Document:

Exhibit 4.2

 

GAMEFLY, INC.

 

THIRD AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

This
Third Amended and Restated Investors’ Rights Agreement (the “Agreement”)
is made as of November 15, 2004, by and among GameFly, Inc., a
Delaware corporation (the “Company”), the holders of the Company’s Series A
Preferred Stock set forth on Exhibit A attached hereto (the “Series A
Holders”), the holders of the Company’s Series B Preferred Stock set
forth on Exhibit B attached hereto (the “Series B Holders”),
the holders of the Company’s Series C Preferred Stock set forth on Exhibit C
attached hereto (the “Series C Holders”), the holders of Series D
Preferred Stock set forth on Exhibit D attached hereto (the “Series D  Holders,” and together with the Series A
Holders, the Series B Holders and the Series C Holders, the “Investors”),
Silicon Valley Bancshares (“SVB”), Best Buy Stores, L.P. (“Best Buy”)
and Edward C. Lenk, Sean Spector, Jung Suh and David Hodess, each of whom is
herein referred to as a “Founder.”

 

RECITALS

 

A.            The Company, SVB, Best Buy,
the Series A Holders, the Series B Holders, the Series C Holders
and the Founders have previously entered into a Second Amended and Restated
Investors’ Rights Agreement dated March 4, 2004 (the “Prior Rights
Agreement”), pursuant to which the Company granted SVB, the Series A
Holders, the Series B Holders, the Series C Holders and the Founders
certain rights.

 

B.            The Company and the Series D
Holders have entered into a Series D Preferred Stock Purchase Agreement
(the “Purchase Agreement”) of even date herewith pursuant to which the
Company desires to sell to the Series D Holders and the Series D
Holders desire to purchase from the Company shares of the Company’s Series D
Preferred Stock. A condition to the Series D Holders’ obligations under
the Purchase Agreement is that the Company and the Investors enter into this
Agreement in order to (i) amend and restate all the terms and conditions
of the Prior Rights Agreement; and (ii) provide the Series D Holders
with (a) certain rights to register shares of the Company’s Common Stock
issuable upon conversion of the Series D Preferred Stock held by the Series D
Holders; (b) certain rights to receive or inspect information pertaining
to the Company; and (c) a right of first offer with respect to certain
issuances by the Company of its securities. The Company desires to induce the Series D
Holders to purchase shares of Series D Preferred Stock pursuant to the
Purchase Agreement by agreeing to the terms and conditions set forth herein.

 

C.            The Company, SVB, Best Buy,
the Series A Holders, the Series B Holders, the Series C Holders
and the Founders each desire to amend and restate the Prior Rights Agreement to
add the Series D Holders as parties to this Agreement and make certain
other changes.

 

 

AGREEMENT 

The
parties hereby agree as follows:

 

A.            Amendments of Prior Rights
Agreement; Waiver of Right of First Offer. Effective and
contingent upon execution of this Agreement by the Company and the holders of a
majority of the Registrable Securities (as defined in the Prior Rights
Agreement), not including the Founders’ Stock (as defined in the Prior Rights
Agreement), and upon closing of the transactions contemplated by the Purchase
Agreement, the Prior Rights Agreement is hereby amended and restated in its
entirety to read as set forth in this Agreement, and the Company, SVB, Best
Buy, the Founders, and the Investors hereby agree to be bound by the provisions
hereof as the sole agreement of the Company, SVB, Best Buy, the Founders and
the Investors with respect to registration rights of the Company’s securities
and certain other rights, as set forth herein. The Series A Holders, Series B
Holders and Series C Holders that are Major Investors (as defined in the
Prior Rights Agreement) hereby waive the Right of First Offer, including the
notice requirements, set forth in the Prior Rights Agreement with respect to
the issuance of Series D Preferred Stock.

 

AGREEMENT

 

The
parties hereby agree as follows:

 

1.             Registration Rights. The Company
and the Investors covenant and agree as follows:

 

1.1            Definitions. For purposes
of this Section 1:

 

(a)           The term “Exchange Act”
means the Securities Exchange Act of 1934, as amended (and any successor
thereto) and the rules and regulations promulgated thereunder;

 

(b)           The term “Form S-3”
means such form under the Securities Act as in effect on the date hereof or any
successor form under the Securities Act that permits significant incorporation
by reference of the Company’s subsequent public filings under the Exchange Act;

 

(c)           The term “Founders’ Stock”
means the shares of Common Stock issued to the Founders;

 

(d)           The term “Holder”
means any person owning or having the right to acquire Registrable Securities
or any assignee thereof in accordance with Section 1.12 of this Agreement;

 

(e)           The term “Qualified IPO”
means a firm commitment underwritten public offering by the Company of shares
of its Common Stock in connection with which all the then-outstanding shares of
Preferred Stock are converted into shares of Common Stock pursuant

 

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to
the Company’s Restated Certificate of Incorporation as such Restated
Certificate of Incorporation may be amended from time to time;

 

(f)            The terms “register,” “registered,” and “registration” refer to a registration effected by
preparing and filing a registration statement or similar document in compliance
with the Securities Act, and the declaration or ordering of effectiveness of
such registration statement or document;

 

(g)           The term “Registrable Securities” means (i) the shares
of Common Stock issuable or issued upon conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock other than the SVB Stock, the Best Buy Stock
(as hereinafter defined) and shares for which registration rights have
terminated pursuant to Section 1.15 hereof, (ii) the shares of
Founders’ Stock, SVB Stock and the shares of Common Stock issuable or issued
upon conversion of the Preferred Stock issuable or issued to Best Buy or its
affiliates, upon exercise of warrants issued to Best Buy pursuant to that
certain Strategic Marketing Agreement, dated October 15, 2003, entered
into by and between the Company and Best Buy (the “Best
Buy Stock”), provided, however, that for the purposes of Section 1.2,
1.4 or 1.13 the Founders’ Stock, SVB Stock and Best Buy Stock shall not be
deemed Registrable Securities and the Founders, SVB and Best Buy shall not be
deemed Holders, and (iii) any other shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, the shares listed in (i) and
(ii); provided, however, that the
foregoing definition shall exclude in all cases any Registrable Securities sold
by a person in a transaction in which his or her rights under this Agreement
are not assigned. Notwithstanding the foregoing, Common Stock or other
securities shall only be treated as Registrable Securities if and so long as (A) they
have not been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, (B) they have not been
sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that
all transfer restrictions, and restrictive legends with respect thereto, if
any, are removed upon the consummation of such sale, or (C) the Holder
thereof is entitled to exercise any right provided in Section 1 in
accordance with Section 1.15 below;

 

(h)           The number of shares of “Registrable Securities then outstanding” shall be
determined by the number of shares of Common Stock outstanding which are, and
the number of shares of Common Stock issuable pursuant to then exercisable or
convertible securities which are, Registrable Securities;

 

(i)            The term “SEC” means the Securities and Exchange Commission;

 

(j)            The term “Securities Act” means the Securities Act of 1933, as amended
(and any successor thereto) and the rules and regulations promulgated
thereunder; and

 

(k)           The term “SVB Stock” means the Series A Preferred Stock issuable to
SVB upon exercise of that certain Warrant to Purchase Stock, dated January 21,
2003.

 

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1.2           Request for
Registration.

 

(a)           If the Company shall receive
at any time after the earlier of (i) November 15, 2008, or (ii) six
months after the effective date of the first registration statement for a
public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction), a written request from the Holders of a majority of the
Registrable Securities then outstanding that the Company file a registration
statement under the Securities Act where the reasonably anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$5,000,000, then the Company shall, within 10 days of the receipt thereof, give
written notice of such request to all Holders and shall, subject to the
limitations of subsection 1.2(b), use its best efforts to effect as soon as
practicable, and in any event within 90 days of the receipt of such request,
the registration under the Securities Act of all Registrable Securities which
the Holders request to be registered within 20 days of the mailing of such notice
by the Company in accordance with Section 3.5.

 

(b)           If the Holders initiating
the registration request hereunder (“Initiating Holders”) intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 1.2 and the Company shall include such
information in the written notice referred to in subsection 1.2(a). The
underwriter will be selected by a majority in interest of the Initiating
Holders and shall be reasonably acceptable to the Company. In such event, the
right of any Holder to include its Registrable Securities in such registration
shall be conditioned upon such Holder’s participation in such underwriting and
the inclusion of such Holder’s Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating
Holders and such Holder) to the extent provided herein. All Holders proposing
to distribute their securities through such underwriting shall (together with
the Company as provided in subsection 1.5(e)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting. Notwithstanding any other provision of this Section 1.2,
if the underwriter advises the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all participating Holders thereof, including the Initiating
Holders, in proportion (as nearly as practicable) to the amount of Registrable
Securities of the Company owned by each participating Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting.

 

(c)           Notwithstanding the
foregoing, if the Company shall furnish to Holders requesting a registration
statement pursuant to this Section 1.2, a certificate signed by the
President of the Company stating that in the good faith judgment of the Board
of Directors of the Company (the “Board”), it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not

 

4

 

more
than 90 days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than twice in
any twelve-month period and the right to defer such filing shall not exceed an
aggregate of 120 days in any 12 month period and provided further that the
Company shall not register any securities for the account of itself or any
other stockholder during such one hundred twenty (120) day period (other than a
registration relating solely to the sale of securities of participants in a
Company stock plan, a registration relating to a corporate reorganization or
transaction under Rule 145 of the Act, a registration on any form that
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities, or a registration in which the only Common Stock being registered
is Common Stock issuable upon conversion of debt securities that are also being
registered).

 

(d)           In addition, the Company
shall not be obligated to effect, or to take any action to effect, any
registration pursuant to this Section 1.2:

 

(i)            After the Company has
effected two registrations pursuant to this Section 1.2 and such
registrations have been declared or ordered effective;

 

(ii)           During the period starting
with the date 60 days prior to the Company’s good faith estimate of the date of
filing of, and ending on a date 90 days after the effective date of, a
registration subject to Section 1.3 hereof unless such offering is the
initial public offering of the Company’s securities, in which case, ending on a
date 180 days after the effective date of such registration subject to Section 1.3
hereof; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective,
and further provided that the Company delivers written notice of the Company’s
intent to file a registration statement to the Holders requesting registration
pursuant to this Section 1.2 within 30 days of the Company’s receipt of
such registration request; or

 

(iii)          If the Initiating Holders
propose to dispose of shares of Registrable Securities that may be immediately
registered on Form S-3 pursuant to a request made pursuant to Section 1.4
below.

