S-1

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As filed with the Securities and Exchange Commission on December 22, 2004

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933

FASTCLICK, INC.
(Exact name of registrant as specified in its charter)

California
(State or other jurisdiction of
incorporation or organization) 7319
(Primary Standard Industrial
Classification Code Number) 77-0540202
(I.R.S. Employer
Identification No.)

360 Olive Street
Santa Barbara, CA 93101
(805) 568-5334
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Kurt A. Johnson
President and Chief Executive Officer
Fastclick, Inc.
360 Olive Street
Santa Barbara, CA 93101
(805) 568-5334
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:
C. Thomas Hopkins, Esq. Linda Giunta Michaelson, Esq. Sheppard, Mullin, Richter & Hampton LLP 800 Anacapa Street Santa Barbara, CA 93101 (805) 568-1151	Fred J. Krupica Chief Financial Officer Fastclick, Inc. 360 Olive Street Santa Barbara, CA 93101 (805) 568-5334	William H. Hinman Jr., Esq. Simpson Thacher & Bartlett LLP 3330 Hillview Avenue Palo Alto, California 94304 (650) 251-5000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed maximum aggregate offering price(1)(2)	Amount of registration fee
Common Stock, par value $0.001 per share	$92,000,000	$10,828.40

(1)

Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

(2)

Includes shares of common stock issuable upon exercise of the underwriters' over-allotment option, if any.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED DECEMBER 22, 2004

              Shares

Fastclick, Inc.

Common Stock

        Prior to this offering, there has been no public market for our common stock. We are offering                            shares and the selling stockholders are offering                            shares. We will not receive any of the proceeds from the sale of common stock by the selling stockholders. The initial public offering price of our common stock is expected to be between $              and $              per share. We have applied to list our common stock on the Nasdaq National Market under the symbol "FSTC."

        The underwriters have an option to purchase a maximum of              additional shares from us and                            additional shares from the selling stockholders to cover over-allotments of shares.

Investing in our common stock involves risks. See "Risk Factors" beginning on page 7.

	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to Fastclick	$	$
Proceeds, before expenses, to selling stockholders	$	$

        Delivery of the shares of common stock will be made on or about                         , 2005.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse First Boston Citigroup

Thomas Weisel Partners LLC
Jefferies Broadview

The date of this prospectus is                         , 2005

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY	1
RISK FACTORS	7
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	25
USE OF PROCEEDS	26
DIVIDEND POLICY	26
CAPITALIZATION	27
DILUTION	28
SELECTED FINANCIAL DATA	29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
BUSINESS	45
MANAGEMENT	56
EXECUTIVE COMPENSATION	61
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	69
PRINCIPAL AND SELLING STOCKHOLDERS	70
DESCRIPTION OF CAPITAL STOCK	73
SHARES ELIGIBLE FOR FUTURE SALE	78
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. STOCKHOLDERS	80
UNDERWRITING	83
NOTICE TO CANADIAN RESIDENTS	86
LEGAL MATTERS	87
EXPERTS	87
WHERE YOU CAN FIND MORE INFORMATION	87
INDEX TO FINANCIAL STATEMENTS	F-1

You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

Dealer Prospectus Delivery Obligation

Until                        , 2005 (25 days after commencement of the offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

PROSPECTUS SUMMARY

The following is a brief summary of selected contents of this prospectus. It may not contain all the information that is important to you. To understand this offering fully, you should read the following summary together with the entire prospectus, including the more detailed information regarding us and the common stock being sold in this offering and our financial statements and the related notes appearing elsewhere in this prospectus. You should carefully consider, among other things, the matters discussed in the section entitled "Risk Factors," before making an investment decision. In this prospectus, "Fastclick," "we," "us" and "our" refer to Fastclick, Inc. and not to the underwriters.

Fastclick, Inc.

        We provide performance-based technology solutions to advertisers and website publishers that are designed to improve advertising campaign performance across our growing network of websites. We believe our technology solutions, including our proprietary Optimization Engine, managed-market bidding system, and our reporting suite and campaign management tools, increase advertisers' return-on-investment, or ROI, and enhance the value of website publishers' advertising space. Our proprietary Optimization Engine continually analyzes Internet user responses to various advertising campaign elements, including the performance of an ad on a specific website and the effectiveness of creative content, to assess whether an advertiser's performance objectives are being met. Based on this analysis, our Optimization Engine continuously refines an advertiser's campaign to emphasize the most effective elements of the campaign, such as the use of specific creative content, and removes elements that are not achieving the advertiser's marketing objectives, such as ads that underperform on a specific website.

        By offering website publishers attractive pricing and revenue share arrangements, easy-to-use web-based solutions and quality service, we have built one of the largest Internet advertising networks, with over 7,500 active websites. Our publisher network includes branded websites that offer large volumes of advertising space as well as a substantial number of websites that reach Internet users with highly-targeted demographics and interests.

Industry Background

        The Internet continues to be a powerful and rapidly growing medium that enables advertisers to effectively target consumers. According to Forrester Research, the U.S. Internet advertising market, which is comprised primarily of display advertising and search engine marketing, was approximately $7 billion in 2003, which represented 3% of the total U.S. advertising market. Forrester Research projects U.S. Internet advertising to grow to $15.6 billion in 2008, representing a compound annual growth rate of 17.5% over that time period. We believe that this market growth is due to increased broadband access, growing consumer Internet usage and the benefits offered by Internet advertising relative to traditional media, including interactivity, rapid and measurable user feedback and the ability to more effectively target consumers. We believe that another factor driving Internet advertising growth is the increase in performance-based advertising, where an advertiser only pays for an ad when an Internet user performs a specific act in response to that ad.

The Fastclick Solution

        We believe our performance-based technology solutions effectively address the needs of advertisers and website publishers.

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        Key elements of our solution include:

•

Our Optimization Engine.    Utilizing advanced mathematical algorithms, our proprietary Optimization Engine is designed to improve advertising campaign performance by automatically delivering ads to the highest performing websites using the most effective creative content.



•

Large and growing network of websites.    Our network of over 7,500 websites allows us to offer advertisers a significant volume of advertising space across a wide variety of content channels. We believe the size and quality of our network creates efficiencies that benefit both advertisers and publishers.



•

Efficient pricing for advertisers and publishers.    Our managed-market bidding system prices advertising space based on current supply and demand for Internet advertising space on our network. Advertisers willing to bid the highest price for advertising space receive priority delivery of their ads, subject to certain rules which may be set by us, our advertisers or our publishers. Our managed-market bidding system enables advertisers to more efficiently meet their campaign objectives and enhances the value of publishers' advertising space.



•

Reporting suite and campaign management tools.    Our easy-to-use, web-based solutions provide advertisers and publishers with customized reporting, updated hourly, and the ability to exercise control over their advertising campaigns and advertising space.



•

Outstanding customer service. We believe our account managers provide outstanding account management service that increases the effectiveness of our advertisers' campaigns.

Our Strategy

        Our goal is to be a leading provider of performance-based Internet advertising technology solutions to advertisers and website publishers. To achieve this goal, we plan to do the following:

•

Enhance our existing technologies.    We plan to enhance our Optimization Engine, managed-market bidding system, and our reporting suite and campaign management tools. We expect that our planned enhancements will provide our advertisers with increased ROI and our publishers with higher advertising revenue through greater campaign control and flexibility.



•

Introduce our search engine advertising technology solution.    We are in the process of leveraging our existing technologies to enable advertisers to optimize their advertising campaigns across multiple Internet search engines. Our search engine advertising technology solution is being designed to manage search engine advertising, including bids for key words, to increase our advertisers' ROI on their search engine advertising campaigns. We currently intend to launch our search engine advertising technology solution in the first quarter of 2005.



•

Respond to new market opportunities.    We anticipate that as Internet usage and broadband access increases, and advertisers and website publishers face new challenges, the demand for increasingly sophisticated Internet advertising solutions will grow. We plan to increase our research and development efforts to respond to new market opportunities and changing advertiser, website publisher and Internet user demands.



•

Expand our publisher network.    To increase our volume of advertising space and to enable our advertisers to reach a larger and broader demographic base of Internet users, we plan to add more high-traffic websites that meet our content standards.



•

Grow our advertiser base and gain a larger share of advertisers' marketing expenditures.    We intend to invest significant resources in our sales and marketing organization to attract additional advertisers and garner a larger share of advertisers' marketing budgets. We plan on increasing

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our sales and marketing efforts to target potential advertisers directly and to work with indirect channels, such as advertising agencies, to grow our advertiser base.

•

Expand through acquisitions.    We intend to pursue acquisition candidates to grow our advertiser and publisher base and access technology and talent. However, we have no present understandings, commitments or agreements with respect to the acquisition of any other businesses or technologies.

Company Information

        We were incorporated in California in March 2000 and plan to reincorporate in Delaware prior to the effective date of the registration statement of which this prospectus is a part. Our principal executive offices are located at 360 Olive Street, Santa Barbara, California 93101 and our telephone number is (805) 568-5334. Our website is www.fastclick.com. Information contained on our website, or that can be accessed through our website, does not constitute a part of this prospectus.

        The "Fastclick" family of related marks, images and symbols are our properties, trademarks and service marks. All other trade names, trademarks and service marks appearing in this prospectus are the property of their respective owners.

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The Offering

Common stock offered by:
	Fastclick	shares
	The selling stockholders	shares
	Total	shares
Common stock outstanding after this offering		shares
Use of proceeds		We intend to use the net proceeds we receive from this offering primarily for general corporate purposes, including working capital. We may also use a portion of the net proceeds to acquire complementary technologies or businesses. We currently have no specific acquisition plans. We will not receive any proceeds from the sale of common stock by the selling stockholders. See "Use of Proceeds."
Risk factors		An investment in our common stock involves a high degree of risk. See "Risk Factors" and other information included in this prospectus for a discussion of some of the factors you should carefully consider before deciding to invest in shares of our common stock.
Proposed Nasdaq National Market symbol		"FSTC"

        The number of shares of common stock described above as outstanding immediately after this offering is based on            shares of common stock outstanding as of                        , 2004, and excludes:

•

438,500 shares of common stock issuable on the exercise of options outstanding as of September 30, 2004, at a weighted average exercise price of $9.63 per share; and



•

227,997 shares of common stock reserved for future issuance under our 2004 Stock Plan.

        As of September 30, 2004, no shares remained available for issuance under our 2000 Stock Plan and 227,997 shares remained available for future issuance under our 2004 Stock Plan. Upon the completion of this offering, no new options will be granted under our 2004 Stock Plan.

        Unless otherwise stated, all information in this prospectus assumes:

•

an initial public offering price of $    per share, the midpoint of the filing range set forth on the cover of this prospectus;



•

the automatic conversion of all outstanding shares of our Series A Preferred Stock on a one-for-one basis into 2,131,285 shares of common stock upon completion of this offering;



•

no exercise of the over-allotment option granted to the underwriters;



•

our reincorporation in Delaware prior to the effective date of the registration statement of which this prospectus is a part;



•

the filing of our amended and restated certificate of incorporation immediately prior to the completion of this offering; and



•

a    -    stock split of our common stock to be effected prior to the completion of this offering.

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Summary Financial Data

        The following tables present our summary financial information. You should read this information together with our financial statements and related notes and the information under "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. The summary financial data below for the years ended December 31, 2001, 2002 and 2003 is derived from our audited financial statements included elsewhere in this prospectus. The summary financial data for the nine months ended September 30, 2003 and 2004 are derived from our unaudited financial statements included elsewhere in this prospectus. The unaudited interim financial statements have been prepared on the same basis as our audited financial statements and, in our opinion, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the results of operations and financial position for those periods and as of that date. The unaudited pro forma statement of operations data presents our pro forma provision for income taxes and pro forma net income as if we had been a C corporation for all periods presented. The historical results are not necessarily indicative of the results to be expected for any future periods and the results for the nine months ended September 30, 2004 should not be considered indicative of results expected for the full fiscal year.

		Year Ended December 31,								Nine Months Ended September 30,
		2001			2002		2003			2003			2004
		(in thousands, except share data)
										(unaudited)
Statements of Operations Data:
Revenue		$	4,480		$	17,664	$	28,663		$	18,459		$	38,986
Cost of revenue			3,114			11,766		19,246			12,398			25,688
Gross profit			1,366			5,898		9,417			6,061			13,298
Operating costs(1):
	Sales and marketing		229			995		2,160			1,371			4,670
	Technology		221			345		402			278			1,851
	General and administrative		193			422		1,045			716			1,761
	Stock-based compensation(2)		—			—		—			—			340
Total operating costs			643			1,762		3,607			2,365			8,622
Operating income			723			4,136		5,810			3,696			4,676
Interest and dividend income			8			19		19			14			23
Interest expense			—			—		(5	)		(3	)		(6	)
Loss on sale/disposal of equipment			(1	)		—		(12	)		(12	)		—
Income before income taxes			730			4,155		5,812			3,695			4,693
Provision for income taxes(3)			207			97		55			42			1,348
Net income(4)		$	523		$	4,058	$	5,757		$	3,653		$	3,345
Unaudited Pro Forma Statement of Operations Data(5):
Income before income taxes					$	4,155	$	5,812		$	3,695		$	4,693
Pro forma provision for income taxes						1,581		2,167			1,360			1,722
Pro forma net income					$	2,574	$	3,645		$	2,335		$	2,971

(footnotes on following page)

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        The following table presents a summary of our unaudited balance sheet data as of September 30, 2004:

•

on an actual basis;



•

on a pro forma basis to give effect to the automatic conversion of all of our outstanding shares of Series A Preferred Stock on a one-for-one basis into 2,131,285 shares of common stock upon completion of this offering; and



•

on a pro forma as adjusted basis to reflect the sale of            shares of common stock by us in this offering at the estimated initial public offering price of $            per share, the midpoint of the price range set forth on the front of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

	As of September 30, 2004
	Actual			Pro Forma		Pro Forma as Adjusted
	(in thousands)
	(unaudited)
Balance Sheet Data:
Cash and cash equivalents	$	2,409		$	2,409
Short-term investments		20,000			20,000
Working capital		19,993			19,993
Total assets		32,725			32,725
Long-term obligations (including current portion)		134			134
Redeemable convertible preferred stock		73,434			—
Retained earnings		1,523			1,523
Total stockholders' equity (deficit)	$	(52,026	)	$	21,408

(1)

Operating costs for the nine months ended September 30, 2004 include the one-time compensation charge of $952,000 paid to employees in conjunction with the termination of the Ownership Equivalency Plan. See Note 12 to our audited financial statements.

(2)

See Note 1 and Note 11 to our audited financial statements for an explanation of our stock-based compensation.

(3)

From our inception in 2000 to December 31, 2001, we operated as a C corporation. For the years ended December 31, 2002 and 2003 and the period from January 1, 2004 through September 28, 2004 we were a subchapter S corporation. On September 28, 2004 our subchapter S corporation status was revoked in connection with the issuance of our Series A Preferred Stock and we now operate as a C corporation. The provision for income taxes for the nine months ended September 30, 2004 includes the recognition of taxes of $1,038 under Section 481(a) of the Internal Revenue Code as a result of the revocation of our subchapter S corporation status. See Note 1 and Note 4 to our audited financial statements.

(4)

As a result of our subchapter S corporation status for tax purposes for all of 2002 and 2003 and for the period from January 1, 2004 through September 28, 2004 and our status as a closely held corporation from inception through December 31, 2001, earnings per share information has not been presented.

(5)

Presents pro forma provision for income taxes and pro forma net income as if we operated as a C corporation in all periods presented, except for the year ended December 31, 2001 in which we were a C corporation. See Note 1 and Note 4 to our audited Financial Statements for an explanation of the unaudited pro forma statement of operations data.

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RISK FACTORS

An investment in our common stock involves significant risks. You should consider carefully the risks described below, together with all of the other information in this prospectus, before making a decision to invest in our common stock. If any of the following risks actually occurs, our business, operating results, financial condition and prospects could suffer. As a result, the trading price of our common stock could decline and you may lose all or part of your investment.

Risks Related to Our Business and Industry

We have a limited operating history, operate in an immature industry and have a relatively new business model, all of which may make it difficult for you to evaluate our business and prospects.

        We were incorporated in California in March 2000 and began offering Internet advertising technology solutions in September 2000. Accordingly, we have a limited operating history, and as a result, we have limited financial data that you can use to evaluate our business and prospects. In addition, we derive nearly all of our revenue from Internet advertising, which is an immature industry that has undergone rapid and dramatic changes in its short history. Our business model is also evolving and is distinct from other companies in our industry and it may not be successful. As a result of these factors, the future revenue and income potential of our business is uncertain. Although we have experienced significant revenue growth in recent periods, we may not be able to sustain this growth. Any evaluation of our business and our prospects must be considered in light of these factors and the risks and uncertainties often encountered by companies in our stage of development. Some of these risks and uncertainties relate to our ability to do the following:

•

maintain our current relationships, and develop new relationships, with advertisers, advertising agencies, direct marketers, and website publishers;



•

continue to grow our revenue and meet anticipated growth targets;



•

manage our expanding operations and implement and improve our operational, financial and management controls;



•

adapt to industry consolidation;



•

continue to grow our publisher network;



•

successfully introduce new, and upgrade our existing, technology solutions for Internet advertisers and website publishers;



•

respond to government regulations relating to the Internet and other aspects of our business;



•

respond effectively to competition; and



•

attract and retain qualified management and employees.

        If we are unable to address these risks, our business, results of operations and prospects could be harmed.

If we do not effectively manage our growth, our business and results of operations could be harmed.

        We have experienced rapid growth in both our headcount and operations, and we may experience continued growth in our business, both through acquisitions and internal growth. This growth has placed, and will continue to place, significant demands on our management and our operational and financial infrastructure. In particular, continued growth will make it more difficult for us to accomplish the following:

•

recruit, train and retain a sufficient number of highly skilled personnel;

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•

maintain our customer service standards;



•

maintain the quality of websites on our publisher network;



•

develop and improve our operational, financial and management controls and maintain adequate reporting systems and procedures;



•

successfully scale our software and technology to accommodate a larger business; and



•

maintain advertiser satisfaction.

        The improvements required to manage our growth will require us to make significant expenditures and allocate valuable management resources. For example, we are in the process of implementing a new accounting system. If we do not implement this new system successfully, it could adversely affect our ability to timely and accurately report our operations. If we fail to effectively manage our growth, our business and results of operations could be harmed.

If we are unable to retain our senior management or attract and retain qualified senior management in the future, our business, results of operations and prospects could be harmed.

        We depend on the continued contributions of our senior management and, in particular, Kurt A. Johnson, our president and chief executive officer, and Fred J. Krupica, our chief financial officer. We maintain a key person life insurance policy on only Mr. Johnson. Several members of our senior management have been with us for a short time. For example, Mr. Johnson has served as our chief executive officer since March 2004, Mr. Krupica has served as our chief financial officer since September 2004, James Aviani has served as our chief technology officer since March 2004 and Michael S. Hughes has served as our chief marketing officer since December 2004. It is possible that personality conflicts and differences in management styles may surface, which could slow our decision-making process, prevent us from making strategic decisions in a timely manner or cause us to lose members of our senior management team. In addition, the vesting of some of the stock options granted to two of our senior executives, Mr. Krupica and Mr. Aviani, accelerates upon the consummation of this offering. These individuals may be more likely to leave us if the shares underlying their options have significantly appreciated in value relative to the option exercise price.

        We also need to hire additional members of senior management to adequately manage our growing business. We may not be able to identify and attract additional qualified senior management. Competition for senior management in our industry is intense. Qualified individuals are in high demand, and we may incur significant costs to attract them. Volatility or lack of performance in our stock price may also affect our ability to attract and retain senior management. If we are unable to attract and retain qualified senior management, our business, results of operations and prospects could be harmed.

We need to hire additional qualified personnel to grow and manage our business. If we are unable to attract and retain qualified personnel, our business, results of operations and prospects could be harmed.

        Our performance depends on the talents and efforts of our employees. Our future success will depend on our ability to attract, retain and motivate highly skilled personnel in all areas of our organization and, in particular, in our technology, finance, and sales and marketing teams. We plan to continue to grow our business and will need to hire additional personnel to support this growth. We have experienced difficulties in attracting and retaining qualified personnel in the past, particularly in the Santa Barbara, California area where our headquarters are located. If we experience similar difficulties in the future, our growth may be hindered. For example, we intend to expand our operations in Los Angeles, California in the first quarter of 2005. Qualified individuals are in high demand, and we may incur significant costs to attract them. Many of our employees have also become, or will soon become, substantially vested in their stock option grants. Employees may be more likely to

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leave us if the shares underlying their options have significantly appreciated in value relative to the option exercise price. If we are unable to attract and retain the personnel we need to succeed, our business, results of operations and prospects could be harmed.

Our operating results have fluctuated in the past and may do so in the future, which could make our results of operations difficult to predict or cause them to fall short of expectations.

        Our prior operating results have fluctuated due to changes in our business and the Internet advertising industry. Similarly, our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control and could cause our results to be below investors' expectations, causing the price of our common stock to fall. Because our business is changing and evolving, our historical operating results may not be useful to you in predicting our future operating results. Factors that may increase the volatility of our operating results include the following:

•

the addition of new advertisers or website publishers or the loss of existing advertisers or website publishers;



•

changes in demand and pricing for our advertising services;



•

the timing and amount of sales and marketing expenses incurred to attract new advertisers, advertising agencies, and website publishers;



•

changes in the economic prospects of advertisers or the economy generally, which could alter current or prospective advertisers' spending priorities, or could increase the time it takes us to close sales with advertisers;



•

new product launches by advertisers;



•

changes in our pricing policies, the pricing policies of our competitors or the pricing of Internet advertising generally;



•

overall Internet usage, which generally declines during the summer months;



•

timing differences at the end of each quarter between our payments to website publishers for advertising space and our collection of advertising revenue related to that space;



•

introduction of new ad formats and shifts in ad format mix;



•

costs related to acquisitions of businesses or technologies; and



•

Internet advertising is a relatively new medium and advertisers have not settled into consistent spending patterns.

        In addition, advertising spending has historically been cyclical in nature, reflecting overall economic conditions as well as budgeting and buying patterns. Our rapid growth has historically masked the cyclicality and seasonality of our business. As our rate of growth slows, we expect that the cyclicality and seasonality in our business may become more pronounced and may in the future cause our operating results to fluctuate.

If we fail to compete effectively against other Internet advertising companies, we could lose advertisers or advertising space and our business and operating results could be harmed.

        The market for Internet advertising technology solutions and related services is intensely competitive. We expect this competition to continue to increase because there are no significant barriers to entry. We compete both for advertisers and for the high quality advertising space that is available through website publishers. We compete for advertisers on the basis of a number of factors, including price, ROI, volume of available advertising space and customer service.

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        Our primary current and potential competitors include:

•

Internet advertising networks such as Advertising.com (acquired by AOL), ValueClick, Tribal Fusion, and Burst Media;



•

Internet advertising technology providers, including search engine optimization companies; and



•

other performance-based Internet marketers, including affiliate networks.

        We also compete with large Internet companies and traditional media for a share of advertisers' overall marketing budgets, including:

•

website publishers with their own sales forces that sell their advertising space directly to advertisers;



•

major Internet portals and search engine companies with advertising networks such as Google and Yahoo!; and



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direct marketing, television, radio, cable and print companies.

        Competition for ads among website publishers, search engines, Internet service providers, or ISPs, as well as competition with traditional media companies, could result in significant price pressure, declining margins, reductions in advertising revenue and loss of our market share. In addition, as we continue to expand the scope of our services, we may compete with a greater number of website publishers, advertisers and traditional media companies across an increasing range of different services, including in vertical markets where competitors may have advantages in expertise, brand recognition and other areas. Large websites with brand recognition, such as Yahoo!, AOL, Google and MSN, have direct sales personnel and substantial proprietary advertising space that provides a significant competitive advantage compared to our network of website publishers and have significant impact on pricing for Internet advertising. Many of our current and potential competitors also enjoy other competitive advantages over us, such as longer operating histories, larger advertiser bases, greater access to advertising space on high-traffic websites, and significantly greater financial, technical and marketing resources. As a result, we may not be able to compete successfully. If we fail to deliver advertising results that are superior to those that advertisers or publishers could achieve directly or through the use of our competitors, we could lose advertisers or advertising space and our business and operating results could be harmed.

We depend on website publishers for advertising space, and any decline in the supply of advertising space available through our network could cause our revenue to decline or the cost to acquire advertising space to increase.

        We generate a significant portion of our revenue from the advertising space provided by a limited number of website publishers. Expenses for our top ten website publishers accounted for 22.6% of our publisher expenses for 2003 and 23.3% of our publisher expenses for the nine months ended September 30, 2004. In most instances, website publishers can change the amount of advertising space they make available to us at any time and therefore impact our revenue. In addition, website publishers may place significant restrictions on our use of their advertising space. These restrictions may prohibit ads from specific advertisers or specific industries, or restrict the use of certain creative content or format. If a website publisher decides not to make advertising space available to us, or decides to demand a higher revenue share or places significant restrictions on the use of such advertising space, we may not be able to replace the space with advertising space from other website publishers that satisfy our requirements in a timely and cost-effective manner. In addition, the number of competing Internet advertising networks that acquire space from website publishers continues to increase. We cannot assure you that we will be able to acquire advertising space that meets our advertisers' performance, price and quality requirements. If any of these things occur, our revenue could decline or our cost of acquiring advertising space may increase.

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If we offer new solutions that compete with products or services offered by our advertisers or website publishers, we could lose advertisers or advertising space and our revenue and operating results could be harmed.

        We intend to expand the scope of our services and develop new technology solutions. As we do so, we will compete with a greater number of advertisers, website publishers and other media companies across an increasing range of markets, which may include advertisers or publishers to whom we currently provide technology solutions. We depend, and expect to continue to depend, on our relationships with our advertisers or website publishers. If we develop new technology solutions or services that compete with our current advertisers or website publishers, they may materially reduce or cease their use of our advertising technology solutions and our business and results of operations would be harmed.

A substantial portion of our revenue is generated from a limited number of advertisers, and if we lose a major advertiser and do not replace this revenue, our business and results of operations may be harmed.

        A substantial portion of our revenue is generated from a limited number of advertisers and advertising agencies. Our advertisers can generally terminate their contracts with us at any time, without prior notice or penalty. Our top ten advertisers accounted for 47.6% of our advertising revenue for 2003 and 44.2% of our advertising revenue for the nine months ended September 30, 2004. We expect that a limited number of advertisers may continue to account for a significant percentage of our revenue and the loss of, or material reduction in, their advertising purchases could harm our business and results of operations.

Because our advertiser contracts generally can be cancelled by the advertiser with little or no prior notice or penalty, the cancellation of one or more contracts could result in an immediate decline in our revenue and results of operations.

        We derive substantially all of our revenue from Internet advertising campaigns under short-term contracts, most of which are cancelable with no prior notice required. In addition, these contracts do not contain penalty provisions for cancellation before the end of the contract term. The non-renewal, renegotiation, cancellation or deferral of large contracts, or a number of contracts that in the aggregate account for a significant amount of revenue, is difficult to anticipate and could result in an immediate decline in our cash available from operations, revenue and results of operations.

We may pursue the acquisition of other businesses which may not achieve the desired results or could result in operating difficulties, dilution and other harmful consequences.

        A component of our strategy is to acquire other businesses in order to grow our advertiser and publisher base and access technology and talent. However, suitable acquisition candidates may not be available on terms and conditions we find acceptable. In pursuing acquisitions, we will compete with other companies, many of which have greater financial and other resources than we do. Further, if we do succeed in consummating acquisitions, these acquisitions could be material to our business, operating results and financial condition. Any future acquisition or investment may require us to use significant amounts of cash, issue potentially dilutive equity securities with rights, preferences or privileges greater than our common stock, incur debt or assume contingent liabilities, any of which could harm our results of operations and financial position. In addition, the anticipated benefits of our acquisitions may not materialize and the acquired business may not achieve anticipated revenue, earnings or cashflows. In addition, acquisitions involve numerous risks, any of which could harm our business, including:

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diversion of management's attention and resources from other business concerns;

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difficulties and expenditures associated with integrating the operations and employees from the acquired company into our organization, and integrating each company's accounting, management information, human resources and other administrative systems to permit effective management;



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inability to maintain the key business relationships and the reputations of the acquired businesses;



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ineffectiveness or incompatibility of acquired technologies or services with our existing technologies and systems;



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potential loss of key employees of acquired businesses;



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responsibility for liabilities of acquired businesses;



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unavailability of favorable financing for future acquisitions;



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inability to maintain our standards, controls, procedures and policies, which could affect our ability to receive an unqualified attestation from our independent accountants regarding management's required assessment of the effectiveness of our internal control structure and procedures for financial reporting; and



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increased fixed costs.

        We also may pursue the acquisition of businesses outside the United States. Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.

Interruption or failure of our information technology and communications systems could impair our ability to effectively deliver our technology solutions, which could cause us to lose advertisers or advertising space and harm our operating results.

        Our delivery of technology solutions depends on the continuing operation of our technology infrastructure and systems. Any damage to or failure of our systems could result in interruptions in our ability to deliver ads quickly and accurately and to process users' responses to ads. Interruptions in our service could reduce our revenue and profits, and our reputation could be damaged if people believe our system is unreliable. Our systems are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power loss, telecommunications failures, computer viruses or other attempts to harm our systems, and similar events. We have critical systems in our Santa Barbara, California headquarters and lease server space in San Jose, California and Ashburn, Virginia. Our California facilities are located in areas with a high risk of major earthquakes. Our facilities are also subject to break-ins, sabotage and intentional acts of vandalism, and to potential disruptions if the operators of these facilities have financial difficulties. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, a decision to close a facility we are using without adequate notice for financial reasons or other unanticipated problems at our facilities could result in lengthy interruptions in our service.

        We have experienced limited system failures in the past and may in the future. For example, we failed to deliver ads to our website publishers for an aggregate of approximately two hours during the nine months ended September 30, 2004. Any unscheduled interruption in our service puts a burden on our entire organization and results in an immediate loss of revenue. If we experience frequent or persistent system failures, the attractiveness of our solutions to advertisers and website publishers could be permanently harmed. Our insurance policies may not adequately compensate us for any losses that occur due to failure in our systems. The steps we have taken to increase the reliability and redundancy

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of our systems are expensive, reduce our operating margin and may not be successful in reducing the frequency or duration of unscheduled interruptions.

Capacity constraints could impair our level of service.

        Our future success depends in part on the efficient performance of our software and technology infrastructure. As the numbers of websites and Internet users increase, our technology infrastructure may not be able to meet the increased demand. A sudden and unexpected increase in the volume of ads delivered by us or in user responses could strain the capacity of our technology infrastructure. Any capacity constraints we experience could lead to slower response times or system failures and adversely affect the availability of ads, the number of ads delivered and the level of user responses received, which would result in the loss of advertisers and harm our business and results of operations.

If we do not adequately protect our intellectual property rights, our competitive position may suffer.

        We rely on a combination of patent, copyright, trademark and trade secret laws of the United States and other countries, and confidentiality procedures to protect our intellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain and use our proprietary technology. The use of our intellectual property rights by others could reduce any competitive advantage we have developed and cause us to lose advertisers or website publishers or otherwise harm our business. Monitoring unauthorized use of our proprietary technology is difficult and costly, and we cannot be certain that the steps we have taken and continue to take will prevent unauthorized distribution and use of our proprietary technology, particularly in foreign countries, where the laws may not protect our intellectual property rights as fully as in the United States. If it became necessary for us to resort to litigation to protect these rights, any proceedings could be burdensome and costly and we may not prevail.

Third parties may sue us for intellectual property infringement which, if successful, could require us to pay significant damage awards or licensing fees.

        We cannot be certain that we do not and will not infringe the intellectual property rights of others. We may be subject to legal proceedings and claims in the ordinary course of our business and third parties may sue us for intellectual property infringement or initiate proceedings to invalidate our intellectual property. Any intellectual property claims, whether or not meritorious, could result in costly litigation and could divert management resources and attention. Moreover, should we be found liable for infringement, we may be required to enter into licensing agreements (if available on acceptable terms or at all), pay damages or limit or curtail our product or service offerings. Moreover, we may need to redesign some of our products or processes to avoid future infringement liability. Any of the foregoing could prevent us from competing effectively and harm our business and results of operations.

Our proprietary technologies may include design or performance defects and may not achieve their intended results.

        Our Optimization Engine and other proprietary technologies are relatively new, and they may contain design or performance defects that are not yet apparent. We cannot assure you that the use of our proprietary technologies will achieve the intended results as effectively as other technologies that exist now or may be introduced by our competitors, in which case our business could be harmed.

        In addition, we recently have spent significant resources developing our search engine advertising product. If this product, which we currently intend to launch in the first quarter of 2005, does not achieve its intended results, our expected growth in future revenue and margins may not materialize. Our success also depends on our ability to develop and introduce new proprietary technologies that address our advertisers' and website publishers' changing needs. Any new products that we develop may not achieve significant market acceptance. Our competitors may introduce new products that compete

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with our proprietary technologies and render our proprietary technologies unmarketable. Developing new products and technologies requires a significant commitment of technology and other resources. If revenue generated from the use of our proprietary technologies does not cover our development costs, our results of operations may be harmed.

The price that some of our advertisers pay for advertising space on our network may be less than the amount we pay publishers for that space.

        Our advertisers can purchase advertising space on our network on a cost-per-thousand impressions, or CPM, cost-per-action, or CPA, or a cost-per-click, or CPC, basis. Regardless of how an advertiser pays for space, we pay the vast majority of our publishers on a CPM-basis based on the number of impressions served. However, the number of impressions it actually takes to achieve an action can be far greater than the number we anticipated. This can result in us paying a higher price to our publishers for advertising space than our advertisers pay us for that space. If we are unable to accurately convert advertising campaigns that are priced on a CPA- or CPC-basis to an effective CPM-based price that reflects the actual amount of impressions it takes to achieve an action or click, our results of operations will suffer. For the nine months ended September 30, 2004, approximately 20% of our advertising was purchased on a CPA- or CPC-basis and we paid the website publishers displaying these ads on a CPM-basis. We expect that advertising purchased based on this pricing will increase over time.

Any decrease in demand for our Internet advertising solutions could substantially reduce our revenue.

        To date, substantially all of our revenue has been derived from Internet advertising. We expect that Internet advertising will continue to account for substantially all our revenue in the future. However, our revenue from Internet advertising may decrease in the future for a number of reasons, including the following:

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the rate at which Internet users take action in response to an ad may decrease;



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the popularity of the Internet as an advertising medium could decrease;



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Internet users may install existing or to-be-developed software programs that allow them to prevent ads from appearing on their screens;



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advertisers may prefer an alternative Internet advertising format, product or service which we might not offer; and



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we may be unable to make the transition to new Internet advertising formats preferred by advertisers.

If we fail to keep pace with rapidly changing technologies, we could lose advertisers or advertising space.

        The Internet advertising market is characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions and changing user demands. The introduction of new products and services embodying new technologies and the emergence of new industry standards and practices can render existing products and services obsolete and unmarketable or require unanticipated investments in technology. Our future success will depend on our ability to adapt to rapidly changing advertising formats and other technologies. We will need to enhance our existing solutions and to develop and introduce a variety of new solutions to address our advertisers' changing demands. In addition, an increase in the bandwidth of Internet access resulting in faster data delivery may provide new products and services that will take advantage of this expansion in delivery capability. If we fail to adapt successfully to such developments, we could lose advertisers or advertising space. We may also experience difficulties that could delay or prevent the successful design,

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development, introduction or marketing of new solutions. Any new solution or enhancement that we develop will need to meet the requirements of our current and prospective advertisers and may not achieve significant market acceptance. For example, we currently intend to launch our search engine advertising technology solution in the first quarter of 2005. We expect the success of our search engine advertising technology solution to be material to our future growth. If we do not successfully introduce new technology solutions or if we fail to keep pace with technological developments and the introduction of new industry and technology standards on a cost-effective basis, our expenses could increase, and we could lose advertisers or advertising space.

Changes in government regulation and industry standards applicable to the Internet could decrease demand for our technology solutions and harm our business and results of operation.

        Laws and regulations that apply to Internet communications, commerce and advertising are becoming more prevalent. These regulations could affect the costs of communicating on the Internet and adversely affect the demand for our products and services or otherwise harm our business, results of operations and financial condition.

        In the United States, federal and state laws have been enacted regarding children's privacy, copyrights, sending of unsolicited commercial email, user privacy, search engines, Internet tracking technologies, direct marketing, data security, pricing, sweepstakes, promotions, intellectual property ownership and infringement, trade secrets, export of encryption technology, taxation and acceptable content and quality of goods. The European Union has also adopted directives that may affect our ability to collect and use information regarding Internet users in Europe. Other laws and regulations may be adopted in the future. This legislation could hinder growth in the use of the Internet generally, and decrease the acceptance of the Internet as a communications, commercial and advertising medium.

        Several recent federal laws could have an impact on our business. The Digital Millennium Copyright Act is intended, in part, to limit the liability of eligible Internet service providers for listing or linking to third-party websites that include materials that infringe copyrights or other rights of others. The Children's Online Protection Act and the Children's Online Privacy Protection Act are intended to restrict the distribution of certain materials deemed harmful to children and impose additional restrictions on the ability of Internet services to collect user information from minors. In addition, the Protection of Children From Sexual Predators Act of 1998 requires Internet service providers to report evidence of violations of federal child pornography laws under certain circumstances. Though we specifically prohibit the use of our network for any such activities, and refuse to transact business with any advertiser or publisher participating in such activities, such legislation may impose significant additional costs on our business or subject us to additional liabilities.

        Due to the global nature of the Internet, it is possible that, although our transmissions originate in Santa Barbara, California, San Jose, California and Ashburn, Virginia, the governments of other states or foreign countries might attempt to regulate our transmissions or levy sales or other taxes relating to our activities. For example, we file tax returns in the states where we are required to by law, based on principles applicable to traditional businesses. However, one or more states could seek to impose additional income tax obligations or sales tax collection obligations on out-of-state companies, such as ours, that engage in or facilitate electronic commerce. A number of proposals have been made at state and local levels that could impose such taxes on the sale of products and services through the Internet or the income derived from such sales. If adopted, these proposals could substantially impair the growth of electronic commerce and seriously harm our profitability.

        The determination of our provision for income taxes and other tax liabilities requires significant judgment and, in the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

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        The laws governing the Internet remain largely unsettled, even in areas where there has been some legislative action. We are not certain how our business might be affected by the application of existing laws governing issues such as property ownership, copyrights, encryption and other intellectual property issues, taxation, libel, obscenity and export or import matters to the Internet advertising industry. The vast majority of such laws were adopted prior to the advent of the Internet. As a result, they do not contemplate or address the unique issues of the Internet and related technologies. Changes in laws intended to address such issues could create uncertainty in the Internet market. It may take years to determine how existing laws apply to the Internet and Internet advertising. Such uncertainty can make it difficult to predict costs and could reduce demand for our services or increase the cost of doing business as a result of litigation costs or increased service delivery costs.

        The growth and development of the market for Internet commerce may prompt calls for more stringent laws and regulations governing the Internet, both in the United States and abroad, which may impose additional burdens on companies conducting business over the Internet. In addition to governmental regulation, privacy advocacy groups and the advertising, technology and direct marketing industries are all considering various new, additional or different self-regulatory standards applicable to the Internet. Our business, results of operations and financial condition could be materially and adversely affected by the adoption or modification of laws, regulations or industry guidelines relating to the Internet, or the application of existing laws to the Internet or Internet-based advertising.

If the technology that we currently use to target the delivery of Internet advertisements and to prevent fraud on our network is restricted by or becomes subject to regulation, our expenses could increase and we could lose advertisers or advertising space.

        Websites typically place small files of non-personalized, or anonymous, information, commonly known as cookies and action tags, on an Internet user's hard drive, generally without the user's knowledge or consent. Cookies generally collect aggregate information about users on a non-personalized basis to enable websites to provide users with a more customized experience. Cookie information is passed to the website through an Internet user's browser software. We use cookies to collect information regarding the ads we deliver to Internet users and their interaction with these ads. An action tag functions similarly to a banner ad, except that the action tag is not visible. Action tags may be placed on certain pages of a website, which enables us to measure an advertising campaign's effectiveness in driving Internet users to take specific actions. We use this information to identify Internet users who have received our ads in the past and to monitor and prevent potentially fraudulent activity. In addition, our proprietary technologies use this information to monitor the performance of ongoing advertising campaigns and plan future campaigns. Most currently available Internet browsers allow Internet users to modify their browser settings to prevent cookies from being stored on their hard drives, and some users currently do so. Internet users can also delete cookies from their hard drives at any time. Recently, technologies have been developed, like the Platform for Privacy Preferences Project, or P3P, which limit the collection of cookie and action tag information. Finally, third parties have brought class action lawsuits against other companies relating to the use of cookies, and we may be subject to similar lawsuits in the future. The use of such technologies or the results of such lawsuits could limit or eliminate our ability to use cookies and action tags.

        Some Internet commentators and privacy advocates have suggested limiting or eliminating the use of cookies and certain software programs which allow the monitoring of Internet users' activities without their consent; such programs are commonly known as "spyware." Legislation has been passed or is pending in several states and the United States Congress that restrict the use of these types of technologies. For example, in California, the Consumer Protection Against Computer Spyware Act was passed and will take effect on January 1, 2005. In the United States Congress, the House of Representatives recently passed two separate bills known as the Securely Protect Yourself Against Cyber Trespass Act, or the SPY Act, and the Internet Spyware Prevention Act of 2004, or the I-SPY Act. Both the SPY Act and the I-SPY Act are pending in the United States Senate. In addition, the

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European Union has adopted a directive requiring that when cookies are used, the user must be informed regarding the use and purpose of cookies and provided instructions on how to remove cookies.

        Any reduction of or limitation on our ability to use Internet tracking technologies such as cookies and action tags may:

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reduce the effectiveness of our proprietary technologies;



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require us to replace or re-engineer our proprietary technologies, which could require significant amounts of our time and resources, may not be completed in time to avoid losing advertisers or advertising space, and may not be commercially or technically feasible; and



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cause us to become subject to costly and time-consuming litigation or investigations due to our use of cookie technology or other technologies designed to collect Internet usage information.

        Any one or more of these occurrences could result in increased costs, require us to change our business practices or divert management's attention.

New technologies could block our ability to serve advertisements, which would harm our business and results of operations.

        Technologies have been developed and distributed that are designed to block the appearance of pop-up and pop-under ads on website pages viewed by Internet users. Currently, we derive a substantial portion of our revenue from our deployment of pop-under ads across our network. These technologies may become more effective and their use may become more widespread, and they may block the display of other current or future formats that we may use to deploy our ads. Substantially all of our revenue is derived from fees paid to us by advertisers in connection with the display of ads on websites. As a result, ad-blocking technology could, in the future, harm our business and results of operations.

Disputes with advertisers or website publishers over our measurement of Internet user impressions, clicks or actions may cause us to lose advertisers and website publishers.

        We earn advertising revenue and make payments to website publishers based on the number of impressions, clicks and actions from ads delivered on our network of websites. Advertisers' and website publishers' willingness to use our services and join our network will depend on the extent to which they perceive our measurements to be accurate and reliable. Advertisers and website publishers often maintain their own technologies and methodologies for counting impressions, clicks and actions from ads, and we frequently have had to resolve differences between our measurements and theirs. Any significant dispute over the proper measurement of impressions, clicks and actions from ads could cause us to lose advertisers or advertising space and the related revenue.

If our pricing models are not accepted by our advertisers, we could lose advertisers and our revenue and results of operations could be harmed.

        Many of our services are offered to advertisers based on CPA or CPC pricing models, under which advertisers only pay us if the user takes a specific action in response to the ad, such as clicking on it or registering on a website. These performance-based pricing models differ from the fixed-rate pricing model used by many Internet advertising companies, under which these companies are paid based on the number of times the ad is shown without regard to effectiveness. Our ability to generate significant revenue from advertisers will depend, in part, on our ability to demonstrate the effectiveness of our primary pricing models to advertisers, who may be more accustomed to a fixed-rate pricing model. Furthermore, intense competition among websites and other Internet advertising providers has led to the development of a number of alternative pricing models for Internet advertising. The proliferation of multiple pricing alternatives may confuse advertisers and make it more difficult for them to differentiate among these alternatives. In addition, it is possible that new pricing models may be

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developed and gain widespread acceptance that are not compatible with our business model or our technology. These alternatives, and the likelihood that additional pricing models will be introduced, make it difficult for us to project the levels of advertising revenue or the margins that we, or the Internet advertising industry in general, will realize in the future. If advertisers do not understand the benefits of our pricing models, then the market for our services may decline or develop more slowly than we expect, which may limit our ability to grow our revenue or cause our revenue to decline.

Limitations on our ability to collect and use data derived from advertising campaigns could significantly diminish the value of our services and cause us to lose advertisers and revenue.

        When a user visits our publishers' websites, we use technologies, including cookies, to collect information such as the user's IP address, ads delivered by us that have been previously viewed by the user and responses by the user to those ads. In order to determine the effectiveness of an advertising campaign by one of our advertisers and to determine how to modify the campaign, we need to access and analyze this information. Certain of our advertisers and publishers prohibit or limit our collection or use of this data. Interruptions, failures or defects in our data collection systems, as well as privacy concerns regarding the collection of user data, could also limit our ability to analyze data from our advertisers' advertising campaigns. If that happens, we may be unable to prove effective advertising solutions to advertisers and we may lose advertisers.

We could lose advertisers if we fail to detect click-through fraud on advertisements in a manner that is acceptable to our advertisers.

        We are exposed to the risk of fraudulent clicks on our ads by individuals seeking to increase the advertising fees paid to our website publishers. We may in the future have to refund revenue that our advertisers have paid to us and that was later attributed to click-through fraud. Click-through fraud occurs when an individual clicks on an ad displayed on a website for the sole intent of generating the revenue share payment to the website publisher rather than to view the underlying content. If we find evidence of past fraudulent clicks, we may have to issue refunds retroactively of amounts previously paid to us by our advertisers. This would negatively affect our profitability, and this type of fraudulent act could hurt our brand. If fraudulent clicks are not detected, the affected advertisers may experience a reduced return on their investment in our advertising programs, which could lead the advertisers to become dissatisfied with our advertising campaigns, and in turn, lead to loss of advertisers and the related revenue.

Consolidation of website publishers may impair our ability to provide marketing services and acquire advertising space at favorable rates.

        The consolidation of Internet advertising networks and website publishers could eventually lead to a concentration of desirable advertising space on a small number of networks and large websites. Such concentration could:

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increase our costs if these website publishers use their greater bargaining power to increase revenue share rates for advertising space;



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impair our ability to provide advertising solutions if these website publishers prevent us from distributing our advertisers' advertising campaigns on their websites or if they adopt ad delivery systems that are not compatible with our ad delivery systems; and



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lessen the value of our services as an intermediary if these website publishers choose to negotiate directly with advertisers or use the services of our competitors rather than us.

Some of our advertisers may not be able to pay for our services.

        Some of our advertisers have limited operating histories, are unprofitable and may not be able to pay for our services. In the past we have lost advertisers, or have had difficulty collecting payments

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from advertisers, who could not pay for our services because they were unprofitable and unable to secure funding. The ability of several of our advertisers to meet their payment obligations is affected by the risks and difficulties encountered by companies with limited operating histories, particularly in the evolving Internet market. We pay our publishers on a 25-day, net basis, regardless of whether we have received payment from our advertisers. If any of our current or future advertisers are unable to pay for our services, we will suffer losses for services provided to them and our business and results of operations would be harmed.

We may be liable for content displayed on our network of websites which could increase our expenses.

        We may be liable to third parties for content in the ads we deliver if the artwork, text or other content included in the ads violates copyright, trademark, or other intellectual property rights of third parties or if the content is defamatory. Any claims or counterclaims could be time-consuming, could result in costly litigation and could divert management's attention.

If the market for Internet advertising fails to continue to develop, our revenue and our results of operations could be harmed.

        Our future success is highly dependent on the continued use and growth of the Internet as an advertising medium. The Internet advertising market is relatively new and rapidly evolving, and it uses different measurements than traditional media to gauge its effectiveness. As a result, demand for and market acceptance of Internet advertising services is uncertain. Many of our current or potential advertisers have little or no experience using the Internet for advertising purposes and have allocated only limited portions of their advertising budgets to the Internet. The adoption of Internet advertising, particularly by those entities that have historically relied upon traditional media for advertising, requires the acceptance of a new way of conducting business, exchanging information, measuring success and evaluating new advertising products and services. Such advertisers may find Internet advertising to be less effective for promoting their products and services than traditional advertising media. They may never adopt Internet advertising or cease using it. We cannot assure you that the market for Internet advertising will continue to grow or become sustainable. If the market for Internet advertising fails to continue to develop or develops more slowly than we expect, our business and results of operations could be harmed.

The advertising industry, including Internet advertising, could be adversely affected by general economic downturns, catastrophic events or declines or disruptions in industries that advertise heavily on the Internet.

        The advertising industry, including Internet advertising, is sensitive to both general economic and business conditions and to specific events, such as acts of terrorism. In addition, Internet advertising spending can be affected by the condition of industries that advertise heavily on the Internet such as the travel, financial services, education, telecommunications, retail and entertainment industries. Some of these industries tend to be sensitive to event-driven disruptions such as government regulation, war, terrorism, disease, natural disasters and other significant events. A general decline in economic conditions or disruptions in specific industries characterized by heavy spending on Internet advertising, could cause a decline in Internet advertising expenditures, which could in turn cause a decline in our revenue.

Changes to financial accounting standards and new exchange rules could make it more expensive to issue stock options to employees, which will increase compensation costs and may cause us to change our business practices.

        We prepare our financial statements to conform with GAAP in the United States. These accounting principles are subject to interpretation by the Public Company Accounting Oversight Board, the SEC and various other bodies. A change in those policies could have a significant effect on our

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reported results and may affect our reporting of transactions completed before a change is announced. For example, we have used stock options and other long-term equity incentives as a component of our employee compensation packages. We believe that stock options and other long-term equity incentives directly motivate our employees to maximize long-term stockholder value and, through the use of vesting, encourage employees to remain with us. Several regulatory agencies and entities are considering regulatory changes that could make it more difficult or expensive for us to grant stock options to employees. In December 2004, the Financial Accounting Standards Board issued a final standard that requires us to record a charge to earnings for employee stock option grants. This standard will be effective for interim and annual periods beginning after June 15, 2005. We could adopt the standard in one of two ways—the modified prospective transition method or the modified retrospective transition method, and we have not concluded how we will adopt the new standard. In addition, regulations implemented by the Nasdaq National Market generally require stockholder approval for all stock option plans, which could make it more difficult or expensive for us to grant stock options to employees. We will, as a result of these changes, incur increased compensation costs, which could be material and we may change our equity compensation strategy or find it difficult to attract, retain and motivate employees, any of which could harm our business and results of operations.

We rely on bandwidth and data center providers, and other third parties for key aspects of the process of providing products and services to our users, and any failure or interruption in the services and products provided by these third parties could harm our business.

        We rely on third-party vendors, including data center and bandwidth providers. Any disruption in the network access or co-location services provided by these third-party providers or any failure of these third-party providers to handle current or higher volumes of use could significantly harm our business. Any financial or other difficulties our providers face may have negative effects on our business, the nature and extent of which we cannot predict. We exercise little control over these third party vendors, which increases our vulnerability to problems with the services they provide. We license technology and related databases from third parties to facilitate aspects of our campaign reporting, analysis and storage of data, and delivery of ads across our network. We have experienced and expect to continue to experience interruptions and delays in service and availability for such elements. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies and information services could negatively impact our relationship with users and adversely affect our brand and our business and could expose us to liabilities to third parties.

        Our systems also heavily depend on the availability of electricity, which also comes from third-party providers. If we were to experience a major power outage, we would have to rely on back-up generators. These back-up generators may not operate properly through a major power outage and their fuel supply could also be inadequate during a major power outage. Information systems such as ours may be disrupted by even brief power outages, or by the fluctuations in power resulting from switches to and from backup generators. This could result in a disruption of our business.

We are in the process of implementing new financial and accounting systems which may not work as expected.

        We are in the process of implementing new financial and accounting software. Additionally, we are in the process of upgrading certain of our other information systems and internal controls. These systems are critical to our operations and involve sensitive interactions between us and our advertisers and our website publishers. If we fail to successfully implement and integrate these new financial reporting and accounting systems, or we are not able to scale these systems to our growth, we may not have adequate, accurate or timely financial information. Failure to have adequate, accurate or timely financial information could result in advertiser or publisher dissatisfaction, disrupt our operations and adversely affect our results of operations and effect our ability to prepare financial information in accordance with GAAP.

20

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.

        Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. For example, our auditors have identified the need to hire additional financial employees and upgrade our accounting system. In addition, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to evaluate and report on our internal controls over financial reporting and have our independent auditors attest to our evaluation, beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2006. We have prepared an internal plan of action for compliance with Section 404 and strengthening and testing our system of internal controls to provide the basis for our report. The process of strengthening our internal controls and complying with Section 404 will be expensive and time consuming, and require significant attention of management. Although we believe our recent efforts will strengthen our internal controls we are continuing to work to improve our internal controls, including in the areas of our accounting system. We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we or our auditors discover a material weakness, the disclosure of that fact, even if quickly remedied, would reduce the market's confidence in our financial statements and harm our stock price. In addition, a delay in compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension or delisting of our common stock from the Nasdaq National Market and the inability of registered broker-dealers to make a market in our common stock, which would further reduce our stock price.

Risks Related to this Offering

Sales of a substantial number of shares of common stock in the public market following this offering may adversely affect the market price for our common stock.

        Upon completion of this offering, we will have                        shares of common stock outstanding, of which the                        shares sold in this offering, or                        shares if the underwriters' over-allotment option is exercised in full. These shares will be freely tradable without restriction or further registration under the Securities Act, unless purchased by our "affiliates," as that term is defined under the Securities Act, whose shares will be subject to the resale limitations but not the holding period requirements of Rule 144 under the Securities Act. We and our executive officers and directors, the selling stockholders and substantially all of our other stockholders, option holders and warrant holders, have entered into 180-day lock-up agreements with the underwriters. As of the date of this prospectus, holders of                        shares, in the aggregate, are not subject to a lock-up agreement. The lock-up agreements prohibit each of us from selling or otherwise disposing of our shares of common stock except in limited circumstances. The lock-up agreements are contractual agreements, and Credit Suisse First Boston LLC and Citigroup Global Markets Inc., at their discretion, can waive the restrictions of any lock-up agreement at an earlier time without prior notice or announcement and allow the sale of shares of our common stock. If the restrictions in the lock-up agreements are waived, shares of our common stock will be available for sale into the public market, subject to applicable securities laws, which could reduce the market price for shares of our common stock. See "Underwriting."

        Under our Investors' Rights Agreement, dated September 27, 2004, some of our stockholders have customary demand and piggyback registration rights. See "Description of Capital Stock—Registration Rights." In addition, we intend to file a registration statement under the Securities Act to register an

21

aggregate of up to                        shares of our common stock reserved for issuance under our 2004 Stock Incentive Plan, or 2004 Stock Plan, and            shares of our common stock reserved for issuance under our 2005 Equity Incentive Plan, or 2005 Equity Plan. These shares when issued in accordance with the plans, will be eligible for immediate sale in the public market, subject to the 180-day lock-up restriction described above and Rule 144 resale volume limitations if held by affiliates. We may also issue our common stock in connection with acquisitions or investments. The sale of any additional shares of our common stock, or the perception of investors that such a sale could take place, could depress the market price for our common stock.

Our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid or at all.

        Our common stock has not been sold in a public market prior to this offering. We cannot predict the extent to which a trading market will develop or how liquid that market might become. The initial public offering price for our shares of common stock will be determined by negotiations among the representatives of the underwriters, the selling stockholders and us and may not be indicative of prices that will prevail in the trading market. The trading price of our common stock could be subject to wide fluctuations due to the factors discussed in this "Risk Factors" section and elsewhere in this prospectus. In addition, the stock market in general, and the Nasdaq National Market and technology companies in particular, have experienced extreme price and volume fluctuations. Current trading prices and valuations may not be sustainable. Investor sentiment towards the market and our industry may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a company's securities, securities class action litigation has often been instituted against such companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.

If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock, our stock price and trading volume could decline.

        The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrade our common stock, our common stock price would likely decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.

Concentration of ownership among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions and may result in a lower trading price for our common stock than if ownership of our common stock was less concentrated.

        Upon completion of this offering, our executive officers, directors and principal stockholders will beneficially own, in the aggregate, approximately    % of our outstanding common stock. As a result, these stockholders, acting together, could have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions. This concentration of control could be disadvantageous to other stockholders with interests different from those of our executive officers, directors and principal stockholders. For example, our executive officers, directors and principal stockholders could delay or prevent an acquisition or merger even if the transaction would benefit other stockholders. In addition, this significant concentration of common stock ownership may adversely affect the market price for our

22

common stock because investors often perceive disadvantages in owning stock in companies with a concentration of ownership in a few stockholders. See "Principal and Selling Stockholders."

We do not intend to pay any cash dividends in the foreseeable future.

        Prior to September 2004, we elected to be treated as a subchapter S corporation for tax purposes. During this time period, we made regular distributions to our stockholders. In addition, as part of our Series A Preferred Stock financing, which closed on September 28, 2004, we agreed to make a final cash distribution to our former S corporation stockholders of approximately $3.2 million before December 31, 2004. Subsequent to our change in status from a subchapter S corporation to a C corporation, we have not declared or paid any cash dividend on our capital stock, and, except for the distribution to our subchapter S corporation stockholders prior to December 31, 2004, we do not anticipate declaring or paying any cash dividends in the foreseeable future. We intend to reinvest any earnings in the growth of our business. Payments of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our business, operating results and financial condition, current and anticipated cash needs, plans for expansion and any legal or contractual limitations on our ability to pay dividends.

Our new investors will experience dilution in the book value per share.

        The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock immediately after this offering. As a result, purchasers of the common stock in this offering will experience an immediate and substantial dilution of $            in the net tangible book value per share based on the assumed initial public offering price of $            per share, the midpoint of the range set forth on the front cover of this prospectus. Any exercise of options and warrants that are currently outstanding will result in further dilution.

We will incur increased costs as a public company.

        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the SEC and the Nasdaq National Market, have required changes in corporate governance practices of public companies. We expect these new rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, as a result of being a public company, we will be required to create additional board committees and adopt policies regarding internal controls and disclosure controls and procedures. In addition, we will incur additional costs associated with our public company reporting requirements. We also expect these new rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these new rules, but we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

We have not determined a specific use for the net proceeds received by us from this offering and we may use these proceeds in ways with which you may not agree.

        We have not determined a specific use for the net proceeds received by us from this offering. You will not have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately. Our management will have considerable discretion in the application of the net proceeds from this offering and you must therefore rely on their judgment. We intend to use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures. We may also use a portion of the net proceeds to acquire or invest in businesses and technologies. However, we have no present understandings, commitments or agreements with

23

respect to the acquisition of other businesses or technologies. The net proceeds received by us from this offering may be placed in investments that do not produce income or which lose value, or could be applied in other ways that do not improve our operating results or increase the value of your investment.

We plan to reincorporate in Delaware prior to the effective date of the registration statement of which this prospectus is a part and provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

        Provisions in our certificate of incorporation and bylaws, as amended and restated prior to the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

•

Vacancies created by the expansion of the board of directors, or the resignation, death or removal of a director may be filled only by a majority of the remaining directors, even though less than a quorum, or by a sole remaining director, and not by the stockholders.



•

Our certificate of incorporation does not provide for cumulative voting in the election of directors. This limits the ability of minority stockholders to elect director candidates. Members of the board of directors may only be removed for cause and upon the affirmative vote of the holders of a majority of our capital stock entitled to vote.



•

Our certificate of incorporation provides for the board of directors to be divided into three classes, each with staggered three-year terms. As a result, only one class of directors will be elected at each annual meeting of stockholders, and each of the two other classes of directors will continue to serve for the remainder of their respective three-year term, limiting the ability of stockholders to reconstitute the board of directors.



•

Our bylaws provide that the holders of a majority of our capital stock entitled to vote constitute a quorum for the conduct of business at a meeting of stockholders. However, the holders of at least two-thirds of our outstanding voting stock must approve any amendments to the protective provisions of our certificate of incorporation and bylaws, which include the requirements that actions by stockholders be taken at duly called meetings and not by written consent, and that our board of directors be divided into three classes with staggered terms.



•

Our bylaws provide that special meetings of the stockholders can be called only by the board of directors, the chairman of the board or the president, and not by any stockholders. Our bylaws will also prohibit the conduct of any business other than as specified in the notice of special meeting or as otherwise brought before the meeting by the board of directors. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of us.



•

Our board of directors may issue, without stockholder approval, shares of preferred stock with rights, preferences and privileges determined by the board of directors. The ability to authorize and issue preferred stock with voting or other rights or preferences makes it possible for our board of directors to issue preferred stock with super voting, special approval, dividend or other rights or preferences that could impede the success of any attempt to acquire us.



•

We will be subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15 percent or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction in which such person became such an interested stockholder. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us. See "Description of Capital Stock."

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•

our expectations regarding our future operating results;



•

our anticipated cash needs and our estimates regarding our capital requirements and our needs for additional financing;



•

plans for future technology solutions and for enhancements of existing technology solutions;



•

elements of our growth strategy;



•

our intellectual property;



•

anticipated trends and challenges in our business and the market in which we operate;



•

statements regarding our potential legal proceedings; and



•

our ability to attract advertisers, advertising agencies and website publishers.

In some cases, you can identify forward-looking statements by such terms as "may," "might," "will," "objective," "intend," "should," "could," "can," "would," "expect," "believe," "estimate," "predict," "potential," "plan," "is designed to" or the negative of these terms, and similar expressions.

        These statements reflect our current views with respect to future events and are based on assumptions and estimates, which are subject to risks and uncertainties including those discussed under the heading "Risk Factors" and elsewhere in this prospectus. Accordingly, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this prospectus. We do not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made.

        You should read this prospectus, the documents to which we refer in this prospectus and those we have filed as exhibits to the registration statement of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

        References to industry statistics and market data attributed to Forrester Research are references to their independent research publication Marketing to Consumers: The Changing Landscape, November 22, 2004. Although we believe that this publication is reliable, we have not independently verified the data contained in the publication.

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USE OF PROCEEDS

        We estimate that we will receive net proceeds of $                        from our sale of the shares of common stock offered by us in this offering, assuming an initial public offering price of $            per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters' over-allotment option is exercised in full, we estimate that our net proceeds will be approximately $            . We will not receive any of the proceeds from the sale of shares of common stock by the selling stockholders.

        The principal purposes for this offering are to increase our working capital, create a public market for our common stock, facilitate our future access to the public capital markets and increase our visibility in our markets. We intend to use the net proceeds from this offering primarily for general corporate purposes, including working capital. We may use a portion of the net proceeds to pursue acquisition candidates to grow our advertising and publishing base and access technology and talent. However, we have no present understandings, commitments or agreements with respect to the acquisition of other businesses or technologies.

        We have not yet determined all of our anticipated expenditures and therefore cannot estimate the amounts to be used for all of the purposes discussed above. The amounts and timing of any expenditures will vary depending on the amount of cash generated by our operations, competitive and technological developments and the rate of growth, if any, of our business. Accordingly, our management will have broad discretion in applying the net proceeds from this offering. Pending the uses described above, we intend to invest the net proceeds from this offering in short-term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

        We currently intend to retain any future earnings to finance the growth, development and expansion of our business and do not anticipate paying cash dividends in the future. Payments of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our business, operating results and financial condition, current and anticipated cash needs and plans for expansion and any legal or contractual restrictions on the payment of dividends.

        During the time period that we elected to file taxes as a subchapter S corporation, our policy was to disburse the necessary amount of funds to satisfy the stockholders' estimate of income tax liabilities based on our taxable income. These stockholder distributions were $0.6 million, $4.4 million and $3.8 million, respectively, in 2002, 2003 and for the nine months ended September 30, 2004. In addition, as part of our Series A Preferred Stock financing, which closed on September 28, 2004, we agreed to make a final cash distribution to our former S corporation stockholders of approximately $3.2 million before December 31, 2004.

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CAPITALIZATION

        The following table sets forth our capitalization as of September 30, 2004, as follows:

•

on an actual basis;



•

on a pro forma basis to give effect to the automatic conversion of all of our outstanding shares of Series A Preferred Stock on a one-for-one basis into 2,131,285 shares of common stock upon completion of this offering; and



•

on a pro forma as adjusted basis to reflect (1) the sale of            shares of common stock by us in this offering at the estimated initial public offering price of $            per share, the midpoint of the range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, (2) the filing of our amended and restated certificate of incorporation immediately prior to the completion of this filing and (3) a       -for-      stock split of our common stock to be effected prior to the completion of this offering.

        You should read this table together with "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the related notes appearing elsewhere in this prospectus.

				As of September 30, 2004
				Actual			Pro Forma			Pro Forma As Adjusted
				(in thousands, except share data)
				(unaudited)
Cash and cash equivalents				$	2,409		$	2,409		$
Short-term investments					20,000			20,000
Long-term obligations (including current portion)					134			134
Redeemable convertible preferred stock, no par value per share; 2,131,285 shares authorized, issued and outstanding, actual; 2,131,285 shares authorized and no shares issued or outstanding, pro forma; and no shares authorized, issued or outstanding pro forma as adjusted					73,434			—
Stockholders' equity:
	Preferred stock; no par value per share, no shares authorized, issued or outstanding, actual and pro forma; $0.001 par value per share,                      shares authorized and no shares issued or outstanding, pro forma as adjusted				—			—
	Common stock, no par value per share, 3,750,000 shares authorized, 2,234,988 issued and 612,044 shares outstanding, actual; no par value per share, 3,750,000 shares authorized and 2,803,329 shares issued and 2,743,329 shares outstanding, pro forma; and $0.001 par value per share,                     shares authorized,                      shares issued and                     outstanding, pro forma as adjusted				6,165			79,599
	Additional paid-in capital				—			—
	Deferred stock-based compensation				(5,328	)		(5,328	)
	Less: treasury stock				(54,386	)		(54,386	)
	Retained earnings				1,523			1,523
		Total stockholders' equity (deficit)			(52,026	)		21,408
			Total capitalization	$	21,542		$	21,542		$

        The table above excludes the following shares:

•

438,500 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2004, at a weighted average exercise price of $9.63 per share; and



•

227,997 shares of common stock reserved for future issuance under our 2004 Stock Plan.

        As of September 30, 2004, 227,997 shares remained available for future issuance under our 2004 Stock Plan. Upon the completion of this offering, no shares of common stock will remain available for option grants under this plan.

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DILUTION

        If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding as of September 30, 2004 after giving effect to the conversion of all of our outstanding Series A Preferred Stock into an aggregate of 2,131,285 shares of our common stock and a      -for-      split of our common stock, both of which will occur upon completion of this offering.

        Investors participating in this offering will incur immediate, substantial dilution. Our pro forma net tangible book value was approximately $            million, or $             per share of common stock as of September 30, 2004. After giving effect to the sale of            shares of common stock by us in this offering at the assumed initial public offering price of $            per share, the midpoint of the range on the cover page of this prospectus, after deducting underwriting discounts, commissions and estimated offering expenses we are responsible for paying, our pro forma as adjusted net tangible book value as of September 30, 2004, would have been $            million, or $            per share of common stock. This represents an immediate increase in pro forma net tangible book value of $            per share of common stock to our existing stockholders and an immediate dilution of $            per share to the new investors purchasing shares in this offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share			$
	Pro forma net tangible book value per share before this offering at September 30, 2004	$
	Increase in net tangible pro forma book value per share attributable to new investors in this offering
	Pro forma as adjusted net tangible book value per share after this offering
Dilution per share to new investors			$

        The following table summarizes, as of September 30, 2004, on a pro forma as adjusted basis, the total number of shares, the consideration paid to us, and the average price per share paid by existing stockholders and by new investors purchasing shares of common stock in this offering from us at the assumed initial public offering price of $             per share, the midpoint of the range on the cover page of this prospectus, and before deducting the underwriting discounts, commissions and estimated offering expenses we are responsible for paying:

		Shares Purchased			Total Consideration
								Average Price per Share
		Number	Percent		Amount	Percent
Existing stockholders				%	$		%	$
New Investors
	Total		100	%	$	100	%

        If the underwriters exercise their over-allotment option in full, the following will occur: (1) the number of shares of common stock held by our existing stockholders will represent approximately    % of the total number of shares of common stock outstanding; and (2) the number of newly issued shares of common stock held by new investors will be increased to            , or approximately    % of the total number of shares of our common stock outstanding after this offering.

        The discussion and tables above are based on the number of shares of common stock and Series A Preferred Stock outstanding as of September 30, 2004.

        The discussion and tables above exclude the following shares:

•

438,500 shares of common stock issuable upon exercise of stock options outstanding, as of September 30, 2004, at a weighted average exercise price of $9.63 per share; and



•

227,997 shares of common stock available for future issuance under our 2004 Stock Plan, as of September 30, 2004.

        To the extent outstanding options are exercised, new investors will experience further dilution.

