L90, INC.
SERIES C REGISTRATION AGREEMENT
-------------------------------
THIS AGREEMENT is made as of September 22, 1999, among L90, Inc., a
Delaware corporation (the "Company"), and the purchasers (each an "Investor,"
and collectively, the "Investors") of shares of Series C Preferred Stock of the
Company pursuant to the Series C Preferred Stock Purchase Agreement of even date
herewith (the "Purchase Agreement").
The parties to this Agreement are parties to the Purchase Agreement.
In order to induce the Investors to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
Closing under the Purchase Agreement. Unless otherwise provided in this
Agreement, capitalized terms used herein shall have the meanings set forth in
paragraph 8 hereof.
The parties hereto agree as follows:
1. Required Registration at Initial Public Offering. When the
------------------------------------------------
Company files a registration statement (the "Registration Statement") in
connection with a firm commitment underwritten initial public offering of its
Common Stock, led by an investment bank with a national reputation, under the
Securities Act (the "Initial Public Offering"), the Company shall include
therein all of the Registrable Securities so as to allow the Investors to effect
re-sales of their Registrable Securities. Following the effectiveness of the
Registration Statement, the Company may, at any time, suspend the effectiveness
of the Registration Statement for up to 30 days, as appropriate (a "Suspension
Period"), by giving notice to each Investor, if the Company shall have
determined, through the good faith determination of the Board, that the Company
may be required to disclose any material corporate development which disclosure
may have a material adverse effect on the Company. Notwithstanding the
foregoing, no more than two Suspension Periods may occur in any continuous 12-
month period. The period of any such suspension of the Registration Statement
shall be added to the period of time the Company agrees to keep the Registration
Statement effective as provided in Section 4(b). The Company shall use its best
efforts to limit the duration and number of any Suspension Periods. Each
Investor agrees that, upon receipt of any notice from the Company of a
Suspension Period, such Investor shall forthwith discontinue disposition of
Registrable Securities covered by the Registration Statement or prospectus until
such Investor (i) is advised in writing by the Company that the use of the
applicable prospectus may be resumed, (ii) has received copies of a supplemental
or amended prospectus, if applicable, and (iii) has received copies of any
additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.
2. Management of Process; Selection of Underwriters. The Company
------------------------------------------------
shall have the exclusive right to determine when and whether to file the
Registration Statement and shall have
the exclusive right to select the investment banker(s) and manager(s) to
administer the Initial Public Offering.
3. Holdback Agreements. Notwithstanding that its Registrable Securities
-------------------
are included in the Registration Statement, each Investor agrees that it shall
not effect any sale or distribution or other disposition of equity securities of
the Company, including any Registrable Securities, or any securities convertible
into or exchangeable or exercisable for such equity securities, during the
period beginning the 30 days prior to the filing of the Registration Statement
and ending 180 days after the date of the commencement of the Initial Public
Offering. During the period between 181 days and 270 days after the date of the
commencement of the Initial Public Offering, each Investor may sell up to one-
half ( 1/2) of the Registrable Securities it then holds, and beginning 271 days
after the date of the commencement of the Initial Public Offering, the Investors
may sell all of their Registrable Securities. This holdback covenant is for the
benefit of the Company and the underwriters of the Initial Public Offering, and
may be enforced by any of them, including the seeking and obtaining of equitable
relief. Nothing herein is intended, nor shall be deemed, to negate or affect the
Investors' obligations under the antifraud provisions of applicable federal and
state securities laws.
4. Registration Procedures. In connection with its obligations
-----------------------
hereunder, the Company shall do the following:
(a) before filing the Registration Statement or prospectus therein or
any amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities copies of
all such documents proposed to be filed, which documents shall be subject to the
expeditious review and comment of such counsel with respect to the Investors and
their Registrable Securities;
(b) notify each holder of Registrable Securities of the effectiveness
of the Registration Statement and prepare and file with the Securities and
Exchange Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep the Registration Statement effective for a period of not less than two
years and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration Statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in the Registration Statement; provided that upon the date
that is one year from the Initial Public Offering, the Company may, in its
discretion and so long as it is eligible, amend the Registration Statement to
Form S-3;
(c) furnish to each seller of Registrable Securities such number of
copies of the Registration Statement, each amendment and supplement thereto, the
prospectus included in the Registration Statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
2
(d) use commercially reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company shall not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, 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 contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use commercially
reasonable efforts to secure designation of all such Registrable Securities
covered by such registration statement as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Securities and Exchange
Commission or, failing that, to secure NASDAQ authorization for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register as such with respect to such Registrable
Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of the Registration Statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably
3
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in its
reasonable judgment (upon the advice of its counsel), might be deemed to be an
underwriter or a controlling person of the Company, to participate in the
preparation of the Registration Statement and to require the insertion therein
of material, furnished to the Company in writing, which in the reasonable
judgment of such holder and its counsel should be included; and
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use commercially reasonable efforts promptly to
obtain the withdrawal of such order.