 

1.3           Company Registration. If (but
without any obligation to do so) the Company proposes to register (including
for this purpose a registration effected by the Company for stockholders other
than the Holders) any of its stock under the Securities Act in connection with
the public offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan or a transaction covered by Rule 145 under the
Securities Act, a registration in which the only stock being registered is
Common Stock issuable upon conversion of debt securities which are also being
registered, or any registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within 20 days
after mailing of such notice by the Company in accordance with Section 3.5,
the Company shall, subject to the provisions of Section 1.8, use its best
efforts to cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.

 

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1.4           Form S-3 Registration. In case the
Company shall receive from any Holder or Holders a written request or requests
that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:

 

(a)           promptly give written notice
of the proposed registration, and any related qualification or compliance, to
all other Holders; and

 

(b)           as soon as practicable, use
its best efforts to effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holder’s or Holders’
Registrable Securities as are specified in such request, together with all or such
portion of the Registrable Securities of any other Holder or Holders joining in
such request as are specified in a written request given within 15 days after
receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 1.4: (i) if Form S-3
is not available for such offering by the Holders; (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters’ discounts or commissions) of less than $1,000,000; (iii) if
the Company shall furnish to the Holders a certificate signed by the President
of the Company stating that in the good faith judgment of the Board, it would
be seriously detrimental to the Company and its stockholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than 75 days after receipt of the request of the Holder or
Holders under this Section 1.4; provided, however, that the
Company shall not utilize this right more than twice in any 12-month period and
provided further that the Company shall not register any securities for the
account of itself or any other stockholder during such seventy five (75) day
period (other than a registration relating solely to the sale of securities of
participants in a Company stock plan, a registration relating to a corporate
reorganization or transaction under Rule 145 of the Act, a registration on
any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities, or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities that are
also being registered); (iv) if the Company has, within the 12-month
period preceding the date of such request, already effected two registrations
on Form S-3 for the Holders pursuant to this Section 1.4; (v) in
any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance; or (vi) during
the period ending 180 days after the effective date of a registration statement
subject to Section 1.3.

 

(c)           If the Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 1.4 and the Company shall include such
information in the written notice referred to in Section 1.4(a). The
provisions of Section 1.2(b) shall be applicable to such request
(with the substitution of “Section 1.4” for references to “Section 1.2”).

 

6

 

(d)           Subject to the foregoing,
the Company shall file a registration statement covering the Registrable
Securities and other securities so requested to be registered as soon as
practicable after receipt of the request or requests of the Holders.
Registrations effected pursuant to this Section 1.4 shall not be counted
as demands for registration or registrations effected pursuant to Sections 1.2
or 1.3, respectively.

 

1.5           Obligations
of the Company. Whenever
required under this Section 1 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

 

(a)           Prepare and file with the
SEC a registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the Registrable
Securities registered thereunder, keep such registration statement effective
for up to 120 days, or until the distribution described in such registration
statement is completed, if earlier. The Company shall not be required to file,
cause to become effective or maintain the effectiveness of any registration
statement that contemplates a distribution of securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act.

 

(b)           Prepare and file with the
SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be necessary
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement for up to
120 days, or until the distribution described in such registration statement is
completed, if earlier.

 

(c)           Furnish to the Holders such
numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them.

 

(d)           Use its best efforts to
register and qualify the securities covered by such registration statement
under such other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.

 

(e)           In the event of any underwritten
public offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.

 

(f)            Notify each Holder of
Registrable Securities covered by such registration statement at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make

 

7

 

the
statements therein not misleading in the light of the circumstances then
existing, such obligation to continue for 120 days.

 

(g)           Cause all such Registrable
Securities registered pursuant hereunder to be listed on each securities
exchange or trading system on which similar securities issued by the Company
are then listed.

 

(h)           Provide a transfer agent and
registrar for all Registrable Securities registered pursuant hereunder and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration.

 

(i)            Use its best efforts to
furnish, at the request of any Holder requesting registration of Registrable
Securities pursuant to this Section 1, on the date that such Registrable
Securities are delivered to the underwriters for sale in connection with a
registration pursuant to this Section 1, if such securities are being sold
through underwriters, or if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering and reasonably satisfactory
to the Holders of a majority of the Registrable Securities being registered,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.

 

1.6           Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder’s
Registrable Securities. The Company shall have no obligation with respect to
any registration requested pursuant to Section 1.2 or Section 1.4 of
this Agreement if, as a result of the application of the preceding sentence,
the number of shares or the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not equal or
exceed the number of shares or the anticipated aggregate offering price
required to originally trigger the Company’s obligation to initiate such
registration as specified in subsection 1.2(a) or subsection 1.4(b)(2),
whichever is applicable, provided, however, if other Holders request inclusion
of such number of additional Registrable Securities in such registration that
would result in the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration equaling
or exceeding the number of shares or the anticipated aggregate offering price
required to originally trigger the Company’s obligation to initiate such
registration specified in subsection 1.2(a) or subsection 1.4(b)(2),
whichever is applicable, the Company shall be obligated to proceed with such
registration.

 

8

 

1.7           Expenses of Registration.

 

(a)           Demand Registration.  All expenses other than underwriting discounts
and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers’ and accounting fees,
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them with the
approval of the Company, which approval shall not be unreasonably withheld,
shall be borne by the Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 1.2
if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all participating Holders shall bear such expenses pro rata based on the
number of Registrable Securities that were to be included in the withdrawn
registration), unless the Holders of a majority of the Registrable Securities
agree to forfeit their right to one demand registration pursuant to Section 1.2;
provided further, however, that if at the time of such withdrawal, the Holders (i) have
learned of a material adverse change in the condition, business, or prospects
of the Company that was not known to the Holders at the time of their request
and (ii) have withdrawn the request with reasonable promptness following
disclosure by the Company of such material adverse change, then the Holders
shall not be required to pay any of such expenses and shall not forfeit their
rights pursuant to Section 1.2.

 

(b)           Company Registration.  All expenses other than underwriting discounts
and commissions incurred in connection with registrations, filings or
qualifications of Registrable Securities pursuant to Section 1.3 for each
Holder (which right may be assigned as provided in Section 1.12),
including (without limitation) all registration, filing, and qualification
fees, printers’ and accounting fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the
selling Holder or Holders selected by them with the approval of the Company,
which approval shall not be unreasonably withheld, shall be borne by the
Company.

 

(c)           Registration on Form S-3.  All expenses incurred in connection with a
registration requested pursuant to Section 1.4 (exclusive of any
underwriters’ discounts or commissions associated with Registrable Securities),
including (without limitation) all registration, filing, qualification,
printers’ and accounting fees and the reasonable fees and disbursements of one
counsel for the selling Holder or Holders selected by them with the approval of
the Company, which approval shall not be unreasonably withheld, shall be borne
by the Company.

 

1.8           Underwriting Requirements.  In connection with any offering involving  an underwriting of shares of the Company’s
capital stock, the Company shall not be required under Section 1.3 to
include any of the Holders’ securities in such underwriting unless they accept
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering

 

9

 

only
that number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not jeopardize the success
of the offering (the securities so included to be apportioned pro rata among
the selling stockholders according to the total amount of securities entitled
to be included therein owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by such selling stockholders) but in
no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below 25% of the total amount of securities
included in such offering, unless such offering is the initial public offering of
the Company’s securities, in which case, the selling stockholders may be
excluded if the underwriters make the determination described above and no
other stockholder’s securities are included or (ii) any securities held by
a Founder be included if any securities held by any selling Holder are
excluded. Further, in no event shall any Registrable Securities be excluded
from such offering unless all other stockholders’ securities are also excluded.
For purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall
be deemed to be a single “selling
stockholder,” and any pro-rata reduction with respect to such
“selling stockholder” shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such “selling stockholder,” as defined in this sentence.

 

1.9           Delay of Registration.  No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.

 

1.10         Indemnification.  In the event any Registrable Securities are
included in a registration statement under this Section 1:

 

(a)           To the extent permitted by
law, the Company will indemnify and hold harmless each Holder, its partners,
officers, directors, legal counsel, accountants, any underwriter (as defined in
the Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a “Violation”): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities
law; and the Company will pay to each such Holder, underwriter, controlling
person or other aforementioned person as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any

 

10

 

such
loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable to any Holder, underwriter, controlling person or other
aforementioned person for any such loss, claim, damage, liability, or action to
the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Holder, underwriter,
controlling person or other aforementioned person.

 

(b)           To the extent permitted by
law, each selling Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers who has signed the registration statement,
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter, legal counsel and accountants for the Company
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 1.10(b), in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided, that
in no event shall any indemnity under this subsection 1.10(b) exceed the
net proceeds from the offering received by such Holder, except in the case of
willful fraud by such Holder.

 

(c)           Promptly after receipt by an
indemnified party under this Section 1.10 of notice of the commencement of
any action (including any governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 1.10, deliver to the indemnifying party a written notice of
the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties which
may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the reasonable fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission so to deliver
written

 

11

 

notice
to the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 1.10.

 

(d)           If the indemnification
provided for in this Section 1.10 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any
loss, liability, claim, damage or expense referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations; provided,
that in no event shall any contribution by a Holder under this Subsection 1.10(d) exceed
the net proceeds from the offering received by such Holder, except in the case
of willful fraud by such Holder. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties’ relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.

 

(e)           Notwithstanding the foregoing,
to the extent that the provisions on indemnification and contribution contained
in the underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the provisions
in the underwriting agreement shall control.

 

(f)            The obligations of the
Company and Holders under this Section 1.10 shall survive the completion
of any offering of Registrable Securities in a registration statement under
this Section 1, and otherwise.