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SELECTED FINANCIAL DATA

        The following table sets forth our selected historical financial data as of and for the periods presented. The statements of operations data for the years ended December 31, 2001, 2002 and 2003 and the balance sheet data as of December 31, 2002 and 2003 are derived from our audited financial statements included elsewhere in this prospectus. The statements of operations data for the nine months ended September 30, 2003 and 2004 and the balance sheet data as of September 30, 2004 are derived from unaudited interim financial statements included elsewhere in this prospectus. The statements of operations data for the period beginning March 31, 2000, our inception, through December 31, 2000 and the balance sheet data as of December 31, 2000 and 2001 are derived from our audited financial statements for those periods, which are not included in this prospectus. The selected financial data presented below should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus.

        The unaudited interim financial statements have been prepared on the same basis as our audited financial statements and, in our opinion, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the results of operations and financial position for those periods and as of that date. The unaudited pro forma statement of operations data presents our pro forma provision for income taxes and pro forma net income as if we had been a C corporation for all periods presented. The historical results are not necessarily indicative of the results to be expected for any future periods and the results for the nine months ended September 30, 2004 should not be considered indicative of results expected for the full fiscal year.

													Nine Months Ended September 30,
		March 31, 2000 (Inception) Through December 31, 2000			Year Ended December 31,
					2001			2002		2003			2003			2004
		(in thousands, except share data)
													(unaudited)
Statements of Operations Data:
Revenue		$	143		$	4,480		$	17,664	$	28,663		$	18,459		$	38,986
Cost of revenue			106			3,114			11,766		19,246			12,398			25,688
Gross profit			37			1,366			5,898		9,417			6,061			13,298
Operating costs(1):
	Sales and marketing		68			229			995		2,160			1,371			4,670
	Technology		15			221			345		402			278			1,851
	General and administrative		81			193			422		1,045			716			1,761
	Stock-based compensation(2)		—			—			—		—			—			340
Total operating costs			164			643			1,762		3,607			2,365			8,622
Operating income			(127	)		723			4,136		5,810			3,696			4,676
Interest and dividend income			10			8			19		19			14			23
Interest expense			—			—			—		(5	)		(3	)		(6	)
Loss on sale/disposal of equipment			—			(1	)		—		(12	)		(12	)		—
Income before income taxes			(117	)		730			4,155		5,812			3,695			4,693
Provision for income taxes(3)			—			207			97		55			42			1,348
Net income (loss)(4)		$	(117	)	$	523		$	4,058	$	5,757		$	3,653		$	3,345
Unaudited Pro Forma Statement of Operations Data(5):
Income before income taxes								$	4,155	$	5,812		$	3,695		$	4,693
Pro forma provision for income taxes									1,581		2,167			1,360			1,722
Pro forma net income								$	2,574	$	3,645		$	2,335		$	2,971

(footnotes on following page)

29

	As of December 31,
										As of September 30, 2004
	2000			2001		2002		2003
	(in thousands)
										(unaudited)
Balance Sheet Data:
Cash and cash equivalents	$	55		$	89	$	2,023	$	1,657	$	2,409
Short-term investments		—			—		—		—		20,000
Working capital		43			553		3,687		4,131		19,993
Total assets		403			1,697		6,074		7,854		32,725
Long-term obligations (including current portion)		—			—		—		156		134
Redeemable convertible preferred stock		—			—		—		—		73,434
Retained earnings		(117	)		406		3,857		5,230		1,523
Total stockholders' equity (deficit)	$	284		$	807	$	4,248	$	5,657	$	(52,026	)

(1)

Operating costs for the nine months ended September 30, 2004 include the one-time compensation charge of $952,000 paid to employees in conjunction with the termination of the Ownership Equivalency Plan. See Note 12 to our audited financial statements.

(2)

See Note 1 and Note 11 to our audited financial statements for an explanation of our stock-based compensation.

(3)

From our inception in 2000 to December 31, 2001, we operated as a C corporation. For the years ended December 31, 2002 and 2003 and the period from January 1, 2004 through September 28, 2004 we were a subchapter S corporation. On September 28, 2004 our subchapter S corporation status was revoked in connection with the issuance of our Series A Preferred Stock and we now operate as a C corporation. The provision for income taxes for the nine months ended September 30, 2004 includes the recognition of taxes of $1,038 under Section 481(a) of the Internal Revenue Code as a result of the revocation of our subchapter S corporation status. See Note 1 and Note 4 to our audited financial statements.

(4)

As a result of our subchapter S corporation status for tax purposes for all of 2002 and 2003 and for the period from January 1, 2004 through September 28, 2004 and our status as a closely held corporation from inception through December 31, 2001, earnings per share information has not been presented.

(5)

Presents pro forma provision for income taxes and pro forma net income as if we operated as a C corporation, in all periods presented, except for the year ended December 31, 2001 in which we were a C corporation. See Note 1 and Note 4 to our audited Financial Statements for an explanation of the unaudited pro forma statement of operations data.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with the financial statements and related notes that are included elsewhere in this prospectus. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described under "Risk Factors" or elsewhere in this prospectus.

General

        We provide performance-based technology solutions to advertisers and website publishers that are designed to improve advertising campaign performance across our growing network of over 7,500 websites. We believe our technology solutions, including our proprietary Optimization Engine, managed-market bidding system, and our reporting suite and campaign management tools, increase advertisers' return-on-investment, or ROI, and enhance the value of our website publishers' advertising space.

        Our advertisers include direct response marketers, brand marketers and advertising agencies. We represent advertisers in a variety of industries, including travel, financial services, education, telecommunications, retail, automotive, entertainment, finance, pharmaceutical and health and information technology, either directly or indirectly through an advertising agency. For the nine months ended September 30, 2004, no advertiser accounted for more than 10% of our revenue. Our top ten advertisers accounted for 47.6% of our advertising revenue for 2003 and 44.2% of our advertising revenue for the nine months ended September 30, 2004.

        Our website publishers include branded websites that offer large amounts of advertising space as well as a substantial number of websites that reach Internet users with highly-targeted demographics and interests. No single website publisher accounted for more than 10% of our publisher expenses for the year ended December 31, 2003 or for the nine months ended September 30, 2004. Our top ten website publishers accounted for 22.6% and 23.3% of our publisher expenses for 2003 and the nine months ended September 30, 2004, respectively.

Overview

Our History

        We were founded in March 2000 and engaged primarily in the development of our proprietary technology throughout 2000. We began generating revenue in 2000, and have since increased our revenue from $0.1 million in 2000, to $4.5 million in 2001, $17.7 million in 2002, $28.7 million in 2003 and $39 million for the nine months ended September 30, 2004. We introduced our proprietary Optimization Engine and our managed-market bidding system in late 2000 and became profitable in the first quarter of 2001. We generated a net loss of $0.1 million for 2000 and net income of $0.5 million, $4.1 million, $5.8 million and $3.3 million in 2001, 2002, 2003 and for the nine months ended September 30, 2004, respectively.

        Our early operations were financed with $0.4 million of equity financing in March 2000. Thereafter, we financed our operations primarily through internally generated funds through September 2004. On September 28, 2004, we sold 2,131,285 shares of our Series A Preferred Stock at a price per share of $35.19, for an aggregate purchase price of approximately $75 million. Approximately $55 million of these proceeds were used to repurchase 1,562,944 shares of our common stock held by our founders, employees and investors at the issuance price. Approximately $20 million of our net proceeds from the sale of our Series A Preferred Stock remains on our balance sheet as short-term investments and we expect to use these funds to finance our future growth. We also agreed to make a

31

final cash distribution to our former subchapter S corporation stockholders of approximately $3.2 million before December 31, 2004.

        From our inception to December 31, 2001, we operated as a C corporation. Effective January 1, 2002, we elected to be taxed as a subchapter S corporation for federal and state income tax purposes. For the years ended December 31, 2002 and 2003 and the period from January 1, 2004 through September 28, 2004, we did not incur any provision for federal income taxes as the income, deductions, gains, losses, tax credits and other tax attributes of the corporation for these periods passed through and were taxed directly to the stockholders. We were subject to a 1.5% California subchapter S corporation income tax during these periods. We made distributions to our stockholders of $0.6 million, $4.4 million and $3.8 million for the years ended December 31, 2002 and 2003 and for the nine months ended September 28, 2004, respectively. Our subchapter S corporation status was revoked on September 28, 2004 in connection with the issuance of our Series A Preferred Stock and we now operate as a C corporation and are subject to federal and state tax in the United States.

        We have grown our employee base from three employees at inception to 35 employees as of December 31, 2003 and 72 employees as of September 30, 2004. While we have increased the number of our employees in all areas, our highest growth has been in our sales and marketing, technology and general and administrative departments. We expect our headcount to continue to grow as our business expands. We have two office locations in Santa Barbara, California, including our corporate headquarters. We also currently have sales and marketing operations in San Francisco, Los Angeles and New York City, and expect to expand our Los Angeles presence in 2005. We also lease server space in San Jose, California and Ashburn, Virginia.

Our Business Model

        We generate revenue primarily from the sale of advertising across our growing network of over 7,500 websites. Advertising space on our network of websites is priced through our managed-market bidding system, which values advertising space based on market demand by matching the advertisers willing to bid the highest price for the advertising space that meets their campaign objectives with the websites able to supply that space, subject to certain rules that may be set by us, our advertisers or our publishers.

        We offer advertisers multiple pricing options to achieve their desired results. These alternatives include:

•

Cost-per-action, or CPA, where the advertiser pays us a fee based on the number of specified Internet user responses, such as registrations, requests for information or sales that its ads produce;



•

Cost-per-click, or CPC, where the advertiser pays us a fee based on the number of clicks its ads generate; and



•

Cost-per-thousand impressions, or CPM, where the advertiser pays us a fee based on the number of times its ads are displayed, referred to as impressions.

        While we allow advertisers to purchase advertising space based on a CPA, CPC or CPM pricing model, we pay for a majority of our publishers' advertising space on a CPM-basis. This allows our publishers to be paid for the impressions they serve and our advertisers to receive the performance-based pricing model they desire for their advertising campaigns.

        Our standard advertising contract covers both campaign management and ad delivery. Advertisers generally pay us on a 30-day, net basis, although a portion of our advertisers prepay us for their campaigns. Our advertising contracts are terminable at any time by the advertiser or us without prior notice or penalty. Our standard publisher contract covers the provision and use of advertising campaigns by publishers and the related payments. We pay a vast majority of our publishers within 25 days of the end of the month, under revenue-sharing agreements pursuant to which we pay them a

32

majority of the advertising revenue we generate from ads placed on their websites. Either the publisher or we can terminate our publisher contract at any time without prior notice or penalty.

Components of Gross Margin

Sources of Revenue

        We principally derive revenue from the sale of Internet advertising space across our network of websites. With respect to the Internet advertising solutions we provide to advertisers, we recognize revenue when the advertising impression is served (for CPM contracts) or when the specified click or other action occurs or when lead-based information is delivered (for CPC and CPA contracts), provided that we have no significant remaining obligations, collection of the resulting receivable is reasonably assured and prices are fixed and determinable. Our revenue recognition policy is discussed in more detail in the section below entitled "Critical Accounting Policies and the Use of Estimates—Revenue Recognition."

Cost of Revenue

        Cost of revenue consists primarily of amounts we incur and pay to our website publishers for their share of revenue we derive from the sale of their advertising space and, to a lesser extent, the cost of maintaining the computer systems infrastructure which supports our proprietary technologies, the salaries and benefits of network operations personnel, bandwidth and communications costs, depreciation of network infrastructure equipment and the cost of database maintenance and support.

Components of our Operating Costs and Other Items

        The following describes certain line items in our statement of operations:

Operating Costs

        Our operating costs include sales and marketing, technology, general and administrative and stock-based compensation.

        Sales and marketing.    Our sales and marketing expenses primarily consist of the compensation and associated costs for sales and marketing personnel, marketing and advertising, public relations and other promotional activities, general business development activities, publisher acquisition and product development expenses. We expect sales and marketing expenses to increase in absolute terms with the growth of our business as we expand our sales and marketing workforce and further promote our products and services.

        Technology.    Technology costs include expenses for the research and development of new technologies designed to enhance our Internet advertising solutions and costs associated with the maintenance and administrative support of our technology team, including the salaries and related expenses for our research and development, as well as costs for contracted services and supplies. Also included in technology is the amortization of capitalized software development costs. We expect our technology expenses to increase in absolute terms as we grow and continue to invest in new technologies and hire additional technology personnel.

        General and administrative.    Our general and administrative expenses primarily consist of the compensation and associated costs for general and administrative personnel and facility costs. We expect that general and administrative expenses will increase in absolute terms as we hire additional personnel and incur costs related to the anticipated growth of our business and our operation as a public company.

        Stock-based compensation.    We have recorded stock-based compensation expense for some of our equity awards provided to employees and non-employee directors. Our accounting policy for recognizing stock compensation expense is described in the section below entitled "Critical Accounting

33

Policies and the Use of Estimates—Accounting for Stock-Based Compensation." As of September 30, 2004, we had an aggregate of $5.3 million of deferred stock-based compensation expense, which will be recognized over the next four years as the related awards vest.

Income Taxes

        We are subject to tax in the United States as we are now a C corporation. The accounting for income taxes is discussed in more detail in the section below entitled "Critical Accounting Policies and Use of Estimates—Accounting for Income Taxes."

Trends that Affect our Business

        Our business has grown rapidly since our inception in March 2000, and we expect that it will continue to grow; however, we anticipate that our growth rate will slow as our revenue base increases. We expect that some of the historical trends or patterns in our business will change over time, and in managing and evaluating our business we are focused on several trends, including the following:

•

Revenue growth.    Our revenue depends on the volume of paid ads, pricing of advertising and ad format mix that our advertisers purchase. Over the past several years we have experienced a significant increase in the volume of paid ads we deliver across our network. Additionally, we have generally experienced a gradual increase in ad pricing. The historical increase in ad volume and pricing has been partially offset by the introduction of new, lower-priced ad formats and other new products in response to demand from both advertisers and publishers. We anticipate that the volume of paid ads, pricing of advertising and ad format mix will continue to be key revenue drivers in the future.



•

Gross profit margin.    The primary component of our cost of revenue is the revenue share payments we make to our publishers. The percentage of revenue we share with our publishers has remained relatively constant. We anticipate that our gross profit margin will increase as advertisers continue to shift to CPA and CPC-based pricing models. Our advertisers increasingly prefer to purchase advertising on a CPA- or CPC-basis because they pay only for ads which result in the desired action. Our publishers typically prefer payment on a CPM-basis, in which they are paid for the impressions they serve and do not assume performance risk. In order to mitigate the performance risks associated with paying publishers on a CPM-basis for the CPA-based and CPC-based campaigns of our advertisers, we typically build in a higher profit margin when pricing these campaigns.



•

Sales and marketing.    We anticipate that our sales and marketing expenses will increase over the next several quarters. In addition, as we continue to grow, we expect to hire additional sales and marketing personnel and expand to new facilities to accommodate our growing sales and marketing team.



•

Technology.    We anticipate increasing our investment in the development and deployment of new products, services and features to our existing technology solutions. Our historical decline in technology expense as a percentage of revenue primarily reflects the increase in our revenue over the three year period ended December 31, 2003. In the future, we expect our technology expense, both as a percentage of revenue, and in absolute dollars, will increase. In addition, as we continue to grow, we expect to hire additional technology personnel and expand to new facilities.



•

General and administrative.    We anticipate that our general and administrative expenses will increase over the next several quarters as we incur expenses related to being a public company, including increased legal, accounting and insurance expenses. In addition, as we continue to grow, we expect to hire additional senior management personnel and expand to new facilities.



•

Seasonality and cyclicality.    We believe that our business is subject to seasonal and cyclical fluctuations. Generally, our advertisers and advertising agencies place more ads in the fourth

34

calendar quarter and fewer ads in the first calendar quarter of each year. Overall Internet usage generally declines during the summer months, resulting in lower inventories for our website publishers and lower revenue for us. In addition, domestic advertising spending generally is cyclical in reaction to overall conditions in the United States economy. Our rapid historical growth rate has masked the impact of seasonality on our business. As our growth rate slows, however, we expect the seasonal pattern of our business to become more pronounced.

•

Volume of advertising space.    Over the past several years our publisher network and advertising space volume have increased significantly. In order to continue to grow our revenue we must increase the volume of advertising space that we are able to sell to advertisers. We anticipate that our ability to grow advertising space volume will be influenced by a number of factors including the size of our publisher network and Internet advertising market dynamics such as sector consolidation.



•

Provision for income taxes.    From our inception to December 31, 2001 we operated as a C corporation. From January 1, 2002 through September 28, 2004 we operated as a subchapter S corporation. In connection with the issuance of our Series A Preferred Stock our subchapter S corporation status was revoked and we now operate as a C corporation. During the period we were a subchapter S corporation, we did not incur any provision for federal income taxes and we were subject to a 1.5% California income tax. As a C corporation, we will now pay C corporation income taxes. We currently anticipate our effective tax rate to be approximately 40%, excluding the effects of any future tax credits.

Results of Operations

        The following table sets forth the items in our historical statements of operations for the periods indicated as a percentage of revenue:

		Year Ended December 31,						Nine Months Ended September 30,
		2001		2002		2003		2003		2004
								(unaudited)
Statements of Operations Data:
Revenue		100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue		69.5		66.6		67.1		67.2		65.9
Gross profit		30.5		33.4		32.9		32.8		34.1
Operating costs:
	Sales and marketing	5.1		5.6		7.5		7.4		12.0
	Technology	4.9		2.0		1.4		1.5		4.7
	General and administrative	4.3		2.4		3.6		3.9		4.5
	Stock-based compensation	—		—		—		—		0.9
Total operating costs		14.3		10.0		12.5		12.8		22.1
Operating income		16.2		23.4		20.4		20.0		12.0
Interest and dividend income		0.2		0.1		0.1		0.1		0.1
Interest expense		—		—		—		—		—
Loss on sale/disposal of equipment		—		—		—		—		—
Income before income taxes		16.4		23.5		20.5		20.1		12.1
Provision for income taxes		4.6		0.5		0.2		0.2		3.5
Net income		11.8	%	23.0	%	20.3	%	19.9	%	8.6	%

Comparison of the Nine Months Ended September 30, 2003 and 2004

        Revenue.    Revenue increased from $18.5 million for the nine months ended September 30, 2003 to $39 million for the nine months ended September 30, 2004, a 111.2% increase. This increase was

35

primarily due to an increase in the number of paid ads delivered across our network as well as a slight increase in the average price of existing ad formats as compared to the prior period. This growth in volume and ad pricing was partially offset by a shift in mix to include new lower priced advertising formats.

        Cost of revenue.    Cost of revenue increased from $12.4 million for the nine months ended September 30, 2003 to $25.7 million for the nine months ended September 30, 2004, a 107.2% increase. Our cost of revenue decreased slightly as a percentage of revenue from 67.2% for the nine months ended September 30, 2003 to 65.9% for the nine months ended September 30, 2004. This increase in absolute dollars was primarily due to an increase in the volume of advertising sold to advertisers resulting in increased publisher revenue-share costs. While the percentage of revenue we shared with publishers remained relatively constant and we continued to pay our publishers primarily on a CPM-basis, the shift to CPA- and CPC-priced advertising campaigns resulted in improved gross margins.

        Sales and marketing.    Sales and marketing expenses increased from $1.4 million for the nine months ended September 30, 2003 to $4.7 million for the nine months ended September 30, 2004, a 240.6% increase. Our sales and marketing expenses increased as a percentage of revenue from 7.4% for the nine months ended September 30, 2003 to 12.0% for the nine months ended September 30, 2004. This increase in sales and marketing expenses was primarily the result of hiring additional sales and marketing personnel, combined with expanded marketing and advertising costs.

        Technology.    Technology expenses increased from $0.3 million for the nine months ended September 30, 2003 to $1.9 million for the nine months ended September 30, 2004, a 565.8% increase. Our technology expenses increased as a percentage of revenue from 1.5% for the nine months ended September 30, 2003 to 4.7% for the nine months ended September 30, 2004. This increase in our technology expenses primarily resulted from an increase in technology personnel.

        General and administrative.    General and administrative expenses increased from $0.7 million for the nine months ended September 30, 2003 to $1.8 million for the nine months ended September 30, 2004, an increase of 145.9%. Our general and administrative expenses increased as a percentage of revenue from 3.9% for the nine months ended September 30, 2003 to 4.5% for the nine months ended September 30, 2004. This increase in general and administrative expenses was primarily due to the hiring of additional personnel and expansion into new facilities.

        Stock-based compensation.    Stock-based compensation for the nine months ended September 30, 2003 was $0 compared to $0.3 million for the nine months ended September 30, 2004. The increase in stock based compensation was primarily a result of recognizing the impact of the deemed fair value of the option exercise prices for stock option grants during the period.

        Interest and other income (expense), net.    Interest and other income (expense), net for the nine months ended September 30, 2003 amounted to an expense of $1,000 compared to income of $0.02 million for the nine months ended September 30, 2004. The change was primarily a result of increasing average cash balances in our money market account.

Comparison of the Years Ended December 31, 2002 and 2003

        Revenue.    Revenue increased from $17.7 million in 2002 to $28.7 million in 2003, a 62.3% increase. This increase in revenue was primarily due to an increase in the number of paid ads delivered across our network as well as an increase in the average price of existing ad formats as compared to the prior period. The growth in volume was partially offset by a shift in mix to lower priced advertising formats.

        Cost of revenue.    Cost of revenue increased from $11.8 million in 2002 to $19.2 million in 2003, a 63.6% increase. Our cost of revenue increased as a percentage of revenue from 66.6% in 2002 to

36

67.1% in 2003. While the percentage of revenue we share with publishers remained relatively constant compared to the prior period, the increase was primarily due to an increase in the cost of maintaining and upgrading our computer and communications systems.

        Sales and marketing.    Sales and marketing expenses increased from $1.0 million in 2002 to $2.2 million in 2003, a 117.1% increase. Our sales and marketing expenses increased as a percentage of revenue from 5.6% in 2002 to 7.5% in 2003. This increase in sales and marketing expenses was primarily the result of hiring additional sales and marketing personnel, combined with expanded marketing and advertising costs.

        Technology.    Technology expenses increased from $0.3 million in 2002 to $0.4 million in 2003, a 16.5% increase. Our technology expenses decreased as a percentage of revenue from 2% in 2002 to 1.4% in 2003. This increase in our technology expenses in absolute dollars was primarily the result of an increase in technology personnel. The decrease in our technology expenses as a percentage of revenue was primarily the result of our rate of revenue growth.

        General and administrative.    General and administrative expenses increased from $0.4 million in 2002 to $1.0 million in 2003, an increase of 147.6%. Our general and administrative expenses increased as a percentage of revenue from 2.4% in 2002 to 3.6% in 2003. This increase in our general and administrative expenses resulted from the hiring of additional personnel and expansion into new facilities.

        Interest and other income (expense), net.    Interest and other income (expense), net for the year ended December 31, 2002 amounted to income of $0.02 million compared to income of $2,000 for the year ended December 31, 2003. The change was primarily a result of a loss on sale of equipment.

Comparison of the Years Ended December 31, 2001 and 2002

        Revenue.    Revenue increased from $4.5 million in 2001 to $17.7 million in 2002, a 294.3% increase. This increase in revenue was primarily due to an increase in the number of paid ads delivered across our network and a shift in mix to higher priced ad formats.

        Cost of revenue.    Cost of revenue increased from $3.1 million in 2001 to $11.8 million in 2002, a 277.8% increase. Our cost of revenue decreased as a percentage of revenue from 69.5% in 2001 to 66.6% in 2002. This increase in absolute dollars was primarily due to an increase in the volume of advertising sold to advertisers resulting in increased revenue share payments to our publishers. The decrease as a percentage of revenue was primarily due to our revenue growing faster than our cost of maintaining and upgrading our computer and communications systems.

        Sales and marketing.    Sales and marketing expenses increased from $0.2 million in 2001 to $1 million in 2002, a 334.5% increase. Our sales and marketing expenses increased as a percentage of revenue from 5.1% in 2001 to 5.6% in 2002. This increase in sales and marketing expenses was primarily the result of hiring additional sales and marketing personnel, combined with expanded marketing and advertising.

        Technology.    Technology expenses increased from $0.2 million in 2001 to $0.3 million in 2002, a 56.1% increase. Our technology expenses decreased as a percentage of revenue from 4.9% in 2001 to 2% in 2002. This increase in our technology expenses in absolute dollars was primarily the result of an increase in technology personnel. The decrease in our technology expenses as a percentage of revenue was primarily the result of our rate of revenue growth.

        General and administrative.    General and administrative expenses increased from $0.2 million in 2001 to $0.4 million in 2002, an increase of 118.7%. Our general and administrative expenses decreased as a percentage of revenue from 4.3% in 2001 to 2.4% in 2002. The increase in our general and

37

administrative expenses in absolute dollars primarily resulted from an increase in hiring additional personnel. The decrease in our general and administrative expenses as a percentage of revenue was primarily the result of our rate of growth.

        Interest and other income (expense), net.    Interest and other income (expense), net for the year ended December 31, 2001 amounted to income of $7,000 compared to income of $0.02 million for the year ended December 31, 2002. The change was primarily a result of increased interest income due to an increase in our cash balance.

Quarterly Results of Operations

        The following table sets forth our unaudited quarterly statements of operations data for the eight quarters ended December 31, 2004. This data has been derived from the unaudited interim financial statements prepared on the same basis as the audited financial statements contained in this prospectus and, in our opinion, includes all adjustments consisting only of normal recurring adjustments that we consider necessary for a fair presentation of such information. This data should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this prospectus. The operating results for any quarter should not be considered indicative of results for any future period.

		Three Months Ended
		March 31, 2003		June 30, 2003			Sept. 30, 2003			Dec. 31, 2003			March 31, 2004			June 30, 2004			Sept. 30, 2004			Dec. 31, 2004
		(in thousands)
		(unaudited)
Revenue		$	5,179	$	6,093		$	7,187		$	10,204		$	10,922		$	12,222		$	15,842		$
Cost of revenue			3,495		4,013			4,890			6,848			7,380			8,056			10,252
Gross profit			1,684		2,080			2,297			3,356			3,542			4,166			5,590
Operating costs:
	Sales and marketing		418		457			496			789			893			1,409			2,368
	Technology		170		39			69			124			373			532			946
	General and administrative		260		233			223			329			404			492			865
	Stock-based compensation		—		—			—			—			—			—			340
Total operating costs			848		729			788			1,242			1,670			2,433			4,519
Operating income			836		1,351			1,509			2,114			1,872			1,733			1,071
Interest and dividend income			5		5			4			5			6			6			11
Interest expense			—		(1	)		(2	)		(2	)		(2	)		(2	)		(2	)
Loss on sale/disposal of equipment			—		—			(12	)		—			—			—			—
Income before income taxes			841		1,355			1,499			2,117			1,876			1,737			1,080
Provision for income taxes			14		14			14			13			43			14			1,291
Net income (loss)		$	827	$	1,341		$	1,485		$	2,104		$	1,833		$	1,723		$	(211	)	$

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        The following table sets forth our historical results, quarterly statements of operations data for the eight quarters ended December 31, 2004 as a percentage of revenue.

		Three Months Ended
		March 31, 2003		June 30, 2003		Sept. 30, 2003		Dec. 31, 2003		March 31, 2004		June 30, 2004		Sept. 30, 2004		Dec. 31, 2004
		(unaudited)
Revenue		100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%		%
Cost of revenue		67.5		65.9		68.0		67.1		67.6		65.9		64.7
Gross profit		32.5		34.1		32.0		32.9		32.4		34.1		35.3
Operating costs:
	Sales and marketing	8.1		7.5		6.9		7.7		8.2		11.5		14.9
	Technology	3.3		.6		1.0		1.2		3.4		4.4		6.0
	General and administrative	5.0		3.8		3.1		3.2		3.7		4.0		5.5
	Stock-based compensation	—		—		—		—		—		—		2.1
Total operating costs		16.4		11.9		11.0		12.1		15.3		19.9		28.5
Operating income		16.1		22.2		21.0		20.8		17.1		14.2		6.8
Interest and dividend income		0.1		0.1		0.1		0.1		—		—		0.1
Interest expense		—		—		—		—		—		—		—
Loss on sale/disposal of equipment		—		—		(0.2	)	—		—		—		—
Income before income taxes		16.2		22.3		20.9		20.9		17.1		14.2		6.9
Provision for income taxes		0.3		0.2		0.2		0.1		0.4		0.1		8.1
Net income (loss)		15.9	%	22.1	%	20.7	%	20.8	%	16.7	%	14.1	%	(1.2	)%		%

        Our revenue generally increased in each quarter primarily from an increase in the number of paid ads delivered across our network of website publishers. Our costs of revenue generally increased each quarter as a result of the increase in publisher revenue share costs related to the increasing volume of advertising sold to advertisers quarter over quarter. The quarter over quarter increase in operating expenses was directly related to the addition of employees commensurate with the growth in our business. The quarter ended September 30, 2004 reflects approximately $1 million of costs related to the termination of our ownership equivalent plan as final payments to employees in conjunction with the plan termination on September 28, 2004, which is allocated across cost of revenue and all operating expense categories.

Liquidity and Capital Resources

        With the exception of an initial equity financing of $0.4 million in 2000, we have principally financed our operations through internally generated funds. On September 28, 2004, the Company closed a private placement of preferred shares in which we sold 2,131,285 shares of our Series A Preferred Stock at a price per share of $35.19 for an aggregate purchase price of approximately $75 million. We used approximately $55 million of the proceeds from the sale of the Series A Preferred Stock to repurchase 1,562,944 shares of our common stock held by our founders and employees at the same $35.19 issue price. Of the proceeds that went to our stockholders, $3 million was placed into escrow to cover the stockholders' indemnification obligations and an additional $0.7 million went to cover their expenses. Approximately $20 million in our net proceeds from the private placement remains on our balance sheet as short-term investments, and we expect to use these funds to finance our future growth.

        Our principal sources of liquidity are our cash, cash equivalents and short-term investments as well as the cash flow that we generate from our operations. Short-term investments consist of highly liquid commercial paper as of September 30, 2004.

        Our net cash provided by operating activities was $6.4 million for the nine months ended September 30, 2004, as compared to $4.5 million for the nine months ended September 30, 2003. Net

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cash provided by operating activities was $5.1 million in 2003 compared to $2.9 million in 2002 and $0.1 million in 2001. Net cash provided by operating activities for the years ended December 31, 2001, 2002 and 2003 was primarily the result of our growth in profitability.

        Accounts receivable from our advertisers has increased with our revenue growth. Our day's sales in outstanding receivables increased to 44 days at September 30, 2004 compared to 37 days at December 31, 2003. Our accounts receivable balance increased by $1.2 million, $1.2 million and $1.8 million at December 31, 2001, 2002 and 2003 and $1.5 million and $3.5 million at September 30, 2003 and 2004. The growth in receivables is anticipated to continue if our revenue continue to increase and this will continue to have a significant impact on our cash flows from operations.

        Our net cash used in investing activities was $20.9 million for the nine months ended September 30, 2004 compared to $0.8 million for the nine months ended September 30, 2003. Net cash used in investing activities for the nine months ended September 30, 2004 was comprised of the acquisition of property and equipment as well as purchase of domain names. Net cash used in investing activities was $1.2 million for the year ended December 31, 2003 compared to net cash from investing activities of $0.4 million for the year ended December 31, 2002 and net cash used in investing activities of $0.2 million for the year ended December 31, 2001. Our investing activities primarily represent the acquisition of property and equipment as well as software development. For the years ended December 31, 2001, 2002 and 2003, we added $0.2 million, $0.1 million and $0.7 million of property and equipment, respectively. For the nine months ended September 30, 2003 and 2004, we purchased property and equipment amounting to $0.5 million and $0.9 million, respectively, including capital expenditures to enhance our facilities. We expect to continue to invest in our facilities and technology to support our operations and remain competitive and expect to spend approximately $1.5 million to $2 million in capital expenditures in 2005, exclusive of acquisitions.

        Our net cash provided by financing activities was $15.3 million for the nine months ended September 30, 2004 compared to $4.2 million used in financing activities for the nine months ended September 30, 2003. Net cash used in financing activities was $4.2 million for the year ended December 31, 2003 compared to $0.6 million for the year ended December 31, 2002 and $0 for the year ended December 31, 2001. Historically, cash used in financing activities has been from the distributions to stockholders during the time period that we elected to be treated as a subchapter S corporation. Cash provided by financing activities was generated from the private placement of Series A Preferred Stock and from shares issued upon the exercise of stock options.

        During the time period that we elected to file taxes as a subchapter S corporation, we made regular cash distributions to our stockholders. These stockholder distributions were $0.6 million, $4.4 million and $3.8 million, respectively, in 2002, 2003 and in the nine months ended September 30, 2004. As part of our Series A financing, which closed on September 28, 2004, we agreed to make a final cash distribution to our former subchapter S corporation stockholders of approximately $3.2 million before December 31, 2004.

        We believe that our current cash and cash equivalents, short-term investments and cash flow from operations will be sufficient to meet our anticipated cash needs, including working capital purposes, capital expenditures and various contractual obligations, for at least the next 12 months. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If these sources are insufficient to satisfy our cash requirements, we may seek to sell debt securities or additional equity securities or to obtain a credit facility. The sale of convertible debt securities or additional equity securities could result in additional dilution to our stockholders. The incurrence of indebtedness would result in incurring debt service obligations and could result in operating and financial covenants that would restrict our operations. In addition, there can be no assurance that any additional financing will be available on acceptable terms, if at all.

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Indebtedness

        As of September 30, 2004, we had $0.1 million indebtedness related to the purchase of equipment, which we intend to repay prior to the offering, and no outstanding debt securities, material contingent liabilities or material mortgages or liens.

Contractual Obligations

        Our major outstanding contractual obligations relate to our notes payable related to purchases of fixed assets, operating lease obligations and contractual obligations, primarily consisting of bandwidth and content delivery. We have no long-term obligations of more than three years. We have summarized in the table below our fixed contractual cash obligations as of December 31, 2003.

	Total		Less than 1 Year		1 to 3 Years
	(in thousands)
Notes payable related to the purchase of fixed assets	$	155.7	$	110.7	$	45.0
Operating lease obligations		719.1		302.5		416.7
Contractual obligations		401.9		231.9		170.0
Total	$	1,276.7	$	645.1	$	631.7

Critical Accounting Policies and the Use of Estimates

        Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

        Our significant accounting policies are described in Note 1 to our financial statements, and of those policies, we believe that the following accounting policies involve the greatest degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition

        We recognize revenue in accordance with the guidelines of SEC Staff Accounting Bulletin, or SAB, No. 104 "Revenue Recognition" and Emerging Issues Task Force Issue ("EITF") 00-21 "Revenue Arrangements with Multiple Deliverables."

        We recognize revenue when the advertising impression is served (for CPM contracts) or when the specified click or other action occurs or when lead-based information is delivered (for CPC and CPA contracts), provided that we have no significant remaining obligations, collection of the resulting receivable is reasonably assured and prices are fixed and determinable.

        We assess the likelihood of collection based on a number of factors, including past transaction history with the customer and the credit worthiness of the customer. We do not request collateral from our customers. If we determine that collection of a fee is not reasonably assured, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash. Cash received in advance is recorded as deferred revenue until earned.

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Accounting for Stock-Based Compensation

        We account for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations, and comply with the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB Opinion No. 25, compensation cost, if any, is recognized over the respective vesting period based on the difference between the deemed fair value of our common stock and the exercise price on the date of grant. We account for non-employee stock-based awards, in which goods or services are the consideration received for the equity instruments issued, in accordance with the provisions of SFAS No. 123 and related interpretations. We have recorded compensation charges for issuances of stock awards where the exercise price was less than the deemed fair value of the underlying stock for financial accounting purposes. See "—Results of Operations—Stock-Based Compensation."

        In connection with the grant of common stock awards, we have recorded deferred stock-based compensation for the difference between the exercise price and the deemed fair value for financial accounting purposes of the underlying shares of stock and option awards to employees on the date of the grant.

        During the 12-month period ended September 30, 2004, we granted stock options with exercise prices ranging from $7.00 per share to $12.75 per share and deemed fair values for accounting purposes for the same period ranging from $7.00 per share to $35.19 per share, resulting in deferred stock-based compensation of $5.7 million for the 12-month period ended September 30, 2004. All stock options granted to our employees, officers and directors under our equity plans were intended to be exercisable at a price per share not less than the fair value of the shares of our common stock underlying those options or awards on their respective dates of grant. Because there has not been a public market for our shares prior to this offering, our board of directors determined these exercise prices in good faith, based on the best information available to the board and our management at the time of grant.

Accounts Receivable and the Allowance for Doubtful Accounts

        We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by a review of their current credit information. We regularly monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that have been experienced in the past.

        The allowance for doubtful accounts for estimated losses results from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Short-Term Investments

        We record an impairment charge when we believe our short-term investments have experienced a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment's current carrying value, thereby possibly requiring an impairment charge in the future.

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Accounting for Software Development Costs for Internal Use

        In accordance with SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," we capitalize and amortize over the expected life of a software asset the costs incurred during the application development stage including the following: (1) external direct costs of materials and services consumed in developing or obtaining software, (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the project, and (3) interest costs incurred, when material. We expense the costs of research, during the preliminary project stage and costs incurred for training and maintenance.

Impairment of Long-Lived Assets

        We assess impairment of our other long-lived assets in accordance with the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets." An impairment review is performed whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered by us include:

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significant underperformance relative to expected historical or projected future operating results;



•

significant changes in the manner of use of the acquired assets or the strategy for our overall business; and



•

significant negative industry or economic trends.

        When we determine that the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators of impairment, we estimate the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the asset, we recognize an impairment loss. We report an impairment loss in the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair market value if available, or discounted cash flows if not. To date, we have not had an impairment of long-lived assets.

Accounting for Income Taxes

        We account for income taxes using the asset and liability method in accordance with SFAS 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of the assets and liabilities. We periodically review the likelihood that we will realize the value of our deferred tax assets and liabilities to determine if a valuation allowance is necessary. At September 30, 2004 there was no valuation allowance against net deferred tax assets. If we determine in the future that it is more likely than not that we will realize any future deferred tax assets for which we previously provided a valuation allowance, we would reduce the existing valuation allowance and recognize income in the amount of the reduction. Conversely, if we determine that we would not be able to realize any future recorded net deferred tax asset, we would increase the valuation allowance and recognize the increase as a charge to our results of operations in the period when we reached the conclusion.

        From inception to December 31, 2001, we operated as a C corporation. Effective January 1, 2002, we elected to be taxed as a subchapter S corporation for income tax purposes. Income, deductions, gains, losses, tax credits and other tax attributes of the corporation pass through were taxed directly to the stockholders for 2002, 2003 and the period from January 1, 2004 through September 28, 2004. On September 28, 2004, we revoked our subchapter S corporation status and we now operate as a C corporation. Under SFAS 109, in connection with the revocation of subchapter S, we recognized both

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a federal and state tax provision in the amount of $1.2 million and $0.2 million, respectively, arising from the change from non-taxable subchapter S to taxable entity status as a C corporation.

        In addition, we operate within multiple domestic taxing jurisdictions and are subject to audit in those jurisdictions. These audits can involve complex issues, which may require an extended period of time for resolution. Although we believe that our financial statements reflect a reasonable assessment of our income tax liability, it is possible that the ultimate resolution of these issues could significantly differ from our original estimates.

Contingencies and Litigation

        We evaluate contingent liabilities including threatened or pending litigation in accordance with SFAS No. 5, "Accounting for Contingencies" and record accruals when the outcome of these matters is deemed probable and the liability is reasonably estimable. We make these assessments based on the facts and circumstances and in some instances based in part on the advice of outside legal counsel.

Off-Balance Sheet Arrangements

        We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions, foreign currency forward contracts or any other off-balance sheet arrangements.

Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Risk

        Our exposure to adverse movements in foreign currency exchange rates is primarily related to nominal payments to international website publishers. A hypothetical change of 10% in foreign currency exchange rates would not have a material impact on our financial statements or results of operations. All of our sales are denominated in U.S. Dollars.

Interest Rate Risk

        Our exposure to market risks for changes in interest rates relates primarily to our investment portfolio. As of September 30, 2004, our cash equivalents consisted of money market funds. Due to the short-term nature of our investment portfolio, we do not believe that an immediate 10% increase interest rates would have a material effect on the fair market value of our investment portfolio. We believe that we have the ability to liquidate this portfolio in short order and we do not expect our operating results or cash flows to be materially affected to any significant degree by a sudden change in market interest rates on our investment portfolio.

Recent Accounting Pronouncements

        On December 16, 2004, the Financial Accounting Standards Board, or FASB, issued its final standard on accounting for share-based payment in FASB Statement 123R, which requires all companies to measure compensation cost for all share-based payments (including stock options) at fair value, would be effective for public companies for interim or annual periods beginning after June 15, 2005. We can adopt the new standard in one of two ways—the modified prospective transition method or the modified retrospective transition method.

        We have not concluded when and how they will adopt this new standard if it is finalized. This standard will have a significant impact on our consolidated statement of operations as we will be required to expense the fair value of our stock options rather than disclosing the impact on its consolidated result of operations within our footnotes in accordance with the disclosure provisions of SFAS 123 (see Note 1 of the notes to the consolidated condensed financial statements). This will result in lower reported earnings per share, which could negatively impact our stock price. In addition, this could impact our ability to utilize broad based employee stock plans to reward employees and could result in a competitive disadvantage to us in hiring and retaining qualified employees.

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BUSINESS

Overview

        We provide performance-based technology solutions to advertisers and website publishers that are designed to improve advertising campaign performance across our growing network of over 7,500 websites. We believe our technology solutions, including our proprietary Optimization Engine, managed-market bidding system and our reporting suite and campaign management tools, increase advertisers' return-on-investment, or ROI, and enhance the value of our website publishers' advertising space.

        Advertisers use our flexible, web-based solutions to define their marketing objectives and establish their Internet advertising campaigns. Once a campaign has been set up and implemented, our Optimization Engine continually analyzes Internet user responses to various advertising campaign elements, including the performance of an ad on a specific website and the effectiveness of creative content to assess whether the advertiser's performance objectives are being met. Based on this analysis, our Optimization Engine continuously refines an advertiser's campaign to emphasize the most effective elements of the campaign, such as the use of specific creative content, and removes elements that are not achieving the advertiser's marketing objectives, such as ads that underperform on a specific website. We also provide advertisers with a web-based reporting suite that automatically tracks ad delivery based on a variety of performance criteria. Using this information, advertisers can use our web-based campaign management tools to customize various aspects of their campaigns, including the scope and frequency of ad deployment and creative content. Throughout this process, our dedicated and experienced account managers work with our advertisers to design, implement and effectively manage each advertising campaign in order to achieve their marketing objectives.

        We have built one of the largest Internet advertising networks by offering website publishers attractive pricing and revenue share arrangements, easy-to-use web-based solutions and quality service. Our publisher network includes branded websites that offer large volumes of advertising space as well as a substantial number of websites that reach Internet users with highly-targeted demographics and interests. We price advertising space on our network using our managed-market bidding system, which we believe enhances the value of publishers' advertising space. We also provide publishers with a web-based reporting suite and management tools that allow them to exercise control over the frequency, pricing, creative content and format of ads appearing on their websites.

Industry Background

        The Internet continues to be a powerful and rapidly growing medium that enables advertisers to effectively target consumers. According to Forrester Research, the U.S. Internet advertising market, which is comprised primarily of display advertising and search engine marketing, was approximately $7 billion in 2003, which represented 3% of the total U.S. advertising market. Forrester Research projects U.S. Internet advertising to grow to $15.6 billion in 2008, representing a compound annual growth rate of 17.5% over that time period. We believe that this market growth is due to increased broadband access, growing consumer Internet usage and the benefits offered by Internet advertising relative to traditional media, including:

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Interactivity. The interactive nature of the Internet enables consumers to respond directly to Internet marketing messages, request additional information and purchase goods and services online. This enables advertisers to more effectively convert Internet users to leads or customers based on these responses.



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Rapid and measurable feedback. The Internet provides an opportunity for advertisers to obtain a wide range of detailed, rapid feedback on advertising campaign effectiveness, allowing them to dynamically adjust their campaigns to improve performance.

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Targeted Advertising. The Internet provides advertisers the opportunity to more effectively target consumers based on their affinities, demographics and geographic location.

        We believe the growth in Internet advertising is also being driven by an increase in performance-based advertising. Advertising historically has been purchased on a cost-per-thousand-impressions, or CPM, basis, where an advertiser pays for advertising based on the number of times an ad is viewed. Internet advertising, however, increasingly is being purchased on a performance-based model where an advertiser only pays when an Internet user performs a specified action, such as a click-through or user registration, in response to an ad.

Internet Advertising Market Challenges

        Despite the benefits of Internet advertising, we believe advertisers and website publishers seeking to take advantage of the Internet's potential face numerous challenges.

        Challenges Faced by Advertisers.    The challenges faced by advertisers include:

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Generating an attractive ROI. We believe that, while the Internet represents an attractive advertising medium, several inefficiencies can hinder an advertiser's ability to generate a positive return on its marketing investment. Ad redundancy, where a user is shown an ad on a repetitive basis, poor ad targeting, or ineffective creative content or ad format can result in underperforming Internet advertising campaigns. Additionally, it can be difficult to accurately measure ROI when an advertiser chooses a campaign based on the number of times an ad is viewed as opposed to user actions in response to the ad.



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Assessing and actively managing advertising campaigns. To assess a campaign's effectiveness and rapidly make informed modifications to improve campaign performance, advertisers need access to complex computer networking, software applications and systems that provide these functions. Developing these technologies demands significant investments and technical expertise.



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Reaching the right audience. To reach the desired audience in terms of both user profile and size, an Internet advertiser may have to advertise across hundreds of websites using multiple ad formats. The ability to deliver ads across multiple websites requires significant technical capabilities and involves costs associated with managing relationships with multiple website publishers, including negotiating and executing contracts and keeping track of available advertising space.



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Complexity of implementing advertising campaigns. The complex nature of Internet advertising requires advertisers to identify and manage multiple campaign elements, including creative content and technical requirements, performance, measurement tools and pricing. This complexity is compounded by the wide variety of media and measurement methods used in Internet advertising.

        Challenges Faced by Website Publishers.    The challenges faced by website publishers include:

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Attracting advertisers. Website publishers desiring to sell advertising space need to attract advertisers to their websites. This can be difficult due to the large number of websites, limited resources focused on advertising sales and the fragmented nature of the Internet.



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Maximizing revenue opportunities. Each unique visit to a website or use of a search engine, e-mail or Internet software application represents an opportunity to display an ad and generate revenue. In order to maximize its advertising revenue, a website publisher must find the advertiser that is willing to pay the highest price for its current volume of advertising space.



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Controlling advertising space. The ads displayed on a website can dramatically affect the experience of users of that website. Website publishers have an interest in actively controlling

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the content and frequency of ads displayed on their websites and need easy-to-use technologies that give them this control.

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Developing technology to support complex and changing advertiser requirements. The Internet advertising market is evolving rapidly and website publishers must have the resources to respond to the increasing technological sophistication and complex needs of their advertisers. Website publishers must continually assess the value and volume of their advertising space when identifying, negotiating with and managing multiple advertiser prospects and clients. Additionally, the complex nature of Internet advertising imposes significant technical and administrative burdens on publishers. These technical and administrative issues are particularly challenging to website publishers that lack sufficient technical and sales capabilities.

The Fastclick Solution

        We believe our performance-based Internet advertising technology solutions effectively address the challenges faced by advertisers and website publishers. We help Internet advertisers increase their ROI and website publishers enhance the value of their advertising space through a combination of our proprietary Optimization Engine, managed-market bidding system and suite of reporting and campaign management tools. We intend to improve our existing performance-based technology solutions and develop new technologies to address the constantly evolving needs of advertisers and website publishers.

        We believe our competitive strengths include:

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Our Optimization Engine. Utilizing advanced mathematical algorithms, our proprietary Optimization Engine is designed to improve advertising campaign performance by delivering ads using the most effective creative content to the highest performing websites. Our Optimization Engine automatically refines an advertising campaign based on Internet users' responses to various campaign elements, including website, creative content, targeting and other variables. Through this process, we reduce Internet ad redundancy, poorly targeted placements and other Internet advertising inefficiencies.



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Large and growing network of websites. By offering website publishers attractive pricing and revenue-share arrangements, easy-to-use web-based solutions and quality services, we continue to refine and grow one of the largest Internet advertising networks with over 7,500 websites. Our network allows us to offer advertisers a significant volume of advertising space across a wide variety of content channels. We maintain the quality of our network by periodically evaluating each website in our network to ensure it meets our content standards. We believe the size and quality of our network creates efficiencies that benefit both advertisers and publishers. Our ability to analyze large numbers of advertising campaigns across our network provides us with data that we can use to improve campaign performance for all of our advertisers. Publishers on our network also derive benefits from access to a larger market of advertisers competing for their advertising space.



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Efficient pricing for advertisers and publishers. Our managed-market bidding system prices advertising space based on current supply and demand for Internet advertising space on our network. Advertisers willing to bid the highest price for advertising space receive priority delivery of their ads, subject to certain rules which may be set by us, our advertisers or our publishers. Our managed-market bidding system enables advertisers to more efficiently meet their campaign objectives and enhances the value of publishers' advertising space.



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Reporting suite and campaign management tools. Our easy-to-use, web-based solutions provide customized campaign reporting, updated hourly, to advertisers and publishers. Advertisers can obtain a wide range of detailed feedback on ad placement, impressions, clicks, actions and

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overall advertising campaign effectiveness, and then use our campaign management tools to optimize their overall marketing efforts in response to that feedback. Publishers can also use our tools to view detailed information regarding the ads appearing on their websites, and exercise control over the frequency, pricing, creative content and format of those ads.

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Outstanding customer service. We believe our account managers provide outstanding account management service that increase the effectiveness of our advertisers' campaigns.

        Benefits to Advertisers.    Our solutions deliver the following benefits to advertisers:

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Increased ROI. Our Optimization Engine is designed to increase advertiser ROI by delivering higher performing ads, based on creative content, to those websites that meet the advertiser's objectives and by removing ads that underperform on specific websites and underperforming creative content. Our Optimization Engine is distinct from, and we believe complementary to, campaign targeting. Targeting in advertising is based on predetermined market research, historical testing, assumptions and experience from prior campaigns. Our optimization technologies improve upon static targeting by applying a set of delivery rules specific to each user, website, creative content and advertising campaign. These rules combine predetermined parameters set by the advertiser and our extensive optimization algorithms.



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Detailed, hourly campaign performance feedback. Our web-based reporting suite provides detailed campaign statistics, such as impressions, clicks and actions that are broken down by category, sub-category and website. These statistics are updated hourly, 24 hours a day, 7 days a week.



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Flexible set-up and campaign management tools. Using our web-based solutions, advertisers create campaigns for deployment on our network by setting their budget, selecting ad formats, and determining targeting criteria, including geography, day part or publisher category. Using the information provided by our reporting suite, advertisers use our web-based campaign management tools to efficiently and dynamically manage their Internet advertising campaigns, including loading and changing a campaign's creative content, changing targeting and pausing a campaign. Our campaign managers assist advertisers throughout this process.



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Access to large amounts of higher-performing advertising space. Through our managed-market bidding system, our advertisers can bid higher prices to access a greater volume of higher-performing advertising space.



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Broad reach. Through our network, we offer our advertisers access to over 7,500 websites and millions of unique Internet users across a wide range of content channels. Our broad and growing network enables advertisers to deliver the right marketing message to the right Internet users at the right time.

        Benefits to Website Publishers.    Our solutions deliver the following benefits to website publishers:

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Enhanced value of advertising space. Our managed-market bidding system selects the highest bidding advertising campaign for priority delivery across our network, subject to certain rules that may be set by us, our advertisers or our publishers. This system can increase the amount of advertising revenue our publishers generate.



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Attractive economic relationships. We offer publishers attractive revenue share agreements, in which we pay our publishers a majority of the advertising revenue we generate for their advertising space. Additionally, our solutions mitigate payment and performance risks for our publishers. Our publishers typically prefer payment on a CPM-basis, in which they are paid for the ad impressions they serve and do not assume performance risk, while our advertisers typically prefer to purchase advertising on a CPA- or CPC-basis. Our technology solutions enable us to manage the risk associated with reconciling these preferences, while ensuring publishers

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are paid for the ad impressions they serve. We assume the risk of payment from advertisers and we make payments to our publishers on consistent 25-day payment terms.

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Control over advertising space. By providing our publishers with extensive information regarding advertising campaigns, they are able to make better decisions regarding which campaigns to run on their websites. Publishers can exercise control over the frequency, pricing, creative content and format of ads appearing on their websites. They can also block specific types or categories of advertising campaigns from appearing on their websites. These controls enable publishers to enhance ad performance, limit ad "burn out" and improve their users' experience.



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Ease-of-use. Our technologies have been designed to enhance ease-of-use for our network publishers. We offer publishers a web-based solution that allows them to automatically join our network. Once a publisher has joined our network, our technologies automatically begin delivering ads to their websites, enabling the publisher to quickly and easily generate revenue.

Our Strategy

        Our goal is to be a leading provider of performance-based Internet advertising technology solutions to advertisers and website publishers. To achieve this goal, we plan to:

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Enhance our existing technologies. We plan to enhance our Optimization Engine so that campaign performance can be optimized based on additional variables. We also plan to improve the functionality of our managed-market bidding system and our reporting suite and campaign management tools. We expect that our planned enhancements will provide our advertisers with increased ROI and our publishers with higher advertising revenue through greater campaign control and flexibility. We also plan on hiring additional personnel within our technology division.



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Introduce our search engine advertising technology solution. According to Forrester Research, the U.S. search engine advertising market was $1.9 billion in 2003 and is projected to grow to $5.6 billion in 2008, representing a compound annual growth rate of 24% over that time period. We are in the process of leveraging our existing technologies to enable advertisers to optimize their advertising campaigns across multiple Internet search engines. Our search engine advertising technology solution is being designed to manage search engine advertising, including bids for key words, to increase our advertisers ROI on their search advertising campaigns. We currently intend to launch our search engine advertising technology solution in the first quarter of 2005.



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Respond to new market opportunities. We anticipate that as Internet usage and broadband access increases, and advertisers and website publishers face new challenges, the demand for increasingly sophisticated Internet advertising solutions will grow. We plan to increase our research and development efforts to respond to new market opportunities and changing advertiser, website publisher and Internet user demands.



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Expand our publisher network. To increase our volume of advertising space and to enable our advertisers to reach a larger and broader demographic base of Internet users, we plan to add more high-traffic websites that meet our content standards. We also plan to increase the overall value of advertising space on our network by developing new revenue sources for website publishers, offering new and innovative ad formats and developing other revenue opportunities for our publishers.



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Grow our advertiser base and gain a larger share of our advertisers' marketing spend. We intend to invest significant resources in our sales and marketing organization to attract additional advertisers and garner a larger share of advertisers' marketing budgets. We plan to increase our sales and marketing efforts to target potential customers directly and to work with indirect

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channels, such as advertising agencies, to grow our advertiser base. Additionally, we will continue to work with our advertisers to demonstrate the value of our existing and future Internet advertising technologies to increase the amount of money they spend with us. We intend to hire sales representatives in key domestic markets, including New York City, Los Angeles, San Francisco and Chicago.

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Expand through acquisitions. We intend to pursue acquisition candidates to grow our advertiser and publisher base and access technology and talent. However, we have no present understandings, commitments or agreements with respect to the acquisition of any other businesses or technologies.

Our Advertisers

        The vast majority of our advertisers are direct response marketers. Direct response marketers generally place Internet ads that will generate an immediate response or action from an Internet user. We also work with brand marketers and advertising agencies that represent multiple advertisers. We represent advertisers in a variety of industries, including travel, financial services, education, telecommunications, retail, automotive, entertainment, finance, pharmaceutical and health and information technology, either directly or indirectly through an advertising agency. Our advertiser base is not concentrated by industry, and our top 20 advertisers by revenue for 2003 were from ten different industries. No single advertiser represented more than 10% of our revenue for the nine months ended September 30, 2004. Our top ten advertisers accounted for 47.6% of our advertising revenue for 2003 and 44.2% of our advertising revenue for the nine months ended September 30, 2004.

        Our standard advertising contract covers both campaign management and delivery. Advertisers pay us on a 30-day, net basis. The contract is terminable at any time by the advertiser or us without prior notice or penalty.

        We offer advertisers multiple pricing options to achieve their desired results. These alternatives include:

•

Cost-per-action, or CPA, where the advertiser pays us a fee based on the number of specified Internet user responses, such as registrations, requests for information or sales that its ads produce;



•

Cost-per-click, or CPC, where the advertiser pays us a fee based on the number of clicks its ads generate; and



•

Cost-per-thousand impressions, or CPM, where the advertiser pays us a fee based on the number of times its ads are shown, referred to as impressions.

        We also offer advertisers new creative advertising formats to provide a variety of media options, as evidenced by our implementation of industry standard formats such as interstitials, InVues and larger in-page formats, like leaderboards, skyscrapers and rectangles, and the incorporation of audio and video content in all advertising formats. All of our advertising formats comply with the Internet Advertising Bureau standards.

Our Publishers

        Our publishers represent over 7,500 active websites across 18 distinct content channels. Our publisher network includes branded websites that offer large volumes of advertising space as well as a substantial number of websites that reach Internet users with highly-targeted demographics and interests. We maintain the quality of our network by periodically evaluating each website in our network to ensure it meets our content standards. The vast majority of our publishers joined our network using our automated web-based sign-up tools. No single website publisher accounted for more

50

than 10% of our publisher expenses for the years ended December 31, 2001 and 2003 or for the nine months ended September 30, 2004. Yahoo! represented 25.9% of our publisher expenses for the year ended December 31, 2002. Our top ten website publishers accounted for 22.6% and 23.3% of our publisher expenses for 2003 and the nine months ended September 30, 2004, respectively.

        Our standard publisher contract covers the provision and use of advertising campaigns by publishers and the related payments. We pay a vast majority of our publishers within 25 days of the end of the month under revenue-sharing agreements in which we pay them a majority of the advertising revenue we generate from ads placed on their websites. Either the publisher or we can terminate the contract at any time without prior notice or penalty.

        Our 18 content channels, which are further divided into 201 sub-content channels, include the following:

Arts & Humanities	Family & Living	Music & Radio
Autos, Boats & Planes	Health & Fitness	News & Reference
Business Management	Hobbies & Interests	Science, Nature & Technology
Careers & Education	Internet	Shopping
Computers & Software	Money & Finance	Sports & Recreation
Entertainment & Leisure	Movies & Television	Travel

Sales and Marketing

        Our sales and marketing team markets our proprietary optimization technologies directly to advertisers and indirectly to advertising agencies and other companies that represent multiple advertisers. We have account executives located in our Santa Barbara, California headquarters, as well as in other cities including New York, Los Angeles, and San Francisco. We intend to expand our sales and marketing team.

        We primarily acquire advertisers through our direct sales force. We also use a variety of traditional and web-based channels including direct marketing, print advertising in trade journals, field sales, client referrals, trade shows, industry conferences, Internet advertising and our website.

        Our account managers use their Internet advertising campaign expertise to assist existing and potential advertisers with various elements of their Internet campaigns, including media selection, creative content advice, reporting and campaign monitoring. We consider our account managers to be the primary customer contact for all of our advertisers' Internet campaign management needs. We believe our account managers in conjunction with our technology infrastructure translates into a higher level of customer service for our advertisers.

        Our publisher acquisition team focuses on building our publisher network in order to continue to provide a large volume of advertising space. Currently, we generate publisher leads primarily through direct sales, publisher referrals, our website and responses to our marketing and public relations efforts.

Technology

        We have devoted more than four years to developing proprietary software and other technology solutions for Internet advertisers and website publishers, including our proprietary Optimization Engine, managed-market bidding system, and our reporting suite and campaign management tools. We believe that the quality of our technology gives us an advantage over our competitors and we intend to continue to invest resources to enhance our existing and develop new technology. In addition, we periodically evaluate new technology and software alternatives to help improve operational efficiency and reduce operating costs.

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        Our Optimization Engine is an automated technology designed to improve advertiser ROI and enhance website publisher revenue. Our Optimization Engine applies advanced mathematical algorithms to Internet users' response patterns to determine the optimal ad to deliver to our publishers' available advertising space. Based on campaign data, including pricing, website and creative content performance, targeting, advertising space and other variables, our Optimization Engine automatically refines campaign delivery and creative content selection. Once an advertiser establishes a campaign, our Optimization Engine helps an advertiser realize its campaign objectives by testing the performance of creative content and ads on various websites.

        We serve an average of over 230 million ads per day through database clustering technology and advanced content routing algorithms. Our database clustering technology relies on our software and technology infrastructure, which provides substantial computing power at low cost. We currently use a combination of licensed and proprietary software running on clusters of servers located in Santa Barbara and San Jose, California and Ashburn, Virginia. Our technology infrastructure makes our continuous campaign reporting possible, simplifies the analysis and storage of large amounts of data, and facilitates the rapid delivery of ads across our network. By efficiently distributing our data across many servers, we have created a highly optimized, scalable system that can be easily upgraded as needed. Using three facilities to store our data provides us with system redundancy and enables us to offer rapid response time and availability to our advertisers and publishers.

        Our technology research and development efforts are critical to our success. We currently conduct our technology research and development primarily in our Santa Barbara, California headquarters through a staff of approximately 20 employees as of September 30, 2004. We intend to expand our technology research and development resources in Los Angeles, California as well. Much of our technology expense has been focused on developing other performance-based marketing solutions, including search engine advertising. We currently intend to introduce our search engine advertising product in the first quarter of 2005. Some of our other current research and development efforts include continuing to enhance and improve our proprietary technologies and our database capabilities with respect to geographic targeting.

        Our technology expenses were $0.2 million in fiscal year 2001, $0.3 million in fiscal year 2002, $0.4 million in fiscal year 2003 and $1.9 million for the nine months ended September 30, 2004.

Competition

        The Internet advertising market is characterized by rapidly changing technologies, evolving industry standards, frequent new product and service introductions and changing client demands. As demand for Internet advertising solutions continues to increase, we expect new competitors to enter the market and existing competitors to allocate more resources to develop and market Internet advertising services and products. As a result, we expect competition in the Internet advertising market to intensify.

        Our primary current and potential competitors include:

•

Internet advertising networks such as Advertising.com (acquired by AOL), ValueClick, Tribal Fusion and Burst Media;



•

Internet advertising technology providers, including search engine optimization companies; and



•

other performance-based Internet marketers, including affiliate networks.

        We also compete with large Internet companies and traditional media for a share of advertisers' overall marketing spending, including:

•

website publishers with their own sales forces that sell their advertising space directly to advertisers;

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•

major Internet portals and search companies with advertising networks such as Google and Yahoo!; and



•

direct marketing, television, radio, cable and print, advertising companies.

        We believe we compete favorably in the principal competitive factors in our market, which consist of the following:

•

innovative technology allowing advertisers to track and increase their ROI;



•

high volume of quality advertising space;



•

economic relationship with publishers;



•

an efficient and scalable operating model; and



•

technical capability, advertiser and publisher service and management experience.

Intellectual Property

        Our intellectual property is an essential element of our business. We rely on a combination of patent, copyright, trademark and trade secret laws of the United States and other countries and confidentiality procedures to protect our intellectual property rights. Our employees and independent contractors are required to sign agreements acknowledging that all inventions, trade secrets, works of authorship, developments and other processes generated by them on our behalf are our property, and assigning to us any ownership that they may claim in those works. Our standard form agreements for website publishers and advertisers also contain provisions designed to protect our intellectual property rights. Despite our precautions, it may be possible for third parties to obtain and use, without consent, intellectual property that we own or license. Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.

        We are the owner of a service mark registered with the U.S. Patent and Trademark Office, "Fastclick." We do not have any patents issued by the U.S. Patent and Trademark Office for our intellectual property. We currently have one patent application pending with the U.S. Patent and Trademark Office. We do not own any copyrights registered with the U.S. Copyright office.

        In addition, we license technology and related databases from third parties to facilitate aspects of our facilities and connectivity operations. We have non-exclusive licenses to use these technologies. Our license agreements include agreements with Digital Envoy, which expires in May 2005, and GeoBytes, which expires in February 2005.

        We cannot be sure that we do not and will not infringe the intellectual property rights of others. We may be subject to legal proceedings and claims in the ordinary course of business and third parties may sue us for intellectual property infringement or initiate proceedings to invalidate our intellectual property. Moreover, should we be found liable for infringement, we may be required to enter into licensing agreements (if available on acceptable terms or at all), pay damages or curtail our product and service offerings. Moreover, we may need to redesign some of our products or processes to avoid future infringement liability. Any of the foregoing could prevent us from competing effectively and adversely affect our business.

Seasonality and Cyclicality

        We believe that our business is subject to seasonal and cyclical fluctuations. Generally, our advertisers and advertising agencies place more ads in the fourth calendar quarter and fewer ads in the first calendar quarter of each year. Additionally, overall Internet usage generally declines during the summer months, resulting in lower advertising space volume for website publishers. Furthermore,

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domestic advertising spending generally is cyclical in reaction to overall conditions in the United States economy. We believe our recent performance and strong historical growth have masked the impact of seasonality on our business which we expect to be more pronounced in the future.

Regulation

        Our business is subject to government laws and regulations relating to privacy, direct marketing activities and Internet commerce. These laws and regulations are constantly evolving as new laws and regulations are passed and as the courts interpret existing laws and regulations. In addition, advertising and Internet commerce trade and industry associations have in the past and will continue to adopt guidelines and standards for Internet advertising and commerce. While we pay close attention to these shifting regulatory and industry environments, we cannot predict the impact of future changes in those environments, and we anticipate that it may be necessary in the future to adapt our business in response to such changes.

        As part of our on-going efforts to ensure the best possible experience for all recipients of our advertising, we use cookies and action tags (also known as clear gif technology) to collect technical data from web browsers to aggregate statistical information. This data includes IP addresses, browser types, operating systems, domain names, access times and referring website addresses. Cookies are files that an Internet browser places on the hard drive of a computer used to access the Internet, which we use to improve the web advertising experience for Internet users. Action tags are tiny transparent graphic image files placed in a website, which are served by us and counted when served. We use these action tags to track the completion of transactions and submittal of applications. The cookies and action tags we use do not provide us with personally identifiable information, and we do not and cannot use cookies or action tags to retrieve personal information from an Internet user's computer. For those Internet users who remain concerned about cookies, we provide an opt-out cookie to the public free of charge on our website to block future placements of our cookies.

        In addition, advertisers using our network or we may collect personally identifiable information explicitly provided by Internet users for purposes such as purchasing goods and services, shipping orders, and entering sweepstakes. In addition, some ads delivered by us provide links that permit Internet users to click through to websites not under our control. Any personally-identifiable information collected using our network is subject to our privacy policies or those of our individual advertisers.

Employees

        As of September 30, 2004, we had 72 employees, all of them located in the United States, including 20 in technology, 40 in sales and marketing and 12 in general administration. We have never had a work stoppage and none of our employees is represented by a labor organization or under any collective bargaining arrangements. We consider our employee relations to be good.

Facilities

        Our principal executive officers are located in Santa Barbara, California, where we lease two properties with approximately 14,891 square feet and 7,600 square feet of space under leases that expire in April 2006. We also lease server space in San Jose, California and Ashburn, Virginia. In the first quarter of 2005, we intend to lease additional facilities in Los Angeles, California for expansion of our sales force and technology teams. We believe that our space will be adequate for our needs and that suitable additional or substitute space in the future will be available to accommodate the foreseeable expansion of our operations.

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Legal Proceedings

        From time to time we may be involved in other litigation relating to claims of alleged infringement, misuse or misappropriation of intellectual property rights of third parties. In the normal course of business, we may also be subject to claims arising out of our operations, and may file collection claims against delinquent advertisers. As of the date of this prospectus, there are no claims or actions pending or threatened against us that, if adversely determined, that would have a material adverse effect on us.

Corporate Information

        We were incorporated in California in March 2000. In September 2004, we underwent a recapitalization in which we offered and sold shares of Series A Preferred Stock to investors and used a portion of the proceeds from the offering to repurchase a substantial percentage of our then-outstanding common stock. We plan to reincorporate in Delaware prior to the closing of this offering.

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MANAGEMENT

Directors and Executive Officers

        The following table sets forth information about our directors and executive officers as of December 15, 2004:

Name	Age	Position
Kurt A. Johnson	41	President, Chief Executive Officer and Director
Fred J. Krupica	52	Chief Financial Officer
Michael S. Hughes	54	Chief Marketing Officer
James Aviani	39	Chief Technology Officer
Shayne G. Mihalka	34	Executive Vice President of Operations
Robert J. Davis	48	Director
Fredric W. Harman	44	Director
Daniel J. Nova	43	Director

        Provided below are biographies for each of our executive officers and directors listed in the table above.

Kurt A. Johnson has served as our President and Chief Executive Officer since March 2004. Mr. Johnson joined our company as President and Chief Financial Officer in October 2003. In September 2004, Mr. Johnson relinquished his duties as Chief Financial Officer upon our hiring of Fred J. Krupica. Prior to joining us, from May 1999 to June 2002, Mr. Johnson served as chief financial officer of ValueClick, Inc., a provider of Internet advertising solutions. From February 1998 to May 1999, Mr. Johnson served as an investment banker at Olympic Capital Partners, specializing in mergers and acquisitions and Internet company investments. From March 1995 to January 1998, Mr. Johnson served as vice president of investments for Bozarth & Turner Securities, a private investment management firm. From April 1994 to March 1995, Mr. Johnson served as chief financial officer of HSD Corporation, a privately held industrial automation company. Mr. Johnson is a Certified Management Accountant and holds a BA from Eastern Washington University and a MBA from Gonzaga University.

