except for
guarantees by endorsement of negotiable instruments for deposit or collection in the ordinary course of business, and except for the guaranties of the permitted obligations of any wholly owned
Subsidiary, without the consent of a majority of the Company's Board of Directors. 

        (v)    Dealings
with Affiliates and Others.    Other than as contemplated by this Agreement and transactions in the ordinary course of
business involving less than $60,000, the Company shall not, and shall cause each of its Subsidiaries not to, enter into, after the date of this Agreement, any transaction, including, without
limitation, any loans or extensions of credit or royalty agreements, with any officer, director or affiliate of the Company or any of its Subsidiaries or any member of their respective immediate
families or any corporation or other entity directly or indirectly affiliated with one or more of such officers, directors or members of their immediate families unless such transaction is approved in
advance by a majority of the disinterested members of the Company's Board of Directors. 

        (w)    Cancellation
of Treasury Stock.    The Company shall take all actions necessary to return the Repurchased Shares to the status of
unissued and authorized shares of Common Stock within 30 days after the Closing. 

        Section 5.    Conditions
to Closing.    

        (a)    Conditions
to Closing of the Purchasers.    The obligations of the Purchasers under this Agreement are subject to the fulfillment
on or before Closing, of each of the following conditions (or the written waiver by the Purchasers of any condition that is not so fulfilled): 

          (i)  Representations
and Warranties.    The representations and warranties of the Company contained in  Section 2 hereof shall be true and correct on the date of the Closing. 

         (ii)  Performance.    The
Company shall have performed and complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before the Closing. 

21

 

        (iii)  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 Preferred Securities pursuant to this Agreement shall be duly obtained and effective as of the
Closing. 

        (iv)  Board
of Directors.    The Company shall have taken all necessary corporate action such that immediately following the Closing:
(i) the number of directors constituting the full Board of Directors shall be fixed at seven (7) members, and (ii) the directors of the Company shall include Dan Nova, Bob Davis,
Fredric W. Harman, Kurt Johnson and David Gross. In addition, the election of Dan Nova, Bob Davis and Fredric W. Harman shall have been unanimously approved by the Company's Board of Directors. 

         (v)  Repurchase
Agreements.    The Company and the Sellers shall have executed and delivered Repurchase Agreements with respect to the
Company's repurchase of at least 1,136,686 Repurchased Shares from the Sellers. 

        (vi)  Deliveries
at Closing.    At the Closing, the Company shall have delivered to the Purchasers all of the following: 

         (I)  The
Investors' Rights Agreement duly executed and delivered by the Company and the parties set forth on  Schedule 5(a) attached hereto. 

        (II)  The
Voting Agreement duly executed and delivered by the Company and the parties set forth on Schedule 5(a)  attached hereto. 

      (III)  An
opinion from Sheppard, Mullin, Richter & Hampton LLP, counsel for the Company, in the form of Exhibit G  attached hereto, and an opinion ("Sellers' Opinion") from Reicker, Pfau, Pyle, McRoy & Herman LLP, counsel for the
Sellers ("Sellers' Counsel"), in the form of Exhibit H attached hereto, each of which shall be addressed
to the Purchasers and dated as of the Closing Date. 

      (IV)  A
management rights letter in the form attached hereto as Exhibit I. 

        (V)  A
certificate signed by an officer of the Company stating that the conditions specified in the foregoing Sections 5(a)(i)  and 5(a)(ii) have been fulfilled.

      (VI)  A
certificate of the Secretary or other officer of the Company certifying the names of the officers of the company authorized to sign this Agreement, the certificates
for the Preferred Securities and the other documents, instruments or certificates to be delivered pursuant to this Agreement by the Company or any of its officers, together with the true signatures of
such officers, together with copies of: 

         (1)  The
Restated Articles (certified by the California Secretary of State as of a date not more than two days prior to the Closing) and the Bylaws of the Company (as amended
through the date of the Closing), in each case certified by the Secretary of the Company as true and correct copies thereof as of the Closing. 

         (2)  The
resolutions of the Board of Directors and, if required, the shareholders of the Company approving the Restated Articles, this Agreement and the other matters
contemplated hereby, certified by the Secretary of the Company to be true, complete and correct. 

         (3)  A
good standing certificate California Secretary of State dated within five (5) days of the Closing with applicable "bring-down" certificates dated as
of the date hereof. 