5. Registration Expenses.
---------------------
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions which shall be borne pro rata by the holders of Registrable
Securities included in such registration) and other Persons retained by the
Company (all such expenses being herein called "Registration Expenses"), shall
be borne as provided in this Agreement, except that the Company shall, in any
event, pay its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed or on the NASD automated quotation system.
(b) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any
4
Registration Expenses not so allocable shall be borne by all sellers of
securities included in such registration in proportion to the aggregate selling
price of the securities to be so registered.
6. Indemnification.
---------------
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in the
Registration Statement, prospectus or preliminary prospectus included therein or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
Registration Statement or prospectus included therein or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company shall indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) In connection with the Registration Statement, each such holder
shall furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with the Registration
Statement or prospectus therein and, to the extent permitted by law, shall
indemnify the Company, its directors and officers and each Person who controls
the Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact contained in the Registration Statement,
prospectus or preliminary prospectus therein or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided that the obligation to indemnify shall be individual, not joint
and several, for each holder and shall be limited to the net amount of proceeds
received by such holder from the sale of Registrable Securities pursuant to the
Registration Statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the
5
indemnified party. If such defense is assumed, the indemnifying party shall not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent shall not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim shall not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company
also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No Person may
-------------------------------------------
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder,
such holder's Registrable Securities and such holder's intended method of
distribution) or to undertake any indemnification obligations to the Company or
the underwriters with respect thereto, except as otherwise provided in paragraph
6 hereof.
8. Definitions.
-----------
(a) "Registrable Securities" means (i) any Common Stock issued upon
----------------------
conversion of any Series C Preferred Stock or upon exercise of the Warrants
issued pursuant to the Purchase Agreement and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Registrable Securities, such securities shall cease to be
Registrable Securities when they have been (i) distributed to the public
pursuant to a offering registered under the Securities Act, or (ii) sold to the
public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act (or any similar rule then in force). For purposes of
this Agreement, a Person shall be deemed to be a holder of Registrable
Securities, and the Registrable Securities shall be deemed to be in existence,
whenever such Person has the right to acquire directly or indirectly such
Registrable Securities upon conversion.
6
(b) Unless otherwise stated, other capitalized terms contained herein
have the meanings set forth in the Purchase Agreement.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company shall not hereafter enter
--------------------------
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Remedies. Any Person having rights under any provision of this
--------
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that, in addition to any other rights and
remedies existing in its favor, any party shall be entitled to specific
performance and/or other injunctive relief from any court of law or equity of
competent jurisdiction (without posting any bond or other security) in order to
enforce or prevent violation of the provisions of this Agreement.
(c) Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of at least a majority of the
Registrable Securities.
(d) Successors and Assigns. All covenants and agreements in this
----------------------
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and permitted assigns of the parties
hereto whether so expressed or not. The Company shall not, directly or
indirectly, enter into any merger, consolidation or reorganization in which the
Company is not the surviving corporation unless the proposed surviving
corporation, prior to the merger, consolidation or reorganization, agrees in
writing to assume the obligations of the Company under this Agreement, and for
that purpose references herein to "Registrable Securities" shall be deemed to be
references to the securities to which holders of Registrable Securities would be
entitled to receive in exchange for Registrable Securities in any such merger,
consolidation or reorganization unless such securities were registered under the
Securities Act in connection with the merger, consolidation or reorganization.
(e) Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7
(f) Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(g) Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
(h) Governing Law. All issues and questions concerning the
-------------
construction, validity, interpretation and enforcement of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
(i) Notices. All notices, demands or other communications to be given
-------
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Investor at the address indicated on the
Schedule of Investors and to the Company at the address indicated below:
L90, Inc.
0000 Xxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attn: Executive Financial Officer
with a copy to:
Xxxx Xxxxxxxx Xxxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Xx.
(j) Arbitration. Each of the parties hereto agrees that in the event
-----------
of any dispute arising between parties arising out of or relating to this
Agreement or its breach, such dispute shall be resolved pursuant to the pre-
dispute arbitration agreement attached as Exhibit F to the Purchase Agreement.
---------
* * * * *
8
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
L90, INC.
---------
By: /s/ Xxxx X. Xxxxx
_________________________________
Name: Xxxx X. Xxxxx
Title: President and CEO
INVESTORS:
RARE MEDIUM GROUP, INC.
By: /s/ Xxxxxx Xxxxx
_________________________________
Name: Xxxxxx Xxxxx
Title: Vice President
DEVELOPMENT VENTURES (TWO) INC.
By: /s/ Xxxxxxx Xxxxxxxxxxxx
__________________________________
Name: Xxxxxxx Xxxxxxxxxxxx
Title: Chief Financial Officer
[Signature page to Series C Registration Agreement]
9