Fred J. Krupica has served as our Chief Financial Officer since September 2004. Mr. Krupica has also served as our Secretary since October 2004. Prior to joining us, from December 2002 to August 2004, Mr. Krupica served as chief financial officer of WJ Communications, Inc., a leading designer and manufacturer of radio frequency semiconductors. From May 2001 to November 2002, Mr. Krupica served as chief financial officer of Magnetic Data Technologies LLC (acquired by Solectron Corporation in June 2002), an international repair manufacturer. From January 2000 to April 2001, Mr. Krupica served as chief financial officer and chief operating officer of Patel Ventures, a private equity firm. From December 1994 to December 1999, Mr. Krupica served as founder, president and chief financial officer of F&G Financial Services, a financial services firm. Mr. Krupica is a CPA (state of Illinois) and holds a BS from the University of Illinois and a MBA from the University of California, Los Angeles.

Michael S. Hughes has served as our Chief Marketing Officer since December 2004. Prior to joining us, from November 2001 to November 2004, Mr. Hughes served as Executive Vice President, Microsoft Chief Client Officer for MRM Partners, a customer relationship marketing and interactive advertising agency and a wholly owned subsidiary of McCann Worldgroup. From May 2001 to October 2001 Mr. Hughes served as Chief Executive Officer of Digital Planet, a webcasting and streaming media company. From November 1998 to April 2001, Mr. Hughes served as President of the Irvine, California office of Wunderman, an advertising agency and a wholly-owned subsidiary of Young & Rubicam. From August 1995 to October 1998, Mr. Hughes served as Director of Relationship

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Marketing for Team One Advertising, a wholly-owned subsidiary of Saatchi & Saatchi. Mr. Hughes holds a BA from Dickinson College.

James Aviani has served as our Chief Technology Officer since March 2004. Prior to joining us, from May 1996 to February 2004, Mr. Aviani served as a Senior Software Development Manager of Cisco Systems, Inc., an Internet networking company. Mr. Aviani holds a BA from the University of California, Santa Cruz and a MA in computer science from California Polytechnic University, San Luis Obispo. He holds seven US patents.

Shayne G. Mihalka has served as our Executive Vice President of Operations since October 2004. Mr. Mihalka also served as our Executive Vice President of Strategic Development from December 2003 to September 2004, our Senior Vice President and General Manager of AdServer from November 2002 to November 2003, and our Vice President of Business Development from April 2002 to October 2002. Prior to joining us, from June 2000 to March 2002 Mr. Mihalka served as Vice President of Network Development and Business Operations of ValueClick, Inc., and from July 1999 to May 2002 served in key financial and operational roles for ValueClick Inc. Prior to that, Mr. Mihalka held several operations and financial roles at Association Group Insurance Administrators. Mr. Mihalka holds a BA in Political Science from University of California at Santa Barbara and a MBA from California State University, Northridge.

Robert J. Davis has served as one of our directors since September 2004. Since February 2001, Mr. Davis has served as a venture partner of Highland Capital Partners, a venture capital firm. From October 2000 to February 2001, Mr. Davis served as chief executive officer of Terra Lycos, a global Internet portal and access provider. From June 1995 to October 2000, Mr. Davis served as president and chief executive officer of Lycos, Inc., a global Internet portal. Mr. Davis holds a BS from Northeastern University, a MBA from Babson College and Honorary Doctorates from Northeastern University and Bentley College. Mr. Davis also serves as director for several privately held companies.

Fredric W. Harman has served as one of our directors since September 2004. Since July 1994, Mr. Harman has served as a Managing Member of the General Partner of venture capital funds affiliated with Oak Investment Partners. From June 1987 to June 1994, Mr. Harman was employed by Morgan Stanley, where he served as a General Partner of Morgan Stanley Venture Capital, L.P. Mr. Harman serves as a director of Internap Network Services, an Internet infrastructure company, as well as several privately held companies. Mr. Harman holds a BS and a MS in electrical engineering from Stanford University and a MBA from Harvard University.

Daniel J. Nova has served as one of our directors since September 2004. Since August 1999, Mr. Nova has served as a managing general partner at Highland Capital Partners, a venture capital firm. From August 1996 to August 1999, Mr. Nova was a general partner at Highland Capital Partners. Mr. Nova holds a BS in Computer Science and Marketing from Boston College and a MBA from Harvard University. Mr. Nova also serves as director for several privately held companies.

        Each executive officer serves at the discretion of our board of directors and holds office until his successor is elected and qualified or until his earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

Composition of the Board of Directors after this Offering

        Our board of directors currently consists of four members and upon completion of this offering will consist of    members. Upon completion of this offering, our common stock will be quoted on the Nasdaq National Market and we will be subject to the rules of the Nasdaq National Market. These rules require that at least one member of our board be "independent" as of the date of this offering, two members of our board to be independent by 90 days after this offering and a majority of our board of directors to be independent by the first anniversary of this offering. We intend to comply with these

57

requirements and prior to the offering our board of directors will determine which of our directors will be designated as independent.

        Classified Board.    Upon completion of this offering, our certificate of incorporation will provide that our board of directors will be divided into three classes of directors, with the classes as nearly equal in number as possible. As a result, approximately one-third of our board of directors will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our board. Upon completion of this offering, our certificate of incorporation and bylaws will provide that the number of directors will range from three to nine members, with the exact number to be fixed at the discretion of the board.

Board Committees

        Upon completion of this offering, our board of directors will have an audit committee, a compensation committee and a nominating and corporate governance committee. Our board of directors may also establish from time to time any other committees that it deems necessary or advisable.

Audit Committee

        Upon completion of this offering, our board of directors will have an audit committee initially consisting of three directors. Our audit committee will recommend, and our board of directors will adopt, a written charter for our audit committee, which will be posted on our website. Our audit committee, among other things, will:

•

select a firm to serve as independent auditors to audit our financial statements;



•

help to ensure the independence of the auditors;



•

discuss the scope and results of the audit with the independent auditors, and review, with management and the independent auditors, our interim and year-end operating results;



•

develop procedures for employees to anonymously submit concerns about questionable accounting or audit matters;



•

consider the adequacy of our internal accounting controls and audit procedures; and



•

approve (or, as permitted, pre-approve) all audit and non-audit services to be performed by the independent registered public accounting firm.

        The audit committee will have the sole and direct responsibility for appointing, evaluating and retaining our independent auditors and for overseeing their work. At least one member of the audit committee will be "independent," as defined under Nasdaq National Market and SEC rules, at the time of this offering, a majority of the members of the audit committee will be independent by 90 days after this offering and all of the members of the audit committee will be independent by the first anniversary of this offering. Each member of our audit committee will be financially literate at the time such director is appointed. In addition, our audit committee will include a financial expert within the meaning of Item 401(h) of Regulation S-K of the Securities Act and at least one member who has the financial sophistication required under the Nasdaq National Market rules. All audit services to be provided to us and all permissible non-audit services, other than de minimis non-audit services, to be provided to us by our independent auditors will be approved in advance by our audit committee.

Compensation Committee

        We currently have a compensation committee comprised of Messrs. Nova, Davis and Harman. Upon completion of this offering, our board of directors will have a compensation committee initially

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consisting of three directors. At least one member of the compensation committee will be "independent" as defined under Nasdaq National Market rules at the time of this offering, a majority of the members of the compensation committee will be independent by 90 days after this offering and all of the members of the compensation committee will be independent by the first anniversary of this offering. The purpose of our compensation committee will be to discharge the responsibilities of our board of directors relating to compensation of our executive officers. Our compensation committee will recommend, and our board of directors will adopt, a written charter for our compensation committee, which will be posted on our website. Our compensation committee, among other things, will:

•

review and determine the compensation of our executive officers;



•

administer our stock plans;



•

review and make recommendations to our board with respect to incentive compensation and equity plans; and



•

establish and review general policies relating to compensation and benefits of our employees.

Corporate Governance and Nominating Committee

        Upon completion of this offering, our board of directors will have a corporate governance and nominating committee initially consisting of three directors. At least one member of the corporate governance and nominating committee will be "independent" as defined under Nasdaq National Market rules at the time of this offering, a majority of the members of the corporate governance and nominating committee will be independent by 90 days after this offering and all of the members of the corporate governance and nominating committee will be independent by the first anniversary of this offering. The corporate governance and nominating committee will recommend, and our board of directors will adopt, a written charter for our corporate governance and nominating committee, which will be posted on our website. Our corporate governance and nominating committee, among other things, will:

•

identify, evaluate and recommend nominees to our board of directors and committees of our board of directors;



•

conduct searches for appropriate directors;



•

evaluate the performance of our board of directors and of individual directors;



•

consider and make recommendations to the board of directors regarding the size and composition of the board and its committees;



•

review developments in corporate governance practices;



•

evaluate the adequacy of our corporate governance practices and reporting; and



•

make recommendations to our board of directors concerning corporate governance matters.

Code of Ethics

        Upon completion of this offering, we will adopt a written code of ethics applicable to our directors, officers and employees in accordance with the rules of the Nasdaq National Market and the SEC. Our code of ethics will be designed to deter wrongdoing and to promote:

•

honest and ethical conduct;



•

full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and in our other public communications;



•

compliance with applicable laws, rules and regulations, including insider trading compliance; and

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•

accountability for adherence to the code and prompt internal reporting of violations of the code, including illegal or unethical behavior regarding accounting or auditing practices.

        The code of ethics will include a code of ethics that applies to our senior financial officers, as described in Item 406 of Regulation S-K of the SEC. The audit committee of our board of directors will review our code of ethics on a regular basis and will propose or adopt additions or amendments as it determines are required or appropriate. Our code of ethics will be posted on our website.

Director Compensation

        Our directors historically have not received cash fees as compensation for their services. We reimburse our directors for their reasonable out-of-pocket travel expenditures. Members of our board of directors do not currently receive any compensation for serving as directors or members of committees.

        Upon consummation of this offering, non-employee directors will receive an annual retainer of $            , plus $            for each board meeting attended in person, $            for each board meeting attended by telephone, $            for each committee meeting attended in person and $            for each committee meeting attended by telephone. In addition, each committee chairperson will receive an annual retainer of $            and each audit committee member (other than the chairperson) will receive an annual retainer of $            . Non-employee directors will also receive an annual grant of an option to purchase            shares of our common stock at an exercise price equal to the fair market value of our common stock at the time of grant. We will continue to reimburse all of our directors for costs associated with attending board and committee meetings.

Compensation Committee Interlocks and Insider Participation

        None of the members of our compensation committee has at any time been one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

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EXECUTIVE COMPENSATION

        The following table summarizes the compensation we paid during the fiscal year ended December 31, 2004 to our President and Chief Executive Officer, former Chief Executive Officer, and each of our executive officers, who earned more than $100,000.

Summary Compensation Table

					Long-Term Compensation Awards
		Annual Compensation
Name and Principal Position					Securities Underlying Options	All Other Compensation(3)
	Year	Salary		Bonus(2)
Kurt A. Johnson(1) President and Chief Executive Officer	2004	$	217,603		50,491	$	6,600
Fred J. Krupica(4) Chief Financial Officer	2004	$	52,435		51,147	$	1,823
James Aviani(5) Chief Technology Officer	2004	$	150,000		34,000	$	4,750
Shayne G. Mihalka Executive Vice President of Operations	2004	$	146,926		10,000	$	4,513
David R. Gross(6) Former Chief Executive Officer	2004	$	123,932	—	—	$	3,717

(1)

Mr. Johnson became our Chief Executive Officer on March 3, 2004. Prior to March 3, 2004, Mr. Johnson served as our President and Chief Financial Officer. On September 7, 2004, Mr. Johnson relinquished his duties as our Chief Financial Officer upon our hiring of Mr. Krupica.

(2)

Bonus amounts for the year ended December 31, 2004 have not yet been determined.

(3)

Consists of matching contributions made by us pursuant to our 401(k) plan and payment of life insurance premiums.

(4)

Mr. Krupica became our Chief Financial Officer on September 7, 2004.

(5)

Mr. Aviani became our Chief Technology Officer on February 11, 2004.

(6)

Mr. Gross resigned as our Chief Executive Officer on March 3, 2004.

Stock Option Grants

        The following tables set forth certain information for the year ended December 31, 2004 with respect to stock options granted to our named executive officers. The percentage of total options granted is based on an aggregate of options to purchase 308,236 shares of common stock granted in 2004.

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Option Grants in 2004

								Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(3)
		Individual Grants
		Number of Shares Underlying Options Granted	% of Total Options Granted to Employees in 2004
Name					Exercise Price Per Share(1)		Expiration Date(2)
								5%	10%
Kurt A. Johnson		50,491	16.38	%	$	12.75	9/28/14
Fred J. Krupica		51,147	16.59	%	$	12.75	9/7/14
James Aviani
	2004 Plan	14,000	4.54	%	$	12.75	9/28/14
	2000 Plan	20,000	6.49	%	$	7.00	3/15/14
Shayne G. Mihalka		10,000	3.24	%	$	12.75	9/28/14

(1)

The exercise price for each grant is equal to the fair market value of our common stock on the date of grant.

(2)

The options have a term of up to four years, subject to earlier termination in certain events related to termination of employment. The options must vest at least as rapidly as 20% on each of the first five anniversaries of the date of grant. Pursuant to the terms of their employment agreements, upon the completion of this offering 50% of Mr. Krupica's and Mr. Aviani's remaining unvested options will vest.

(3)

Potential realizable values are calculated by:

•

multiplying the number of shares of our common stock subject to a given option by $            per share, the midpoint of the range set forth on the front cover of this prospectus;

•

assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rates shown in the table for the entire ten-year term of the option; and

•

subtracting from that result the total option exercise price.

        The 5% and 10% assumed rates of appreciation are required by the rules of the Securities and Exchange Commission and do not represent our estimate or projection of the future common stock price. There can be no assurance that any of the values reflected in the table will be achieved.

Aggregated Option Exercises in 2004 and Year-End Option Values

        The following table sets forth, for the year ended December 31, 2004, certain information with respect to stock options exercised by our named executive officers and the number and value of unexercised options held by our named executive officers. This table assumes a per-share fair market value equal to $    , the midpoint of the range set forth on the front cover of this prospectus.

Name	Shares Acquired on Exercise	Value Realized		Number of Securities Underlying Unexercised Options at Fiscal Year-End Exercisable/Unexercisable	Value of Unexercised In-the-Money Options at Fiscal Year-End Exercisable/Unexercisable
Kurt A. Johnson	—	$	—	40,000/130,491
Fred J. Krupica	—	$	—	3,196/47,951
James Aviani	—	$	—	3,750/30,250
Shayne G. Mihalka	3,438	$	120,983	1,875/22,187

Agreements with Employees

        On October 15, 2003, we entered into an employment agreement with Kurt A. Johnson under which Mr. Johnson agreed to serve as our President and Chief Financial Officer. On March 3, 2004

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Mr. Johnson became our Chief Executive Officer. In September 2004, Mr. Johnson relinquished his duties as our Chief Financial Officer upon our hiring of Fred J. Krupica. Mr. Johnson receives an annual base salary of $220,000, and is eligible to participate in bonus plans as the board of directors shall determine and based on achievement of reasonable business goals for revenue and profitability. Mr. Johnson also received grants of 120,000 stock options with an exercise price of $7 per share in 2003 and 50,491 with an exercise price of $12.75 per share in 2004. Mr. Johnson's 2003 stock option grant is governed by the 2000 Stock Plan and his 2004 stock option grant is governed by the 2004 Stock Plan. The stock options granted to Mr. Johnson in 2003 vest quarterly in equal portions over a period of three years beginning April 1, 2004. The stock options granted to Mr. Johnson in 2004 vest quarterly, over a period of four years beginning on the date of grant. Mr. Johnson's employment agreement has a term of five years and may be terminated, with or without cause, by either party upon 15 days written notice. If Mr. Johnson is terminated without cause, he will be entitled to all compensation earned through the date of termination, and for a period of four months after termination, continued salary and health and welfare benefits. If Mr. Johnson is terminated due to a change of control of our company, which includes an acquisition, merger, liquidation, sale or other disposition of substantially all our assets, or during the 12 month period after a change of control other than for cause, he will be entitled to compensation earned through the date of termination, and for a period of 12 months after termination, continued salary and health and welfare benefits. For purposes of this agreement, "cause" means, fraud, gross negligence, willful misconduct, or insubordination.

        On August 2, 2004, we entered into an employment agreement with Fred J. Krupica under which Mr. Krupica acts as our Chief Financial Officer. Mr. Krupica receives an annual base salary of $200,000, and is eligible for a maximum bonus of $150,000, as determined by the board of directors and based on achievement of reasonable business goals for revenue and profitability. Mr. Krupica also received stock options to purchase 51,147 shares of our common stock, which is equal to 1.5% of the fully diluted shares of the company that were outstanding immediately following the close of the Series A Preferred Stock financing. The stock option grant is governed by the 2004 Stock Plan, has an exercise price of $12.75 per share, and vests quarterly in equal portions over a period of four years from the date of grant. Upon completion of this offering, 50% of Mr. Krupica's remaining unvested options will vest. If Mr. Krupica is terminated within 12 months following a change of control, 100% of his remaining unvested options will vest. Mr. Krupica's employment agreement has a term of three years, and automatically renews for successive additional one-year periods. The agreement may be terminated, with or without cause, by either party upon 30 days written notice. If Mr. Krupica is terminated without cause, he will be entitled to all compensation earned through the date of termination, and, for a period of 12 months after termination, continued salary and health and welfare benefits. If Mr. Krupica is terminated due to a change of control of our company, which includes an acquisition, certain mergers, liquidation or sale or other disposition of substantially all of our assets or during the 12 month period after a change of control other than for cause, he will be entitled to compensation earned through the date of termination, and for a period of 12 months after termination, continued salary and health and welfare benefits.

        On February 11, 2004, we entered into an employment agreement with James Aviani under which Mr. Aviani acts as our Chief Technology Officer. Mr. Aviani receives an annual base salary of $200,000, and is eligible for a bonus as determined by the board of directors and based on achievement of reasonable business goals for revenue and profitability. Mr. Aviani also received stock options to purchase 20,000 shares of our common stock. The stock option grant is governed by the 2000 Stock Plan, and has an exercise price of $7.00 per share. On October 1, 2004, 12.5% of the stock option grant vested and thereafter an equal portion vests quarterly over a period of four years. In addition, on September 28, 2004, Mr. Aviani received stock options to purchase 14,000 shares of our common stock. The 2004 stock option grant is governed by the 2004 Stock Plan and has an exercise price of $12.75 per share. The stock options granted to Mr. Aviani in 2004 vest quarterly over four years from the date of grant. In addition, upon the completion of this offering or a change of control, which includes an

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acquisition, certain mergers, liquidation, or sale or other disposition of substantially all of our assets, 50% of Mr. Aviani's remaining unvested options will vest. Mr. Aviani's employment agreement may be terminated, with or without cause, by either party upon 15 days written notice. If Mr. Aviani is terminated without cause, he will be entitled to all compensation earned through the date of termination, and for a period of six months after termination, continued salary, continued vesting and exercise of his ownership equivalents and stock options, and health and welfare benefits. If Mr. Aviani is terminated due to a change of control of our company, or if he is terminated or resigns because of a material change in duties or salary during the 12-month period after a change of control, he will be entitled, for a period of 12 months after termination, to continued salary, continued vesting and exercise of his stock options, and health and welfare benefits.

        On December 1, 2004, we entered into an employment agreement with Michael S. Hughes under which Mr. Hughes acts as our Chief Marketing Officer. Mr. Hughes receives an annual base salary of $200,000, and is eligible for a maximum bonus of $100,000 as determined by the board of directors and based on achievement of reasonable business goals as defined by the Chief Executive Officer or the board of directors. Mr. Hughes also received stock options to purchase 34,098 shares of our common stock, which was equal to 1% of the combined common and preferred shares outstanding on a fully-diluted basis as of the date of the grant. The stock option grant is governed by the 2004 Stock Plan and has an exercise price of $17.50 per share. 25% of the stock option vests on the first anniversary date of the agreement, with the remaining amount vesting in equal amounts on a quarterly basis through the fourth anniversary of the agreement. The agreement has an initial term of three years and automatically renews. The agreement may be terminated, with or without cause, by either party upon 15 days written notice. If Mr. Hughes is terminated without cause, he will be entitled to all compensation earned through the date of termination, immediate vesting of 18.75% of the stock options not then-vested, and, for a period of nine months after termination, continued salary and health and welfare benefits. If Mr. Hughes is terminated due to a change of control of our company, which includes an acquisition, merger, liquidation, sale or other disposition of substantially all of our assets, or terminated during the 12-month period after a change of control other than for cause, he will be entitled to compensation earned through the date of termination, and, for a period of 12-months after termination, continued salary and health and welfare benefits.

Stock Incentive Plans

        The following table sets forth certain information related to our equity compensation plans as of September 30, 2004.

		Equity Compensation Plan Information
Plan Category		Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted Average Exercise Price		Number of Securities Remaining available for future issuance under Equity Compensation Plans
Plans Approved by Stockholders		438,500	$	9.63	227,997
Plans Not Approved by Stockholders.		—		—	—
	Total	438,500	$	9.63	227,997

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2005 Equity Incentive Plan

        In 2005, we intend to present to our board of directors for adoption, and to our stockholders for their approval, the 2005 Equity Incentive Plan, or 2005 Equity Plan. The 2005 Equity Plan will provide for the grant to our employees of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, or Code, and the grant of nonstatutory stock options, stock awards, stock appreciation rights and cash awards to our employees, directors and consultants. Each of these is referred to as an "award". The following is a description of the expected features of the 2005 Equity Plan.

        Number of Shares of Common Stock Available Under the 2005 Equity Plan.    A total of             shares of our common stock are expected to be reserved for issuance pursuant to the 2005 Equity Plan.

        If an option or other award expires or is terminated or canceled without having been exercised or settled in full, the shares subject to the expired, terminated or canceled award will be returned to the pool of shares available for future grant or sale under the 2005 Equity Plan (unless the 2005 Equity Plan has terminated).

        Administration of the 2005 Equity Plan.    Our compensation committee will act as the administrator of the 2005 Equity Plan. In the case of awards intended to qualify as "performance based compensation" within the meaning of Section 162(m) of the Code, the committee will consist of two or more "outside directors" within the meaning of Section 162(m). The administrator will have the power to determine the terms of the awards, including the exercise price, the number of shares subject to each award, the exercisability of the awards and the form of consideration payable upon exercise. The administrator will also have the power to implement an award transfer program, whereby awards may be transferred to a financial institution or other person or entity selected by the administrator.

        Stock Options.    A stock option is the right to purchase shares of our common stock at a fixed exercise price for a fixed period of time. The administrator will determine the exercise price of options granted under our 2005 Equity Plan, but with respect to nonstatutory stock options intended to qualify as "performance based compensation" within the meaning of Section 162(m) of the Code and all incentive stock options, the exercise price generally must at least equal the fair market value of our common stock on the date of grant. After termination of one of our employees, directors or consultants, he or she may exercise his or her option for the period of time stated in the option agreement. If termination is due to death or disability, the option generally will remain exercisable for 12 months following such termination. In all other cases, the option generally will remain exercisable for three months. However, an option may never be exercised later than the expiration of its term. The term of any stock option may not exceed ten years, and with respect to any participant who owns 10% or more of the voting power of all classes of our outstanding capital stock, the term must not exceed five years. Awards granted under the 2005 Equity Plan will vest over the period determined by the administrator.

        Stock Awards.    Stock awards are awards or issuances of shares of our common stock that vest in accordance with terms and conditions established by the administrator. Stock awards include stock units, which are bookkeeping entries representing an amount equivalent to the fair market value of a share of common stock, payable in cash, property or other shares of stock. The administrator will determine the number of shares to be granted and impose whatever conditions to vesting it determines to be appropriate, including performance criteria and level of achievement versus the criteria that the administrator determines, which criteria may be based on financial performance, personal performance evaluations and completion of service by the participant. The administrator will determine the purchase price of any grants of restricted stock. Unless the administrator determines otherwise, shares that have not vested typically will be subject to forfeiture or to our right of repurchase, which we may exercise on

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the voluntary or involuntary termination of the purchaser's service with us for any reason, including death or disability.

        Stock Appreciation Rights.    A stock appreciation right is the right to receive the appreciation in the fair market value of our common stock between the date of grant and the exercise date, for a number of shares of our common stock specified in the award at the time of grant. We may pay the appreciation in either cash, in shares of our common stock with equivalent value, or in some combination, as determined by the administrator. The administrator will determine the exercise price of stock appreciation rights, the term of the stock appreciation rights, the vesting schedule and other terms and conditions of stock appreciation rights; however, stock appreciation rights terminate under the same rules that apply to stock options.

        Cash Awards.    Cash awards are awards that give the participant the opportunity to earn future cash payments tied to the level of achievement with respect to one or more performance criteria established by the administrator for a performance period. The administrator will establish the performance criteria and level of achievement versus the criteria, which criteria may be based on financial performance or personal performance evaluations. When awards are intended to qualify as "performance based compensation" within the meaning of Section 162(m) of the Code the administration must specify the measures in writing no later than 90 days after the commencement of the period of service to which the performance goals relate, and the outcome must be substantially uncertain at that time.

        Adjustment for Changes in Capital Stock.    The number of shares of our common stock subject to outstanding awards under the 2005 Equity Plan, as well as the exercise price of outstanding options, will be proportionately adjusted for any stock split, reverse stock split, stock dividend, combination or reclassification of our common stock, or similar change in our capital structure.

        Transferability of Awards.    Unless the administrator determines otherwise, the 2005 Equity Plan will not allow for the transfer of awards other than by will or by the laws of descent and distribution, and only the participant may exercise an award during his or her lifetime.

        Merger or Change in Control.    The 2005 Equity Plan will provide that in the event of a merger or consolidation where we are not the surviving corporation or a "change in control," including the sale of all or substantially all of our assets, and certain other events, the board of directors or appropriate committee of the board may, in its discretion, provide for the assumption or substitution of, or adjustment to, each outstanding award, accelerate the vesting of options and SARs, and terminate any restrictions on stock awards or cash awards or provide for the cancellation of awards in exchange for a cash payment to the participant.

        Amendment and Termination of the 2005 Equity Plan.    The 2005 Equity Plan will automatically terminate in 2015, unless we terminate it sooner. In addition, our administrator will have the authority to amend, alter or discontinue the 2005 Equity Plan, subject to the approval of the stockholders. No amendment may impair the rights of a participant under any outstanding award, unless the participant and the administrator mutually agree.

2004 Stock Incentive Plan

        On September 8, 2004, our board of directors adopted, and on September 9, 2004, our stockholders approved, the 2004 Stock Incentive Plan, or 2004 Stock Plan. The 2004 Stock Plan provides for the grant to our employees of incentive stock options to our employees, within the meaning of Section 422 of the Code, and the grant of stock awards to our employees, directors and consultants.

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        Number of Shares of Common Stock Available Under the 2004 Stock Plan.    As of September 30, 2004, we had reserved 495,585 shares of our common stock for issuance under our 2004 Stock Plan. As of September 30, 2004, 227,997 shares of our common stock remained available for grant under our 2004 Stock Plan, 267,588 shares are subject to outstanding awards and no shares of our common stock have been issued. We will not issue any additional shares under the 2004 Stock Plan following the effective date of the registration statement of which this prospectus is a part.

        While the 2004 Stock Plan permits shares to be reissued after unvested options lapse or restricted stock is forfeited, we will not issue any further shares under the 2004 Stock Plan after the effective date of the registration statement of which this prospectus is a part.

        Administration of the 2004 Stock Plan.    The 2004 Stock Plan is administered by a committee appointed by the board of directors or, if no committee is appointed, the full board of directors. The administrator has the power to grant to us the right of repurchase and the right of first refusal with respect to any shares issued pursuant to an award.

        Stock Options.    The board granted all options under the 2004 Stock Plan at an exercise price equal to the board's good faith estimate of the fair market value of the common stock at the time of grant. Options granted under the 2004 Stock Plan generally vest over a period of four years and are exercisable for a term of no more than ten years. If an option grant recipient's employment or other service relationship terminates for any reason other than his or her death or disability, his or her otherwise exercisable options will expire 90 days after termination. In the case of a recipient's death or disability, options will expire 12 months after the death or disability. If we terminate a recipient of an option grant for cause, the options will expire on such recipient's date of termination.

        Stock Purchase Awards.    A stock purchase award is the right to purchase shares of our common stock at a fixed purchase price for 30 days. The administrator determines the purchase price of the award, however, the minimum purchase price must be at least 85% of the fair market value of our common stock on the date of the grant. Shares issued under stock purchase awards must vest at a rate of at least 20% per year. The common stock issued pursuant to stock purchase awards may be subject to our right to repurchase the stock at the recipient's purchase price on the terms determined by the administrator.

        Adjustment for Change in Capital Stock.    The number of shares of our common stock subject to outstanding awards under the 2004 Stock Plan as well as the exercise price of outstanding options will be proportionately adjusted for any stock split, reverse stock split, stock dividend, combination or reclassification of our common stock, or similar change in our capital structure.

        Transferability of Awards.    Unless the administrator determines otherwise, the 2004 Stock Plan will not allow for the transfer of awards other than by will or by the laws of descent and distribution, and only the participant may exercise an award during his or her lifetime.

        Change in Control.    Our 2004 Stock Plan provides that in the event of a "change in control," including an acquisition of 51% or more of our outstanding voting stock by another party, a transaction requiring stockholder approval for our acquisition, or certain changes in the composition of our board of directors, we may, in our discretion, provide for the assumption or substitution of, or adjustment to, each outstanding award, accelerate the vesting of the options or provide for the cancellation of awards in exchange for a cash payment to the participant.

        Amendments and Termination of the 2004 Stock Plan.    Our board of directors may amend, suspend or terminate the 2004 Stock Plan at any time. Some amendments may require stockholder approval under applicable state and federal law and rules of any stock exchange or national market system on which our common stock is then listed or traded.

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2000 Equity Participation Plan

        On July 1, 2000, our board of directors adopted, and on July 20, 2000, our stockholders approved, the 2000 Equity Participation Plan, or the 2000 Stock Plan. The 2000 Stock Plan was first revised in April 2002, with our board of directors adopting the revised plan on May 1, 2002. The board of directors revised the 2000 Stock Plan a second time on September 8, 2004. We granted stock options under the 2000 Stock Plan to our officers and employees.

        Number of Shares of Common Stock Available Under the 2000 Stock Plan.    As of September 30, 2004, we had reserved 170,912 shares of our common stock for issuance under our 2000 Stock Plan. As of September 30, 2004, zero shares of our common stock remained available for grant under our 2000 Stock Plan. 170,912 shares of our common stock are subject to outstanding awards under the 2000 Stock Plan and a total of 35,488 shares of our common stock have been issued under the 2000 Stock Plan. We will not issue any additional shares under the 2000 Stock Plan.

        While the 2000 Stock Plan permits shares to be reissued after unvested options lapse or restricted stock is forfeited, we will not issue any further shares under the 2000 Stock Plan.

        Administration of the 2000 Stock Plan.    The 2000 Stock Plan is administered by a committee appointed by the board of directors. The administrator also has the power to modify, extend or assume outstanding awards. In addition, the administrator has the power to grant to us the right of repurchase with respect to any shares issued pursuant to an award.

        Stock Options.    The board granted all options under the 2000 Stock Plan at an exercise price equal to the board's good faith estimate of the fair market value of the common stock at the time of grant. Options granted under the 2000 Stock Plan generally vest over a period of four years and are exercisable for a term of no more than ten years. If recipient's employment or other service relationship terminates for any reason other than his or her death or disability, his or her otherwise exercisable options will expire 90 days after termination. In the case of a recipient's death or disability, options will expire 12 months after the death or disability.

        Adjustment for Changes in Capital Stock.    The number of shares of our common stock subject to outstanding awards under the 2000 Stock Plan, as well as the exercise price of outstanding options will be proportionately adjusted for any stock split, reverse stock split, stock dividend, combination or reclassification of our common stock, or similar change in our capital structure.

        Transferability of Awards.    Unless the administrator determines otherwise, the 2000 Stock Plan will not allow for the transfer of awards other than by will or by the laws of descent and distribution, and only the participant may exercise an award during his or her lifetime.

        Merger, Consolidation or Asset Sale.    In a merger or consolidation where we are not the surviving corporation, or a sale of all or substantially all of our assets, the acquiring or surviving entity may assume all outstanding options or issue substitute substantially similar rights in the acquiring or surviving entity. If the acquiring or surviving entity does not assume the options or issue substitute options, each outstanding option under the 2000 Stock Plan will automatically accelerate and become exercisable in whole or in part for 15 days (or a longer period determined by the administrator) following written notice of acceleration. If not exercised within that period, the option terminates.

        Amendments and Termination of the 2000 Stock Plan.    Our board of directors may amend, suspend or terminate our 2000 Stock Plan at any time. Some amendments may require stockholder approval under applicable state and federal law and rules of any stock exchange or national market system on which our common stock is listed or traded. Our 2000 Stock Plan will automatically terminate on December 31, 2009, unless sooner terminated by our board of directors.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Indemnification and Director and Officer Insurance

        Our certificate of incorporation contains provisions that limit the liability of our directors. Prior to completion of this offering, we will enter into indemnification agreements with our directors and executive officers. The indemnification agreements will obligate us to pay defense costs and any damages that result from third party claims against directors and officers for their actions on our behalf, so long as they acted in good faith and in a manner they believed to be in the best interests of our Company. We intend to obtain insurance that insures our directors and officers against certain losses and which insures us against our obligations to indemnify our directors and officers.

Series A Recapitalization

        On September 28, 2004, we sold 2,131,285 shares of our Series A Preferred Stock at a price per share of $35.19, for an aggregate purchase price of approximately $75 million. Approximately $55 million of these proceeds were used to repurchase 1,562,944 shares of our common stock held by our founders, employees and investors at the issuance price.

Investors' Rights Agreement

        We have entered into the Investors' Rights Agreement, dated September 27, 2004, with the purchasers of our outstanding Series A Preferred Stock, which include entities with which some of our directors are affiliated, and our executive officers and directors. See "Description of Capital Stock—Registration Rights."

Internet Domain Name Agreement

        On April 15, 2000, we entered into an agreement with one of our founders, Jeff Pryor, with respect to our use of the Internet domain "www.fastclick.com." Under the agreement we were obligated to pay royalties to Mr. Pryor for use of the domain name. We accrued royalty obligations of $14,335 and $0 for the nine months ended September 30, 2003 and 2004 (unaudited) and $21,940, $19,955 and $3,000 for the years ended 2001, 2002 and 2003, respectively. On May 6, 2004, we entered into an assignment agreement with Mr. Pryor pursuant to which we acquired ownership of the domain name "www.fastclick.com" and satisfied all of our accrued royalty obligations for use of the domain name for a payment to Mr. Pryor of $125,000.

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PRINCIPAL AND SELLING STOCKHOLDERS

        The following table sets forth information regarding the beneficial ownership of our common stock as of September 30, 2004, and as adjusted to give effect to this offering, by the following persons and entities:

•

each of our directors;



•

each of our named executive officers;



•

all of our executive officers and directors as a group;



•

each person, or group of affiliated persons, known to us to beneficially own 5% or more of our outstanding common stock; and



•

each selling stockholder.

        Beneficial ownership of shares is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder. Percentage of beneficial ownership is based on 2,743,329 shares of common stock outstanding as of September 30, 2004 and            shares of common stock outstanding after the completion of this offering, in each case, assuming, upon completion of this offering, the conversion of all of our outstanding Series A Preferred Stock into an aggregate of 2,131,285 shares of our common stock. Shares of common stock subject to options that are currently exercisable or exercisable within 60 days of September 30, 2004, are considered outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated below, the address of each individual listed below is 360 Olive Street, Santa Barbara, California 93101.

        We have granted to the underwriters an option to purchase up to an additional            shares of common stock and the selling stockholders have granted to the underwriters an option to purchase up to an additional            shares of common stock, in each case, exercisable to cover over-allotments, if any, at the public offering price less the underwriting discount shown on the cover page of this prospectus. The underwriters may exercise this option at any time until 30 days after the date of this

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prospectus. The numbers shown below assume no exercise by the underwriters of their over-allotment option.

			Shares Beneficially Owned After this Offering
Name and Address	Shares Beneficially Owned Prior to this Offering	Shares Sold in this Offering(8)
			Number	Percentage
5% Stockholders
Entities affiliated with Highland Capital Partners(1) c/o Highland Capital Partners LLC 92 Hayden Avenue Lexington, MA 02421
Oak Investment Partners XI, Limited Partnership(2) 525 University Avenue, Suite 1300 Palo Alto, CA 94301
Entities affiliated with Steamboat Ventures, LLC(3) 3601 West Olive Avenue, Suite 501 Burbank, CA 91505
Jeff Pryor
Executive Officers and Directors
Kurt A. Johnson(4)
Fred J. Krupica(5)
James Aviani(6)
Michael S. Hughes(7)
Shayne G. Mihalka(8)
Robert J. Davis(1)
Frederic W. Harman(2)
Daniel J. Nova(1)
All executive officers and directors as a group (8 persons)

*

Less than 1%

(1)

Includes                  shares beneficially owned by Highland Capital Partners VI Limited Partnership,                  shares beneficially owned by Highland Capital Partners VI-B Limited Partnership and                  shares beneficially owned by Highland Entrepreneurs' Fund VI Limited Partnership. The general partner of Highland Capital Partners VI Limited Partnership and Highland Capital Partners VI-B Limited Partnership is Highland Management Partners VI Limited Partnership and the general partner of Highland Entrepreneurs' Fund VI Limited Partnership is HEF VI Limited Partnership. The general partner of both Highland Management Partners VI Limited Partnership and HEF VI Limited Partnership is Highland Management Partners VI, Inc. Robert J. Davis serves as venture partner of Highland Capital Partners, LLC, and Daniel J. Nova serves as a managing director of Highland Management Partners VI, Inc. Mr. Davis and Mr. Nova each disclaim beneficial ownership of the shares held by these funds except to the extent of his pecuniary interest in these funds.

(2)

Includes shares beneficially owned by Oak Investment Partners XI, Limited Partnership. Oak Investment Partners XI, Limited Partnership is managed by its general partner, Oak Associates XI, LLC. Fredric W. Harman serves as a Managing Member of Oak Associates XI, LLC. Mr. Harman disclaims beneficial ownership of the shares held by these funds except to the extent of his pecuniary interest in these funds.

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(3)

Includes                  shares beneficially owned by Steamboat Ventures, LLC and            shares beneficially owned by Steamboat Ventures Manager, LLC.

(4)

Includes            shares underlying options to purchase our common stock issued to Mr. Johnson under our stock plans.                        of the options have an exercise price of $            and            have an exercise price of $            . Does not include            shares underlying options to purchase our common stock under our stock plans with an exercise price of $            and            with our exercise price of $            which will vest in quarterly installments through            .

(5)

Includes            shares underlying options to purchase our common stock issued to Mr. Krupica under our stock plans with an exercise price of $            .             of these options vested upon the completion of this offering. Does not include            shares underlying options to purchase our common stock issued to Mr. Krupica under our stock plans with an exercise price of $            which will vest in quarterly installments through            .

(6)

Includes            shares underlying options to purchase our common stock issued to Mr. Aviani under our stock plans with an exercise price of $            .             of these options vested upon the completion of this offering. Does not include            shares underlying options to purchase our common stock issued to Mr. Aviani with an exercise price of $            which will vest in quarterly installments through            .

(7)

Includes            shares underlying options to purchase our common stock issued to Mr. Hughes under our stock plans with an exercise price of $            . Does not include             shares underlying options to purchase our common stock issued to Mr. Hughes with an exercise price of $            which will vest in quarterly installments through             .

(8)

Includes            shares underlying options to purchase our common stock issued to Mr. Mihalka under our stock plans with an exercise price of $            . Does not include            shares underlying options to purchase our common stock issued to Mr. Mihalka with an exercise price of $            which will vest in quarterly installments through             .

(9)

If the underwriters' over-allotment option is exercised in full, the additional shares sold would be allocated among the selling stockholders as follows:

Selling Stockholders	Shares Subject to the Over-allotment Option
	—
All selling stockholders as a group (      persons)	—

        If the underwriters' over-allotment option is exercised in part, the additional shares sold would be allocated pro rata based upon the share amounts set forth in the preceding table.

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DESCRIPTION OF CAPITAL STOCK

        The following is a summary of the rights of our common stock and preferred stock and related provisions of our certificate of incorporation and bylaws, as they will be in effect upon the closing of this offering. This summary is not complete. For more detailed information, please see our certificate of incorporation, bylaws and Investors' Rights Agreement, which are filed as exhibits to the registration statement of which this prospectus is a part.

        We plan to reincorporate in the state of Delaware prior to this offering. The following description of our capital stock gives effect to the reincorporation and the related changes in our certificate of incorporation and bylaws.

        Pursuant to our certificate of incorporation, our authorized capital stock consists of                  shares, each with no par value per share, of which:

•

shares are designated as common stock; and



•

shares are designated as preferred stock.

        As of September 30, 2004, there were 63 holders of record of our common stock and 6 holders of record of our Series A Preferred Stock. Upon the closing of this offering, there will be no outstanding shares of our Series A Preferred Stock.

Common Stock

        Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. Common stockholders do not have the right to cumulate their votes in the election of directors. Accordingly, a plurality of the votes cast in any election may elect all of the directors standing for election. Holders of common stock are entitled to receive any dividends ratably, if declared by the board of directors out of assets legally available for the payment of dividends, subject to any preferential dividend rights of any outstanding preferred stock. If we liquidate, dissolve or wind up, the holders of common stock are entitled to share ratably in all assets remaining after we satisfy all liabilities and the liquidation preference of any shares of preferred stock outstanding at that time. Holders of common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of preferred stock, which we may designate and issue in the future without further stockholder approval.

Common Stock Outstanding at Consummation of Offering

        Upon the consummation of this offering, there will be            shares of common stock issued and outstanding.

Preferred Stock

        The board of directors is authorized to issue, without further stockholder approval, up to            shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each series, including the dividend rights, dividend rates, conversion rights, voting rights, term of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of any series. We may issue shares of preferred stock in ways that may delay, defer or prevent a change in control of us without further action by our stockholders and may adversely affect the voting and other rights of the holders of common stock. The issuance of preferred stock with

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voting and conversion rights may adversely affect the voting power of the holders of common stock, including the loss of voting control to the holder of preferred stock issued in the future.

Preferred Stock Outstanding at Consummation of Offering

        As of the consummation of this offering, there will be no outstanding shares of preferred stock.

Options

        As of September 30, 2004, options to purchase a total of 438,500 shares of common stock with a weighted average exercise price of $9.63 were outstanding. Of these options, options to purchase 33,437 shares were vested at September 30, 2004. All of the options, other than options to purchase            shares to be sold in this offering, will be subject to 180 day lock-up agreements with the underwriters. See "Underwriting" for a description of the terms of the lock-up agreements.

Registration Rights

        The holders of 2,131,285 shares of our common stock issuable upon the automatic conversion of our Series A Preferred Stock upon completion of this offering have the right to require us to register their shares for resale under the Securities Act. The following stockholders have registration rights: Highland Capital Partners VI Limited Partnership, Highland Capital Partners VI-B Limited Partnership, Highland Entrepreneurs' Fund VI Limited Partnership, Oak Investment Partners XI, Limited Partnership, Steamboat Ventures, LLC and Steamboat Ventures Manager, LLC. These registration rights are contained in our Investors' Rights Agreement and are described below. The registration rights under the Investors' Rights Agreement will expire five years following the completion of this offering, or, with respect to an individual holder's S-3 registration rights described below, when that holder is able to sell all of its shares pursuant to Rule 144 under the Securities Act in any three month period.

•

Demand registration rights.  Six months after the closing of this offering, the holders of shares of common stock having demand registration rights under the Investors' Rights Agreement have the right to require that we register their common stock. The holders exercising the demand rights must hold at least one-third of the shares of common stock subject to the Investors' Rights Agreement, and the proposed number of shares to be offered by the holders must equal to at least one third of the shares of common stock subject to the Investors' Rights Agreement. We are obligated to effect two registrations in response to these demand registration rights. We may postpone the filing of a registration statement for up to 90 days once in any 12-month period if, in our reasonable opinion, material non-public information exists about us that should not be disclosed. The underwriters of any underwritten offering have the right to limit the number of shares to be included in a registration statement filed in response to the exercise of these demand registration rights. We must pay all expenses, except for underwriters' discounts and commissions, incurred in connection with these demand registration rights, except that our obligation to reimburse the reasonable fees and disbursements of counsel to the exercising holders is limited to $20,000 and except that if the registration statement is withdrawn at the request of a majority of the exercising holders, those holders must pay all expenses.



•

Piggyback registration rights.  If we register any securities for public sale, the stockholders with piggyback registration rights under the Investors' Rights Agreement have the right to include their shares in the registration, subject to specified exceptions. The underwriters of any underwritten offering have the right to limit the number of shares registered by these stockholders due to marketing reasons. We must pay all expenses, except for underwriters' discounts and commissions, incurred in connection with these piggyback registration rights.

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•

S-3 registration rights.  If we are eligible to file a short-form registration statement on Form S-3, the stockholders with S-3 registration rights under the Investors' Rights Agreement can request that we register their shares, provided that the total price of the shares of common stock offered to the public is at least $2,500,000. The holders of S-3 registration rights may only require us to file one Form S-3 registration statement in any 12-month period. We may postpone the filing of a registration statement for up to 90 days once in any 12-month period if, in our reasonable opinion, material non-public information exists about us that should not be disclosed. We must pay all expenses, except for underwriters' discounts and commissions, incurred in connection with these S-3 registration rights.

Anti-Takeover Provisions

Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws.

        Delaware law and our certificate of incorporation and our bylaws, as amended and restated prior to the closing of this offering, contain provisions that may delay, defer or discourage another party from acquiring control of us. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give the board the power to discourage acquisitions that some stockholders may favor.

Special Approval for Amendment of Certificate of Incorporation and Bylaws.

        Our certificate of incorporation and bylaws will provide that the holders of a majority of our capital stock entitled to vote constitute a quorum for the conduct of business at a meeting of stockholders. However, the holders of at least two-thirds of our outstanding voting stock must approve any amendments to the protective provisions of our certificate of incorporation or bylaws, which include the requirements that actions by stockholders be taken at duly called meetings and not by written consent, and that our board of directors be divided into three classes with staggered terms.

Limits on Ability of Stockholders to Act by Written Consent.

        Our certificate of incorporation and bylaws provide that our stockholders may not act by written consent. This limit on the ability of our stockholders to act by written consent may lengthen the amount of time required to take stockholder actions. In addition, our bylaws provide that special meetings of stockholders may be called only by the board of directors, chairman of the board or president, and not by any stockholders. As a result, one or more persons controlling a majority of our voting stock would not be able to amend our bylaws or remove directors without a stockholders meeting.

Undesignated Preferred Stock.

        The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with super voting, special approval, dividend or other rights or preferences that could impede the success of any attempt to acquire us. These and other provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changing control or management of us.

Classified Board of Directors.

        Our certificate of incorporation will provide for the board of directors to be divided into three classes, each with a staggered three-year term. As a result, only one class of directors will be elected at each annual meeting of stockholders, and each of the two other classes of directors will continue to

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serve for the remainder of their respective three-year term. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our board. Our certificate of incorporation will provide that the number of directors will be fixed in the manner provided in the bylaws. Our bylaws will provide that the number of directors will be fixed from time to time solely pursuant to a resolution adopted by the board, but must consist of not less than three or more than nine directors. Upon completion of this offering, our board of directors will have            members. Our certificate of incorporation contains a provision prohibiting cumulative voting for the election of directors. Members of the board of directors may only be removed for cause and upon the affirmative vote of the holders of a majority of our capital stock entitled to vote.

Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals.

        Our bylaws provide that special meetings of the stockholders can be called only by the board of directors, the chairman of the board or the president, and not by any stockholders. Our bylaws will also prohibit the conduct of any business other than as specified in the notice of special meeting or as otherwise brought before the meeting by the board of directors. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.

        Our bylaws will establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors. Additionally, vacancies and newly created directorships may be filled only by a vote of a majority of the directors then in office, even though less than a quorum, and not by the stockholders. Our bylaws will allow the board of directors or the presiding officer at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquiror from conducting a solicitation of proxies to elect the acquiror's own slate of directors or otherwise attempting to obtain control of us.

Limitations on Liability and Indemnification of Directors and Officers.

        For a description of the limitations on liability and indemnification of our officers and directors, see "Certain Relationships and Related Party Transactions—Indemnification Agreements and Director and Officer Insurance."

Amendment Provisions.

        Our certificate of incorporation will grant our board of directors the authority to amend and repeal our bylaws without a stockholder vote in any manner not inconsistent with the laws of the State of Delaware or our certificate of incorporation.

Delaware Anti-Takeover Statute.

        We plan to reincorporate in Delaware prior to the effective date of the registration statement of which this prospectus is a part. Once we reincorporate in Delaware, we will be subject to the provisions of Section 203 of the Delaware General Corporation Law, which regulates corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years

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following the date the person became an interested stockholder unless at least one of the following conditions applies:

•

prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;



•

on completion of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or



•

on or subsequent to the date of the transaction, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66²/3% of the outstanding voting stock which is not owned by the interested stockholder.

        Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with the stockholder's affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation's outstanding voting securities. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may discourage attempts that might result in a premium over the market price for the shares of our common stock held by stockholders.

        The provisions of Delaware law, our certificate of incorporation and our bylaws could have the effect of deferring, delaying or discouraging hostile takeovers and, consequently, they may inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in control or management of us. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Transfer Agent and Registrar

        The transfer agent and registrar for our common stock is EquiServe Trust Company, N.A. and its address is 250 Royall Street, Canton, MA 02021.

Quotation

        We have applied to have our common stock approved for quotation on the Nasdaq National Market under the symbol "FSTC."

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SHARES ELIGIBLE FOR FUTURE SALE

        Prior to this offering, there has been no public market for our common stock. We cannot predict the effect, if any, that market sales of shares or the availability of shares for sale will have on the market price prevailing from time to time. Sales of our common stock in the public market after the offering, or the perception that those sales may occur, could cause the prevailing market price to decrease or to be lower than it might be in the absence of those sales or perceptions.

        Following the completion of this offering, we will have            shares of common stock outstanding assuming automatic conversion of all preferred stock, no exercise of the over-allotment option by the underwriters and no exercise of outstanding options. Of these shares, all of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless one of our existing affiliates, as that term is defined in Rule 144 under the Securities Act, purchases the shares.

        The remaining shares of common stock held by existing stockholders are restricted shares as that term is defined in Rule 144 under the Securities Act. We issued and sold the restricted shares in private transactions in reliance upon exemptions from registration under the Securities Act. Restricted shares may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration, such as the exemptions provided under Rules 144 or 701 under the Securities Act, which are summarized below.

        Taking into account the lock-up agreements described below, the number of shares that will be available for sale in the public market 180 days after the date of this prospectus under the provisions of Rules 144 and 144(k) and Rule 701 under the Securities Act will be            shares, of which approximately            shares will be vested and eligible for sale upon the exercise of options.

Lock-Up Agreements

        We and our officers, directors and 5% or greater stockholders have entered into lock-up agreements with the underwriters in connection with this offering. These lock-up agreements provide that, subject to limited exceptions, neither we nor any of our directors or executive officers nor any of those stockholders may dispose of or hedge any shares of common stock or securities convertible into or exchangeable for shares of common stock. These restrictions will be in effect for a period of 180 days after the date of this prospectus. At any time and without notice, the underwriters may release all or some of the securities from these lock-up agreements. See "Underwriting" for a description of the lock-up agreements.

Rule 144

        In general, under Rule 144, as currently in effect, a person who owns shares that were acquired from us or one of our affiliates at least one year prior to the proposed sale is entitled to sell upon expiration of the selling restrictions described above, within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

•

1% of the number of shares of common stock then outstanding, which will equal approximately            shares immediately after this offering; or



•

the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

        Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. Rule 144 also provides that our affiliates who sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares with the exception of the holding period requirement.

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Rule 144(k)

        Under Rule 144(k), a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than our affiliates, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation, or notice provisions of Rule 144. Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately upon the completion of this offering.

Rule 701

        In general, under Rule 701 as currently in effect, any of our employees, consultants or advisors who purchases shares from us in connection with a compensatory stock or option plan or other written agreement in a transaction that was completed in reliance on Rule 701 and complied with the requirements of Rule 701, is eligible, subject to the terms of the lock-up agreements, to resell those shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period and notice requirements of Rule 144 and, in the case of non-affiliates, without having to comply with the public information, volume limitation or notice filing provisions of Rule 144.

Form S-8 Registration Statements

        Shortly after the effectiveness of this offering, we intend to file a registration statement on Form S-8 under the Securities Act covering shares of common stock reserved for issuance under our 2000 Stock Plan, 2004 Stock Plan and 2005 Equity Plan. Upon the filing of the Form S-8, shares of common stock issued upon the exercise of options under our 2000 Stock Plan, 2004 Stock Plan, and 2005 Equity Plan will be available for sale in the public market, subject to Rule 144 volume limitations applicable to affiliates and subject to the lock-up agreements described above.

Registration Rights

        The holders of 2,131,285 shares of our common stock issuable upon the automatic conversion of our Series A Preferred Stock upon completion of this offering are entitled to rights with respect to the registration of their shares under the Securities Act. These registration rights are contained in our Investors' Rights Agreement and are described above. The registration rights under the Investors' Rights Agreement will expire five years following the completion of this offering, or, with respect to an individual holder's S-3 registration rights, when the holder is able to sell all of its shares pursuant to Rule 144 under the Securities Act in any three month period.

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. STOCKHOLDERS

        The following is a summary of the material U.S. federal income tax consequences of the ownership and disposition of our common stock to non-U.S. holders (as described below), but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This discussion does not address tax consequences of the purchase, ownership or disposition of our common stock to holders of our common stock other than those holders who acquired their beneficial ownership in the common stock in this offering. This summary is based upon the provisions of the Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. We have not sought any ruling from the Internal Revenue Service, or IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions.

        This summary also does not address estate tax considerations or the tax considerations arising under the laws of any foreign, state, local or other tax jurisdiction. In addition, except where noted, this discussion addresses only those holders who hold the common stock as capital assets and does not address tax considerations applicable to an investor's particular circumstances or to investors that may be subject to special tax rules, including, without limitation:

•

banks, insurance companies or other financial institutions;



•

persons subject to the alternative minimum tax;



•

tax-exempt organizations or government entities;



•

brokers or dealers in securities or currencies;



•

traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;



•

persons that own, or are deemed to own, more than five percent of our equity securities;



•

certain former citizens or long-term residents of the United States;



•

certain foreign entities that are owned by U.S. persons, including "controlled foreign corporations" and "passive foreign investment companies;"



•

persons who hold our common stock as a position in a hedging transaction, "straddle," "conversion transaction" or other risk reduction transaction;



•

persons deemed to sell our common stock under the constructive sale provisions of the Code; or



•

partnerships or entities taxable as partnerships.

        If a partnership holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships which hold our common stock and partners in such partnerships should consult their tax advisors.

        YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE UNITED STATES FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

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Non-United States Holder Defined

        For purposes of this discussion, you are a non-U.S. holder if you are a holder that, for U.S. federal income tax purposes, is not a U.S. person or a partnership. For purposes of this discussion, you are a U.S. person if you are:

•

an individual citizen or resident of the United States;



•

a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States any state thereof or the District of Columbia;



•

an estate whose income is subject to U.S. federal income tax regardless of its source; or



•

a trust (i) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (ii) which has made an election to be treated as a U.S. person.

Distributions

        Since our conversion to a C Corporation on September 28, 2004 we have not made any distributions on our common stock, and we do not plan to make any distributions for the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock.

        Subject to the discussion below under "Income or Gain Effectively Connected with a United States Trade or Business," any dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form W-8BEN or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. If a non-U.S. holder holds the common stock through a foreign intermediary, a reduced rate of withholding may be obtained if the foreign intermediary provides a properly executed IRS Form W-8IMY, stating that such holder of the common stock is holding the common stock on behalf of non-U.S. holders and attaching properly executed IRS Form W-8BENs of such non-U.S. holders (unless such intermediary is a qualified intermediary) to the Form W-8IMY. In all situations, the applicable form must be delivered pursuant to applicable procedures and must be promptly transmitted to the U.S. paying/withholding agent.

        If you are eligible for a reduced rate of withholding tax pursuant to a tax treaty, you may obtain a refund of any excess amounts currently withheld if you file an appropriate claim for refund with the IRS.

Gain on Disposition of Common Stock

        You generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

•

the gain is effectively connected with your conduct of a U.S. trade or business (and if a tax treaty applies, such gain is attributable to your permanent establishment in the United States) (in either case, see the discussion below under "Income or Gain Effectively Connected with a United States Trade or Business);

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•

you are an individual who holds our common stock as a capital asset (generally, an asset held for investment purposes) and who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or



•

our common stock constitutes a U.S. real property interest by reason of our status as a "U.S. real property holding corporation" for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or your holding period for our common stock.

        Unless an applicable treaty provides otherwise, if you are an individual non-U.S. holder described in the second bullet above, you will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by U.S. source capital losses (even though you are not considered a resident of the United States). We believe we are not and do not anticipate becoming a "U.S. real property holding corporation."

Income or Gain Effectively Connected with a United States Trade or Business

        If you are engaged in a trade or business in the United States and if gain realized on the sale or other disposition of the common stock is effectively connected with your conduct of such trade or business (and, if an applicable tax treaty requires, is attributable to a U.S. permanent establishment maintained by you in the United States), you will generally be subject to U.S. federal income tax on such dividends or gain on a net income basis in the same manner as if you were a U.S. taxpayer, although you will be exempt from U.S. withholding tax if you deliver, pursuant to applicable procedures, a properly executed IRS Form W-8ECI to the U.S. paying/withholding agent. In addition, if you are a foreign corporation, you may be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable U.S. income tax treaty) of a portion of your effectively connected earnings and profits for the taxable year.

Backup Withholding and Information Reporting

        Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address, and the amount of tax withheld, if any. A similar report is sent to you. Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in your country of residence.

        Payments of dividends or of proceeds on the disposition of stock made to you may be subject to information reporting and backup withholding unless you establish an exemption, for example by properly certifying your non-United States status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that you are a U.S. person.

        Backup withholding is currently imposed at a rate of 28%; however, it is not an additional tax. Rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may be obtained, provided that the required information is furnished to the IRS.

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UNDERWRITING

        Under the terms and subject to the conditions contained in an underwriting agreement dated                        , we and the selling stockholders have agreed to sell to the underwriters named below, for whom Credit Suisse First Boston LLC, Citigroup Global Markets Inc., Thomas Weisel Partners LLC and Jefferies Broadview, a division of Jefferies & Company, Inc. are acting as representatives, the following respective numbers of shares of common stock:

Underwriter		Number of Shares
Credit Suisse First Boston LLC
Citigroup Global Markets Inc.
Thomas Weisel Partners LLC
Jefferies Broadview, a division of Jefferies & Company, Inc.
	Total

        The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

        We and the selling stockholders have granted to the underwriters a 30-day option to purchase on a pro rata basis up to            additional shares from us and an aggregate of            additional outstanding shares from the selling stockholders at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

        The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $            per share. The underwriters and selling group members may allow a discount of $            per share on sales to other broker/dealers. After the initial public offering, the representatives may change the public offering price and concession and discount to broker/dealers.

        The following table summarizes the compensation and estimated expenses we and the selling stockholders will pay:

	Per Share		Total
	Without Over-allotment	With Over-allotment	Without Over-allotment	With Over-allotment
Underwriting Discounts and Commissions paid by us	$	$	$	$
Expenses payable by us	$	$	$	$
Underwriting Discounts and Commissions paid by selling stockholders	$	$	$	$
Expenses payable by the selling stockholders	$	$	$	$

        The representatives have informed us that they do not expect sales to accounts over which the underwriters have discretionary authority to exceed 5% of the shares of common stock being offered.

        We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, or the Securities Act, relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of

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Credit Suisse First Boston LLC and Citigroup Global Markets Inc. for a period of 180 days after the date of this prospectus,except in certain limited circumstances.

        Our officers, directors and existing stockholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse First Boston LLC and Citigroup Global Markets Inc. for a period of 180 days after the date of this prospectus.

        The underwriters have reserved for sale at the initial public offering price up to            shares of the common stock for employees, directors and other persons associated with us who have expressed an interest in purchasing common stock in the offering. The number of shares available for sale to the general public in the offering will be reduced to the extent these persons purchase the reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares.

        We and the selling stockholders have agreed to indemnify the underwriters against liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.

        We have applied to list the shares of common stock on The Nasdaq National Market, under the symbol "FSTC".

        In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Securities Exchange Act of 1934 (the "Exchange Act").

•

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.



•

Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.



•

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

84

•

Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

        These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time.

        A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their Internet brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make Internet distributions on the same basis as other allocations.

85

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

        The distribution of the common stock in Canada is being made only on a private placement basis exempt from the requirement that we and the selling stockholders prepare and file a prospectus with the securities regulatory authorities in each province where trades of the common stock are made. Any resale of the common stock in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the common stock.

Representations of Purchasers

        By purchasing common stock in Canada and accepting a purchase confirmation a purchaser is representing to us, the selling stockholders and the dealer from whom the purchase confirmation is received that:

•

the purchaser is entitled under applicable provincial securities laws to purchase the common stock without the benefit of a prospectus qualified under those securities laws,



•

where required by law, that the purchaser is purchasing as principal and not as agent, and



•

the purchaser has reviewed the text above under Resale Restrictions.

Rights of Action—Ontario Purchasers Only

        Under Ontario securities legislation, a purchaser who purchases a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the common stock, for rescission against us and the Selling Stockholders in the event that this circular contains a misrepresentation. A purchaser will be deemed to have relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the common stock. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the common stock. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us or the Selling Stockholders. In no case will the amount recoverable in any action exceed the price at which the common stock were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we and the Selling Stockholders, will have no liability. In the case of an action for damages, we and the Selling Stockholders, will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the common stock as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

Enforcement of Legal Rights

        All of our directors and officers as well as the experts named herein and the Selling Stockholders may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

Taxation and Eligibility for Investment

        Canadian purchasers of common stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the common stock in their particular circumstances and about the eligibility of the common stock for investment by the purchaser under relevant Canadian legislation.

86

LEGAL MATTERS

        Selected legal matters with respect to this offering and the validity of the common stock offered by this prospectus will be passed upon for us by Sheppard, Mullin, Richter & Hampton LLP, Los Angeles, California. Selected legal matters in connection with this offering will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP, Palo Alto, California.

EXPERTS

        The financial statements of Fastclick, Inc. at December 31, 2002 and 2003, and for each of the three years in the period ended December 31, 2003, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933 with respect to the common stock offered by this prospectus. This prospectus does not contain all of the information contained in the registration statement and the exhibits to the registration statement. Please refer to the registration statement and exhibits for further information with respect to the common stock offered by this prospectus. Statements contained in this prospectus regarding the contents of any contract or other document are only summaries. With respect to any contract or document filed as an exhibit to the registration statement, you should refer to the exhibit for a copy of the contract or document, and each statement in this prospectus regarding that contract or document is qualified by reference to the exhibit. A copy of the registration statement and its exhibits and schedules may be inspected without charge at the SEC's public reference room, located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC's website at www.sec.gov.

        Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act, and we intend to file reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SEC's public reference room and the website of the SEC referred to above.

87

Fastclick, Inc.

INDEX TO FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm	F-2
Balance Sheets as of December 31, 2002 and 2003 and September 30, 2004 (unaudited)	F-3
Statements of Operations for the Years Ended December 31, 2001, 2002, and 2003 and the Nine Months Ended September 30, 2003 and 2004 (unaudited)	F-4
Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2001, 2002 and 2003 and the Nine Months Ended September 30, 2004 (unaudited)	F-5
Statements of Cash Flows for the Years Ended December 31, 2001, 2002 and 2003 and the Nine Months Ended September 30, 2003 and 2004 (unaudited)	F-6
Notes to Financial Statements	F-7

F-1

REPORT OF ERNST & YOUNG LLP,
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
of Fastclick, Inc.

        We have audited the accompanying balance sheets of Fastclick, Inc. as of December 31, 2002 and 2003, and the related statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fastclick, Inc., at December 31, 2002 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.

/s/  ERNST & YOUNG LLP

Los Angeles, California
June 3, 2004

F-2

FASTCLICK, INC.

BALANCE SHEETS

		As of December 31,						As of September 30, 2004
		2002			2003			Actual			Pro Forma
		($ in thousands, except share data)
								(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents	$	2,023		$	1,657		$	2,409
	Short-term investments		—			—			20,000
	Accounts receivable, net of allowance of $0 (2002), $70 (2003), and $389 (2004)		2,568			4,413			7,888
	Prepaid expenses and other current assets		922			213			210
Total current assets			5,513			6,283			30,507
Property and equipment, net			243			793			1,467
Other assets			318			778			751
Total assets		$	6,074		$	7,854		$	32,725
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
	Accounts payable	$	1,339		$	1,027		$	4,450
	Deferred revenue		157			491			402
	Accrued payroll		197			300			1,405
	Accrued other liabilities		75			172			299
	Income taxes payable		24			—			81
	Payable to S corporation stockholders		—			—			3,228
	Current portion of loans payable		—			111			110
	Deferred income taxes		31			49			537
	Other current liabilities		3			2			2
Total current liabilities			1,826			2,152			10,514
Long-term portion of loans payable, net of current portion			—			45			24
Deferred tax liability			—			—			779
Total long-term liabilities			—			45			803
	Total liabilities		1,826			2,197			11,317
Commitments and contingencies
Redeemable convertible preferred stock, $0 par value; 0 shares authorized at December 31, 2002 and 2003 and 2,131,285 authorized at September 30, 2004; 0 issued and outstanding as of December 31, 2003 and 2,131,285 issued and outstanding at September 30, 2004 (liquidation preference of $75,000)			—			—			73,434
Stockholders' equity (deficit)
	Preferred stock, $0 par value; 800,000 shares authorized at December 31, 2002 and 2003 and 0 at September 30, 2004; 0 outstanding at December 31, 2002, 2003, and September 30, 2004		—			—			—
	Common stock, $0 par value; 3,750,000 shares authorized; 2,035,125 and 2,135,125 shares issued and outstanding as of December 31, 2002 and 2003, respectively and 2,234,988 issued and 612,044 shares outstanding as of September 30, 2004		421			457			6,165		$	79,599
	Deferred compensation		—			—			(5,328	)		(5,328	)
	Less: Treasury stock		(30	)		(30	)		(54,386	)		(54,386	)
	Retained earnings		3,857			5,230			1,523			1,523
Total stockholders' equity (deficit)			4,248			5,657			(52,026	)	$	21,408
Total liabilities and stockholders' equity		$	6,074		$	7,854		$	32,725

See accompanying notes.

F-3

FASTCLICK, INC.

STATEMENTS OF OPERATIONS

		Year Ended December 31,								Nine Months Ended September 30,
		2001			2002		2003			2003			2004
		(in thousands, except share data)
										(unaudited)
Revenue		$	4,480		$	17,664	$	28,663		$	18,459		$	38,986
Cost of revenue			3,114			11,766		19,246			12,398			25,688
Gross profit			1,366			5,898		9,417			6,061			13,298
Operating costs:
	Sales and marketing		229			995		2,160			1,371			4,670
	Technology		221			345		402			278			1,851
	General and administrative		193			422		1,045			716			1,761
	Stock-based compensation(a)		—			—		—			—			340
Total operating costs			643			1,762		3,607			2,365			8,622
Operating income			723			4,136		5,810			3,696			4,676
Interest and dividend income			8			19		19			14			23
Interest expense			—			—		(5	)		(3	)		(6	)
Loss on sale/disposal of equipment			(1	)		—		(12	)		(12	)		—
Income before income taxes			730			4,155		5,812			3,695			4,693
Provision for income taxes			207			97		55			42			1,348
Net income		$	523		$	4,058	$	5,757		$	3,653		$	3,345
Unaudited pro forma statement of operations data (see Note 1 and Note 4):
Income before income taxes					$	4,155	$	5,812		$	3,695		$	4,693
Pro forma provision for income taxes						1,581		2,167			1,360			1,722
Pro forma net income					$	2,574	$	3,645		$	2,335		$	2,971

(a)

Stock-based compensation charges are excluded from the following operating expense categories:

Cost of revenue	$	7
Sales and marketing		206
Technology		93
General and administrative		34
	$	340

See accompanying notes.

