<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CAREERBUILDER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<TABLE>
<S> <C> <C>
DELAWARE 7370 54-1779164
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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11495 SUNSET HILLS ROAD
RESTON, VIRGINIA 20190
(703) 709-1001
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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ROBERT J. MCGOVERN
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
CAREERBUILDER, INC.
11495 SUNSET HILLS ROAD
RESTON, VIRGINIA 20190
(703) 709-1001
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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Copies to:
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DAVID SYLVESTER, ESQ. JOCELYN M. AREL, ESQ.
BRENT B. SILER, ESQ. TESTA, HURWITZ & THIBEAULT, LLP
HALE AND DORR LLP HIGH STREET TOWER
1455 PENNSYLVANIA AVENUE, NW 125 HIGH STREET
WASHINGTON, D.C. 20004 BOSTON, MA 02110
TELEPHONE: (202) 942-8400 TELEPHONE: (617) 248-7000
TELECOPY: (202) 942-8484 TELECOPY: (617) 248-7100
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
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,
check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.001 par value per share..................... $51,750,000 $14,387
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933,
as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and 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 MARCH 8, 1999
SHARES
[LOGO]
COMMON STOCK
-------------------------
We are selling shares of common stock and the selling
stockholders are selling shares of common stock. We
will not receive any of the proceeds from the shares of
common stock sold by the selling stockholders.
The underwriters have an option to purchase a maximum of
additional shares from
us to cover over-allotments of shares.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price of the common stock is
expected to be between $ and $ per share. We
will make application to list the common stock on The
Nasdaq Stock Market's National Market under the
symbol "CBDR".
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
STARTING ON PAGE 6.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSIONS CAREERBUILDER SELLING STOCKHOLDERS
-------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
Total.................................. $ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 1999, against payment in immediately available funds.
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
BANCBOSTON ROBERTSON STEPHENS
HAMBRECHT & QUIST
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
Prospectus dated , 1999.
<PAGE> 3
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TABLE OF CONTENTS
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PAGE
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<S> <C>
PROSPECTUS SUMMARY.......................................... 3
RISK FACTORS................................................ 6
USE OF PROCEEDS............................................. 19
DIVIDEND POLICY............................................. 19
CAPITALIZATION.............................................. 20
DILUTION.................................................... 22
SELECTED FINANCIAL DATA..................................... 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 25
BUSINESS.................................................... 33
MANAGEMENT.................................................. 43
CERTAIN TRANSACTIONS........................................ 49
PRINCIPAL AND SELLING STOCKHOLDERS.......................... 52
DESCRIPTION OF CAPITAL STOCK................................ 55
SHARES ELIGIBLE FOR FUTURE SALE............................. 58
UNDERWRITING................................................ 60
NOTICE TO CANADIAN RESIDENTS................................ 62
LEGAL MATTERS............................................... 63
EXPERTS..................................................... 63
ADDITIONAL INFORMATION...................................... 63
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
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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.
"CareerBuilder(R)," "TeamBuilder(R)," "CareerBuilder Achieve(R),"
"CareerBuilder Network," "TeamBuilder Online," "Personal Search Agent," "PSA"
and the CareerBuilder logo are trademarks or service marks of CareerBuilder.
Other trademarks or service marks appearing in this prospectus are the property
of their respective holders.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999 (25 DAYS AFTER THE 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 DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before investing in the common stock. You should read the entire
prospectus carefully. Unless otherwise indicated, all information contained in
this prospectus assumes that the underwriters will not exercise their
over-allotment option and reflects the mandatory conversion into common stock of
all outstanding shares of preferred stock upon the closing of this offering.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors" and elsewhere in this prospectus.
CAREERBUILDER, INC.
We are a leading provider of comprehensive online recruitment offerings for
employers and job seekers. Through our network of more than 550 subscriber
customers, job seekers who have registered over 320,000 Personal Search Agents
and 18 premier interactive media companies, we bring employers and job seekers
together by:
- providing employers with the ability to advertise job openings and manage
their online recruiting efforts on a premier network of integrated
Internet sites, including CareerBuilder.com and career sites for 18
interactive media companies, including cYnet, Business Week, USA Today
and NBC Interactive; and
- providing job seekers with the tools to find, explore, evaluate and
compare job opportunities.
The emergence of the Internet and the growth in its use have created an
opportunity to more efficiently recruit job seekers. Companies from a broad
range of industries are expected to do at least a portion of their employee
recruiting over the Internet. Forrester Research, Inc., an independent research
firm, estimates that the size of the online recruitment market will be $1.7
billion by 2003, an increase from $105 million in 1998. Forrester also forecasts
that, by 2003, most large companies, 60% of medium-sized companies and 20% of
small companies will use the Internet for recruiting purposes.
We believe there is significant need for online recruitment offerings that
leverage the attributes of the Internet. These offerings should enable employers
both to advertise job openings on a variety of sites and to focus their
recruiting efforts on select communities of potential employees. These offerings
should also be easily accessible to employers, allowing them to effectively
manage their online recruiting efforts, and should allow potential job seekers
to easily locate, compare, explore, evaluate and apply for jobs.
Our solution is to provide offerings which fulfill these online recruitment
needs. Our offerings consist of:
- THE CAREERBUILDER NETWORK. The CareerBuilder Network consists of
CareerBuilder.com and career sites located on the Internet sites of 18
premier interactive media companies. Through the use of the CareerBuilder
Network, an employer can directly solicit and target job seekers in a
broad range of online communities.
- CAREERBUILDER.COM. CareerBuilder.com is the flagship site of the
CareerBuilder Network and one of the largest independent career sites on
the Internet.
- TEAMBUILDER. TeamBuilder consists of TeamBuilder Online and TeamBuilder
Software. Through the use of TeamBuilder, employers can access the
CareerBuilder Network to post job advertisements and manage their online
recruiting efforts.
As of December 31, 1998, our customer base included more than 550
subscriber customers in industries such as technology, financial services,
health care, professional services, retail and
telecommunications/communications. Our customers include Microsoft Corporation,
Network Associates, Inc., Capital One
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<PAGE> 5
Financial Corporation, Freddie Mac, Bristol-Meyers Squibb Company, Bowne and
Co., Inc. and GTE Internetworking.
Our strategy is to be the leading provider of online recruitment offerings.
To do this, we plan to:
- enhance and expand our online recruitment offerings;
- employ a multi-channel sales strategy to address a greater portion of the
recruitment market;
- expand the CareerBuilder Network;
- strengthen CareerBuilder.com as a premier branded career site on the
Internet;
- expand internationally; and
- pursue acquisitions of providers of related online recruitment services.
We sell our online recruitment offerings through our own direct and
telesales organizations and through ADP's 470-person major accounts division
sales force, which is our primary sales channel for customers with between 100
and 1000 employees.
We were incorporated in Delaware on November 6, 1995 under the name
NetStart, Inc. and changed our name to CareerBuilder, Inc. on March 2, 1998. Our
principal office is located at 11495 Sunset Hills Road, Reston, Virginia 20190.
Our telephone number is (703)709-1001.
THE OFFERING
Common stock offered by us............. shares
Common stock offered by the selling
stockholders........................... shares
Common stock to be outstanding after
the offering........................... shares
Proposed Nasdaq National Market
symbol................................. CBDR
Use of proceeds........................ - repayment of $2.0 million of debt;
- working capital;
- general corporate purposes; and
- potential acquisitions.
The number of shares of common stock to be outstanding after the offering
excludes (1) an aggregate of 3,300,000 shares of common stock reserved for
issuance under our stock plans, of which 1,428,655 shares were subject to
outstanding options as of February 28, 1999 at a weighted average exercise price
of $0.98 per share and (2) 567,889 shares of common stock issuable upon exercise
of outstanding warrants. See "Management -- Stock Plans," "Description of
Capital Stock -- Warrants" and Note 8 of Notes to Financial Statements.
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(NOVEMBER 1995)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1995 1996 1997 1998
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<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue......................................... $ -- $ 138 $ 1,925 $ 7,006
Gross profit.......................................... -- 102 1,608 5,315
Income (loss) from operations......................... (52) (2,412) (7,421) (12,018)
Net income (loss)..................................... (52) (2,416) (7,314) (11,987)
Preferred stock dividend requirements................. -- (71) (549) (1,128)
Net income (loss) available to common stockholders.... (52) (2,487) (7,863) (13,115)
Basic and diluted net income (loss) available per
share............................................... $(0.01) $ (0.48) $ (1.80) $ (2.92)
Shares used to compute basic and diluted net income
(loss) available per share.......................... 5,468 5,133 4,366 4,494
Unaudited pro forma basic and diluted net income
(loss) per share.................................... $ (0.87)
Shares used to compute unaudited pro forma basic and
diluted net income (loss) per share................. 13,850
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 2,709 $ 13,709
Working capital (deficit)................................... (3,899) 7,101
Total assets................................................ 6,042 17,042
Convertible preferred stock................................. 18,931 -- --
Total stockholders' equity (deficit)........................ (21,520) 8,411
</TABLE>
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For an explanation of basic and diluted net income (loss) available per share,
unaudited pro forma basic and diluted net income (loss) per share and the
weighted average shares used to determine the basic and diluted net income
(loss) available per share and unaudited pro forma basic and diluted net income
(loss) per share, see Note 2 to Notes to Financial Statements.
The pro forma balance sheet data gives effect to the issuance of 2,018,350
shares of Class F convertible preferred stock on January 26, 1999 and the
receipt of the net proceeds therefrom and the conversion of all shares of
preferred stock into common stock, which will occur automatically upon the
closing of this offering.
The pro forma as adjusted balance sheet data gives effect to the sale of the
shares of common stock offered by us in the offering at an assumed
initial public offering price of $ per share, after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us.
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RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus,
including our financial statements and related notes, before you purchase any
common stock. The risks and uncertainties described below are not the only ones
facing CareerBuilder. Additional risks and uncertainties, including those not
presently known to us or that we currently deem immaterial, may also impair our
business.