 

1.11         Reports Under the Exchange Act.  With a view to making
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees
to:

 

(a)           make and keep public
information available, as those terms are understood and defined in SEC Rule 144,
at all times after 90 days after the effective date of the first registration
statement filed by the Company for the offering of its securities to the
general public so long as the Company remains subject to the periodic reporting
requirements under Sections 13 or 15(d) of the Exchange Act;

 

(b)           take such action, including
the voluntary registration of its Common Stock under Section 12 of the
Exchange Act, as is necessary to enable the Holders to utilize Form S-3
for the sale of their Registrable Securities, such action to be taken as soon
as practicable after the end of the fiscal year in which the first registration
statement filed by the Company for the offering of its securities to the
general public is declared effective;

 

12

 

(c)           file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and

 

(d)           furnish to any Holder, so
long as the Holder owns any Registrable Securities, forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of SEC Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company), the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC which permits the selling of any such securities without
registration or pursuant to such form.

 

1.12         Assignment
of Registration Rights.  The rights to cause the Company to register
Registrable Securities pursuant to this Section 1 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee (i) who,
after such transfer or assignment, holds at least 2% of the Registrable
Securities, (ii) that is a subsidiary, parent, partner, limited partner,
retired partner, member, retired member or stockholder of a Holder, (iii) that
is an affiliated fund or entity of the Holder, which means with respect to a
limited liability company or a limited liability partnership, a fund or entity
managed by the same manager or managing member or general partner or management
company or by an entity controlling, controlled by, or under common control
with such manager or managing member or general partner or management company
(such a fund or entity, an “Affiliated Fund”), (iv) who is a
Holder’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law (such a relation, a Holder’s “Immediate
Family Member”, which term shall include adoptive relationships), or (v) that
is a trust for the benefit of an individual Holder or such Holder’s Immediate
Family Member, provided the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further,
that such assignment shall be effective only if the transferee agrees to be
bound by this Agreement and immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Securities Act. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of (x) a partnership who are partners or retired
partners of such partnership or (y) a limited liability company who are
members or retired members of such limited liability company (including
Immediate Family Members of such partners or members who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership or limited liability company; provided that all
assignees and transferees who would not qualify individually for assignment of
registration rights shall have a single attorney-in-fact for the purpose of
exercising any rights, receiving notices or taking any action under Section 1.

 

1.13         Limitations
on Subsequent Registration Rights.  From and after the date of this Agreement, the
Company shall not, without the prior written consent of the Holders of a
majority of the outstanding Registrable Securities, enter into any agreement
(other than this

 

13

 

Agreement)
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 1.2, 1.3 or 1.4 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within 120 days of the effective date of any registration
effected pursuant to Section 1.2.

 

1.14         Lock-Up Agreement.

 

(a)           Lock-Up Period; Agreement.  In connection with the initial public offering
of the Company’s securities and upon request of the Company or the underwriters
managing such offering of the Company’s securities, each Holder agrees not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any securities of the Company, however or whenever
acquired (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 180 days) from the effective date of such
registration as may be requested by the Company or such managing underwriters
and to execute an agreement reflecting the foregoing as may be requested by the
underwriters at the time of the Company’s initial public offering.

 

(b)           Limitations.  The obligations described in Section 1.14(a) shall
apply only if all officers and directors of the Company, all one-percent
securityholders and all other persons with registration rights (whether or not
pursuant to this Agreement) enter into similar agreements, and shall not apply
to a registration relating solely to employee benefit plans, or to a
registration relating solely to a transaction pursuant to Rule 145 under
the Securities Act.

 

(c)           Stop-Transfer Instructions.  In order to enforce the foregoing covenants,
the Company may impose stop-transfer instructions with respect to the
securities of each Holder (and the securities of every other person subject to
the restrictions in Section 1.14(a)).

 

(d)           Transferees Bound.  Each Holder agrees that prior to the Company’s
initial public offering it will not transfer securities of the Company unless
each transferee agrees in writing to be bound by all of the provisions of this Section 1.14.

 

1.15         Termination of Registration Rights.  No Holder shall be entitled to exercise any
right provided for in this Section 1 after the earlier of (i) 5 years
following the consummation of a Qualified IPO or (ii) such time as Rule 144
or another similar exemption under the Securities Act is available for the sale
of all of such Holder’s shares during a three-month period without
registration.

 

14

 

2.             Covenants
of the Company.

 

2.1           Delivery
of Financial Statements.  The Company shall deliver to (i) each Holder
of at least 750,000 (subject to adjustments for stock splits, stock dividends,
reclassifications or the like) shares of Registrable Securities (except for a
Major Investor reasonably deemed by the Company to be a competitor of the
Company) and (ii) Silicon Valley BancVentures, L.P., or its affiliates (“SVBV”),
for so long as SVBV continues to hold at least 80% of the Registrable
Securities originally purchased by SVBV:

 

(a)           as soon as practicable, but in any event within 120 days after the end of
each fiscal year of the Company occurring after the date hereof, an income
statement for such fiscal year, a balance sheet of the Company and statement of
stockholders’ equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles (“GAAP”),
and audited and certified by an independent public accounting firm of
nationally recognized standing selected by the Company;

 

(b)           as soon as practicable, but in any event within 30 days after the end of
each of the first three quarters of each fiscal year of the Company, an
unaudited profit or loss statement, a statement of cash flows for such fiscal
quarter and an unaudited balance sheet as of the end of such fiscal quarter;

 

(c)           within 30 days of the end of each month, an unaudited income statement
and a statement of cash flows and balance sheet for and as of the end of such
month, in reasonable detail;

 

(d)           as soon as practicable, but in any event 30 days prior to the end of each
fiscal year, a budget and business plan for the next fiscal year, prepared on a
monthly basis, and, as soon as prepared, any other budgets or revised budgets
prepared by the Company; and

 

(e)           with respect to the financial statements called for in subsections (b) and
(c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with
prior practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment, provided that the foregoing shall not restrict the right of the
Company to change its accounting principles consistent with GAAP, if the Board
determines that it is in the best interest of the Company to do so.

 

2.2           Inspection.  The Company shall permit each
Major Investor (except for a Major Investor reasonably deemed by the Company to
be a competitor of the Company), at such Major Investor’s expense, to visit and
inspect the Company’s properties, to examine its books of account and records and
to discuss the Company’s affairs, finances and accounts with its officers, all
at such reasonable times as may be requested by the Major Investor;  provided, however, that

 

15

 

the Company shall not be obligated pursuant to this Section 2.2
to provide access to any information which it reasonably considers to be a
trade secret or similar confidential information.

 

2.3           Right
of First Offer.  Subject to the terms and conditions specified
in this Section 2.3, the Company hereby grants to each Major Investor a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). For purposes of this Section 2.3, Major Investor
includes (i) any general partners, managing members and affiliates of a
Major Investor, including Affiliated Funds, and (ii) SVBV, for so long as
SVBV continues to hold at least 80% of the Registrable Securities originally
purchased by SVBV. A Major Investor who chooses to exercise the right of first
offer may designate as purchasers under such right itself or its partners or
affiliates, including Affiliated Funds, in such proportions as it deems
appropriate.

 

Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock (“Shares”), the Company shall first make an offering of
such Shares to each Major Investor in accordance with the following provisions:

 

(a)           The Company shall deliver a notice (the “RFO Notice”) to the Major
Investors stating (i) its bona fide intention to offer such Shares, (ii) the
number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.

 

(b)           Within 20 calendar days after delivery of the RFO Notice, the Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the RFO Notice, up to that portion of such Shares (“Pro Rata
Portion”) which equals the proportion that the number of shares of Common
Stock issued and held, or issuable upon conversion and exercise of all
convertible or exercisable securities then held, by such Major Investor bears
to the total number of shares of Common Stock then outstanding (assuming full
conversion and exercise of all outstanding convertible or exercisable
securities). Such purchase shall be completed at the same closing as that of
any third party purchasers or at an additional closing thereunder. The Company
shall promptly, in writing, inform each Major Investor that purchases all the
shares available to it (each, a “Fully-Exercising Investor”) of any
other Major Investor’s failure to do likewise. During the 10-day period commencing after receipt
of such information, each Fully-Exercising Investor shall be entitled to obtain
that portion of the Shares for which Major Investors were entitled to subscribe
but which were not subscribed for by the Major Investors that is equal to the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Fully-Exercising Investor bears to the total
number of shares of Common Stock then outstanding (assuming full conversion and
exercise of all outstanding convertible or exercisable securities).

 

(c)           The Company may, during the 45-day period following the expiration of the
period provided in subsection 2.3(b) hereof, offer the remaining
unsubscribed portion of the Shares to any person or persons at a price not less
than, and upon terms no more favorable to the offeree than those specified in
the RFO Notice. If the Company does not enter

 

16

 

into an agreement for the sale of the Shares
within such period, or if such agreement is not consummated within 60 days of
the execution thereof, the right provided hereunder shall be deemed to be
revived and such Shares shall not be offered unless first reoffered to the
Major Investors in accordance herewith.

 

(d)           The right of first offer in
this Section 2.3 shall not be applicable to (i) Common Stock issued
pursuant to stock dividends, stock splits or similar transactions; (ii) shares
of Common Stock issued or issuable to employees, consultants or directors of
the Company for the primary purpose of soliciting their services directly or
pursuant to a stock option plan or restricted stock plan approved by the Board;
(iii) capital stock, or options or warrants to purchase capital stock,
issued to financial institutions or lessors in connection with commercial credit
arrangements, equipment financings, commercial property lease transactions or
similar transactions; provided such issuances are for other than primarily
equity financing purposes; (iv) shares of Common Stock or Preferred Stock
issuable upon exercise of warrants (y) outstanding as of the date hereof
or (z) which the Company is contractually obligated to issue as of the
date hereof; (v) capital stock, or warrants or options to purchase capital
stock, issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board; (vi) shares of
Series D Preferred Stock issued or sold pursuant to the Purchase Agreement
and shares of Common Stock issuable or issued upon conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock; (vii) shares of Common Stock issuable or
issued in a public offering prior to or in connection with which all
outstanding shares of Preferred Stock will be converted to Common Stock; (viii) shares
of Common Stock issuable or issued with the affirmative vote of a majority of
the then outstanding Resistrable Securities set forth in Section 1.1(g)(i),
voting together as a single class and not as separate series, on an as-if converted
to Common Stock basis (provided that Major Investors holding such Registrable
Securities consent to the waiver of the right of first offer to such issuance
(voting together as a single class and not as separate series, on an as-if
converted to Common Stock basis)); and (ix) capital stock issued or
issuable to an entity as a component of any business relationship with such
entity for the purpose of (A) joint venture, technology licensing or
development activities, (B) distribution, supply or manufacture of the
Company’s products or services or (C) any other arrangements involving
corporate partners that are primarily for purposes other than raising capital,
the terms of which business relationship with such entity are approved by the
Board. In addition to the foregoing, the right of first offer in this Section 2.3
shall not be applicable with respect to any Major Investor and any subsequent
securities issuance, if (i) at the time of such subsequent securities
issuance, the Major Investor is not an “accredited investor,” as that term is
then defined in Rule 501(a) under the Securities Act, and (ii) such
subsequent securities issuance is otherwise being offered only to accredited
investors.