F-4

FASTCLICK, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

		Preferred Stock					Common Stock
											Deferred Stock Based Compensation						Retained Earnings			Total Stockholders' Equity
		Shares		Amount			Shares		Amount					Treasury Stock
		(in thousands)
Balance at December 31, 2000		400		$	400		1,400		$	1	$	—		$	—		$	(117	)	$	284
	Conversion of preferred to common stock prior to S corporation election	(400	)		(400	)	400			400		—			—			—			—
	Net income	—			—		—			—		—			—			523			523
Balance at December 31, 2001		—			—		1,800			401		—			—			406			807
	Sale of common stock	—			—		120			—		—			—			—			—
	Exercises of stock options	—			—		175			20		—			—			—			20
	Treasury stock	—			—		(60	)		—		—			(30	)		—			(30	)
	Distributions to stockholders	—			—		—			—		—			—			(607	)		(607	)
	Net income	—			—		—			—		—			—			4,058			4,058
Balance at December 31, 2002		—			—		2,035			421		—			(30	)		3,857			4,248
	Exercises of stock options	—			—		100			36		—			—			—			36
	Distributions to stockholders	—			—		—			—		—			—			(4,384	)		(4,384	)
	Net income	—			—		—			—		—			—			5,757			5,757
Balance at December 31, 2003		—			—		2,135			457		—			(30	)		5,230			5,657
	Exercises of stock options	—			—		40			40		—			—			—			40
	Distributions to stockholders	—			—		—			—		—			—			(7,052	)		(7,052	)
	Treasury stock repurchased	—			—		(1,563	)		—		—			(54,356	)		—			(54,356	)
	Deferred stock-based compensation related to issuance of stock options to employees	—			—		—			5,668		(5,668	)		—			—			—
	Amortization of stock-based compensation	—			—		—			—		340			—			—			340
	Net income	—			—		—			—		—			—			3,345			3,345
Balance at September 30, 2004 (unaudited)		—		$	—		612		$	6,165	$	(5,328	)	$	(54,386	)	$	1,523		$	(52,026	)

See accompanying notes.

F-5

FASTCLICK, INC.

STATEMENTS OF CASH FLOWS

			Year Ended December 31,									Nine Months Ended September 30,
			2001			2002			2003			2003			2004
			(in thousands)
												(unaudited)
Cash flow from operating activities:
Net income			$	523		$	4,058		$	5,757		$	3,653		$	3,345
Adjustments to reconcile net income to net cash provided by operating activities:
	Amortization of deferred compensation			—			—			—			—			340
	Depreciation and amortization			60			112			192			144			308
	Loss on sale/disposal of equipment			3			—			27			27			—
	Changes in operating assets and liabilities:
		Accounts receivable		(1,239	)		(1,222	)		(1,845	)		(1,515	)		(3,475	)
		Prepaid expenses and other assets		(7	)		(914	)		709			850			3
		Other assets		(8	)		(24	)		10			3			(8	)
		Accounts payable		397			878			(311	)		618			3,424
		Deferred revenue		92			58			335			210			(89	)
		Accrued payroll		62			100			102			355			1,104
		Income taxes payable		—			25			(25	)		16			82
		Accrued other and other current liabilities		12			51			97			118			127
		Deferred income taxes		208			(176	)		18			—			1,266
Net cash provided by operating activities				103			2,946			5,066			4,479			6,427
Cash flow from investing activities:
Purchase of property and equipment				(169	)		(145	)		(717	)		(482	)		(860	)
Purchase of domain names				—			(129	)		(5	)		(5	)		(87	)
Purchase of short-term investments				—			—			—			—			(20,000	)
Website development costs				—			—			(28	)		(12	)		—
Software development costs				—			(120	)		(489	)		(326	)		—
Net cash used in investing activities				(169	)		(394	)		(1,239	)		(825	)		(20,947	)
Cash flow from financing activities:
Net borrowings under loans payable				—			—			155			163			(22	)
Proceeds from sale of common stock				—			20			36			25			40
Net proceeds from the sale of preferred stock				—			—			—			—			73,434
Payments to repurchase common stock				—			(30	)		—			—			(54,356	)
Distributions to S corporation stockholders				—			(608	)		(4,384	)		(4,384	)		(3,824	)
Net cash (used in) provided by financing activities				—			(618	)		(4,193	)		(4,196	)		15,272
(Decrease) increase in cash and cash equivalents				(66	)		1,934			(366	)		(542	)		752
Cash and cash equivalents, beginning of year				155			89			2,023			2,023			1,657
Cash and cash equivalents, end of year			$	89		$	2,023		$	1,657		$	1,481		$	2,409

Supplemental disclosures to the statements of cash flows were as follows:

		Year Ended December 31,						Nine Months Ended September 30, 2004
		2001		2002		2003
Cash paid for interest		$	—	$	—	$	5	$	7
Cash paid for income taxes			—		252		75		15
Supplemental disclosure of cash flow information:
	Equity based deferred compensation	$	—	$	—	$	—	$	5,668

See accompanying notes.

F-6

FASTCLICK, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2003
INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 and 2004 IS UNAUDITED

1. The Company and Summary of Significant Accounting Policies

The Company—Fastclick, Inc. (Fastclick or the Company) provides performance-based technology solutions to Internet advertisers and website publishers to improve advertising campaign performance across its network of websites. The Company's technology solutions, including its proprietary Optimization Engine, managed-market bidding system and reporting suite and campaign management tools, are designed to increase advertisers' return-on-investment and enhance the value of website publishers' advertising space.

        Fastclick was incorporated on March 31, 2000, under the laws of California and plans to reincorporate under the laws of Delaware prior to the effective date of the registration statement (see Note 14). The Company's headquarters are located in Santa Barbara, California.

Pro Forma Balance Sheet—The unaudited pro forma balance sheet as of September 30, 2004 reflects the automatic conversion of all outstanding shares of the Company's redeemable convertible Series A preferred stock on a one-for-one basis into 2,131,285 shares of common stock upon completion of the Company's initial public offering. (See Note 14)

Unaudited Interim Financial Information—The accompanying unaudited interim balance sheet as of September 30, 2004 and the consolidated statements of income and cash flows for the nine months ended September 30, 2003 and 2004 are unaudited. These unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States. In the opinion of the Company's management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary for the fair presentation of the Company's statement of financial position, results of operations and its cash flows for the nine months ended September 30, 2003 and 2004.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents—Cash and cash equivalents include cash on hand, in banks, and short-term investments with original maturities of three months or less on the date of purchase.

Short-term Investments—The Company considers its marketable securities available-for-sale as defined in SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities." Realized gains and losses and declines in value considered to be other than temporary are included in income. The cost of securities sold is based on the specific identification method. For short-term marketable securities, there were no material realized or unrealized gains or losses, nor any material differences between estimated fair values, based on quoted market prices, and the costs of securities in the investment portfolio as of September 30, 2004. The Company's short-term marketable securities consist primarily of Euro dollar commercial paper.

Fair Value of Financial Instruments—The carrying value of financial instruments, which includes cash and cash equivalents, accounts receivable, accounts payable and borrowings approximates fair

F-7

values at September 30, 2004 and December 31, 2002 and 2003, due to their short-term maturities and the relatively stable interest rate environment.

Prepaid Expenses—Prepaid expenses consist primarily of prepayments to website publishers and amounts paid for operating expenses, such as rent, insurance, and trade show fees, that will be recognized in the following period. As of December 31, 2002, prepaid expenses included prepayments totaling $886,250 to two website publishers. The prepayments were recognized as an expense as advertisements were delivered across the network in subsequent periods.

Property and Equipment, Net—Property and equipment are stated at cost, net of accumulated depreciation. Maintenance and repairs are charged to expense as incurred. Expenditures for additions and major improvements are capitalized. Depreciation is provided using the straight-line method. Depreciation expense was $104,500 and $186,406 for the nine months ended September 30, 2003 and 2004 (unaudited), respectively and was $39,724, $87,022 and $140,187 for the years ended December 31, 2001, 2002 and 2003, respectively.

Software Development Costs for Internal Use—According to SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," (SOP 98-1) software development costs incurred during the application development stage including (1) external direct costs of materials and services consumed in developing or obtaining the software, (2) payroll and payroll-related costs for employees who are directly associated with and who devote time to the project, and (3) interest costs incurred, when material, while developing the software are capitalized.

        Costs incurred in the preliminary project and post-implementation stages of an internal use software project are expensed as incurred.

        The Company capitalized software development costs for internal use amounting to $120,323 during 2002 and $488,786 during 2003.

        Software development costs for internal use are being amortized using the straight-line method over four years. Amortization of software development costs was $37,619 and $118,325 for the nine months ended September 30, 2003 and 2004 (unaudited), respectively, and $19,069, $24,082 and $49,150 for the years ended December 31, 2001, 2002 and 2003, respectively. Management expects all costs to be recovered during the amortization periods. Management routinely assesses whether recovery periods should be reduced based on changes in market and other external factors.

Website Development Costs—Under EITF 00-2, "Accounting for Website Development Costs," the Company accounts for its website development costs by applying SOP 98-1. During 2003, $27,800 was capitalized. Of that amount, $19,000 was for the enhancement of the "fastclick.com" website. Website development costs are being amortized using the straight-line method over four years. Amortization of website development costs was $1,647 and $4,005 for the nine months ended September 30, 2003 and 2004 (unaudited), respectively. Amortization of website development costs was $1,009, $1,009 and $2,197 for the years ended December 31, 2001, 2002 and 2003, respectively.

F-8

Domain Names—The Company has capitalized costs paid to acquire certain domain names, and management believes that the purchased domain names will have an infinite life and, therefore, does not amortize the cost of acquiring these domain names.

Impairment of Long-Lived Assets—The Company evaluates impairment of long-lived assets, which includes property and equipment and identifiable intangible assets whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value may not be recoverable. Events and circumstances that may indicate that an asset is impaired may include significant decreases in the market value of an asset or common stock, a significant decline in actual or projected revenue, a change in the extent or manner in which an asset is used, shifts in technology, loss of key management or personnel, changes in the Company's operating model or strategy, and competitive forces as well as other factors. To date, the Company has identified no such impairment losses.

Revenue Recognition—The Company recognizes revenue in accordance with accounting principles generally accepted in the United States and with Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition." Recognition occurs when there is persuasive evidence of an arrangement, delivery has occurred (as indicated below), the fees are fixed and determinable, and collection is reasonably assured.

        The Company offers its advertisers multiple pricing options, including (1) cost-per-action, or CPA, where the advertiser pays Fastclick a fee based on the number of specified Internet user responses, such as registrations, requests for information or sales that its advertisements produce; (2) cost-per-click, or CPC, where the advertiser pays Fastclick a fee based on the number of clicks its advertisements generate; and (3) cost-per-thousand impressions, or CPM, where the advertiser pays Fastclick a fee based on the number of times its advertisements are displayed, referred to as impressions. Under the CPC and CPA pricing models, Fastclick's revenue is recognized when an Internet user performs a specific action, such as clicking on an advertiser's banner. Under the CPM pricing model, Fastclick recognizes revenue based on the number of advertisements delivered.

        The Company provides some advertisers services under CPC, CPA and CPM pricing models simultaneously. Management believes that services under each model represent separate units of accounting pursuant to EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables" (EITF 00-21). EITF 00-21 addresses certain aspects of accounting by a vendor of arrangements under which it will perform multiple revenue generating activities, specifically, how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. These separate services are provided simultaneously to the advertisers and are recognized as revenue in the periods delivered (as indicated above).

        Deferred revenue is recorded when payments are received in advance of the Company providing advertising services.

Cost of Revenue—Cost of revenue consists primarily of amounts the Company incurs and pays to publishers for their share of revenue the Company derives from their advertising space and, to a lesser extent, the cost of maintaining the computer systems infrastructure which supports the Company's

F-9

proprietary technologies, salaries and benefits of network operations personnel, bandwidth and communications costs, depreciation of network infrastructure equipment and the cost of database maintenance and support.

Sales and Marketing—The Company's sales and marketing expenses relate primarily to the compensation and associated costs for sales and marketing personnel, marketing and advertising, public relations and other promotional activities, general business development activities, publisher acquisition and product development expenses.

        Advertising costs included in sales and marketing expenses were $4,117 and $118,123 for the nine months ended September 30, 2003 and 2004 (unaudited), respectively, and $550, $996 and $50,545 for the years ended December 31, 2001, 2002 and 2003, respectively.

Technology—Technology costs include expenses for the research and development of new technologies designed to enhance the Company's Internet advertising solutions and costs associated with the maintenance and administrative support of the Company's technology team, including the salaries and related expenses for the Company's research and development, as well as costs for contracted services and supplies. Also included in technology is the amortization of capitalized software development costs. Costs incurred for research and development are expensed as incurred.

General and Administrative—The Company's general and administrative expenses relate primarily to the compensation and associated costs for general and administrative personnel, professional fees and facility costs.

Sales and Concentration of Credit Risk—Fastclick extends credit to its advertisers based on an ongoing evaluation of their financial condition. The Company generally does not require collateral or other security to support accounts receivable. To date, credit losses have not been significant and are within management's expectations.

        The Company encounters a certain amount of risk as a result of a concentration of revenue from a few significant advertisers, and website advertising space provided by a few significant publishers.

        The Company's top 10 advertisers accounted for 56.6%, 49.7% and 47.6% of revenue in 2001, 2002 and 2003, respectively. One advertiser accounted for 11.2% and 11.6% of revenue for the year ended December 31, 2003 and for the nine months ended September 30, 2003 (unaudited), respectively. No advertiser accounted for more than 10% of revenue for the year ended December 31, 2002 or for the nine months ended September 30, 2004.

        Expenses for the Company's top 10 publishers accounted for 23.3%, 28%, 44.3% and 22.6% of publisher expenses for the nine months ended September 30, 2004 (unaudited) and years ended December 31, 2001, 2002 and 2003, respectively. No publisher accounted for more than 10% of publisher expenses for the nine months ended September 30, 2004 and 2003 and years ended December 31, 2001 and 2003. One publisher accounted for 25.9% of publisher expenses in 2002.

Stock-Based Compensation—The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of shares at the date of grant. As permitted by

F-10

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), the Company accounts for stock option grants to employees using the intrinsic-value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25). During 2001, 2002 and 2003 there was no compensation expense recognized under APB No. 25.

        In accordance with SFAS 123, the Company provides the pro forma disclosures in Note 11 of the effect on net income if SFAS 123 had been applied in measuring compensation expense for all periods presented.

        In conjunction with the Company's recapitalization transaction discussed in Note 9, the Company reviewed its historical exercise prices through September 30, 2004 and, as a result, revised the estimate of fair value for all stock options granted subsequent to January 1, 2004. With respect to these options granted, the Company had a deferred stock compensation balance of $5,327,822 at September 30, 2004 (unaudited), for the difference between the original exercise price per share determined by the Board of Directors and the revised estimate of fair value per share at the respective grant dates. The Company expects to record significant additional deferred compensation and compensation expense from October 1, 2004 through the initial public offering date. Deferred stock compensation is recognized and amortized on a straight-line basis over the vesting period of the related options, generally four years. The Company recorded no deferred compensation or compensation expense in 2001, 2002 and 2003 as all grants of options were at fair market value. Compensation expense related to stock options granted to the Company's employees was $340,201 for the nine months ended September 30, 2004 (unaudited).

Income Taxes—From inception to December 31, 2001, the Company operated as a C corporation. Effective January 1, 2002, the Company elected to be taxed as a subchapter S corporation for federal and state income tax purposes. Income, deductions, gains, losses, tax credits and other tax attributes of the Company passed through and were taxed directly to the stockholders for the years ended December 31, 2002, 2003 and the period from January 1, 2004 through September 28, 2004. On September 28, 2004, Fastclick completed a private placement of preferred shares, which resulted in the revocation of its subchapter S corporation status. The Company now operates as a C corporation and is subject to tax in the United States. Consequently, no federal income tax provision is recorded in the accompanying financial statements for the years ended December 31, 2002, 2003 and for the period January 1, 2004 through September 28, 2004 (unaudited). Under state laws, certain taxes (net of available tax credits) are imposed upon subchapter S corporations and are provided for in the accompanying financial statements. As a subchapter S corporation, the Company's policy was to disburse the necessary amount of funds to satisfy the stockholders' estimate of income tax liabilities based upon the Company's taxable income. The pro forma income tax provision on the face of the statements of operations reflects the pro forma effects as if the Company had been established as a C corporation for all periods presented. (See Note 4)

        As a result of changing from a subchapter S corporation to a C corporation, the Company has recorded a tax provision amounting to $1.2 million for federal taxes and $0.2 million for California state taxes. The Company will be taxed at regular corporate rates going forward. Deferred tax assets

F-11

and liabilities will be recognized for the tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities will be measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A deferred tax asset valuation allowance will be recorded if it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized.

Recent Accounting Pronouncements—On December 16, 2004, the Financial Accounting Standards Board (FASB) issued its final standard on accounting for Share-Based Payment in FASB Standard 123R, which requires all companies to measure compensation cost for all share-based payments (including stock options) at fair value, would be effective for public companies for interim or annual periods beginning after June 15, 2005. The Company could adopt the new standard in one of two ways—the modified prospective transition method or the modified retrospective transition method.

        The Company has not concluded when and how it will adopt this new standard. This standard will have a significant impact on the Company's consolidated statement of operations as the Company will be required to expense the fair value of its stock options rather than disclosing the impact on its consolidated result of operations within its footnotes in accordance with the disclosure provisions of SFAS 123. This will result in lower reported earnings per share, which could negatively impact the Company's future stock price. In addition, this could impact the Company's ability to utilize broad based employee stock plans to reward employees and could result in a competitive disadvantage to us in the employee marketplace.

2. Property and Equipment

        Property and equipment consisted of the following:

		As of December 31,
								As of September 30, 2004
	Useful Life	2002			2003
	(in thousands)
								(unaudited)
Computer equipment and purchased software	3 years	$	350		$	529		$	1,215
Furniture and equipment	7 years		26			126			295
Leasehold improvements	20 years		—			384			390
			376			1,039			1,900
Less accumulated depreciation			(133	)		(246	)		(433	)
		$	243		$	793		$	1,467

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3. Loans Payable

        Loans payable consist of the following:

		As of December 31, 2003		As of September 30, 2004
		(in thousands)
				(unaudited)
Current portion of loans payable:
	Bank of the West loan	$	83	$	81
	Caterpillar loan		28		29
Total current loans payable		$	111	$	110
Long-term portion of loans payable:
	Caterpillar loan	$	45	$	24

        The Company obtained a loan from Caterpillar Financial Services (Caterpillar) to finance the purchase of a generator for emergency electricity supply. Caterpillar holds a security interest in this equipment and has recorded a UCC filing in California. The loan bears annual interest at 6.75%, and the Company began repaying the loan in July 2003 in 36 equal monthly installments.

        The Company signed a promissory note with Bank of the West and obtained a short-term credit line of $350,000 in 2003. This is an unsecured loan, and bears a variable interest rate of 1.5% over prime. The interest rate was 5.25% and 6% at December 31, 2003 and September 30, 2004 (unaudited), respectively.

4. Income Taxes

        From inception to December 31, 2001, the Company operated as a C corporation. Effective January 1, 2002, the Company elected to be taxed as a subchapter S corporation for federal and state income tax purposes. As a result, the Company was subject to federal and California built-in gains taxes in 2002. The unpaid amount of built-in gains tax as of December 31, 2002, was included in the current income tax liability at December 31, 2002. In addition to the built-in gains tax, the Company was also subject to a 1.5% California S corporation income tax.

        Because of the subchapter S corporation election, the income, deductions, gains, losses, tax credits, and other tax attributes of the corporation pass through and were taxed directly to the stockholders for 2002 and 2003 and for the period from January 1, 2004 through September 28, 2004.

F-13

        The components of the income tax expense were as follows:

		Year Ended December 31,
									Nine Months Ended in September 30, 2004
		2001		2002			2003
		(in thousands)
									(unaudited)
Current:
	Federal	$	—	$	221		$	—	$	22
	California		—		53			37		60
			—		274			37		82
Deferred:
	Federal		178		(179	)		—		1,156
	California		29		2			18		110
			207		(177	)		18		1,266
Total		$	207	$	97		$	55	$	1,348

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for state income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:

		As of December 31,						As of September 30,
		2002			2003			2004
								(unaudited)
Deferred tax assets (liabilities):
	Accounts receivable	$	(39	)	$	(65	)		—
	Prepaid expenses		(14	)		(3	)		—
	Difference in book versus tax basis accumulated depreciation		(1	)		(1	)		(239	)
	Internally developed software capitalized for book and expensed for tax, net of amortization		(2	)		(9	)		(194	)
	Accounts payable		20			16			—
	Payroll liabilities		1			3			—
	IRC Section 481(a) adjustment								(1,038	)
	Deferred revenue		4			7			—
	Allowance for doubtful accounts								155
	Other		—			3			—
Total deferred tax assets (liabilities)		$	(31	)	$	(49	)	$	(1,316	)

F-14

        Effective September 28, 2004, the Company revoked its subchapter S corporation status for federal and state income tax purposes. The components of income tax expense from September 28, 2004 through September 30, 2004 are insignificant.

        Effective September 29, 2004, the Company will be taxed as a C corporation. Deferred tax assets and liabilities are recognized for the tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A deferred tax asset valuation allowance will be recorded if it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized.

        For informational purposes, the combined statements of operations include a pro forma adjustment for income taxes that would have been recorded if the Company had been a C corporation from inception, calculated in accordance with FAS No. 109, "Accounting for Income Taxes."

        The Company's effective tax rate differs from the statutory federal income tax rate of 34% as per the following table:

	Year Ended December 31,						Nine Months Ended September 30,
	2001		2002		2003		2003		2004
Provision on earnings at federal statutory tax rate	34	%	34	%	34	%	34	%	34	%
State tax provision, net of federal tax effect	7	%	6	%	6	%	7	%	7	%
Tax credits	(8	)%	(2	)%	(3	)%	(4	)%	(4	)%
Total provision (benefit) for income taxes	33	%	38	%	37	%	37	%	37	%

F-15

        The components of the income tax provision, on a pro-forma basis (unaudited), for the periods presented are as follows:

		Year Ended December 31,				Nine Months Ended September 30,
		2002		2003		2003		2004
		(in thousands)
Current:
	Federal	$	1,214	$	1,514	$	881	$	1,452
	State and local		310		396		242		347
Total current provision			1,524		1,910		1,123		1,799
Deferred:
	Federal		48		235		225		(50	)
	State and local		9		22		12		(27	)
Total deferred provision			57		257		237		(77	)
Total income tax provision		$	1,581	$	2,167	$	1,360	$	1,722

5. Allowance of Doubtful Accounts

        The following schedule reflects the changes in our allowance for doubtful accounts:

Balance, December 31, 2001	$	—
Provision expense		—
Charge to allowance		—
December 31, 2002	$	—
Provision expense		70,000
Charge to allowance		—
December 31, 2003	$	70,000
Provision expense		420,133
Charge to allowance		(101,576	)
September 30, 2004 (unaudited)	$	388,557

F-16

6. Related Party Transactions

        On April 15, 2000, the Company entered into a licensing agreement with one of its founders, Jeff Pryor. Under the agreement, the Company utilized the "fastclick.com" Internet domain name (which was owned by the founder) and was obligated to pay certain royalty fees to the founder. Accordingly, the Company accrued royalties fees totaling $14,335 and $0 for the nine months ended September 30, 2003 and 2004 (unaudited) and $21,940, $19,955 and $3,000 for the years ended December 31, 2001, 2002 and 2003, respectively.

        On May 6, 2004, the Company entered into an assignment agreement with the founder, acquired the Internet domain name "Fastclick.com" and paid off the previous accrued royalties for a total of $125,000.

        Jeff Pryor, one of the Company's founders, operates websites that offer advertising space on the Company's network. Our payments to Mr. Pryor totaled $10,707 and $14,586 for the nine months ended September 30, 2003 and 2004 (unaudited), respectively, and $5,127 $28,024 and $16,244 for the years ended December 31, 2001, 2002 and 2003, respectively and are included in cost of revenue.

7. Commitments and Contingencies

        On January 1, 2003, the Company began leasing office space in downtown Santa Barbara, California, for administration, research, and operations. The lease term is for 40 months, through April 2006, with a renewal option at the Company's discretion. On June 1, 2003, the Company entered into a sublease for a second office location in Santa Barbara, California with a lease term of 23 months through April 2006.

        Rent expense under the Company's building operating leases was $209,455 and $254,790 for the nine months ended September 30, 2003 and 2004 (unaudited), respectively and $21,673, $48,498 and $257,641 for the years ended December 31, 2001, 2002 and 2003, respectively.

        The Company does not have any capital leases.

        The Company has existing legal claims against it and may encounter future legal claims in the normal course of business. In the opinion of the Company, the resolution of the existing legal claims are not expected to have a material impact on the Company's financial position or results of operations. The Company believes an accrual is not necessary in connection with the above litigation.

8. Redeemable Convertible Series A Preferred Stock (unaudited)

        On September 28, 2004, the Company issued 2,131,285 shares of Series A Preferred Stock at a price of $35.19 per share resulting in net proceeds of $73.4 million. Issuance costs amounted to approximately $1.6 million.

        The Series A Preferred Stock has the rights, preferences and privileges set forth below.

        Voting

        Each holder of the Preferred Stock shall be entitled to the number of votes equal to the number of shares of common stock issuable upon conversion of such shares of Preferred Stock and shall have

F-17

voting rights and powers equal to the voting rights and powers of the common stock. Each holder of common stock shall be entitled to one vote for each share of common stock held.

        The Company will have a Board consisting of seven directors. The Preferred Stockholders will be entitled to elect three directors. The Preferred Stockholders and Common Stockholders voting together as a single class on an as-converted to common stock basis, will be entitled to elect four directors.

        Conversion

        Each share of Series A Preferred Stock will be convertible, at the option of the holder, into the number of shares of common stock determined by dividing $35.19 (the "Original Series A Issue Price") by the conversion price (the "Conversion Price"). The initial Conversion Price will be the Original Series A Issue Price and initially each share of Series A Preferred Stock will convert into one share of common stock. The Conversion Price is adjustable based on stock splits, combinations and weighted average anti-dilution protection in the event the Company issues any securities at a price deemed to be less than $35.19 per share. The Series A Preferred Stock will automatically convert into common stock at the Conversion Price if i) there is an initial public offering of the common stock at $70.38 per share and resulting in gross proceeds to the Company of at least $50,000,000, or ii) the holders of at least two-thirds of the Series A Preferred Stock consent to a conversion.

        Dividends

        The Holders of shares of Series A Preferred Stock will be entitled to receive dividends prior and in preference to any dividend on the common stock, at the annual rate of 8% of the purchase price per annum, payable when, as and if declared by the Board. The dividends will not be cumulative.

        Liquidation

        If there is a liquidation, dissolution or winding up of the Company, the Series A Preferred Stock holders will be entitled to receive, prior and in preference to any distribution to the holders of common stock, an amount equal to $35.19 per share. Any remaining assets will be distributed to the Preferred Stock holders and common stock holders on a pro rata basis (assuming conversion of the Series A Preferred Stock) until the Series A Preferred Stock holders have received (i) $70.38 per share if the liquidation, dissolution or winding up of the Company occurs on or prior to September 30, 2006, or (ii) $87.975 per share if the liquidation, dissolution or winding up of the Company occurs after September 30, 2006, in each case including the initial payment to the Preferred Stock holders. The common stock holders will receive all remaining assets on a pro rata basis.

        Redemption

        The Series A Preferred Stock holders may require the Company to redeem their shares of Series A Preferred Stock at anytime after September 30, 2009 by written request of the holders of at least two-thirds of the Series A Preferred Stock. The redemption price will be $35.19 per share and will be payable in three (3) equal annual installments.

F-18

        Protective Provisions

        If at least 410,443 of the originally issued shares of Series A Preferred Stock are outstanding, the Company must obtain the approval of the holders of at least two-thirds of the Series A Preferred Stock before the Company may 1) consent to (i) any liquidation, dissolution or winding up of the Company, (ii) any issuance, sale or other disposition of a majority by voting power of the voting shares of the Company, or (iii) any merger or consolidation with or into, or permit any subsidiary to merge or consolidate with or into, any other corporation, corporations, entity or entities (except as provided in the Amended and Restated Articles), 2) sell, abandon, transfer, lease, license, mortgage, hypothecate or otherwise encumber or otherwise dispose of all or substantially all of the Company's properties or assets 3) alter or change the rights, preferences or privileges of the Series A Preferred Stock so as to affect adversely the Series A Preferred Stock, 4) increase the total number of authorized shares of Series A Preferred Stock, 5) authorize or issue, or obligate itself to issue, any equity security, other than the common stock authorized and issued as of the date of the Amended and Restated Articles, having rights, preferences or privileges senior to or over, or being on a parity with, the Series A Preferred Stock, 6) redeem, repurchase or otherwise acquire shares of Preferred Stock or common stock, except as provided in the Amended and Restated Articles, 6) amend, alter or repeal the Amended and Restated Articles or Bylaws, except as otherwise provided, 7) increase or decrease the size of the Board, 8) increase the number of shares reserved for issuance to employees, directors, consultants or advisors performing services for the Company or any subsidiary pursuant to a stock option plan, restricted stock plan or other arrangement, or 9) change the principal business of the Company or exit the Company's current line of business.

9. Stockholders' Equity

        Preferred Stock

        As of December 31, 2003, the Company was authorized to issue 800,000 shares of preferred stock, none of which were outstanding. As of September 30, 2004, the Company was authorized to issue 2,131,285 shares of Series A Preferred Stock of which 2,131,285 were outstanding.

        On December 31, 2001 400,000 shares of preferred stock were converted to common on a one-to-one basis.

        Common Stock

        As of September 30, 2004, the Company was authorized to issue 3,750,000 shares of common stock. As of September 30, 2004, 2,131,285 shares of preferred stock and 1,618,715 shares of common stock were reserved for issuance and 2,131,285 shares of preferred stock and 612,044 of common stock were issued and outstanding.

        In connection with the issuance of redeemable convertible Series A preferred stock on September 28, 2004, the Company simultaneously repurchased common stock from the Company's founders, stockholders and employees at the same $35.19 per share price as the Series A preferred. As a result, the new preferred stockholders acquired approximately 78% of the Company. The Company structured and treated this transaction as a recapitalization, for accounting purposes given that existing

F-19

common stockholders maintained approximately 22% of the Company, the transaction did not include leverage, and a new company was not utilized to effect the transaction.

10. Stock Options

        On July 20, 2000, the Company adopted the 2000 Equity Participation Plan (the 2000 Stock Plan). The 2000 Stock Plan permits the issuance of both qualified stock options herein referred to as incentive stock options (ISO), and nonqualified stock options. The ISOs may only be awarded to employees, while the nonqualified stock options may be awarded to directors, officers, employees, and consultants. Options granted under the 2000 Stock Plan are subject to vesting and certain forfeiture provisions related to non-competition with the Company. The outstanding options, which expire ten years from date of grant, have exercise prices that range between $0.10 to $7 per share. The exercise price of ISOs may not be less than the fair market value of the shares on the date of grant, while nonqualified options may be granted at an exercise price not less than 85% of the fair market value of the stock on the date of grant. No nonqualified options have been granted under the 2000 Stock Plan.

        The Company reserved 800,000 shares of common stock for grants of ISOs and nonqualified stock options under the 2000 Stock Plan. As of September 30, 2003, options have been granted to purchase 465,900 shares, of which 275,125 shares have been issued for options exercised. On September 8, 2004, the Board determined to cease granting shares under the 2000 Stock Plan. As of September 30, 2004 the Company had 170,912 shares of common stock reserved for issuance, and zero shares of common stock remained available for grant.

F-20

        A summary of the Company's 2000 Stock Plan is as follows:

		Shares		Weighted- Average Price per Share
Outstanding at December 31, 2000		82,000		$	0.10
	Granted	152,500			0.10
	Exercised	—			—
	Cancelled	—			—
	Expired	—			—
Outstanding at December 31, 2001		234,500		$	0.10
	Granted	60,000			0.75
	Exercised	(175,125	)		0.11
	Cancelled	—			—
	Expired	—			—
Outstanding at December 31, 2002		119,375		$	0.41
	Granted	171,400			5.81
	Exercised	(100,000	)		0.36
	Cancelled	—			—
	Expired	—			—
Outstanding at December 31, 2003		190,775		$	5.29
	Granted	20,000			12.75
	Exercised	(39,863	)		1.01
	Cancelled	—			—
	Expired	—			—
Outstanding at September 30, 2004 (unaudited)		170,912		$	7.16

        On September 8, 2004, the Company adopted the 2004 Stock Incentive Plan (the 2004 Stock Plan). The 2004 Stock Plan permits the issuance of both qualified stock options herein referred to as incentive stock options (ISO), and nonqualified stock options. The ISOs may only be awarded to employees, while the nonqualified options may be awarded to directors, officers, employees, and consultants. Options granted under the 2004 Stock Plan are subject to vesting and certain forfeiture provisions related to non-competition with the Company. The outstanding options expire ten years from date of grant. The exercise price of ISOs may not be less than the fair market value of the shares on the date of grant, while nonqualified options may be granted at an exercise price not less than 85% of the fair market value of the stock on the date of grant. No nonqualified options have been granted under the 2004 Stock Plan.

        The Company reserved 495,585 shares of common stock for grants of ISOs and nonqualified stock options under the 2004 Stock Plan. As of September 30, 2004 the Company had 227,997 shares of common stock available for grant under the 2004 Stock Plan. No new options will be issued under the 2004 Stock Plan following the closing of the Company's initial public offering.

F-21

        A summary of the Company's 2004 Stock Plan is as follows:

		Shares	Weighted- Average Price per Share
Outstanding at December 31, 2003		—	$	—
	Granted	267,588		12.75
	Exercised	—		—
	Cancelled	—		—
	Expired	—		—
Outstanding at September 30, 2004 (unaudited)		267,588	$	12.75

        Information regarding stock options pursuant to the 2000 Stock Plan outstanding and exercisable as of December 31, 2003, is as follows:

Exercise Prices	Number of Options Outstanding	Weighted- Average Contractual Life in Years	Number of Options Exercisable
$0.10	3,750	7.95	3,750
$0.50	7,500	8.29	—
$1.00	42,125	8.97	3,375
$7.00	137,400	9.81	—
Total	190,775	—	7,125

        Information regarding stock options pursuant to the 2000 Stock Plan outstanding and exercisable as of September 30, 2004, is as follows:

Exercise Prices	Number of Options Outstanding	Weighted- Average Contractual Life in Years	Number of Options Exercisable
$1.00	14,750	8.39	—
$7.00	136,162	9.06	33,437
$12.75	20,000	9.46	—
Total	170,912	—	33,437

F-22

        Information regarding stock options pursuant to the 2004 Stock Plan outstanding and exercisable as of September 30, 2004, is as follows:

Exercise Prices	Number of Options Outstanding	Weighted- Average Contractual Life in Years	Number of Options Exercisable
$12.75	267,588	9.97	—
Total	267,588	—	—

11. Stock Compensation

        The Company accounts for stock options using the intrinsic-value method under APB No. 25. Accordingly, no compensation expense has been recorded for the stock options granted since the exercise price was equal to the fair market value of the shares at the grant date. However, if the Company recognized employee stock option related compensation expense in accordance with SFAS No. 123 and used the minimum-value method for determining the weighted average fair value of options granted, the pro forma net income would have been as follows:

	Year Ended December 31,
										Nine Months Ended September 30, 2004
	2001			2002			2003
	(in thousands)
										(unaudited)
Net income as reported	$	523		$	4,058		$	5,757		$	3,345
Less: Stock compensation as if the fair value method was used		(1	)		(4	)		(13	)		(60	)
Pro forma income	$	522		$	4,054		$	5,744		$	3,285

        The compensation portion of the Company's stock option grants was estimated at the date of the grant using the minimum-value option-pricing model with the following assumptions:

	2001		2002		2003		Nine Months Ended September 30, 2004
							(unaudited)
Risk-free interest rate	4.38	%	3.34	%	2.11	%	3.28	%
Expected option life (years)	5.00		5.00		5.00		5.00
Dividend yield	0.00	%	0.00	%	0.00	%	0.00	%

        For purposes of pro forma disclosures, the estimated fair value of the options is amortized ratably over the option's vesting period. The pro forma effect on net income for the years presented is not representative of the pro forma effect on net income in future years because compensation expense in future years could reflect the amortization of a greater or lesser number of stock options granted in succeeding years. Should the Company complete an initial public offering of its common stock, stock-based awards granted thereafter will be valued using the Black-Scholes option pricing model. In

F-23

addition to the factors used to estimate the fair value of stock options issued using the minimum-value method, the Black-Scholes model considers the expected volatility of the Company's stock price, determined in accordance with SFAS 123, in arriving at an estimated fair value. The minimum-value method does not consider stock price volatility.

12. Ownership Equivalency Plan

        In 2003 the Company established an Ownership Equivalency Plan (OEP) to provide a means through which it was able to grant its directors, officers, employees, and consultants the right to realize similar economic benefits that would otherwise result from the ownership of equity securities of the Company. The Company reserved 400,000 ownership equivalent units with automatic quarterly vesting over two to four years. As of December 31, 2003, 60,600 equivalent units had been granted, of which 7,700 units were vested. From January 1, 2004 through September 28, 2004 an additional 23,200 ownership equivalent units were granted, 900 were cancelled and a total of 25,723 had vested by September 28, 2004 (unaudited). The units had strike prices ranging from $1 to $12.75, which equaled the deemed fair market value of the unit at the grant date.

        The Company treated the OEP under APB Opinion 25 as a fixed plan (as the number of shares and exercise price were known at the grant date) with a contingent appreciation right, which would only be triggered in the event of a liquidation of the Company, pro rata redemption of the Company's common stock or termination of the OEP. Upon termination, the Company has the right to repurchase the equivalent units from the holders at fair market value. On September 8, 2004, the Board approved the termination of the OEP on a pro rata basis, in connection with the recapitalization that occurred on September 28, 2004. As a result, all outstanding equivalent units were cancelled. The Company recorded a compensation charge in the amount of $952,000 (unaudited) which was based on the fair market value of the common stock at $35.19 per share (as evidenced by the recapitalization transaction), plus additional compensation to the equivalent units holders for forfeiting their rights under the OEP.

13. Retirement Plan

        The Company sponsors a 401(k) salary deferral plan (the 401(k)Plan) that qualifies under Section 401(k) of the Internal Revenue Code. The 401(k) plan became effective in January 2002. Under the 401(k) Plan, eligible employees may defer a percentage of their pre-tax salaries and wages up to specified limits. All full-time employees of the Company are eligible to participate in the 401(k) Plan. The 401(k) Plan does not invest 401(k) Plan assets in the stock of the Company. The Company can make discretionary contributions as a percentage of each participating employee's salary. Discretionary contributions made by the Company for the years ended December 31 were as follows:

Year	Amount
2003	$	76,806
2002		22,288

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        As of September 30, 2004, the Company intends on contributing 3% of eligible wages and has accrued $134,829.

14. Subsequent Event (unaudited)

        On December 21, 2004, the Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission for the Company's initial public offering.

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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

        Other than the pro rata underwriting discounts and commissions to be paid by the selling stockholders, all costs and expenses incurred in connection with the sale and distribution of the common stock being registered for sale will be paid by the registrant. The following table sets forth the various expenses expected to be incurred by the registrant in connection with the sale and distribution of the securities being registered hereby, other than underwriting discounts and commissions. All amounts are estimated except the Securities and Exchange Commission registration fee, the National Association of Securities Dealers, Inc. filing fee and the Nasdaq National Market listing fee.

Securities and Exchange Commission registration fee	$	10,828.40
National Association of Securities Dealers, Inc. filing fee		9,700.00
Nasdaq National Market listing fee		5,000.00
Blue Sky fees and expenses
Accounting fees and expenses
Legal fees and expenses
Printing and engraving fees
Registrar and Transfer Agent's fees
Miscellaneous fees and expenses
Total	$

Item 14. Indemnification of Directors and Officers.

Delaware General Corporate Law

        The registrant plans to reincorporate in Delaware prior to the effective date of the registration statement of which this prospectus is a part. Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful. Section 145 provides further that a corporation may indemnify any such person against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of any action or suit by or in the right of the corporation, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification may be made in respect of any claim, issue or matter as to which such person has been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described in this paragraph, or in defense of any claim, issue or matter therein, such person shall be indemnified against

II-1

expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.

        In addition, Section 102(b)(7) of the Delaware General Corporation Law allows a corporation to eliminate or limit the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except liability for the following:

•

any breach of their duty of loyalty to the corporation or its stockholders;



•

acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;



•

unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or



•

any transaction from which the director derived an improper personal benefit.

The registrant's certificate of incorporation contains provisions that limit the liability of its directors for monetary damages to the fullest extent permitted by Delaware law.

        The registrant's bylaws provide that the registrant shall indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a party to any action, suit or proceeding (other than an action by or in the right of the registrant) by reason of the fact that he or she is or was a director or officer of the registrant or is or was serving at the registrant's request as a director officer of another corporation, partnership, joint venture, trust or other enterprise. The registrant's bylaws provide that the registrant may indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a party to any action, suit or proceeding, by reason of the fact that he or she is or was an employee or agent of the registrant or is or was serving at the registrant's request as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The registrant's bylaws also provide that it may advance expenses incurred by or on behalf of a director, officer, employee or agent in advance of the final disposition of any action or proceeding.

Directors' and Officers' Liability Insurance

        Section 145 of the Delaware General Corporation Law further provides that a corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under Section 145.

        The registrant's bylaws permit the registrant to secure insurance on behalf of any officer, director, employee or other agent of the registrant and any person serving at the registrant's request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or member of any committee or similar body, for any liability arising out of his or her actions in that capacity, regardless of whether the registrant's bylaws would otherwise permit indemnification.

        The registrant expects to obtain policies of insurance under which, subject to the limitations of such policies, coverage will be provided to the registrant's directors and officers against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or officer, including claims relating to public securities matters, and to the registrant with respect to payments which may be made by the registrant to these officers and directors pursuant to our indemnification obligations or otherwise as a matter of law.

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Indemnification Agreements

        Prior to completion of this offering, the registrant will enter into indemnification agreements with each of its directors and officers that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements may require the registrant, among other things, to indemnify its directors and officers against liabilities that may arise by reason of their status or service. These indemnification agreements may also require the registrant to advance all expenses incurred by the directors and officers in investigating or defending any such action, suit or proceeding. The registrant believes that these agreements are necessary to attract and retain qualified individuals to serve as directors and officers.

        At present, the registrant is not aware of any pending litigation or proceeding involving any person who is or was a director, officer, employee or other agent of the registrant or is or was serving at the registrant's request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, for which indemnification is sought, and the registrant is not aware of any threatened litigation that may result in claims for indemnification.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable.

Underwriting Agreement

        The underwriting agreement provides for indemnification by the underwriters of the registrant and its officers, directors and employees for certain liabilities arising under the Securities Act, or otherwise.

Item 15. Recent Sales of Unregistered Securities.

        During the registrant's last three fiscal years, the registrant issued unregistered securities to a limited number of purchasers as described below:

        (1)   The registrant issued and sold an aggregate of 2,131,285 shares of Series A Preferred Stock for aggregate consideration of approximately $75 million. The securities were sold pursuant to the Recapitalization Agreement, dated September 9, 2004. The closing of the transaction occurred on September 28, 2004. The investors in this financing were Highland Capital Partners VI Limited Partnership, Highland Capital Partners VI-B Limited Partnership, Highland Entrepreneurs' Fund VI Limited Partnership, Oak Investment Partners XI, Limited Partnership, Steamboat Ventures, LLC and Steamboat Ventures Manager, LLC. The registrant issued these securities in a transaction exempt from registration under Section 4(2) of the Securities Act.

        In the transaction described above the recipients of the securities represented that they were accredited investors and that their intentions were to acquire the securities for investment only and not with a view to, or for sale in connection with, any distribution thereof. Appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sales of these securities were made without general solicitation or advertising.

        (2)   During the registrants last three fiscal years, the registrant made stock option grants to employees under its 2000 Stock Plan and 2004 Stock Plan covering an aggregate of 559,636 shares of common stock, at a weighted average exercise price of $9.68 per share. None of these options were canceled without being exercised. The registrant issued these stock options in transactions exempt from registration under the Securities Act pursuant to Rule 701 promulgated thereunder.

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        (3)   During the registrants last three fiscal years, the registrant issued an aggregate of 314,988 shares of common stock, no par value, upon exercise of stock options for aggregate consideration of $0.1 million. The registrant issued these stock options in transactions exempt from registration under the Securities Act pursuant to Rule 701 promulgated thereunder.

        In each transaction described above that was exempt under Rule 701 promulgated under the Securities Act, the recipients of the securities where either employees, directors or officers of the registrant. In addition, the amounts of securities issued at any time conformed to the limits of Rules 701(d) of the Securities Act.

        (4)   On February 22, 2002 the Company issued and sold 40,000 shares of common stock to Alexis Brown, one of the Company's employees, for aggregate consideration of $25.00. The registrant issued these securities in a transaction exempt from registration under Section 4(2) of the Securities Act.

        (5)   On February 22, 2002 the Company issued and sold 80,000 shares of common stock to Stephen Szu-chien Chang, one of the Company's employees, for aggregate consideration of $50.00. The registrant issued these securities in a transaction exempt from registration under Section 4(2) of the Securities Act.

        In each transaction described above that was exempt from registration under Section 4(2) of the Securities Act, the recipients of the securities represented that their intentions were to acquire the securities for investment only and not with a view to, or for sale in connection with, any distribution thereof. Appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sales of these securities were made without general solicitations or advertising.

Item 16. Exhibits and Financial Statement Schedules.

(a)

Exhibits. See Index of Exhibits.



(b)

Schedules. The required schedules are set forth in Part I of this registration statement.

        Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 17. Undertakings.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes to provide to the underwriters at the closing(s) specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

II-4

        The undersigned Registrant hereby undertakes that:

(1)

For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this registration statement as of the time it was declared effective.



(2)

For the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-5

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Barbara, State of California, on this 22^nd day of December, 2004.

FASTCLICK, INC.
By:	/s/  KURT A. JOHNSON Kurt A. Johnson President and Chief Executive Officer

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Kurt A. Johnson and Fred J. Krupica, and each of them acting individually, as his true and lawful attorneys-in-fact and agents, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this registration statement, including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Name	Title	Date
/s/  KURT A. JOHNSON Kurt A. Johnson	President, Chief Executive Officer (Principal Executive Officer) and Director	December 22, 2004
/s/  FRED J. KRUPICA Fred J. Krupica	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	December 22, 2004
/s/  ROBERT J. DAVIS Robert J. Davis	Director	December 22, 2004
/s/  DANIEL J. NOVA Daniel J. Nova	Director	December 22, 2004
/s/  FREDRIC W. HARMAN Fredric W. Harman	Director	December 22, 2004

II-6

INDEX OF EXHIBITS

        The following documents are filed as exhibits to this registration statement:

Exhibit No.	Description
*1.1	Form of Underwriting Agreement.
3.1	Amended and Restated Articles of Incorporation of Fastclick, Inc., as filed with the Secretary of State of the State of California on September 24, 2004, as amended.
*3.2	Form of Restated Certificate of Incorporation of Fastclick, Inc., to be filed upon the closing of the offering to which this Registration Statement relates.
3.3	Amended and Restated Bylaws of Fastclick, Inc.
*3.4	Form of Amended and Restated Bylaws of Fastclick, Inc., to be effective upon the closing of the offering to which this Registration Statement relates.
*4.1	Investors' Rights Agreement dated September 27, 2004.
*4.2	Amended and Restated Offer to Purchase for Cash Shares of Common Stock of Fastclick, Inc. dated September 9, 2004
*4.3	Form of common stock certificate.
*5.1	Opinion of Sheppard, Mullin, Richter & Hampton LLP.
*10.1	Recapitalization Agreement by and among Fastclick, Inc., the Purchasers named therein and Jeff Pryor and David R. Gross dated September 9, 2004.
*10.2	Key Employee Agreement dated December 1, 2004 by and between Fastclick, Inc. and Michael S. Hughes.
*10.3	Key Employee Agreement dated February 11, 2004 by and between Fastclick, Inc. and James Aviani.
*10.4	Key Employee Agreement dated August 1, 2004 by and between Fastclick, Inc. and Fred Krupica.
*10.5	Key Employee Agreement dated October 6, 2003 by and between Fastclick, Inc. and Kurt A. Johnson.
*10.6	2005 Equity Incentive Plan.
10.7	Form of 2004 Stock Incentive Plan.
10.8	Form of Amended and Restated 2000 Stock Incentive Plan.
10.9	Sublease dated November 25, 2002 by and between Fastclick, Inc. and Openwave Systems, Inc.
10.10	Lease Agreement dated April 21, 2004 by and between Fastclick, Inc. and Cito Corp.
23.1	Consent of Ernst and Young LLP.
*23.3	Consent of Sheppard, Mullin, Richter & Hampton LLP, counsel to the registrant (included in 5.1).
24.1	Power of Attorney. See page II-6.

*

To be filed by amendment.

II-7

QuickLinks

TABLE OF CONTENTS
PROSPECTUS SUMMARY
Summary Financial Data
RISK FACTORS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
EXECUTIVE COMPENSATION
Summary Compensation Table
Option Grants in 2004
Aggregated Option Exercises in 2004 and Year-End Option Values
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
PRINCIPAL AND SELLING STOCKHOLDERS
DESCRIPTION OF CAPITAL STOCK
SHARES ELIGIBLE FOR FUTURE SALE
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. STOCKHOLDERS
UNDERWRITING
NOTICE TO CANADIAN RESIDENTS
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
Fastclick, Inc. INDEX TO FINANCIAL STATEMENTS
REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FASTCLICK, INC. BALANCE SHEETS
FASTCLICK, INC. STATEMENTS OF OPERATIONS
FASTCLICK, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FASTCLICK, INC. STATEMENTS OF CASH FLOWS
FASTCLICK, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 and 2004 IS UNAUDITED
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
SIGNATURES
POWER OF ATTORNEY
INDEX OF EXHIBITS

EX-3.1

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Exhibit 3.1

AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF FASTCLICK.COM, INC.,
a California Corporation

        The undersigned Kurt Johnson hereby certifies that:

        ONE: He is the duly elected and acting President and Secretary of said corporation.

        TWO: The Articles of Incorporation of said corporation shall be amended and restated to read in full as follows:

ARTICLE I

        The name of this corporation is Fastclick.com, Inc.

ARTICLE II

        The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

ARTICLE III

        A.    Classes of Stock. This corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the corporation is authorized to issue is Five Million Eight Hundred Eighty-One Thousand Two Hundred Eighty-Five (5,881,285) shares. Three Million Seven Hundred Fifty Thousand (3,750,000) shares shall be Common Stock and Two Million One Hundred Thirty-One Thousand Two Hundred Eighty-Five (2,131,285) shares shall be Preferred Stock. The Board of Directors of this corporation may decrease (but not below the number of shares then outstanding) the number of shares of any series of Preferred Stock subsequent to the issue of shares of that series.

        B.    Rights, Preferences and Restrictions of Preferred Stock. Two Million One Hundred Thirty-One Thousand Two Hundred Eighty-Five (2,131,285) shares of the authorized Preferred Stock are hereby designated as "Series A Convertible Preferred Stock" (the "Series A Preferred Stock"). The rights, preferences, privileges, and restrictions granted to and imposed on the Series A Preferred Stock are as set forth below in this Article III(B).

        1.     Dividend Provisions. The holders of shares of Series A Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of this corporation and other than any dividends declared prior to, but not fully paid as of, the date of filing of these Amended and Restated Articles of Incorporation to the extent not paid as of such date) on the Common Stock of this corporation, at the rate of $2.815 per share (as adjusted for any stock dividends, combinations, stock splits or recapitalization) per annum, payable when, as and if declared by the Board of Directors. Such dividends shall not be cumulative.

        2.     Liquidation Preference.

        (a)   In the event of any liquidation, dissolution or winding up of this corporation, either voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to receive, prior and in

1

preference to any distribution of any of the assets of this corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) $35.19 for each outstanding share (as adjusted for any stock dividends, combinations, stock splits or recapitalization affecting the number of shares of Series A Preferred Stock outstanding) of Series A Preferred Stock and (ii) all accrued but unpaid dividends on such share through the date of liquidation, dissolution or winding up. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the amount of such stock owned by each such holder.

        (b)   Upon the completion of the distribution required by subsection 2(a), the remaining assets of the corporation available for distribution to stockholders shall be distributed among the holders of Series A Preferred Stock and Common Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all such Series A Preferred Stock) until, with respect to the holders of Series A Preferred Stock, such holders shall have received, including any and all amounts distributed to such holders pursuant to subsection 2(a), an amount per share equal to (i) $70.38 for each outstanding share of Series A Preferred Stock (as adjusted for any stock dividends, combinations, stock splits or recapitalization affecting the number of shares of Series A Preferred Stock outstanding) if the liquidation, dissolution or winding up of this corporation occurs on or prior to September 30, 2006, or (ii) $87.975 for each outstanding share of Series A Preferred Stock (as adjusted for any stock dividends, combinations, stock splits or recapitalization affecting the number of shares of Series A Preferred Stock outstanding) if the liquidation, dissolution or winding up of this corporation occurs after September 30, 2006; thereafter, if assets remain in this corporation, the holders of the Common Stock of this corporation shall receive all of the remaining assets of this corporation pro rata based on the number of shares of Common Stock held by each.

        (c)   (i)    Unless otherwise agreed to by the holders of at least two-thirds (2/3) of the voting power of all of the then outstanding shares of Series A Preferred Stock, for purposes of this Section 2, a liquidation, dissolution or winding up of this corporation shall be deemed to be occasioned by, or to include, (A) any consolidation or merger of this corporation into or with any other entity or entities (except a consolidation or merger with or into a direct or indirect wholly-owned subsidiary of this corporation, or except a consolidation or a merger in which either (1) this corporation's voting shares outstanding immediately prior to such transaction continue to represent a majority by voting power of the voting shares of this corporation outstanding immediately following the transaction or (2) the shares issued in exchange for this corporation's voting shares outstanding immediately prior to such transaction represent a majority by voting power of the voting shares of the continuing or resulting entity outstanding immediately following the transaction), (B) a transaction or series of related transactions in which a person or group of persons (as defined in Rule 13d-5(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) acquires beneficial ownership (as determined in accordance with Rule 13d-3 under the Exchange Act) of a majority by voting power of the voting shares of this corporation, or (C) any sale, license, lease or other disposition of all or substantially all of the assets of this corporation, other than a sale, license, lease or disposition to a direct or indirect wholly-owned subsidiary of this corporation.

2

        (ii)   In any of such events, if the consideration received by the corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:

        (A)  Securities not subject to investment letter or other similar restrictions on free marketability:

        (1)   If traded on a securities exchange or through NASDAQ-NMS, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing;

        (2)   If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and

        (3)   If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the corporation.

        (B)  The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in subsections 2(c)(ii)(A)(1), (2) or (3) to reflect the approximate fair market value thereof, as determined in good faith by the Board of Directors of the corporation.

        (iii)  In the event the requirements of this subsection 2(c) are not complied with, this corporation shall forthwith either:

        (A)  cause such closing to be postponed until such time as the requirements of this subsection 2(c) have been complied with; or

        (B)  cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series A Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 2(c)(iv) hereof.

        (iv)  The corporation shall give each holder of record of Series A Preferred Stock written notice of any impending liquidation, dissolution or winding up of the corporation not later than twenty (20) days prior to the shareholders' meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days after the corporation has given the first notice provided for herein or sooner than ten (10) days after the corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Series A Preferred Stock that represent at least a majority of the then outstanding shares of Series A Preferred Stock.

        3.     Redemption.

        (a)   At any time after September 30, 2009 but within one hundred twenty (120) days (the "Initial Redemption Date") after the receipt by this corporation of a written request from the holders of not less than two-thirds (2/3) of the then outstanding Series A Preferred Stock, and concurrently with surrender by such holders of the certificates representing such shares, this corporation shall, to the extent it may lawfully do so, redeem the then outstanding shares of Series A Preferred Stock by paying in cash therefor a sum per share equal to $35.19 per share of Series A Preferred Stock (as adjusted for

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any stock dividends, combinations, stock splits or recapitalization affecting the number of shares of Series A Preferred Stock outstanding) plus all accrued but unpaid dividends on such shares through the date of redemption (the "Redemption Price"). Any redemption effected pursuant to this subsection 3(a) shall be made on a pro rata basis among the holders of the Series A Preferred Stock in proportion to the number of shares of Series A Preferred Stock then held by such holders and shall be made (i) one-third (1/3) of the outstanding shares of Series A Preferred Stock on the Redemption Date, (ii) one-half (1/2) of the remaining outstanding shares of Series A Preferred Stock on the first anniversary of the Redemption Date and (iii) the remaining outstanding shares of Series A Preferred Stock on the second anniversary of the Redemption Date. The date of each redemption is referred to herein as a "Redemption Date."

        (b)   Within a reasonable time prior to a Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series A Preferred Stock, at the address last shown on the records of this corporation for such holder, notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, such Redemption Date, the Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to this corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares to be redeemed on such Redemption Date (each, a "Redemption Notice"). Except as provided in subsection (3)(c) on or after such Redemption Date, each holder of Series A Preferred Stock shall surrender to this corporation the certificate or certificates representing the shares of Series A Preferred Stock to be redeemed on such Redemption Date, in the manner and at the place designated in the Redemption Notice, and thereupon the applicable Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.

        (c)   From and after a Redemption Date, unless there shall have been a default in full payment of the Redemption Price payable in respect of the redemption to be effected on such Redemption Date, all rights of the holders of the shares of Series A Preferred Stock designated for redemption in the Redemption Notice as holders of Series A Preferred Stock (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of this corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of the corporation legally available for redemption of shares of Series A Preferred Stock on any Redemption Date are insufficient to redeem the total number of shares of Series A Preferred Stock to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of Series A Preferred Stock based on the number of shares held by each holder thereof on such Redemption Date. The shares of Series A Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. At any time thereafter when additional funds of the corporation are legally available for the redemption of shares of Series A Preferred Stock, such funds will immediately be used to redeem the balance of the shares which the corporation has become obliged to redeem on the Redemption Date but which it has not redeemed.

        4.     Conversion. The holders of the Series A Preferred Stock shall have conversion rights as follows (the "Conversion Rights"):

        (a)   Right to Convert. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of this corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $35.19 (the "Original Series A Issue Price") by the

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conversion price applicable to such share (the "Conversion Price"), determined as hereafter provided, in effect on the date the certificate is surrendered for conversion; provided, however, that, notwithstanding anything in these Articles of Incorporation to the contrary, in the event of a conversion of shares of Series A Preferred Stock at the time of or following the initial sale of this corporation's securities in an underwritten public offering pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended (the "Securities Act"), resulting in gross proceeds of not less than Twenty-Five Million Dollars ($25,000,000) in the aggregate and a public offering price of less than $70.38 per share (as adjusted for any stock dividends, combinations, stock splits or recapitalizations), each share of Series A Preferred so converted shall convert into that number of fully paid and nonassessable shares of Common Stock equal to the greater of (i) such number as determined by dividing the Original Series A Issue Price by the Conversion Price for the Series A Preferred Stock then in effect and (ii) such number as determined by dividing (A) $52.79 (as adjusted for any stock dividends, combinations, stock splits or recapitalization) by (B) the per share public offering price in connection with such underwritten offering. The initial Conversion Price per share for shares of Series A Preferred Stock shall be the Original Series A Issue Price; provided, however, that the Conversion Price for the Series A Preferred Stock shall be subject to adjustment as set forth in subsection 4(d).

        (b)   Automatic Conversion. Each share of Series A Preferred Stock shall automatically be converted into shares of Common Stock based upon the Conversion Price at that time in effect immediately upon the earlier of (i) except as provided in subsection 4(c), the corporation's sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement on Form S-1 under the Securities Act, the public offering price of which was not less than $70.38 per share (as adjusted for any stock dividends, combinations, stock splits or recapitalization) and resulting in gross proceeds to this corporation of not less than Fifty Million Dollars ($50,000,000) in the aggregate or (ii) the date specified by written consent or agreement of the holders of two-thirds (2/3) of the then outstanding shares of Series A Preferred Stock.

        (c)   Mechanics of Conversion. Before any holder of Series A Preferred Stock shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of this corporation or of any transfer agent for the Series A Preferred Stock, and shall give written notice to this corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act, the conversion may, at the option of any holder tendering Series A Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock upon conversion of the Series A Preferred Stock shall not be deemed to have converted such Series A Preferred Stock until immediately prior to the closing of such sale of securities. The right to receive any dividend accrued but unpaid at the time of conversion on any shares of Series A Preferred Stock converted pursuant to the provisions of this Section 4 shall terminate upon conversion thereof.

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        (d)   Conversion Price Adjustments of Preferred Stock for Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series A Preferred Stock shall be subject to adjustment from time to time as follows:

        (i)(A) If the corporation shall issue (or be deemed to have issued), at any time and from time to time, or on after the date upon which any shares of Series A Preferred Stock were first issued (the "Purchase Date"), any Additional Stock without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to the issuance of such Additional Stock, the Conversion Price in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this clause (i)) be adjusted to a price determined by multiplying the Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding (which shall include the total number of shares of Common Stock then issuable upon exercise, conversion or exchange of Options and Convertible Securities outstanding) immediately prior to such issuance plus the number of shares of Common Stock that the aggregate consideration received by the corporation for such issuance would purchase at the existing Conversion Price; and the denominator of which shall be the number of shares of Common Stock outstanding (which shall include the total number of shares of Common Stock then issuable upon exercise, conversion or exchange of Options and Convertible Securities outstanding) immediately prior to such issuance plus the number of shares of such Additional Stock.

        (B)  No adjustment of the Conversion Price shall be made in an amount less than one cent ($0.01) per share, provided that any adjustments which are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in subsections 4(d)(i)(E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this subsection 4(d)(i) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment.

        (C)  In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any discounts, commissions or other expenses allowed, paid or incurred by this corporation for any underwriting or otherwise in connection with the issuance and sale thereof.

        (D)  In the case of the issuance of the Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors in good faith irrespective of any accounting treatment.

        (E)  In the case of the issuance (whether before, on or after the Purchase Date) of options, rights or warrants ("Options") to purchase or subscribe for Common Stock, securities by their terms, directly or indirectly, convertible into or exercisable or exchangeable for Common Stock ("Convertible Securities"), or Options to purchase or subscribe for Convertible Securities, the following provisions shall apply for all purposes of this subsection 4(d)(i) and subsection 4(d)(ii):

        (1)   The aggregate maximum number of shares of Common Stock deliverable upon exercise of such Options shall be deemed to have been issued at the time such Options were issued and for a consideration equal to the consideration (determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)), if any, received by the corporation upon the issuance of such Options plus the minimum exercise price provided in such Options (without taking into account potential antidilution adjustments) for the Common Stock covered thereby.

        (2)   The aggregate maximum number of shares of Common Stock deliverable upon conversion of or in for any such Convertible Securities or upon the exercise of Options to

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purchase or subscribe for such Convertible Securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such Convertible Securities were issued or such Options were issued and for a consideration equal to the consideration, if any, received by the corporation for any such Convertible Securities and related Options (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the corporation (without taking into account potential antidilution adjustments) upon the conversion, exercise or exchange of such Convertible Securities or the exercise of any related Options (the consideration in each case to be determined in the manner provided in subsections 4(d)(i)(C) and (d)(i)(D)).

        (3)   In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to this corporation upon exercise of such Options or upon conversion or exercise of or in exchange for such Convertible Securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price, to the extent in any way affected by or computed using such Options or Convertible Securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such Options or the conversion, exercise or exchange of such Convertible Securities.

        (4)   Upon the expiration of any such Options or the termination of any such Convertible Securities, the Conversion Price, to the extent in any way affected by or computed using such Options or Convertible Securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible, exercisable or exchangeable securities which remain in effect) actually issued upon the exercise of such Options or upon the conversion, exercise or exchange of such Convertible Securities.

        (5)   The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to subsections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subsection 4(d)(i)(E)(3) or (4).

        (ii)   "Additional Stock" shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E)) by this corporation after the Purchase Date other than shares of Common Stock issued or issuable

        (A)  pursuant to a transaction described in subsection 4(d)(iii);

        (B)  to employees, consultants, directors or advisors of this corporation or any subsidiary of this corporation directly or pursuant to a stock option plan, restricted stock plan or other arrangement approved by the Board of Directors of this corporation (the "Stock Plans"); provided, that no more than 981,170 (including 314,673 shares of Common Stock issued under the Stock Plans as of the date of filing of these Articles of Incorporation) of shares of Common Stock (subject to adjustment for and stock dividends, combinations, stock splits or recapitalization affecting the number of shares of Common Stock outstanding) are issued or issuable in connection therewith;

        (C)  in a public offering pursuant to a registration statement on Form S-1 under the Securities Act in connection with which all outstanding shares of Series A Preferred Stock will be converted to Common Stock;

        (D)  in connection with the acquisition of any business or assets or any joint venture or strategic alliance or similar transaction, the terms of which (including the issuance of the corporation's securities) are approved by the Board of Directors and the holders of at least two-thirds (2/3^rd) of the of the voting power of all of the then outstanding shares of Series A Preferred Stock;

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        (E)  to vendors, financial institutions, equipment leasing companies, lessors or customers of the corporation pursuant to arrangements approved by the Board of Directors;

        (F)  pursuant to any transactions approved by the Board of Directors and the holders of at least two-thirds (2/3^rd) of the of the voting power of all of the then outstanding shares of Series A Preferred Stock, primarily for the purpose of (a) the purchase of domain names and related trademarks and trade names, (b) joint ventures, licensing or research and development activities, (c) distribution or manufacture of this corporation's products or services or (d) the purchase of advertising placement;

        (G)  in connection with the exercise of any Options or Convertible Securities outstanding as of the date of filing of these Articles of Incorporation;

        (H)  in connection with any event for which adjustment has already been made pursuant to this subsection 4(d); or

        (I)   upon conversion of the Series A Preferred Stock.

        (iii)  In the event the corporation should at any time or from time to time after the Purchase Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series A Preferred Stock shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to time in the manner provided for deemed issuances in subsection 4(d)(i)(E).

        (iv)  If the number of shares of Common Stock outstanding at any time after the Purchase Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of Series A Preferred Stock shall be decreased in proportion to such decrease in outstanding shares.

        (e)   Other Distributions. In the event this corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by this corporation or other persons, assets (excluding cash dividends and any distributions declared prior to, but not fully paid as of, the date of filing of these Amended and Restated Articles of Incorporation to the extent not paid as of such date) or securities or rights not referred to in subsection 4(d)(iii), then, in each such case for the purpose of this subsection 4(e), the holders of the Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock into which their shares of Series A Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock entitled to receive such distribution.

        (f)    Recapitalizations. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than in connection with a subdivision, combination or transaction provided for elsewhere in this Section 4 or Section 2) provision shall be made so that the holders of the Series A Preferred Stock shall thereafter be entitled to receive, upon conversion of the Series A Preferred Stock, the number of shares of stock or other securities or property of this corporation or otherwise to which

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a holder of Common Stock was entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Series A Preferred Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Series A Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.

        (g)   No Fractional Shares and Certificate as to Adjustments.

        (i)    No fractional shares shall be issued upon the conversion of any share or shares of the Series A Preferred Stock. In lieu of any fractional share to which any holder of Preferred Shares would otherwise be entitled, this corporation shall pay the holder cash equal to the product of such fraction multiplied by the Common Stock's fair market value as determined in good faith by the Board of Director as of the date of conversion. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion.

        (ii)   Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 4, this corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series A Preferred Stock.

        (h)   Notices of Record Date. In the event of any taking by this corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, this corporation shall mail to each holder of Series A Preferred Stock, at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

        (i)    Reservation of Stock Issuable Upon Conversion. This corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, in addition to such other remedies as shall be available to each holder of Series A Preferred Stock, this corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to these articles.

        (j)    Notices. Any notice required by the provisions of this Section 4 to be given to the holders of shares of Series A Preferred Stock shall be deemed given five (5) days after deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of this corporation.

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        5.     Voting Rights.

        (a)   The holder of each share of Series A Preferred Stock shall have the right to one vote for each share of Common Stock into which such Series A Preferred Stock could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any shareholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series A Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

        (b)   The holders of Series A Preferred Stock, voting as a separate class, shall be entitled to elect three (3) directors of the corporation (together, the "Series A Directors"). The holders of Series A Preferred Stock and Common Stock, voting together as a single class on an as-converted to Common Stock basis in accordance with Section 5(a), shall be entitled to elect four (4) directors of the corporation. At any meeting held for the purpose of electing directors, the presence in person or by proxy of the holders of a majority of the shares of the applicable stock of the corporation entitled to elect such director then outstanding shall constitute a quorum for the purpose of electing such director. A vacancy in any directorship shall be filled only by vote or written consent in lieu of a meeting of the class of holders entitled to elect the director to fill such vacancy. The directors to be elected in accordance to the provisions hereof shall serve for terms extending from the date of their election and qualification until the time of the next succeeding annual meeting of shareholders and until their successors have been elected or qualified, provided however, that any director elected by the holders of a particular class of stock or a combination of classes of stock may be removed during such director's term of office, either for or without cause, by the affirmative vote given at a special meeting of shareholders of such class or combination of classes duly called or by an action by written consent for that purpose.