WE HAVE A LIMITED OPERATING HISTORY WITH WHICH YOU CAN EVALUATE OUR BUSINESS AND
PROSPECTS
We commenced operations in November of 1995, recorded our first revenue in
the third quarter of 1996 and introduced the first commercial version of
TeamBuilder Online in November 1997. Accordingly, we have only a limited
operating history with which you can evaluate our business and prospects. In
addition, our prospects must be considered in light of the risks and
uncertainties encountered by companies in the early stages of development in new
and rapidly evolving markets, specifically the online recruitment market. These
risks include:
- our ability to attract and retain a larger number of employers to recruit
online using the CareerBuilder Network instead of other online
recruitment providers and traditional recruiting methods;
- our ability to attract a larger number of job seekers to the
CareerBuilder.com flagship site and our interactive media company
affiliates' ability to continue to attract potential job seekers to the
other sites on the CareerBuilder Network; and
- our ability to maintain our current, and add new, online interactive
media companies to the CareerBuilder Network.
If we fail to manage these risks successfully, our business, results of
operations and financial condition will be materially and adversely affected.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE
We have incurred substantial net losses in every fiscal period since we
began operations. As of December 31, 1998, our accumulated deficit was
approximately $21.8 million. We are not certain when we will become profitable,
if at all. Even if we do achieve profitability, we may not sustain or increase
profitability on a quarterly or annual basis. Failure to achieve or maintain
profitability may materially and adversely affect the market price of our common
stock. We have generated relatively small amounts of revenue until recent fiscal
quarters, while increasing operating expenditures in all areas, particularly in
sales and marketing. If revenues grow more slowly than we anticipate, or if
operating expenses exceed our expectations or cannot be adjusted accordingly,
our business, results of operations and financial condition will be materially
and adversely affected.
OUR QUARTERLY RESULTS MAY FLUCTUATE WHICH COULD CAUSE THE PRICE OF OUR COMMON
STOCK TO FALL
Our quarterly revenue and results of operations are difficult to predict
and may fluctuate significantly from quarter to quarter. If our quarterly
revenue or results of operations fall below expectations of investors or public
market analysts, the price of our common stock could fall substantially. Our
quarterly revenue is difficult to predict and our results of operations may
fluctuate for several reasons, including:
- the online recruitment market is at an early stage of development and
therefore it is difficult to predict customer demand for online
recruitment offerings;
- ADP is our principal sales channel for customers with 100 to 1,000
employees, and ADP's selling efforts will significantly affect our
results of operations in any quarter;
- customers may choose to pay for our services on a per-job posting basis
instead of a multi-month subscription basis; and
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- our cost of revenue, and therefore our operating results, could be
affected by the allocation of our customers' job advertisements among the
CareerBuilder.com site and the other sites on the CareerBuilder Network,
as well as the relative mix of sales between our sales force and sales
made through ADP.
A significant percentage of our expenses, such as employee compensation and
rent, are relatively fixed. Moreover, our expense levels are based, in part, on
our expectations of future revenue. As a result, any shortfall in revenue in
relation to our expectations could cause significant changes in our results of
operations from quarter to quarter and could result in increased or continued
quarterly losses.
Because of these factors, we believe that period to period comparisons of
our results of operations are not necessarily meaningful, and therefore you
should not rely on our quarterly revenue and results of operations to predict
our future performance.
OUR EARNINGS COULD BE SUBJECT TO SEASONAL FLUCTUATIONS
Because our online recruitment business model is new, we do not know if the
online recruitment market is subject to seasonal fluctuations. We believe that
revenue from print media, recruiting search firms and other traditional
recruiting services are generally lower in the months of August, November and
December because of reduced recruiting and job search activity during vacation
periods and holiday seasons. As the online recruitment market develops, seasonal
and cyclical patterns in online recruiting may affect our revenue. In addition,
we believe that we may experience lower sales through our ADP sales channel from
November through January because of a year-end focus by ADP's sales force on
ADP's core business, which may adversely affect our revenue. If seasonal
fluctuations develop in the online recruitment market or as a result of ADP's
selling efforts, our business, results of operations and financial condition
could be materially and adversely affected.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY A RECESSION
Online recruitment is a new industry and we do not know how sensitive our
industry is to general economic conditions. Demand for online recruitment
offerings may be significantly and adversely affected by the level of economic
activity and employment in the United States and abroad. A recession could cause
employers to reduce or postpone their recruiting efforts generally, and their
online recruiting efforts in particular. Therefore, if a significant economic
downturn or recession occurs in the United States or abroad, our business,
results of operations and financial condition could be materially and adversely
affected.
WE ARE DEPENDENT ON ADP'S SALES FORCE FOR A SIGNIFICANT PORTION OF OUR REVENUE
ADP is our principal sales channel for customers with between 100 and 1,000
employees. Sales of our offerings by ADP accounted for approximately 21% of our
revenue in the quarter ended December 31, 1998, as compared to 9% in the quarter
ended September 30, 1998. We expect ADP's contribution to our revenue to
continue to increase at least through 1999. Our existing agreement with ADP may
be terminated by ADP at any time after January 2002 upon 120 days notice. It is
possible that ADP's sales force will not continue to market our services beyond
January 2002.
ADP may not continue to market our services at the current levels even
during the remaining term of the agreement. Although our agreement with ADP
provides certain financial incentives for ADP to market our recruitment
offerings and ADP is subject to certain sales and marketing commitments, ADP is
not required to achieve specific revenue targets. Our agreement with ADP
generally prohibits us from entering into any reseller, distribution or similar
agreement with any other payroll or benefits administration provider. Moreover,
under the terms of the ADP agreement, it is possible that under certain limited
circumstances ADP could seek to market alternative online recruitment services,
including those of our competitors, during the term of our agreement. Even after
the termination of our agreement with ADP, ADP will continue to receive a share
of recurring revenue derived from customers originally identified by ADP in its
capacity as a sales agent for as long as these customers continue to receive any
of our services for which orders were procured by ADP.
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We may not be able to attract a sufficient number of employer customers
without the ADP sales channel. In addition, we may compete with ADP for sales of
our services to companies employing between 500 and 1,000 persons. It is
possible that we may not manage this channel conflict effectively and that our
relationship with ADP could be materially and adversely affected. If our
relationship with ADP is discontinued or damaged, or if the level of sales
through the ADP channel is lower than expected, our business, results of
operations and financial condition would be materially and adversely affected.
See "Certain Transactions -- Transactions with ADP."
WE COULD BE REQUIRED TO RECORD SIGNIFICANT EXPENSES IF ADP ACHIEVES CERTAIN
REVENUE GOALS
Should ADP achieve certain revenue milestones, warrants to purchase shares
of common stock would become exercisable to purchase up to 457,026 shares of
common stock commencing on each of March 31, 2001 and March 31, 2002 at an
exercise price of $5.00 per share. The ADP warrant contains certain antidilution
provisions that increase the number of shares for which the warrant is
exercisable if we issue additional shares, particularly for financing purposes
(not including the shares sold in this offering). After the completion of this
offering, the antidilution provisions are limited so that the number of shares
of common stock for which each of the installments of the warrant may be
exercisable is limited to a maximum of 502,729 shares. For more information
regarding this warrant, see "Certain Transactions -- Transactions with ADP."
If and when it becomes probable that the net revenue we will receive from
ADP will reach the necessary level for either installment of the warrant to
vest, we would begin to record an expense reflecting the fair value of the
warrant, which will be determined in part based on the market price of the
common stock. We would begin to recognize this expense on the determination of
probability that the revenue targets would be achieved, continuing through the
actual vesting date. We would initially estimate the amount of the expense at
the time of the determination that achievement is probable, based in part on the
market price of the common stock at that time. At the time of actual vesting,
the fair value of the warrant would be remeasured and, if different from the
value used in initially estimating the expense, the difference would be
reflected as an additional charge or credit at that time. Accordingly, the
higher our stock price is at the time probability is determined, or the actual
vesting occurs, the more significant would be the expense we would be required
to record. That expense could be spread over multiple quarters or concentrated
in one quarter. If we are required to record significant expense, our results of
operations for that period could fall below the expectations of our investors or
public market analysts, which could cause the price of our common stock to fall
substantially.
THE INTERNET IS UNPROVEN AS A RECRUITING MEDIUM
Our future is highly dependent on a significant increase in the use of the
Internet as a recruiting medium. The online recruitment market is new and
rapidly evolving, and we cannot yet gauge its effectiveness as compared to
traditional recruiting methods. As a result, demand and market acceptance of
online recruitment offerings are uncertain. Most of our current and potential
employer customers have little or no experience using the Internet for
recruiting purposes and have allocated only a limited portion of their
recruiting budgets to online recruiting. The adoption of online recruiting,
particularly by those entities that have historically relied upon traditional
methods of recruiting, requires the acceptance of a new way of conducting
business, exchanging information and advertising for jobs. Such customers may
find online recruiting to be less effective for meeting their hiring needs
relative to traditional methods of recruiting employees. We cannot assure you
that the online recruitment market will continue to emerge or become
sustainable. If the online recruitment market fails to develop or develops more
slowly than we expect, our business, results of operations and financial
condition would be materially and adversely affected.
OUR BUSINESS MODEL IS UNPROVEN
We first recorded revenue in September 1996 from sales of TeamBuilder
Software. At that time, software sales were a significant component of our
revenue. Beginning in late 1997, we began offering online subscriptions by means
of TeamBuilder Online and software sales became a smaller component of our
revenue. In May 1998,
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<PAGE> 10
we again evolved our business model when we introduced the CareerBuilder
Network, enabling our customers to advertise job openings across a network of
affiliate sites. Accordingly, our business model and profit potential are
unproven. To be successful, we must develop and market online recruitment
offerings that achieve broad market acceptance by employers, job seekers and
interactive media companies. In addition, CareerBuilder.com and the
CareerBuilder Network affiliate sites must generate sufficient job seeker
traffic with demographic characteristics attractive to our employer customers.
It is possible that we will be required to further adapt our business model
in response to additional changes in the online recruitment market or if our
current business model is not successful. If we are not able to anticipate
changes in the online recruitment market or if our business model is not
successful, our business, financial condition and results of operations would be
materially and adversely affected.