22

 

     (VII)  The
Drag-Along Agreement duly executed and delivered by the Company and the holders of record of at least 95% of the outstanding shares of Common Stock
(immediately after giving effect to the Repurchase Transaction). 

       (vii)  Disqualified
Person Certificate.    A Certificate as to Disqualified Persons in form and substance reasonably acceptable to
Highland Capital Partners VI Limited Partnership. 

      (viii)  Escrow
Agreement; Indemnification Escrow Agreement.    The Escrow Agreement shall have been executed and delivered by all
parties thereto. The Indemnification Escrow Agreement shall have been executed and delivered by all parties thereto. 

        (ix)  Waivers.    The
Company shall have obtained all consents or waivers, if any, necessary to execute and deliver this Agreement, the
Investors' Rights Agreement, the Voting Agreement, the Drag-Along Agreement, the Repurchase Agreements, the Indemnification Escrow Agreement and the Escrow Agreement, to issue the
Preferred Securities and to repurchase the Repurchased Shares, and to carry out the transactions contemplated hereby and thereby, and all such consents and waivers shall be in full force and effect. 

         (x)  Payment
of Fees.    The Company shall have paid in accordance with Section 8(a)  the fees, expenses and disbursements of Testa, Hurwitz & Thibeault, LLP, special counsel for
the Purchasers, and any consultants retained by the Purchasers in connection
with their purchase of Preferred Securities, in an amount not to exceed $50,000 in the aggregate. 

        (xi)  2003
Ownership Equivalency Plan.    The Company shall have terminated the 2003 Ownership Equivalency Plan. 

        (b)    Conditions
to the Company's Obligations at Closing.    The obligations of the Company under this Agreement are subject to the
fulfillment on or before Closing, of each of the following conditions (or the waiver by the Company of any condition that is not so fulfilled): 

          (i)  Representations
and Warranties.    The representations and warranties of each Purchaser contained in  Section 3 shall be true and correct at the Closing. 

         (ii)  Performance.    The
Purchasers shall have performed and complied with all agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by the Purchasers on or before the Closing. 

        (iii)  Authorizations.    The
Company shall have obtained from its shareholders all of the waivers, authorizations, approvals and
consents needed to consummate the transaction contemplated by this Agreement, including, without limitation, the filing of the Restated Articles, the issuance and sale of the Preferred Securities, and
the execution and delivery of the Investors' Rights Agreement, the Voting Agreement and the Drag-Along Agreement. 

        (iv)  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 Preferred Securities pursuant to this Agreement shall be duly obtained and effective as of the
Closing. 

         (v)  Repurchase
Agreements.    The Company shall have received executed Repurchase Agreements from the Sellers with respect to the
Company's repurchase of at least 1,136,686 Repurchased Shares from such Sellers. 

        Section 6.    Definitions.    For
the purposes of this Agreement, the following terms have the meanings set forth below: 

        "2004 S Period Distribution" has the meaning set forth in Section 4(f)(i). 

        "Accounting Referee" has the meaning set forth in Section 4(f)(iii). 

23

 

        "Agent" means Perseus Advisors, LLC. 

        "Agreement" has the meaning set forth in the Preamble. 

        "Articles of Incorporation" has the meaning set forth in Section 1(a)(i). 

        "Closing" has the meaning set forth in Section 1(d). 

        "Closing Date" has the meaning set forth in Section 1(d). 

        "Common Stock" has the meaning set forth in Section 2(b). 

        "Company" has the meaning set forth in the Preamble. 

        "Computer Program(s)" means (i) any and all computer programs (consisting of sets of statements or instructions to be used directly or
indirectly in a computer in order to bring about a certain result) and portions thereof, and (ii) all associated data and compilations of data, regardless of their form or embodiment. "Computer
Programs" shall include, without limitation, all source code, object code, natural language code, all versions, all screen displays and designs, all component modules, all descriptions, flow-charts
and other work product used to design, plan, organize and develop any of the foregoing, and all documentation, including without limitation user manuals and training materials, relating to any of the
foregoing. 