        6.     Protective Provisions. So long as at least 410,433 shares of Series A Preferred Stock (as adjusted for any stock dividends, combinations, stock splits or recapitalization affecting the number of Series A Preferred Stock outstanding) are outstanding, this corporation shall not, and shall not permit any subsidiary (which shall mean any corporation, association or other business entity of which this corporation and/or any of its other subsidiaries directly or indirectly owns at the time a majority of the outstanding voting securities or over which it has effective voting control) to, whether by amendment of these Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least two-thirds (2/3) of the then outstanding shares of Series A Preferred Stock:

        (a)   consent to (i) any liquidation, dissolution or winding up of the corporation, (ii) any issuance, sale or other disposition (or a series of related issuances, sales or dispositions) of a majority by voting power of the voting shares of the corporation, or (iii) any merger or consolidate with or into, or permit any subsidiary to merge or consolidate with or into, any other corporation, corporations, entity or entities (except (A) a consolidation or merger with or into a direct or indirect wholly-owned subsidiary of this corporation or (B) a merger in which (1) the corporation is the surviving corporation or (2) the holders of the corporation's voting stock outstanding immediately prior to the merger hold a majority by voting power of the voting shares of the surviving corporation outstanding immediately following the transaction);

        (b)   sell, abandon, transfer, lease, license, mortgage, hypothecate or otherwise encumber or otherwise dispose of all or substantially all of the corporation's properties or assets;

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        (c)   alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to affect adversely the shares of Series A Preferred Stock;

        (d)   increase the total number of authorized shares of Series A Preferred Stock;

        (e)   authorize or issue (by reclassification or otherwise), or obligate itself to issue, any equity security, other than shares of Common Stock authorized as of the date of these Articles of Incorporation, including additional shares of Series A Preferred Stock and including any security convertible into or exercisable or exchangeable for any equity security, (i) having rights, preferences or privileges senior to or over, or being on a parity with, the Series A Preferred Stock with respect to voting, dividends, payment of dividends, redemption or the distribution of assets upon liquidation, dissolution or winding up, or (ii) having rights similar to any of the rights of the Series A Preferred Stock under this Section 6;

        (f)    redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any share or shares of Preferred Stock or Common Stock; provided, however, that this restriction shall not apply to (i) the repurchase of shares of Common Stock at cost from employees, officers, directors, consultants or other persons performing services for this corporation or any subsidiary pursuant to agreements under which this corporation has the option to repurchase such shares at cost or at cost upon the occurrence of certain events, such as the termination of employment, or (ii) the redemption of any share or shares of Series A Preferred Stock in accordance with Section 3;

        (g)   amend, alter or repeal (by merger or otherwise) this corporation's Articles of Incorporation or bylaws;

        (h)   increase or decrease the size of the Board of Directors of the corporation from seven (7);

        (i)    increase the number of shares reserved for issuance to employees, directors, consultants or advisors performing services for this corporation or any subsidiary pursuant to a stock option plan, restricted stock plan or other arrangement; or

        (j)    change the principal business of this corporation or exit this corporation's current line of business.

        7.     Status of Converted or Redeemed Stock. In the event any shares of Series A Preferred Stock shall be redeemed or converted pursuant to Section 3 or Section 4 hereof, the shares so converted or redeemed shall be cancelled and shall not be issuable by the corporation. The Articles of Incorporation of this corporation shall be appropriately amended to effect the corresponding reduction in the corporation's authorized capital stock.

        8.     Repurchase of Shares. Each holder of outstanding shares of Series A Preferred Stock shall be deemed to have consented, solely for purposes of Sections 502 and 503 of the General Corporation Law of California (to the extent applicable to the corporation), to distributions made by the corporation in connection with the repurchase of shares of Common Stock issued to or held by employees, officers, directors, consultants or other persons performing services for the corporation or any of its subsidiaries upon termination of their employment or services or in connection with the exercise by the corporation of contractual rights of first refusal or first offer pursuant to agreements providing for the right of said repurchase between the corporation and such persons, provided that the terms of such repurchase shall have been approved by the Board.

        C.    Common Stock.

        1.     Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors.

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        2.     Liquidation Rights. Upon the liquidation, dissolution or winding up of the corporation, the assets of the corporation shall be distributed as provided in Section 2 of Division (B) of this Article III hereof.

        3.     Voting Rights. The holder of each share of Common Stock shall have the right to one vote, and shall be entitled to notice of any shareholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law.

ARTICLE IV

        A.    Limitation on Directors' Liability. The liability of the directors of this corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

        B.    Indemnification. This corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through bylaw provisions, agreements with the agents, vote of shareholders or disinterested directors, or otherwise in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to applicable limits set forth in Section 204 of the California Corporations Code with respect to actions for breach of duty to the corporation and its shareholders. The corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate is or was a director of the corporation or any predecessor of the corporation, or serves or served at any other enterprise as a director at the request of the corporation or any predecessor to the corporation against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by or on behalf of such person in connection with such action or proceeding and any appeal therefrom. Neither any amendment nor repeal of this provision, nor the adoption of any provision of the corporation's Articles of Incorporation inconsistent with this provision, shall eliminate or reduce the effect of this provision in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this provision, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

*    *    *

        THREE    The foregoing amendment has been approved by the Board of Directors of said corporation.

        FOUR    The foregoing amendment was approved by the holders of the requisite number of shares of said corporation in accordance with Sections 902 and 903 of the California General Corporation Law; the total number of outstanding shares of each class entitled to vote with respect to the foregoing amendment was 2,174,988 shares of Common Stock. No shares of Series A Preferred Stock were outstanding. The number of shares voting in favor of the foregoing amendment equaled or exceeded the vote required, such required vote being a majority of the outstanding shares of Common Stock.

[Remainder of Page Intentionally Left Blank]

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        IN WITNESS WHEREOF, the undersigned have executed this certificate on September 25, 2004.

/s/  KURT JOHNSON Kurt Johnson, President and Secretary

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CERTIFICATE OF AMENDMENT

OF

AMENDED AND RESTATED ARTICLES OF INCORPORATION

OF

FASTCLICK.COM, INC.

        KURT JOHNSON and FRED KRUPICA hereby certify that:

        1.     They are the President and the Secretary, respectively, of FASTCLICK.COM, INC., a California corporation (the "Corporation").

        2.     Article I of the Amended and Restated Articles of Incorporation of the Corporation is amended to read as follows:

"The name of this corporation is Fastclick, Inc."

        3.     The foregoing Certificate of Amendment of Amended and Restated Articles of Incorporation has been duly approved by the unanimous written consent of the Board of Directors of this Corporation.

        4.     The foregoing Certificate has been duly approved by the required vote of the shareholders of this Corporation in accordance with Section 902 of the California Corporations Code. The total number of outstanding shares of Common Stock of the Corporation is 612,044 shares. The total number of outstanding shares of Series A Preferred Stock of the Corporation is 2,131,285. The number of shares in favor of the Certificate of Amendment of Amended and Restated Articles of Incorporation equaled or exceeded the vote required. The percentages of votes required was more than fifty percent (50%) of the Common Stock and more than sixty-six percent (66.6%) of the Series A Preferred Stock.

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        We further declare, under penalty of perjury, under the laws of the State of California, that the matters set forth in this Certificate are true and correct of our own knowledge.

Date: December 17, 2004

/s/  KURT JOHNSON KURT JOHNSON,
President

/s/  FRED KRUPICA FRED KRUPICA,
Secretary

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Exhibit 3.1

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF FASTCLICK.COM, INC., a California Corporation
CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED ARTICLES OF INCORPORATION OF FASTCLICK.COM, INC.

EX-3.3

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Exhibit 3.3

AMENDED AND RESTATED

BYLAWS

OF

FASTCLICK.COM, INC.

BYLAWS

OF

FASTCLICK.COM, INC.

Section 1. NAME; EXECUTIVE OFFICES

        1.1   Name of Corporation. The name of this Corporation is FASTCLICK.COM, INC.

        1.2   Principal Office. The Board of Directors shall designate the location of the principal executive office of the Corporation, which may be at any place within or without the State of California. If the principal executive office is located outside of California, and if the Corporation has one or more business offices in California, then the Board of Directors shall designate a principal business office in the State of California.

        1.3   Additional or New Offices. The Board of Directors may establish such branch or subordinate offices, or may relocate the Corporation's principal office from time to time, at or to such locations as it determines to be appropriate.

Section 2. DEFINITIONS

        For purposes of these Bylaws, the terms set forth below shall be used as they are defined in this Section.

        2.1   Articles of Incorporation. The term "Articles of Incorporation" means the Articles of Incorporation of the Corporation as in effect at the time in question.

        2.2   Common Stock. The term "Common Stock" means the Common Stock of the Corporation as constituted as of the date in question, including each Series of Common Stock.

        2.3   GCL. The term "GCL" means the California General Corporation Law as in effect at the time in question.

        2.4   Shares Entitled to Vote. If the Articles of Incorporation provide for more or less than one vote for any share of capital stock on any matter, every reference in these Bylaws to a majority or other percentage or amount of the "shares entitled to vote" shall mean a majority or other applicable percentage or amount of the total number of votes entitled to be cast with respect to the shares of capital stock which have the right to vote or act by written consent on such matter, and the "shares entitled to vote" shall not be limited to the number of such shares that are outstanding.

        2.5   Voting Power. If the Articles of Incorporation provide for more or less than one vote for any share of capital stock on any matter, every reference in these Bylaws to a majority or other percentage of the "voting power" shall mean a majority or other applicable percentage of the total number of votes entitled to be cast with respect to the shares of capital stock which have the right to vote or act by written consent on such matter, and the "voting power" shall not be limited to the number of such shares that are outstanding.

Section 3. MEETINGS OF THE SHAREHOLDERS

        3.1   Place of Meeting. All meetings of the shareholders of this Corporation shall be held at the principal office of the Corporation in the State of California, or at such other place within or without the State as may be designated from time to time by the Board of Directors or as may be consented to in writing by all of the persons entitled to vote who were not present at the meeting.

        3.2   Annual Meetings. The annual meeting of the shareholders shall be held each year within one hundred and twenty (120) days of the end of the Corporation's fiscal year on the exact date and at a time within such 120-day period as shall be determined by the Board of Directors. At each annual

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meeting the shareholders shall elect a Board of Directors, consider reports of the affairs of the Corporation, and transact such other business as may properly be brought before the meeting.

        3.3   Special Meeting. Special meetings of the shareholders may be called in accordance with the procedures set forth in this Section 3.3 for the purpose of taking any action permitted to be taken by the shareholders under the GCL and the Articles of Incorporation.

        3.3.1 Authorization to Call Special Meetings. The Chairman of the Board, the President, the Board of Directors, any two or more members of the Board, or one or more shareholders holding not less than ten percent (10%) of the voting power of the Corporation, may call special meetings of the shareholders at any time.

        3.3.2 Procedure for Calling Special Meetings. If a special meeting is called by any person other than the Board of Directors, the request for the special meeting, specifying the general nature of the business proposed to be transacted, shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the President, the Chairman of the Board, any Vice-President or the Secretary of the Corporation. The officer receiving the request shall promptly cause notice of the meeting to be given in the manner provided by Section 3.4 of these Bylaws to the shareholders entitled to vote at the meeting. Any special meeting called for pursuant to this Section 3.3.2 shall be held not less than thirty-five (35) nor more than sixty (60) days following receipt of the request for the special meeting. If notice of the special meeting is not given to shareholders within twenty (20) days after the receipt of a request, the person(s) calling the meeting may give notice thereof in the manner provided by these Bylaws or apply to the California Superior Court as provided in Section 305(c) of the GCL.

        3.4   Notice of Meetings. Notice of meetings, annual or special, shall be given in writing to each shareholder entitled to vote at such meeting by the Secretary or an Assistant Secretary, or if there be no such officers, by the Chairman of the Board or the President, or in the case of neglect or refusal, by any person entitled to call a meeting, not less than ten (10) days (or, if sent by third class mail, thirty (30) days) nor more than sixty (60) days before the date of the meeting.

        3.4.1 Procedure for Giving Notice. Written notice of the meeting shall be given either personally or by first class mail (or third class mail if the Corporation has shares held of record by 500 or more persons as of the record date for the meeting) or telegraphic or other means of written communication, charges prepaid, addressed to the shareholder at the address of the shareholder appearing on the books of the Corporation or given by the shareholder to the Corporation for the purpose of notice. If no such address for notice appears on the Corporation's books or has not been given, notice shall be deemed to have been given if sent to the shareholder in care of the Corporation's principal executive office or if published at least once in a newspaper of general circulation in the county in which the principal executive office of the Corporation is located. The giving of notice as provided by these Bylaws maybe omitted only to the extent and in the manner expressly permitted by the GCL.

        3.4.2 Contents of Notice. Notice of any meeting of shareholders shall specify:

        A.    The place, the date and the hour of the meeting;

        B.    Those matters which the Board, at the time of the mailing of the notice, intends to present for action by the shareholders;

        C.    If Directors are to be elected, the names of nominees whom, at the time of the notice, management intends to present for election;

        D.    The general nature of any business to be transacted at a special meeting and that no other business shall be transacted;

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        E.    The general nature of business to be transacted at any meeting, whether regular, annual or special, if such business relates to any proposal to take action with respect to the approval of(1) a contract or other transaction with an interested Director, governed by Section 310 of the GCL, (2) an amendment of the Articles of Incorporation, (3) the reorganization of the Corporation within the meaning of the GCL, (4) the voluntary dissolution of the Corporation, or (5) a plan of distribution in dissolution other than in accordance with the rights of any outstanding preferred shares as provided in Section 2007 of the GCL; and

        F.     Such other matters, if any, as may be expressly required by the GCL.

        3.4.3 Waiver of Notice of Meetings. The transactions of any meeting of shareholders, however called and noticed, shall be as valid as action taken at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, but who are not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. A waiver of notice or a consent to the holding of any meeting of shareholders need not specify the business transacted at or the purpose of any regular or special meeting, other than any proposal approved or to be approved at such meeting, the general nature of which was required by paragraph E. of Section 3.4.3 of these Bylaws to be stated in the notice thereof.

        3.5   Quorum Requirements. The holders of a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at, all meetings of the shareholders for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

        3.6   Lack of Quorum; Adjournments. If a quorum is not present or represented at any meeting of the shareholders, the meeting may be adjourned by a majority vote of the shares entitled to vote who are present, either in person or by proxy, until such time as the requisite number of voting shares constituting a quorum is present.

        3.6.1 Conduct of Adjourned Meeting. Except as provided in Section 3.6.2 of these Bylaws, it shall not be necessary to give any notice of the adjourned meeting, other than by announcement of the time and place thereof at the meeting at which the adjournment is taken, and the Corporation may transact at the adjourned meeting any business which might have been transacted at the original meeting.

        3.6.2 Notice of Adjourned Meeting. When a meeting is adjourned for more than forty-five (45) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with the provisions of Section 3.4 of these Bylaws.

        3.7   Voting Rights. Subject to the provisions of Sections 702 through 704, inclusive, of the GCL, only persons in whose names shares entitled to vote stand on the stock records of the Corporation on the record date shall be entitled to vote at meetings of the shareholders.

        3.7.1 General Voting Rights. Except as otherwise provided in the Articles of Incorporation or Section 3.8, below, every shareholder entitled to vote shall be entitled to one vote for each share of stock entitled to vote held of record. If the Articles of Incorporation provide for more or less than one vote for any share of stock on any matter, every reference in these Bylaws to a majority or other proportionate vote of the stock of the Corporation shall refer to such majority or

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proportionate vote of the shares entitled to vote based on the aggregate number of votes entitled to be cast by such shares on such matter.

        3.7.2 Majority Vote. Except as otherwise provided in the Articles of Incorporation or Section 4.3, below, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on any matter shall be the act of the shareholders, unless the vote of a greater number of shares of stock or voting by classes is required by the GCL or by the Articles of Incorporation.

        3.7.3 Voice Voting; Written Ballots. Voting at meetings of the shareholders may be by voice vote or by ballot except that, in any election of Directors, voting must be by written ballot if voting by ballot is requested by any shareholder entitled to vote.

        3.8   Cumulative Voting. Voting for the election of Directors shall be by cumulative voting if the names of candidates for Directors have been placed in nomination before the commencement of voting and any shareholder entitled to vote in the election has given notice at the meeting before the voting has commenced of an intention to cumulate votes. Should the election of Directors be by cumulative voting, the shareholders entitled to vote at such election shall be entitled to cumulate their votes to the extent and in the manner provided by Section 708 of the GCL.

        3.9   Voting by Proxy. Every shareholder entitled to vote, or to execute consents, may do so either in person, by telegram, or by written proxy in a form as provided in, and executed in accordance with the applicable provisions of the GCL. Proxies must be filed with the Secretary or an Assistant Secretary of the Corporation. The validity of a proxy tendered on behalf of a shareholder, and any revocation thereof, shall be determined in accordance with the provisions of Section 705 of the GCL.

        3.10 Inspectors of Election. In advance of any meeting of shareholders, the Board of Directors may appoint any persons other than nominees for office to act as Inspectors of Election at such meeting or any adjournment thereof. If no Inspectors of Election are appointed or if an appointment is vacated by an Inspector who fails to appear or fails or refuses to act, the Chairman of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointment or fill such vacancy at the meeting. The number of Inspectors shall be as prescribed by and shall have the duties set forth in Section 707(a) of the GCL. Inspectors shall have the authority and duties set forth in Sections 707(b) and 707(c) of the GCL.

        3.11 Shareholder Action without a Meeting. Unless otherwise provided in the Articles of Incorporation, any action which may be taken at any annual or special meeting of the shareholders, other than the election of Directors, may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shareholders entitled to vote thereon were present and voted.

        3.11.1 Notice of Written Consent. Unless the consents of all shareholders entitled to vote have been solicited in writing, prompt notice of any corporate action approved by shareholders without a meeting by less than unanimous written consent shall be given, in accordance with Section 601(b) of the GCL, to those shareholders entitled to vote who have not consented in writing. Such notice must be given at least ten (10) days before the consummation of any action authorized by such approval if the action involves (i) a contract or other transaction with an interested Director, governed by Section 310 of the GCL, (ii) the indemnification of any present or former agent of the Corporation within the meaning of Section 317 of the GCL, (iii) any reorganization within the meaning of the GCL, or (iv) a plan of distribution in dissolution other than in accordance with the rights of any outstanding preferred shares as provided in GCL Section 2007.

        3.11.2 Election of Directors by Written Consent. A Director may be elected at any time to fill a vacancy (other than a vacancy resulting from the removal of a Director) not filled by the Board by

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the written consent of persons holding a majority of the outstanding shares entitled to vote for the election of Directors, and any required notice of any such election shall promptly be given as provided in Section 3.4.2, above. Directors may not otherwise be elected without a meeting unless a consent in writing, setting forth the action so taken, is signed by all of the persons who would be entitled to vote for the election of Directors.

Section 4. DIRECTORS OF THE CORPORATION

        4.1   Powers of Directors. Subject to the limitations of the Articles of Incorporation, the Bylaws, and the GCL as to action requiring the authorization or approval of the shareholders, the outstanding shares, or less than a majority vote of the preferred shares, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed by, the Board of Directors. The Board may delegate the management of the day-to-day operation of the business to a management company or other person, provided that the business and the affairs of the Corporation shall be managed, and all corporation powers shall be exercised under, the ultimate direction of the Board.

        4.2   Number and Qualification of Directors. The authorized number of Directors shall be seven (7).

        4.2.1 Change in Authorized Number. A change in the minimum or maximum number of Directors who may be authorized to serve on the Board of Directors, or a change from a variable to a fixed Board, unless made in accordance with Section 4.2, above, may be made only by amendment of the Articles of Incorporation or by a Bylaw amending this Section 4.2 duly adopted by the vote or written consent of the holders of a majority of the outstanding shares entitled to vote.

        4.2.2 Minimum Number of Directors. Unless the Corporation then has less than three (3) shareholders of record, the authorized number of Directors shall not be reduced below three (3). No Bylaw or amendment of the Articles reducing the authorized number of Directors or the minimum number of Directors to less than five (5) shall be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of action by written consent, are equal to more than 16²/3% of the outstanding shares entitled to vote.

        4.3   Election of Directors; Term. The Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. At any election of Directors, the Directors receiving the highest number of votes, up to the total number of Directors to be elected, shall be elected. Each Director, including a Director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. No reduction in the authorized number of Directors shall have the effect of removing any Director prior to the expiration of that Director's term of office.

        4.4   Resignation of Directors. Any Director may resign by giving written notice of resignation to the Chairman of the Board, if any, or to the President, the Secretary or the Board of Directors. If any Director tenders a resignation in the manner provided by the GCL, the shareholders or the Board of Directors shall have the power to elect a successor to take office at such time as the resignation shall become effective.

        4.5   Removal of Directors. The entire Board of Directors, or any individual Director, may be removed from office in the manner provided by the GCL.

        4.6   Vacancies on Board of Directors. A vacancy in the Board of Directors shall be deemed to exist in the case of the death, resignation or removal of any Director, if a Director has been declared of unsound mind by order of Court or convicted of a felony, if the authorized number of Directors is increased, or if the shareholders shall fail, either at a meeting at which an increase in the number of

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Directors is authorized or at an adjournment thereof, or at any other time, to elect the full number of authorized Directors. Vacancies on the Board of Directors shall be filled as follows:

        4.6.1 If Director not Removed. Any vacancy, other than a vacancy created by the removal of a Director, may be filled by a majority of the remaining Directors, whether or not less than a quorum, or by a sole remaining Director, and each Director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.

        4.6.2 If Director Removed. A vacancy created by the removal of a Director may be filled only by a vote of the majority of the shares entitled to vote at a duly held meeting of the shareholders, or by the unanimous written consent of the holders of the outstanding shares entitled to vote.

        4.6.3 Action by Shareholders. The shareholders may at any time elect Directors to fill any other vacancies not filled by the Directors, and any such election made by written consent shall require the consent of a majority of the outstanding shares entitled to vote.

        4.7   Meetings of the Board of Directors. Meetings of the Board of Directors shall be held at the principal executive office of the Corporation, or at such other place as may be designated from time to time by resolution of the Board of Directors.

        4.7.1 Annual Meetings. An annual meeting of the Board of Directors shall be held without notice at the place of the annual meeting of shareholders immediately following the adjournment of the annual shareholders meeting for the purpose of organizing the Board, electing any officers desired to be elected, and transacting such other business as may properly come before the meeting.

        4.7.2 Other Regular Meetings. Other regular meetings of the Board of Directors shall be held without notice at such time as may be designated from time to time by resolution of the Board of Directors.

        4.7.3 Special Meetings. Special meetings of the Board of Directors may be called for any purpose at any time by the Chairman of the Board, the President, any Vice-President, the Secretary, or by any two (2) Directors.

        A.    Notice of the time and place of special meetings shall be delivered or communicated personally to each Director by telephone, or by telegraph or mail, charges prepaid, addressed to each Director at the address of that Director as it is shown upon the records of the Corporation, or if such address is not readily ascertainable, at the place in which the meetings of the Directors are regularly held.

        B.    Notice by mail shall be deposited in the United States mail at least four (4)days prior to the scheduled time of the meeting, and notice by telegraph shall be delivered to the telegraph company at least forty-eight (48) hours prior to the scheduled time of the meeting. Should notice be delivered personally or by telephone, it shall be so delivered at least forty-eight (48) hours prior to the scheduled time of the meeting.

        C.    Notice given by mail, telegraph or by delivery in person within the time provided by this Section shall be due, legal and personal notice to the Director to whom it is directed. Any oral notice given within the time provided by this Section shall be due, legal and personal notice if communicated to a person at the office of the Director for whom intended in the reasonable belief that such person will promptly communicate such notice to that Director.

        4.7.4 Conference Telephone Meetings. Any meeting, regular or special, may be held by conference telephone or similar communications equipment as long as all Directors participating in the meeting can hear one another, and any such participation shall constitute presence in person at the meeting.

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        4.7.5 Waiver of Notice. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as action taken at a meeting regularly called and noticed if all the Directors are present and sign a written waiver of notice and consent to holding such meeting, or if a majority of the Directors are present and all Directors either before or after the meeting, sign a written waiver of notice, or a consent to holding the meeting, or an approval of the minutes thereof. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting need not be given to a Director who attends the meeting without protesting the lack of notice to such Director, either prior thereto or at the commencement of such meeting.

        4.7.6 Quorum Requirements. A majority of the exact number of authorized Directors fixed in, or by the Board of Directors pursuant to Section 4.2.1, shall be necessary to constitute a quorum for the transaction of business (other than to adjourn) and the action of a majority of the Directors present at a meeting duly held at which a quorum is present shall be valid as the act of the Board of Directors unless a greater number is required by the Articles of Incorporation, these Bylaws, or the GCL. A meeting at which a quorum initially is present may continue to transact business, notwithstanding the withdrawal of one or more Directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

        4.7.7 Adjourned Meetings. A majority of the Directors present, whether or not a quorum, may adjourn from time to time by fixing a new time and place prior to taking adjournment, but if any meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given, prior to the reconvening of the adjourned meeting, to any Directors not present at the time the adjournment was taken.

        4.8   Director Action Without a Meeting. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board shall individually or collectively consent in writing to that action. Each such written consent shall be filed with the minutes of the proceedings of the Board, and shall have the same force and effect as a unanimous vote of the Directors.

        4.9   Committees of Directors. The Board of Directors, by resolutions adopted by a majority of the authorized number of Directors, may establish one or more committees, including an Executive Committee, each consisting of two or more Directors, to serve at the pleasure of the Board, and may designate one or more alternate Directors to replace any absent committee members at any meeting of a committee.

        4.9.1 Powers of Committees. The Board of Directors may delegate to any such committee any of the powers and authority of the Board of Directors in the business and affairs of the Corporation, except those powers specifically reserved to the Board of Directors by the provisions of Section 311 of the GCL.

        4.9.2 Meetings and Actions of Committees. Meetings of committees shall be held and actions of committees shall be taken in the same manner as is provided by these Bylaws for meetings of Directors, except that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by the members of the committee. Alternate committee members shall be entitled to attend all committee meetings and to receive notice of special meetings of the committee. The Board of Directors may adopt rules for the governing of any committee not inconsistent with the provisions of these Bylaws.

Section 5. OFFICERS OF THE CORPORATION

        5.1   Principal Officers. The principal officers of the Corporation shall consist of a President, a Secretary and a Chief Financial Officer. At the discretion of the Board of Directors, the Corporation

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may also appoint a Chairman of the Board, one or more Vice-Presidents, and such subordinate officers pursuant to Section 5.3 of these Bylaws as it determines to be appropriate.

        5.2   Election; Qualification and Tenure. After their election, the Board of Directors shall meet and organize by electing a President, a Secretary and a Chief Financial Officer, who may be, but need not be, members of the Board of Directors, and such additional officers provided by these Bylaws as the Board of Directors shall determine to be appropriate. Any two or more offices may be held by the same person. Each officer of this Corporation shall serve at the pleasure of the Board of Directors, subject, however, to any rights of an officer under any contract of employment with the Corporation.

        5.3   Subordinate Officers. Subordinate officers, including Assistant Secretaries, Treasurers and Assistant Treasurers, and such other officers or agents as the business of the Corporation may require, may from time to time be appointed by the Board of Directors, the President, or by any officer empowered to do so by the Board of Directors, and shall have such authority and shall perform such duties as are provided in the Bylaws or as the Board of Directors or the President may from time to time determine.

        5.4   Resignation and Removal of Officers. Subject to the provisions of Section 5.4.3, below:

        5.4.1 Removal. Any non-principal officer may be removed, either with or without cause, by a unanimous vote of the Directors at the time in office at any regular or special meeting of the Board. A majority shareholder vote is required to remove a principal director.

        5.4.2 Resignation. Any officer may resign at any time by giving written notice to the Board of Directors or to the President, or to the Secretary or an Assistant Secretary of the Corporation. Any such resignation shall take effect upon receipt of such notice or at any later time specified therein, and unless otherwise specified in the notice, the acceptance of such resignation shall not be necessary to make it effective.

        5.4.3 Contractual Obligations. The resignation or removal of an officer shall not prejudice the rights of the Corporation or of the officer under any contract of employment between the officer and the Corporation.

        5.5   Vacancies in Offices. Any vacancy in an office occurring because of death, resignation, removal, disqualification or any other cause may be filled by the Board of Directors at any regular or special meeting of the Board, or in such manner as may otherwise be prescribed in the Bylaws for regular appointment to the vacant office.

        5.6   Responsibilities of Officers. The officers of the Corporation shall have the following responsibilities:

        5.6.1 Chairman of the Board. The Chairman of the Board, if there be one, shall, when present, preside at all meetings of the shareholders and of the Board of Directors, and shall have such other powers and duties as from time to time shall be prescribed by the Board of Directors. If there is no President, the Chairman of the Board, if any, shall be the Chief Executive Officer and general manager of the Corporation and shall have the powers and duties prescribed in Section 5.6.2, below.

        5.6.2 President. The President shall be the general manager of the Corporation and, subject to the control of the Board of Directors, shall be the chief executive officer of the Corporation and shall have general supervision, direction and control of the business and officers of the Corporation. In the absence of the Chairman of the Board, or if there be none, the President shall preside at all meetings of the shareholders and of the Board of Directors, but shall have no vote at any such meetings unless the President is also a Director. The President shall have the general powers and duties of management customarily vested in the office of President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors.

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        5.6.3 Vice-Presidents. In the absence or the disability of the President, and the Chairman of the Board, if any, the Vice-Presidents, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice-President designated by the President, shall perform the duties and exercise the powers of the President and when so acting shall have all of the powers of and shall be subject to all of the restrictions upon the President. The Vice-Presidents shall perform such other duties and have such other powers as the Board of Directors and the President shall prescribe.

        5.6.4 Secretary. The Secretary shall have such powers and shall perform such duties as may be prescribed by the Board of Directors and the President and shall, in addition:

        A.    Keep, or cause to be kept, at the principal executive office or such other place as the Board of Directors may order, a book of all minutes of all of the proceedings of its shareholders and the Board of Directors and committees of the Board, with the time and place of holding of meetings, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at Directors' meetings, the number of shares present or represented at shareholders' meetings, and the proceedings thereof;

        B.    Keep, or cause to be kept, at the principal executive office or at the office of the Corporation's transfer agent, a share register or a duplicate share register, showing classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation;

        C.    Give, or cause to be given, notice of all the meetings of the shareholders and of the Board of Directors required by the Bylaws or by law to be given; and

        D.    Keep the seal of the Corporation if one be adopted, and affix the seal to all documents requiring a seal.

        5.6.5 Assistant Secretary. The Assistant Secretary, if provided for and appointed, shall have all the rights, duties, powers and privileges of the Secretary and may act in the place and stead of the Secretary whenever necessary or desirable.

        5.6.6 Chief Financial Officer. The Chief Financial Officer shall have such powers and perform such duties as may be prescribed by the Board of Directors and the President and shall, in addition:

        A.    Keep and maintain or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares;

        B.    Deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board of Directors; and

        C.    Disburse the funds of the Corporation as may be ordered by the Board of Directors, and render to the President and the Directors, whenever they so request, an account of all transactions as Chief Financial Officer and of the financial condition of the Corporation.

Section 6. COMPENSATION; INDEMNIFICATION

        6.1   Directors' Fees and Expenses. Directors and committee members may receive compensation for their services in that capacity, and may be reimbursed for expenses incurred by them on behalf of the Corporation, in the manner and only to the extent authorized in resolutions duly adopted by the Board of Directors. Nothing in this Section 6.1 shall preclude a Director from receiving compensation for services in the capacity of an officer, employee or agent of the Corporation.

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        6.2   Compensation of Officers. The compensation of the officers of the Corporation shall be fixed from time to time by the Board of Directors or by the President, subject to any rights of the officer pursuant to any employment contract between that officer and the Corporation.

        6.3   Indemnification of Agents. The Corporation shall have the power and authority to indemnify any Director, officer, committee member or other representative, employee or agent of the Corporation (as that latter term is defined in Section 317 of the GCL) in the mariner and to the extent provided in Section 317 of the GCL. The indemnification provided for by this Section shall not be deemed exclusive of any other rights which those seeking indemnification may have including, but not limited to, any rights granted under any agreement, insurance policy, or a vote of shareholders or disinterested Directors.

        6.4   Liability Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any of its Directors, officers, employees or agents insuring against liability asserted against or incurred by any such person in such capacity, whether or not the Corporation would be empowered to indemnify such person under the provisions of this Section 6.

Section 7. CORPORATE RECORDS AND REPORTS

        7.1   Corporate Records. The Corporation shall keep and maintain all of the books and records required by this Section 7.1.

        7.1.1 Record of Shareholders. A record of shareholders of the Corporation, giving the names and addresses of all shareholders and the number and class of shares held by each of them, shall be kept at the Corporation's principal executive office, or at the office of its transfer agent or registrar if one be appointed. The records of the Corporation's shareholders shall be open to the shareholders for inspection in the manner and to the extent provided by Section 1600 of the GCL.

        7.1.2 Corporate Bylaws. The original or a copy of these Bylaws, as amended to date, shall be kept at the principal executive office of the Corporation or, if such office is not in the State of California, at its principal business office in California, and shall be open to inspection by the shareholders at any reasonable time during regular business hours. If the Corporation has no principal executive or business office in California, the Secretary shall furnish a copy of the Bylaws, as amended to date, to any shareholder who makes a written request to inspect the Bylaws.

        7.1.3 Minutes and Accounting Records. Accounting books and records of the business and properties of the Corporation, and minutes of the proceedings of its shareholders, the Board of Directors and its committees shall be kept at the principal executive office of the Corporation or at such other location as may be fixed by the Board of Directors from time to time. All such minutes, accounting books and records shall be open to inspection upon the written request of a shareholder at any reasonable time during regular business hours for a purpose reasonably related to the interests of the requesting shareholder in accordance with the provisions of Section 1601 of the GCL.

        7.2   Inspection of Books and Records. Every Director shall have the absolute right to inspect all books, records and documents of the Corporation and each of its subsidiaries, and to inspect their respective properties, in the manner provided by Section 1602 of the GCL. Shareholders and Directors may exercise their right of inspection either in person or by an agent or attorney acting on their behalf. The right to inspect any records or books of the Corporation shall include also the right to copy and to make extracts of such books and records.

        7.3   Annual Report to Shareholders. So long as the Corporation has less than one hundred (100) holders of record of its shares (determined as provided in Section 605 of the GCL), no annual report to shareholders shall be required, and the requirement of such a report contained in Section 1501 of the GCL is hereby expressly waived. Should the Corporation have more than one

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hundred (100) shareholders of record (determined as provided in Section 605 of the GCL), the Board of Directors of the Corporation shall cause an annual report to be prepared and delivered to shareholders in accordance with the provisions of Section 1501 of the GCL, within the time frame required by that Section. If no annual report for a previous fiscal year was sent to shareholders, the Corporation shall, upon the written request of any shareholder made more than one hundred and twenty (120) days after the close of that fiscal year, deliver or mail to the person making the request within thirty (30) days thereafter the financial statements required by Section 1501(a) of the GCL.

        7.4   Financial Statements. Upon the written request of any one or more shareholders holding at least five percent (5%) of the outstanding shares of any class of its stock, the Corporation shall furnish an income statement for the Corporation's most recent fiscal year ended more than one hundred and twenty (120) days prior to the date of the request, and for the most recent interim quarterly or semiannual period ended more than thirty (30) days prior to the date of the request. The Chief Financial Officer shall cause the requested income statements to be prepared, if not previously prepared, and delivered to any requesting shareholder entitled to do so within thirty (30) days after receipt of any such request.

        7.4.1 Contents of Financial Statement. If an annual report for the last fiscal year has not been sent to shareholders, the income statement prepared by the Corporation at the request of shareholders entitled to do so shall be accompanied by a balance sheet as of the end of that period and a statement of changes in financial position for the fiscal year.

        7.4.2 Audit Report. The quarterly income statements and balance sheets required by this Section 7.4 shall be accompanied by the report, if any, of any independent accountants engaged by the Corporation or by a certificate of an authorized officer of the Corporation that the income statements and balance sheets were prepared without audit from the books and records of the Corporation.

        7.5   Non-Disclosure Agreement. The Corporation may require as a condition to the delivery of any information under this Section 7 or to a shareholder's inspection of any books or records of the Corporation pursuant to the provisions of this Section 7 that the shareholder and any other person permitted to participate in such inspection execute an appropriate Confidentiality and Non-Disclosure Agreement and, as appropriate, that the shareholder agree to return all records and information provided by the Corporation after a reasonable period.

Section 8. CERTIFICATES AND TRANSFER OF SHARES

        8.1   Certificates for Shares. Subject to the provisions of Section 8.1.1, below, certificates for shares shall be in such form as the Board of Directors may prescribe.

        8.1.1 Form of Certificate. Certificates for shares shall certify the number of shares and the classes or series of shares owned by the shareholder, and shall contain a statement setting forth the office or agency of the Corporation from which the shareholder may obtain, upon request and without charge, a copy of the statement of any rights, preferences, privileges, and restrictions granted to or imposed upon each class or series of shares authorized to be issued and upon the holders thereof, and any other legend or statement as may be required by Section 418 of the GCL and the Federal and California corporate securities laws. Notwithstanding the foregoing provisions of this Section 8.1.1, the Board of Directors may adopt a system of issuance, recordation and transfer of the Corporation's shares by electronic or other means not involving any issuance of certificates, provided such system complies with the GCL.

        8.1.2 Officer Signatures. Every certificate for shares shall be signed in the name of the Corporation by the Chairman of the Board or by the President or Vice-President and the Chief Financial Officer or Assistant Chief Financial Officer or the Secretary or an Assistant Secretary. Any or all of the signatures on the certificate may be by facsimile.

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        8.2   Transfer of Shares on Books. Upon surrender to the Secretary or an Assistant Secretary or to the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

        8.3   Lost or Destroyed Certificates. A new certificate may be issued without the surrender and cancellation of a prior certificate that is lost, apparently destroyed or wrongfully taken when: (a) the request for the issuance of a new certificate is made within a reasonable time after the owner of the prior certificate has notice of its loss, destruction or theft; and (b) such request is received by the Corporation prior to its receipt of notice that the prior certificate has been acquired by a bona fide purchaser; and (c) the owner of the prior certificate gives an indemnity bond or other adequate security sufficient in the judgment of the Board of Directors to indemnify the Corporation against any claim, expense or liability resulting from the issuance of a new certificate. Upon the issuance of a new certificate, the rights and liabilities of the Corporation, and of the holders of the old and new certificates, shall be governed by the provisions of Sections 8104, 8404 and 8405 of the California Commercial Code.

        8.4   Transfer Agent and Registrars. The Board of Directors may appoint one or more transfer agents or transfer clerks, and one or more registrars, which shall be banks or trust companies, either domestic or foreign, at such times and places as the Board of Directors determines to be appropriate.

Section 9. RESTRICTION ON TRANSFER

        9.1   Shares. For purposes of this Section, the term "Shares" shall mean all of the shares of capital stock of the Corporation now owned or hereafter acquired by any present or future shareholder of the Corporation, including but not limited to, (a) all shares of the capital stock of the Corporation hereafter received by a shareholder as a dividend or other distribution upon or with respect to the Shares, (b) all shares of capital stock of the Corporation into which the Shares hereafter may be changed or for which the Shares may be exchanged, whether through reorganization, recapitalization, stock split-up or the like, (c) all shares of capital stock of the Corporation hereafter acquired by a shareholder, whether or not for value, and (d) all shares of capital stock of the Corporation hereafter acquired by a shareholder pursuant to any stock option, stock bonus, stock purchase right or similar stock right granted to the shareholder by the Corporation.

        9.2   Transfer. For purposes of this Section, the term "Transfer" shall mean any voluntary or involuntary sale, assignment, gift, bequest, transfer, pledge, hypothecation or other disposition, whether or not for value, of any or all of the Shares. The term "Transfer" specifically includes, without limitation, testamentary transfers pursuant to (a) the shareholder's will or the laws of descent and distribution, (b) property settlements, whether pursuant to court order, incident to the dissolution of the shareholder's marriage or otherwise, and (c) voluntary and involuntary transfers in connection with the enforcement of a lien, security interest, judgment or other legal process.

        9.3   General Restriction on Transfer. A shareholder shall not Transfer any or all of the Shares held by the shareholder, or any interest in any such Shares, to any person or entity except in strict compliance with the terms of this Section, including, without limitation, the expiration of all notice and other periods specified in this Section and the completion of all appraisals and other actions contemplated in this Section. Notwithstanding the provisions of any Shareholders Agreement, Buy-Sell Agreement or other agreement containing a contrary provision, any Transfer or attempted Transfer of any of the Shares, or any interest in any Shares, which is not in strict compliance with the terms of this Section shall be null and void.

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        9.3.1 Option to Purchase. The Corporation shall have the option, but shall have no obligation, to purchase on the occurrence of any of the following events all, but not less than all, of the Shares which are the subject of such occurrence:

        A.    A shareholder agrees to Transfer any or all of the Shares;

        B.    The entry of an order, whether pursuant to a judicial proceeding, an arbitration or otherwise, directing the shareholder to Transfer any or all of the Shares, or any interest in any or all of the Shares; and

        C.    The occurrence of an event of bankruptcy of the shareholder, including, but not limited to, a general assignment for the benefit of creditors; the filing by or against the shareholder of a petition under any provision of the Federal Bankruptcy Code, unless the same is dismissed within sixty (60) days; the appointment of a trustee or receiver to take possession of substantially all of the shareholder's assets, unless possession of such assets is restored to the shareholder within sixty (60) days thereafter; the attachment, execution or other judicial seizure of substantially all of the shareholder's assets, unless such seizure is discharged within sixty (60) days thereafter; or the shareholder's admission in writing of his or her inability to pay his or her debts generally as they become due.

In the event of the occurrence of any event described in Section C, above, all of the Shares then held by the shareholder shall be considered the subject of such occurrence.

        9.3.2 Notice. The shareholder, or the shareholder's legal representative (the "Transferring Shareholder"), shall deliver to the Corporation within ten (10) days after the occurrence of any of the events described in Section 9.3.1, above, written notice of the occurrence of such event. With respect to a Transfer described in Section 9.3.1.A or 9.3.1.B, above, the Transferring Shareholder shall specify in the written notice the identity of the proposed transferee, the purchase price the Transferring Shareholder will receive in the proposed Transfer, and the other terms and conditions of the proposed Transfer. The Corporation shall exercise, if at all, its option to purchase the Shares subject to the occurrence (the "Transferred Shares") within thirty (30) days after its receipt of written notice of the occurrence of any such event. If the Corporation does not exercise its option to purchase the Transferred Shares within such 30-day period, its option to purchase the Transferred Shares covered by such written notice shall terminate and the Transferring Shareholder thereafter shall be free to Transfer the Transferred Shares covered by the written notice without further complying with the provisions of this Section 9.3; provided that if the written notice relates to a Transfer described in Section 9.3.1.A, above, and the identify of the proposed transferee or the terms and conditions of the proposed Transfer are changed from those specified in the written notice or the Transfer is not completed within thirty (30) days after the earlier of the date on which the Corporation notifies the Transferring Shareholder of its election not to exercise its option to purchase the Transferred Shares and the expiration of the 30-day period during which the Corporation could exercise its option to purchase, the Transferring Shareholder shall be required to comply with the provisions of this Section 9.3 to the same extent as if the Transferring Shareholder had not previously given notice of such intended Transfer.

        9.3.3 Purchase Price. The purchase price for the Transferred Shares purchased by the Corporation on exercise of its option under Section 9.3.2, above, shall be an amount equal to the product of the number of Transferred Shares and the Fair Market Value (as hereinafter defined) per share of the Transferred Shares on the date of the notice delivered by the Transferring Shareholder pursuant to Section 9.3.2, above.

        9.3.4 Fair Market Value. For purposes of this Section 9.3, the "Fair Market Value" of any Share at any date shall be the value of the Common Stock of the Corporation as determined in accordance with the provisions of this Section 9.3.

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        A.    For purposes of this Section 9.3, the Fair Market Value of the shares of any Series of Common Stock shall be determined without considering either (a) the value, if any, because the shares of such Series of Common Stock have more than one (1) vote per share or (b) the reduction in value, if any, because the shares of such Series of Common Stock have only one (1) vote per share and there is then outstanding another Series of Common Stock which has more than one (1) vote per share.

        B.    The parties shall first attempt to agree on the Fair Market Value of the Shares. If the parties do not agree on the Fair Market Value within fifteen (15) days after the delivery to the Transferring Shareholder of notice of the exercise of the purchase option or the Transferring Shareholder or the Corporation so elects, the Fair Market Value of the Shares shall be determined by appraisal in accordance with the provisions of Section 9.3.5.C, below.

        C.    If the Fair Market Value is to be determined by appraisal, the following procedures shall apply.

        (1)   If the Fair Market Value of the Common Stock of the Corporation has been determined for purposes of this Section 9.3 within six (6) months prior to the date on which the Transferring Shareholder delivers the written notice described in Section 9.4, above, the Fair Market Value of the Common Stock as determined pursuant to such appraisal shall be conclusive for all purposes under this Section 9.3.

        (2)   If Section 9.3.5.C.(1), above, does not apply, the following procedures shall apply. The parties jointly shall select a mutually acceptable appraiser, or if the parties cannot agree on a mutually acceptable appraiser within ten (10) days after the end of the 15-day period described in Section 9.3.5.B above, (i) the Corporation shall select one appraiser, (ii) the Transferring Shareholder shall select one appraiser, and (iii) the two appraisers so selected shall select a third mutually acceptable appraiser. The Fair Market Value determined by an appraisal under this Section shall be the average of the values determined by all of the appraisers. The Transferring Shareholder shall pay one-half (1/2) of the costs of the appraisers and the Corporation shall pay one-half (1/2) of the costs of the appraisers.

        (3)   Except upon a showing of fraud, corruption or undue influence by any party or appraiser, the Fair Market Value determined by appraisal shall be conclusive for all purposes under this Section 9.3.

        (4)   Notwithstanding anything in this Section 9.3 to the contrary, in no event shall the Fair Market Value of the Common Stock with respect to a Transfer described in Section 9.3.l.A or Section 9.3.1.B, above, exceed the purchase price specified in the written notice provided by the Transferring Shareholder or the value per share specified in the order directing Transfer of the Shares, as appropriate.

        9.3.5 Payment. The purchase price for the Transferred Shares shall be paid as follows.

        A.    If the Transferred Shares are to be Transferred pursuant to a transaction described in Section 9.3.1.A, above, and the notice of Transfer specifies the payment terms, the purchase price shall be paid in the manner specified in the notice.

        B.    If the Shares are to be Transferred pursuant to an order described in Section 9.3.1.B, above, and the order specifies the payment terms, the purchase price shall be paid in the manner specified in the order.

        C.    If the Corporation exercises its purchase option in connection with an event described in Section 9.3.1.C, above, or if the applicable notice of Transfer or the order do not specify the payments terms, the purchase price shall be paid on such terms and at such times

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as the parties may agree; provided that if the parties cannot or do not agree on the terms of payment within fifteen (15) days after the determination of the purchase price, the purchase price shall be paid as follows: on the Transfer Date, as hereinafter defined, (a) fifty percent (50%) of the purchase price shall be paid to the Transferring Shareholder in cash or by cashier's or certified checks and (b) the Corporation shall deliver to the Transferring Shareholder one or more unsecured promissory note(s) in the principal amount equal to fifty percent (50%) of the purchase price, which note(s) shall bear interest at the rate of ten percent (10%) per annum, shall have a term of two (2) years, shall be payable in equal monthly installments of principal and interest, shall provide for prepayment without penalty, shall be secured by a lien on the Transferred Shares, and shall have such other terms and conditions as are typical for that type of promissory note.

        9.3.6 Transfer Date. The Corporation shall designate a date (the "Transfer Date"), not less than fifteen (15) nor more than forty-five (45) days after the date of the determination of the purchase price on which the Transferring Shareholder shall Transfer the Transferred Shares to the Corporation and on which the Corporation shall pay the purchase price to the Transferring Shareholder.

        9.3.7 Power of Attorney. Each shareholder hereby irrevocably appoints each person who from time to time hereafter is a Director of the Corporation as the shareholder's agent and attorney-in-fact, with full power of substitution, for the limited purpose of effecting the Transfer of the Transferred Shares by reason of the purchase by the Corporation of the Transferred Shares pursuant to this Section 9.3. If, after compliance by the Corporation with the provisions of this Section 9.3 and the tender to the Transferring Shareholder on or before the Transfer Date of the purchase price for the Transferred Shares, the Transferring Shareholder does not deliver to the Corporation on the Transfer Date the Transferred Shares then to be Transferred, each Director of the Corporation, individually and as the Transferring Shareholder's agent and attorney-in-fact, may take all action and may execute all documents necessary to effect the Transfer of the Transferred Shares to the Corporation and/or the other shareholders. Upon a Director's taking of such action and execution of such documents, the Transferring Shareholder shall have no further interest in the Transferred Shares to be then Transferred pursuant to this Section 9.3 and the Transferring Shareholder's only right shall be to receive payment of the purchase price for the Transferred Shares. Each shareholder acknowledges and agrees that the granting of this power of attorney is coupled with an interest and shall survive the death or disability of the shareholder and his or her assignment of any interest in the Shares.

        9.3.8 Termination. The provisions of this Section 9.3 shall lapse and be of no further force or effect from and after the date of the occurrence of the first of the following events:

        A.    The voluntary or involuntary filing by or against the Corporation of a petition for the protection under the federal Bankruptcy Code, for the appointment of a receiver for all or substantially all of the Corporation's assets, or for the dissolution of the Corporation;

        B.    At such time as there is only one remaining shareholder;

        C.    The consummation by the Corporation of an underwritten public offering of the Common Stock of the Corporation registered under the Securities Act of 1933, as amended;

        D.    The Common Stock of the Corporation is held of record by 75 or more persons according to the stock records of the Corporation; and

        E.    The execution and delivery of a binding agreement for the consummation of any of the following transactions: (a) the sale in a single transaction or a series of related transactions of all or substantially all of the assets of the Corporation; (b) the merger or consolidation of the Corporation into or with another corporation in a transaction in which

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the Corporation is not the surviving corporation; or (c) the acquisition by another person, firm or corporation of eighty percent (80%) or more in fair market value of the outstanding capital stock of the Corporation; provided that, if any such agreement is canceled prior to the consummation of such transaction or such transaction is otherwise abandoned prior to consummation, the provisions of this Section 9.3 shall be reinstated and shall apply to all of the Shares to the same extent as if no such binding agreement had ever been entered into.

        9.4   [Intentionally Omitted].

        9.5   Indemnification. Each shareholder severally shall indemnify, defend, and hold harmless the Corporation and its officers, directors, employees and agents, from and against any and all claims, demands, costs, expenses, obligations, liabilities or damages, including interest, penalties, and reasonable attorneys' fees, which any such person shall incur or suffer, arising out of, in connection with or relating to, any breach or failure by a shareholder to perform each and all of the shareholder's obligations under this Section 9. The indemnifications authorized by this Section 9.5 shall include, without limitation, the payment of reasonable attorneys' fees and other expenses (not limited to taxable costs) incurred in settling or defending any claims, actions, threatened actions, or finally adjudicated legal proceedings.

        9.6   Notices. All notices permitted or required under this Section 9 shall be personally delivered or sent by United States certified or registered mail, postage prepaid, to the parties hereto at the following addresses:

If to the Corporation, to the President of the Corporation at the Corporation's principal business office; and

If to a shareholder, to the address of the shareholder on the Corporation's stock records.

Written notice shall be deemed to have been delivered five (5) business days after it has been deposited in the mail, if mailed, and when delivered, if personally delivered. If notice is to be sent to multiple parties, the latest date of delivery to any of the noticed parties shall be deemed to be the date of delivery to all of the noticed parties.

        9.7   Legend. Each stock certificate issued by the Corporation and covering any Shares shall have endorsed prominently on the certificate substantially the following words:

"ANY VOLUNTARY OR INVOLUNTARY SALE, ASSIGNMENT, GIFT, BEQUEST, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SHARES OF CAPITAL STOCK OR ANY INTEREST THEREIN REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY, AND SUBJECT TO, THE TERMS AND PROVISIONS OF BYLAWS OF THE ISSUER. A COPY OF SUCH BYLAWS AND ALL AMENDMENTS OR SUPPLEMENTS THERETO IS ON FILE IN THE OFFICE OF THE SECRETARY OF THE ISSUER. BY ACCEPTANCE OF THIS CERTIFICATE THE HOLDER HEREOF AGREES TO BE BOUND BY THE TERMS OF SAID BYLAWS AND ALL AMENDMENTS OR SUPPLEMENTS THERETO."

A copy of this Section shall be shown by the Secretary of the Corporation to any qualified person making inquiry concerning it.

Section 10. GENERAL CORPORATE MATTERS

        10.1 Corporate Seal. The Board of Directors may, in its discretion, adopt a corporate seal, circular in form and having inscribed thereon the name of the Corporation and the date and state of its incorporation.

        10.2 Record Date. The Board of Directors may fix, in advance, a record date for the purpose of determining shareholders entitled to notice of and to vote at any meeting of shareholders, to consent to

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corporate action in writing without a meeting, to receive any report, to receive any dividend or other distribution or allotment of any right, to exercise rights with respect to any change, conversion or exchange of shares, or to exercise any rights with respect to any other lawful action. The record date so fixed shall not be more than sixty (60) days prior to any event for the purpose for which it is fixed, and shall not be less than ten (10) days prior to the date of any meeting of the shareholders. If no such record date is fixed by the Board of Directors, then the record date shall be that date prescribed by Section 701 of the GCL.

        10.3 Voting of Shares in Other Corporations. Shares standing in the name of this Corporation may be voted or represented and all rights incident thereto may be exercised on behalf of the Corporation by the President or, if he is unable or refuses to act, by a Vice-President or by such other person as the Board of Directors may designate.

        10.4 Definitions and Interpretation. Unless the context requires otherwise, these Bylaws and the words and phrases included in them shall be construed and interpreted in accordance with the general provisions, rules of construction and definitions in the GCL. Unless expressly provided otherwise, every reference in these Bylaws to the provisions of the GCL shall refer to such provisions as they exist from time to time, or to any successor provision thereto.

Section 11. AMENDMENT TO BYLAWS

        11.1 Amendments By Shareholders. These Bylaws may be repealed or amended, or new Bylaws may be adopted, by the affirmative vote of a majority of the outstanding shares entitled to vote or by the written consent of shareholders entitled to vote such shares, subject, however, to the restrictions on such amendments imposed by the GCL, the Articles of Incorporation, or other provisions of these Bylaws.

        11.2 Amendment By Directors. Subject to the right of shareholders as provided in Section 11.1 to adopt, amend or repeal Bylaws, the Board of Directors may adopt, amend or repeal Bylaws; provided, however, that no Bylaw or amendment changing the number of Directors of the Corporation, or changing the number of authorized Directors from a fixed to a variable number or vice versa, shall be adopted other than in the manner provided by Section 4.2 of these Bylaws.

        11.3 Record of Amendments. Any amendment or new Bylaw adopted by the shareholders or the Board of Directors shall be copied in the appropriate place in the minute book with the original Bylaws, and the repeal of any Bylaw shall be entered on the original Bylaws together with the date and manner of such repeal. The original or a copy of the Bylaws as amended to date shall be open to inspection by the shareholders at the Corporation's principal office in California at all reasonable times during office hours.

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CERTIFICATE OF SECRETARY

OF

FASTCLICK.COM, INC.

        The undersigned, Secretary of Fastclick.com, Inc., a California corporation, does hereby certify that the foregoing Bylaws were duly adopted as the Bylaws of the Corporation by the unanimous written consent of the Board of Directors, effective as of September 8, 2004, and by the written consent of the shareholders of the Corporation, effective as of September 9, 2004.

        IN WITNESS WHEREOF, the undersigned has executed this certificate and affixed the seal of the Corporation on this 27th day of September 2004.

/s/  KURT JOHNSON Kurt Johnson, Secretary

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Exhibit 3.3

AMENDED AND RESTATED BYLAWS OF FASTCLICK.COM, INC.
BYLAWS OF FASTCLICK.COM, INC.
CERTIFICATE OF SECRETARY OF FASTCLICK.COM, INC.

EX-10.7

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Exhibit 10.7

FASTCLICK.COM, INC.
2004 STOCK INCENTIVE PLAN

1.    Purpose of the Plan.    The purpose of this Fastclick.com, Inc. 2004 Stock Incentive Plan is to offer certain Employees, Non-Employee Directors, and Consultants the opportunity to acquire a proprietary interest in the Company. Through the Plan, the Company and its Related Corporations seek to attract, motivate, and retain highly competent persons. The success of the Company and its Related Corporations are dependent upon the efforts of these persons. The Plan provides for the grant of options and awards to purchase Common Stock. An option granted under the Plan may be a Non-Statutory Stock Option or an Incentive Stock Option, as determined by the Administrator.

2.    Definitions.    As used herein, the following definitions shall apply.

        "Act" shall mean the Securities Act of 1933, as amended.

        "Administrator" shall mean the Board or any one of the Committees.

        "APB 25" shall mean Opinion 25 of the Accounting Principles Board, as amended, and any successor thereof.

        "Award" shall mean an Option or a Stock Purchase Award.

        "Board" shall mean the Board of Directors of the Company.

        "Cause" shall mean any of the following acts or omissions on the part of the Participant: fraud, gross negligence, willful misconduct, insubordination, material failure to comply with the Company's general policies, violation of the employee inventions assignment agreement, failure to carry out instructions of the Participant's supervisors, conviction of any felony or a misdemeanor involving moral turpitude, as determined in the Administrator's sole and absolute discretion.

        "Change in Control" shall mean: (i) the acquisition by any entity, person, or group (other than the Company, any one of its Related Corporations, or an employee benefit plan maintained by the Company or any one of its Related Corporations) of beneficial ownership of 51% or more of the outstanding voting stock (other than preferred stock) of the Company; (ii) the occurrence of a transaction requiring shareholder approval for the acquisition of the Company by the purchase of stock or assets, or by merger, or otherwise; or (iii) the election during any period of 24 months or less of 51% or more of the members of the Board without the approval of the nomination of such members by a majority of the Board consisting of members who were serving at the beginning of such period.

        "Code" shall mean the Internal Revenue Code of 1986, as amended.

        "Committee" shall mean a committee appointed by the Board.

        "Common Stock" shall mean the common stock of the Company, without par value.

        "Company" shall mean Fastclick.com, Inc., a California corporation.

        "Consultant" shall mean any natural person who performs bona fide services for the Company or a Related Corporation as a consultant or advisor, excluding Employees and Non-Employee Directors; provided, however, that such services must not be in connection with the offer or sale of securities in a capital raising transaction, and such person does not directly or indirectly promote or maintain a market for the Company's securities.

        "Date of Grant" shall mean the effective date as of which the Administrator grants an Option to an Optionee or a Stock Purchase Award to a Purchaser.

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        "Disability" shall mean total and permanent disability as defined in Section 22(e)(3) of the Code.

        "Employee" shall mean any individual who is a common-law employee of the Company or a Related Corporation.

        "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

        "Exercise Price" shall mean the exercise price of a share of Optioned Stock.

        "Fair Market Value" shall mean, as of any date, the value of Common Stock determined as follows:

          (i)  If the Common Stock is listed on any established stock exchange or a national market system, including without limitation, the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

         (ii)  If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock quoted by such recognized securities dealer on the last market trading day prior to the day of determination; or

        (iii)  In the absence of an established market for the Common Stock, its Fair Market Value shall be determined, in good faith, by the Administrator.

For purposes of (iii) above, the Administrator may, but is not required to, engage an outside valuation firm to help it determine the Fair Market Value of a Share, and such firm may use such valuation method(s) as are standard in its profession to value non-public companies.

        "FASB" shall mean the Financial Accounting Standards Board.

        "Immediate Family" shall mean any 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 and shall include adoptive relationships.

        "Incentive Stock Option" shall mean an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

        "Mature Shares" shall mean Shares that had been held by the Participant for a meaningful period of time such as six months or such other period of time that is consistent with FASB's interpretation of APB 25.

        "Non-Employee Director" shall mean a non-employee member of the Board.

        "Non-Statutory Stock Option" shall mean an Option not intended to qualify as an Incentive Stock Option.

        "Notice of Stock Option Grant" shall mean the notice delivered by the Company to the Optionee evidencing the grant of an Option.

        "Option" shall mean a stock option granted pursuant to the Plan.

        "Option Agreement" shall mean a written agreement that evidences an Option in such form as the Administrator shall approve from time to time.

        "Optioned Stock" shall mean the Common Stock subject to an Option.

        "Optionee" shall mean any person who receives an Option.

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        "Participant" shall mean an Optionee or a Purchaser.

        "Person" shall be construed broadly and shall include, without limitation, an individual, a partnership, an investment fund, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, and a governmental entity or any department, agency or political subdivision thereof.

        "Plan" shall mean the Fastclick.com, Inc. 2004 Stock Incentive Plan.

        "Purchase Price" shall mean the purchase price of a share of Purchased Stock.

        "Purchased Stock" shall mean the Restricted Stock subject to a Stock Purchase Agreement.

        "Purchaser" shall mean any person who receives a Stock Purchase Award.

        "Qualified Note" shall mean a recourse note, with a market rate of interest, that may, at the discretion of the Administrator, be secured by the Optioned Stock, Purchased Stock, or otherwise.

        "Related Corporation" shall mean any parent or subsidiary (as defined in Sections 424(e) and (f) of the Code) of the Company.

        "Restricted Stock" shall mean Common Stock that is subject to a Right of Repurchase.

        "Right of Repurchase" shall mean the Company's right (not obligation) to repurchase Common Stock in accordance with Section 8 below.

        "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3.

        "Section 280G Approval" shall mean the stockholder approval obtained in compliance with the requirements of Code Section 280G(b)(5)(B), as amended, and any successor thereof, and the regulations or proposed regulations promulgated thereunder, as determined by the Administrator in its sole discretion.

        "Service" shall mean the performance of services for the Company (or any Related Corporation) by an Employee, Non-Employee Director, or Consultant, as determined by the Administrator in its sole discretion. Service shall not be considered interrupted in the case of: (i) a change of status (i.e., from Employee to Consultant, Non-Employee Director to Consultant, or any other combination); (ii) transfers between locations of the Company or between the Company and any Related Corporation; or (iii) a leave of absence approved by the Company or a Related Corporation. A leave of absence approved by the Company or a Related Corporation shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the Company or a Related Corporation.

        "Service Provider" shall mean an Employee, Non-Employee Director, or Consultant.

        "Share" shall mean a share of Common Stock.

        "Stock Purchase Agreement" shall mean a written agreement that evidences a Stock Purchase Award in such form as the Administrator shall approve from time to time.

        "Stock Purchase Award" shall mean an award granted pursuant to the Plan that entitles the Purchaser to purchase Restricted Stock at the applicable Purchase Price.

        "Taxes" shall mean the federal, state, and local income and employment tax liabilities incurred by the Participant in connection with his/her Awards.

        "10% Shareholder" shall mean the owner of stock (as determined under Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock of the Company (or any Related Corporation).

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        "Termination Date" shall mean the date on which a Participant's Service terminates, as determined by the Administrator in its sole discretion.

3.    Administration of the Plan.

        (a)    Initial Plan Administration.    Prior to the date, if any, upon which the Company becomes subject to the Exchange Act, the Plan shall be administered by the Board or a Committee.

        (b)    Plan Procedure after the Date, if any, upon Which the Company becomes Subject to the Exchange Act.

        (i)    Multiple Administrative Bodies.    The Plan may be administered by different Committees with respect to different groups of Service Providers.

        (ii)    Section 162(m).    To the extent that the Administrator determines that it is desirable to qualify Awards as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee comprised solely of two or more "outside directors" within the meaning of Section 162(m) of the Code.

        (iii)    Rule 16b-3.    To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.

        (iv)    Other Administration.    Other than as provided for above, the Plan shall be administered by (A) the Board or (B) a Committee, which Committee shall be constituted to satisfy applicable laws.

        (c)    Powers of the Administrator.    Subject to the provisions of the Plan and in the case of specific duties delegated by the Administrator, and subject to the approval of relevant authorities, including the approval, if required, of any stock exchange or national market system upon which the Common Stock is then listed, the Administrator shall have the authority, in its sole discretion:

          (i)  to determine the Fair Market Value of the Common Stock;

         (ii)  to select the Service Providers to whom Awards may, from time to time, be granted under the Plan;

        (iii)  to determine whether and to what extent Awards are granted under the Plan;

        (iv)  to determine the number of Shares that are covered by an Award;

         (v)  to approve the terms of the Option Agreement and Stock Purchase Agreement;

        (vi)  to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award. Such terms and conditions may include, but are not limited to, the Exercise Price, Purchase Price, the status of an Option (Non-Statutory Stock Option or Incentive Stock Option), the time or times when Awards may be exercised, any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding the Award or the Shares relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

       (vii)  to determine the method of payment of the Exercise Price and Purchase Price;

      (viii)  to delegate to others responsibilities to assist in administering the Plan; and

        (ix)  to construe and interpret the terms of the Plan, Option Agreements, Stock Purchase Agreements, and any other documents related to the Awards.

        (d)    Effect of Administrator's Decision.    All decisions, determinations, and interpretations of the Administrator shall be final and binding on all Participants and any other holders of any

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Awards. The Administrator's decisions and determinations under the Plan need not be uniform and may be made selectively among Participants whether or not such Participants are similarly situated.

        (e)    Liability.    No member of the Administration shall be personally liable by reason of any contract or other instrument executed by such member or on his/her behalf in his/her capacity as a member of the Committee for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person's own fraud or bad faith. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power the Company may have to indemnify them or hold them harmless.

4.    Stock Subject To The Plan.

        (a)    Limitations.    Subject to the adjustments provided for in Section 9 of the Plan, the maximum aggregate number of Shares that may be issued under the Plan through Awards is 495,585 Shares. Notwithstanding the foregoing, the maximum aggregate number of Shares that may be issued under the Plan through Incentive Stock Options is 495,585 Shares, subject to the adjustments provided for in Section 9 of the Plan.

        (b)    Additional Shares.    In the event that any outstanding Award expires or is canceled or otherwise terminated, the Shares allocable to the unexercised portion of such Award shall again be available for the purposes of the Plan. In the event that Shares issued under the Plan are reacquired by the Company at their original purchase price, such Shares shall again be available for the purposes of the Plan. Notwithstanding the foregoing, Shares issued under the Plan that are reacquired by the Company at their original purchase price shall not be available for the purposes of the Incentive Stock Option limitation provided for in Section 4(a) above.

5.    Eligibility.    The persons eligible to participate in the Plan shall be limited to Employees, Non-Employee Directors, and Consultants who have the potential to impact the long-term success of the Company and/or its Related Corporations and who have been selected by the Administrator to participate in the Plan.

6.    Option Terms.    Each Option shall be evidenced by an Option Agreement, in the form approved by the Administrator and may contain such provisions as the Administrator deems appropriate; provided, however, that each Option Agreement shall comply with the terms specified below. Each Option Agreement evidencing an Incentive Stock Option shall, in addition, be subject to Section 7 below.

        (a)    Exercise Price.

          (i)  The Exercise Price of an Option shall be determined by the Administrator but shall not be less than 85% (110% in the case of a person who owns, on the Date of Grant of such Option, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Related Corporation) of the Fair Market Value of a Share on the Date of Grant of such Option.

         (ii)  The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator and may consist entirely of (A) cash, (B) check, (C) Mature Shares, (D) Qualified Note, (E) consideration

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received by the Company under a broker assisted sale and remittance program acceptable to the Administrator, or (F) any combination of the foregoing methods of payment.

        (b)    Vesting.    Any Option granted hereunder shall be exercisable and shall vest at such times and under such conditions as determined by the Administrator and set forth in the Notice of Stock Option Grant and Option Agreement, but in the case of an Optionee who is not an officer of the Company, a Non-Employee Director, or a Consultant, an Option or Shares purchased thereunder shall vest at a rate of at least 20% per year. An Option may not be exercised for a fraction of a Share.

        (c)    Term of Options.    No Option shall have a term in excess of 10 years measured from the Date of Grant of such Option.

        (d)    Procedure for Exercise.    An Option shall be deemed to be exercised when written notice of such exercise has been given to the Administrator in accordance with the terms of the Option Agreement by the person entitled to exercise the Option and full payment of the applicable Exercise Price for the Share being exercised has been received by the Administrator. Full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under Subsection (a)(ii) above.

        (e)    Effect of Termination of Service.

        (i)    Termination of Service.    Upon termination of an Optionee's Service, other than due to death, Disability, or Cause, the Optionee may exercise his/her Option, but only on or prior to the date that is 90 days following the Optionee's Termination Date, and only to the extent that the Optionee was entitled to exercise such Option on the Termination Date (but in no event later than the expiration of the term of such Option, as set forth in the Notice of Stock Option Grant to the Option Agreement). If, on the Termination Date, the Optionee is not entitled to exercise the Optionee's entire Option, the Shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after termination of Service, the Optionee does not exercise his/her Option within the time specified herein, the Option shall terminate, and the Optioned Stock shall revert to the Plan.

        (ii)    Disability of Optionee.    In the event of termination of an Optionee's Service due to his/her Disability, the Optionee may exercise his/her Option, but only on or prior to the date that is 12 months following the Termination Date, and only to the extent that the Optionee was entitled to exercise such Option on the Termination Date (but in no event later than the expiration date of the term of his/her Option, as set forth in the Notice of Stock Option Grant to the Option Agreement). To the extent the Optionee is not entitled to exercise the Option on the Termination Date, or if the Optionee does not exercise the Option to the extent so entitled within the time specified herein, the Option shall terminate, and the Optioned Stock shall revert to the Plan.