WE MAY BE UNABLE TO CONTINUE TO BUILD AWARENESS OF THE "CAREERBUILDER.COM" BRAND
NAME
We believe that continuing to build awareness of the "CareerBuilder.com"
brand name is critical to achieving widespread acceptance of our online
recruitment offerings. Brand recognition is a key differentiating factor among
providers of online recruitment offerings and we believe it could become more
important as competition in the online recruitment market increases. In order to
promote our brand, we may find it necessary to increase our marketing budget or
otherwise increase our financial commitment to creating and maintaining brand
awareness among potential customers. If we fail to successfully promote and
maintain our brand or incur significant expenses in promoting our brand, our
business, results of operations and financial condition could be materially and
adversely affected.
WE MAY HAVE DIFFICULTY MAINTAINING AND EXPANDING THE CAREERBUILDER NETWORK
We believe that a primary reason the CareerBuilder Network is valuable to
employers is that our major interactive media affiliates appeal to a variety of
distinct Internet user communities in strategic broad-based, vertical,
geographic and diversity categories. Our agreements with affiliate members
generally have one-year terms, subject to extension. In addition, one of our key
business strategies is to expand the CareerBuilder Network by adding additional
interactive media affiliates targeting a variety of distinct online communities.
If an affiliate member declines to renew its agreement with us and withdraws
from the CareerBuilder Network, and if we are unable to find a suitable
replacement for that affiliate member, or if we otherwise are not successful in
our efforts to expand the CareerBuilder Network, the CareerBuilder Network may
be less valuable to employers, and our business, results of operations and
financial condition could be materially and adversely affected.
OUR PLANS FOR INTERNATIONAL EXPANSION INVOLVE RISKS
Our strategy includes expansion into international markets through a
combination of partnerships, acquisitions and internal business expansion. We
may experience difficulty in managing international operations due to
competition from local and foreign-based recruitment services, technical
problems, distance, language barriers and cultural differences. Accordingly, we
may not be able to successfully execute our business plan in foreign markets.
Our future international operations will be subject to additional risks,
including difficulties in staffing and managing foreign operations, legal
uncertainties inherent in transnational operations such as export and import
regulations, tariffs and other trade barriers, taxation issues, unexpected
changes in trading policies, regulatory requirements and exchange rates,
operational issues such as longer customer payment cycles and greater
difficulties in collecting accounts receivable, seasonal reductions in business
activity, language and cultural differences, and issues relating to
uncertainties of laws and enforcement relating to the protection of intellectual
property. General political and economic trends may also affect our future
international operations.
In addition, we cannot accurately predict the impact of future fluctuations
in foreign currency exchange rates on our results of operations and financial
condition. To the extent future revenue from international expansion is
denominated in foreign currencies, we would be subject to increased risks
relating to foreign
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currency exchange rate fluctuations. Although we may attempt to hedge currency
rate exposure in the future, any hedging policies that we might implement could
be unsuccessful.
If revenue from international ventures are not adequate to cover our
investment in those ventures, our business, results of operations and financial
condition could be materially and adversely affected.
OUR ACQUISITION STRATEGY INVOLVES RISKS
Our business strategy includes the pursuit of strategic acquisitions. From
time to time, we have engaged in discussions with third parties concerning
potential acquisitions of product lines, technologies and businesses. We
currently do not have active negotiations, commitments or agreements with
respect to any acquisition.
In executing our acquisition strategy, we may be unable to identify
suitable acquisition candidates. In addition, we expect to face competition from
other providers of online recruitment solutions for acquisition candidates,
making it more difficult to acquire suitable companies on favorable terms.
Furthermore, if we pursue any acquisition, our management could spend a
significant amount of time and effort in identifying, negotiating and completing
the acquisition. If we complete an acquisition, we may have to devote a
significant amount of time and management resources to integrate the acquired
business with our existing business. In addition, an acquisition may not produce
the revenue, earnings or business synergies that we anticipated, and an acquired
service or technology may not perform as expected. Accordingly, our acquisition
efforts may not succeed, and the time, capital and management and other
resources spent on an acquisition that failed to meet our expectations could
cause our business, results of operations and financial condition to be
materially and adversely affected.
Acquisitions also involve numerous other risks, including:
- difficulties in the assimilation of the operations, technologies,
products and personnel of the acquired company;
- risks of entering markets in which we have no or limited prior
experience;
- the applicability of rules and regulations that might restrict our
ability to operate; and
- the potential loss of key employees of the acquired company.
To pay for an acquisition, we might use capital stock, or cash, including
the proceeds from this offering, or a combination of both. Alternatively, we may
borrow money from a bank or other lender. If we use capital stock, our
stockholders will experience dilution. If we use cash or debt financing, our
financial liquidity will be reduced. In addition, from an accounting
perspective, an acquisition may involve non-recurring charges or involve
amortization of significant amounts of goodwill that could adversely affect our
results of operations.
WE MAY HAVE DIFFICULTY IN MANAGING OUR GROWTH
Our rapid growth has sometimes strained, and may in the future strain, our
managerial and other resources. Our acquisition strategy and plans for
international expansion could further increase our growth and place additional
burdens on our resources. Our ability to manage growth will depend, in part, on
our ability to continue to enhance our operating, financial and management
information systems. Our personnel, systems, procedures and controls may not be
adequate to support our growth. If we are unable to manage growth effectively,
our business, results of operations and financial condition could be materially
and adversely affected.
WE ARE DEPENDENT ON A NUMBER OF KEY EXECUTIVES
Our future success depends upon the skills, experience and efforts of our
executive officers and key technical employees, in particular Robert J.
McGovern, our Chairman of the Board, President and Chief Executive Officer. Mr.
McGovern founded CareerBuilder in 1995 and has been instrumental in determining
our structure, direction and focus. None of our employees have employment
agreements with us. If we lose the
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services of Mr. McGovern or any of our other executive officers or other key
employees, our business, results of operations and financial condition could be
materially and adversely affected.
WE MUST COMPETE FOR SKILLED PERSONNEL
We depend upon the ability to attract, hire, train and retain highly
skilled technical, sales and marketing, and support personnel, particularly with
expertise in Internet solutions and online recruiting. Competition for qualified
personnel throughout our industry is intense. If we fail to attract, hire or
retain such personnel, our business, results of operations and financial
condition could be materially and adversely affected. In particular, we plan to
expand our sales and marketing and customer support organizations. Based on our
experience, it takes an average of four months for a new salesperson to achieve
targeted levels of productivity. If we are not successful in hiring additional
qualified salespeople or increasing the productivity of our existing sales
force, our business, results of operations and financial condition could be
materially and adversely affected.
OUR MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE
Our success is dependent on our ability to develop new and enhanced
software, services and related products to meet rapidly evolving requirements
for online recruitment software and solutions. Trends that could have a critical
impact on our success include:
- rapidly changing technology in the area of online recruiting;
- evolving industry standards, including both formal and de facto standards
relating to online recruiting;
- developments and changes relating to the Internet;
- competing products and services that offer increased functionality; and
- changes in employer and job seeker requirements.
If we are unable to develop and introduce new products and services, or
enhancements to existing products and services, in a timely and successful
manner, our business, results of operations and financial condition could be
materially and adversely affected.
WE HAVE SIGNIFICANT COMPETITION FROM A VARIETY OF SOURCES
The market for online recruitment solutions is intensely competitive and
highly fragmented. We compete with companies, including recruiting search firms,
that offer a single database "job board" solution, such as Monster.com and
Career Mosaic, as well as newspapers, magazines and other traditional media
companies that provide online job search services, such as CareerPath.com. We
also compete with large Internet information hubs, or portals, such as AOL.com.
We may experience competition from potential customers to the extent that they
develop their own online recruitment offerings internally. In addition, we
compete with traditional recruiting services, such as newspapers and employee
recruiting agencies, for a share of employers' total recruiting budgets. We
expect to face additional competition as other established and emerging
companies, including print media companies and employee recruiting agencies with
established brands, enter the online recruitment market. We may also face
competition from organizations that choose to develop online recruitment
offerings internally. It is also possible that, as the online recruitment market
develops and new products and services are introduced, we may face competition
from the members of the CareerBuilder Network.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, greater brand recognition and a larger installed customer base than
we do. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships to expand their offerings
and to offer more comprehensive solutions.
We believe that there will be rapid business consolidation in the online
recruitment industry. Accordingly, new competitors may emerge and rapidly
acquire significant market share. In addition, new technologies will
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likely increase the competitive pressures that we face. The development of
competing technologies by market participants or the emergence of new industry
standards may adversely affect our competitive position. As a result of these
and other factors, if we are not able to compete effectively with current or
future competitors, our business, results of operations and financial condition
could be materially and adversely affected.
WE HAVE A NUMBER OF RISKS ASSOCIATED WITH THE YEAR 2000
Computer systems and software must accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, many software and
computer systems may need to be upgraded in order to be year 2000 compliant.
Significant uncertainties exist in the software industry concerning the
potential effects associated with the failure of computer systems and software
to be year 2000 compliant. We have completed an assessment of the year 2000
readiness of our products and systems. We cannot, however, be certain that we
have identified all of the potential risks to our business that could result
from matters related to the year 2000. We have identified the following risks
that you should be aware of:
- UNDETECTED YEAR 2000 PROBLEMS COULD MATERIALLY AND ADVERSELY AFFECT OUR
CURRENTLY SUPPORTED PRODUCTS. We believe that all of the products and
services we currently offer to our customers were year 2000 compliant at
the time of installation or launch, and we have conducted tests to
validate their compliance. We cannot be certain, however, that these
tests would have detected all potential year 2000 problems. The failure
of our currently supported products to be fully year 2000 compliant could
result in claims by or liability to our customers, job seekers and
members of the CareerBuilder Network, in which case our business, results
of operations and financial condition could be materially and adversely
affected.
- YEAR 2000 PROBLEMS COULD MATERIALLY AND ADVERSELY AFFECT THE
CAREERBUILDER NETWORK. It is possible that members of the CareerBuilder
Network will experience problems with their Internet sites due to
software that is not year 2000 compliant, leading to disruptions on the
CareerBuilder Network, which could cause our business, results of
operations and financial condition to be materially and adversely
affected.