 

2.4           Confidential Information and
Invention Assignment Agreements.  The Company shall require all employees and
consultants with access to confidential information to execute and deliver a
Confidential Information and Invention Assignment Agreement in substantially
the form approved by the Board.

 

2.5           Employee Agreements.  Unless approved by the Board, all future employees
of the Company who shall purchase, or receive options to purchase, shares of
the

 

17

 

Company’s
Common Stock following the date hereof shall be required to execute stock
purchase or option agreements providing for (i) vesting of shares over a
four-year period with the first 25% of such shares vesting following twelve
(12) months of continued employment or services, and the remaining shares
vesting in equal monthly installments over the following 36 months thereafter
and (ii) a 180-day lockup period in connection with the Company’s initial
public offering. The Company shall retain a right of first refusal on transfers
until the Company’s initial public offering and the right to repurchase
unvested shares at cost.

 

2.6           Termination of Covenants.

 

(a)           The covenants set forth in
Sections 2.1 through Section 2.5 shall terminate as to each Holder and be
of no further force or effect immediately prior to the consummation of a
Qualified IPO.

 

(b)           The covenants set forth in
Sections 2.1 and 2.2 shall terminate as to each Holder and be of no further
force or effect when the Company first becomes subject to the periodic
reporting requirements of Sections 13 or 15(d) of the Exchange Act, if
this occurs earlier than the event described in Section 2.6(a) above.

 

3.              Miscellaneous.

 

3.1            Entire
Agreement. This Agreement constitutes
the entire agreement between the parties hereto pertaining to the subject
matter hereof, and any and all other written or oral agreements relating to the
subject matter hereof existing between the parties hereto are expressly
canceled.

 

3.2           Successors and Assigns.  Except as otherwise provided in this Agreement,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties
(including transferees of any of the Company’s Preferred Stock or any Common
Stock issued upon conversion thereof). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

3.3            Amendments
and Waivers.  Any term of this Agreement may be amended or
waived only with the written consent of the Company and the holders of a
majority of the Registrable Securities then outstanding, not including
the Founders’ Stock, SVB Stock or Best Buy Stock; provided, however,
that if such amendment or waiver has the effect of affecting the Founders’
Stock, SVB Stock or Best Buy Stock (i) in a manner different than
securities issued to the Investors and (ii) in a manner adverse to the
interests of the holders of the Founders’ Stock, SVB Stock or Best Buy Stock,
as applicable, then such amendment or waiver shall require the consent of the
holder or holders of a majority of the Founders’ Stock, SVB Stock or Best Buy
Stock, as applicable, provided, further, that any amendment or
waiver that changes the rights or obligations of one or more Investors under
this Agreement so as to affect them adversely in a manner different than other
similarly situated Investors shall require the consent of the Investors that
hold a majority of the Registrable Securities held by all of such adversely
affected Investors, voting as a separate class. Notwithstanding the foregoing,
this Agreement may be amended with

 

18

 

only
the written consent of the Company for the sole purpose of including additional
purchasers of Series D Preferred Stock as “Investors” and “Holders.” Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each party to the Agreement, whether or not such party has signed such
amendment or waiver, each future holder of all such Registrable Securities, and
the Company.

 

3.4           Notices.  Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day, (iii) five (5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
respective parties at the addresses set forth on the signature pages or an
exhibit attached hereto, and if to the Company, with a copy to Heller Ehrman
White & McAuliffe, LLP, 2775 Sand Hill Road, Menlo Park, CA 94025, Attn:
Glen R. Van Ligten.

 

3.5           Severability.  If one or more provisions
of this Agreement are held to be unenforceable under applicable law, the
parties agree to renegotiate such provision in good faith. In the event that
the parties cannot reach a mutually agreeable and enforceable replacement for
such provision, then (a) such provision shall be excluded from this
Agreement, (b) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (c) the balance of the Agreement shall
be enforceable in accordance with its terms.

 

3.6           Governing Law.  This Agreement and all acts and transactions
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of California, without giving effect to principles of conflicts
of laws.

 

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

 

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

 

3.9           Aggregation of Stock.  All shares of the Preferred Stock held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.

 

3.10         Revocability of Certain SVBV
Rights.  The Company may, upon five (5) business
days prior written notice to SVBV, revoke any and all rights granted to SVBV
pursuant to Section 2.1 (Delivery of Financial Statements) and Section 2.3
(Right of First Offer) if the Company determines, in its sole discretion, that
SVBV has made an investment in any entity that the Company reasonably deems to
be competitive with the Company’s business. SVBV hereby warrants that it shall
notify the Company in writing of any such investment that may reasonably

 

19

 

be
deemed to be competitive to the Company’s business within five (5) business
days of the closing of such investment.

 

[Signature
Pages Follow]

 

20

 

The
parties have executed this Third Amended and Restated Investors’ Rights
Agreement as of the date first above written.

 

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  GAMEFLY,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David Hodess

  
	
   

  	
   

  	
  David
  Hodess

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  3000
  Ocean Park Blvd.

  
	
   

  	
   

  	
  Suite 2014

  
	
   

  	
   

  	
  Santa
  Monica, CA 90405

  
	
   

  	
  Facsimile:

  	
  (310)
  664-6788

  
				

 

SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

INVESTORS RIGHTS AGREEMENT

GAMEFLY, INC.

 

 

The
parties have executed this Third Amended and Restated Investors’ Rights
Agreement as of the date first above written.

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS PARTNERSHIP ACCOUNT 2000/2001, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Partnership GP

  
	
   

  	
  2000/2001,
  L.P., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  LB
  I Group Inc., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS OFFSHORE PARTNERSHIP ACCOUNT 2000/2001, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Offshore Partnership GP 

  
	
   

  	
  2000/2001,
  L.P., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Offshore Partners Ltd., its  

  
	
   

  	
  General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  

 

SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

INVESTORS RIGHTS AGREEMENT

GAMEFLY, INC.

 

 

The
parties have executed this Third Amended and Restated Investors’ Rights
Agreement as of the date first above written.

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS VENTURE CAPITAL

  2003 PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Venture Associates 2003 

  
	
   

  	
  LLC,
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  LB
  I Group Inc., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS P.A. LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS VENTURE CAPITAL

  PARTNERS II, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Venture Associates II 

  
	
   

  	
  LLC,
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  

 

SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

INVESTORS RIGHTS AGREEMENT

GAMEFLY, INC.

 

 

The
parties have executed this Third Amended and Restated Investors’ Rights
Agreement as of the date first above written.

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS VENTURE PARTNERS

  2003-C, L.P.

  
	
   

  	
   

  
	
   

  	
  By:
  Lehman Brothers Venture GP Partnership 2003

  L.P., its General Partner

  
	
   

  	
   

  
	
   

  	
  By:
  Lehman Brothers Venture Associates 2003 LLC,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS VENTURE PARTNERS

  2003-P, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  Lehman Brothers Venture GP Partnership 2003

  L.P., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  Lehman Brothers Venture Associates 2003 LLC,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  

 

SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

INVESTORS RIGHTS AGREEMENT

GAMEFLY, INC.

 

 

The parties have executed this Third Amended
and Restated Investors’ Rights Agreement as of the date first above written.

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
  SEQUOIA
  CAPITAL IX

  
	
   

  	
  SEQUOIA
  CAPITAL ENTREPRENEURS

  ANNEX FUND

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SC
  IX.I Management, LLC

  
	
   

  	
   

  	
  A
  Delaware Limited Liability Company

  
	
   

  	
   

  	
  General
  Partner of Each

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mark Kvamme

  
	
   

  	
   

  	
  Managing
  Member

  
				

 

SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

INVESTORS RIGHTS AGREEMENT

GAMEFLY, INC.

 

 

The parties have executed this Third Amended and Restated Investors’
Rights Agreement as of the date first above written.

 

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SEQUOIA
  CAPITAL X

  
	
   

  	
  SEQUOIA
  TECHNOLOGY PARTNERS X

  
	
   

  	
  SEQUOIA
  CAPITAL X PRINCIPALS FUND

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SC
  X Management, L.L.C

  
	
   

  	
   

  	
  A
  Delaware Limited Liability Company

  General Partner of Each

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mark Kvamme

  
	
   

  	
   

  	
  Managing
  Member

  
				

 

SIGNATURE
PAGE TO THIRD AMENDED AND RESTATED

INVESTORS
RIGHTS AGREEMENT

GAMEFLY,
INC.

 

 

The
parties have executed this Third Amended and Restated Investors’ Rights
Agreement as of the date first above written.

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
  SILICON VALLEY
  BANCVENTURES, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  SILICON
  VALLEY BANCVENTURES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Douglas Hamilton

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  (print)

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Investment
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  3000
  Sand Hill Road

  
	
   

  	
   

  	
  Building
  1, Suite 240

  
	
   

  	
   

  	
  Menlo
  Park, CA 94025

  
	
   

  	
  Facsimile:

  	
  650-233-9061

  

 

SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

INVESTORS RIGHTS AGREEMENT

GAMEFLY, INC.

 

 

The
parties have executed this Third Amended and Restated Investors’ Rights
Agreement as of the date first above written.