        (iii)    Death of Optionee.    In the event that an Optionee should die while in Service, the Optionee's Option may be exercised by the Optionee's estate or by a person who has acquired the right to exercise the Option by bequest or inheritance, but only on or prior to the date that is 12 months following the date of death, and only to the extent that the Optionee was entitled to exercise the Option at the date of death (but in no event later than the expiration date of the term of his/her Option, as set forth in the Notice of Stock Option Grant to the Option Agreement). If, at the time of death, the Optionee was not entitled to exercise his/her entire Option, the Shares covered by the unexercisable portion of the Option shall immediately revert to the Plan. If, after death, the Optionee's estate or a person who acquires the right to exercise the Option by bequest or inheritance does not exercise the Option within

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the time specified herein, the Option shall terminate, and the Optioned Stock shall revert to the Plan.

        (iv)    Cause.    In the event of termination of an Optionee's Service due to Cause, the Optionee's Options shall terminate on the Termination Date.

        (f)    Shareholder Rights.    Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 9 below.

        (g)    Repurchase Rights.    Shares purchased upon exercise of an Option shall be subject to such Company repurchase rights as the Administrator shall deem appropriate. These repurchase rights shall be set forth in the Option Agreement and the Stock Restriction Agreement attached to the Option Agreement, and shall comply with the terms specified below. If the Company has a right to repurchase the Optioned Stock upon termination of the Optionee's Service, then the Company shall repurchase such Shares (if at all) at: (i) their Fair Market Value on the Optionee's Termination Date; or (ii) their original Exercise Price (provided that the right to repurchase the Shares of an Optionee (who is not an officer of the Company, a Non-Employer Director, or a Consultant) at their original Exercise Price lapses at the rate of at least 20% of the Shares per year from the Date of Grant of the Option). The Company must exercise such repurchase right, if at all, within 90 days after the Optionee's Termination Date (or in the case of Shares issued upon exercise of an Option after the Termination Date, within 90 days after the date of exercise) for cash or for cancellation of indebtedness incurred in purchasing the Shares. The right to repurchase the Shares at their Fair Market Value shall terminate when the Common Stock becomes publicly traded.

        (h)    Non-transferability of Options.    Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. Notwithstanding the foregoing, the Administrator, in its sole discretion, may allow an Optionee to: (i) transfer his or her Option to a trust where under Section 671 of the Code and other applicable laws, the Optionee is considered the sole beneficial owner of the Option while it is held in the trust; and (ii) gift his or her Non-Statutory Stock Option to a member of the Optionee's Immediate Family, or to an inter vivos or testamentary trust in which members of the Optionee's Immediate Family have a beneficial interest of more than 50% and which provides that such Non-Statutory Stock Option is to be transferred to the beneficiaries upon the Optionee's death.

        (i)    Change in Control.

          (i)  Except as otherwise provided for in the Optionee's Option Agreement, in the event of a Change in Control, the Company and the successor corporation, if any, may agree (without the Optionee's consent):

        (A)  that, subject to Subsection (ii) below, all Options that are outstanding on the date that immediately precedes the date of the Change in Control shall become exercisable on the date that immediately precedes the date of the Change in Control, and the Administrator shall notify the Optionees of their Options' exercisability at least 21 days prior to the date of the Change in Control so that the Optionees can decide whether or not to exercise their Options on the date that immediately precedes the date of the Change in Control. Effective as of the date of the Change in Control, the Plan shall terminate and all unexercised Options shall be cancelled;

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        (B)  to terminate the Plan and cancel all outstanding Options effective as of the date of the Change in Control without the payment of any consideration; provided, however, that the Administrator shall notify the Optionees of their Options' cancellation at least 21 days prior to the date of the Change in Control so that the Optionees can exercise those Options that are otherwise exercisable before they are cancelled;

        (C)  that the successor corporation or its parent shall assume the Plan and all outstanding Options effective as of the date of the Change in Control;

        (D)  to terminate the Plan and cancel all outstanding Options effective as of the date of the Change in Control and replace such Options with comparable options in the successor corporation or parent thereof (the determination of comparability shall be made by the Administrator, and its determination shall be final, binding, and conclusive);

        (E)  to terminate the Plan and cancel all outstanding Options effective as of the date of the Change in Control and, subject to Subsection (ii) below, deliver to the Optionee in lieu thereof the difference between the Fair Market Value of a Share on the date of the Change in Control and the Exercise Price of the Optionee's Option, multiplied by the number of Shares to which the Option relates; or

        (F)  to terminate the Plan and cancel all outstanding Options effective as of the date of the Change in Control and deliver to the Optionee in lieu thereof the difference between the Fair Market Value of a Share on the date of the Change in Control and the Exercise Price of the Optionee's Option, multiplied by the number of vested Shares that the Optionee would have received had he/she exercised the Option. For purposes of this Subsection, an Optionee shall be deemed to be vested in a Share if such Share is not subject to the Company's right to repurchase at its Exercise Price.

         (ii)  Notwithstanding the foregoing, unless Section 280G Approval has been obtained, no acceleration of exercisability or payment shall occur under Subsection (i) above to the extent that such acceleration or payment would, after taking into account any other payments in the nature of compensation to which the Optionee would have a right to receive from the Company and any other Person contingent upon the occurrence of such Change in Control, result in a "parachute payment" as defined in Section 280G(b)(2) of the Code.

        (iii)  The outstanding Options shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

7.    Incentive Stock Options.    The terms specified below shall be applicable to all Incentive Stock Options, and these terms shall, as to such Incentive Stock Options, supercede any conflicting terms in Section 6 above. Options which are specifically designated as Non-Statutory Stock Options when issued under the Plan shall not be subject to the terms of this Section.

        (a)    Eligibility.    Incentive Stock Options may only be granted to Employees.

        (b)    Exercise Price.    The Exercise Price of an Incentive Stock Option shall not be less than 100% of the Fair Market Value of a Share on the Date of Grant of such Option, except as otherwise provided in Subsection (d) below.

        (c)    Dollar Limitation.    In the case of an Incentive Stock Option, the aggregate Fair Market Value of the Optioned Stock (determined as of the Date of Grant of each Option) with respect to Options granted to any Employee under the Plan (or any other option plan of the Company or any Related Corporation) that may for the first time become exercisable as Incentive Stock Options during any one calendar year shall not exceed the sum of $100,000. An Incentive Stock Option is considered to be first exercisable during a calendar year if the Incentive Stock Option

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will become exercisable at any time during the year, assuming that any condition on the Optionee's ability to exercise the Incentive Stock Option related to the performance of services is satisfied. If the Optionee's ability to exercise the Incentive Stock Option in the year is subject to an acceleration provision, then the Incentive Stock Option is considered first exercisable in the calendar year in which the acceleration provision is triggered. To the extent the Employee holds two or more Options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such Options as Incentive Stock Options shall be applied on the basis of the order in which such Options are granted. However, because an acceleration provision is not taken into account prior to its triggering, an Incentive Stock Option that becomes exercisable for the first time during a calendar year by operation of such provision does not affect the application of the $100,000 limitation with respect to any Incentive Stock Option exercised prior to such acceleration. Any Options in excess of this limitation shall automatically be treated as Non-Statutory Stock Options.

        (d)    10% Shareholder.    If any Employee to whom an Incentive Stock Option is granted is a 10% Shareholder, then the Exercise Price shall not be less than 110% of the Fair Market Value of a Share on the Date of Grant of such Option, and the Option term shall not exceed five years measured from the Date of Grant of such Option.

        (e)    Change in Status.    In the event of an Optionee's change of status from Employee to Consultant or to Non-Employee Director, an Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Statutory Stock Option three months and one day following such change of status.

        (f)    Leave of Absence.    For purposes of Incentive Stock Options, no leave of absence may exceed three months, unless reemployment upon expiration of such leave is provided by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company or a Related Corporation is not so provided by statute or contract, an Optionee's employment with the Company shall be deemed terminated on the first day immediately following such three month period of leave for Incentive Stock Option purposes.

8.    Stock Purchase Awards.    Each Stock Purchase Award shall be evidenced by a Stock Purchase Agreement, in the form approved by the Administrator and may contain such provisions as the Administrator deems appropriate; provided, however, that each Stock Purchase Agreement shall comply with the terms specified below.

        (a)    Purchase Price.

          (i)  The Purchase Price of a Stock Purchase Award shall be determined by the Administrator but shall not be less than 85% (100% in the case of a person who owns, on the Date of Grant of such Stock Purchase Award, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Related Corporation) of the Fair Market Value of a Share on the Date of Grant of such Stock Purchase Award.

         (ii)  The consideration to be paid for the Shares to be issued upon exercise of a Stock Purchase Award, including the method of payment, shall be determined by the Administrator and may consist entirely of (A) cash, (B) check, (C) Mature Shares, (D) Qualified Note, or (E) any combination of the foregoing methods of payment.

        (b)    Purchase Period.    A Stock Purchase Award shall automatically expire on the earlier of: (i) the date that is 30 days following the Date of Grant of such Stock Purchase Award; or (ii) the date on which the Company terminates the Purchaser's Service for Cause.

        (c)    Procedure for Exercise.    A Stock Purchase Award shall be deemed to be exercised when written notice of such exercise has been given to the Administrator in accordance with the terms of

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the Stock Purchase Agreement by the person entitled to exercise the Stock Purchase Award and full payment of the applicable Purchase Price for the Shares being purchased have been received by the Administrator. Full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under Subsection (a)(ii) above.

        (d)    Rights as a Stockholder.    Upon exercise of a Stock Purchase Award, the Purchaser shall have the rights of a stockholder with respect to the voting of the Purchased Stock, subject to the conditions contained in the Stock Purchase Agreement.

        (e)    Dividends.    The Stock Purchase Agreement may require or permit the immediate payment, waiver, deferral or investment of dividends paid on Restricted Stock.

        (f)    Non-transferability of Stock Purchase Award.    Stock Purchase Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution and may be exercised, during the lifetime of the Purchaser, only by the Purchaser.

        (g)    Right of Repurchase.

        (i)    General Rule.    Shares issued upon exercise of a Stock Purchase Award shall initially be subject to the Company's right (not obligation) of repurchase such Shares at their Purchase Price. The Right of Repurchase shall be set forth in the Stock Purchase Agreement, and shall comply with the terms specified below.

        (ii)    Lapse of Right of Repurchase.    The Right of Repurchase shall lapse as the Purchaser vests in the Purchased Stock. The Purchaser shall vest in the Purchased Stock at such times and under such conditions as determined by the Administrator and set forth in the Stock Purchase Agreement. Notwithstanding the foregoing, a Purchaser who is not an officer of the Company, a Non-Employee Director, or a Consultant shall vest at a rate of at least 20% per year.

        (iii)    Repurchase Period.    The Company must exercise (if at all) the Right of Repurchase within 90 days after the Purchaser's Termination Date for cash or cancellation of indebtedness incurred in purchasing the Shares.

        (iv)    Non-transferability of Restricted Stock.    The Purchaser may not sell, pledge, assign, hypothecate, transfer, or dispose of the Shares while they are subject to the Right of Repurchase.

        (v)    Additional Restrictions.    When the Right of Repurchase lapses, such Shares shall be subject to such other Company repurchase rights as the Administrator shall deem appropriate. These repurchase rights shall be set forth in the Stock Restriction Agreement on the Date of Grant of the Stock Purchase Agreement and shall comply with the terms specified below. If the Company has a right to repurchase the Purchased Stock upon termination of the Purchaser's Service, then the Company shall repurchase such Shares (if at all) at their Fair Market Value on the Purchaser's Termination Date. The Company must exercise such repurchase right, if at all, within 90 days after the Purchaser's Termination Date for cash or for cancellation of indebtedness incurred in purchasing the Shares. The right to repurchase the Shares at their Fair Market Value shall terminate when the Common Stock becomes publicly traded.

        (vi)    Change in Control.    Except as otherwise provided for in the Purchaser's Stock Purchase Agreement, in the event of a Change in Control, the Company and the successor corporation, if any, may agree (without the Purchaser's consent):

        (A)  to repurchase the Restricted Stock at their Purchase Price;

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        (B)  that the Restricted Stock shall remain outstanding and the successor corporation or its parent will assume the Right of Repurchase;

        (C)  to exchange the Restricted Stock for comparable restricted stock in the successor corporation or its parent (the determination of comparability shall be made by the Administrator, and its determination shall be final, binding, and conclusive); or

        (D)  to repurchase the Restricted Stock at the Fair Market Value of the Shares on the date of the Change in Control. Notwithstanding the foregoing, unless Section 280G Approval has been obtained, no repurchase shall occur under this Subsection to the extent that such repurchase would, after taking into account any other payments in the nature of compensation to which the Purchaser would have a right to receive from the Company and any other Person contingent upon the occurrence of such Change in Control, result in a "parachute payment" as defined in Section 280G(b)(2) of the Code.

9.    Adjustments Upon Changes in Capitalization.

        (a)    Changes in Capitalization.    The number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for which no Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Award, as well as the Exercise Price or Purchase Price per Share covered by each such outstanding Award, as well as the number of shares of Restricted Stock shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued and outstanding Shares, effected without the receipt of consideration by the Company. Such adjustment shall be made by the Administrator, to the extent possible, so that the adjustment shall not result in an accounting consequence under APB 25 and FASB Interpretation No. 44, as amended, and any successor thereof. The Administrator's determination with respect to the adjustment shall be final, binding, and conclusive.

        (b)    Dissolution or Liquidation.    In the event of the proposed dissolution or liquidation of the Company that is not a Change in Control, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. In such event, the Administrator, in its discretion, may provide for a Participant to fully vest in his/her Option and the Right of Repurchase to lapse on his/her Restricted Stock. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares. To the extent it has not been previously exercised, an Award shall terminate upon such dissolution or liquidation of the Company.

10.    Modification, Extension, and Assumption of Options.    Within the limitations of the Plan, the Board may modify, extend, or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options for the same or a different number of Shares and at the same or a different Exercise Price. Notwithstanding the foregoing, no modification of an Option shall, without the consent of the Optionee, impair the Optionee's rights or increase the Optionee's obligations under such Option.

11.    Share Escrow/Legends.    Unvested Shares issued under the Plan may, in the Administrator's discretion, be held in escrow by the Company until the Participant's interest in such Shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested Shares.

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12.    Tax Withholding.

        (a)   The Company's obligation to deliver Shares upon the exercise of Options or deliver Shares or remove any restrictive legends upon vesting of such Shares under the Plan shall be subject to the satisfaction of all applicable federal, state and local income and employment tax withholding requirements. The Participant shall satisfy the tax withholding requirements pursuant to the method or methods selected by the Administrator.

        (b)   In addition to any other method selected by the Administrator, the Administrator may, in its discretion, provide any or all holders of Non-Statutory Stock Options or unvested Shares under the Plan with the right to use previously vested Shares in satisfaction of all or part of the Taxes incurred by such holders in connection with the exercise of their Options or the vesting of their Shares; provided, however, that this form of payment shall be limited to the withholding amount calculated using the minimum statutory rates. Such right may be provided to any such holder in either or both of the following formats:

        (i)    Stock Withholding:    The election to have the Company withhold, from the Shares otherwise issuable upon the exercise of such Non-Statutory Stock Option or the vesting of such Shares, a portion of those Shares with an aggregate Fair Market Value equal to the Taxes calculated using the minimum statutory withholding rates interpreted in accordance with APB 25 and FASB Interpretation No. 44.

        (ii)    Stock Delivery:    The election to deliver to the Company, at the time the Non-Statutory Stock Option is exercised or the Shares vest, one or more Shares previously acquired by such holder (other than in connection with the Option exercise or Share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the Taxes calculated using the minimum statutory withholding rates interpreted in accordance with APB 25 and FASB Interpretation No. 44.

13.    Effective Date and Term of the Plan.    Subject to Section 18 below, the Plan shall become effective as of                                  , the date of its adoption by the Board. Unless sooner terminated by the Administrator, the Plan shall continue until the day prior to the tenth anniversary of the date on which the Board adopted the Plan or the date on which the shareholders of the Company approved the Plan, which ever is earlier. When the Plan terminates, no Awards shall be granted under the Plan thereafter.

14.    Time of Granting Awards.    The Date of Grant of an Award shall, for all purposes, be the date on which the Administrator makes the determination to grant such Award, or such other date as determined by the Administrator; provided, however, that any Award granted prior to the date on which the Plan is approved by the Company's shareholders shall be subject to the shareholders' approval of the Plan. Notice of the determination shall be given to each Service Provider to whom an Award is so granted within a reasonable period of time after the date of such grant.

15.    Amendment and Termination of the Plan.    The Board may at any time amend, alter, suspend, or discontinue the Plan, but no amendment, alteration, suspension, or discontinuation shall be made which would impair the rights that the Participant had earned by the time of the amendment, alternation, suspension, or discontinuance of the Plan without his/her consent. In addition, to the extent necessary and desirable to comply with Section 422 of the Code (or any other applicable law or regulation, including the requirements of any stock exchange or national market system upon which the Common Stock is then listed), the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required.

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16.    Regulatory Approvals.

        (a)   The implementation of the Plan, the granting of any Awards and the issuance of any Shares upon the exercise of any granted Award shall be subject to the Company's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the Awards granted under it, and the Shares issued pursuant to it.

        (b)   No Shares or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement (if required) for the Shares issuable under the Plan, and all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading (if any).

17.    No Employment/Service Rights.    Nothing in the Plan shall confer upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Related Corporation employing or retaining such person) or of the Participant, which rights are hereby expressly reserved by each, to terminate such person's Service at any time for any reason, with or without cause.

18.    Shareholder Approval.    The Plan shall be subject to approval by the shareholders of the Company within 12 months before or after the date the Plan is adopted by the Board. Notwithstanding the foregoing, the effective date of the Plan shall be the date of its adoption by the Board. Such shareholder approval shall be obtained in the degree and manner required under applicable state and federal law and the rules of any stock exchange or national market system upon which the Common Stock is then listed or traded.

19.    Financial Reports.    The Company shall deliver to the Participants and the shareholders who have received Shares under the Plan a balance sheet and an income statement at least annually, unless such individual is a key Employee whose duties in connection with the Company (or any Related Corporation) assure such individual access to equivalent information.

20.    Market Stand-Off.    In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Act, including the Company's initial public offering, the Participant shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Plan without the prior written consent of the Company or its underwriters. Such restriction (the "Market Stand-Off") shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriters. In no event, however, shall such period exceed 180 days. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company's outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Plan until the end of the applicable stand-off period. The Company's underwriters shall be beneficiaries of the agreement set forth in this Section. This Section shall not apply to Shares registered in the public offering under the Act, and the Optionee shall be subject to this Section only if the directors and officers of the Company are subject to similar arrangements.

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21.    Stock Restriction Agreement.    Notwithstanding any other provision of this Plan, the Administrator may condition the initial exercise of an Award upon the Participant and, if applicable, his/her spouse, entering into a Stock Restriction Agreement. The certificates evidencing the Shares issued to the Participant pursuant to this Plan shall bear the legend required by the Stock Restriction Agreement. This provision may be waived by the Company in writing and shall terminate when the Common Stock becomes publicly traded.

22.    Governing Law.    This Plan shall be governed by California law, applied without regard to conflict of law principles.

        IN WITNESS WHEREOF, the Company, by its duly authorized officer, has executed this Plan effective as of                                  .

	FASTCLICK.COM, INC., a California corporation
Date:	By:
	Its:

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Exhibit 10.7

FASTCLICK.COM, INC. 2004 STOCK INCENTIVE PLAN

EX-10.8

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Exhibit 10.8

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2000 EQUITY PARTICIPATION PLAN (revised 9/04)

FASTCLICK.COM, INC., a California corporation, has adopted the 2000 Equity Participation Plan for the benefit of its eligible Employees, Consultants, and Directors.

        The purposes of this Plan are to provide an additional incentive for Directors, Employees and Consultants to further the growth, development and financial success of the Company by personally benefiting through the ownership of securities of the Company; and (b) enable the Company to obtain and retain the services of Directors, Employees and Consultants considered essential to the long-term success of the Company by offering them an opportunity to own securities in the Company which will reflect the growth, development and financial success of the Company.

1.    Definitions    Wherever the following terms are used in this Plan they shall have the meaning specified below, unless the context clearly indicates otherwise.

        1.1    Administrator.    "Administrator" means the Board or any of its Committees as shall be administering the Plan in accordance with Section 7 of the Plan.

        1.2    Applicable Laws.    "Applicable Laws" means the federal and state laws relating to the administration of stock option plans.

        1.3    Award.    "Award" means any Option or Restricted Stock granted or issued under this Plan.

        1.4    Award Agreement.    "Award Agreement" means any Option Agreement or Restricted Stock Agreement, as appropriate, relating to any Award.

        1.5    Board.    "Board" means the Board of Directors of the Company.

        1.6    Change in Control.    A "Change in Control" shall be deemed to have occurred if:

        1.6.1 Any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (a) the Company, (b) any subsidiary of the Company, (c) any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of any subsidiary of the Company, or (d) any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Section 13(d)), together with all Affiliates and Associates (as such terms are used in Rule 12b-2 under the Exchange Act) of such person, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; and

        1.6.2 During any period of two (2) consecutive years (not including any period prior to the Effective Date of the Plan), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Section 1.6.1 above) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (²/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board.

        1.7    Code.    "Code" means the Internal Revenue Code of 1986, as amended.

        1.8    Common Stock.    "Common Stock" means the Common Stock of the Company, no par value.

        1.9    Company.    "Company" means Fastclickcom, Inc., a California corporation, and shall include any parent corporation and subsidiary corporation as those terms are defined in Sections 424(e) and 424(f), respectively, of the Code.

        1.10    Consultant.    "Consultant" means any person who renders services to the Company as a consultant or as an adviser, whether as an independent contractor or an employee of an employer or as a member of the Board of Advisers, and who is not an Employee or a Director as of the date an Option is granted to him or her under the Plan.

        1.11    Director.    "Director" means a member of the Board.

        1.12    Disability.    "Disability" means total and permanent disability as defined in Section 22(e)(3) of the Code.

        1.13    Donative Transfer.    "Donative transfer" means any transfer of an Option made for donative purposes or without the payment or receipt by or on behalf of the Optionee of any cash, property or other consideration. For purposes of this Section 1.13, neither an Optionee's receipt of or eligibility for a deduction, credit or similar allowance for federal or state income tax or estate tax purposes nor the transferee's use for family or support purposes of any proceeds realized from the sale of any shares of Common Stock acquired on exercise of an Option shall be deemed to be the receipt of consideration.

        1.14    Effective Date.    "Effective Date" means the date specified in Section 14 hereof as the beginning date of the term of the Plan.

        1.15    Employee.    "Employee" means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company.

        1.16    Exchange Act.    "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        1.17    Fair Market Value.    "Fair Market Value" means, as of any date, the value of the Common Stock determined as follows:

        1.17.1 If the Common Stock is listed on an established national stock exchange or the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system (or the exchange with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

        1.17.2 If the Common Stock is quoted on the NASDAQ System (but not on the National Market System thereof) or is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; and

        1.17.3 In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

        1.18    Incentive Stock Option.    "Incentive Stock Option" means an option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Administrator.

        1.19    Independent Director.    "Independent Director" means a member of the Board who is not an Employee of the Company.

        1.20    Nonqualified Stock Option.    "Nonqualified Stock Option" means an Option which is not designated as an Incentive Stock Option by the Administrator.

        1.21    Officer.    "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

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        1.22    Option.    "Option" means a stock option granted under this Plan. An Option granted under this Plan shall be either a Nonqualified Stock Option or an Incentive Stock Option; provided that Options granted to Independent Directors and Consultants shall be Nonqualified Stock Options.

        1.23    Option Agreement.    "Option Agreement" means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement is subject to the terms and conditions of the Plan. The terms and provisions of each Option Agreement need not be the same.

        1.24    Option Exchange Program.    "Option Exchange Program" means a program whereby outstanding options are surrendered in exchange for options with a lower exercise price.

        1.25    Optionee.    "Optionee" means an Employee, Consultant or Independent Director granted an Option under this Plan.

        1.26    Participant    "Participant" means any Optionee and Restricted Stockholder who has received an Award under this Plan.

        1.27    Plan.    "Plan" means this 2000 Equity Participation Plan.

        1.28    Restricted Stock.    "Restricted Stock" means Common Stock awarded under this Plan.

        1.29    Restricted Stockholder.    "Restricted Stockholder" means an Employee, Independent Director or Consultant granted an award of Restricted Stock under this Plan.

        1.30    Restricted Stock Agreement.    "Restricted Stock Agreement" means a written agreement between the Company and the Restricted Stockholder evidencing the terms and restrictions applying to the award of the Restricted Stock. Each Restricted Stock Agreement is subject to the terms and conditions of the Plan. The terms and provisions of each Restricted Stock Agreement need not be the same.

        1.31    Rule 16b-3.    "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act.

        1.32    Section 16(b).    "Section 16(b)" means Section 16(b) of the Exchange Act.

        1.33    Termination of Consultancy.    "Termination of Consultancy" means the date on which the engagement of Optionee or Restricted Stockholder as a Consultant to the Company is terminated for any reason, with or without cause, including, but not limited to, resignation, discharge, death or retirement; but excluding teriminations where there is a simultaneous commencement of employment with the parent or a subsidiary of the Company. The Administrator shall determine the effect of all matters and questions relating to a Termination of Consultancy, including, but not limited to, the question of whether a Termination of Consultancy resulted from a discharge for cause for purposes of the Plan, and all questions of whether particular leaves of absence constitute Terminations of Consultancy. Notwithstanding any other provision of this Plan, the Company has an absolute and unrestricted right to terminate a Consultant's service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided in a separate writing between the Company and the Consultant.

        1.34    Termination of Directorship.    "Termination of Directorship" means the date on which an Optionee or Restricted Stockholder who is an Independent Director ceases to be a Director for any reason, including, but limited not to, a termination by resignation, failure to be elected, death or retirement. The Administrator shall determine the effect of all matters and questions relating to a Termination of Directorship for purposes of the Plan.

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        1.35    Termination of Employment.    "Termination of Employment" means the date on which the employee-employer relationship between the Optionee or Restricted Stockholder and the Company is terminated for any reason, including, but limited not to, a termination by resignation, discharge, death, disability or retirement; but excluding (a) terminations where there is a simultaneous reemployment or continuing employment of an Optionee or Restricted Stockholder by the parent or a subsidiary of the Company, (b) at the discretion of the Administrator, terminations which result in a temporary severance of the employee-employer relationship, and (c) at the discretion of the Administrator, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company with the former employee. The Administrator shall determine the effect of all matters and questions relating to a Termination of Employment for purposes of the Plan, including, but limited not to, the question of whether a Termination of Employment resulted from a discharge for cause, and all questions of whether particular leaves of absence constitute Terminations of Employment; provided that, with respect to Incentive Stock Options, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence or other change interrupts employment for the purposes of Section 422(a)(2) of the Code. Notwithstanding any other provision of this Plan, the Company has an absolute and unrestricted right to terminate an Employee's employment at any time for any reason whatsoever, with or without cause, except to the extent expressly provided in a separate writing between the Company and the Employee.

2.    Shares Subject to Plan

        2.1    Shares Subject to Plan.    The shares of stock subject to the grant of Options and the award of Restricted Stock under this Plan shall be shares of the Company's Common Stock. The aggregate number of shares of Common Stock which may be issued upon exercise of Options granted under this Plan and as awards of Restricted Stock under the Plan shall not exceed four hundred eighty-five thousand five hundred eighty-five (485,585) shares. The shares of Common Stock issuable upon exercise of Options or as awards of Restricted Stock may be either previously authorized but unissued shares, shares previously issued and reacquired by the Company, or treasury shares.

        2.2    Unexercised Options and Reacquired Restricted Stock.    If any Option granted under this Plan expires or is canceled without having been fully exercised, or if the Company reacquires any shares of Restricted Stock, the number of shares subject to the unexercised portion of such expired or canceled Option and such reacquired Restricted Stock may again be optioned, granted or awarded hereunder. Shares of Common Stock which are delivered by the Optionee or withheld by the Company upon the exercise of any Option in payment of the exercise price thereof, may again be optioned, granted or awarded hereunder. If any share of Restricted Stock is forfeited by the Restricted Stockholder or repurchased by the Company under this Plan hereof, such share may again be optioned, granted or awarded hereunder. Notwithstanding the provisions of this Section 2.2, no shares of Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.

3.    Grant of Options

        3.1    Eligibility.    Any Employee, Consultant or Independent Director selected by the Administrator shall be eligible to be granted an Option; provided that Incentive Stock Options may be granted only to Employees. Notwithstanding the foregoing, no Option shall be granted under this Plan to a Director except by resolution adopted by a majority of the Board without counting the vote of the interested Director or Directors.

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        3.2    Powers of the Administrator.

        3.2.1 The Administrator shall from time to time, in its absolute discretion:

        A.    Determine which Employees are key Employees and select the key Employees, Consultants or Independent Directors (including Employees, Consultants or Independent Directors who have previously received Options or other awards under this Plan) to be granted Options;

        B.    Determine the number of shares to be subject to Options granted to Employees, Consultants or Independent Directors;

        C.    Determine whether such Options are to be Incentive Stock Options or Nonqualified Stock Options; and

        D.    Determine the other terms and conditions of such Options consistent with this Plan.

        3.2.2 Upon the selection of a key Employee, Consultant or Independent Director to be granted an Option, the Administrator shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Administrator may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of an Option that the Employee, Consultant or Independent Director surrender for cancellation some or all of the unexercised Options or awards of Restricted Stock or other rights which have been previously granted to him or her under this Plan or otherwise. An Option, the grant of which is conditioned upon such surrender, may have an option price lower (or higher) than the exercise price of such surrendered Option or other award, may cover the same (or a lesser or greater) number of shares as such surrendered Option or other award, may contain such other terms as the Administrator deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, exercise period or any other term or condition of such surrendered Option or other award.

        3.2.3 An Incentive Stock Option granted under this Plan may not be modified by the Administrator to disqualify such Option from treatment as an "incentive stock option" under Section 422 of the Code without the consent of the Optionee.

4.    Terms of Options

        4.1    Option Agreement.    Each Option shall be evidenced by an Option Agreement, which shall be executed by the Optionee and an officer of the Company and which shall contain such terms and conditions as the Administrator shall determine consistent with this Plan. Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to comply with the provisions of Section 422 of the Code.

        4.2    Option Price.    The exercise price per share of the Option shall be set by the Administrator; provided that:

        4.2.1 In the case of Incentive Stock Options such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted; provided that in the case of an Incentive Stock Option granted to an individual who then owns (within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, such price shall be 110% of the Fair Market Value of a share of Common Stock on the date such Option is granted; and

        4.2.2 In the case of Nonqualified Stock Options, such price shall be not less than 85% of the Fair Market Value of a share of Common Stock on the date such Option is granted.

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        4.3    Option Term.    The term of an Option shall be set by the Administrator in its discretion; provided that in any event the term of an Option shall expire on the earliest of the following:

        4.3.1 Ten (10) years after the date on which the Option was granted; provided that the term of any Incentive Stock Option granted to an individual who then owns (within the meaning of Section 424(d) of the Code) more than ten percent (10%) of the total combined voting power of all classes of stock of the Company shall expire no later than five (5) years after the date on which the Option was granted; or

        4.3.2 Ninety (90) days after the date of the Optionee's Termination of Employment, Termination of Consultancy or Termination of Directorship for any reason other than death or disability; or

        4.3.3 One (1) year after the date of the Optionee's Termination of Employment, Termination of Consultancy or Termination of Directorship if such termination occurs due to the Optionee's death or disability.

        4.4    Option Vesting.

        4.4.1 The period during which the right to exercise an Option in whole or in part vests shall be set by the Administrator and the Administrator may determine that an Option may not be exercised in whole or in part for a specified period after it is granted; provided that each Option shall become exercisable no later than five (5) years after such Option is granted and at least twenty (20%) of each Option shall become exercisable on each anniversary of the date such Option is granted. At any time after the grant of an Option, the Administrator may, in its sole discretion, accelerate the period during which an Option vests.

        4.4.2 Notwithstanding anything in this Plan or in any Option Agreement to the contrary, no Option shall be exercisable prior to six (6) months after the date of grant of the Option.

        4.4.3 The Administrator may provide in any Option Agreement that the Option shall become fully vested on the occurrence of a Change in Control. The Administrator's inclusion of such a provision in one Option Agreement shall not obligate him to include such a provision in all Option Agreements.

        4.4.4 No portion of an Option which is unexercisable at the Optionee's Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the Option Agreement or in a resolution adopted following the grant of the Option.

        4.5    Limitation on Incentive Stock Options.    To the extent that the aggregate Fair Market Value of stock with respect to which Incentive Stock Options (including Options granted under both the Plan and all other incentive stock option plans of the Company) are exercisable for the first time by an Optionee during any calendar year exceeds $100,000, such Options shall be treated as Nonqualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 4.5, the Fair Market Value of stock shall be determined as of the time the Option with respect to such stock is granted.

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        4.6    Consideration.    In consideration of the granting of an Option, the Optionee shall agree to remain in the employ of or to consult for or to serve as an Independent Director of, as applicable, the Company for a period of at least one (1) year (or such shorter period as may be fixed by the Administrator following grant of the Option) after the Option is granted (or until the next annual meeting of stockholders of the Company, in the case of an Independent Director). Nothing in this Plan or any Option Agreement shall confer upon any Optionee any right to continue in the employ of, as a Consultant for, or as a Director of the Company, or shall interfere with or restrict in any way the rights of the Company to discharge any Optionee at any time for any reason whatsoever, with or without cause.

        4.7    Repurchase.    In the discretion of the Administrator, the Option Agreement may provide that the Company shall have the right to repurchase the Common Stock issued upon the exercise of the Option upon the Optionee's Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable.

5.    Exercise of Options

        5.1    Partial Exercise.    An exercisable Option may be exercised in whole or in part; provided that an Option shall not be exercised with respect to fractional shares and the Administrator may require that a partial exercise be with respect to a minimum number of shares.

        5.2    Manner of Exercise.    All or a portion of an exercisable Option shall be deemed exercised upon the Optionee's delivery of all of the following to the Secretary of the Company:

        5.2.1 A written notice complying with the rules established by the Administrator stating that the Option is exercised. The notice shall be signed by the Optionee or other person then entitled to exercise the Option;

        5.2.2 Such representations and documents as the Administrator deems necessary or advisable to effect compliance with the Applicable Laws. The Administrator may take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to transfer agents and registrars;

        5.2.3 In the event that the Option shall be exercised by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option; and

        5.2.4 Full payment of the exercise price for the shares with respect to which the Option is exercised.

        5.3    Payment of Exercise Price.    The Administrator may:

        5.3.1 Allow a delay in payment of the exercise price up to thirty (30) days from the date the Option is exercised; or

        5.3.2 Allow payment of the exercise price, in whole or in part, through any of the following:

        A.    The delivery of shares of Common Stock owned by the Optionee and with a Fair Market Value on the date of delivery equal to the applicable exercise price of the Option;

        B.    The surrender of shares of Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of exercise of the Option equal to the applicable exercise price of the Option;

        C.    The delivery of a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Administrator; and

        D.    Through any combination of the foregoing types of consideration.

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In the case of a promissory note, the Administrator may prescribe the form of such note and the security to be given for such note. The Option may not be exercised by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law.

        5.4    Conditions to Issuance of Stock Certificates.    The Company shall not be required to issue or deliver any certificate or certificates for shares of stock issuable upon the exercise of any Option prior to fulfillment of all of the following conditions:

        5.4.1 The admission of such shares to listing on all stock exchanges on which such class of stock is then listed;

        5.4.2 The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Administrator deems necessary or advisable;

        5.4.3 The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall determine to be necessary or advisable;

        5.4.4 The lapse of such reasonable period of time following the exercise of the Option as the Administrator may establish from time to time for reasons of administrative convenience; and

        5.4.5 The receipt by the Company of full payment of the exercise price for such shares, including payment of any applicable withholding tax.

        5.5    Rights as Stockholder.    An Optionee shall not be, nor have any of the rights or privileges of, a stockholder of the Company with respect to any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders.

        5.6    Ownership and Transfer Restrictions.    The Administrator (or Board, in the case of Options granted to Independent Directors) may impose such restrictions on the ownership and transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the Option Agreement and may be referred to on the certificates evidencing such shares. The restrictions, if any, imposed by the Administrator or the Board under this Section need not be identical for all Options and the imposition of any restrictions with respect to one Option shall not require the imposition of the same or any other restrictions with respect to any other Option. The Administrator may require the Employee to give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option within (a) two (2) years from the date of granting such Option to such Employee or (b) one (1) year after the transfer of such shares to such Employee. The Administrator may direct that the certificates evidencing shares acquired by exercise of an Option refer to such requirement to give prompt notice of disposition.

6.    Award of Restricted Stock.

        6.1    Award of Restricted Stock.

        6.1.1 The Administrator shall from time to time, in its absolute discretion:

        A.    Determine which Employees are key Employees and select the key Employees, Consultants or Independent Directors (including Employees, Consultants or Independent Directors who have previously received other awards under this Plan) to be awarded Restricted Stock;

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        B.    Determine the purchase price, if any, payable for the Restricted Stock;

        C.    Determine the period, if any, over which the Restricted Stockholder's interest in the Restricted Stock shall vest; provided that such period shall not be longer than five (5) years and at least twenty percent (20%) of the interest shall vest on each anniversary of the date of issuance of the Restricted Stock; provided further that the Administrator may provide in any Restricted Stock Agreement that the Restricted Stock shall be fully vested on the occurrence of a Change in Control; and

        D.    Determine the other terms and conditions, consistent with this Plan, applicable to the award of the Restricted Stock.

        6.1.2 The Administrator shall establish the purchase price, if any, and the form of payment of the purchase price for the Restricted Stock; provided that such purchase price shall be no less than par value.

        6.1.3 Upon the selection of a key Employee, Consultant or Independent Director to be awarded Restricted Stock, the Administrator shall instruct the Secretary of the Company to issue such Restricted Stock and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate.

        6.2    Restricted Stock Agreement.    Restricted Stock shall be issued only pursuant to a Restricted Stock Agreement, which shall be executed by the selected key Employee, Consultant or Independent Director and an officer of the Company and which shall contain such terms and conditions as the Administrator shall determine consistent with this Plan.

        6.3    Continued Services.    As consideration for the issuance of the Restricted Stock, in addition to payment of any purchase price, the Restricted Stockholder shall agree to remain in the employ of, or to consult for or serve as a Director of the Company for a period of at least one (1) year (or such shorter period as may be fixed by the Administrator) after the Restricted Stock is issued. Nothing in this Plan or in any Restricted Stock Agreement shall confer on any Restricted Stockholder any right to continue in the employ of, or as a Consultant for or as a Director of the Company or shall interfere with or restrict in any way the rights of the Company to discharge any Restricted Stockholder at any time for any reason whatsoever, with or without cause.

        6.4    Rights as Stockholders.    Upon delivery of the shares of Restricted Stock to the Restricted Stockholder or to the escrow holder pursuant to Section 6.9 hereof, the Restricted Stockholder shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said shares, subject to the restrictions in the Restricted Stock Agreement, including the right to receive all dividends and other distributions (other than stock dividends, which shall be paid to the escrow holder for the benefit of the Restricted Stockholder) paid or made with respect to the Restricted Stock.

        6.5    Restriction on Transfer.    Notwithstanding anything in this Plan or any Restricted Stock Agreement to the contrary, no Restricted Stockholders may sell or otherwise transfer, whether or not for value, any of the Restricted Stock prior to six (6) months after the date of the award of the Restricted Stock.

        6.6    Restriction.    All shares of Restricted Stock issued under this Plan (including any shares of Common Stock and other securities issued with respect to the shares of Restricted Stock as a result of stock dividends, stock splits or similar changes in the capital structure of the Company) shall be subject to such restrictions as the Administrator shall provide, which restrictions may include, without limitation, restrictions concerning voting rights, transferability of the Restricted Stock and restrictions based on duration of employment with the Company, Company performance and individual performance; provided that the Administrator may, on such terms and conditions as it may determine to be appropriate, remove any or all of such restrictions. Restricted Stock may not be sold or

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encumbered until all applicable restrictions have terminated or expire. The restrictions, if any, imposed by the Administrator or the Board under this Section need not be identical for all Restricted Stock and the imposition of any restrictions with respect to any Restricted Stock shall not require the imposition of the same or any other restrictions with respect to any other Restricted Stock.

        6.7    Repurchase of Unvested Restricted Stock.    Each Restricted Stock Agreement shall provide that the Company shall have the right to repurchase from the Restricted Stockholder the unvested Restricted Stock upon a Termination of Employment, Termination of Directorship or Termination of Consultancy as applicable, at a cash price per share equal to the purchase price paid by the Restricted Stockholder for such Restricted Stock; provided that provision may be made that no such right of repurchase shall exist in the event of a Termination of Employment, Termination of Directorship or Termination of Consultancy without cause or following a Change In Control.

        6.8    Repurchase of Vested Restricted Stock.    In the discretion of the Administrator, the Restricted Stock Agreement may provide that the Company shall have the right to repurchase the vested Restricted Stock upon a Termination of Employment, Termination of Directorship or Termination of Consultancy as applicable, at a cash price per share equal to the then Fair Market Value of the Common Stock; provided that provision may be made that no such right of repurchase shall exist in the event of a Termination of Employment, Termination of Directorship or Termination of Consultancy without cause or following a Change In Control.

        6.9    Escrow.    The Secretary of the Company or such other escrow holder as the Administrator may appoint shall retain physical custody of each certificate representing Restricted Stock until all of the restrictions imposed on the Restricted Stock expire or have been removed.

        6.10    Legend.    The Administrator shall cause a legend or legends to be placed on certificates representing shares of Restricted Stock that are subject to restrictions under Restricted Stock Agreements, which legend or legends shall make appropriate reference to the applicable restrictions.

7.    Administration.

        7.1    Procedure.    The Plan shall be administered by (a) the Board or (b) a Committee designated by the Board, which committee shall be constituted to satisfy Applicable Laws, including any "independent administration" requirements under Section 16(b). Once appointed, such Committee shall serve in its designated capacity until otherwise directed by the Board. The Board may increase the size of the Committee and may appoint additional members, remove members (with or without cause) and substitute new members, fill vacancies (however caused), and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by Applicable Laws.

        7.2    Powers of the Administrator.    Subject to the provisions of the Plan, the Administrator shall have the authority, in its discretion, to:

        7.2.1 Select the Employees, Consultants and Directors to whom Options and Restricted Stock may be granted or awarded hereunder;

        7.2.2 Determine whether and to what extent Options and Restricted Stock are granted hereunder;

        7.2.3 Determine the number of shares of Common Stock to be covered by Options and Restricted Stock granted hereunder;

        7.2.4 Determine the Fair Market Value of the Common Stock in accordance with Section 1.17 hereof;

        7.2.5 Approve forms of the Option Agreements and the Restricted Stock Agreements, which Agreements need not be identical;

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        7.2.6 Determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder, including, but not limited to, the exercise price, the time or times when Options or Restricted Stocks may be exercised or become vested (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Restricted Stock or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

        7.2.7 Reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted;

        7.2.8 Construe and interpret the terms of the Plan and awards granted under the Plan;

        7.2.9 Prescribe, amend and rescind rules and regulations relating to the Plan;

        7.2.10 Modify or amend each Option or Restricted Stock;

        7.2.11 Authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or Restricted Stock previously granted by the Administrator;

        7.2.12 Institute an Option Exchange Program;

        7.2.13 Determine the terms and restrictions applicable to Options and any Restricted Stock; and

        7.2.14 Make all other determinations deemed necessary or advisable for administering the Plan.

        7.3    Cancellation of Award    The Administrator may include in any Award Agreement a provision requiring that the Participant return, or (if the Participant has not received such economic value) forfeit, to the Company the economic value of any Award which is realized or obtained, or realizable or obtainable, (measured at the date of exercise) by the Participant at any time during the period beginning on the date which is six (6) months prior to the date of the Termination of Consultancy, Termination of Directorship or Termination of Employment, as appropriate, and ending six (6) months after the date of such Termination of Consultancy, Termination of Directorship or Termination of Employment. The Administrator shall provide in any such Award Agreement provision that the Company may enforce its right to recover such economic value from the Participant at any time within two (2) years after the date of the Termination of Consultancy, Termination of Directorship or Termination of Employment and that the Participant shall pay to the Company the amount of such economic value in such manner and on such terms and conditions as the Company may require, and the Company shall be entitled to set-off the amount of any economic value against any amount owed to the Participant by the Company.

        7.4    Effect of Administrator's Decision.    The Administrator's decisions, determinations and interpretations shall be final and binding on all Optionees, Restricted Stockholders and any other holders of Options or Restricted Stock.

        7.5    Committee Procedure.    If a Committee of the Board acts as the Administrator, the Administrator shall act pursuant to a majority vote, or the written consent of a majority of its members, and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the provisions of the Plan and the directions of the Board, the Administrator may establish and follow such rules and regulations for the conduct of its business as it may deem advisable.

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        7.6    Professional Assistance; Good Faith Actions.    The Administrator may, with the approval of the Board, employ and rely on the advice of attorneys, consultants, accountants, appraisers, brokers, or other persons. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon all Optionees, Restricted Stockholders, the Company and all other interested persons. No member of the Administrator or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan, Options or Restricted Stock granted or awarded under this Plan, or any Option Agreement or Restricted Stock Agreement, and the Administrator or all members thereof shall be fully protected by the Company in respect of any such action, determination or interpretation.

        7.7    Indemnification.    In addition to any other rights of indemnification they may have, the Administrator and the members of the Administrator shall be indemnified by the Company against reasonable expenses, including attorneys' fees and costs, actually incurred in connection with the defense of any action, suit, or proceeding, or in connection with any appeal thereof, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, any Option or Restricted Stock granted or awarded thereunder, or any Option Agreement or Restricted Stock Agreement, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any action, suit, or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit, or proceeding that such member is liable for gross negligence or willful misconduct in the performance of his or her duties. The indemnification provided in this Section shall be available only if, within sixty (60) days after institution of any such action, suit, or proceeding, the Administrator or the member thereof seeking indemnification shall in writing offer the Company the opportunity, at its own expense, to handle and defend such action, suit or proceeding.

8.    Transferabiltiy of Options.

        8.1    Restriction on Transfer of Options and Restricted Stock.    Except as specifically set forth in Section 9.2 hereof, neither an Option nor any Restricted Stock subject to any restrictions may be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution or pursuant to a qualified domestic relations order as defined in the Code and Title I of the Employee Retirement Income Security Act, or the rules thereunder. An Option may be exercised, during the lifetime of the Optionee, only by the Optionee.

        8.2    Limited Transferability.    A Stock Option Agreement may provide that an Optionee may transfer all or a portion of any Non-Qualified Option or Non-Qualified Reload Option in accordance with provisions of this Section 9.2. If a Stock Option Agreement permits the transfer of any Non-Qualified Option or Non-Qualified Reload Option, any transfer that does not comply with all of the provisions of this Section 9.2 and the Stock Option Agreement shall be null and void ab initio. The provisions of the Stock Option Agreements dealing with the transferability of the Options need not be identical for all Options and the provision for transferability with respect to one Option shall not require the provision for transferability with respect to any other Option. (For purposes of this Section 9.2, Non-Qualified Options and Non-Qualified Reload Options which may be transferred are referred to as "Transferable Option".)

        8.2.1    Permitted Transferees.    A Transferable Option may be transferred by the Optionee only to one or more of the following: (a) the Optionee's spouse, parents and lineal descendants, including adopted children (the "Immediate Family Members"); (b) a trust established by the Optionee and with respect to which all beneficial interests are held by one or more of the Optionee, the Immediate Family Members, and a tax-exempt charitable organization which has only a contingent residual interest in the trust; (c) a partnership or limited liability company established by the Optionee and in which all beneficial interests are held by one or more of the Optionee and the Immediate Family Members; (d) a tax-exempt educational, religious or charitable organization, as those terms are defined in Section 501(c)(3) of the Code; and (e) such

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other persons and entities as the Company may specifically approve in writing after written notice from the Optionee. The Company may require as a condition to the transfer of any Transferable Option under this Section 9.2 that the transferee provide to the Company reasonable evidence that the proposed transferee is described in one of the foregoing clauses.

        8.2.2    Permitted Transfers.    Any transfer of a Transferable Option under this Section 9.2 must be either a Donative Transfer, a transfer to a partnership or limited liability company described in clause (c) of Section 9.2.1 above, pursuant to which the Optionee receives only his or her interest in the partnership or limited liability company, or a transfer specifically approved in writing by the Company after written notice from the Optionee.

        8.2.3    Minimum Transfer.    Any transfer of a Transferable Option or a Reload Option must be with respect to not less than one hundred (100) shares of Optioned Stock and may be made only in whole number multiples of one hundred (100) shares of Optioned Stock.

        8.2.4    Notice to the Company.    The Optionee shall give the Company at least ten (10) days prior written notice of any proposed transfer of a Transferable Option pursuant to this Section 9.2 and shall include with such notice:

        A.    The name and address of the proposed transferee and a statement of the basis on which the proposed transferee is a permitted transferee under Section 9.2.1 hereof; and

        B.    The proposed transferee's written agreement to accept the Transferable Option and any shares of Common Stock acquired on exercise of the Transferable Option subject to all of the terms and conditions of this Plan and the applicable Stock Option Agreement, including the provisions dealing with the termination of the Transferable Option on the death or disability of the Optionee or the termination of the Optionee's employment with the Company or any of its Subsidiaries.

        8.2.5    No Further Transfer.    Notwithstanding anything in this Plan or any Stock Option Agreement to the contrary, a transferee of any Transferable Option shall not have the right to further transfer all or any portion of the Transferable Option, other than (a) by will or the laws of descent and distribution, or (b), if the transferee is a trust, pursuant to the terms of the trust agreement by reason of the death of any settlor.

        8.2.6    No Transfer of Incentive Options.    Notwithstanding anything in this Plan or any Stock Option Agreement to the contrary, an Optionee may not transfer any Incentive Option or Reload Option granted with respect to an Incentive Option other than by will or the laws of descent and distribution.

        8.2.7    Further Acts.    The Company may require as a condition to the transfer of any Transferable Option such additional information and agreements from the Optionee and the proposed transferee as the Company may deem necessary or beneficial for purposes of complying with this Section or any applicable federal or state law, rule or regulation.

        8.2.8    Disclaimer.    The Company's acceptance of any transfer of a Transferable Option shall not be considered legal or tax advice to the Optionee or the proposed transferee as to their compliance with any applicable law, rule or regulation or the legal or tax consequences of such transfer or the subsequent exercise of the Transferable Option or the sale or exchange of any of the shares of Common Stock acquired on exercise of the Transferable Option.

9.    Changes in Capital Stock.

        9.1    Changes in Capitalization.    Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, the number of shares of Restricted Stock outstanding, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options or Restricted Stock have been

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granted or awarded, as well as the price per share of Common Stock covered by each such outstanding Option or outstanding Restricted Stock, shall be appropriately adjusted in the event of a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or similar change in the capital structure of the Company. Such adjustment shall be made by the Administrator, whose determination shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or outstanding shares of Restricted Stock right.

        9.2    Dissolution or Liquidation.    In the event of the proposed dissolution or liquidation of the Company, to the extent that any outstanding Option or Restricted Stock has not been previously exercised or become vested, the Option shall terminate and the Company shall have the right to repurchase the unvested Restricted Stock immediately prior to the consummation of such proposed action. The Administrator may, in its sole discretion, (a) declare that any Option shall terminate as of a date fixed by the Administrator and may give each Optionee the right to exercise the Option as to all or any part of the shares covered by the Option, including shares as to which the Option would not otherwise be exercisable, and (b) waive any vesting restrictions otherwise applicable to the Restricted Stock. Any declaration or waiver made by the Administrator under this Section shall be effective with respect to any Optionee or Restricted Stockholder only if it is made in writing and written notice thereof is delivered to the Optionee or Restricted Stockholder.

        9.3    Merger or Asset Sale.    In the event of the consummation of a merger or consolidation of the Company with or into another corporation (as a result of which the company is not the surviving corporation) or the sale of all or substantially all of the assets of the Company (other than the sale or transfer of the Company's assets to one or more majority owned direct or indirect subsidiaries of the Company), all outstanding Options shall terminate and the Company shall have the right to repurchase all unvested Restricted Stock unless the surviving corporation or a parent or subsidiary of the surviving corporation assumes such Options and Restricted Stock or an equivalent option or stock right is substituted therefor by the surviving corporation or a parent or subsidiary of the surviving corporation. In the event that the surviving corporation refuses to assume or substitute for the Options or Restricted Stock rights, (a) the Optionee shall have the right to exercise the Option as to all of the shares covered by the Option, including shares as to which it would not otherwise be exercisable and (b) any restrictions applicable to the Restricted Stock shall be waived. If an Option is exercisable in lieu of assumption or substitution by the surviving corporation, the Administrator shall notify the Optionee thereof and the Option shall be fully exercisable for a period of fifteen (15) days from the date of such notice, or such longer period as the Administrator may specify, and the unexercised portion of the Option shall terminate upon the expiration of such period. Notwithstanding anything in this Plan to the contrary, any exercise of an Option after the Administrator's delivery of any notice contemplated in the preceding sentence, shall be effective immediately prior to the closing of the transaction described in the first sentence of this Section. For the purposes of this Section, the Option or Restricted Stock shall be considered assumed if, following the merger or sale of assets, the Option or Restricted Stock confers the right to purchase or receive the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided that if such consideration received in the merger or sale of assets was not solely common stock of the surviving corporation or its parent, the Administrator may, with the consent of the surviving corporation, provide for the consideration to be received upon the exercise of the Option or Restricted Stock right to be solely common stock of the surviving corporation or its parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets.

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        9.4    Abandonment of Transaction.    If any of the transactions described in any of Sections 10.1, 10.2 and 10.3 is abandoned by the Company or otherwise fails to close for any reason, (a) any action taken by the Administrator and any Optionee or Restricted Stockholder shall be deemed void ab initio, (b) any acceleration of the exercisability of any Option or waiver of restrictions on any Restricted Stock or exercise of any Option shall be deemed cancelled, and (c) the Options and Restricted Stock shall have the same status, exercisability and restrictions as they would have had if the Administrator had not provided any notice of any of the transactions described in Sections 10.1, 10.2 and 10.3 above.

10.    Liability of Company.

        10.1    Inability to Obtain Authority.    The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained.

        10.2    Grants Exceeding Allotted Shares.    If the number of shares of Common Stock covered by an Option or Restricted Stock exceeds, as of the date of grant, the number of shares of Common Stock which may be issued under the Plan without additional stockholder approval, such Option or Restricted Stock shall be void with respect to such excess number of shares of Common stock, unless stockholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is thereafter obtained.

11.    Amendment and Termination of the Plan

        11.1    Amendment and Termination.    The Board may at any time amend, alter, suspend or terminate the Plan.

        11.2    Stockholder Approval.    The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Rule 16b-3 or with Section 422 of the Code (or any successor rule or statute or other Applicable Law, including the requirements of any exchange or quotation system on which the Common Stock is listed or quoted). Such stockholder approval, if required, shall be obtained in such a manner and to such a degree as is required by the Applicable Law.

        11.3    Effect of Amendment or Termination.    No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee or Restricted Stockholder, unless mutually agreed otherwise between the Optionee or the Restricted Stockholder and the Administrator, which agreement must be in writing and signed by the Optionee or the Restricted Stockholder and the Company.

12.    Miscellaneous Provisions.

        12.1    Disclaimer.    Nothing in this Plan or any Option Agreement or Restricted Stock Agreement, nor any action taken by the Company, the Administrator, or any member, officer, director or employee of either the Company or the Administrator, shall be, or shall be deemed to be, legal or tax advice to any Optionee or Restricted Stockholder with respect to any matter, including, but not limited to, the application of, or the Optionee's or the Restricted Stockholder's compliance with, any of the provisions of Section 16(b), Rule 16b-3 or any other Rule promulgated under Section 16(b). Each Optionee and Restricted Stockholder shall be responsible for obtaining such legal and tax advice as the Optionee or Restricted Stockholder deems necessary in connection with their acceptance and exercise of any Option or Restricted Stock granted or awarded under this Plan.

        12.2    Tax Withholding.    The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Optionee or Restricted Stockholder of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting or exercise of any Option or Restricted Stock. The Administrator may allow an Optionee or Restricted Stockholder to

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elect to satisfy such withholding obligation by having the Company withhold shares of Common Stock (or allow the return of shares of Common Stock) having a Fair Market Value equal to the sums required to be withheld.

        12.3    Effect of Plan Upon Options and Compensation Plans.    The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company. Nothing in this Plan shall be construed to limit the right of the Company to (a) establish any other forms of incentives or compensation for Employees, Consultants or Directors or (b) grant or assume options or other rights otherwise than under this Plan in connection with any corporate purpose including, but not limited to, the grant or assumption of options in connection with the acquisition of the business, stock or assets of any corporation, partnership, firm or association.

        12.4    Compliance with Laws.    This Plan, the granting and exercisability of Options granted under this Plan, and the award and vesting of Restricted Stock awarded under this Plan and the issuance and delivery of shares of Common Stock are subject to compliance with all Applicable Laws (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan, the Option Agreement and Restricted Stock Agreements, Options or Restricted Stock granted or awarded under this Plan shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

        12.5    Titles.    Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan.

        12.6    Governing Law.    This Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of California without regard to conflicts of laws thereof.

        12.7    Reservation of Shares.    At all times during the term of this Plan, the Company shall reserve and keep available such number of shares of Common Stock and other securities as shall be sufficient to satisfy the requirements of the Plan.

13.    Shareholder Approval and Term of Plan.    The term of this Plan shall begin as July 1st, 2000, and unless sooner terminated by the Board in its sole and absolute discretion, the Plan shall expire on December 31, 2009. The Plan shall be submitted for approval by the shareholders of the Company, which approval must occur on or prior to July 1st, 2001. In the event such shareholder approval is not obtained on or before July 1st, 2001, this Plan shall continue in full force and effect but shall permit the grant of only Nonqualified Stock Options and any Incentive Stock Options granted on or before July 1st, 2001, shall remain outstanding, but automatically shall be deemed to be Nonqualified Stock Options.

        I hereby certify that the foregoing Plan, revised in April of 2002, was duly adopted by the Board of Directors of Fastclick.com, Inc. on May 1st, 2002.

EXECUTED on this                           day of                        , 2004

By

Kurt Johnson
Secretary

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Exhibit 10.8

2000 EQUITY PARTICIPATION PLAN (revised 9/04)

EX-10.9

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Exhibit 10.9

SUBLEASE

        THIS SUBLEASE (the "Sublease") is dated for references purposes only as of November 25, 2002, and is entered by and between OPENWAVE SYSTEMS, INC., a Delaware corporation ("Sublessor"), and FASTCLICK, INC., a California corporation ("Sublessee"). Sublessor and Sublessee hereby agree as follows:

        1.     Recitals:    This Sublease is made with reference to the fact that Olive Court LP., a California limited partnership and successor-in-interest to Olive Court, a dba of Cerdoc LP, a California limited partnership, and Universal Court, Ltd, a California limited partnership ("Master Lessor"), as Lessor, and Sublessor's predecessor-in-interest, Software.com, Inc., a Delaware corporation, as Lessee, are parties to that certain Standard Industrial/Commercial Single-Tenant Lease—Net, dated as of May 16, 2000 ("Master Lease"), with respect to approximately 13,906 rentable square feet ("Premises") comprising that certain building commonly known as 512 East Gutierrez Street, Santa Barbara, California ("Building"), as more particularly described in the Lease. A copy of the Master Lease is attached hereto as Exhibit A and incorporated by reference herein.

        2.     Subleased Premises:    Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor, the entire Premises consisting of approximately 13,906 rentable square feet ("Subleased Premises"). The Subleased Premises are more particularly described in the Master Lease.

        3.     Term:

        A.    Term.    The term of this Sublease ("Term") shall be for that period commencing on the date on which all of the Sublessee Conditions (as defined in Paragraph 25 below) have been deemed satisfied or waived ("Commencement Date"), and ending on April 29, 2006 ("Expiration Date"), unless this Sublease is sooner terminated pursuant to its terms, or the Master Lease is sooner terminated pursuant to its terms. If Sublessor is unable to deliver possession of the Subleased Premises to Sublessee on or before the Commencement Date for any reason whatsoever, Sublessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Sublease or the obligations of Sublessee hereunder, or extend the Term, but in such case Sublessee shall not be obligated to pay Rent (as defined in Paragraph 4.B. below) or perform any other obligation of Sublessee hereunder until Sublessor delivers possession of the Subleased Premises to Sublessee in the required condition. Sublessor and Sublessee promptly shall execute a Commencement Date memorandum establishing the Commencement Date, the Rent Commencement Date (as defined below) and the Expiration Date promptly after the Commencement Date has been established. Sublessee's failure to execute the Commencement Date memorandum shall not affect the validity of this Sublease or the dates set forth therein.

        B.    No Option to Extend.    The parties acknowledge that Sublessee has no option to extend the Term of this Sublease.

        C.    Options to Terminate.    Sublessee shall have the right to terminate this Sublease in event of the failure of any or all of the Sublessee Conditions (as defined in Paragraph 25 below), by providing written notice to Sublessor of such election ("Termination Notice") within thirty (30) days ("Termination Date") after the later of the dates upon which Sublessor and Sublessee have executed this Sublease ("Execution Date"). If prior to the Termination Date Sublessee timely delivers to Sublessor any Termination Notice permitted or required by this Sublease to be exercised on or before the Termination Date, this Sublease shall terminate as of the date of the Termination Notice, neither party shall have any further rights or obligations hereunder and Sublessor shall return to Sublessee all sums paid by Sublessee to Sublessor in connection with Sublessee's execution hereof. The return of all sums paid by Sublessee to Sublessor shall be

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Sublessee's sole and exclusive remedy in the event of a termination pursuant to the foregoing sentence. It is agreed that time is of the essence with respect to the exercise of any option to terminate permitted or required by this Sublease to be exercised on or before the Termination Date. Therefore, if Sublessee fails to deliver to Sublessor any Termination Notice permitted or required by this Sublease to be exercised on or before the Termination Date (including any Termination Notice required in connection with the Sublessee Conditions) by 5:00 p.m. Pacific Time on the Termination Date, Sublessee's options to terminate shall be null and void and of no further force or effect, and Sublessee shall have no further right to terminate this Sublease, except as otherwise expressly set forth in this Sublease. The options to terminate which are permitted or required by this Sublease to be exercised on or before the Termination Date pursuant to this Paragraph 3.C. are personal to FastClick, Inc. and may not be assigned.

        D.    Early Entry.    From and after the Execution Date and prior to the Commencement Date, at reasonable times and upon reasonable prior notice Sublessor shall escort Sublessee, its vendors, consultants, contractors and agents through the Subleased Premises for Sublessee's space planning purposes.

        4.     Rent:

        A.    Monthly Base Rent.    Subject to the provisions of Paragraph 4.D. below, commencing on the Rent Commencement Date and continuing on the first day of each month thereafter during the Term, Sublessee shall pay to Sublessor monthly base rent ("Monthly Base Rent") for the Subleased Premises in equal monthly installments as set forth below:

Months	Monthly Base Rent
1-12	$1.15 per rentable square foot per month, or $15,991.90 per month
13-24	$1.20 per rentable square foot per month, or $16,687.20 per month
25-36	$1.25 per rentable square foot per month, or $17,382.50 per month
37-Expiration Date	$1.30 per rentable square foot per month, $18,077.80 per month

As used herein, "month" shall mean a period beginning on the first (1st) day of a calendar month and ending on the last day of that month. Monthly Base Rent shall be paid on or before the first (1st) day of each month. Rent (as defined in Paragraph 4.B. below) for any period during the Term hereof which is for less than one month of the Term shall be a prorata portion of the monthly installment based on a 30-day month. Subject to the provisions of Paragraph 4.B. below, Rent shall be payable without notice or demand and without any deduction, offset or abatement, in lawful money of the United States of America. Rent shall be paid directly to Sublessor at Openwave Systems, Inc., 1400 Seaport Boulevard, Redwood City, California 94063, Attn: Real Estate Department, or such other address as may be designated in writing by Sublessor.

        B.    Additional Rent.    In addition to Monthly Base Rent, Sublessee shall pay to Sublessor, at the time that Sublessee pays Monthly Base Rent or, if so notified by Sublessor in writing, within twenty (20) days after receipt of Sublessor's invoice therefor, one hundred percent (100%) ("Sublessee's Percentage Share") of "Lessee's Share" of "Direct Expenses", including, without limitation, "Operating Expenses" and "Tax Expenses" (all as defined in Section 56.2 of the Master Lease), payable by Sublessor to Master Lessor with respect to the Subleased Premises. Sublessee's Percentage Share is determined by dividing the square footage of the Subleased Premises by the square footage of the Premises. Sublessee also shall be responsible for payment of all other "Additional Rent", as defined in Section 56 of the Master Lease, imposed by the Master Lease and applicable to the Subleased Premises, including, without limitation, insurance pursuant to Section 8.1 of the Master Lease, and Real Property Taxes pursuant to Section 10.2(a) and Section 56.2.4 of the Master Lease. Sublessee also shall pay directly to the provider its own

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utilities, as set forth in Section 11 of the Master Lease, to the extent not provided to the Subleased Premises by Master Lessor, as well as its own telephone, telecommunications and data communications charges. All monies required to be paid by Sublessee under this Sublease (except for Monthly Base Rent, as defined in Paragraph 4.A.), including, without limitation, any amounts payable by Sublessor to Master Lessor under the Master Lease with respect to the Subleased Premises, shall be deemed additional rent ("Additional Rent"). Sublessee and Sublessor agree that, except as expressly set forth herein to the contrary, as a material part of the consideration given by Sublessee to Sublessor for this Sublease, Sublessee shall pay all costs, expenses, taxes, insurance, maintenance and other charges of every kind and nature arising in connection with the Master Lease and relative to the Subleased Premises during the Term which are payable by Sublessor as Lessee under the Master Lease, such that Sublessor shall receive, as net consideration for this Sublease, full reimbursement thereof; provided that notwithstanding anything in this Section to the contrary, in no event shall Sublessee have any obligation to pay or reimburse Sublessor for any of the following: (a) any costs or expenses incurred by Sublessor in connection with its performance of its obligations under this Sublease; (b) any costs or expenses incurred by Sublessor in connection with its negotiation, preparation, execution or performance of the First Amendment (as defined in Paragraph 32 below); (c) the Termination Fee described in Paragraph 60 of Addendum A to the Master Lease or Section 2 of' the First Amendment; (d) the sale and transfer of the Personal Property by Sublessor to Master Lessor under Section 3 of the Master Lease; or (e) any differential between the amount of the Base Rent payable by Sublessor, as Lessee, to Master Lessor under the Master Lease and the amount of the Monthly Base Rent payable by Sublessee to Sublessor under this Sublease. Monthly Base Rent and Additional Rent hereinafter collectively shall be referred to as "Rent."

        C.    Payment of First Month's Rent.    Upon Sublessee's execution of this Sublease, Sublessee shall pay to Sublessor the sum of $15,991.90, which sum shall constitute Monthly Base Rent for the first full month of the Term following the Rent Abatement Period (defined below).

        D.    Abatement of Rent.

        (i)    Rent Abatement Period.    Notwithstanding anything to the contrary contained in this Sublease, Sublessee shall not be obligated to pay Rent under this Sublease for that period commencing on the Commencement Date and expiring on January 31, 2003 ("Rent Abatement Period"). The "Rent Commencement Date" shall be February 1, 2003.

        (ii)   Lease of Adjacent Space.    Also notwithstanding anything to the contrary contained in this Paragraph 4, if Sublessee leases the Adjacent Space (as defined in Paragraph 30 below) pursuant to a direct lease with Master Lessor, Sublessor shall provide to Sublessee the Allowance described in Paragraph 14.B. below. The Allowance shall be in the form of a credit against Rent due under this Sublease, which credit shall commence as of February 1, 2003 and shall continue against Rent due for each month or partial month thereafter until the $50,000.00 has been credited in full. From and after the Commencement Date and continuing for twelve (12) calendar months thereafter ("Reimbursement Period"), Sublessee shall deliver to Sublessor Sublessee's invoices for costs incurred solely in constructing the Adjacent Space Improvements (as defined in Paragraph 14.B. below). If, by the last day of the Reimbursement Peried, Sublessee does not incur costs of $50,000.00 in constructing the Adjacent Space Improvements, Sublessee shall pay to Sublessor an amount equal to the difference between $50,000.00 and the total amount of costs incurred by Sublessee in constructing the Adjacent Space Improvements during the Reimbursement Period. Sublessee shall pay Sublessor any amount payable under the preceding sentence within twenty (20) days after the last day of the Reimbursement Period. In no event shall Sublessee be entitled to a credit against the Allowance for costs incurred after the last day of the Reimbursement Period.