- YEAR 2000 PROBLEMS COULD MATERIALLY AND ADVERSELY AFFECT OUR INTERNAL
SYSTEMS. Although we have reviewed year 2000 compliance statements made
by the vendors for certain of our internal software systems, such as
accounting and database management, we have not conducted tests to
validate the year 2000 compliance of any of our internal software
systems. Accordingly, it is possible that such systems could contain
undetected problems that could cause serious and costly disruptions which
would have a material adverse effect on our business, results of
operations and financial condition. We are developing contingency plans
to address issues that we believe are critical to our operations in the
event that internal systems fail to be year 2000 compliant and anticipate
finalizing such plans by June 30, 1999.
- PURCHASING PATTERNS OF OUR CUSTOMERS COULD BE MATERIALLY AND ADVERSELY
AFFECTED BY YEAR 2000 ISSUES. The purchasing patterns of our customers
and potential customers may be materially and adversely affected by year
2000 issues because they may be required to expend significant resources
on year 2000 compliance matters, rather than investing in new online
recruitment services such as those we offer. In addition, as the new year
approaches, employers may elect to spend a greater portion of their
recruiting budgets on traditional recruitment methods rather than risk
disruption in their job advertisements in the event of technical
difficulties related to year 2000 problems. We have not conducted a year
2000 review of ADP. Should ADP experience year 2000 problems, they could
be distracted from marketing our services at current levels, which could
reduce revenue derived from ADP.
- YEAR 2000 PROBLEMS COULD AFFECT THE INTERNET. Disruptions caused by year
2000 problems could affect Internet usage generally, which could cause
our business, results of operations and financial condition to be
materially and adversely affected.
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OUR COMPUTER SYSTEMS AND THE COMPUTER SYSTEMS OF OUR CAREERBUILDER NETWORK
AFFILIATES COULD FAIL OR OVERLOAD
The success of our online recruitment offerings is highly dependent on the
efficient and uninterrupted operation of our computer and communications
hardware systems. Substantially all of our communications hardware and certain
of our other computer hardware operations that maintain the CareerBuilder
Network are located at Global Center's facilities in Herndon, Virginia. Fire,
floods, earthquakes, power loss, telecommunications failures and similar events
could damage or cause interruptions in these systems. Computer viruses,
electronic break-ins or other similar disruptive problems could also adversely
affect CareerBuilder.com or other sites on the CareerBuilder Network. If our
systems or the systems of any of the Internet sites of the members of the
CareerBuilder Network are affected by any of these occurrences, our business,
results of operations and financial condition could be materially and adversely
affected. Our insurance policies may not cover, or if covered, may not
adequately compensate us for, any losses that may occur due to any failures or
interruptions in our systems or the systems of the Internet sites of the members
of the CareerBuilder Network. We do not presently have any secondary "off-site"
systems or a formal disaster recovery plan.
In addition, CareerBuilder.com and the Internet sites of the other members
of the CareerBuilder Network must accommodate a high volume of traffic and
deliver frequently updated information. CareerBuilder.com and the Internet sites
of each of the members of the CareerBuilder Network have in the past and may in
the future experience slower response times or decreased traffic for a variety
of reasons. In addition, our users depend on Internet service providers and
other Internet site operators for access to CareerBuilder.com and the Internet
sites of the members of the CareerBuilder Network. Many of the Internet service
providers have experienced significant outages in the past, and could experience
outages, delays and other difficulties due to system failures unrelated to our
systems. If we experience any of these problems, our business, results of
operations and financial condition could be materially and adversely affected.
WE RELY ON TECHNOLOGY THAT IS OWNED BY THIRD PARTIES
We license technology that is incorporated into our services and related
products from third parties. Examples include licenses from Centura Software
Corporation, for certain database technology, and from Verity, Inc., for
full-text indexing and searching technology. In light of the rapidly evolving
nature of Internet technology, we may increasingly need to rely on technology
from other vendors. Technology from others may not continue to be available to
us on commercially reasonable terms, if at all. The loss or inability to access
such technology could result in delays in our development and introduction of
new services and related products or enhancements until equivalent or
replacement technology could be accessed, if available, or developed internally,
if feasible. If we experience such delays, our business, results of operations
and financial condition could be materially and adversely affected.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR SOFTWARE CONTAINS BUGS
Our software products, including TeamBuilder Online and TeamBuilder
Software, could contain undetected errors or "bugs" that could adversely affect
their performance. Additionally, we regularly introduce new releases and
periodically introduce new versions of our software products. The occurrence of
errors in our current products or new products or enhancements could result in
loss of or delay in revenue, loss of market share, failure to achieve market
acceptance, diversion of development resources, injury to our reputation and
damage to our efforts to build brand awareness, any of which could cause our
business, results of operations and financial condition to be materially and
adversely affected.
OUR BUSINESS IS DEPENDENT ON THE INTERNET INFRASTRUCTURE
Our success will depend, in large part, upon the development and
maintenance of the Internet infrastructure as a reliable network backbone with
the necessary speed, data capacity and security, and timely development of
enabling products, such as high speed modems, for providing reliable Internet
access and services. We cannot assure you that the Internet infrastructure will
continue to effectively support the demands placed on it as the
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Internet continues to experience increased numbers of users, greater frequency
of use or increased bandwidth requirements of users. Even if the necessary
infrastructure or technologies are developed, we may have to spend considerable
resources to adapt our offerings accordingly. Furthermore, in the past, the
Internet has experienced a variety of outages and other delays. Any future
outages or delays could affect the Internet sites on which our customers' job
advertisements are posted and the willingness of employers and job seekers to
use our online recruitment offerings. If any of these events occur, our
business, results of operations and financial condition could be materially and
adversely affected.
INTERNET SECURITY CONCERNS COULD HINDER THE GROWTH OF THE INTERNET AND INTERNET
USAGE
The need to securely transmit confidential information over the Internet
has been a significant barrier to electronic commerce and communications over
the Internet. Any well-publicized compromise of security on the Internet could
deter more people from using the Internet or from using it to conduct
transactions that involve transmitting confidential information, such as a job
seeker's resume or an employer's hiring needs. We may be required to incur
significant costs to protect against the threat of security breaches to
CareerBuilder.com and the CareerBuilder Network or to alleviate problems caused
by such breaches. If any of these events occur, our business, results of
operations and financial condition could be materially and adversely affected.
WE MAY BE ADVERSELY AFFECTED BY GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES
ASSOCIATED WITH THE INTERNET
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent, but the legislative and
regulatory treatment of the Internet remains largely unsettled. The United
States Congress recently adopted Internet laws regarding copyrights, taxation
and the protection of children. In addition, a number of other legislative and
regulatory proposals under consideration by federal, state, local and foreign
governments could lead to additional laws and regulations affecting the right to
collect and use personally identifiable information, online content, user
privacy, taxation, access charges and liability for third-party activities,
among other things. For example, the growth and development of the market for
Internet commerce may prompt calls for more stringent consumer protection laws,
both in the United States and abroad, that may impose additional burdens on
companies conducting business over the Internet.
Although our transmissions originate from 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. The European Union
recently enacted its own privacy regulations that may result in limits on the
collection and use of certain user information. Courts may seek to apply
existing laws not explicitly relating to the Internet in ways that could impact
the Internet, and it may take years to determine whether and how laws such as
those governing intellectual property, privacy, libel and taxation will affect
the Internet and the online recruitment industry.
Existing or future laws or regulations affecting the Internet could lessen
the growth in use of the Internet generally and decrease the acceptance of the
Internet as a communications, commercial and advertising medium, and could
reduce the demand for our services or increase our cost of doing business, all
of which could cause our business, financial condition and results of operations
to be materially and adversely affected.
WE MAY BE LIABLE FOR INFORMATION RETRIEVED FROM OR TRANSMITTED OVER THE INTERNET
We may be sued for defamation, negligence, copyright or trademark
infringement, personal injury or other legal claims relating to information that
is published or made available on CareerBuilder.com and the other sites on the
CareerBuilder Network. These types of claims have been brought, sometimes
successfully, against online services in the past. We could also be sued for the
content that is accessible from CareerBuilder.com and the other CareerBuilder
Network sites through links to other Internet sites or through content and
materials that may be posted by members in chat rooms or bulletin boards. We
also offer email services, which may subject us to potential risks, such as
liabilities or claims resulting from unsolicited email (spamming), lost or
misdirected messages, security breaches, illegal or fraudulent use of email, or
interruptions or delays in email service. Our insurance does not specifically
provide for coverage of these types of claims and therefore may not adequately
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protect us against these types of claims. In addition, we could incur
significant costs in investigating and defending such claims, even if we
ultimately are not found liable. If any of these events occur, our business,
results of operations and financial condition could be materially and adversely
affected.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
PROPRIETARY TECHNOLOGY
Our success depends to a significant degree upon the protection of our
proprietary technology, including TeamBuilder Software and TeamBuilder Online.
The unauthorized reproduction or other misappropriation of our proprietary
technology could enable third parties to benefit from our technology without
paying us for it. If this were to occur, our business, results of operations and
financial condition could be materially and adversely affected.
We rely upon a combination of patents, copyright, trade secret and
trademark laws and non-disclosure and other contractual arrangements to protect
our proprietary rights. The steps we have taken to protect our proprietary
rights, however, may not be adequate to deter misappropriation of proprietary
information. We may not be able to detect unauthorized use of our proprietary
information and take appropriate steps to enforce our intellectual property
rights. Moreover, the laws of other countries in which we may market our
services in the future may afford little or no effective protection of our
intellectual property.
If we resort to legal proceedings to enforce our intellectual property
rights, the proceedings could be burdensome and expensive and could involve a
high degree of risk.
OTHERS COULD CLAIM THAT WE INFRINGE THEIR INTELLECTUAL PROPERTY
Although we attempt to avoid infringing known proprietary rights of third
parties, we are subject to the risk of claims alleging infringement of third
party proprietary rights. If we were to discover that any element of our online
recruitment offerings violates third party proprietary rights, we might not be
able to obtain licenses on commercially reasonable terms to continue offering
our entire online recruitment offerings without substantial reengineering and
that any effort to undertake such reengineering might not be successful. In
addition, product development is inherently uncertain in a rapidly evolving
technological environment in which there may be numerous patent applications
pending, which are confidential when filed, with regard to similar technologies.