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HEWM/VLG
  INVESTMENTS LLC

  
	
   

  	
  By:

  	
  Heller
  Ehrman White & McAuliffe LLP

  
	
   

  	
   

  	
  Manager

  
	
   

  	
   

  
	
   

  	
  /s/
  Michael A. Morrissey

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Michael
  A. Morrissey

  
	
   

  	
  Authorized
  Signatory

  
	
   

  	
  Print
  Name and Title (if entity)

  

 

SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

INVESTORS RIGHTS AGREEMENT

GAMEFLY, INC.

 

 

The
parties have executed this Third Amended and Restated Investors’ Rights
Agreement as of the date first above written.

 

	
   

  	
  INVESTORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GLEN
  R. VAN LIGTEN

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Glen R. Van Ligten

  
	
   

  	
  Signature

  

 

SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

INVESTORS RIGHTS AGREEMENT

GAMEFLY, INC.

 

 

The
parties have executed this Third Amended and Restated Investors’ Rights
Agreement as of the date first above written.

 

	
   

  	
  FOUNDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Edward C. Lenk

  
	
   

  	
  Edward
  C. Lenk

  
	
   

  	
   

  

 

	
   

  	
  Address:

  	
  112
  Amber Valley Drive

  
	
   

  	
   

  	
  Orinda,
  CA 94563

  
	
   

  	
  Facsimile:

  	
  415-427-0275

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Sean Spector

  
	
   

  	
  Sean
  Spector

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  5870
  West Jefferson Blvd.

  
	
   

  	
   

  	
  Suite J

  
	
   

  	
   

  	
  Los
  Angeles, CA 90016

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Jung Suh

  
	
   

  	
  Jung
  Suh

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  5870
  West Jefferson Blvd.

  
	
   

  	
   

  	
  Suite J

  
	
   

  	
   

  	
  Los
  Angeles, CA 90016

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  David Hodess

  
	
   

  	
  David
  Hodess

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  5870
  West Jefferson Blvd.

  
	
   

  	
   

  	
  Suite J

  
	
   

  	
   

  	
  Los
  Angeles, CA 90016

  

 

SIGNATURE PAGE TO
THIRD AMENDED AND RESTATED

INVESTORS RIGHTS AGREEMENT

GAMEFLY, INC.

 

 

EXHIBIT
A

 

SERIES
A HOLDERS

 

	
  Name/Address/Fax No.

  	
   

  	
  No. of
  Shares of

  Series A Preferred

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia Capital X

  	
   

  	
  1,379,000

  	
   

  
	
  3000 Sand Hill Road

  	
   

  	
   

  	
   

  
	
  Bldg. 4, Suite 180

  	
   

  	
   

  	
   

  
	
  Menlo
  Park, CA 94025

  	
   

  	
   

  	
   

  
	
  Attn:
  Michael Moritz

  	
   

  	
   

  	
   

  
	
  Telephone:
  650/854 3927

  	
   

  	
   

  	
   

  
	
  Fax:
  650/854 2977

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia
  Technology Partners X

  	
   

  	
  204,400

  	
   

  
	
  3000
  Sand Hill Road

  	
   

  	
   

  	
   

  
	
  Bldg.
  4, Suite 180

  	
   

  	
   

  	
   

  
	
  Menlo
  Park, CA 94025

  	
   

  	
   

  	
   

  
	
  Attn:
  Michael Moritz

  	
   

  	
   

  	
   

  
	
  Telephone:
  650/854 3927

  	
   

  	
   

  	
   

  
	
  Fax:
  650/854 2977

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia
  Capital X Principals Fund

  	
   

  	
  166,600

  	
   

  
	
  3000
  Sand Hill Road

  	
   

  	
   

  	
   

  
	
  Bldg.
  4, Suite 180

  	
   

  	
   

  	
   

  
	
  Menlo
  Park, CA 94025

  	
   

  	
   

  	
   

  
	
  Attn:
  Michael Moritz

  	
   

  	
   

  	
   

  
	
  Telephone:
  650/854 3927

  	
   

  	
   

  	
   

  
	
  Fax:
  650/854 2977

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Geoffrey P.M.
  Goodman

  	
   

  	
  25,000

  	
   

  
	
  P.O. Box
  675887

  	
   

  	
   

  	
   

  
	
  Rancho
  Santa Fe, CA 92067

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Michael
  Joe

  	
   

  	
  25,000

  	
   

  
	
  12
  Cardinal Drive

  	
   

  	
   

  	
   

  
	
  Westwood,
  MA 02090

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Wesley
  Hein

  	
   

  	
  25,000

  	
   

  
	
  779
  Latimer Road

  	
   

  	
   

  	
   

  
	
  Santa
  Monica, CA 90402

  	
   

  	
   

  	
   

  

 

 

	
  Name/Address/Fax No.

  	
   

  	
  No. of
  Shares of

  Series A Preferred

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Stewart
  M. Kim

  	
   

  	
  25,000

  	
   

  
	
  11111
  Santa Monica Blvd. #910

  	
   

  	
   

  	
   

  
	
  Los
  Angeles, CA 90025

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DF
  Associates – GameFly

  	
   

  	
  50,000

  	
   

  
	
  21515
  Hawthorne Blvd.

  	
   

  	
   

  	
   

  
	
  Suite 1200

  	
   

  	
   

  	
   

  
	
  Torrance,
  CA 90503

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Frank
  Han

  	
   

  	
  25,000

  	
   

  
	
  63
  Fountainhead Circle

  	
   

  	
   

  	
   

  
	
  Henderson,
  NV 89052

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Marc
  Kozin

  	
   

  	
  25,000

  	
   

  
	
  40
  Robinson Road

  	
   

  	
   

  	
   

  
	
  Lexington,
  MA 02420

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  VLG
  Investments LLC

  	
   

  	
  29,500

  	
   

  
	
  c/o
  Venture Law Group

  	
   

  	
   

  	
   

  
	
  2775
  Sand Hill Road

  	
   

  	
   

  	
   

  
	
  Menlo
  Park, CA 94025

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Trimus
  II Partners

  	
   

  	
  20,500

  	
   

  
	
  1620
  26th Street

  	
   

  	
   

  	
   

  
	
  South
  Tower – Suite 300

  	
   

  	
   

  	
   

  
	
  Santa
  Monica, CA 90404

  	
   

  	
   

  	
   

  

 

 

EXHIBIT
B

 

SERIES B HOLDERS

 

	
  Name/Address/Fax No.

  	
   

  	
  No. of
  Shares of

  Series B Preferred

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia
  Capital X

  	
   

  	
  2,594,880

  	
   

  
	
  3000
  Sand Hill Road

  	
   

  	
   

  	
   

  
	
  Bldg.
  4, Suite 180

  	
   

  	
   

  	
   

  
	
  Menlo
  Park, CA 94025

  	
   

  	
   

  	
   

  
	
  Attn:
  Michael Moritz

  	
   

  	
   

  	
   

  
	
  Telephone:
  650/854 3927

  	
   

  	
   

  	
   

  
	
  Fax:
  650/854 2977

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia
  Technology Partners X

  	
   

  	
  373,760

  	
   

  
	
  3000
  Sand Hill Road

  	
   

  	
   

  	
   

  
	
  Bldg.
  4, Suite 180

  	
   

  	
   

  	
   

  
	
  Menlo
  Park, CA 94025

  	
   

  	
   

  	
   

  
	
  Attn:
  Michael Moritz

  	
   

  	
   

  	
   

  
	
  Telephone:
  650/854 3927

  	
   

  	
   

  	
   

  
	
  Fax:
  650/854 2977

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia
  Capital X Principals Fund

  	
   

  	
  231,360

  	
   

  
	
  3000
  Sand Hill Road

  	
   

  	
   

  	
   

  
	
  Bldg.
  4, Suite 180

  	
   

  	
   

  	
   

  
	
  Menlo
  Park, CA 94025

  	
   

  	
   

  	
   

  
	
  Attn:
  Michael Moritz

  	
   

  	
   

  	
   

  
	
  Telephone:
  650/854 3927

  	
   

  	
   

  	
   

  
	
  Fax:
  650/854 2977

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Peter
  Thiel

  	
   

  	
  200,000

  	
   

  
	
  c/o
  Clarium Capital Management, LLC

  	
   

  	
   

  	
   

  
	
  555
  California Street

  	
   

  	
   

  	
   

  
	
  Suite 4360

  	
   

  	
   

  	
   

  
	
  San
  Francisco, CA 94104

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Silicon
  Valley Bancventures, L.P.

  	
   

  	
  200,000

  	
   

  
	
  Building
  1, Suite 240

  	
   

  	
   

  	
   

  
	
  3000
  Sand Hill Road

  	
   

  	
   

  	
   

  
	
  Menlo
  Park, CA 94025

  	
   

  	
   

  	
   

  

 

 

EXHIBIT C

 

SERIES C HOLDERS

 

	
  Name/Address/Fax No.

  	
   

  	
  No. of
  Shares of

  Series C Preferred

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia Capital X

  3000 Sand Hill Road

  Bldg. 4, Suite 180

  Menlo Park, CA 94025

  Attn: Michael Moritz

  Telephone: 650/854 3927

  Fax: 650/854 2977

  	
   

  	
  612,088

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia Technology Partners X

  3000 Sand Hill Road

  Bldg. 4, Suite 180

  Menlo Park, CA 94025

  Attn: Michael Moritz

  Telephone: 650/854 3927

  Fax: 650/854 2977

  	
   

  	
  89,053

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia Capital X Principals Fund

  3000 Sand Hill Road

  Bldg. 4, Suite 180

  Menlo Park, CA 94025

  Attn: Michael Moritz

  Telephone: 650/854 3927

  Fax: 650/854 2977

  	
   

  	
  61,297

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia Capital IX.I Holdings, L.L.C.

  3000 Sand Hill Road

  Bldg. 4, Suite 180

  Menlo Park, CA 94025

  Attn: Michael Moritz

  Telephone: 650/854 3927

  Fax: 650/854 2977

  	
   

  	
  1,011,758

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Peter Thiel

  c/o Clarium Capital Management, LLC

  555 California Street

  Suite 4360

  San Francisco, CA 94104

  	
   

  	
  80,646

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Silicon Valley Bancventures, L.P.