        "Confidential Information" means all information of a confidential or proprietary nature (whether or not specifically labeled or
identified as "confidential"), in any form or medium, that relates to the business (including proprietary databases), products, services, research or development of the Company or its Subsidiaries or
their respective suppliers, distributors, customers, vendors or other trade related business relations. Confidential Information includes, but is not limited to, the following: (i) internal business
and financial information (including information relating to strategic and staffing plans, business, training, marketing, promotional and sales plans, cost, rate and pricing structures); (ii)
identities of, individual requirements of, and specific contractual arrangements with, the Company's suppliers, distributors, customers, vendors and other business relations and their confidential
information; (iii) trade secrets, know-how, compilations of data and analyses, specifications, systems, records, reports, manuals, documentation, models, data and databases relating
thereto (including information contained in the Company's proprietary databases and the use and functions thereof); (iv) inventions, innovations, improvements, processes, developments, plans, designs,
formulas, analyses, drawings, reports and all similar or related information (whether or not patentable) and (v) all other Intellectual Property Rights of the Company. Confidential Information shall
not include information that a receiving party can demonstrate is publicly known through no wrongful act or breach of any obligation of confidentiality. 

        "Conversion Stock" has the meaning set forth in Section 2(d). 

        "Determination Date" has the meaning set forth in Section 4(f)(iii). 

        "Disbursement Schedule" has the meaning set forth in Section 1(b). 

        "Disclosure Schedule" has the meaning set forth in Section 2. 

        "Distributable S Period Taxable Income" has the meaning set forth in  Section 4(f)(i). 

        "ERISA Affiliate" means any Person who is in the same controlled group of corporations or who is under common control with the Company
(within the meaning of Section 414 of the Code). 

        "Escrow Agent" has the meaning set forth in Section 1(d). 

        "Escrow Agreement" has the meaning set forth in Section 1(c). 

24

 

        "Financial Statements" has the meaning set forth in Section 2(v). 

        "Indemnification Escrow Agreement" has the meaning set forth in Section 1(c). 

        "Indemnification Escrow Amount" means $3,000,000. 

        "Indemnification Escrow Fund" means the escrow fund to be governed by the terms of the Indemnification Escrow Agreement, initially
constituted by the Indemnification Escrow Amount delivered pursuant to Section 1.1(e)(ii). 

        "Intellectual Property Rights" means any and all of the following in any and all legal jurisdictions around the world: (i) patents, patent
applications, patent disclosures and all related continuations, continuations-in-part, divisionals, reissues, re-examinations and renewals (together
"Patents"), (ii) trademarks, service marks, trade dress, logos, trade names, service names, domain names and corporate names, and registrations and
applications for registration thereof (together "Trademarks"), (iii) copyrights, and registrations and applications for registration thereof, (iv) mask
works, and registrations and applications for registration thereof, (v) trade secrets and confidential business information, including without limitation, know-how, manufacturing and
product processes and techniques, research and development information, financial, marketing and business data, pricing and cost information, technical data, business and marketing plans, and customer
and supplier lists and information (together "Trade Secrets"), (vi) other proprietary rights relating to any of the foregoing (including without
limitation associated goodwill and remedies against infringements thereof and rights of protection of an interest therein under the laws of all jurisdictions).. 

        "Investment Transaction" has the meaning set forth in Section 1(b). 

        "Investors' Rights Agreement" has the meaning set forth in Section 1(b). 

        "Material Adverse Effect" has the meaning set forth in Section 2(a). 

        "Party" or "Parties" has the meaning set forth in the Preamble. 

        "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. 

        "Preferred Securities" has the meaning set forth in Section 1(a)(ii). 

        "Preferred Securities Purchase Price" has the meaning set forth in Section 1(b). 

        "Preferred Stock" has the meaning set forth in Section 2(b). 

        "Purchaser" has the meaning set forth in the Preamble. 

        "Qualified Public Offering" shall mean a fully underwritten, firm commitment public offering pursuant to an effective registration under
the Act covering the offer and sale by the Company of its Common Stock in which the aggregate net proceeds to the Company equal or exceed $50,000,000 million, in which the price per share of
such Common Stock equals or exceeds $70.38 per share (such price subject to equitable adjustment in the event of any stock split, stock dividend, combination, reorganization, reclassification or other
similar event). 

        "Repurchase Price" has the meaning set forth in Section 1(a)(iii). 

        "Repurchase Transaction" has the meaning set forth in Section 1(c). 