Any claim of infringement could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from our business. Furthermore, a party making such a claim could
secure a judgment that requires us to pay substantial damages. A judgment could
also include an injunction or other court order that could prevent us from
selling our products. If any of these events occurred, our business, results of
operations and financial condition could be materially and adversely affected.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND SUCH ADDITIONAL FINANCING MAY
NOT BE AVAILABLE
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least the next 12
months. We may need to raise additional capital, however, to fund more rapid
expansion, both in the United States and internationally, to develop new and to
enhance existing services to respond to competitive pressures, and to acquire
complementary services, businesses or technologies. We have raised capital
through the issuance of equity securities three times since January 1998. If we
raise additional funds through further issuances of equity or convertible debt
securities, the percentage of ownership of our current stockholders will be
reduced and such securities may have rights, preferences and privileges senior
to those of our current stockholders, including stockholders purchasing shares
in this offering. In addition, we may not be able to obtain additional financing
on terms favorable to us, if at all. If adequate funds are not available or are
not available on terms favorable to us, our business, results of operations and
financial condition could be materially and adversely affected.
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YOU WILL HAVE A NUMBER OF MARKET RISKS TYPICALLY ASSOCIATED WITH INITIAL PUBLIC
OFFERINGS
Before this offering, there has been no public market for our common stock.
If you purchase shares of common stock in the offering, you will pay a price
that was not established in a competitive market, but was negotiated between us
and the underwriters. The price of the common stock that will prevail in the
market after the offering may be higher or lower than the price you pay.
Although our common stock will be listed on The Nasdaq Stock Market's National
Market, an active trading market may not develop or be sustained after this
offering.
The stock market in general has recently experienced extreme price and
volume fluctuations. In particular, the market prices of shares in newly public
technology companies, particularly those offering Internet-based products and
services, have been extremely volatile and have experienced fluctuations that
have often been unrelated or disproportionate to the operating performance of
such companies. The market price of our common stock could be highly volatile
and subject to wide fluctuations in response to many factors, including the
following:
- quarterly variations in our results of operations;
- adverse business developments impacting CareerBuilder;
- changes in financial estimates by securities analysts;
- investor perception of CareerBuilder and online recruitment services in
general;
- announcements by our competitors of new products and services; and
- general economic conditions both in the United States and in foreign
countries.
In the event of broad fluctuations in the market price of our common stock,
you may be unable to resell your shares at or above the offering price.
Securities class action litigation has often been brought against companies
that experience volatility in the market price of their securities. Litigation
brought against us could result in substantial costs to us in defending against
the lawsuit and a diversion of management's attention that could cause our
business, results of operations and financial condition to be materially and
adversely affected.
YOU WILL EXPERIENCE AN IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF
YOUR INVESTMENT
Purchasers of shares of common stock in this offering will experience
immediate and substantial dilution of $ in the pro forma net tangible
book value per share of common stock (assuming a public offering price of
$ per share). The public offering price per share of common stock is
expected to be substantially higher than the net tangible book value per share
of common stock. This dilution is due in large part to the fact that earlier
investors in CareerBuilder paid substantially less than the public offering
price when they purchased their shares of common stock. The exercise of
outstanding options and warrants to purchase our common stock will result in
additional dilution per share. See "Certain Transactions -- Transactions with
ADP."
CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BY-LAWS MAY MAKE A
TAKEOVER OF OUR COMPANY MORE DIFFICULT
Delaware corporate law and our certificate of incorporation and by-laws
contain certain provisions that could have the effect of delaying, deferring or
preventing a change in control of CareerBuilder or our management. These
provisions could discourage proxy contests and make it more difficult for you
and other stockholders to elect directors and take other corporate actions.
These provisions could also limit the price that certain investors might be
willing to pay in the future for shares of our common stock. Certain of these
provisions:
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- authorize the issuance of "blank check" preferred stock (preferred stock
which can be created and issued by the Board of Directors without prior
stockholder approval) with rights senior to those of common stock;
- provide for a staggered Board of Directors (so that it would take three
successive annual meetings to replace all directors);
- prohibit stockholder action by written consent; and
- establish advance notice requirements for submitting nominations for
election to the Board of Directors and for proposing matters that can be
acted upon by stockholders at a meeting.
FUTURE SALES BY EXISTING STOCKHOLDERS COULD DEPRESS THE MARKET PRICE OF OUR
COMMON STOCK
Immediately following this offering, there will be shares of our
common stock outstanding, or shares if the underwriters exercise their
over-allotment option in full. Sales of our common stock in the public market
following this offering could adversely affect the market price of our common
stock. Moreover, the perception in the public market that such sales could occur
could depress the market price of the common stock. All of the shares sold in
this offering will generally be freely tradable in the open market.
Substantially all of the restricted securities are subject to lock-up agreements
with the underwriters. Person subject to lock-up agreements have agreed not to
sell shares of common stock for a period of 180 days after the completion of
this offering without the underwriters' prior permission. The following sets
forth information regarding potential sales of restricted securities:
- no shares will be eligible for immediate resale;
- 33,625 shares will be eligible for resale beginning 90 days after the
date of this prospectus;
- 14,721,765 additional shares will be eligible for resale beginning 180
days after the date of this prospectus; and
- the remainder of the shares will be eligible for resale from time to time
thereafter.
We intend to register an aggregate of up to 3,300,000 shares of common
stock, which may be issued under our Stock Option Plan, 1999 Stock Incentive
Plan, 1999 Director Stock Option Plan and 1999 Employee Stock Purchase Plan
after this offering. No shares will be issuable under the 1999 Employee Stock
Purchase Plan until at least six months after the closing of this offering.
Some of our existing stockholders and warrantholders have the right to
require us to register their shares of common stock with the Securities and
Exchange Commission. If we register their shares of common stock, they can sell
those shares in the public market.
OUR OFFICERS AND DIRECTORS WILL EXERCISE SIGNIFICANT CONTROL OVER OUR AFFAIRS
We anticipate that the executive officers, directors and entities
affiliated with them will control approximately % of our outstanding common
stock following the completion of this offering. These stockholders, if they act
together, may be able to exercise substantial influence over all matters
requiring approval by our stockholders, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also have the effect of delaying or preventing a change in control of
CareerBuilder and might affect the market price of the common stock.
WE HAVE BROAD DISCRETION IN USE OF PROCEEDS
We have not identified specific uses for the proceeds from the offering,
and we can spend most of the proceeds of this offering in ways with which you
may not agree. You will not have the opportunity to evaluate the economic,
financial or other information on which we base our decisions on how to use the
proceeds.
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USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately
$ million (approximately $ million if the underwriters' overallotment
option is exercised in full) from the sale of the shares of common stock offered
by us, at an assumed initial public offering price of $ , after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by us. We will not receive any proceeds from the sale of shares of
common stock by the selling stockholders.
We intend to use a portion of the net proceeds to repay all amounts
outstanding under our bridge loan. The bridge loan is secured by substantially
all of our assets and bears interest at a variable rate. As of December 31,
1998, the interest rate for the bridge loan was 11.75%. The bridge loan matures
on the earlier of June 30, 1999 or the date of certain other events, including
the closing of this offering. As of December 31, 1998, the outstanding balance
of the bridge loan was $2.0 million.
We expect to use the remaining net proceeds from this offering for working
capital and other general corporate purposes, including potential acquisitions.
We are not currently participating in any active negotiations and have no
commitments or agreements with respect to any acquisition. We intend to invest
the net proceeds from this offering in short-term, investment grade,
interest-bearing instruments until they are used.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
we do not anticipate paying cash dividends in the foreseeable future. We
currently intend to retain earnings, if any, to fund the development and growth
of our business. The terms of our revolving credit agreement restrict our
ability to declare and pay cash dividends.
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CAPITALIZATION
The following table sets forth as of December 31, 1998 (1) the actual
capitalization of CareerBuilder, (2) the pro forma capitalization of
CareerBuilder as described in footnote 1 below, and (3) the pro forma as
adjusted capitalization of CareerBuilder after giving effect to the sale by
CareerBuilder of the shares of common stock offered hereby at an
assumed initial public offering price of $ per share and after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by CareerBuilder. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and Notes thereto appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA (1) AS ADJUSTED
-------- ------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short term debt............................................. $ 3,450 $ 3,450
Convertible preferred stock:
Class A convertible preferred stock, $.001 par value per
share; 1,562,500 shares authorized, 1,507,500 shares
issued and outstanding (actual); no shares authorized,
issued or outstanding (pro forma and pro forma as
adjusted)............................................... 482 -- --
Class B convertible preferred stock, $.001 par value per
share; 2,151,420 shares authorized, 2,071,420 shares
issued and outstanding (actual); no shares authorized,
issued or outstanding (pro forma and pro forma as
adjusted)............................................... 1,574 -- --
Class C convertible preferred stock, $.001 par value per
share; 3,188,889 shares authorized, issued and
outstanding (actual); no shares authorized, issued or
outstanding (pro forma and pro forma as adjusted)....... 4,566 -- --
Class D convertible preferred stock, $.001 par value per
share; 2,045,785 shares authorized, issued and
outstanding (actual); no shares authorized, issued or
outstanding (pro forma and pro forma as adjusted)....... 7,279 -- --
Class E convertible preferred stock, $.001 par value per
share; 1,024,351 shares authorized, issued and
outstanding (actual); no shares authorized, issued or
outstanding (pro forma and pro forma as adjusted)....... 5,030 -- --
Class F convertible preferred stock, $.001 par value per
share; no shares authorized, issued and outstanding
(actual); no shares authorized, issued and outstanding
(pro forma and pro forma as adjusted)(1)................ -- -- --
-------- -------- ------
Total convertible preferred stock.................. 18,931 -- --
Stockholders' equity (deficit):
Preferred stock, $.001 par value; no shares authorized,
issued or outstanding (actual); 10,000,000 shares
authorized, no shares issued or outstanding (pro forma
and pro forma as adjusted).............................. -- -- --
Common stock, $.001 par value per share; 17,500,000 shares
authorized, 4,855,333 shares issued and outstanding
(actual); 21,000,000 shares authorized; 16,711,628
shares issued and outstanding (pro forma); 50,000,000
shares authorized, shares issued and
outstanding (pro forma as adjusted)(2).................. 5 17
Additional paid-in capital................................ 244 30,163
Accumulated deficit....................................... (21,769) (21,769)
-------- -------- ------
Total stockholders' equity (deficit)............... (21,520) 8,411
-------- -------- ------
Total capitalization........................................ $ 861 $ 11,861 $
======== ======== ======
</TABLE>
19
<PAGE> 21
- -------------------------
(1) Gives effect to (a) issuance of 2,018,350 shares of Class F convertible
preferred stock on January 26, 1999 and the receipt of the net proceeds
therefrom, (b) the automatic conversion of all outstanding shares of
convertible preferred stock into an aggregate of 11,856,295 shares of common
stock upon the closing of this offering and (c) the filing upon the closing
of the offering of CareerBuilder's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of common stock to
50,000,000 and authorize CareerBuilder to issue 10,000,000 shares of
preferred stock.