  Building 1, Suite 240

  3000 Sand Hill Road

  Menlo Park, CA 94025

  	
   

  	
  80,646

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Marc Kozin

  40 Robinson Road

  Lexington, MA 02420

  	
   

  	
  8,065

  	
   

  

 

 

	
  Wesley Hein

  779 Latimer Road

  Santa Monica, CA 90402

  	
   

  	
  8,065

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Geoffrey P.M. Goodman

  P.O. Box 675887

  Rancho Santa Fe, CA 92067

  	
   

  	
  8,065

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Stewart M. Kim

  11111 Santa Monica Blvd. #910

  Los Angeles, CA 90025

  	
   

  	
  8,065

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Michael Joe

  12 Cardinal Drive

  Westwood, MA 02090

  	
   

  	
  8,065

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Trimus II Partners

  c/o Stephen Paul

  1620 26th Street

  South Tower – Suite 300

  Santa Monica, CA 90404

  	
   

  	
  8,065

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Michael D. Robertson and Kimberly A. Robertson

  Trustees of the Robertson Family Trust
  dated 8/11/2003

  519 Aliso Avenue

  Newport Beach, CA 92663

  	
   

  	
  8,065

  	
   

  

 

2

 

EXHIBIT D

 

SERIES D HOLDERS

 

	
  Name/Address/Fax No.

  	
   

  	
  No. of
  Shares of

  Series D Preferred

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lehman Brothers Venture Capital Painters II, L.P.

  c/o Lehman Brothers
  Venture Capital

  155 Linfield Drive

  Menlo Park, CA
  94025

  	
   

  	
  166,694

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lehman Brothers P.A.
  LLC

  c/o Lehman Brothers
  Venture Capital

  155 Linfield Drive

  Menlo Park, CA
  94025

  	
   

  	
  117,045

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lehman Brothers
  Partnership Account 2000/2001, L.P.

  c/o Lehman Brothers
  Venture Capital

  155 Linfield Drive

  Menlo Park, CA
  94025

  	
   

  	
  52,735

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lehman Brothers
  Offshore Partnership Account 2000/2001, L.P

  c/o Lehman Brothers
  Venture Capital

  155 Linfield Drive

  Menlo Park, CA
  94025

  	
   

  	
  13,677

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lehman Brothers Venture
  Partners 2003 - C LP

  c/o Lehman Brothers Venture Capital

  155 Linfield Drive

  Menlo Park, CA
  94025

  	
   

  	
  267,357

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lehman Brothers Venture
  Partners 2003 - P LP

  c/o Lehman Brothers Venture Capital

  155 Linfield Drive

  Menlo Park, CA
  94025

  	
   

  	
  278,614

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lehman Brothers Venture
  Capital 2003 Partnership

  c/o Lehman Brothers Venture Capital

  155 Linfield Drive

  Menlo Park, CA
  94025

  	
   

  	
  162,611

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia Capital X

  3000 Sand Hill Road

  Bldg. 4, Suite 180

  Menlo Park, CA 94025

  Attn: Michael Moritz

  Telephone: 650/854
  3927

  Fax: 650/854 2977

  	
   

  	
  633,593

  	
   

  

 

 

	
  Sequoia Technology Partners X

  3000 Sand Hill Road

  Bldg. 4, Suite 180

  Menlo Park, CA 94025

  Attn: Michael Moritz

  Telephone: 650/854 3927

  Fax: 650/854 2977

  	
   

  	
  91,261

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia Capital X Principals Fund

  3000 Sand Hill Road

  Bldg. 4, Suite 180

  Menlo Park, CA 94025

  Attn: Michael Moritz

  Telephone: 650/854 3927

  Fax: 650/854 2977

  	
   

  	
  56,491

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia Capital IX

  3000 Sand Hill Road

  Bldg. 4, Suite 180

  Menlo Park, CA 94025

  Attn: Michael Moritz

  Telephone: 650/854 3927

  Fax: 650/854 2977

  	
   

  	
  276,996

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Sequoia Capital Entrepreneurs Annex Fund

  3000 Sand Hill Road

  Bldg. 4, Suite 180

  Menlo Park, CA 94025

  Attn: Michael Moritz

  Telephone: 650/854 3927

  Fax: 650/854 2977

  	
   

  	
  26,861

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Silicon Valley Bancventures, L.P.

  Building 3, Suite 150

  3000 Sand Hill Road

  Menlo Park, CA 94025

  	
   

  	
  92,639

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  HEWM/VLG Investments LLC

  275 Middlefield Road

  Menlo Park, CA 94025

  Attn: Sylvia Kartika

  	
   

  	
  11,910

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Glen R. Van Ligten

  35 Hudson Street

  Redwood City, CA 94062

  	
   

  	
  1,323

  	
   

  

 

2

 

GAMEFLY, INC.

 

AMENDMENT TO THIRD AMENDED AND RESTATED INVESTORS’
RIGHTS

AGREEMENT

 

This Amendment to Third Amended and Restated Investors’
Rights Agreement (the “Amendment”) is made as of March 1, 2007,
between GameFly, Inc., a Delaware corporation (the “Company”), and the parties set forth on the signature pages hereto.

 

The Company, certain
investors and certain holders of Common Stock have entered into a Third Amended
and Restated Investors’ Rights Agreement dated November 15, 2004 (the “Rights
Agreement”). In connection with a debt financing with Silicon Valley Bank
the Company will issue a warrant (the “Warrant”) to Silicon Valley Bank
to purchase, upon the occurrence of certain conditions, shares of the Company’s Common Stock. As a
condition to the financing, the Company has agreed to grant Silicon Valley Bank
certain registration rights with respect to the shares of the Company’s Common
Stock issuable upon exercise of the Warrant (the “Warrant Stock”), and
certain Investors (as defined in the Rights Agreement) desire to amend the
Rights Agreement to include the Warrant Stock thereunder for certain limited
purposes.

 

Now, therefore, in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree, on behalf of themselves and on behalf
of all of the Investors (as such term is defined in the Rights Agreement), as
follows:

 

1.             Section 1.1(k) of the Rights Agreement shall
be amended in its entirety as follows:

 

“(k)         The term “SVB Stock” means (a) the
Series A Preferred Stock issuable to SVB upon exercise of that certain
Warrant to Purchase Stock, dated January 21, 2003, and (b) the Common
Stock issuanble to Silicon Valley Bank upon exercise of that certain Warrant to
Purchase Stock, dated March 1, 2007.”

 

2.             Silicon Valley Bank and any other holder of the Warrant
or the Common Stock issuable upon exercise thereof agree to be bound by the
obligations contained in the Rights Agreement, including without limitation the
“Lock-Up Agreement” contained in Section 1.14 of the Rights Agreement.

 

3.             The Rights Agreement as modified herein shall remain in
full force and effect as so modified.

 

[Signature Pages Follow]

 

 

The
parties have executed this Amendment to Third Amended and Restated Investors’
Rights Agreement as of the date first above written.

 

 

	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
  GAMEFLY,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  David Hodess

  
	
   

  	
  David
  Hodess, Chief Executive Officer

  

 

 

The parties have executed
this Amendment to Third Amended and Restated Investors’ Rights Agreement as of
the date first above written.

 

 

	
   

  	
  LEHMAN
  BROTHERS VENTURE PARTNERS 

  2003-C, L.P.

  
	
   

  	
   

  
	
   

  	
  By:
  Lehman Brothers Venture GP Partnership 2003 

  L.P., its General Partner

  
	
   

  	
   

  
	
   

  	
  By:
  Lehman Brothers Venture Associates 2003 LLC, 

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS VENTURE PARTNERS 

  2003-P, L.P.

  
	
   

  	
   

  
	
   

  	
  By:
  Lehman Brothers Venture GP Partnership 2003 

  L.P., its General Partner

  
	
   

  	
   

  
	
   

  	
  By: Lehman
  Brothers Venture Associates 2003 LLC, 

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  

 

 

The parties have executed
this Amendment to Third Amended and Restated Investors’ Rights Agreement as of
the date first above written.

 

 

	
   

  	
  LEHMAN
  BROTHERS VENTURE CAPITAL 

  2003 PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Venture Associates 2003 

  
	
   

  	
  LLC,
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  LB
  I Group Inc., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS P.A. LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LEHMAN BROTHERS VENTURE CAPITAL 

  PARTNERS II, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Venture Associates II 

  
	
   

  	
  LLC,
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing  Director

  

 

 

The parties have
executed this Amendment to Third Amended and Restated Investors’ Rights
Agreement as of the date first above written.

 

	
   

  	
  LEHMAN BROTHERS PARTNERSHIP 

  ACCOUNT 2000/2001, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Partnership GP 

  
	
   

  	
  2000/2001,
  L.P., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  LB
  I Group Inc., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LEHMAN BROTHERS OFFSHORE 

  PARTNERSHIP ACCOUNT 2000/2001, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Offshore Partnership GP 

  
	
   

  	
  2000/2001,
  L.P., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Lehman
  Brothers Offshore Partners Ltd., its 

  
	
   

  	
  General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tom
  Banahan

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing  Director

  

 

 

The
parties have executed this Amendment to Third Amended and Restated Investors’
Rights Agreement as of the date first above written.

 

 

	
   

  	
  SEQUOIA CAPITAL X

  
	
   

  	
  SEQUOIA TECHNOLOGY PARTNERS
  X

  
	
   

  	
  SEQUOIA CAPITAL X
  PRINCIPALS FUND

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SC X Management, L.L.C

  
	
   

  	
   

  	
  A Delaware Limited
  Liability Company

  
	
   

  	
   

  	
  General Partner of Each

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mark Kvamme

  
	
   

  	
   

  	
  Managing
  Member

  

 

 

The
parties have executed this Amendment to Third Amended and Restated Investors’
Rights Agreement as of the date first above written.

 

 

	
   

  	
  SEQUOIA CAPITAL IX

  
	
   

  	
  SEQUOIA CAPITAL
  ENTREPRENEURS

  ANNEX FUND

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SC IX.I Management, LLC

  
	
   

  	
   

  	
  A Delaware Limited
  Liability Company

  
	
   

  	
   

  	
  General Partner of Each

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mark Kvamme

  
	
   

  	
   

  	
  Managing
  MemberExhibit 4.3

 

WARRANT TO PURCHASE STOCK

 

THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF
ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE
OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
EXEMPT FROM REGISTRATION.