        "Repurchased Shares" has the meaning set forth in Section 1(a)(iii). 

        "Restated Articles" has the meaning set forth in Section 1(a)(i). 

25

 

        "Securities Act" means the Securities Act of 1933, as amended, or any similar federal law then in force. 

        "Seller" or "Sellers" has the meaning set forth in the Preamble. 

        "Series A Directors" has the meaning set forth in the Restated Articles. 

        "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business
entity of which (i) if a corporation, a majority of the total voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors, Board of
Directors or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a
limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of the limited liability company, partnership, association or other
business entity gains or losses or shall be or control any managing shareholder or general partner of such limited liability company, partnership, association or other business entity. 

        "Tax" or "Taxes" means federal, state, county, local, foreign or other income, gross
receipts, ad valorem, franchise, profits, sales or use, transfer, registration, excise, utility, environmental, communications, real or personal property, capital interests, license, payroll, wage or
other withholding, employment, social security, severance, stamp, occupation, alternative or add-on minimum, estimated and other taxes of any kind whatsoever (including deficiencies,
penalties, additions to tax, and interest attributable thereto) whether disputed or not. 

        "Voting Agreement" has the meaning set forth in Section 1(b). 

        Section 7.    Indemnification
and Survival.    

        (a)   Subject
to the terms of this Agreement, including, without limitation, Section 7(c) hereof, the Company and each
Seller shall, jointly and severally, indemnify, pay, defend and hold the Purchasers and each of the Purchasers' officers, directors, employees and agents and their respective affiliates (the
"Indemnitees") harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever, including, without limitation, the actual and reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto, which may be (i) imposed on such Indemnitee, (ii) incurred by such Indemnitee,
or (iii) asserted against such Indemnitee by a third party, as a result of the misrepresentation, violation or breach of any representation, warranty, covenant, agreement or obligation of the
Company under this Agreement or the other agreements contemplated herein. Without limiting the generality of the foregoing, the Purchasers shall be deemed to have suffered liability, loss or damage as
a result of the untruth, inaccuracy or breach of any such representations, warranties, covenants, agreements or obligations if such liability, loss or damage shall be suffered by the Company as a
result of, or in connection with, such untruth, inaccuracy or breach of any facts or circumstances constituting such untruth, inaccuracy or breach. 

        (b)   The
representations and warranties of the Company set forth in this Agreement and the indemnification obligations set forth in  Section 7(a) shall survive the execution and delivery of this Agreement,
any investigation by or on behalf of any Party and the Closing and shall
terminate at 5:00 PM (Pacific time) on April 30, 2006 and be of no further force or effect after such time, except that (i) the representations and warranties set forth in  Section 2(b),
Sections 2(j)(i), (ii) and
(v) and 

26

 

 Section 2(z), and the indemnification obligations set forth in Section 7(a) related thereto, shall survive forever
and shall not terminate, and (ii) the representations and warranties set forth in Section 2(n),  Section 2(o), Section 2(q) and  Section 2(s), and the indemnification obligations set forth in Section 7(a) related
thereto, shall survive the Closing until the expiration of the applicable statutes of limitations (taking into account all extensions thereof); provided, however, that in the event notice for
indemnification under Section 7(a) shall have been given within the applicable survival period, the representation and warranty that is the
subject of such indemnification claim shall survive until such time as such claim is finally resolved. The respective covenants, agreements and obligations of the Parties (exclusive of their
respective representations and warranties which shall survive as indicated in the first sentence hereof) set forth in this Agreement or in any certificate, document or other instrument delivered
pursuant to this Agreement shall survive the execution and delivery of this Agreement, any investigation by or on behalf of any other party hereto, and the Closing without limitation; provided,
however, that the covenants, agreements and obligations of the Company set forth in Section 4(e) and Sections
4(i) through 4(v) shall terminate and be of no further force and effect immediately upon the earlier to occur of a
Qualified Public Offering or the conversion into Common Stock of at least 75% of all issued shares of Series A Preferred Stock. 