(2) Excludes (a) an aggregate of 2,100,000 shares of common stock reserved for
issuance under CareerBuilder's Stock Option Plan, of which 1,483,517 shares
were subject to outstanding options as of December 31, 1998 at a weighted
average exercise price of $0.64 per share and (b) 40,568 shares of common
stock issuable upon exercise of outstanding warrants. See
"Management -- Stock Plans," "Description of Capital Stock -- Warrants," and
Note 8 of Notes to Financial Statements.
20
<PAGE> 22
DILUTION
The pro forma net tangible book value of CareerBuilder as of December 31,
1998 was $8,242,000 or $0.49 per share of common stock. Pro forma net tangible
book value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding, after
giving effect to the issuance of 2,018,350 shares of Class F convertible
preferred stock in January 1999 and the receipt of the proceeds therefrom and
the automatic conversion of all shares of preferred stock into common stock at
the closing of the offering. After giving effect to the sale of the shares of
common stock offered by CareerBuilder pursuant to this offering at an assumed
initial public offering price of $ per share and after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by CareerBuilder, CareerBuilder's pro forma net tangible book value as of
December 31, 1998 would have been approximately $ million, or $ per
share. This value represents an immediate increase in such pro forma net
tangible book value of $ per share to existing stockholders and an immediate
dilution of $ per share to new investors purchasing shares in this offering.
If the initial public offering price is higher or lower, the dilution to the new
investors will in turn be greater or less. The following table illustrates the
per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $
Pro forma net tangible book value at December 31,
1998.................................................. $ 0.49
Increase attributable to this offering.................
Pro forma net tangible book value after this offering.......
--------
Dilution to new investors................................... $
========
</TABLE>
The following table summarizes, as of December 31, 1998 on the pro forma
basis described above, the total number of shares of common stock purchased from
CareerBuilder, the total consideration paid and the average price paid per share
by the existing stockholders and by the new investors based upon an assumed
initial public offering price of $ per share before deducting the estimated
underwriting discounts and commissions and offering expenses payable by
CareerBuilder:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................ 16,711,628 % $30,180,000 % $1.81
New investors................................
---------- ----- ----------- ----- -----
Total.............................. 100.0% $ 100.0% $
========== ===== =========== ===== =====
</TABLE>
As of December 31, 1998, there were also outstanding options to purchase an
additional 1,483,517 shares of common stock at a weighted average exercise price
of $0.64 per share. In addition, warrants to purchase 40,568 shares of common
stock at an exercise price of $4.93 per share were then outstanding. To the
extent these options or the warrants are exercised, there will be further
dilution to new investors in the pro forma net tangible book value of their
shares. See "Management -- Stock Plans" and Note 8 of Notes to Financial
Statements.
21
<PAGE> 23
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with the Financial Statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," appearing elsewhere
in this prospectus. The statement of operations data for the years ended
December 31, 1996, 1997 and 1998, and the balance sheet data as of December 31,
1997 and 1998, are derived from, and are qualified by reference to, audited
financial statements included elsewhere in this prospectus. The balance sheet
data as of December 31, 1995 and 1996 and the statement of operations data for
the period from inception (November 1995) through December 31, 1995 are derived
from unaudited financial statements of the Company that do not appear in this
prospectus. The unaudited financial statements have been prepared on the same
basis as the audited financial statements and, in the opinion of CareerBuilder's
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information set forth
therein. The historical results are not necessarily indicative of the operating
results to be expected in the future.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(NOVEMBER 1995) YEAR ENDED DECEMBER 31,
THROUGH ------------------------------------
DECEMBER 31, 1995 1996 1997 1998
----------------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Service fees.................................. $ -- $ 94 $ 1,263 $ 6,648
Software license fees......................... -- 44 662 358
------ ------- ------- --------
Total revenue.............................. -- 138 1,925 7,006
Cost of revenue:
Service fees.................................. -- 30 197 1,629
Software license fees......................... -- 6 120 62
------ ------- ------- --------
Total cost of revenue...................... -- 36 317 1,691
------ ------- ------- --------
Gross profit.................................... -- 102 1,608 5,315
------ ------- ------- --------
Operating expenses:
Product development........................... -- 521 1,310 2,293
General and administrative.................... 52 663 1,267 2,305
Sales and marketing........................... -- 1,330 6,452 12,735
------ ------- ------- --------
Total operating expenses................... 52 2,514 9,029 17,333
------ ------- ------- --------
Income (loss) from operations................... (52) (2,412) (7,421) (12,018)
Net interest income (expense)................... -- (4) 107 31
------ ------- ------- --------
Net income (loss)............................... (52) (2,416) (7,314) (11,987)
------ ------- ------- --------
Preferred stock dividend requirements........... -- (71) (549) (1,128)
Net income (loss) available to common
stockholders.................................. $ (52) $(2,487) $(7,863) $(13,115)
====== ======= ======= ========
Basic and diluted net income (loss) available
per share..................................... $(0.01) $ (0.48) $ (1.80) $ (2.92)
Shares used to compute basic and diluted net
income (loss) available per share............. 5,468 5,133 4,366 4,494
Unaudited pro forma basic and diluted net income
(loss) per share.............................. $ (0.87)
Shares used to compute unaudited pro forma basic
and diluted net income (loss) per share....... 13,850
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1995 1996 1997 1998
---- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $454 $ 82 $ 1,909 $ 2,709
Working capital (deficit)................................. 454 (520) (131) (3,899)
Total assets.............................................. 475 371 3,589 6,042
Convertible redeemable preferred stock.................... -- 2,135 10,700 18,931
Stockholders' equity (deficit)............................ $475 $(2,440) $(9,752) $(21,520)
</TABLE>
23
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of CareerBuilder should be read in conjunction with
"Selected Financial Data" and Financial Statements and Notes thereto appearing
elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks and uncertainties. CareerBuilder's
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
CareerBuilder provides comprehensive online recruitment offerings for
employers and job seekers. CareerBuilder was founded in November 1995 and has
grown from 7 employees as of March 31, 1996 to 111 employees as of December 31,
1998. During the period from inception (November 1995) to September 1996,
CareerBuilder had insignificant revenue and was primarily engaged in developing
online recruiting technology, specifically TeamBuilder Software and the
CareerBuilder.com career site. During July and August of 1996, CareerBuilder
expanded its operations by adding direct sales and marketing personnel.
CareerBuilder's sales commenced in September 1996. CareerBuilder began
generating more significant revenue in the fourth quarter of 1996 through the
sale of perpetual licenses for TeamBuilder Software and through customer service
fees for monthly subscriptions. In November 1997, CareerBuilder introduced
TeamBuilder Online, to provide Internet-based access to its online recruitment
offerings. In May 1998, CareerBuilder launched the CareerBuilder Network by
hosting the career sites located on the Internet sites of interactive media
companies.
CareerBuilder's revenue is derived principally from service fees and, to a
lesser extent, license fees for TeamBuilder Software. From inception (November
1995) through December 31, 1997, CareerBuilder generated approximately 66% of
its total revenue from service fees and 34% from software license fees. In 1998,
service fees accounted for more than 95% of total revenue. CareerBuilder expects
that service fee revenue will continue to account for a substantial portion of
its revenue for the foreseeable future.
- SERVICE FEES. Service fees include (1) subscription fees received from
customers that post up to a specific number of job advertisements per
month on the career sites that constitute the CareerBuilder Network, (2)
banner and other employment advertising fees and (3) fees for recruiting
services provided by CareerBuilder. The majority of CareerBuilder's
service revenue comes from monthly subscription fees. Customers typically
subscribe for three-, six- or twelve-month subscriptions. Customers may
also subscribe on an individual posting basis. TeamBuilder Online is
provided to customers as part of their monthly service or individual
advertising fee. The monthly subscription fees are recognized ratably
over the subscription period. Revenue from specific numbers of individual
monthly postings are recognized during the month following the month such
postings are made. Revenue from banner and other employment advertising
on CareerBuilder.com is recognized when the advertising impressions are
delivered. Recruitment services revenue is recognized as the services are
performed.
- SOFTWARE LICENSE FEES. Software license fees are generated from sales of
TeamBuilder Software. Customers generally purchase a perpetual license
for TeamBuilder Software and associated features, with an average license
fee for sales made in 1998 of approximately $8,100. Revenue from the sale
of perpetual software licenses is composed of gross revenue less
estimated returns, and is recognized upon delivery to customers.
The members of the CareerBuilder Network receive a portion of the
subscription fee from customers that choose to post job advertisements on their
respective career sites. The portion of the subscription fee paid to members of
the CareerBuilder Network is included in cost of revenue. In addition,
CareerBuilder pays certain
24
<PAGE> 26
fees, including advertising and marketing fees, to four current CareerBuilder
Network members, and, in one case, may offset a portion of these advertising
fees through job advertising fees paid to this member.
CareerBuilder is party to a joint marketing and sales representative
agreement with ADP. Pursuant to the joint marketing and sales representative
agreement, ADP receives a percentage of the total monthly revenue received by
CareerBuilder from orders procured by ADP. This sales commission fee is included
in CareerBuilder's cost of revenue. The sales commission fee as a percentage of
service fee revenue varies based on the relative job posting activity of these
customers between CareerBuilder.com and the other sites on the CareerBuilder
Network. CareerBuilder recognizes all of the revenue derived from the ADP sales
channel. ADP is generally responsible for billing and collecting from these
customers. Revenue from orders procured by ADP accounted for approximately 11%
of CareerBuilder's total revenue in 1998, including 21% of its total revenue for
the quarter ended December 31, 1998. CareerBuilder expects revenue from this
joint marketing and sales representative agreement to increase in 1999 as a
percentage of its total revenue.