 

	
  Company:

  	
  GameFly, Inc.

  
	
  Number
  of Shares:

  	
  37,500

  
	
  Class of
  Stock:

  	
  Series A
  Preferred

  
	
  Warrant
  Price:

  	
  $1.00
  per share

  
	
  Issue
  Date:

  	
  January 21,
  2003

  
	
  Expiration
  Date:

  	
  The
  later to occur of (A) January 21, 2013 or (B) five
  (5) years after the closing of the initial public offering of the
  common stock of GameFly, Inc. (the “IPO”) effected pursuant to a
  Registration Statement on Form S-1 (or its successor) filed under
  the Securities Act of 1933, as amended (the “1933 Act”).

  

 

THIS
WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other good
and valuable consideration, SILICON VALLEY BANK (“Holder”) is entitled to
purchase the number of fully paid and nonassessable shares of the class of
securities (the “Shares”) of the company (the “Company”) at the Warrant Price,
all as set forth above and as adjusted pursuant to Article 2 of this
Warrant, subject to the provisions and upon the terms and conditions set forth
in this Warrant.

 

ARTICLE
1. EXERCISE.

 

1.1        Method of Exercise. Holder may
exercise this Warrant by delivering a duly executed Notice of
Exercise in substantially the form attached as Appendix 1 to the principal
office of the Company. Unless Holder
is exercising the conversion right set forth in Article 1.2,
Holder shall also deliver to the Company
a check, wire transfer (to an account designated by the
Company), or other from of payment acceptable to the Company
for the aggregate Warrant Price for the Shares being purchased.

 

1.2        Conversion
Right. In lieu of exercising this Warrant as
specified in Article 1.1, Holder may from time
to time convert this Warrant, in whole or in part, into a number of Shares determined by dividing (a) the aggregate fair market value of the Shares or other
securities otherwise issuable upon exercise of this Warrant minus the
aggregate Warrant Price of such Shares by (b) the fair market value of one
Share. The fair market value of the Shares shall be determined pursuant to Article 1.3.

 

1.3        Fair Market
Value. If the Company’s common stock is traded in a public market and the  shares are common stock, the fair market value
of each Share shall be the closing price of a Share reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company (or in
the instance where the Warrant is exercised immediately prior to the
effectiveness of the Company’s initial public offering, the “price to public”
per share price

 

 

specified
in the final prospectus relating to such offering). If the Company’s common
stock is traded in a public market and the Shares are preferred stock, the fair
market value of a Share shall be the closing price of a share of the Company’s
common stock reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company (or, in the instance where the Warrant is
exercised immediately prior to the effectiveness of the Company’s initial
public offering, the initial “price to public” per share price specified in the
final prospectus relating to such offering), in both cases, multiplied by the
number of shares of the Company’s common stock into which a Share is
convertible. If the Company’s common stock is not traded in a public market,
the Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment.

 

1.4        Delivery of
Certificate and New Warrant. Promptly after Holder exercises or converts
this Warrant and, if applicable, the Company receives payment of the aggregate
Warrant Price, the Company shall deliver to Holder certificates for the Shares
acquired and, if this Warrant has not been fully exercised or converted and has
not expired, a new Warrant representing the Shares not so acquired.

 

1.5        Replacement of
Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, on delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company or, in the case of mutilation, or surrender and
cancellation of this Warrant, the Company shall execute and deliver, in lieu of
this Warrant, a new warrant of like tenor.

 

1.6        Treatment of Warrant
Upon Acquisition of Company.

 

1.6.1           “Acquisition”. For the purpose
of this Warrant, “Acquisition” means any sale, license, or other disposition of
all or substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company’s
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.

 

1.6.2           Treatment of Warrant at
Acquisition.

 

A)             Upon the written
request of the Company, Holder agrees that, in the event of an Acquisition in
which the sole consideration is cash, either (a) Holder shall exercise its
conversion or purchase right under this Warrant and such exercise will be
deemed effective immediately prior to the consummation of such Acquisition or (b) if
Holder elects not to exercise the Warrant, this Warrant will expire upon the
consummation of such Acquisition. The Company shall provide the Holder with
written notice of its request relating to the foregoing (together with such
reasonable information as the Holder may request in connection with such
contemplated Acquisition giving rise to such notice), which is to be delivered
to Holder not less than ten (10) days prior to the closing of the proposed
Acquisition.

 

B)              Upon the written request
of the Company, Holder agrees that, in the event of an Acquisition
that is an “arms length” sale of all or substantially all of the Company’s
assets (and only its assets) to a third party that is not an Affiliate (as
defined below) of the Company (a “True Asset Sale”), either (a) Holder
shall exercise its conversion or purchase right under this Warrant and such
exercise will be deemed effective immediately prior to the consummation of such
Acquisition or (b) if Holder elects not to exercise the Warrant, this
Warrant will continue until the Expiration Date if the Company continues as a
going concern following the closing of any such True Asset Sale. The Company
shall provide the Holder with written notice of its request relating to the foregoing
(together with such reasonable information as the Holder may request in
connection with such contemplated Acquisition giving rise to
such notice), which is to

 

2

 

be
delivered to Holder not less than ten (10) days prior to the closing of
the proposed Acquisition.

 

C)          Upon the closing of
any Acquisition other than those particularly described in subsections (A) and
(B) above, the successor entity shall assume the obligations of this
Warrant, and this Warrant shall be exercisable for the
same securities, cash, and property as would be payable for the Shares issuable
upon exercise of the unexercised portion of this Warrant as if such Shares were
outstanding on the record date for the Acquisition and subsequent closing. The
Warrant Price and/or number of Shares shall be adjusted accordingly.

 

As
used herein “Affiliate” shall mean any person or
entity that owns or controls directly or indirectly ten (10) percent or
more of the stock of Company, any person or entity that
controls or is controlled by or is under common control with such persons or
entities, and each of such person’s or entity’s officers, directors, joint
venturers or partners, as applicable.

 

ARTICLE
2. ADJUSTMENTS TO THE SHARES.

 

2.1        Stock Dividends, Splits, Etc. If the Company
declares or pays a dividend on the Shares payable in common stock, or other
securities, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record as of the date the
dividend occurred. If the Company subdivides the Shares by reclassification or
otherwise into a greater number of shares or takes any other action which increase
the amount of stock into which the Shares are convertible, the number of shares
purchasable hereunder shall be proportionately increased and the Warrant Price
shall be proportionately decreased. If the outstanding shares are combined or
consolidated, by reclassification or otherwise, into
a lesser number of shares, the Warrant Price shall be proportionately increased
and the number of Shares shall be proportionately decreased.

 

2.2        Reclassification,
Exchange, Combinations or Substitution. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately before such
reclassification, exchange, substitution, or other event. Such an event shall
include any automatic conversion of the outstanding or issuable securities of
the Company of the same class or series as the Shares to common stock pursuant
to the terms of the Company’s Certificate of Incorporation upon the closing of
a registered public offering of the Company’s common stock. The Company or its
successor shall promptly issue to Holder an amendment to this Warrant setting
forth the number and kind of such new securities or other property issuable
upon exercise or conversion of this Warrant as a result of such
reclassification, exchange, substitution or other event that results in a
change of the number and/or class of securities issuable upon exercise or
conversion of this Warrant. The amendment to this Warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments
to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this Article 2.2
shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events.

 

2.3        Adjustments for Diluting Issuances. The Warrant
Price and the number of Shares issuable upon exercise of this Warrant
or, if the Shares are Preferred Stock, the number of shares of common stock
issuable upon conversion of the Shares, shall be subject to adjustment,
from time to time in the manner set forth in the Company’s Certificate of

 

3

 

Incorporation
as if the Shares were issued and outstanding on and as of the date of any such
required adjustment. The provisions set forth for the Shares in the Company’s
Certificate of Incorporation relating to the above in effect as of the Issue
Date may not be amended, modified or waived, without the prior written consent
of Holder unless such amendment, modification or waiver affects the rights
associated with the Shares in the same manner as such amendment, modification
or waiver affects the rights associated with all other shares of the same
series and class as the Shares granted to the Holder.

 

2.4        No Impairment.
The Company shall not, by amendment of its Certificate of Incorporation or
through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue, or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2
and in taking all such action as may be necessary or appropriate to protect
Holder’s rights under this Article against impairment.

 

2.5        Fractional Shares.
No fractional Shares shall be issuable upon exercise or conversion of the
Warrant and the number of Shares to be issued shall be rounded down to the
nearest whole Share. If a fractional share interest arises upon any exercise or
conversion of the Warrant, the Company shall eliminate such fractional share
interest by paying Holder the amount computed by multiplying the fractional
interest by the fair market value of a full Share.

 

2.6        Certificate as to
Adjustments. Upon each adjustment of the Warrant Price, the Company shall
promptly notify Holder in writing, and, at the Company’s expense, promptly
compute such adjustment, and furnish Holder with a certificate of its Chief
Financial Officer setting forth such adjustment and the facts upon which such
adjustment is based. The Company shall, upon written request, furnish Holder a
certificate setting forth the Warrant Price in effect upon the date thereof and
the series of adjustments leading to such Warrant Price.

 

ARTICLE
3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

 

3.1         Representations and
Warranties. The Company represents and warrants to the Holder as follows:

 

(a)           The initial Warrant
Price referenced on the first page of this Warrant is not greater than (i) the
price per share at which the Shares were last issued  in an arms- length
transaction in which at least $500,000 of the Shares were sold and (ii) the
fair market value of the Shares as of the date of this Warrant, as determined
by the Company’s Board of Directors.

 

(b)           All Shares which may
be issued upon the exercise of the purchase right represented by this Warrant,
and all securities, if any, issuable upon conversion of the Shares, shall, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable, and
free of any liens and encumbrances except for restrictions on transfer provided
for herein or under applicable federal and state securities laws.

 

(c)           The Capitalization
Table dated 12/31/02,  previously provided to Holder, remains true and complete as of the Issue Date.