        (c)   Notwithstanding
the provisions of Section 7(a), (i) no Seller shall have any liability pursuant  Section 7(a) unless the aggregate amount of all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims, costs,
expenses and disbursements incurred, or deemed to have been incurred, by the Indemnitees exceeds $250,000, in which event the entire aggregate amount thereof (subject to clause (ii) of this  Section 7(c))
shall be indemnified by the Sellers pursuant to Section 7(a), and
(ii) the maximum aggregate liability of the Sellers under Section 7(a) shall not exceed, and shall be limited solely and exclusively to,
the Indemnification Escrow Fund; provided, however, that nothing in this Section 7(c) shall limit the liability of the Founders pursuant to  Section 4(h). No Seller shall have any right of contribution from the Company for any indemnification claim by the Indemnitees. 

        (d)   Pursuant
to the Repurchase Agreement, the Sellers shall agree and acknowledge that the Company shall deposit the Indemnification Escrow Amount with the escrow agent
pursuant to the Indemnification Escrow Agreement. The Indemnification Escrow Fund shall be governed by the terms set forth in the Indemnification Escrow Agreement. Payment from the Indemnification
Escrow Fund, of any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements indemnified by the Sellers pursuant to  Section 7(a),
shall be made pursuant to the terms of the Indemnification Escrow Agreement. 

        Section 8.    Miscellaneous.    

        (a)    Expenses;
Attorneys' Fees.    Each Party shall pay its own costs and expenses with respect to the negotiation, execution, delivery
and performance of this Agreement, provided, however, that at the Closing, the Company shall reimburse the reasonable fees, expenses and disbursements of Testa, Hurwitz & Thibeault, LLP,
special counsel for the Purchasers, and of any consultants retained by the Purchasers in connection with their purchase of Preferred Securities, in an amount not to exceed $50,000 in the aggregate.
Each Purchaser acknowledges that payment of such fees by the Company raises a potential conflict of interest and hereby consents to the payment arrangement set forth herein. The fees and expenses of
Seller's Counsel shall be paid by the Sellers from the aggregate Repurchase Price. The Company and the Sellers shall each pay 50% of the fees and expenses of the Escrow Agent and the escrow agent
pursuant to the Indemnification Escrow Agreement. 

27

   
        (b)    Remedies.    Subject to the limitations of Section 7(c) of this Agreement,
the Parties shall have all rights and remedies set forth in this Agreement and all rights and remedies which the Parties have been granted at any time under any other agreement or contract executed in
connection with the transactions contemplated hereby and, with respect to the additional rights the Parties may have against the Company in connection with the transactions contemplated hereby, all of
the rights which the Parties have under applicable law. 

        (c)    Consent
to Amendments.    This Agreement may be amended, or any provision of this Agreement may be waived; provided that any such
amendment or waiver shall be binding upon the Company only if set forth in a writing executed by the Company and referring specifically to the provision alleged to have been amended or waived, and any
such amendment or waiver shall be binding upon the Purchasers only if set forth in a writing executed by the Purchasers holding two-thirds (2/3) in interest of the Preferred
Securities and referring specifically to the provision alleged to have been amended or waived. No course of dealing between or among the Parties shall be deemed effective to modify, amend or discharge
any part of this Agreement or any rights or obligations of any Party under or by reason of this Agreement. Notwithstanding anything to the contrary contained in this  Section 7(c), (i) any
amendment which (I) increases any Purchaser's obligations hereunder, or (II) grants to any one or more Purchasers
any rights more favorable than any rights granted to all other Purchasers hereunder, must be approved by each Purchaser so as to be effective against such Purchaser, and (ii) any amendment
which increases any Seller's obligations hereunder must be approved by such Seller so as to be effective against such Seller. 

        (d)    Successors
and Assigns.    This Agreement and all of the covenants and agreements contained herein and all of the rights,
interests and obligations hereunder, by or on behalf of any of the Parties hereto, shall bind and inure to the benefit of the respective successors and assigns of the Parties hereto whether so
expressed or not; provided, however, that the Company shall not have the right to delegate any of its respective obligations hereunder or to assign its respective rights hereunder or any interest
herein without the prior written consent of the Purchasers holding of two-thirds (2/3) in interest of the Preferred Securities. 

        (e)    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 or the application of any such provision to any Person or circumstance shall be held to be prohibited by, illegal or unenforceable
under applicable law in any respect by a court of competent jurisdiction, such provision shall be ineffective only to the extent of such prohibition or illegality or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of this Agreement. 