CareerBuilder's cost of revenue as a percentage of revenue has increased
over the last several quarters. This increase primarily resulted from two
factors: (1) an increase in sales commissions paid to ADP and (2) an increase in
fees paid to members of the CareerBuilder Network. CareerBuilder believes that
cost of revenue will continue to increase in 1999 as a percentage of revenue due
to these factors.
In connection with the execution of the joint marketing and sales
representative agreement and its amendment and the sale of shares of capital
stock to ADP, CareerBuilder issued a warrant to ADP, which vests in three
installments. The first installment of 380,000 shares vested at the signing of
the amendment. CareerBuilder also issued a warrant representing the right to
purchase up to 147,321 shares of common stock in connection with an agreement
with an affiliate member of the CareerBuilder Network. CareerBuilder expects to
recognize approximately $2.4 million of expense related to these warrants
between 1999 and 2002, ratably, based on the duration of these agreements. In
addition, if and when ADP achieves certain revenue milestones, CareerBuilder
could incur additional expenses that could be substantial. For more information
regarding the ADP warrant and these potential expenses, see "Certain
Transactions -- Transactions with ADP" and Note 14 of Notes to Financial
Statements.
CareerBuilder has incurred substantial net losses in every fiscal period
since its inception (November 1995), and as of December 31, 1998 had an
accumulated deficit of $21.8 million. Losses totaled $7.3 million in 1997 and
$12.0 million in 1998. Such net losses and the accumulated deficit resulted from
CareerBuilder's lack of substantial revenue and the significant costs incurred
in developing its online recruitment offerings, including establishing the
CareerBuilder Network.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1998
REVENUE
CareerBuilder's total revenue increased 264% from $1.9 million in 1997 to
$7.0 million in 1998. Service revenue increased 426% from $1.3 million in 1997
to $6.6 million in 1998. The increases in total revenue and service revenue were
primarily due to an increase in the number of customers subscribing to the
CareerBuilder Network as a result of increased direct and telesales efforts and
increased marketing and promotional activities. These increases were also
attributable, in part, to the fact that, during 1998, ADP began offering
CareerBuilder's online. Revenue derived from ADP's efforts comprised 11% of
total revenue in 1998. Revenue from software license fees declined 46% from
$662,000 in 1997 to $358,000 in 1998. This decrease was primarily due to
CareerBuilder's introduction of TeamBuilder Online at the end of 1997 and more
customers choosing to use TeamBuilder Online rather than TeamBuilder Software to
access CareerBuilder's online recruitment services.
COST OF REVENUE
Cost of revenue consists of commissions paid to ADP for its sales of
CareerBuilder's online recruitment offerings, fees paid to CareerBuilder Network
affiliates, and expense associated with the cost of hosting the career sites on
the CareerBuilder Network, including depreciation. Cost of revenue also includes
expenses
25
<PAGE> 27
associated with customer support and the delivery of professional services and
royalties to third parties for certain software included in TeamBuilder
Software. Cost of revenue in absolute dollars increased 433% from $317,000 in
1997 to $1.7 million in 1998 and as a percentage of revenue increased from 16%
in 1997 to 24% in 1998. These increases were primarily due to commissions paid
to ADP, fees paid to the members of the CareerBuilder Network and expenses,
including depreciation, associated with hosting the career sites on the
CareerBuilder Network, offset in part by a decline in royalties paid to third
parties. In 1997, CareerBuilder did not pay any sales commission fees to ADP or
service fees to the CareerBuilder Network affiliates. CareerBuilder anticipates
that cost of revenue as a percentage of revenue will increase in 1999 to the
extent revenue from ADP continues to increase relative to total revenue and
customers increase their usage of affiliate sites on the CareerBuilder Network.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and related benefits for sales and marketing personnel, advertising and
promotional expenses, trade show expenses, advertising and marketing fees paid
to certain members of the CareerBuilder Network and depreciation expense. Sales
and marketing expenses increased 97% from $6.5 million in 1997 to $12.7 million
in 1998. The increase in sales and marketing expenses was due primarily to an
increase in sales personnel, including the establishment of a telesales force
and a channel sales force that supports ADP's sales effort, costs related to the
continued development of CareerBuilder's marketing and branding campaigns, and,
to a lesser extent, commissions associated with higher revenue. CareerBuilder
also incurred expenses for advertising fees to certain CareerBuilder Network
affiliates in 1998 amounting to approximately $872,000. No advertising fees were
paid to members of the CareerBuilder Network in 1997. CareerBuilder expects
sales and marketing expenses to increase in 1999 in absolute dollars but
decrease as a percentage of revenue as CareerBuilder hires additional personnel,
continues to promote its CareerBuilder.com brand and adds affiliates to the
CareerBuilder Network.
Product Development. Product development expenses include expenses for
research, design and development of CareerBuilder's proprietary technology
incorporated in the TeamBuilder offerings and the CareerBuilder Network, and
expenses associated with operating TeamBuilder Online and the operation of the
CareerBuilder Network. CareerBuilder, to date, has expensed all development
costs as they have been incurred. Product development expenses increased 75%
from $1.3 million in 1997 to $2.3 million in 1998. The increase in product
development expenses was due primarily to the establishment of the career sites
of the CareerBuilder Network and the substantial increase in the number of
customers utilizing TeamBuilder Online. CareerBuilder believes that continued
investment in the CareerBuilder Network and its associated network
infrastructure is critical to attaining its strategic objectives, and as a
result, expects product development expenses in 1999 to increase in absolute
dollars but to decrease as a percentage of revenue.
General and Administrative. General and administrative expenses consist
primarily of compensation for administrative and executive staff, fees for
professional services, bad debt expense, depreciation expense and general office
expenses. General and administrative expenses increased 82% from $1.3 million in
1997 to $2.3 million in 1998. The increase in general and administrative
expenses was due primarily to the increase in administrative and executive
personnel. CareerBuilder expects general and administrative expenses to increase
in absolute dollars but decrease as a percentage of revenue in 1999 as
CareerBuilder hires additional personnel and incurs additional costs related to
the growth of its business and with being a public company.
NET INTEREST INCOME (EXPENSE)
Net interest income (expense) was approximately $107,000 in 1997 and
$31,000 in 1998. Interest income was attributable to cash, cash equivalents and
short-term investments primarily attributable to the net proceeds received by
CareerBuilder from its issuance of equity securities, net of interest expenses
primarily from CareerBuilder's revolving credit line.
26
<PAGE> 28
TAXES
CareerBuilder has incurred significant operating losses for all periods
from inception (November 1995) through December 31, 1998. CareerBuilder has
recorded a valuation allowance for 100% of its net deferred tax assets as the
future realization of the tax benefit is not sufficiently assured.
YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1997
REVENUE
Revenue increased from $138,000 in 1996 to $1.9 million in 1997. The
increase in revenue was due primarily to an increase in the number of companies
purchasing TeamBuilder Software and utilizing CareerBuilder's services. This
increase in the number of customers utilizing CareerBuilder's services was due
to CareerBuilder's substantially increasing its direct sales efforts and
marketing and promotional activities.
COST OF REVENUE
From 1996 to 1997, cost of revenue consisted of expenses associated with
customer support, and a small royalty paid to a third party for an embedded
database included with TeamBuilder Software. Cost of revenue increased from
$36,000 in 1996 to $317,000 in 1997. This increase in cost of revenue was due to
an increase in the sales of software products and the expansion of the Company's
support activities. Cost of revenue as a percentage of total revenue decreased
from 26% in 1996 to 16% in 1997. Cost of revenue as a percentage of total
revenue decreased in 1997 relative to 1996 because expenses associated with
customer support activity as a percentage of total revenue declined.
CareerBuilder invested in developing a customer support function in 1996 in
anticipation of future revenue.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses increased 385% from $1.3
million in 1996 to $6.5 million in 1997. The increase in sales and marketing
expenses was due primarily to an increase in sales personnel, greater costs
associated with opening sales offices across the United States, an increase in
commissions due to higher revenue and costs related to the continued development
of CareerBuilder's marketing and branding campaigns.
Product Development. Product development expenses increased 151% from
$521,000 in 1996 to $1.3 million in 1997. The increase in product development
expenses was due primarily to an increase in the number of employees and to the
development of CareerBuilder's customer support infrastructure.
General and Administrative. General and administrative expenses increased
91% from $663,000 in 1996 to $1.3 million in 1997. The increase in general and
administrative expenses was due primarily to the increase in administrative and
executive personnel and professional services fees.
NET INTEREST INCOME (EXPENSE)
Net interest income (expense) was $(4,000) in 1996 and $107,000 in 1997.
PERIOD FROM INCEPTION (NOVEMBER 1995) THROUGH DECEMBER 31, 1995
During the period from inception (November 1995) through December 31, 1995,
CareerBuilder was in the development stage and its operating activities
consisted primarily of recruiting of personnel and research and development of
its product line. CareerBuilder generated no revenue and incurred operating
expenses totaling $52,000 during this period. Accordingly, a comparison of the
operating results for that period and 1996 is not meaningful and has been
omitted.