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        5.     Security Deposit:    Upon the execution of this Sublease by Sublessee, Sublessee shall deposit with Sublessor, in cash, the sum of $18,077.80 as security for the performance by Sublessee of the terms and conditions of this Sublease ("Security Deposit"). If Sublessee fails to pay Rent or other charges due hereunder or otherwise defaults with respect to any provision of this Sublease, then Sublessor may, but shall not be required to, draw upon, use, apply or retain all or any portion of the Security Deposit for the payment of any Rent or other charge in default, for the payment of any other sum which Sublessor has become obligated to pay by reason of Sublessee's default, or to compensate Sublessor for any loss or damage which Sublessor has suffered thereby. The Security Deposit is not an advance payment of Rent or a measure or limit of Sublessor's damages upon Sublessee's default under this Sublease, and Sublessor shall not be required to keep the Security Deposit separate from Sublessor's general funds or to pay interest therein. Sublessor shall not be deemed a trustee of the Security Deposit. The use, application or retention of the Security Deposit, or any portion thereof, by Sublessor shall not prevent Sublessor from exercising any other right or remedy provided by this Sublease or at law or in equity, it being intended that Sublessor shall not first be required to proceed against the Security Deposit, and the Security Deposit shall not operate as a limitation on any recovery to which Sublessor otherwise may be entitled. If Sublessor so uses or applies all or any portion of the Security Deposit, then Sublessee shall, within five (5) days after demand therefor, deposit cash with Sublessor in the amount required to restore the Security Deposit to the full amount stated above. Within thirty (30) days after the later of the expiration or earlier termination of this Sublease and the date that Sublessee surrenders the Subleased Premises in the condition required by this Sublease, if Sublessee is not then in default hereunder, Sublessor shall return to Sublessee (without interest) so much of the Security Deposit as has not been applied by Sublessor pursuant to this Paragraph, or which is not otherwise required to cure Sublessee's defaults.

        6.     Parking:    During the Term and at no cost to Sublessee, Sublessee shall be entitled to the use of all forty-two (42) parking spaces located in the parking area serving the Building. Sublessee may allocate and mark such spaces for company use and use by visitors in such manner as Sublessee may determine, subject, however, to Sublessee's having obtained Master Lessor's prior written consent.

        7.     Condition of Premises:    On the Commencement Date, Sublessor shall deliver the Subleased Premises to Sublessee with all mechanical, electrical, plumbing and HVAC systems and the roof in good working order. Except as provided in the foregoing sentence, Sublessor shall deliver the Subleased Premises to Sublessee in its "as-is, with all faults" condition, and Sublessor shall have no obligation whatsoever to make or pay the cost of any alterations, improvements or repairs to the Subleased Premises, including, without limitation, any improvement or repair required to comply with any law, regulation, building code or ordinance (including, without limitation, the Americans with Disabilities Act of 1990). Sublessee shall look solely to the Master Lessor for performance of any repairs required to be performed by Master Lessor under the terms of the Master Lease, provided, however, that Sublessor shall comply with the obligations and Sublessee shall have the right set forth in Paragraph 24.C. below with respect thereto.

        8.     Sublessee's Indemnification:    In addition to the indemnifications set forth in the Master Lease, including, without limitation, Sections 6.2(d), 7.3(c) and 8.7, and except to the extent caused by Sublessor's gross negligence or willful misconduct, Sublessee shall indemnify, protect, defend with counsel reasonably acceptable to Sublessor and hold harmless Sublessor from and against any and all claims, liabilities, judgments, causes of action, damages, costs and expenses (including reasonable attorneys' and experts' fees), caused by or arising in connection with: (i) the negligence or willful misconduct of Sublessee or its employees, contractors, agents, or invitees; or (ii) a breach of Sublessee's obligations under this Sublease; or (iii) a breach of Sublessee's obligations under the Master Lease to the extent incorporated herein. The foregoing indemnifications and those contained in the Master Lease and incorporated by reference herein shall survive the expiration or earlier termination of this Sublease.

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        9.     Right to Cure Defaults:    If Sublessee fails to pay any sum of money when due to Sublessor, or fails to perform any other act on its part to be performed hereunder, then Sublessor may, but shall not be obligated to, upon two (2) business days' prior notice to Sublessee, make such payment or perform such act. All such sums paid, and all costs and expenses of performing any such act, shall be deemed Additional Rent payable by Sublessee to Sublessor upon demand, together with interest thereon at the maximum rate permitted by law from the date of the expenditure until repaid.

        10.   Assignment and Subletting:

        A.    Conditions.    Except in strict accordance with the terms of Article 12 and Section 64 of the Master Lease, Sublessee may not assign this Sublease, sublet the Subleased Premises, transfer any interest of Sublessee therein, or permit any use of the Subleased Premises by another party ("Transfer"), and Sublessee shall obtain the prior written consent of Sublessor (which consent of Sublessor shall not be unreasonably withheld and shall be granted or denied with twenty-one (21) days after Sublessor's receipt of the information required to be provided by Section 12.2(e) of the Master Lease), and of Master Lessor to any proposed Transfer. A consent to one Transfer shall not be deemed to be a consent to any subsequent Transfer. As a condition of granting its consent to any assignment or subletting, Sublessor shall require that Sublessee pay to Sublessor, as Additional Rent, one hundred percent (100%) of all rent or other consideration received by Sublessee in excess of the Rent called for under this Sublease, after deducting the costs permitted to be deducted pursuant to Section 64.1 of the Master Lease, until Sublessor has received the difference between Monthly Base Rent payable by Sublessee to Sublessor pursuant to this Sublease and the Base Rent payable by Sublessor pursuant to the Master Lease, at which point Sublessor shall be entitled to retain fifty percent (50%) of such excess rent. Any Transfer without the consents required by this Paragraph shall be void and shall, at the option of Sublessor, terminate this Sublease. Sublessor's consent to any assignment or subletting shall be ineffective unless set forth in writing, and Sublessee shall not be relieved from any of its obligations under this Sublease, unless the consent expressly so provides. Notwithstanding anything to the contrary contained in this Sublease or the Master Lease, if Sublessee desires to assign this Sublease or sub-sublease substantially all of the Subleased Premises, Sublessor shall have the right to terminate this Sublease.

        B.    Permitted Transferees.    Notwithstanding anything to the contrary contained in this Sublease or the Master Lease, Sublessee, without Sublessor's prior written consent but with notice to Sublessor, may sublet the Subleased Premises or assign this Sublease to: (i) a successor corporation related to Sublessee by merger, consolidation, non-bankruptcy reorganization or government action; or (ii) a purchaser of substantially all of Sublessee's assets located at the Premises (each, a "Permitted Transferee"), provided, however, that in either of the foregoing cases the Permitted Transferee has the same or greater net worth, determined in accordance with generally accepted accounting principles, as that of Sublessee as of the date of Sublessee's execution of this Sublease, as evidenced by documentation reasonably acceptable to Sublessor. Sublessee shall notify Sublessor of any Transfer to a Permitted Transferee within, ten (10) days after the effective date of the Transfer. The foregoing, however, shall not be deemed to release Sublessee from the obligation to obtain the prior written consent of Master Lessor to an assignment of this Sublease or a sublease of the Subleased Premises to a Permitted Transferee if such consent is required by the Master Lease.

        11.   Use:    Sublessee may use the Subleased Premises only for the uses permitted in Sections 1.8 and 6 of the Master Lease and for no other purpose. Upon demand, Sublessee shall pay to Sublessor all taxes or charges imposed by applicable governmental authorities against the Subleased Premises or Sublessor, so long as such tax or assessment is directly related to Sublessor's interest in the Subleased Premises (including, without limitation, assessments imposed as a consequence of the occurrence, storage, use or disposal of Hazardous Substances [as defined in Section 49.(a)(i) of the Master Lease]

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by Sublessee, its agents, employees, contractors or invitees in or about the Subleased Premises or the Building). Sublessee shall not do or permit anything to be done in or about the Subleased Premises which would (i) injure the Subleased Premises, or (ii) vibrate, shake, overload, or impair the efficient operation of the Subleased Premises or the sprinkler systems, heating ventilating or air conditioning equipment, or utilities systems located therein. Sublessee shall not store any materials, supplies, finished or unfinished products, or articles of any nature outside of the Subleased Premises. Sublessee shall comply with all rules and regulations promulgated from time to time by Master Lessor, and with any reasonable rules and regulations imposed by Sublessor.

        12.   Effect of Conveyance:    As used in this Sublease, the term "Sublessor" means the holder of the lessee's interest under the Master Lease. In the event of any transfer of said lessee's interest, the Sublessor shall be and hereby is entirely relieved of all covenants and obligations of the Sublessor hereunder from and after the effective date of the transfer, and it shall be deemed and construed, without further agreement between the parties, that the transferee has assumed and shall carry out all covenants and obligations to be performed by Sublessor hereunder from and after the date of the transfer. Sublessor shall transfer and deliver any security of Sublessee to the transferee of said lessee's interest in the Master Lease, and thereupon the Sublessor shall be discharged from any further liability with respect thereto.

        13.   Acceptance:    The parties acknowledge and agree that Sublessee is subleasing the Subleased Premises on an "as is, with all faults" basis and that Sublessor has made no representations or warranties with respect to the condition of the Subleased Premises except as set forth in Paragraph 7 above or the Estoppel Certificate (Master Lease—Lessee) provided by Sublessor to Sublessee, a copy of which is set forth in Exhibit C hereto and incorporated by reference herein. Sublessee hereby represents to Sublessor that (i) Sublessee has fully inspected the Subleased Premises and the physical condition thereof, including, without limitation, accessibility and location of utilities and improvements and earthquake preparedness, which in Sublessee's judgment affect or influence Sublessee's use of the Subleased Premises and Sublessee's willingness to enter into this Sublease, (ii) Sublessee is relying on its inspection in subleasing the Subleased Premises, and (iii) Sublessee has received no representations or warranties from Sublessor other than with respect to the physical condition of the Premises (as set forth in Paragraph 7 above) on which Sublessee has relied in entering into this Sublease.

        14.   Improvements:

        A.    Conditions.    No alterations or improvements shall be made to the Subleased Premises except in strict accordance with this Sublease and Sections 7.3 and 7.4 of the Master Lease, and with the prior written consent of both Master Lessor and Sublessor, which consent of Sublessor shall not be unreasonably withheld or delayed. Sublessor shall not be required to provide a tenant improvement allowance to Sublessee in connection with Sublessee's construction of any improvements to the Subleased Premises. Sublessor acknowledges that Sublessee intends to install, for its exclusive use, a diesel-powered generator supplying dedicated, uninterrupted power to the Subleased Premises. Sublessor consents to the installation of the generator, but such consent does not relieve Sublessee of the obligation to obtain Master Lessor's consent to such installation or the location thereof. Upon the expiration or earlier termination of this Sublease, Sublessee, at its sole cost, shall be responsible for removing any and all alterations or improvements installed in the Subleased Premises by or on behalf of Sublessee, including the generator, if the removal is required by Master Lessor, and restoring the Subleased Premises to its condition immediately prior to the alteration or improvement.

        B.    Sublessee Improvements.    If Sublessee does lease the Adjacent Space pursuant to a direct lease with Master Lessor, Sublessor acknowledges Sublessee intends to construct certain improvements in the Adjacent Space, all of which shall be constructed at Sublessee's sole cost and expense. Notwithstanding anything to the contrary contained in this Sublease, Sublessor shall

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provide to Sublessee a tenant improvement allowance of $50,000.00 ("Allowance"), which Allowance shall be applicable solely to Sublessee's construction of improvements in the Adjacent Space, including, but not limited to, the electrical subpanel for the Adjacent Space, the wiring for the Adjacent Space (including that from the subpanel) and the HVAC equipment and installation for the Adjacent Space ("Adjacent Space Improvements"). The Allowance shall be paid by Sublessor to Sublessee by way of a credit against Rent due under this Sublease in accordance with the provisions of Paragraph 4.D.(ii) above.

        15.   Waiver of Subrogation and Release:    Sublessor and Sublessee hereby release each other from any injury to persons, damage to property, or loss of any kind which is caused by or results from any risk insured against under any valid and collectable property insurance policy carried by either party. Each party shall cause each property insurance policy obtained by it to provide that the insurer waives all right of recovery against the other party and its agents and employees in connection with any damage or injury covered by such policy. Sublessor shall not be liable to Sublessee, nor shall Sublessee be entitled to terminate this Sublease or to abate Rent, for any reason, including, without limitation: (i) failure or interruption of any utility system or service; or (ii) failure of Master Lessor to maintain the Subleased Premises as may be required under the Master Lease, provided, however, that Sublessor shall comply with the obligations and Sublessee shall have the rights set forth in Paragraph 24.C. below with respect thereto. Notwithstanding the foregoing to the contrary, to the extent that Rent is abated for Sublessor with respect to the Subleased Premises pursuant to the terms of the Master Lease, Sublessee's Rent obligations with respect to the Subleased Premises also shall be abated. Sublessor and Sublessee are corporations, and the obligations of Sublessor and Sublessee shall not constitute the personal obligations of the officers, directors, trustees, partners, joint venturers, members, owners, stockholders or other principals or representatives of such corporation.

        16.   Default:    Sublessee's performance of each of its obligations under this Sublease constitutes a condition as well as a covenant, and Sublessee's right to continue in possession of the Subleased Premises is conditioned upon such performance. In addition, Sublessee shall be in material default of its obligations under this Sublease if Sublessee is responsible for the occurrence of any of the events of default set forth in Section 13.1 of the Master Lease.

        17.   Remedies:    In the event of any default by Sublessee under this Sublease (including, without limitation, a default pursuant to Section 13.1 of the Master Lease), Sublessor shall have all remedies provided by applicable law and in equity, including, without limitation, all rights pursuant to Sections 13.2, 13.3, 13.4 and 13.5 of the Master Lease. Sublessor may resort to its remedies cumulatively or in the alternative.

        18.   Surrender:    Unless Sublessee has entered a direct lease for the Subleased Premises with Master Lessor commencing on May 1, 2006, on or before the Expiration Date or earlier termination of this Sublease, Sublessee shall remove all of its trade fixtures and all alterations and improvements, including, without limitation, the generator (if removal is required by Master Lessor), and shall surrender the Subleased Premises to Sublessor in the condition required by Section 7.4 of the Master Lease, free of Hazardous Substances stored, used or disposed of by Sublessee. If the Subleased Premises are not so surrendered, then Sublessee shall be liable to Sublessor for all costs incurred by Sublessor in returning the Subleased Premises to the required condition, plus interest thereon at the maximum rate permitted by law. Sublessee shall indemnify, defend, protect and hold harmless Sublessor against any and all claims, liabilities, judgments, causes of action, damages, costs, and expenses (including attorneys' and experts' fees) resulting from Sublessee's delay in surrendering the Subleased Premises, including, without limitation, any claim made by any succeeding tenant founded on or resulting from such failure to surrender. The indemnification set forth in this Paragraph shall survive the expiration or earlier termination of this Sublease.

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        19.   Brokers:    Sublessor and Sublessee each represent to the other that they have dealt with no real estate brokers, finders, agents or salesmen in connection with this transaction, except CB Richard Ellis, representing Sublessor, and Colliers Seeley International, representing Sublessee ("Brokers"). Each party agrees to hold the other party harmless from and against all claims for brokerage commissions, finder's fees, or other compensation made by any other agent, broker, salesman or finder as a consequence of said party's actions or dealings with such agent, broker, salesman, or finder. Sublessor shall be responsible for payment of any brokerage commission due to the Brokers in connection with this Sublease pursuant to the terms of a separate agreement between Sublessor and CB Richard Ellis.

        20.   Notices:    Unless five (5) days' prior written notice is given in the manner set forth in this Paragraph, the addresses of Sublessor and Sublessee for all purposes connected with this Sublease shall be the addresses set forth below their respective signatures. All notices, demands, or communications in connection with this Sublease shall be considered received when (i) sent by facsimile; (ii) personally delivered, or (iii) if properly addressed and either sent by nationally recognized overnight courier or deposited in the mail (registered or certified, return receipt requested, and postage prepaid), on the date shown on the return receipt or other documentation for acceptance or rejection. All notices given to the Master Lessor under the Master Lease shall be considered received only when delivered in accordance with the Master Lease and when sent to Master Lessor in the manner and at the address set forth in Article 23 of the Master Lease.

        21.   Severability:    If any term of this Sublease is held to be invalid or unenforceable by any court of competent jurisdiction, then the remainder of this Sublease shall remain in full force and effect to the fullest extent possible under the law, and shall not be affected or impaired.

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        22.   Amendment:    This Sublease may not be amended except by the written agreement of all parties hereto.

        23.   Attorneys' Fees:    If either party brings any action or legal proceeding with respect to this Sublease, the prevailing party shall be entitled to recover reasonable attorneys' fees, experts' fees, court and other costs pursuant to the provisions of Article 31 of the Master Lease.

        24.   Other Sublease Terms:

        A.    Incorporation By Reference.    Except as otherwise provided in this Sublease, the terms and conditions of this Sublease shall include various Sections of the Master Lease, which are incorporated, into this Sublease as if fully set forth, except that: (i) each reference in such incorporated Sections to "Lease" shall be deemed a reference to "Sublease"; (ii) each reference to the "Premises" shall be deemed a reference to the "Subleased Premises"; (iii) each reference to "Lessor" and "Lessee" shall be deemed a reference to "Sublessor" and "Sublessee", respectively, except as expressly set forth herein; (iv) with respect to work, services, repairs, restoration, provision of insurance or the performance of any other obligation of Master Lessor under the Master Lease, Sublessor's obligations and Sublessee's rights with respect thereto shall be as set forth in Paragraph 24.C. below; (v) with respect to any obligation of Sublessee to be performed under this Sublease, wherever the Master Lease grants to Sublessor a specified number of days to perform its obligations under the Lease, Sublessee shall have three (3) fewer days to perform the obligation, including, without limitation, curing any defaults (provided, however, that if any cure period provides for three (3) days or less to perform, Sublessee shall have two (2) business days to perform); (vi) Sublessor shall have no liability to Sublessee with respect to (a) representations and warranties made by Master Lessor under the Master Lease, (b) any indemnification obligations of Master Lessor under the Master Lease, or other obligations or liabilities of Master Lessor under the Master Lease with respect to compliance with laws, condition of the Premises or Hazardous Substances, and (c) subject to the provisions of Paragraph 24.C. below, obligations under the Master Lease to repair, maintain, restore, or insure all or any portion of the Premises, regardless of whether the incorporation of one or more provisions of the Master Lease might otherwise operate to make Sublessor liable therefor; and (vii) with respect to any approval required to be obtained from the "Lessor" under the Master Lease, such consent must be obtained from both the Master Lessor and the Sublessor, and, except as otherwise expressly set forth in this Sublease, the approval of Sublessor may be withheld if the Master Lessor's consent is not obtained.

        The following paragraphs of the Master Lease hereby are incorporated into this Sublease:

        Sections 1.8 and 1.9 (except that the reference to "Lessor" shall mean Master Lessor) and 1.12;

        Section 2.3, except that (i) the reference to "Lessor" in the first and sixth sentences of this Section shall mean only Master Lessor; (ii) the reference to "Start Date" in that sentence shall mean the Start Date of the Master Lease, (iii) the fourth and fifth sentences hereby are deleted, (iv) references to "Lessor" in Sections 2.3(a) and (b) shall mean only Master Lessor, and (v) Sublessee shall exercise the termination rights set forth in Sections 2.3 (a) and (b) only with the prior written consent of Sublessor, which shall not be unreasonably withheld or delayed;

        Section 2.4;

        Section 3.4;

        Article 6, except that references to "Lessor" in Section 6.2(e), the first sentence of Section 62(f) and in Section 6.2(g) shall mean only Master Lessor;

        Sections 7.3 and 7.4;

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        Article 8, except that (i) references to "Lessor" in Sections 8.2(b) and Sections 8.3(a), (b) and (c) shall mean only Master Lessor, and (ii) references in Article 8 to "Insuring Party" shall mean only Master Lessor;

        Article 9, except that (i) references to "Lessor" in Sections 9.1, 9.2, 9.3, 9.5 and 9.6(b) shall mean only Master Lessor, (ii) the references to "Insuring Party" in Article 9 shall mean only Master Lessor, (iii) the reference to "Paragraph 8.6" in Section 9.4 shall mean Paragraph 15 of this Sublease; and (iv) Sublessee shall not exercise the termination right set forth in Section 9.6(b) without the prior written consent of Sublessor, which shall not be unreasonably witheld or delayed;

        Articles 10 through 12;

        Article 13, except that the last two sentences of Section 13.3 hereby are deleted;

        Article 14, except that (i) references to "Lessor" shall mean only Master Lessor, and (ii) references to "Lessee" in the last sentence of Article 14 shall mean both Sublessor and Sublessee, with respect to thc alterations and improvements installed by each party;

        Articles 16 through 22, except that (i) the first three sentences of Article 17 hereby are deleted, and (ii) references to "Lessor" in the fourth sentence of Article 17 shall mean only Master Lessor;

        Article 23, for purposes of providing notice to Master Lessor only;

        Article 24;

        Articles 26 through 36, except that (i) references to "Lessor" in Article 30 shall mean only Master Lessor, and (ii) the last two sentences of Section 30.3 hereby are deleted;

        Article 38;

        Articles 40 through 48, except that references to "Lessor" in Articles 40 and 42 shall mean only Master Lessor;

        Article 56 of Addendum "A", except that references to "Lessor" in Sections 562.3.1(f) and (g), in Section 56.2.3.2(n), in the last two full paragraphs of Section 56.2.3.2 and in Section 56.3 shall mean only Master Lessor;

        Article 57 of Addendum "A", except that references to "Lessor" in Section 57.2 shall mean only Master Lessor;

        Articles 58 and 59 of Addendum "A"; and

        Article 64 of Addendum "A", except that until Sublessor has received from Sublessee in connection with any assignment or subletting that portion of any Transfer Premium that is equal to the difference between Monthly Base Rent payable by Sublessee to Sublessor hereunder and Base Rent payable by Sublessor to Master Lessor under the Master Lease, the reference to "50%" in the second-to-last line of the first full paragraph of Article 64 shall mean 100%.

        All references to "Start Date" in the incorporated provisions of the Master Lease shall mean the Commencement Date of this Sublease.

        B.    Assumption of Obligations:    This Sublease is and at all times shall be subject and subordinate to the Master Lease and the rights of Master Lessor thereunder, provided, however, that in the event of a conflict between the provisions of this Sublease and the provisions of the Master Lease, as between Sublessor and Sublessee, the provisions of this Sublease shall control. Sublessee hereby expressly assumes and agrees: (i) to comply with all provisions of the Master Lease with respect to the Subleased Premises during the Term to the extent incorporated herein; (ii) to perform all the obligations on the part of the "Lessee" to be performed under the terms of the Master Lease with respect to the Subleased Premises during the Term to the extent

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incorporated herein; and (iii) to hold Sublessor free and harmless of and from all liability, judgments, costs, damages, claims, demands, and expenses (including reasonable attorneys' and experts' fees) arising out of Sublessee's failure to comply with or to perform Sublessee's obligations hereunder or the obligations of the "Lessee" under the Master Lease as herein provided, or to act or omit to act in any manner which will constitute a breach of the Master Lease. The foregoing indemnification shall survive the termination of this Sublease.

        C.    Sublessor's Obligation, Sublessee's Right.    With respect to work, services, repairs, restoration, provision of insurance or the performance of any other obligation of Master Lessor under the Master Lease, the sole obligation of Sublessor shall be to request the same in writing from Master Lessor as and when requested to do so by Sublessee, and to use Sublessor's commercially reasonable efforts to obtain the Master Lessor's performance thereof, without requiring Sublessor to spend more than a nominal sum, in excess of which sum such costs shall be payable by Sublessee. If, after receipt of written request from Sublessee, Sublessor shall fail or refuse to take action for the enforcement of Sublessor's rights against Master Lessor with respect to the Subleased Premises, or if Master Lessor fails to perform after Sublessor has taken commercially reasonable efforts to obtain Master Lessor's performance, Sublessee shall have the right to exercise such rights and remedies under the Master Lease as are available to Sublessor its own name ("Action",) and for that purpose and only to such extent, all of the rights of Sublessor as Tenant under the Master Lease hereby are conferred upon and assigned to Sublessee, and Sublessee hereby is subrogated to such rights to the extent that the same shall apply to the Subleased Premises. If any such Action against Master Lessor in Sublessee's name shall be barred by reason of lack of privity, nonassignability or otherwise, Sublessee may take such Action in Sublessor's name; provided, however, that whether Sublessee takes the Action in its own name or in Sublessor's name, Sublessee shall first have obtained the prior written consent of Sublessor, which consent shall not be unreasonably withheld, and, provided further, that in the event of any Action Sublessee shall indemnify, protect, defend by counsel reasonably satisfactory to Sublessor and hold Sublessor harmless from and against any and all liability, loss, claims, demands, suits, penalties or damage (including, without limitation, reasonable attorneys' fees and expenses) which Sublessor may incur or suffer by reason of such Action.

        25.   Conditions Precedent:    This Sublease and Sublessor's and Sublessee's obligations hereunder are contingent upon the following conditions being deemed satisfied or waived by the Termination Date: (i) obtaining the written consent of the Master Lessor to this Sublease (which consent shall include Master Lessor's consent to Sublessee's use of the Personal Property, if applicable pursuant to Paragraph 33 below); (ii) the execution by Subiessee and Master Lessor of the Agreement (as defined in Paragraph 31 below); and (iii) obtaining the written consent of Master Lessor to Sublessee's installation of an emergency generator at the Subleased Premises. The foregoing conditions collectively shall be referred to as the "Sublessee Conditions". Sublessee shall provide to Master Lessor all financial and other information requested by Master Lessor pursuant to Section 12.2(e) of the Master Lease. If one or more of the Sublessee Conditions has not been deemed satisfied or waived by the Termination Date, Sublessee shall have the right to terminate this Sublease pursuant to the provisions of Paragraph 3.C. above. If Sublessee has not timely exercised its right to terminate this Sublease by the Termination Date, and one or more of the Sublessee Conditions has not been deemed satisfied or waived within seven (7) days after the Termination Date, Sublessor shall have the right to terminate this Sublease, in which case neither party shall have any further rights or obligations hereunder and Sublessor shall return to Sublessee all sums paid by Sublessee to Sublessor in connection with Sublessee's execution hereof. The return of all sums paid by Sublessee to Sublessor shall be Sublessee's sole and exclusive remedy in the event of a termination pursuant to the foregoing sentence.

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        26.   Signage:    At no cost to Sublessor, Sublessee shall have the right to use Building and monument signage available to Sublessor pursuant to Article 34 of the Master Lease, subject to the prior written consent of Master Lessor.

        27.   No Offer.    Submission of this Sublease for examination or signature by Sublessee does not constitute a reservation of, option for or option to sublease, and such submission is not effective as a sublease or otherwise until execution and delivery by both Sublessor and Sublessee, subject, however, to the provisions of Paragraph 25 above.

        28.   Sublessee's Financial Statements:    Upon the reasonable request of Sublessor and/or Master Lessor, Sublessee shall promptly deliver to Sublessor and Master Lessor a copy of Sublessee's unaudited financial statement for the then-current fiscal year, which financial statement or statements shall be prepared in accordance with generally accepted accounting principles and shall be accompanied by a certificate of Sublessee's Chief Financial Officer stating that such statements have been prepared in accordance with generally accepted accounting principals consistently applied and fairly present the financial condition and results of operations of Sublessee at the date thereof and for the periods covered thereby. Sublessor shall (a) treat Sublessee's financial statements and the information provided therein as Sublessee's confidential information, and (b) neither use nor disclose such statements or information to any person or for any purpose not directly related to this Sublease, except that Sublessor may disclose such statements or information to the extent required by law or by court order, or in connection with any proposed merger or acquisition contemplated by Sublessor, so long as such third party agrees to keep such statements or information confidential.

        29.   Estoppel Certificates:    Within seven (7) days after receipt of demand by Sublessor or Master Lessor, Sublessee shall execute and deliver to Sublessor an estoppel certificate to Sublessor in connection with the Sublease in the form required pursuant to Article 16 of the Master Lease.

        30.   Adjacent Space:    Sublessee acknowledges that the unimproved space located on the second floor of the Building adjacent to the Subleased Premises ("Adjacent Space") is not a part of the Subleased Premises. Sublessor acknowledges that Sublessee intends to negotiate with Master Lessor a direct lease for the Adjacent Space with a term concurrent with the Term of this Sublease. Notwithstanding the foregoing, if for any reason Sublessee and Master Lessor do not execute and deliver a direct lease for the Adjacent Space, Sublessee shall not have any right to terminate this Sublease.

        31.   Subordination, Non-Disturbance and Attornment Agreement:    Sublessor acknowledges that Sublessee intends to request that Master Lessor enter a Subordination, Non-Disturbance and Attornment Agreement ("Agreement") in a form acceptable to both Sublessor and Sublessee in the sole and absolute discretion of each. If by the Termination Date (i) Sublessor and Sublessee cannot agree on a form of Agreement acceptable to both parties in their sole and absolute discretion, or (ii) if Master Lessor fails or refuses to execute an Agreement already acceptable to Sublessor and Sublessee, Sublessee shall have the right to terminate this Sublease pursuant to the provisions of Paragraph 3.C. above. In addition, if Sublessor and Sublessee have timely agreed upon a form of Agreement but Master Lessor, as a condition of entering the Agreement, requires Sublessor to provide additional security (in the form of cash, letter of credit or any other form) under the Master Lease, or otherwise guarantee Sublessee's performance under this Sublease, Sublessor shall have the right to terminate this Sublease, in which case neither party shall have any further rights or obligations hereunder and Sublessor shall return to Sublessee all sums paid by Sublessee to Sublessor in connection with Sublessee's execution hereof. The return of all sums paid by Sublessee to Sublessor shall be Sublessee's sole and exclusive remedy in the event of a termination pursuant to the foregoing sentence.

        32.   Eirst Amendment to Master Lease:    Sublessor and sublessee acknowledge and agree that the expiration date for the term of the Master Lease is April 30, 2011, and that Sublessor has an option to terminate the Master Lease as of April 30, 2006 pursuant to Section 60 of the Master Lease. Not later

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than the Commencement Date, Sublessor and Master Lessor shall have entered a First Amendment to the Master Lease ("First Amendment") providing that (i) the termination date of the Master Lease will be April 30, 2006; and (ii) Master Lessor shall purchase the personal property currently located within the Subleased Premises ("Personal Property"), all as more particularly described on Exhibit B attached hereto and incorporated by reference herein, as of the Commencement Date. If for any reason the First Amendment is not executed and delivered by Sublessor and Master Lessor on or before the Commencement Date, Sublessor (a) shall timely exercise its termination option pursuant to Section 60 of the Master Lease, (b) shall permit Sublessee to use the Personal Property pursuant to Paragraph 33 below, and (c) shall deliver to Sublessee a copy of the notice of termination provided by Sublessor to Master Lessor under Section 60 of the Master Lease promptly after its delivery of such notice. Sublessor acknowledges that Sublessee has obtained from Master Lessor an option to lease the Subleased Premises after April 30, 2006, and that Sublessee is relying on Sublessor's agreement to terminate the Master Lease on April 30, 2006, in connection with its execution and delivery of this Sublease.

        33.   Personal Pronerty:    If Sublessor has not transferred the Personal Property to Master Lessor pursuant to Paragraph 32 above, Sublessor shall provide to Sublessee, at no additional cost to Sublessee, the use of the Personal Property during the Term. Sublessee acknowledges that Sublessee shall talk possession of the Personal Property pursuant to this Paragraph on an "as is, where is, with all faults" basis, and that Sublessee shall not rely on any representations or warranties of any kind whatsoever, express or implied, including, without limitation, any implied warranties as to merchantability or fitness for a particular purpose; provided, however, that Sublessor shall represent for the benefit of Sublessee, if Sublessee uses the Personal Property pursuant to this Paragraph, that Sublessor owns the Personal Property free and clear of all liens. Sublessor shall have no obligation to repair, maintain, replace or insure the Personal Property. Upon the expiration or earlier termination of this Sublease, Sublessee shall return the Personal Property to Sublessor in the condition and in the configuration received, ordinary wear and tear excepted. Any damage or deterioration of the Subleased Premises shall not be deemed ordinary wear and tear if the same could have been prevented by customary and ordinary maintenance practices. Sublessee's failure to so return the Personal Property to Sublessor as required by this Paragraph shall be a material default under this Sublease.

[signatures appear on next page]

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        IN WITNESS WHEREOF, the parties have executed this Sublease as of the day and year fist above written.

SUBLESSEE:		SUBLESSOR:
FASTCLICK, INC., a California corporation		OPENWAVE SYSTEMS, INC., a Delaware corporation
By:	/s/  DAVE GROSS Dave Gross	By:	/s/  ALAN BLACK Alan Black
Its:	CFO	Its:	CFO and Sr. VP

Address:	5385 Hollister Ave., Suite 201 Santa Barbara, California 93111 Attn: Chief Financial Officer	Address:	1400 Seaport Boulevard Redwood City, CA 94063 Attn: Real Estate Department
Telephone:	(805) 964-2266	Telephone:	(650) 480-8000

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EXHIBIT A
MASTER LEASE
(to be attached)
Exhibit A

[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE—NET
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)

        1.     Basic Provisions ("Basic Provisions")

        1.1   Parties: This Lease ("Lease"), dated for reference purposes only May 16, 2000, is made by and between Olive Court, a DBA of Cerdoc LP and Universal Court, LTD, both of which are California limited partnerships, ("Lessor") and Software.com, a Delaware corporation ("Lessee"), (collectively the "Parties," or individually a "Party").

        1.2   Premises: That certain real property, including all improvements therein or to be provided by Lessor under the terms of this Lease, commonly known as 512 S. Gutierrez, located in the County of Santa Barbara, State of CA, and generally described as (describe briefly the nature of the property and, if applicable, the "Project", if the property is located within a Project) A new, first class research/development/office building being Phase 2 of the Olive Court Project ("Project") and consisting of Aux. 14,300 rentable sq. ft., plus on-site amenities pursuant to plans and specs by Lanvik and Minor (sheets No. 1-L-4) dated Jan. 26, 2000. ("Premises"). (See Also Paragraph 2)

        1.3   Term: 10 years and 0 months ("Original Term") commencing upon issuance of a certificate of Occupancy by the City of Santa Barbara for the Premises, including the Tenant Improvements which Lessor anticipates will occur on or before April 1, 2001 ("Commencement Date") and ending 10 years from Commencement Date ("Expiration Date"). (See also Paragraph 3 and 54)

        1.4   Early Possession: 30 days prior to estimated Commencement Date ("Early Possession Date"). (See also Paragraphs 3.2 and 3.3)

        1.5   Base Rent: $ See Paragraph 53 per month ("Base Rent"), payable on the First day of each month commencing See Paragraph 54 (See also Paragraph 4)

        ý    If this box is checked, there are provisions in this Lease for the Base Rent to be adjusted.

        1.6   Base Rent Paid Upon Execution: $27,885.00 as Base Rent for the period First Month's Rent.

        1.7   Security Deposit: $ NONE ("Security Deposit"). (See also Paragraph 5)

        1.8   Agreed Use: Research and development of communications software/hardware and related administrative, marketing and general office use. (See also Paragraph 6).

        1.9   Insuring Party. Lessor is the "Insuring Party" unless otherwise stated herein. (See also Paragraph 8)

        1.10 Real Estate Brokers: (See also Paragraph 15)

        (a)   Representation: The following real estate brokers (collectively, the "Brokers") and brokerage relationships exist in this transaction (check applicable boxes):

o                  represents Lessor exclusively ("Lessor's Broker");
o                  represents Lessee exclusively ("Lessee's Broker"); or
ý                  Pacifica Commercial Realty represents both Lessor and Lessee ("Dual Agency").

        (b)   Payment to Brokers: Upon execution and delivery of this Lease by both Parties, Lessor shall pay to the Broker the fee agreed to in their separate written agreement (or if there is no such agreement, the sum of            % of the total Base Rent for the brokerage services rendered by said Broker).

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        1.11 Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by             ("Guarantee"). (See also Paragraph 87).

        1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda consisting of Paragraphs 50 through 64 and Exhibits A and B, all of which constitute a part of this Lease.

        2.     Premises.

        2.1   Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used in calculating rental, is an approximation which the Parties agree is reasonable and the rental based thereon is not subject to revision whether or not the actual size is more or less.

        2.2   Condition. Lessor shall deliver the Premises to Lessee broom clean and free of debris on the Commencement Date or the Early Possession Date, whichever first occurs ("Start Date"), and, so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee within thirty (30) days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"), loading doors, if any, and all other such elements in the Premises, other than those constructed by Lessee, shall be in good operating condition on said date and that the structural elements of the roof, bearing walls and foundation of any buildings on the Premises (the "Building") shall be free of material defects. If a non-compliance with said warranty exists as of the Start Date, Lessor shall, as Lessor's sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from the Lessee setting forth with specificity the nature and extent of such non-compliance, rectify same at Lessor's expense. If, after the Start Date, Lessee does not give Lessor written notice of any non-compliance with this warranty within: (i) one year as to the surface of the roof and the structural portions of the roof, foundations and bearing walls, (ii) six (6) months as to the HVAC systems, (iii) thirty (30) days as to the remaining systems and other elements of the Building, correction of such non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense.

        2.3   Compliance. Lessor warrants that the improvements on the Premises comply with all applicable laws, covenants or restrictions of record, building codes, regulations and ordinances ("Applicable Requirements") in effect on the Start Date. Said warranty does not apply to the use to which Lessee will put the Premises or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the zoning is appropriate for Lessee's intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify the same at Lessor's expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within six (6) months following the Start Date, correction of that non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense. If the Applicable Requirements are hereafter changed (as opposed to being in existence at the Start Date, which is addressed in Paragraph 6.2(e) below) so as to require during the term of this Lease the construction of an addition to or an alteration of the Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Building ("Capital Expenditure"), Lessor and Lessee shall allocate the cost of such work as follows:

        (a)   Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however

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that if such Capital Expenditure is required during the last two (2) years of this Lease and the cost thereof exceeds six (6) months' Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within ten (10) days after receipt of Lessee's termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to six (6) months' Base Rent. If Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least ninety (90) days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure.

        (b)   If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications), then Lessor and Lessee shall allocate the obligation to pay for such costs pursuant to the provisions of Paragraph 7.1(c); provided, however, that if such Capital Expenditure is required during the last two years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon ninety (90) days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within ten (10) days after receipt of Lessor's termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rent until Lessor's share of such costs have been fully paid. If Lessee is unable to finance Lessor's share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon thirty (30) days written notice to Lessor.

        (c)   Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease.

        2.4   Acknowledgements. Lessee acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy itself with respect to the all and proposed plans condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements), and their suitability for Lessee's intended use, (b) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessor's agents, nor any Broker has made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (a) Broker has made no representations, promises or warranties concerning Lessee's ability to honor the Lease or suitability to occupy the Premises, and (b) it is Lessor's sole responsibility to investigate the financial capability and/or suitability of all proposed tenants.

        2.5   LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work.

        3.     Term.

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        3.1   Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3 and 54.

        3.2   Early Possession. If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early possession. All other terms of this Lease (including but not limited to the obligations to pay Real Property Taxes and insurance premiums and to maintain the Premises) shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date.

        3.3   Delay in Possession. Lessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Commencement Date. If, despite said efforts, Lessor is unable to deliver possession as agreed, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until it receives possession of the Premises. If possession is not delivered within sixty (60) days after the Commencement Date, Lessee may, at its option, by notice in writing within ten (10) days after the end of such sixty (60) day period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lessor within said ten (10) day period, Lessee's right to cancel shall terminate. Except as otherwise provided, if possession is not tendered to Lessee by the Start Date and Lessee does not terminate this Lease, as aforesaid, any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession of the Premises is not delivered within four (4) months after the Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in writing.

        3.4   Lessee Compliance. Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied.

        4.     Rent.

        4.1   Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent ("Rent").

        4.2   Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. Rent for any period during the term hereof which is for less than one (1) full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor's rights to the balance of such Rent, regardless of Lessor's endorsement of any check so stating.

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        5.     Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee's faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of said Security Deposit, Lessee shall within ten (10) days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional moneys with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor's reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on said change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within fourteen (14) days after the expiration or termination of this Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise within thirty (30) days after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease.

        6.     Use.

        6.1   Use. Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs owners and/or occupants of, or causes damage to neighboring properties. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the Premises or the mechanical or electrical systems therein, is not significantly more burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall within five (5) business days after such request give written notification of same, which notice shall include an explanation of Lessor's objections to the change in use.

        6.2   Hazardous Substances.

        (a)   Reportable Uses Require Consent. The term "Hazardous Substance" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee's expense) with all Applicable Requirements. "Reportable Use" shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of

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a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit.

        (b)   Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as existing on the Commencement Date, or previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance.

        (c)   Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party.

        (d)   Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys' and consultants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from adjacent properties). Lessee's obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this lease with respect to hazardous substances, unless specifically so agreed by Lessor in writing at the time of such agreement.

        (e)   Lessor Indemnification. Lessor and its successors and assigns shall Indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which existed as a result of Hazardous Substances on the Premises prior to the Start Date or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor's obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.

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        (f)    Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation measure is required as a result of Lessee's use (including "Alterations", as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor's agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor's investigative and remedial responsibilities.

        (g)   Lessor Termination Option. If a Hazardous Substance Condition occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds twelve (12) times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor's desire to terminate this Lease as of the date sixty (60) days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within ten (10) days thereafter, give written notice to Lessor of Lessee's commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to twelve (12) times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within thirty (30) days following such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor's notice of termination.

        6.3   Lessee's Compliance with Applicable Requirements. Except as otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the reasonable requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor's engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the Start Date. Lessee shall, within ten (10) days after receipt of Lessor's written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements.

        6.4   Entry By Lessor; Compliance. Lessor receives the right to enter the Premises in a manner which does not unreasonably interfere with Lessee's business for purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. Such entry by Lessor shall occur only during regular business hours after (i) providing forty-eight (48) hours advanced written notice, (ii) arranging to have a representative of Lessee present at all times during the inspection. In the case of an emergency, as defined herein, no advance notice or accompaniment by a Lessee representative shall be required. An emergency shall be deemed to be

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an event or occurrence threatening life or property. Lessee may absolutely prevent Lessor's access (except in the event of an emergency) to limited limited "safe areas" where lessee stores confidential information. The restricted access safe areas shall not exceed a total of 200 square feet. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a contamination is found to exist or be imminent, or the inspection is reasonably attributable to Lessee's business on the Premises and ordered or requested by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination. [ILLEGIBLE]:

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        7.     Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.

        7.1   LESSEE'S OBLIGATIONS.

        (a)   In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises, Utility Installations, and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing, heating, ventilating, air-conditioning, electrical, lighting facilities, boilers, pressure vessels, fire protection system, fixtures, walls (interior and exterior), foundations, ceilings, roofs, floors, windows, doors, plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways located in, on, or adjacent to the Premises. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below. Lessee's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair. Lessee shall, during the term of this Lease, keep the exterior appearance of the Building in a first-class condition consistent with the exterior appearance of other similar facilities of comparable age and size in the vicinity, including, when necessary, the exterior repainting of the Building.

        (b)   Service Contracts. Lessee shall, at Lessee's sole expense, procure and maintain contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements ("Basic Elements"), if any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke detection, (iv) landscaping and irrigation systems, (v) roof covering and drains, (vi) driveways and parking lots, (vii) clarifiers (viii) basic utility feed to the perimeter of the Building, and (ix) any other equipment, if reasonably required by Lessor.

        (c)   Replacement. Subject to Lessee's indemnification of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of liability resulting from Lessee's failure to exercise and perform good maintenance practices, if the Basic Elements described in Paragraph 7.1(b) cannot be repaired other than at a cost which is in excess of 50% of the cost of replacing such Basic Elements, then such Basic Elements shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is the number of months of the useful life of such replacement as such useful life is specified pursuant to Federal income tax regulations or guidelines for depreciation thereof (including interest on the unamortized balance as is then commercially reasonable in the judgment of Lessor's accountants), with Lessee reserving the right to prepay its obligation at any time.

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        7.2   Lessor's Obligations. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by the Parties hereto that Lessor have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, all of which obligations are intended to be that of the Lessee. It is the intention of the Parties that the terms of this Lease govern the respective obligations of the Parties as to maintenance and repair of the Premises, and they expressly waive the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease.

        7.3   Utility Installations; Trade Fixtures; Alterations.

        (a)   Definitions; Consent Required. The term "Utility Installations" refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems, communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and equipment that can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned Alterations and/or Utility Installations" are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor's prior written consent. Lessee may, however, make non-structural Utility Installations to the interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, and the cumulative cost thereof during this Lease as extended does not exceed $200,000 $50,000 in the aggregate or $20,000 $10,000 in any one year.

        (b)   Consent. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount equal to the greater of one month's Base Rent, or $10,000, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to one and one-half times the estimated cost of such Alteration or Utility Installation and/or upon Lessee's posting an additional Security Deposit with Lessor.

        (c)   Indemnification. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises or any interest therein. Lessee shall give Lessor not less than ten (10) days' notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to one and one-half times the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor's attorneys' fees and costs.

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        7.4   Ownership; Removal; Surrender; and Restoration.

        (a)   Ownership. Subject to Lessor's right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per Paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises.

        (b)   Removal. By delivery to Lessee of written notice from Lessor not earlier than ninety (90) and not later than thirty (30) days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent.

        (c)   Surrender/Restoration. Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee, and the removal, replacement, or remediation of any soil, material or groundwater contaminated by Lessee. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below.

        8.     Insurance; Indemnity.

        8.1   Payment for Insurance. Lessee shall pay for all insurance required under Paragraph 8 except to the extent of the cost attributable to liability insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000 per occurrence. Premiums for policy periods commencing prior to or extending beyond the Lease term shall be prorated to correspond to the Lease term. Payment shall be made by Lessee to Lessor within ten (10) days following receipt of an invoice.

        8.2   Liability Insurance.

        (a)   Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability Policy of Insurance protecting Lessee and Lessor against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $2,000,000 per occurrence with an "Additional Insured—Managers or Lessors of Premises Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement" for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "insured contract" for the performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only.

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        (b)   Carried by Lessor. Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein.

        8.3   Property Insurance—Building, Improvements and Rental Value.

        (a)   Building and Improvements. The Insuring Party shall obtain and keep in force a policy or policies in the name of Lessor, with loss payable to Lessor, any groundlessor, and to any Lender(s) insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lenders, but in no event more than the commercially reasonable and available insurable value thereof. If Lessor is the Insuring Party, however, Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's personal property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $4,000 per occurrence, and Lessee shall be liable for such deductible amount in the event of an Insured Loss.

        (b)   Rental Value. The Insuring Party shall obtain and keep in force a policy or policies in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one (1) year. Said insurance shall provide that in the event the Lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year's loss of Rent from the date of any such loss. Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next twelve (12) month period. Lessee shall be liable for any deductible amount in the event of such loss.

        (c)   Adjacent Premises. If the Premises are part of a larger building, or of a group of buildings owned by Lessor which are adjacent to the Premises, the Lessee shall pay for any increase in the premiums for the property insurance of such building or buildings if said increase is caused by Lessee's acts, omissions, use or occupancy of the Premises. Additionally, Lessee shall not be obligated to pay for any increases in premiums attributable increases causes by the acts, commissions, uses or occupancies of any other tenants of the Project.

        8.4   Lessee's Property/business Interruption Insurance.

        (a)   Property Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force.

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        (b)   Business Interruption. Lessee shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils.

        (c)   No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease.

        8.5   Insurance Policies. Insurance required herein shall be by companies duly licensed or admitted to transact business in the state where the Premises are located, and maintaining during the policy term a "General Policyholders Rating" of at least B+, V, as set forth in the most current issue of "Best's Insurance Guide", or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after thirty (30) days prior written notice to Lessor. Lessee shall, at least thirty (30) days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance binders" evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same.

        8.6   Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.

        8.7   Indemnity. Except for Lessor's gross negligence or willful misconduct, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor's master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified.

        8.8   Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, or from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of

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this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of income or profit therefrom except in the event of Lessor's gross negligence, bad faith breach of this Lease, or willful misconduct under the Lease.

        9.     Damage or Destruction.

        9.1   Definitions.

        (a)   "Premises Partial Damage" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in six (6) months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within thirty (30) days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

        (b)   "Premises Total Destruction" shall mean damage or destruction to the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in six (6) months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within thirty (30) days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

        (c)   "Insured Loss" shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved.

        (d)   "Replacement Cost" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation.

        (e)   "Hazardous Substance Condition" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.

        9.2   Partial Damage—Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor's election, make the repair of any damage or destruction the total cost to repair of which is $10,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds (except as to the deductible which is Lessee's responsibility) as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within ten (10) days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said ten (10) day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within ten (10) days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect; or

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(ii) have this Lease terminate thirty (30) days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party.

        9.3   Partial Damage—Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective sixty (60) days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within ten (10) days after receipt of the termination notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within thirty (30) days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice.

        9.4   Total Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate sixty (60) days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.

        9.5   Damage Near End of Term. If at any time during the last six (6) months of this Lease there is damage for which the cost to repair exceeds one (1) month's Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective sixty (60) days following the date of occurrence of such damage by giving a written termination notice to Lessee within thirty (30) days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is ten days after Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee's option shall be extinguished.

        9.6   Abatement of Rent; Lessee's Remedies.

        (a)   Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein.

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        (b)   Remedies. If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within ninety (90) days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee's election to terminate this Lease on a date not less than sixty (60) days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within thirty (30) days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within said thirty (30) days, this Lease shall continue in full force and effect. "Commence" shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs.

        9.7   Termination—Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor.

        9.8   Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith.

        10.   Real Property Taxes.

        10.1 Definition of "Real Property Taxes." As used herein, the term "Real Property Taxes" shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Premises, Lessor's right to other income therefrom, and/or Lessor's business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Building address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Premises are located. The term "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Premises, except for increases attributable to any reassessment of the Premises and/or Project due to (i) any sale, lease, refinancing, or change in ownership, or (ii) any improvement to buildings within the Project other than the Premises.

        10.2 

        (a)   Payment of Taxes. Lessee shall pay the Real Property Taxes applicable to the Premises during the term of this Lease. Subject to Paragraph 10.2(b), all such payments shall be made at least ten (10) days prior to any delinquency date. Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes have been paid. If any such taxes shall cover any period of time prior to or after the expiration or termination of this Lease, Lessee's share of such taxes shall be prorated to cover only that portion of the tax bill applicable to the period that this Lease is in effect, and Lessor shall reimburse Lessee for any overpayment. If Lessee shall fail to pay any required Real Property Taxes, Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor therefor upon demand.

        (b)   Advance Payment. In the event Lessee incurs a late charge on any Rent payment, Lessor may, at Lessor's option, estimate the current Real Property Taxes, and require that such taxes be paid in advance to Lessor by Lessee, either: (i) in a lump sum amount equal to

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the installment due, at least twenty (20) days prior to the applicable delinquency date, or (ii) monthly in advance with the payment of the Base Rent. If Lessor elects to require payment monthly in advance, the monthly payment shall be an amount equal to the amount of the estimated installment of taxes divided by the number of months remaining before the month in which said installment becomes delinquent. When the actual amount of the applicable tax bill is known, the amount of such equal monthly advance payments shall be adjusted as required to provide the funds needed to pay the applicable taxes. If the amount collected by Lessor is insufficient to pay such Real Property Taxes when due, Lessee shall pay Lessor, upon demand, such additional sums as are necessary to pay such obligations. All monies paid to Lessor under this Paragraph may be intermingled with other monies of Lessor and shall not bear interest. In the event of a Breach by Lessee in the performance of its obligations under this Lease, then any balance of funds paid to Lessor under the provisions of this Paragraph may at the option of Lessor, be treated as an additional Security Deposit.

        10.3 Joint Assessment. If the Premises are not separately assessed, Lessee's liability shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be conclusively determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available.

        10.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all taxes assessed against and levied upon Lessee Owned Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee. When possible, Lessee shall cause such property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said personal property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within ten (10) days after receipt of a written statement.

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        11.   Utilities. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. If any such services are not separately metered to Lessee, Lessee shall pay a reasonable proportion, to be determined by Lessor, of all charges jointly metered.

        12.   Assignment and Subletting.

        12.1 Lessor's Consent Required.

        (a)   Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, "assign or assignment") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent.

        (b)   A change in the control of Lessee (to a merger of acquisition) shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of twenty-five percent (25%) or more of the voting control of Lessee shall constitute a change in control for this purpose.

        (c)   The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than twenty-five percent (25%) of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. "NET WORTH OF LESSEE" shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles.

        (d)   An assignment or subletting without consent shall, at Lessor's option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii) upon thirty (30) days written notice, increase the monthly Base Rent to one hundred ten percent (110%) of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to one hundred ten percent (110%) of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to One Hundred Ten Percent (110%) of the scheduled adjusted rent.

        (e)   Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.

        12.2 Terms and Conditions Applicable to Assignment and Subletting.

        (a)   Regardless of Lessor's consent, any assignment or subletting shall not: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee.

        (b)   Lessor may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall

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constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach.

        (c)   Lessor's consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting.

        (d)   In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee's obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefore to Lessor, or any security held by Lessor.

        (e)   Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $1,000 or ten percent (10%) of the current monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease, whichever is greater, as consideration for Lessor's considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested.

        (f)    Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing.

        12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

        (a)   Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary.

        (b)   In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor.

        (c)   Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor.

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        (d)   No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent.

        (e)   Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee.

        13.   Default; Breach; Remedies.

        13.1 Default; Breach. A "Default" is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or rules under this Lease. A "Breach" is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period:

        (a)   The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism.

        (b)   The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of three (3) business days following written notice to Lessee.

        (c)   The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) a Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 42 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of ten (10) days following written notice to Lessee.

        (d)   A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof, other than those described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of thirty (30) days after written notice; provided, however, that if the nature of Lessee's Default is such that more than thirty (30) days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion.

        (e)   The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a "debtor" as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within thirty (30) days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within thirty (30) days; provided, however, in the event that any provision of this subparagraph 13.1(e) is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.

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        (f)    The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false.

        (g)   If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on an anticipatory basis, and Lessee's failure, within sixty (60) days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease.

        13.2 Remedies. If Lessee fails to perform any of its affirmative duties or obligations, within ten (10) days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by cashier's check. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach:

        (a)   Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of the Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by Lessee's Breach of this Lease shall not waive Lessor's right to recover damages under Paragraph 12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any repaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods

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shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.

        (b)   Continue the Lease and Lessee's right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor's interests, shall not constitute a termination of the Lessee's right to possession.

        (c)   Pursue any other remedy now or hereafter available under the laws or judicial decisions of the state where in the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises.

        13.3 Inducement Recapture. Any agreement for free or abated rent or other charges, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee's entering into this Lease, all of which concessions are hereinafter referred to as "Inducement Provisions," shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance. The Tenant improvements constructed prior to the Commencement Date and with [illegible] the Tenant Improvement Allowances provided for in the Lease are acknowledged by Lessor and Lessee to be an inducement, and should Lessee be obligated to [ILLEGIBLE] for such Tenant Improvements pursuant to this Paragraph 13.3, the reimbursement shall be limited to the unamortized value component of the Tenant Improvement [ILLEGIBLE] with the Tenant Improvement Allowance funds. For purposes of this Lease, Tenant Improvements shall be deemed to have a useful life of ten (10) years.

        13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within five (5) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to ten percent (10%) of each such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3) consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly in advance.

        13.5 Interest. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when due as to scheduled payments (such as Base Rent) or within thirty (30) days following the date on which it was due for non-scheduled payment, shall bear interest

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from the date when due, as to scheduled payments, or the thirty-first (31st) day after it was due as to non-scheduled payments. The interest ("Interest") charged shall be equal to the prime rate reported in the Wall Street Journal as published closest prior to the date when due plus four percent (4%), but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4.

        13.6 Breach By Lessor.

        (a)   Notice of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than thirty (30) days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's obligation is such that more than thirty (30) days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such thirty (30) day period and thereafter diligently pursued to completion.

        (b)   Performance by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within thirty (30) days after receipt of said notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee's expense and offset from Rent an amount equal to the greater of one month's Base Rent or the Security Deposit, and to pay an excess of such expense under protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor.

        14.   Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively "Condemnation"), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than ten percent (10%) of any building portion of the premises, or more than twenty-five percent (25%) of the land area portion of the premises not occupied by any building, is taken by Condemnation, Lessee may, at Lessee's option, to be exercised in writing within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation for Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation.

        15.   Brokers' Fee.

        15.1 Additional Commission. In addition to the payments owed pursuant to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee acquires any rights to the Premises or other premises owned by Lessor and located within the same Project, if any, within which the Premises is located,

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(c) if Lessee remains in possession of the Premises, with the consent of Lessor, after the expiration of this Lease, or (d) if Base Rent is increased, whether by agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee in accordance with the schedule of said Brokers in effect at the time of the execution of this Lease.

        15.2 Assumption of Obligations. Any buyer or transferee of Lessor's interest in this Lease shall be deemed to have assumed Lessor's obligation hereunder. Each Broker shall be a third party beneficiary of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts due as and for commissions pertaining to this Lease when due, then such amounts shall accrue Interest. In addition, if Lessor fails to pay any amounts to Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within ten (10) days after said notice, Lessee shall pay said monies to its Broker and offset such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor's Broker.

        15.3 Representations and Indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys' fees reasonably incurred with respect thereto.

        16.   Estoppel Certificates.

        (a)   Each Party (as "Responding Party") shall within ten (10) days after written notice from the other Party (the "Requesting Party") execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current "Estoppel Certificate" form published by the American Industrial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party.

        (b)   If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such ten day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party's performance, and (iii) if Lessor is the Requesting Party, not more than one month's rent has been paid in advance. Prospective purchasers and encumbrances may rely upon the Requesting Party's Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate.

        (c)   If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall delivery to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past three (3) years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.

        17.   Definition of Lessor. The term "Lessor" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee's interest in the prior lease. In the event of a transfer of Lessor's title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit

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held by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. Notwithstanding the above, and subject to the provisions of Paragraph 20 below, the original Lessor under this Lease, and all subsequent holders of the Lessor's interest in this Lease shall remain liable and responsible with regard to the potential duties and liabilities of Lessor pertaining to Hazardous Substances as outlined in Paragraph 6 above.

        18.   Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

        19.   Days. Unless otherwise specifically indicated to the contrary, the word "days" as used in this Lease shall mean and refer to calendar days.

        20.   Limitation on Liability. Subject to the provisions of Paragraph 17 above, the obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against the individual partners of Lessor, or its or their individual partners, directors, officers or shareholders, or any of their personal assets for such satisfaction.

        21.   Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.

        22.   No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. The liability (including court costs and Attorneys' fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any amendment or modification hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker's liability shall not be applicable to any gross negligence or willful misconduct of such Broker.

        23.   Notices.

        23.1 Notice Requirements. All notices required or permitted by this Lease shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing.

        23.2 Date of Notice. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given forty-eight

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(48) hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed given twenty-four (24) hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation of receipt, provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

        24.   Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or of any other term, covenant or condition hereof. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.

        25.   Recording. Either Lessor or Lessee shall, upon request of the other, execute, acknowledge and deliver to the other a short form memorandum of this Lease for recording purposes. The Party requesting recordation shall be responsible for payment of any fees applicable thereto.

        26.   No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to one hundred fifty percent (150%) of the Base Rent applicable during the month immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee.

        27.   Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

        28.   Covenants and Conditions; Construction of Agreement. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the parties, but rather according to its fair meaning as a whole, as if both parties had prepared it.

        29.   Binding Effect; Choice of Law. This Lease shall be binding upon the parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.

        30.   Subordination; Attornment; Non-Disturbance.

        30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, "Security Device"), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as "Lender") shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and

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such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.

        30.2 Attornment. Subject to the non-disturbance provisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who acquires ownership of the Premises by reason of a foreclosure of a Security Device, and that in the event of such foreclosure, such new owner shall not: (i) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (ii) be subject to any offsets or defenses which Lessee might have against any prior lessor, or (iii) be bound by prepayment of more than one (1) month's rent.

        30.3 Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee's subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance Agreement provides that Lessee's possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within sixty (60) days after the execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at Lessee's option, directly contact Lessor's lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement.

        30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or Non-Disturbance Agreement provided for herein.

        31.   Attorneys' Fees. If any Party or Broker brings an action or proceeding involving the Premises to enforce the terms hereof or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, "Prevailing Party" shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach.

        32.   Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall have the right to enter the Premises pursuant to Paragraph 6.4. At any time, in the case of an emergency, and otherwise at [ILLEGIBLE] times for the purpose of showing the same prospective purchasers, lenders, or lessees, and making such alterations, re[ILLEGIBLE] improvements or additions to be [ILLEGIBLE] as Lessor may deem necessary. All such activities shall be without abatement of rent or liability to Lessee. Lessor may at any time place on the Premises any ordinary "For Sale" signs and Lessor may during the last six (6) months of the term hereof place on the Premises any ordinary "For Lease" signs. Lessee may at any time place on or about the Premises any ordinary "For Sublease" sign.

        33.   Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor's prior written consent, Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction.

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        34.   Signs. Except for ordinary "For Sublease" signs, Lessee shall not place any sign upon the Premises without Lessor's prior written consent. All signs must comply with all Applicable Requirements.

        35.   Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor's failure within ten (10) days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's election to have such event constitute the termination of such interest.

        36.   Consents. Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor's consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor's consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within ten (10) business days following such request.

        37.   Guarantor.

        37.1 Execution. The Guarantors, if any, shall each execute a guaranty in the form most recently published by the American Industrial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease.

        37.2 Default. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor's behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) a Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.

        38.   Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.

        39.   Options.

        39.1 Definition. "Option" shall mean: (a) the right to extend the term of or renew this Lease or to extend or renew any Lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor.

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        39.2 Options Personal To Original Lessee. Each Option granted to Lessee in this Lease is personal to the original Lessee and/or approval [ILLEGIBLE], and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting.

        39.3 Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised.

        39.4 Effect of Default on Options.

        (a)   Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given three (3) or more notices of separate Default, whether or not the Defaults are cured, during the twelve (12) month period immediately preceding the exercise of the Option.

        (b)   The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a).

        (c)   An Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and prior to the commencement of the extended term, (i) Lessee fails to pay Rent for a period of thirty (30) days after such Rent becomes due (without any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee three (3) or more notices of separate Default during any twelve (12) month period, whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.

        40.   Multiple Buildings. If the Premises are a part of a group of buildings controlled by Lessor, Lessee agrees that it will observe all reasonable rules and regulations which Lessor may make from time to time for the management, safety, and care of said properties, including the care and cleanliness of the grounds and including the parking, loading and unloading of vehicles, and that Lessee will pay its fair share of common expenses incurred in connection therewith.

        41.   Security Measures. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties.

        42.   Reservations. Lessor reserves to itself the right, from time to time, to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication, map or restrictions.

        43.   Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal

29

obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay.

        44.   Authority. If either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each party shall, within thirty (30) days after request, deliver to the other party satisfactory evidence of such authority.

        45.   Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions.

        46.   Offer. Preparation of this Lease by either Party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto.

        47.   Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises.

        48.   Multiple Parties. If more than one person or entity is named herein as either Lessor or Lessee, such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease.

        49.   Mediation and Arbitration of Disputes. An Addendum requiring the Mediation and/or the Arbitration of all disputes between the Parties and/or Brokers arising out of this Lease ý is o is not attached to this Lease.

        LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

        ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:

        1.     SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

        2.     RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.

        WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED.

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        The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures.

Executed at:	Santa Barbara	Executed at:	Santa Barbara
on:		on:
By LESSOR:		By LESSEE:
Olive Court, a DBA of Cerdoc LP andUniversal Court, LTD. Calif. Limited Partnership		Software.com, a Delaware corporation
By:	/s/ LOUIS B. WEIDER	By:	/s/
Name Printed:	Louis B. Weider	Name Printed:
Title:	General Parties Universal Court, Ltd.	Title:
By:	/s/ ROSARIO PERRY	By:
Name Printed:	Rosario Perry	Name Printed:
Title:	President of Carmarroco, Inc. (a Nevada Corporation) the General Partner of Cerdoc LP.	Title:
Address:	1769 San Leandro LaneMontecito, Calif., 93108	Address:	525 Anacapa St.Santa Barbara, CA 93101
Telephone:	(805) 565-0705	Telephone:	(805) 882-2470
Facsimile:	(805) 565-0709	Facsimile:
Federal ID No.		Federal ID No.

NOTE:
These forms are often modified to meet the changing requirements of law and industry needs. Always write or call to make sure you are utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So. Flower Street, Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No. (213) 687-8616.

Initials
/s/

© 1997—AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION.
[ILLEGIBLE]

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[FASTCLICK.COM LOGO]

OPTION(S) TO EXTEND
STANDARD LEASE ADDENDUM

Dated	May 16, 2000
By and Between (Lessor)	Olive Court, a DBA of Cerdoc LP andUniversal Court, LTD
(Lessee)	Software.com, a Delaware Corporation
Address of Premises:	512 E Gutierrez Street, Santa Barbara, CA

Paragraph 51

A.    OPTION(S) TO EXTEND:

Lessor hereby grants to Lessee the option to extend the term of this Lease for 2 additional 60 month periods commencing when the prior term expires upon each and all of the following terms and conditions:

        (i)    In order to exercise an option to extend, Lessee must give written notice of such election to Lessor and Lessor must receive the same at least 6 but not more than 9 months prior to the date that the option period would commence, time being of the essence. If proper notification of its exercise of an option is not given and/or received, such option shall automatically expire. Options (if there are more than one) may only be exercised consecutively.

        (ii)   The provisions of paragraph 39, including those relating to Lessee's Default set forth in paragraph 39.4 of this Lease, are conditions of this Option.

        (iii)  Except for the provisions of this Lease granting an option or options to extend the term, all of the terms and conditions of this Lease except where specifically modified by this option shall apply.

        (iv)  This Option is personal to the original Lessee and approved assignee, and cannot be assigned or exercised by anyone other than said original Lessee, or an approved assignee, and only while the original Lessee is in full possession of the Premises and without the intention of thereafter assigning or subletting.

        (v)   The monthly rent for each month of the option period shall be calculated as follows, using the method(s) indicated below:

(Check Method(s) to be Used and Fill in Appropriately)

        ý    1.    Cost of Living Adjustment(s) (COLA)

        a.     On (Fill in COLA Dates): Eleven years from Commencement Date, and annually thereafter, and if the second option is exercised, then 16 years from Commencement Date, and annually thereafter the Base Rent shall be adjusted by the change, if any, from the Base Month specified below, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for (select one): o CPI W (Urban Wage Earners and Clerical Workers) or ý CPI U (All Urban Consumers), for (Fill in Urban Area):

Los Angeles, Anaheim, Orange County All items (1982-1984 = 100), herein referred to as "CPI."

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        b.     The monthly rent payable in accordance with paragraph A.1.a. of the Addendum shall be calculated as follows: the Base Rent set forth in paragraph 1.5 of the attached Lease, shall be multiplied by a fraction the numerator of which shall be the CPI of the calendar month two months prior to the month(s) specified in paragraph A.1.a. above during which the adjustment is to take effect, and the denominator of which shall be the CPI of the calendar month which is two months prior to (select one): o the first month of the term of this Lease as set forth in paragraph 1.3 ("Base Month") or ý (Fill in Other "Base Month"): commencement of option periods 1 & 2 respectively. The sum so calculated shall constitute the new monthly rent hereunder, but in no event, shall any such new monthly rent be less than the rent payable for the month immediately preceding the rent adjustment.

        c.     In the event the compilation and/or publication of the CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then the index most nearly the same as the CPI shall be used to make such calculation. In the event that the Parties cannot agree on such Alternative Index, then the matter shall be submitted for decision to the American Arbitration Association in accordance with the then rules of said Association and the decision of the arbitrators shall be binding upon the parties. The cost of said Arbitration shall be paid equally by the Parties.

        ý    3.    Market Rental Value Adjustment(s) (MRV)

        a.     On (Fill in MRV Adjustment Date(s))10 years from Commencement Date, and if the second option is exercised, then again 15 years from the Commencement Date.
the Base Rent shall be adjusted in the "Market Rental Value" of the property as follows:

        1)    Four months prior to each Market Rental Value Adjustment Date described above, the Parties shall attempt to agree upon what the new MRV will be on the adjustment date. If agreement cannot be reached, within thirty days, then:

        (a)   Lessor and Lessee shall immediately appoint a mutually acceptable appraiser or broker to establish the new MRV within the next thirty days. Any associated costs will be split equally between the Parties, or

        (b)   Both Lessor and Lessee shall each immediately make a reasonable determination of the MRV and submit such determination, in writing, to arbitration in accordance with the following provisions:

        (i)    Within [ILLEGIBLE] days the Lessor and Lessee shall each select an o appraiser, or ý Broker ("Consultant"—check one) of their choice to act as an arbitrator. Two arbitrators so appointed shall immediately select a third mutually acceptable Consultant to act as a third arbitrator.

        (ii)   The three arbitrators shall within thirty days of the appointment of the third arbitrator reach a decision as to what the actual MRV of the Premises is, and whether Lessor's or Lessee's submitted MRV is the closest thereto. The decision of a majority of the arbitrators shall be binding on the Parties. The submitted MRV which is determined to be the closest to the actual MRV shall thereafter be used by the Parties.

        (iii)  If either of the Parties fails to appoint an arbitrator within the specified fifteen days, the arbitrator timely appointed by one of them shall reach a decision on his or her own, and said decision shall be binding on the Parties.