        (f)    Counterparts.    This
Agreement may be executed simultaneously in counterparts (including by means of facsimile signature pages),
any one of which need not contain the signatures of more than one Party, but all such counterparts taken together shall constitute one and the same Agreement. 

        (g)    Descriptive
Headings; Interpretation.    The headings and captions used in this Agreement and the table of contents to this
Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized terms used in any Schedule or Exhibit attached hereto and not
otherwise defined therein shall have the meanings set forth in this Agreement. The use of the word "including" herein shall mean "including without limitation." The Parties intend that each
representation, warranty and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of the first representation, warranty or covenant. 

28

 

        (h)    Entire
Agreement.    This Agreement and the agreements and documents referred to herein contain the entire agreement and
understanding between the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter in any way. 

        (i)    No
Third-Party Beneficiaries.    Except for each Seller and his, her or its permitted successors and assigns, who are express
third party beneficiaries of Section 7 of this Agreement, this Agreement is for the sole benefit of the Parties and their permitted successors
and assigns and nothing herein expressed or implied shall give or be construed to give any Person, other than the Parties and such permitted successors and assigns, any legal or equitable rights
hereunder. 

        (j)    Cooperation
on Tax Matters.    The Company and the Founders shall cooperate fully, as and to the extent reasonably requested by
each such Party and at such requesting Party's expense, in connection with any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon any
such Party's request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided hereunder. The Company and the Founders agree (i) to retain all books and records with respect to Tax matters
pertinent to the Company relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by any such Party, any
extensions thereof) applicable to such taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (ii) to give each such Party reasonable
written notice prior to transferring, destroying or discarding any such books and records and, if any such Party so requests, the Company or the Founders, as the case may be, shall allow such Party to
take possession of such books and records. 

        (k)    Governing
Law.    All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement
and the Schedules and Exhibits hereto shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. Each Party agrees to
accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 8(l),
provided that nothing in this Section 8(k) shall affect the right of any Party to serve such summons, complaint or other initial pleading in any
other manner permitted by law. 

        (l)    Notices.    All
notices, demands or other communications to be given or delivered under or by reason of the provisions of this
Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, one day after being sent to the recipient by reputable overnight courier service
(charges prepaid), upon machine-generated acknowledgment of receipt after transmittal by facsimile or five days after being mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications shall be sent to the Purchasers and the Company at the addresses indicated below or to such other address 

29

 

or
to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 

	The Company:
	

Fastclick.com, Inc.

360 Olive Street

Santa Barbara, CA 93101

Attn: Kurt Johnson, Chief Executive Officer
	Phone:	 	(805) 568-5334
	Facsimile:	 	(805) 456-4300
	

with a copy to:

(which shall not constitute notice to the Company)
	

Sheppard, Mullin, Richter & Hampton LLP

800 Anacapa Street

Santa Barbara, CA 93101-2212

Attn: C. Thomas Hopkins, Esq.
	Phone:	 	(805) 879-1829
	Facsimile:	 	(805) 568-1955
	

The Purchasers
	

To the addresses for the Purchasers set forth on the Schedule of Purchasers
	

with a copy to:

(which shall not constitute notice to any Purchaser)
	

Testa, Hurwitz & Thibeault, LLP

125 High Street

Boston, MA 02110

Attn: William J. Schnoor, Jr., Esq.
	Phone:	 	(617) 248-7000
	Facsimile:	 	(617) 248-7100

        (m)    No
Strict Construction.    The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. 

        (n)    No
Waiver; Cumulative Remedies..    No failure or delay on the part of any party to this Agreement in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 

        (o)    Understanding
Among the Purchasers.    The determination of each Purchaser to enter into this Agreement has been made by such
Purchaser independent of any other Purchaser and independent of any statements or opinions, which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser,
as to the advisability thereof or as to the properties, prospects or conditions (financial or otherwise) of the Company. 

30

 

        (p)    Termination.    