 

3.2        Notice of Certain
Events. If the Company proposes at any time (a) to declare any
dividend or distribution upon any of its stock, whether in cash, property,
stock, or other securities and whether or not a regular cash dividend;
(b) to offer for sale additional shares of any class or series of the Company’s
stock; (c) to effect any reclassification or recapitalization

 

4

 

of
any of its stock; (d) to merge or consolidate with or into any other
corporation, or sell, lease, license, or convey all or substantially all of its
assets, or to liquidate, dissolve or wind up; or (e) offer holders of
registration rights the opportunity to participate in an underwritten public
offering of the company’s securities for cash, then, in connection with each
such event, the Company shall give Holder: (l) at least 10 days prior
written notice of the date on which a record will be taken for such dividend,
distribution, or subscription rights (and specifying the date on which the
holders of common stock will be entitled thereto) or the consummation date of
the matters referred to in (c) and (d) above; (2) in the case of
the matters referred to in (c) and (d) above at least 10 days prior
written notice of the date when the same will take place (and specifying the date
on which the holders of common stock
will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the
case of the matter referred to in (e) above, the same notice as is given
to the holders of such registration rights.

 

3.3        Registration Under Securities
Act of 1933, as amended. The Company agrees that the Shares or, if the
Shares are convertible into common stock of the Company, such common stock,
shall have certain incidental, or “Piggyback,” registration rights pursuant to
and as set forth in the Company’s Investor Rights Agreement dated
July 25, 2002. The provisions set forth therein relating to the above in
effect as of the Issue Date may not be amended,
modified or waived without the prior written consent of Holder
unless such amendment, modification or waiver affects the rights
associated with the Shares in the same manner as such amendment,
modification, or waiver affects the rights associated with all other shares of
the same series and class as the Shares granted to the Holder.

 

3.4        No Shareholder Rights. Except as
provided in this Warrant, the Holder will not have any rights as a
shareholder of the Company until the exercise of this Warrant.

 

ARTICLE
4. REPRESENTATIONS, WARRANTIES OF THE HOLDER. The Holder
represents and warrants to the Company as follows:

 

4.1        Purchase for
Own Account. This Warrant and the securities to be acquired
upon exercise of this Warrant by the Holder will be acquired for investment for
the Holder’s account, not as a nominee or agent, and not with a view to the
public resale or distribution within the meaning of the Act. Holder also represents
that the Holder has not been formed for the specific purpose of
acquiring this Warrant or the Shares.

 

4.2        Disclosure of
Information. The Holder has received or has had full
access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the acquisition of this Warrant
and its underlying securities. The Holder further has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of this Warrant and its underlying securities and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to
verify any information furnished to the Holder or to which the Holder has
access.

 

4.3        Investment
Experience. The Holder understands that the purchase of
this Warrant and its underlying securities involves substantial
risk. The Holder has experience as an investor in securities of companies in
the development stage and acknowledges that the Holder can bear the economic risk
of such Holder’s investment in this Warrant and its underlying securities and
has such knowledge and experience in financial or business matters that the
Holder is capable of evaluating the merits and
risks of its investment in this Warrant and its underlying securities and/or has a
preexisting personal or business relationship with the
Company and certain of its officers, directors or controlling
persons of a nature and duration that enables the

 

5

 

Holder
to be aware of the character, business acumen and financial circumstances of
such persons.

 

4.4        Accredited
Investor Status. The Holder is an “accredited investor”
within the meaning of Regulation D promulgated under the Act.

 

4.5        The Act. The Holder
understands that this Warrant and the Shares issuable upon exercise or
conversion hereof have not been registered under the Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the Holder’s investment intent as expressed herein. The
Holder understands that this Warrant and the Shares issued upon any exercise or
conversion hereof must be held indefinitely unless subsequently registered
under the 1933 Act and qualified under
applicable state securities laws, or unless exemption from such registration
and qualification are otherwise available.

 

ARTICLE
5. MISCELLANEOUS.

 

5.1        Term: This Warrant
is exercisable in whole or in part at any time and from time to time on or
before the Expiration Date.

 

5.2        Legends.   This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:

 

THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
ACT, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE
PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

5.3        Compliance with
Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as
reasonably requested by the Company). The Company shall not require Holder to
provide an opinion of counsel if the transfer is to Silicon Valley Bancshares
(Holder’s parent company) or any other affiliate of Holder. Additionally, the
Company shall also not require an opinion of counsel if there is no material
question as to the availability of current information as referenced in Rule 144(c),
Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied
with Rule 144(f), and the Company is provided with a copy of Holder’s
notice of proposed sale.

 

5.4        Transfer
Procedure. Upon receipt by Holder of the executed
Warrant, Holder will transfer all of this Warrant to Silicon Valley
Bancshares, Holder’s parent company, by execution of an
Assignment substantially in the form of Appendix 2. Subject to the

 

6

 

provisions
of Article 5.3 and upon providing Company with written notice, Silicon
Valley Bancshares and any subsequent Holder may transfer all or part of this
Warrant or the Shares issuable upon exercise of this Warrant (or the Shares
issuable directly or indirectly, upon conversion of the Shares, if any) to any
transferee, provided, however, in connection with any such transfer, Silicon
Valley Bancshares or any subsequent Holder will give the Company notice of the
portion of the Warrant being transferred with the name, address and taxpayer
identification number of the transferee and Holder will
surrender this Warrant to the Company for reissuance to the transferee(s) (and
Holder if applicable). The Company may refuse to transfer this Warrant or the
Shares to any person who directly competes with the Company, unless, in either
case, the stock of the Company is publicly traded.

 

5.5        Notices. All notices
and other communications from the Company to the Holder,
or vice versa, shall be deemed delivered and effective when given personally or
mailed by first-class registered or certified mail, postage prepaid, at such
address as may have been furnished to the Company or the Holder, as the case
may (or on the first business day after transmission by facsimile)
be, in writing by the Company or such holder from time to
time. Effective upon receipt of the fully executed Warrant and the initial
transfer described in Article 5.4 above, all notices to the Holder shall
be addressed as follows until the Company receives notice of a change of
address in connection with a transfer or otherwise:

 

Silicon
Valley Bancshares 

Attn: Treasury Department

3003
Tasman Drive, HA 200

Santa
Clara, CA 95054

Telephone:
408-654-7400

Facsimile:
408-496-2405

 

Notice
to the Company shall be addressed as follows until the Holder receives notice
of a change in address:

 

GameFly, Inc.

Attn: Jordan Posell

3000 Ocean Park Blvd., Suite 2014

Santa Monica, California 90405

Telephone: 310-664-6400

Facsimile: 310-664-6788

 

5.6        Waiver.
This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.

 

5.7        Attorney’s Fees. In the event
of any dispute between the parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party
all costs incurred in such dispute, including reasonable attorney’s
fees.

 

5.8        Automatic
Conversion upon Expiration. In the event that, upon the
Expiration Date, the fair market value of one Share (or other security
issuable upon the exercise hereof) as determined in accordance with
Section 1.3 above is greater than the Exercise Price in effect on
such date, then this Warrant shall automatically be deemed on
and as of such date to be converted pursuant to Section 1.2 above
as to all Shares (or such other securities) for which it shall
not previously have been exercised or converted, and the Company
shall promptly deliver a certificate representing the Shares (or
such other securities) issued upon such conversion to the Holder.

 

7

 

5.9        Counterparts. This Warrant
may be executed in counterparts, all of which together shall constitute one and
the same agreement.

 

5.10      Governing Law. This Warrant
shall be governed by and construed in accordance with the laws of the State of
California, without giving effect to its principles regarding conflicts of law.

 

	
  “COMPANY”

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GAMEFLY,
  INC.

  	
   

  	
  GAMEFLY,
  INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Edward Lenk

  	
   

  	
  By:

  	
  /s/
  Jordan Posell

  
	
  Name:

  	
  Edward
  Lenk

  	
   

  	
  Name:

  	
  Jordan
  Posell

  
	
   

  	
  (Print)

  	
   

  	
   

  	
  (Print)

  
	
  Title:

  	
  Chairman
  of the Board, President or

  	
   

  	
  Title:

  	
  Chief
  Financial Officer, Secretary,

  
	
   

  	
  Vice
  President

  	
   

  	
   

  	
  Assistant
  Treasurer or Assistant

  
	
   

  	
   

  	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  “HOLDER”

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SILICON
  VALLEY BANK

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Troy V. Erickson

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Troy
  V. Erickson

  	
   

  	
   

  	
   

  
	
   

  	
  (Print)

  	
   

  	
   

  	
   

  
	
  Title:
  

  	
  V.P.

  	
   

  	
   

  	
   

  

 

8

 

APPENDIX
1

 

NOTICE OF EXERCISE

 

1.                                       Holder elects to purchase                   shares
of the Common/Series                    Preferred [strike one] Stock of GameFly, Inc. pursuant to the terms
of the attached Warrant, and tenders payment of the purchase price of the
shares in full.

 

[or]

 

1.                                       Holder elects to convert the attached Warrant into Shares/cash [strike one] in the manner specified in the Warrant. This conversion is exercised for                         of
the Shares covered by the Warrant.

 

[Strike paragraph that does
not apply.]

 

2.                                       Please issue a certificate or certificates
representing the shares in the name specified below:

 

	
   

  	
   

  	
   

  
	
   

  	
  Holders
  Name

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  	
   

  

 

3.                                       By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as the date hereof.

 

	
   

  	
  HOLDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Date):

  	
   

  

 

9

 

ASSIGNMENT

 

For value
received, Silicon Valley Bank hereby sells, assigns and transfers unto:

 

Name: Silicon Valley Bancshares

Address: 3003 Tasman Drive (HA-200)

Santa Clara, CA 95054

 

TaxID: 91-1962278

 

that certain Warrant to Purchase Stock issued by GameFly, Inc.  (the “Company”), on January 21, 2003 (the “Warrant”)
together with all rights, title and interest therein.

 

 

	
   

  	
  SILICON VALLEY BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Troy V. Erickson

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Troy V. Erickson

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  January 21, 2003

  	
   

  	
   

  
					

 

 

By
its execution below, and for the benefit of the Company, Silicon Valley
Bancshares makes each of the representations and warranties set forth in Article 4 of the Warrant as of the date hereof.

 

 

	
   

  	
  SILICON VALLEY BANCSHARES

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paulette
  Mehas

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Paulette Mehas

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Treasurer

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