        (iv)  The entire cost of such arbitration shall be paid by the party whose submitted MRV is not selected, i.e. the one that is NOT the closest to the actual MRV.

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        2)    Notwithstanding the foregoing, the new MRV shall not be less than the rent payable for the month immediately preceding the rent adjustment.

        b.     Upon the establishment of each New Market Rental Value:

        1)    the new MRV will become the new "Base Rent" for the purpose of calculating any further Adjustments, and

        2)    the first month of each Market Rental Value term shall become the new "Base Month" for the purpose of calculating any further Adjustments.

[ILLEGIBLE]

B.    NOTICE:

        Unless specified otherwise herein, notice of any rental adjustments, other than Fixed Rental Adjustments, shall be made as specified in paragraph 23 of the Lease.

C.    BROKER'S FEE:

        The Brokers specified in paragraph 1.10 shall be paid a Brokerage Fee in accordance with the separate written listing agreement between Lessor and Broker for each adjustment specified above in accordance with paragraph 15 of the Lease.

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[LOGO]

RENT ADJUSTMENT(S)
STANDARD LEASE ADDENDUM

Dated	May 16, 2000
By and Between (Lessor)	Olive Court, a DBA of Cerdoc LP and Universal Court, LTD.
(Lessee)	Software.com, a Delaware corporation
Address of Premises:	512 E. Gutierrez Street, Santa Barbara, CA

Paragraph 50

A.

RENT ADJUSTMENTS:
The monthly rent for each month of the adjustment period(s) specified below shall be increased using the method(s) indicated below:

(Check method(s) to be Used and Fill in Appropriately)

ý    1.    Cost of Living Adjustment(s) (COLA)

        a.     On (Fill in COLA dates): First anniversary of Commencement Date and annually thereafter
the Base Rent shall be adjusted by the change, if any, from the Base Month specified below. In the Consumer Price Index of the Bureau of Labor Statistics the U.S. Department of Labor for (select one): o CPI W (Urban Wage Earners and Clerical Workers) or ý CPI U (All Urban Consumers), for (Fill in Other Area): Los Angeles, Anaheim, Orange County
All Items (1902-1984 = 100), herein referred to as "CPI".

        b.     The monthly rent payable in accordance with paragraph A.1.a. of this Addendum shall be calculated as follows: the Base Rent set forth in paragraph 1.5 of the attached Lease, shall be multiplied by a fraction the numerator of which shall be the CPI of the calendar month two months prior to the month(s) specified in paragraph A.1.a. above during which the adjustment is to take effect, and the denominator of which shall be the CPI of the calendar month which is two months prior to (select one): ý the first month of the term of this lease as set forth in paragraph 1.3 ("Base Month") or o (Fill in Other "Base Month"):                . The sum so calculated shall constitute the new monthly rent hereunder, but in no event, shall any such new monthly rent be less than the rent payable for the month immediately preceding the rent adjustment.

        c.     In the event the compilation and/or publication of the CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then the Index most nearly the same as the CPI shall be used to make such calculation. In the event that the Parties cannot agree or such alternative Index, then the matter shall be submitted for decision to the American Arbitration Association in accordance with the then rules of said Association and the decision of the arbritrators shall be binding upon the parties. The cost of said Arbritation shall be paid equally by the Parties.

[ILLEGIBLE]

B.

NOTICE

        Unless specified otherwise herein, notice of any such adjustments, other than Fixed Rental Adjustments, shall be made as specified in paragraph [ILLEGIBLE] of the Lease.

C.

BROKER'S FEE.

        The Brokers specified in paragraph 1-10 shall be paid a Brokerage Fee in accordance with the separate written listing agreement between Lessor and with each adjustment specified above with accordance with paragraph 15 of the Lease.

Lease Terms for 985 SF Addition to
Fastclick Sublease at 512 East Gutierrez Street

        Olive Court L.P. (Lessor) and Fastclick.com, Inc. (Fastclick and Sublessee) have agreed to the lease of the additional 985 SF space(Server room) on the 2nd floor of the Building located at 512 East Gutierrez Street on the following terms:

1.

Lease to commence the first of the month that operations start in the designated 985 SF (i.e. Server Room), but no later than November 1, 2003

2.

Lease will terminate at the same time as the Building Lease on April 30, 2006.

3.

The terms of the Server Room Lease will be those applicable terms contained in the "Sublease" between Openwave Systems, Inc. and Fastclick, Inc. dated November 25, 2002 and the "Nondisturbance and Attomment Agreement" between Olive Court L.P. and Fastclick.com, Inc dated November 21, 2002.

4.

The Lease will be NNN and the monthly rent will be $1.70 SF amounting to $1,674.50 payable in advance, beginning at Lease Commencement.

5.

Annual cumulative CPI adjustments will be made beginning as of May 1, 2004. The first increase, if any, will cover the period from commencement to April 30, 2004 and subsequent increases will be annually each May 1. The calculation of CPI adjustments will be in accordance with paragraph 50 of the Master Lease between Olive Court L.P. (Lessor) and Openwave Systems, Inc. (Tenant) dated May 16, 2000.

6.

For purposes of determining "Additional Rent" as defined in Section 4B of the Sublease and Paragraph 56 of the Master Lease, all applicable Olive Court common area costs and expenses will be allocated to the Building Lease space Square Footage, including the 985 SF.

7.

As compensation to Fastclick for Server Room improvements, Olive Court will provide Fastclick with a $15,000 Lease rent inducement at the rate of $1,500.00 a month for 10 months starting the month this lease commences. In the event the Lease for the Building space is renewed for a minimum 5 year term starting May 1, 2006 on Lease terms to be agreed upon, Olive Court will provide Fastclick with a $17,000 Lease rent inducement, on payment terms to be agreed to by Olive Court and Fastclick.

8.

Olive Court will reimburse Fastclick for professional services from Dudek &* Associates for obtaining City approvals of the 985 SF and the designation of "Office Use" for the building, all as contained in City of Santa Barbara Planning Commission Resolution No. 025-03, dated May 22, 2003. The reimbursement will be 50% of the Dudek charges, evidenced by paid invoices, not to exceed $7,500.00. The remaining 50% will be paid, not to exceed $7,500.00, during May 2006 in the event that Fastclick does not renew the Building Lease.

Agreed by Fastclick.com, Inc.	Agreed by Olive Court, L.P.
/s/  DAVE GROSS CEO 7/9/03	/s/  LOUIS WEIDER General Partner of Universal Count, Ltd., General Partner July 1, 2003

*

And others, not to exceed $15,000

COMMENCEMENT DATE MEMORANDUM

        This Commencement Date Memorandum is executed as of November 25, 2002, pursuant to that certain Sublease, dated as of November 25, 2002 ("Sublease"), with respect to the Subleased Premises located at 512 East Gutierrez Street, Santa Barbara, California, by and between Openwave Systems, Inc., a Delaware corporation ("Sublessor"), and Fastclick, Inc., a California corporation ("Sublessee").

        Sublessor and Sublessee are parties to the Sublease. All capitalized terms used herein shall have the sam.e meaning as was ascribed to such terms in the Sublease, unless otherwise indicated.

        Sublessor and Sublessee do hereby declare, pursuant to Paragraph 3.A. of the Sublease, that (i) the Commencement Date of the Sublease hereby is established as November 25, 2002; (ii) Sublessee's obligation to pay Rent under the Sublease shall commence on February 1, 2003 ("Rent Commencement Date"); and (iii) the Sublease Term shall expire on April 29, 2006, unless the Sublease is earlier terminated as provided in the Sublease. The Sublease is in full force and effect as of the date hereof, and Sublessor and Sublessee have fulfilled all of their respective obligations under the Sublease required to be fulfilled by them on or prior to the Commencement Date.

        In witness whereof, Sublessor and Sublessee have executed this Commencement Date Memorandum as of the date first set forth above.

SUBLESSOR:		SUBLESSEE:
OPENWAVE SYSTEMS, INC., a Delaware corporation		FASTCLICK, INC., a California corporation
By:	/s/	By:	/s/  DAVE GROSS
Its:	Vice President Facilities	Its:	CEO      3/10/03

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SUBLEASE
OPTION(S) TO EXTEND STANDARD LEASE ADDENDUM
RENT ADJUSTMENT(S) STANDARD LEASE ADDENDUM

EX-10.10

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Exhibit 10.10

[AIR COMMERCIAL REAL ESTATE ASSOCIATION LOGO]

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE—NET
AIR COMMERCIAL REAL ESTATE ASSOCIATION

1.

Basic Provisions ("Basic Provisions").

1.1   Parties:    This Lease ("Lease"), dated for reference purposes only                         , 2004, is made by and between Cito Corp., a California corporation ("Lessor") and Fastclick, Inc., a California corporation ("Lessee"), (collectively the "Parties", or individually a "Party").

1.2(a) Premises:    That certain portion of the Project (as defined below), including all improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of 201 Calle Cesar Chavez, Suite 300, located in the City of Santa Barbara, County of Santa Barbara, State of CA, with zip code 93103, as outlined on Exhibit "A" attached hereto ("Premises") and generally described as (describe briefly the nature of the Premises): Suite 300 in a multitenant office building. As shown in Exhibit "B" consisting of approximately 7,500 square feet.

In addition to Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any rights to the roof, exterior walls or utility raceways of the building containing the Premises ("Building") or to any other buildings in the Project. The Premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and improvements thereon, are herein collectively referred to as the "Project." (See also Paragraph 2)

1.2(b) Parking:    Shared use of all unreserved vehicle parking spaces ("Unreserved Parking Spaces"); and 20 reserved vehicle parking spaces ("Reserved Parking Spaces"). (See also Paragraph 2.6)

1.3   Term:    1 years and 11 months ("Original Term") commencing June 1, 2004 ("Commencement Date") and ending April 30, 2006 ("Expiration Date"). (See also Paragraph 3)

1.4   Early Possession:    April 21, 2004 ("Early Possession Date"). (See also Paragraphs 3.2 and 3.3)

1.5   Base Rent:    $ See Addendum per month ("Base Rent"), payable on the See Addendum day of each month commencing See Addendum. (See also Paragraph 4)

ý    If this box is checked, there are provisions in this Lease for the Base Rent to be adjusted.

1.6   Lessee's Share of Common Area Operating Expenses:    See Addendum percent (      %) ("Lessee's Share").

1.7   Base Rent and Other Monies Paid Upon Execution:

(a)   Base Rent: $ See Addendum for the period See Addendum.

(b)   Common Area Operating Expenses: $ See Addendum for the period                            .

(c)   Security Deposit: $ See Addendum ("Security Deposit"). (See also Paragraph 5)

(d)   Other: $                                                    for                                                                                          

                                                                                                                                                                                 .

(e)   Total Due Upon Execution of this Lease: $ See Addendum.

1.8   Agreed Use:    See Addendum (See also Paragraph 6)

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1.9   Insuring Party:    Lessor is the "Insuring Party". (See also Paragraph 6)

1.10 Real Estate Brokers:    (See also Paragraph 15)

(a)   Representation:    The following real estate brokers (the "Brokers") and brokerage relationships exist in this transaction (check applicable boxes):

ý    Pacifica Commercial Realty, Greg Bartholomew represents Lessor exclusively ("Lessor's Broker");

ý    CRESA Partners, Brian Davies represents Lessee exclusively ("Lessee's Broker");
or

o                                                      represents both Lessor and Lessee ("Dual Agency").

(b)   Payment to Brokers:    Upon execution and delivery of this Lease by both Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a separate written agreement (or if there is no such agreement, the sum of N/A or N/A % of the total Base Rent for the brokerage services rendered by the Brokers).

1.11 Guarantor.    The obligations of the Lessee under this Lease are to be guaranteed by N/A ("Guarantor"). (See also Paragraph 37)

1.12 Addenda and Exhibits.    Attached hereto is an Addendum or Addenda consisting of Paragraphs 1 through 7 and Exhibits        through       , all of which constitute a part of this Lease.

2.

Premises.

2.1   Letting.    Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used in calculating Rent, is an approximation which the Parties agree is reasonable and any payments based thereon are not subject to revision whether or not the actual size is more or less.

2.2   Condition:    Lessor shall deliver that portion of the Premises contained within the Building ("Unit") to Lessee broom clean and free of debris with carpets shampooed and minor paint touchup on the Commencement Date or the Early Possession Date, whichever first occurs ("Start Date"), and, so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"), loading doors, if any, and all other such elements in the Unit, other than those constructed by Lessee, shall be in good operating condition on said date and that the structural elements of the roof, bearing walls and foundation of the Unit shall be free of material defects. If a non-compliance with such warranty exists as of the Start Date, or if one of such systems or elements should malfunction or fail during the lease term (other than related to Lessee's negligence or misconduct), within the appropriate warranty period, Lessor shall, as Lessor's sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify same at Lessor's expense. The warranty periods shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to the remaining systems and other elements of the Unit. If Lessee does not give Lessor the required notice within the appropriate warranty period, correction of any such non-compliance, malfunction or failure shall be the obligation of Lessee at Lessee's sole cost and expense (except for the repairs to the fire sprinkler systems, roof, foundations, and/or bearing walls, see Paragraph 7).

2.3   Compliance.    Lessor warrants that the improvements on the Premises and the Common Areas comply with the building codes that were in effect at the time that each such improvement, or portion thereof, was constructed, and also with all applicable laws, inclusive of ADA, covenants or restrictions of record, regulations, and ordinances in effect on the Start Date ("Applicable

2

Requirements"). Said warranty does not apply to the use to which Lessee will put the Premises or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee's intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify this same at Lessor's expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within 6 months following the Start Date, correction of that non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense. If the Applicable Requirements are hereafter changed so as to require during the term of this Lease the construction of an addition to or an alteration of the Unit, Premises and/or Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Unit, Premises and/or Building ("Capital Expenditure"), Lessor and Lessee shall allocate the cost of such work as follows:

        (a)   Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital Expenditure is required during the last 2 years of this Lease and the cost thereof exceeds 6 months' Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee's termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to 6 months' Base Rent. If Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least 90 days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure.

        (b)   If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications), then Lessor and Lessee shall allocate the obligation to pay for the portion of such costs reasonably attributable to the Premises pursuant to the formula set out in Paragraph 7.1(d): provided, however, that if such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within 10 days after receipt of Lessor's termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with interest, from Rent until Lessor's share of such ILLEGIBLE have been fully paid. If Lessee is unable to finance Lessor's share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an effect basis, Lessee shall have the right to terminate this Lease upon 30 days written notice to Lessor.

        (c)   Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises (all of which are unique to Lessee as compared to those done by tenants in general) then, and in that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease.

2.4   Acknowledgements.    Lessee acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans Disabilities Act), and their suitability for Lessee's

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intended use, (b) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to the occupancy of the Premises, and (c) neither Lessor, Lessor's agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations, promises or warranties concerning Lessee's ability to honor the Lease or suitability to occupy the Premises, and (ii) it is Lessor's sole responsibility to investigate the financial capability and/or suitability of all proposed tenants.

2.5    Lessee as Prior Owner/Occupant.    The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event Lessee shall be responsible for any necessary corrective work.

2.6   Vehicle Parking.    Lessee shall be entitled to use the number of Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by vehicles no larger than full-size passenger automobiles or pick-up trucks, herein called "Permitted Size Vehicles." Lessor may regulate the loading and unloading of vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Size Vehicles may be parked in the Common Area without the prior written permission of Lessor.

        (a)   Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers, contractors or invitees to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities.

        (b)   Lessee shall not service or store any vehicles in the Common Areas.

        (c)   If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

2.7   Common Areas—Definition.    The term "Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Project and interior utility raceways and installations within the Unit that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other tenants of the Project and their respective employees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading areas, trash areas, roadways, walkways, driveways and landscaped areas.

2.8   Common Areas—Lessee's Rights.    Lessor grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Project. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

2.9   Common Areas—Rules and Regulations.    Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable rules and regulations

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("Rules and Regulations") for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Project and their invitees. Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said Rules and Regulations by other tenants of the Project.

2.10 Common Areas—Changes.    Lessor shall have the right, in Lessor's sole discretion, from time to time:

        (a)   To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways;

        (b)   To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;

        (c)   To designate other land outside the boundaries of the Project to be a part of the Common Areas;

        (d)   To add additional buildings and improvements to the Common Areas;

        (e)   To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Project, or any portion thereof; and

        (f)    To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Project as Lessor may, in the exercise of sound business judgment, deem to be appropriate. Notwithstanding the above, none of these changes or acts mentioned above shall unreasonably interfere with Lessee's access or use of its Premises or reserved parking area, nor will they increase Lessee's financial obligations hereunder.

3.

Term.

3.1   Term.    The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.

3.2   Early Possession.    If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent, Common Area Operating Expenses, and Real Property Taxes shall be abated for the period of such early possession. All other terms of this Lease (including but not limited to the obligations to have pay Lessee's Share of Common Area Operating Expenses, Real Property Taxes and insurance and to maintain the Premises) shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date.

3.3   Delay in Possession.    Lessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Commencement Date. If, despite said efforts, Lessor is unable to deliver possession as agreed, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until it receives possession of the Premises. If possession is not delivered within 60 days after the Commencement Date, Lessee may, at its option, by notice in writing within 10 days after the end of such 60 day period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lessor within said 10 day period, Lessee's right to cancel shall terminate. Except as otherwise provided, if possession is not tendered to Lessee by the Start Date and Lessee does not terminate this Lease, as aforesaid, any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession of

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the Premises is not delivered within 4 months after the Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in writing.

3.4   Lessee Compliance.    Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied.

4.

Rent.

4.1   Rent Defined.    All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent ("Rent").

4.2   Common Area Operating Expenses.    Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, Lessee's Share (as specified in Paragraph 1.6) of all Common Area Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, in accordance with the following provisions:

        (a)   "Common Area Operating Expenses" (See Addendum) are defined, for purposes of this Lease, as all costs incurred by Lessor relating to the ownership and operation of the Project, including, but not limited to, the following:

(i)

The operation, repair and maintenance, in neat, clean, good order and condition of the following:






(aa)    The Common Areas and Common Area Improvements, including parking areas, loading and unloading areas, trash areas, roadways, parkways, walkways, driveways, landscaped areas, bumpers, irrigation systems, Common Area lighting facilities, fences and gates, elevators, roofs, and roof drainage systems.






(bb)    Exterior signs and any tenant directories.






(cc)    Any fire detection and/or sprinkler systems.



(ii)

The cost of water, gas, electricity and telephone to service the Common Areas and any utilities not separately metered.



(iii)

Trash disposal, pest control services, property management, security services, and the costs of any environmental inspections.



(iv)

Reserves set aside for maintenance and repair of Common Areas.



(v)

Real Property Taxes (as defined in Paragraph 10).



(vi)

The cost of the premiums for the insurance maintained by Lessor pursuant to Paragraph 8.



(vii)

Any reasonable deductible portion of an insured loss concerning the Building or the Common Areas.



(viii)

The cost of any Capital Expenditure to the Building or the Project not covered under the provisions of Paragraph 2.3 provided; however, that Lessor shall allocate the cost of any such Capital Expenditure over a 12 year period and Lessee shall not be required is pay more than Lessee's Share of 1/111th of the cost of such Capital Expenditure in any given month (as provided in Addendum).

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(ix)

Any other services to be provided by Lessor that are stated elsewhere in this Lease to be a Common Area Operating Expense.

        (b)   Any Common Area Operating Expenses and Real Property Taxes that are specifically attributable to the Unit, the Building or to any other building in the Project or to the operation, repair and maintenance thereof, shall be allocated entirely to such Unit, Building, or other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the Project.

        (c)   The inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to either have said improvements or facilities or to provide those services unless the Project already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same or some of them.

        (d)   Lessee's Share of Common Area Operating Expenses shall be payable by Lessee within 30 days after a reasonably detailed statement of actual expenses is presented to Lessee. At Lessor's option, however, an amount may be estimated by Lessor from time to time of Lessee's Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12 month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee within 60 days after the expiration of each calendar year a reasonably detailed statement showing Lessee's Share of the actual Common Area Operating Expenses incurred during the preceding year. If Lessee's payments under this Paragraph 4.2(d) during the preceding year exceed Lessee's Share as indicated on such statement, Lessor shall credit the amount of such over-payment against Lessee's Rent Share of Common Area Operating Expenses next becoming due. If Lessee's payments under this Paragraph 4.2(d) during the preceding year were less than Lessee's Share as indicated on such statement, Lessee shall pay to Lessor the amount of the deficiency within 30 days after delivery by Lessor to Lessee of the statement. See Addendum.

4.3   Payment.    Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. Rent for any period during the term hereof which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor's rights to the balance of such Rent, regardless of Lessor's endorsement of any check so stating. In the event that any check, draft, or other instrument of payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any late charges which may be due.

5.    Security Deposit.    Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee's faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the Initial Base Rent. Should the Agreed Use be amended to accommodate a

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material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor's reasonable judgment to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Lessee occurs during the Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantly reduced. Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within 14 days after the expiration or termination of this Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise within 30 days after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease.

6.

Use.

6.1   Use.    Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the Premises or the mechanical or electrical systems therein, and/or is not significantly more burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor's objections to the change in the Agreed Use.

6.2   Hazardous Substances.

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        (a)   Reportable Uses Require Consent.    The term "Hazardous Substances" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, in either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee's expense) with all Applicable Requirements. "Reportable Use" shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements require that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk or contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of proactive modifications (such as concrete encasements) and/or increasing the Security Deposit.

        (b)   Duty to Inform Lessor.    If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance.

        (c)   Lessee Remediation.    Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party.

        (d)   Lessee Indemnification.    Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys' and consultants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party under Lessee's control (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from areas outside of the Project). Lessee's obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of

9

investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under the Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.

        (e)   Lessor Indemnification.    Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which existed as a result of Hazardous Substances on the Premises prior to the Start Date or which are not caused by Lessee. are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor's obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.

        (f)    Investigations and Remediations.    Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation measure is required as a result of Lessee's use (including "Alterations", as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor's agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor's investigative and remedial responsibilities.

        (g)   Lessor Termination Option.    If a Hazardous Substance Condition (see Paragraph 9.1(e)) occurs during the term of the Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor's desire to terminate this Lease as of the date 60 days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee's commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment, in such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor's notice of termination.

        6.3   Lessee's Compliance with Applicable Requirements.    Except as otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessee's engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of

10

Lessor's written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements.

        6.4   Inspection; Compliance.    Lessor and Lessor's "Lender" (as defined in Paragraph 30) and consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times upon 24 hour notice, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a contamination is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination.

        7.     Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.

        7.1   Lessee's Obligations.

        (a)   In General.    Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises, Utility Installations (Intended for Lessee's exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities within the premises, such as plumbing, HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures, interior walls, interior surfaces of the following: exterior walls, ceilings, floors, windows, doors, plate glass, and skylights but excluding any items which are the responsibility of Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the janitorial service contracts required by Paragraph 7.1(b) below. Lessee's obligations shall include non-capital restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair.

        (b)   Service Contracts.    Lessee shall, at Lessee's sole expense, procure and maintain contracts, with copies to Lessee, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements, if any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure vessels, (iii) [illegible] and (iv) any other equipment, if reasonably required by Lessor. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and if Lessor so elects, Lessee shall reimburse Lessee, upon demand, for the cost thereof.

        (c)   Failure to Perform.    If Lessee fails to perform or commence to perform Lessee's obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days' prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee's behalf, and put the Premises in good order, condition and repair, and Lessee shall promptly reimburse Lessor for the cost thereof.

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        (d)   Replacement.    Subject to Lessee's indemnification of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of liability resulting from Lessee's failure to exercise and perform good maintenance practices, if the HVAC system or a part thereof an Item described in Paragraph 7.1(b) cannot be repaired other than at a cost which is in excess of 50% of the cost of replacing such item, then such item shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is 144 (i.e. 1/144th of the cost per month). Lessee shall pay interest on the unamortized balance at a rate that is commercially reasonable in the judgment of Lessor's accountants. Lessee may, however, prepay its obligation at any time.

        7.2   Lessor's Obligations.    Subject to the provisions of Paragraphs 2.2 (Condition), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system, Common Area fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease.

        7.3   Utility Installations; Trade Fixtures; Alterations.

        (a)   Definitions.    The term "Utility Installations" refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems, communications systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and equipment that can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned Alterations and/or Utility Installations" are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

        (b)   Consent.    Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor's prior written consent. Lessee may, however, make non-structural Utility Installations to the Interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, and the cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3 6 month's Base Rent in the aggregate or a sum equal to one three month's Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessor's: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of

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said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month's Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee's posting an additional Security Deposit with Lessor.

        (c)   Indemnification.    Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialman's lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor's attorneys' fees and costs.

        7.4   Ownership; Removal; Surrender; and Restoration.

        (a)   Ownership.    Subject to Lessor's right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises.

        (b)   Removal.    By delivery to Lessee of written notice from Lessor, not earlier than 90 and not later than 30 days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent.

        (b)   Surrender; Restoration.    Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing, if the Lease is for 12 months or less, then Lessee shall surrender the Premises in the same condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the Installation, maintenance or removal of Trade Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall also completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party under Lessee's control (except Hazardous Substances which were deposited via underground migration from areas outside of the Project) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall remain with property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the

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Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below.

        8.     Insurance; Indemnity.

        8.1   Payment of Premiums.    The cost of the premiums for the insurance policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), shall be a Common Area Operating Expense. Premiums for policy periods commencing prior to, or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Start Date or Expiration Date.

        8.2   Liability Insurance.

        (a)   Carried by Lessee.    Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $1,000,000 per occurrence with an annual aggregate of not less than $2,000,000, an "Additional Insured—Managers or Lessors of Premises Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement" for damage caused by heat, smoke or fumes from a hostile fire. The policy shall contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "Insured contract" for the performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only.

        (b)   Carried by Lessor.    Lessor shall maintain liability insurance as described in Paragraph 8.2(a). In addition to, and not in lieu of, the insurance required to be maintained by Lessee, Lessee shall not be named as an additional insured therein.

        8.3   Property Insurance—Building, Improvements and Rental Value.

        (a)   Building and Improvements.    Lessor shall obtain and keep in force a policy or policies of insurance in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's personal property shall be insured by Lessee under Paragraph 8.4. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $1,000 per occurrence.

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        (b)   Rental Value.    Lessor shall also obtain and keep in force a policy or policies in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional 180 days ("Rental Value Insurance"). Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next 12 month period.

        (c)   Adjacent Premises.    Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Project if said increase is caused by Lessee's acts, omissions, use or occupancy of the Premises.

        (d)   Lessee's Improvements.    Since Lessor is the Insuring Party, Lessor shall not be required to insure Lessee Owned Alterations and Utility Installations unless the item in question has become the property of Lessor under the terms of this Lease.

        8.4   Lessee's Property; Business Interruption Insurance.

        (a)   Property Damage.    Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned Alterations and Lessee Owned Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force.

        (b)   Business Interruption.    Lessee shall obtain and maintain insurance loss of income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils.

        (c)   No Representation of Adequate Coverage.    Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease.

        8.5   Insurance Policies.    Insurance required herein shall be by companies duly licensed or admitted to transact business in the state where the Premises are located, and maintaining during the policy term a "General Policyholders Rating" of at least B+, V, as set forth in the most current issue of "Best's Insurance Guide", or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance and such certificate shall state that the insurer will endeavor to provide 30 days notice in the event of cancellation, unless the reason for cancellation is non payment of premium, in which case only 10 days notice is given. No such policy shall be cancellable or subject to modification except after 30 days prior written notice to Lessor. Lessee shall, at least 30 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance binders" evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same.

        8.6   Waiver of Subrogation.    Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils

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required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.

        8.7   Indemnity.    Except for Lessor's gross negligence or willful misconduct, Lessee shall indemnity, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor's master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys' and consultants' fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified.

        8.8   Exemption of Lessor from Liability.    Except for Lessor's gross negligence or willful misconduct, Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, or from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from the failure of Lessor to enforce the provisions of any other lease in the Project. Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of income or profit therefrom.

        9.     Damage or Destruction.    

        9.1   Definitions.    

        (a)   "Premises Partial Damage" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in 3 months or less from the date of the damage or destruction, and the cost thereof does not exceed a sum equal to 6 month's Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

        (b)   "Premises Total Destruction" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 3 months or less from the date of the damage or destruction and/or the cost thereof exceeds a sum equal to 6 month's Base Rent. Lessor shall notify Lessee in writing with 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

        (c)   "Insured Loss" shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a). Irrespective of any deductible amounts or coverage limits involved.

        (d)   "Replacement Cost" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior

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thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation.

        (e)   "Hazardous Substance Condition" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.

        9.2   Partial Damage—Insured Loss.    If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor's election, make the repair of any damage or destruction the total cost to repair of which is $5,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to; (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party.

        9.3   Partial Damage—Uninsured Loss.    If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after receipt of the termination notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice.

        9.4   Total Destruction.    Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.

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        9.5   Damage Near End of Term.    If at any time during the last 6 months of this Lease there is damage for which the cost to repair exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to Lessee within 30 days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is 10 days after Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee's options shall be extinguished.

        9.6   Abatement of Rent; Lessee's Remedies.    

        (a)   Abatement.    In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value Insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein.

        (b)   Remedies.    If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee's election to terminate this Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within such 30 days, this Lease shall continue in full force and effect. "Commence" shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs.

        9.7   Termination; Advance Payments.    Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor.

        9.8   Waive Statutes.    Lessor and Lessee agree that the terms of the Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith.

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        10.   Real Property Taxes.    

        10.1 Definition.    As used herein, the term "Real Property Taxes" shall include any form of assessment, real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Project, Lessor's right to other income therefrom, and/or Lessor's business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Project address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Project is located. The term "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Project or any portion thereof of a change in the improvements thereon. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be included in the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have in common.

        10.2 Payment of Taxes.    Lessor shall pay the Real Property Taxes applicable to the Project, and except as otherwise provided in Paragraph 10.3, any such amounts shall be included in the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2.

        10.3 Additional Improvements.    Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor's records and work sheets as being caused by additional improvements placed upon the Project by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request.

        10.4 Joint Assessment.    If the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall be conclusive.

        10.5 Personal Property Taxes.    Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises. When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within 10 days after receipt of a written statement specifically setting forth the taxes applicable to Lessee's property.

        11.   Utilities.    Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. Notwithstanding the provisions of Paragraph 4.2, if at any time in Lessor's sole judgment, Lessor determines that Lessee is using a disproportionate amount of water, electricity or other commonly metered utilities, or that Lessee is generating such a large volume of trash as to require an increase in the size of the dumpster and/or an increase in the number of times per month that the dumpster is emptied, then Lessor may increase Lessee's Base Rent by an amount equal to such increased costs.

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        12.   Assignment and Subletting.    

        12.1 Lessor's Consent Required.    

        (a)   Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, "assign or assignment") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent.

        (b)   A change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of 25% or more of the voting control of Lessee shall constitute a change in control for this purpose. See Addendum.

        (c)   The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occur, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than 25% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent, "Net Worth of Lessee" shall mean the net worth of Lessee (excluding any guarantees) established under generally accepted accounting principles. See Addendum.

        (d)   An assignment or subletting without consent shall, at Lessor's option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent 110% of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to 110% of the scheduled adjusted rent.

        (e)   Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.

        12.2 Terms and Conditions Applicable to Assignment and Subletting.

        (a)   Regardless of Lessor's consent, no assignment or subletting shall: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) after the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee.

        (b)   Lessor may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach.

        (c)   Lessor's consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting.

        (d)   In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee's obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefore to Lessor, or any security held by Lessor.

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        (e)   Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $1,000 $500 or 10% of the current monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease, whichever is greater, as consideration for Lessor's considering and processing said request. Lessee agrees to provide Lessor with such offer or additional information and/or documentation as may be reasonably requested.

        (f)    Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing.

        (g)   Lessor's consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2).

        12.3 Additional Terms and Conditions Applicable to Subletting.    The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

        (a)   Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary.

        (b)   In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor.

        (c)   Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor.

        (d)   No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent.

        (e)   Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee.

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        13.   Default; Breach; Remedies.    

        13.1 Default; Breach.    A "Default" is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease. A "Breach" is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period;

        (a)   The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 8.2 is jeopardized as a result thereof, or without providing reasonable assurance to minimize potential vandalism.

        (b)   The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of 3 5 business days following written notice to Lessee.

        (c)   The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 41 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee.

        (d)   A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of Lessee's Default is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter diligently prosecutes such cure to completion.

        (e)   The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a "debtor" as defined in 11 U.S.C. § 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph (a) is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.

        (f)    The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false.

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        (g)   If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on an anticipatory basis, and Lessee's failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial measures of Lessee and the Guarantor that existed at the time of execution of this Lease.

        13.2 Remedies.    If Lessee fails to perform or commence to perform any of its affirmative duties or obligations, within 40 30 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by cashier's check. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach:

        (a)   Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee's Breach of this Lease shall not waive Lessor's right to recover damages under Paragraph 12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.f. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.

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        (b)   Continue the Lease and Lessee's right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor's interests, shall not constitute a termination of the Lessee's right to possession.

        (c)   Pursue any other remedy now or hereafter available under the laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises.

        13.3 Inducement Recapture.    Any agreement for free or abated rent or other charges, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee's entering into this Lease, all of which concessions are hereinafter referred to as "Inducement Provisions", shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance.

        13.4 Late Charges.    Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Base Rent shall not be received by Lessor within 5 business days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to 10 6% of each such overdue amount or $100, whichever is greater. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly in advance.

        13.5 Interest.    Any monetary payment due Lessor hereunder, other than Base Rent or late charges, not received by Lessor, when due as to scheduled payments (such as Base Rent) or within 30 days following the date on which it was due for non-scheduled payment, shall bear interest from the date when due, as to scheduled payments, or the 31st day after it was due as to non-scheduled payments. The interest ("Interest") charged shall be equal to the prime rate reported in the Wall Street Journal as published closest prior to the date when due plus 4%, but shall not excess 10% the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4.

        13.6 Breach by Lessor.    

        (a)   Notice of Breach.    Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after

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receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's obligation is such that more than 30 days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such 30 day period and thereafter diligently pursued to completion.

        (b)   Performance by Lessee on Behalf of Lessor.    In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee's expense and offset from Rent an amount equal to the greater of one month's Base Rent or the Security Deposit, and to pay an excess of such expense under protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor.

        14.   Condemnation.    If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively "Condemnation"), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the Unit, or more than 25% of Lessee's Reserved Parking Spaces, is taken by Condemnation, Lessee may, at Lessee's option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severe damages; provided, however, that Lessee shall be entitled to any compensation for Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation.

        15.   Brokerage Fees.    

        15.1 Additional Commission.    In addition to the payments owed pursuant to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee acquires from Lessor any rights to the Premises or other premises owned by Lessor and located within the Project, (c) if Lessee remains in possession of the Premises, with the consent of Lessor, after the expiration of this Lease, or (d) if Base Rent is increased, whether by agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee in accordance with the schedule of the Brokers in effect at the time of the execution of this Lease.

        15.2 Assumption of Obligations.    Any buyer or transferee of Lessor's interest in this Lease shall be deemed to have assumed Lessor's obligation hereunder. Brokers shall be third party beneficiaries of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due, then such amounts shall accrue interest. In addition, if Lessor fails to pay any amounts to Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to

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pay such amounts within 10 days after said notice, Lessee shall pay said monies to its Broker and offset such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor's Broker for the limited purpose of collecting any brokerage fee owed.

        15.3 Representations and Indemnities of Broker Relationships.    Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the Indemnifying Party, including any costs, expenses, attorneys' fees reasonably incurred with respect thereto.

        16.   Estoppel Certificates.    

        (a)   Each Party (as "Responding Party") shall within 10 business days after written notice from the other Party (the "Requesting Party") execute, acknowledge an deliver to the Requesting Party a statement in writing in form similar to the then most current "Estoppel Certificate" form published by the AIR Commercial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party.

        (b)   If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such 10 business day period, the Requesting Party may execute an Estoppel Certificate stating that (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party's performance, and (iii) if Lessor is the Requesting Party, not more than one month's rent has been paid in advance. Prospective purchasers and encumbrances may rely upon the Requesting Party's Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate.

        (c)   If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.

        17.   Definition of Lessor.    The term "Lessor" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the the Lessee's interest in the prior lease. In the event of a transfer of Lessor's title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. Notwithstanding the above, and subject to the provisions of Paragraph 20 below, the original Lessor under this Lease, and all subsequent holders of the Lessor's interest in this Lease shall remain liable and responsible with regard to the potential duties and liabilities of Lessor pertaining to Hazardous Substances as outlined in Paragraph 6.2 above.

        18.   Severability.    The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

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        19.   Days.    Unless otherwise specifically indicated to the contrary, the word "days" as used in this Lease shall mean and refer to calendar days.

        20.   Limitation on Liability.    Subject to provisions of Paragraph 17 above, the obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against the individual partners of Lessor, or its or their individual partners, directors, officers or shareholders, or any of their personal assets for such satisfaction.

        21.   Time of Essence.    Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.

        22.   No Prior or Other Agreements; Broker Disclaimer.    This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. The liability (including court costs and attorneys' fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any amendment or modification hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker's liability shall not be applicable to any gross negligence or willful misconduct of such Broker.

        23.   Notices.    

        23.1 Notice Requirements.    All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing.

        23.2 Date of Notice.    Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 48 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation or receipt (confirmation report from fax machine is sufficient), provided a copy is also delivered via delivery or mail. If notice received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

        24.   Waivers.    No waiver by Lessor of the Default or Breach by Lessee of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or of any other term, covenant or

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condition hereof. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.

        25.   Disclosures Regarding The Nature of a Real Estate Agency Relationship.

        (a)   When entering into a discussion with a real estate agent regarding a real estate transaction, a Lessor or Lessee should from the outset understand what type of agency relationship or representation it has with the agent or agents in the transaction. Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows:

        (i)    Lessor's Agent.    A Lessor's agent under a listing agreement with the Lessor acts as the agent for the Lessor only. A Lessor's agent or subagent has the following affirmative obligations: To the Lessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent's duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.

        (ii)   Lessee's Agent.    An agent can agree to act as agent for the Lessee only. In these situations, the agent is not the Lessor's agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Lessor. An agent acting only for a Lessee has the following affirmative obligations. To the Lessee: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent's duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.

        (iii)  Agent Representing Both Lessor and Lessee.    A real estate agent, either acting directly or through one or more associate licenses, can legally be the agent of both the Lessor and the Lessee in a transaction, but only with the knowledge and consent of both the Lessor and the Lessee. In a dual agency situation, the agent has the following obligations to both the Lessor and the Lessee: (a) A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with either Lessor or the Lessee. (b) Other duties to the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In representing both Lessor and Lessee, the agent may not without the express permission of the respective Party, disclose to the other Party that the Lessor will accept rent in an amount less than that indicated in the listing or that the Lessee is willing to pay a higher rent than that offered. The above duties of the agent in a real estate transaction do not relieve a Lessor or Lessee from the responsibility to protect their own interests. Lessor and Lessee should carefully read all agreements to assure that they adequately express

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their understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional.

        (b)   Brokers have no responsibility with respect to any default or breach hereof by either Party. The liability (including court costs and attorneys' fees), of any Broker with respect to any breach of duty, error or omission relating to this Lease shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker's liability shall not be applicable to any gross negligence or willful misconduct of such Broker.

        (c)   Buyer and Seller agree to identify to Brokers as "Confidential" any communication or information given Brokers that is considered by such Party to be confidential.

        26.   No Right To Holdover.    Lessee has no right to retain possession or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 150% of the Base Rent applicable immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee.

        27.   Cumulative Remedies.    No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

        28.   Covenants and Conditions; Construction of Agreement.    All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it.

        29.   Binding Effect; Choice of Law.    This Lease shall be binding upon the parties, their personal representative, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.

        30.   Subordination; Attornment; Non-Disturbance.

        30.1 Subordination.    This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, "Security Device"), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as "Lender") shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of the Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.

        30.2 Attornment.    In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of such new owner, this Lease shall automatically become a new Lease between Lessee and such new owner, upon all of the terms and conditions hereof, for the remainder of the term hereof, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such

29

new owner shall assume all of Lessor's obligations hereunder, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month's rent, or (d) be liable for the return of any security deposit paid to any prior lessor.

        30.3 Non-Disturbance.    With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee's subordination of this Lease or future attornment in the case of foreclosure shall be subject to receiving a commercially reasonable non-disturbance agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance Agreement provides that Lessee's possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee's option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement.

        30.4 Self-Executing.    The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or Non-Disturbance Agreement provided for herein.

        31.   Attorneys' Fees.    If any Party or Broker brings an action or proceeding involving the Premises, whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, "Prevailing Party" shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees, cost and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation).

        32.   Lessor's Access; Showing Premises; Repairs.    Lessor and Lessor's agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times for the purpose of showing the same to prospective purchasers, lenders, or tenants (during the last 6 months of the term in the case of tenants only), and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary. All such activities shall be without abatement of rent or liability to Lessee. Lessor may at any time place on the Premises any ordinary "For Sale" signs and Lessor may during the last 6 months of the term hereof place on other Premises any ordinary "For Lease" signs. Lessee may at any time place on the Premises any ordinary "For Sublease" sign.

        33.   Auctions.    Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor's prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction.

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        34.   Signs.    Except for ordinary "For Sublease" signs which may be placed only on the Premises, Lessee shall not place any sign upon the Project without Lessor's prior written consent. All signs must comply with all Applicable Requirements.

        35.   Termination; Merger.    Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor's failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's election to have such event constitute the termination of such interest.

        36.   Consents.    Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor's consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor's consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within 10 5 business days following such request.

        37.   Guarantor.

        37.1 Execution.    The Guarantors, if any, shall each execute a guaranty in the form most recently published by the AIR Commercial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease.

        37.2 Default.    It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor's behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.

        38.   Quiet Possession.    Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.

        39.   Options.    If Lessee is granted an option, as defined below, then the following provisions shall apply.

        39.1 Definition.    "Option" shall mean: (a) the right to extend the term of or renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor.

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        39.2 Options Personal To Original Lessee.    Any Option granted to Lessee in this Lease is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting.

        39.3 Multiple Options.    In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised.

        39.4 Effect of Default on Options.    

        (a)   Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given 3 or more notices of separate Default, whether or not the Defaults are cured, during the 12 month period immediately preceding the exercise of the Option.

        (b)   The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a).

        (c)   An Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and prior to the commencement of the extended term, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee 3 or more notices of separate Default during any 12 month period, whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.

        40.   Security Measures.    Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties.

        41.   Reservations.    Lessor reserves the right: (i) to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, (ii) to cause the recordation of parcel maps and restrictions, and (iii) to create and/or install new utility raceways, so long as such easements, rights, dedications, maps, restrictions, and utility raceways do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate such rights.

        42.   Performance Under Protest.    If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay.

        43.   Authority.    If either Party herein is a corporation, trust, limited liability company, partnership, or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each party shall, within 30 days after request, deliver to the other party satisfactory evidence of such authority.

        44.   Conflict.    Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions.

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        45.   Offer.    Preparation of this Lease by either party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This lease is not intended to be binding until executed and delivered by all Parties hereto.

        46.   Amendments.    This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises.

        47.   Multiple Parties.    If more than one person or entity is named herein as either Lessor or Lessee, such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease.

        48.   Waiver of Jury Trial.    The Parties hereby waive their respective rights to trial by jury in any action or proceeding involving the Property or arising out of this Agreement.

        49.   Mediation and Arbitration of Disputes.    An Addendum requiring the Mediation and/or the Arbitration of all disputes between the Parties and/or Brokers arising out of this Lease o is ý is not attached to this Lease.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:

        1.     SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

        2.     RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.

WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED.

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        The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures.

Executed at:	Santa Barbara, CA	Executed at:	Santa Barbara, CA
on:	April, 21, 2004	on:	April 21, 2004
By LESSOR:		By LESSEE:
Cito Corp.,a California corporation		Fastclick, Inc.,a                        corporation
By:	/s/  J. WILLIAM BEAVER	By:	/s/  KURT JOHNSON
Name Printed:	Cito Corp., a California corporation	Name Printed:	Fastclick, Inc., a California corporation
Title:	President	Title:	Chief Financial Officer
By:	N/A	By:	N/A
Name Printed:		Name Printed:
Title:		Title:
Address:	1033 Anacapa StreetSanta Barbara, CA	Address:	360 Olive St.Santa Barbara, CA 93101
Telephone:	(805) 899-2400	Telephone:	(805) 568-5334
Facsimile:	(805) 899-2424	Facsimile:	(805) 568-5332
Federal ID No.	77-0044352	Federal ID No.

These forms are often modified to meet the changing requirements of law and needs of the industry. Always write or call to make sure you are utilizing the most current form: AIR Commercial Real Estate Association, 700 South Flower Street, Suite 600, Los Angeles, California 90017. (213) 687-8777.

©Copyright 1999 by AIR Commercial Real Estate Association.
All rights reserved.
No part of these works may be reproduced in any form without permission in writing.

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[AIR COMMERCIAL REAL ESTATE ASSOCIATION LOGO]

OPTION(S) TO EXTEND
STANDARD LEASE ADDENDUM

Dated    April 21, 2004
By and Between (Lessor)	Cito Corp., a California corporation
(Lessee)	Fastclick, Inc. a                        corporation
Address of Premises:	201 N. Calle Cesar Chavez, Suite 300

Paragraph 50

A.    OPTION(S) TO EXTEND:

        Lessor hereby grants to Lessee the option to extend the term of this Lease for one additional 60 month period(s) commencing when the prior term expires upon each and all of the following terms and conditions:

          (i)  In order to exercise an option to extend, Lessee must give written notice of such election to Lessor and Lessor must receive the same at least six but not more than nine months prior to the date that the option period would commence, time being of the essence. If proper notification of the exercise of an option is not given and/or received, such option shall automatically expire. Options (if there are more than one) may only be exercised consecutively.

         (ii)  The provisions of paragraph 39, including those relating to Lessee's Default set forth in paragraph 39.4 of this Lease, are conditions of this Option.

        (iii)  Except for the provisions of this Lease granting an option or options to extend the term, all of the terms and conditions of this Lease except where specifically modified by this option shall apply.

        (iv)  This Option is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee or a permitted assignee or sublessee of the Original Lessee and only while the original Lessee or a permitted assignee or sublessee is in full possession of the Premises and without the intention of thereafter assigning or subletting.

         (v)  The monthly rent for each month of the option period shall be calculated as follows, using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)

ý

I.      Cost of Living Adjustment(s) (COLA)

        a.     On (Fill in COLA Dates): May 1, 2007, 2008, 2009 and 2010 the Base Rent shall be adjusted by the change, if any, from the Base Month specified below, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for (select one): o CPI W (Urban Wage Earners and Clerical Workers) or ý CPI U (All Urban Consumers), for (Fill in Urban Area): Los Angeles/Anaheim/Riverside. All items (1982-1984 = 100), herein referred to as "CPI".

        b.     The monthly rent payable in accordance with paragraph A.1.a of this Addendum shall be calculated as follows: the Base Rent set forth in paragraph 1.5 of the attached Lease, shall be multiplied by a fraction the numerator of which shall be the CPI of the calendar month 2 months prior to the month(s) specified in paragraph A.1.a. above during which the adjustment is to take effect, and the denominator of which shall be the CPI of the calendar month which is 2 months prior to (select one): ý the first month of the term of this Lease as set forth in paragraph 1.3 ("Base Month") or o (Fill in Other "Base Month"):                                                  . The sum so calculated shall constitute

1

the new monthly rent hereunder, but in no event, shall any such new monthly rent be less than the rent payable for the month immediately preceding the rent adjustment.

        c.     In the event the compilation and/or publication of the CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then the index most nearly the same as the CPI shall be used to make such calculation. In the event that the Parties cannot agree on such alternative index, then the matter shall be submitted for decision to the American Arbitration Association in accordance with the then rules of said Association and the decision of the arbitrators shall be binding upon the parties. The cost of said Arbitration shall be paid equally by the Parties.

ý

II.    Market Rental Value Adjustment(s) (MRV)

        a.     On (Fill in MRV Adjustment Date(s)) May 1, 2006 the Base Rent shall be adjusted to ninety five percent (95%) of the "Market Rental Value" of the property determined as follows:

        1)    Four months prior to each Market Rental Value Adjustment Date described above, the Parties shall attempt to agree upon what the new MRV will be on the adjustment date. If agreement cannot be reached, within thirty days, then:

        (a)   Lessor and Lessee shall immediately appoint a mutually acceptable appraiser or broker to establish the new MRV within the next 30 days. Any associated costs will be split equally between the Parties, or

        (b)   Both Lessor and Lessee shall each immediately make a reasonable determination of the MRV and submit such determination, in writing, to arbitration in accordance with the following provisions:

        (i)    Within 15 days thereafter, Lessor and Lessee shall each select an o appraiser or o broker ("Consultant"—check one) of their choice to act as an arbitrator. The two arbitrators so appointed shall immediately select a third mutually acceptable Consultant to each as a third arbitrator.

        (ii)   The 3 arbitrators shall within 30 days of the appointment of the third arbitrator reach a decision as to what the actual MRV for the Premises is, and whether Lessor's or Lessee's submitted MRV is the closest thereto. The decision of a majority of the arbitrators shall be binding on the Parties. The submitted MRV which is determined to be the closest to the actual MRV shall thereafter be used by the Parties.

        (iii)  If either of the Parties fails to appoint an arbitrator within the specified 15 days, the arbitrator timely appointed by one of them shall reach a decision on his or her own, and said decision shall be binding on the Parties.

        (iv)  The entire cost of such arbitration shall be paid by the party whose submitted MRV is not selected, i.e. the one that is NOT the closest to the actual MRV.

        2)    Notwithstanding the foregoing, the new MRV shall not be less than the rent payable for the month immediately preceding the rent adjustment.

        b.     Upon the establishment of each New Market Rental Value:

        1)    the new MRV will become the new "Base Rent" for the purpose of calculating any further Adjustments, and

        2)    the first month of each Market Rental Value term shall become the new "Base Month" for the purpose of calculating any further Adjustments.

2

o

III.   Fixed Rental Adjustment(s) (FRA)

The Base Rent shall be increased to the following amounts on the dates set forth below:

On (Fill in FRA Adjustment Date(s)):		The New Base Rent shall be:
	$
	$
	$
	$

B.    NOTICE:

        Unless specified otherwise herein, notice of any rental adjustments, other than Fixed Rental Adjustments, shall be made as specified in paragraph 23 of the Lease.

C.    BROKER'S FEE:

        The Brokers shall be paid a Brokerage Fee for each adjustment specified above in accordance with paragraph 15 of the Lease.

NOTE: These forms are often modified to meet changing requirements of law and needs of the industry. Always write or call to make sure you are utilizing the most current form: AIR COMMERCIAL REAL ESTATE ASSOCIATION, 700 S. Flower Street, Suite 600, Los Angeles, Calif. 90017

3

[EXHIBIT A GOES HERE]

EXHIBIT B TO Lease dated April 21, 2004
Cito Corporation as Lessor and Fastclick, Inc. as Lessee for the Premises located at 201 N. Calle Cesar Chavez, Suite 300, Santa Barbara, California

[EXHIBIT B GOES HERE]

ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
MULTI-TENANT LEASE—NET
BETWEEN CITO CORP., AS LESSOR, AND
FASTCLICK, Inc. AS LESSEE DATED APRIL 21, 2004
FOR THE PREMISES: 201 N. CALLE CESAR CHAVEZ, SUITE 300

        Lessee and Lessor hereby agree that in the event of any conflict between the provisions of this Addendum and the printed Standard Industrial/Commercial Multi-Tenant Lease—Net and Exhibits, dated as of April 21, 2004 (collectively, the "Lease"), by and between CITO CORP., a California corporation ("Lessor"), and FASTCLICK, Inc., a California corporation, ("Lessee"), the provisions of this Addendum shall control. All references in the Lease and in this Addendum shall be construed to mean the Lease and Exhibits, as amended and supplemented by this Addendum. All defined terms used in this Addendum, unless specifically defined in this Addendum, shall have the same meaning as the same terms in the Lease.

1)

Base Rent:

"1.5 Base Rent:    Base Rent ("Base Rent") per month shall be the following amounts for the periods indicated:

October 1, 2004 through May 30, 2005:	$12,160 (7,600 x 1.60)
June 1, 2005 through April 30, 2006:	$12,540 (7,600 x 1.65)

All rent shall be payable in advance on or before the first day of each calendar month during the Lease Term without any setoff or deduction."

2)

Base Rent and Other Monies Paid Upon Execution:

"1.7 Base Rent and Other Monies Paid Upon Execution:

Base Rent: $12,160 for the period October 1, 2004 to October 31, 2004

(a) Project Common Area Operating Expenses:	$	-0-
(b) Building Common Area Operating Expenses:	$	-0-
(c) Security Deposit:	$	12,160
(d) Other:	$	-0-
(e) Total Due Upon Execution	$	24,320

3)

Lessee's Share of Common Area Operating Expenses:

"1.6 Lessee's Share of Common Area Operating Expenses:

For the Project:    8.56%

For the Building: 24.89%

Anything herein to the contrary notwithstanding, Lessee's Share of Project Common Area Operating Expenses for any calculation period shall not exceed a five percent (5%) cap determined as follows: Lessee's Share of the Project Common Area Operating Expenses for the first twelve months of the Term of this Lease shall first be determined. That number shall then be increased five percent (5%) per year compounded annually and the resulting number determined as of the date for which the calculation is being made, shall determine the Cap beyond which Lessee's Share of Project Common Area Operating Expenses may not increase. Likewise, Lessee's Share of Building Common Area Operating Expenses for any calculation period shall not exceed a five percent (5%) "cap" determined in the same manner except that it shall be determined with reference to Lessee's Share of Building Common Area Expenses during the first twelve months of the Term of this Lease.

1

BUILDING OPERATING COST ADDENDUM

1)

General Provisions:

a.

If there is any conflict or inconsistency between this Building Operating Cost Addendum ("BOCA") and the other provisions of the Lease, then the provisions of this BOCA shall control and govern the interpretation of the Lease.

b.

Inasmuch as the Lease may contain certain terminology that may not be identical to the terminology contained herein, the following terms are hereby deemed to have the same meaning and can be used interchangeably: Expenses, Direct Expenses, Operating Expenses, and Operating Costs; Taxes, Tax Expenses, Tax Costs, Property Taxes and Real Estate Taxes; Landlord and Lessor; Tenant and Lessee; Expense Year and Comparison Year; Tenant's Share and Tenant's Pro Rata Share; Building, Property, Project and Building/Project.

c.

Landlord shall utilize accounting records and procedures conforming to generally accepted accounting principles, consistently applied, with respect to all aspects of determining Tenant's Pro Rata Share of the Operating Costs and Real Estate Taxes.

2)

Exclusions from Operating Costs. Notwithstanding anything to the contrary contained in the Lease, the following items shall be excluded from the calculation of Operating Costs and/or Real Estate Taxes, each as the case may be, as such applicable term(s) are defined by the Lease:

a.

Corporate Overhead—All costs associated with the operation of the business of the entity which constitutes "Landlord" or "Landlord's managing agent" (as distinguished from the costs of the operations of the Building/Project). Including, but not limited to, Landlord's or Landlord's managing agent's general corporate overhead and general administrative expenses, legal, risk management, and corporate and/or partnership accounting and legal costs, mortgages, debt costs or other financing charges, administrative fees, any costs that would normally be considered included in a management fee (e.g., property accounting charges, travel expenses for company meetings or training, etc.), placement/recruiting fees/costs for employees whether they are assigned to the Building/Project or not, employee training programs, real estate licenses and other industry certifications, health/sports club dues, employee parking and transportation charges, tickets to special events, costs of any business licenses regardless if such costs are considered a form of Real Estate Tax, costs of defending any lawsuits, costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord's interests in the Building/Project, bad debt loss, rent loss or any reserves thereof, and costs incurred in connection with any disputes between Landlord and/or Landlord's management agent and their employees, tenants or occupants, and providers of goods and services to the Building/Project;

b.

Leasing—Any cost relating to the marketing, solicitation, negotiation and execution of leases of space in the Building/Project, including without limitation, promotional and advertising expenses, commissions, finders fees, and referral fees, accounting, legal and other professional fees and expenses relating to the negotiation and preparation of any lease, license, sublease or other such document, costs of design, plans, permits, licenses, inspection, utilities, construction and clean up of tenant improvements to the Premises or the premises of other tenants or other occupants, the amount of any allowances or credits paid to or granted to tenants or other occupants of any such design or construction, and all other costs of alterations of space in the Building/Project leased to or occupied by other tenants or occupants;

c.

Executive/Unrelated/Off-site Salaries—Wages, salaries, fees, fringe benefits, and any other form of compensation paid to any executive employee of Landlord and/or Landlord's managing agent above the grade of Building Manager as such term is commonly understood in the property management industry, provided, however, all wages, salaries and other compensation otherwise allowed to be included in Operating Costs shall also exclude any

2

portion of such costs related to any employee's time devoted to other efforts unrelated to the maintenance and operation of the Building/Project;

d.

Competitively Bid—Any amount paid by Landlord or Landlord's managing agent to a subsidiary or affiliate of Landlord or Landlord's managing agent, or to any party as a result of a non-competitive selection process, for management or other services to the Building/Project, or for supplies or other materials, to the extent the cost of such services, supplies, or materials exceed the cost that would have been paid had the services, supplies or materials been provided by parties unaffiliated with the Landlord or Landlord's managing agent on a competitive basis and are consistent with those incurred by similar buildings in the same metropolitan area in which the Building/Project is located;



e.

Ground Lease—Any rental payments and related costs pursuant to any ground lease of land underlying all or any portion of the Building/Project, and any costs related to any reciprocal easement agreement, and/or covenant, condition and restriction agreement;



f.

Building Defects—Any costs incurred in connection with the original design, construction, landscaping and clean-up of the Building/Project or any major changes to same, including but not limited to, additions or deletions of floors, renovations of the common areas (except as otherwise expressly permitted under this BOCA), correction of defects in design and/or construction of the Building/Project including defective equipment, replacement of major components which have reached the end of their useful life irrespective of whether the replacement may result in reducing the Operating Costs, and the repair of damage to the Building/Project in connection with any type of casualty, event of damage or destruction or condemnation;



g.

Capital—All costs of a capital nature, including, but not limited to, capital improvements, capital repairs, capital equipment, and capital tools, all as determined in accordance with generally accepted accounting principles, consistently applied, and sound management practices, except (i) any capital improvement made to the Building which actually reduces Operating Costs, amortized on a straight-line basis, including interest at the lesser of the interest rate actually paid by Landlord or 7.0% per annum, over the improvement's useful life in accordance with generally accepted accounting principles, provided, however, the annual amortization shall not exceed the annual amount of Operating Costs actually saved as a result of such capital improvement, or (ii) capital expenditures required by government regulation or law enacted after the Commencement Date, the amount of such costs to be amortized on a straight-line basis, with interest at the lesser of the interest rate actually paid by Landlord or 7.0% per annum, over the asset's useful life in accordance with generally accepted accounting principles, or (iii) any cost incurred which is not considered annual recurring routine maintenance but maintains the general appearance of the Project (i.e., painting of the common areas, replacement of carpet in common areas, maintenance of stone/tile) the aggregate cost of which does not exceed $5,000 in any calendar year with the amount of all such costs to be amortized on a straight-line basis over the useful life, with interest at the lesser of the interest rate actually paid by Landlord or 7.0% per annum. In no event shall the costs of replacing or retrofitting the heating, ventilation and air conditioning ("HVAC") system to comply with any of Sections 604-606 and/or 608 of the Clean Air Act be included in Operating Costs;



h.

Other Capital—Rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment, the cost of which if purchased would be excluded from Operating Costs as a capital cost, excepting from this exclusion equipment not affixed to the Building/Project which is used in providing janitorial or similar services and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency condition in the Building/Project;

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i.

Building Codes/ADA—Any cost incurred in connection with upgrading the Building/Project to comply with insurance requirements, life safety codes, ordinances, statutes, or other laws in effect prior to the Commencement Date, including without limitation the Americans With Disabilities Act (or similar laws, statutes, ordinances or rules imposed by the State, County, City, or other agency where the Building/Project is located), including penalties or damages incurred as a result of non-compliance;



j.

Hazardous Material—Any cost or expense related to monitoring, testing, removal, cleaning, abatement or remediation of any "hazardous material", including toxic mold, in or about the Building/Project or real property, and including, without limitation, hazardous substances in the ground water or soil.

3)

Agreed Use:

"1.8 Agreed Use:    General office use including the right to install telecommunications or HVAC equipment on the roof of the Building, subject to Lessor's reasonable approval and in accordance with all applicable laws and city ordinances. The installation and maintenance of said equipment shall be at the sole cost and expense of Lessee. If installed, Lessee shall remove said equipment upon expiration of the Term at its sole cost and expense and shall be responsible for any damage caused by the installation, maintenance or removal of said equipment. There shall be no additional charge to Lessee during the Term or the option period, if any, for said roof rights. This right shall be granted so long as the equipment is for Lessee's sole and exclusive use. Lessee shall not have the right to install third party cellular equipment."

4)

Lessee's Audit Rights for Common Area Operating Expenses:

"4.2(d)...(add)...    Any objection to the statement shall be deemed waived if not raised by written notice to Lessor within six (6) months after delivery of the statement. After giving such notice, Lessee shall have the right, during Lessor's regular business hours and on reasonable prior notice, to inspect, at the location of Lessor's accounting records, at Lessee's sole cost, Lessor's general ledger regarding Common Area Operating Expenses for the time period to which the statement relates. The inspection of Lessor's general ledger may be conducted by Lessee's employee or a reputable certified public accountant (i.e., a member of a reputable, independent, nationally or regionally recognized certified public accounting firm, who has experience reviewing financial operating records of office building Lessors provided that such accountant is not retained by Lessee on a contingency fee basis. The inspection of Lessor's general ledger must be completed not later than ninety (90) days after the general ledger is made available to Lessee, and any audit report prepared by Lessee's auditors shall be delivered concurrently to Lessor and Lessee.

If, after inspection of Lessor's general ledger, Lessee disputes the amount of Common Area Operating Expenses the period under inspection, Lessor and Lessee shall meet and attempt in good faith to resolve the dispute. If the parties are unable to resolve the dispute within sixty (60) days after completion of Lessee's inspection, then Lessee shall have the right to submit the dispute to arbitration; this right shall be exercised, if at all, by delivering a written notice of election to arbitrate to Lessor not later than the last day of the sixty (60-day) period. Lessor and Lessee shall agree, within fifteen (15 days) after Lessee's delivery of the arbitration election, to retain an arbitrator who shall be an unaffiliated real estate professional attorney with at least (10) years of experience representing Lessors and Lessees in the leasing of office space in Santa Barbara County. The arbitrator shall have the right to retain, as an expert to consult regarding the dispute, an unaffiliated, reputable certified public accountant who is a member of a reputable Independent nationally or regionally recognized certified public accounting firm and who has experience in reviewing financial operating records of office building Lessors. The arbitration shall be limited to determining the appropriate amount of Common Area Operating Expenses for the period under review. The arbitrator's decision shall be delivered simultaneously to Lessor and Lessee and shall be final and binding on Lessor and Lessee.

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If the arbitrator determines that the amount of Common Area Operating Expenses billed to Lessee was incorrect, the appropriate party shall pay to the other party the deficiency or overpayment, as applicable, within thirty (30) days following delivery of the arbitrator's decision, without interest. All costs and expenses of the arbitration shall be paid by Lessee unless the final determination in the arbitration is that Lessor overstated Common Area Operating Expenses allocated to Lessee for the period in question by more than three percent (3%) of the originally reported Common Area Operating Expenses in which case Lessor shall pay all costs and expenses of the arbitration.

Lessee shall keep any information gained from the inspection of Lessor's general ledger confidential and shall not disclose it to any other party, except as required by law. If requested by Lessor, Lessee shall require its employees or agents inspecting Lessor's general ledger to sign a confidentiality agreement as a condition of Lessor making Lessor's general ledger available to them.

Lessee's exercise of audit rights shall not relieve Lessee of the obligation to pay disputed amounts, and Lessee's rights under this section may be exercised by Lessee only if Lessee is not in default under this Lease during the period for which Lessee is exercising its rights. The payment by Lessee of its Common Area Operating Expenses, or any amount of it on account, shall not preclude Lessee from exercising its rights under this section, but if Lessee fails to timely exercise its audit rights in accordance with this section, the failure shall be conclusively deemed to constitute Lessee's approval of Lessor's Common Area Operating Expense statement for the period in question. Lessor shall maintain its accounting records of Common Area Operating Expenses during the review period for each year and during any audit. Lessee agrees that this section shall be the sole method to be used by Lessee to dispute the amount of any Common Area Operating Expenses payable or not payable by Lessee under the terms of this Lease."

5)

Hazardous Substances:

"6.2(f)...(add)..."Pursuant to California Health and Safety Code §25359.7, Lessor represents to Lessee that a release of hazardous substance has occurred on or beneath the Project. A remediation program has been in process for many years and is nearing completion and in accordance with this provision Lessor shall be responsible, at Lessor's sole cost and expense for the remediation of such condition. Any such costs associated with said remediation shall not be included in the Project Common Area Operating Expenses or in the Building Common Area Operating Expenses."

6)

Assignment and Subletting:

12.1    Lessor's Consent Required.

"12.1 ... (b) Anything to the contrary notwithstanding, Lessee shall have the right to sublease or assign the Premises or any portion thereof to any related entity, parent company, subsidiary or affiliate without Lessor's prior written consent. For purposes hereof, the terms "related entity," "parent company," "subsidiary" or "affiliate" means any individual, corporation, partnership, limited partnership, limited liability company, trust, or other legal entity fifty one percent (51%) or more of the interest in capital, income, and voting rights in which is owned and controlled by Lessee beneficially and or record, or any individual, corporation, partnership, limited partnership, limited liability company, trust, or other legal entity that owns fifty one percent (51%) or more of the interest in capital, income, and voting rights Lessee beneficially and of record."

        If Lessee is a non-public corporation, unincorporated association, partnership or limited liability company, the sale, assignment, transfer or hypothecation of any class of stock or other ownership interest in such corporation, association, partnership or limited liability company in

5

excess of fifty percent (50%) in the aggregate shall be deemed an assignment within the meaning and provision of this Article 12. The foregoing sentence shall not apply (i) if Lessee becomes a publicly traded company on a nationally or regionally recognized stock exchange; or (ii) provided there is no material change in the day-to-day management and control of Tenant's operations, in connection with the investment of venture capital funds into Tenant.

        (c) Intentionally omitted.

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TENANT:	FastCheck, Inc.
PROPERTY:	Santa Barbara Business Center #212
ADDRESS:	201 N. Calle Cesar Chavez, Suite 300
LEASE TYPE:	Net
DATE:	June 2, 2004

2004 COMMON AREA MAINTENANCE EXPENSE ESTIMATES

Expense Category			2004 Estimated Expenses		2004 MiniCam Expenses
Electricity			$	28,552	$	—
Gas			$	—	$	—
Water/Sewer			$	20,090	$	—
Janitorial			$	29,544	$	15,410
Repairs and Maintenance			$	40,008	$	900
Elevators			$	—	$	4,791
HVAC			$	38,551	$	—
Parking Lot Repair			$	—	$	—
Management Fees			$	68,709	$	—
Landscaping			$	25,126	$	—
Pest Control			$	1,800	$	—
Rubbish			$	25,709	$	—
Security & Alarm			$	36,879	$	—
Insurance			$	27,501	$	—
Taxes			$	145,944	$	—
Miscellaneous			$	500	$	—
Total:			$	489,913	$	21,101
Tenant % Share for Suite 300:	8.55	%	$	41,936.55
Tenant % MiniCAM for Suite 300:	24.69	%			$	6,209.84
Tenant $ Share:			$	41,936.55	$	5,209.84
Year 2004 CAM Expense Estimates—Tenant Prorata Share			Annual		Monthly
2004 Estimated CAM Expenses for Suite 300:			$	41,936.55	$	3,494.71
2004 Estimated MiniCAM Expenses for Suite 300:			$	5,209.84	$	434.15
			$	47,146.39	$	3,928.87
Monthly CAM Payments					Per SqFt
Monthly CAM Estimate for Suite 300:			$	3,494.71	$	0.51
Monthly MiniCAM Estimate for Suite 300:			$	434.15	$	0.06
Total Monthly CAM & MiniCam Due:			$	3,928.87	$	0.57

QuickLinks

Exhibit 10.10

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE—NET AIR COMMERCIAL REAL ESTATE ASSOCIATION
OPTION(S) TO EXTEND STANDARD LEASE ADDENDUM
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE—NET BETWEEN CITO CORP., AS LESSOR, AND FASTCLICK, Inc. AS LESSEE DATED APRIL 21, 2004 FOR THE PREMISES: 201 N. CALLE CESAR CHAVEZ, SUITE 300
2004 COMMON AREA MAINTENANCE EXPENSE ESTIMATES

EX-23.1

Exhibit 23.1

CONSENT OF ERNST & YOUNG LLP,
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We consent to the reference to our firm under the caption "Experts" and to the use of our report dated June 3, 2004 in the Registration Statement (Form S-1) and related Prospectus of Fastclick, Inc. for the registration of shares of its common stock.

/s/  ERNST & YOUNG LLP

Los Angeles, CA
December 21, 2004