          (i)  Prior
to the Closing, this Agreement may be terminated and the transactions contemplated hereby may be abandoned: 

         (I)  by
the written agreement of the Company and Purchasers, Purchasers purchasing at least two-thirds (2/3) of the Preferred Securities to be sold
hereunder, assuming issuance of the maximum number of Preferred Securities pursuant to the Investment Transaction; or 

        (II)  by
(A) the Company or (B) Purchasers purchasing at least two-thirds (2/3) of the Preferred Securities to be sold hereunder,
assuming issuance of the maximum number of Preferred Securities pursuant to the Investment Transaction, if the Closing shall not have occurred by 5:00 PM (Pacific time) on October 15, 2004;
provided that the right to terminate this Agreement under this Section 8(p)(i)(II) shall not be available to any party or parties whose failure to fulfill any obligation, or satisfy any
condition, under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date. 

         (ii)  In
the event of termination of this Agreement and the abandonment of the transactions contemplated hereby prior to Closing, this Agreement shall become void and of no
effect with no liability on the part of any party hereto (or of any of its directors, officers, employees, agents, legal and financial advisors or other representatives); provided, however, except as
otherwise provided herein, no such termination shall relieve any party hereto of any liability or damages resulting from any willful breach of this Agreement. 

*
* * * * 

31

        IN WITNESS WHEREOF, the parties hereto have executed this Recapitalization Agreement on the date first written above. 

	 	 	FASTCLICK.COM, INC.
	

 	
 	

By:	
 	

/s/ Kurt Johnson
 Kurt Johnson

Chief Executive Officer

[Signature
Page to Recapitalization Agreement] 

	 	 	PURCHASERS:
	

 	
 	

HIGHLAND CAPITAL PARTNERS VI LIMITED PARTNERSHIP
	

 	
 	

By:	
 	

Highland Management Partners VI Limited Partnership, its General Partner
	

 	
 	

By:	
 	

Highland Management Partners VI, Inc., its General Partner
	

 	
 	

By:	
 	

/s/  ROBERT F. HIGGINS      

	 	 	 	 	Authorized Officer
	

 	
 	

HIGHLAND CAPITAL PARTNERS VI-B LIMITED PARTNERSHIP
	

 	
 	

By:	
 	

Highland Management Partners VI Limited Partnership, its General Partner
	

 	
 	

By:	
 	

Highland Management Partners VI, Inc., its General Partner
	

 	
 	

By:	
 	

/s/  ROBERT F. HIGGINS      

	 	 	 	 	Authorized Officer
	

 	
 	

HIGHLAND ENTREPRENEURS' FUND VI LIMITED PARTNERSHIP
	

 	
 	

By:	
 	

HEF VI Limited Partnership, its General Partner
	

 	
 	

By:	
 	

Highland Management Partners VI, Inc., its General Partner
	

 	
 	

By:	
 	

/s/  ROBERT F. HIGGINS      

	 	 	 	 	Authorized Officer

	 	 	OAK INVESTMENT PARTNERS XI, LIMITED PARTNERSHIP
	

 	
 	

By:	
 	

Oak Associates XI, LLC, its General Partner
	

 	
 	

By:	
 	

/s/ Frederic Harman

	 	 	 	 	Managing Member
	

 	
 	

STEAMBOAT VENTURES, LLC
	

 	
 	

By:	
 	

/s/ John R. Ball

	 	 	Name:	 	John R. Ball
	 	 	Title:	 	Managing Director
	

 	
 	

STEAMBOAT VENTURES MANAGER, LLC
	

 	
 	

By:	
 	

/s/ John R. Ball

	 	 	Name:	 	John R. Ball
	 	 	Title:	 	Managing Director

	 	 	FOUNDERS:
	

 	
 	

/s/ Jeff Pryor
 Jeff Pryor
	

 	
 	

/s/ David Gross
 David Gross

	 	 	OAK INVESTMENT PARTNERS XI, LIMITED PARTNERSHIP
	

 	
 	

By:	
 	

Oak Associates XI, LLC, its General Partner
	

 	
 	

By:	
 	

/s/ Frederic Harman

	 	 	Managing Member
	

 	
 	

STEAMBOAT VENTURES, LLC
	

 	
 	

By:	
 	

/s/ John R. Ball

	 	 	Name:	 	 
	 	 	Title:	 	 

 
 

Schedule of Purchasers    
    

	Name and Address
 
	 	Number of Preferred Securities
	 	Purchase Price

	HIGHLAND CAPITAL PARTNERS VI LIMITED PARTNERSHIP

c /o Highland Capital Partners Limited Partnership

92 Hayden Avenue

Lexington, MA 02421

Telephone: (781) 861-5500

Facsimile: (781) 861-5499	 	622,619	 	$	21,909,962.61
	

HIGHLAND CAPITAL PARTNERS VI-B LIMITED PARTNERSHIP

c /o Highland Capital Partners Limited Partnership

92 Hayden Avenue

Lexington, MA

02421 Telephone: (781) 861-5500

Facsimile: (781) 861-5499	
 	

341,148	
 	
$	

12,004,998.12
	

HIGHLAND ENTREPRENEURS' FUND VI LIMITED PARTNERSHIP

c/o Highland Capital Partners Limited Partnership

92 Hayden Avenue

Lexington, MA

02421 Telephone: (781) 861-5500

Facsimile: (781) 861-5499	
 	

30,833	
 	
$	

1,085,013.27
	

OAK INVESTMENT PARTNERS XI, LIMITED PARTNERSHIP

525 University Avenue, Suite 1300

Palo Alto, CA 94301

Telephone: (650) 614-3700

Facsimile: (650) 328-6345	
 	

994,600	
 	
$	

34,999,974.00
	

STEAMBOAT VENTURES, LLC

3601 West Olive Avenue, Suite 501

Burbank, CA 91505

Telephone: (818) 566-7400

Facsimile: (818) 566-7490	
 	

141,907	
 	
$	

4,993,707.33
	

STEAMBOAT VENTURES MANAGER, LLC

3601 West Olive Avenue, Suite 501

Burbank, CA 91505

Telephone: (818) 566-7400

Facsimile: (818) 566-7490	
 	

178	
 	
$	

6,263.82
	 	 	
	 	

	

Total	
 	

2,131,285	
 	
$	

74,999,919.15
	 	 	
	 	

 
 

Schedule 1(b)    
    
    Disbursement Schedule    
    

 
 

Schedule 2    
    
    Disclosure Schedule    
    

 
 

Schedule 5(a)    
    

Jeff
Pryor

David Gross

Stephen Szu-chien Chang

Kurt Johnson

Jeffrey Hirsch

Fred Krupica

James Aviani

Shayne Mihalka

Barry Anderson

Alexis Weaver 

 
 

Exhibit A    
    
    Form of Restated Articles    
    

 
 

Exhibit B    
    
    Form of Investor's Rights Agreement    
    

 
 

Exhibit C-1    
    
    Form of Voting Agreement    
    

 
 

Exhibit C-2    
    
    Form of Drag-Along Agreement    
    

 
 

Exhibit D    
    
    Form of Repurchase Agreement    
    

 
 

Exhibit E    
    
    Paying Agent Escrow Agreement    
    

 
 

Exhibit F    
    
    Form of Indemnification Escrow Agreement    
    

 
 

Exhibit G    
    
    Form of Opinion of Counsel for the Company    
    

 
 

Exhibit H    
    
    Form of Opinion of Counsel for the Sellers    
    

 
 

Exhibit I    
    
    Form of Management Rights Letter    
    

 
 

Exhibit I-1    
    
    Form of Management Rights Letter    
    

 
 

Exhibit I-2    
    
    Form of Management Rights Letter    
    

 
 

Exhibit I-3    
    
    Form of Management Rights Letter    
    

 
 

Exhibit I-4    
    
    Form of Management Rights Letter    
    

QuickLinks

TABLE OF CONTENTS

EXHIBITS AND SCHEDULES

RECAPITALIZATION AGREEMENT

Schedule of Purchasers

Schedule 1(b) Disbursement Schedule

Schedule 2 Disclosure Schedule

Schedule 5(a)

Exhibit A Form of Restated Articles

Exhibit B Form of Investor's Rights Agreement

Exhibit C-1 Form of Voting Agreement

Exhibit C-2 Form of Drag-Along Agreement

Exhibit D Form of Repurchase Agreement

Exhibit E Paying Agent Escrow Agreement

Exhibit F Form of Indemnification Escrow Agreement

Exhibit G Form of Opinion of Counsel for the Company

Exhibit H Form of Opinion of Counsel for the Sellers

Exhibit I Form of Management Rights Letter

Exhibit I-1 Form of Management Rights Letter

Exhibit I-2 Form of Management Rights Letter

Exhibit I-3 Form of Management Rights Letter

Exhibit I-4 Form of Management Rights Letter

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