27
<PAGE> 29
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth a summary of CareerBuilder's quarterly
operating results for the eight quarters ended December 31, 1998. This
information was derived from unaudited interim financial statements that, in the
opinion of management, were prepared on a basis consistent with the financial
statements contained elsewhere in this prospectus and include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair statement
of such information when read in conjunction with the Financial Statements and
Notes thereto. The results of operations for any quarter are not necessarily
indicative of the results of operations for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
---------- --------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Service fees...................... $ 139 $ 259 $ 359 $ 506 $ 903 $ 1,413 $ 1,978 $ 2,354
Software license fees............. 130 134 214 184 151 91 41 75
------- ------- ------- ------- ------- ------- ------- -------
Total revenue................... 269 393 573 690 1,054 1,504 2,019 2,429
Cost of revenue:
Service fees...................... 30 33 32 102 173 273 485 698
Software license fees............. 24 22 56 18 17 26 15 4
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenue........... 54 55 88 120 190 299 500 702
------- ------- ------- ------- ------- ------- ------- -------
Gross profit........................ 215 338 485 570 864 1,205 1,519 1,727
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Product development............... 226 260 364 460 592 508 606 587
General and administrative........ 185 317 277 488 508 454 556 787
Sales and marketing............... 987 1,308 1,997 2,160 2,858 3,261 3,244 3,372
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses........ 1,398 1,885 2,638 3,108 3,958 4,223 4,406 4,746
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations....... (1,183) (1,547) (2,153) (2,538) (3,094) (3,018) (2,887) (3,019)
Net interest income (expense)....... 39 23 15 30 8 2 18 3
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................... $(1,144) $(1,524) $(2,138) $(2,508) $(3,086) $(3,016) $(2,869) $(3,016)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- --------- -------- --------- -------- --------- --------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Service fees........................ 52% 66% 63% 73% 86% 94% 98% 97%
Software license fees............... 48 34 37 27 14 6 2 3
---- ---- ---- ---- ---- ---- ---- ----
Total revenue..................... 100 100 100 100 100 100 100 100
Cost of revenue:
Service fees........................ 11 8 6 15 16 18 24 29
Software license fees............... 9 6 10 3 2 2 1 0
---- ---- ---- ---- ---- ---- ---- ----
Total cost of revenue............. 20 14 16 18 18 20 25 29
---- ---- ---- ---- ---- ---- ---- ----
Gross profit.......................... 80 86 84 82 82 80 75 71
---- ---- ---- ---- ---- ---- ---- ----
Operating expenses:
Product development................. 84 66 64 67 56 34 30 24
General and administrative.......... 69 81 48 71 48 30 28 32
Sales and marketing................. 367 333 349 313 271 217 161 139
---- ---- ---- ---- ---- ---- ---- ----
Total operating expenses.......... 520 480 461 451 375 281 219 195
---- ---- ---- ---- ---- ---- ---- ----
Income (loss) from operations......... (440) (394) (377) (369) (293) (201) (144) (124)
Net interest income (expense)......... 14 6 3 4 1 -- 1 --
---- ---- ---- ---- ---- ---- ---- ----
Net income (loss)..................... (426)% (388)% (374)% (365)% (292)% (201)% (143)% (124)%
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
28
<PAGE> 30
CareerBuilder's total revenue has increased in each consecutive quarter
during the eight fiscal quarters ending December 31, 1998, as a result of
increased market acceptance of CareerBuilder's online recruitment offerings.
Service fees have increased from 52% of total revenue in the first quarter of
1997 to 97% of total revenue in the fourth quarter of 1998, which reflects
CareerBuilder's transition from selling TeamBuilder Software to selling
TeamBuilder Online to access its online recruitment services. ADP began selling
CareerBuilder's online recruitment services in 1998, increasing from 3% of total
revenue in the second quarter of 1998 to 9% in the third quarter of 1998 and 21%
in the fourth quarter of 1998.
In 1997, cost of revenue as a percentage of total revenue declined from 20%
in the first quarter of 1997 to 18% in the fourth quarter of 1997. The decrease
in cost of revenue was due primarily to the growth in total revenue in relation
to customer support expenses, and a reduction, relative to total revenue, in
expenses associated with third party providers of technology embedded in
TeamBuilder Software. This trend was reversed in 1998, as cost of revenue as a
percentage of total revenue increased to 29% in the fourth quarter of 1998. The
increase in cost of revenue as a percentage of total revenue was primarily due
to:
- commissions paid to ADP, which began selling CareerBuilder's online
recruitment offerings in February 1998;
- service fees paid to affiliates of the CareerBuilder Network, which was
offered to CareerBuilder's customers beginning in May 1998; and
- expenses, including depreciation, associated with hosting the career
sites on the CareerBuilder Network.
These relative increases in fees and expenses were partially offset by a
decline in third-party royalties related to TeamBuilder Software. Cost of
revenue as a percentage of total revenue is affected on a quarterly basis by the
proportion of revenue from ADP relative to other sales channels, as well as
customers' relative use of affiliates' career sites within the CareerBuilder
Network.
Operating expenses have increased in each consecutive quarter during 1997
and 1998 primarily due to an increase in personnel and in marketing and
promotional activities. Sales and marketing expenses increased substantially in
each quarter in 1997 as CareerBuilder expanded its sales and marketing presence
to major cities in the United States. The increase in sales and marketing
expenses in 1998 was primarily due to the increase in personnel associated with
the telesales force and an increase in marketing communications expenses.
General and administrative expenses have increased, especially since the third
quarter of 1997, as CareerBuilder increased its executive and administrative
personnel and invested in its financial and business infrastructure.
In light of the evolving nature of its business and limited operating
history, CareerBuilder believes that period to period comparisons of its
historical revenue and operating results may not be meaningful and should not be
relied on as indications of future performance. Although CareerBuilder has
experienced sequential quarterly revenue growth during the last two years,
CareerBuilder does not believe that its historical revenue growth rates are
necessarily sustainable or indicative of future revenue growth.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, CareerBuilder has financed its activities primarily
through net cash proceeds from private placements of equity securities, totaling
$19.0 million through December 31, 1998. In January 1999, CareerBuilder
completed a private placement of Class F convertible preferred securities of
$11.0 million.
Net cash used in operating activities was $2.2 million in 1996, $5.8
million in 1997 and $9.2 million in 1998. Net cash used in operating activities
resulted from net operating losses and increases in accounts receivable,
partially offset by increases in deferred revenue, accrued expenses and accounts
payable.
Net cash used in investing activities was $242,000 in 1996, $1.2 million in
1997 and $1.1 million in 1998. Net cash used in investing activities was
primarily related to purchases of computer and network equipment, as well as
leasehold improvements.
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Cash provided by financing activities was $2.0 million in 1996, $8.8
million in 1997 and $11.1 million in 1998. Net cash provided by financing
activities was primarily due to private placements of equity securities. In
addition, CareerBuilder has utilized revolving credit lines secured by accounts
receivable and computer equipment to fund its operations.
As of December 31, 1998, CareerBuilder had $2.7 million of cash and cash
equivalents. In addition, CareerBuilder completed a private placement of Class F
convertible preferred securities of $11.0 million in January 1999.
CareerBuilder's principal commitments at December 31, 1998 consisted of
obligations under a revolving credit facility and bridge loan.
In December 1998, CareerBuilder entered into a $2.0 million revolving
credit facility and a $4.0 million bridge loan. The credit facility and the
bridge loan are secured by substantially all of the Company's assets, and bear
interest at a variable rate. The credit facility is renewable annually at the
lender's discretion. The bridge loan becomes due in full on the closing of this
offering. Each of the credit facility and the bridge loan is evidenced by a
promissory note in the amount borrowed. On December 31, 1998, the amount
available for borrowings under the credit facility was $1.5 million and
outstanding borrowings were $1.45 million. At that date, the amount borrowed
under the bridge loan was $2.0 million.
CareerBuilder anticipates it will spend up to $600,000 for capital
equipment in 1999. CareerBuilder has also entered into agreements that provide
for CareerBuilder to pay certain advertising and marketing fees to four of its
current CareerBuilder Network affiliates of up to approximately $3.1 million in
1999. One of these agreements allows the payments to be offset by job posting
fees paid to such affiliate.
CareerBuilder believes that the net proceeds of this offering, together
with its existing cash and cash equivalents, will be sufficient to meet its
anticipated cash requirements for working capital and capital expenditures for
at least the next 12 months.
YEAR 2000 COMPLIANCE
Computer systems and software must accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, many software and
computer systems may need to be upgraded in order to be year 2000 compliant.
Significant uncertainties exist in the software industry concerning the
potential effects associated with the failure of computer systems and software
to be year 2000 compliant. We have completed an assessment of the year 2000
readiness of our products and systems.
CareerBuilder believes that all of the products and services it currently
offers to its customers were year 2000 compliant at the time of installation or
launch and has conducted tests internally to validate the compliance of these
products. We cannot be certain, however, that these tests have detected all
potential year 2000 problems. It is also possible that members of the
CareerBuilder Network will experience problems with their Internet sites due to
software that is not year 2000 compliant, which could lead to disruptions on the
CareerBuilder Network.
CareerBuilder currently believes that its internal software systems are
year 2000 compliant. Although CareerBuilder has reviewed year 2000 compliance
statements made by the vendors of certain of its software systems, such as
accounting and database management systems, CareerBuilder has not conducted
tests to validate the year 2000 compliance of any of its internal software
systems. Accordingly, it is possible that such systems could contain undetected
problems that could cause serious and costly disruptions. CareerBuilder is
developing contingency plans to address issues that it believes are critical to
its operations in the event that internal systems fail to be year 2000 compliant
and anticipates finalizing such plans by June 30, 1999. To date, CareerBuilder
has not incurred significant incremental costs in order to comply with year 2000
requirements and does not believe it will incur significant incremental costs in
the foreseeable future.
The purchasing patterns of customers and potential customers may be
affected by year 2000 issues as companies may be required to expend significant
resources on year 2000 compliance. These expenditures may result in reduced
funds available for online recruiting activities, which could have a material
adverse effect on
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CareerBuilder's business, results of operations and financial condition. Year
2000 complications may disrupt the operations, viability or commercial
acceptance of the Internet, which could also have a material adverse impact on
the CareerBuilder's business, results of operations and financial condition. In
addition, employers may elect to spend a greater portion of their recruiting
budgets on traditional recruitment methods rather than risk disruption in their
job advertisements in the event of technical difficulties related to year 2000
problems. We have not conducted a year 2000 review of ADP. Should ADP experience
year 2000 problems, they could be distracted from marketing our services at
current levels, which could reduce revenue derived from ADP.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures about
Segments of an Enterprise and Related Information, which supersedes SFAS No. 14,
Financial Reporting for Segments of a Business Enterprise. This statement
changes the way that public business enterprises report segment information,
including financial and descriptive information about their selected segment
information. Under SFAS No. 131, operating segments are defined as
revenue-producing components of the enterprise which are generally used
internally for evaluating segment performance. SFAS No. 131 is effective for
CareerBuilder's fiscal year ending December 31, 1998 and CareerBuilder has
determined that it does not have any separately reportable business segments as
of December 31, 1998.
In February 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 establishes the
accounting for costs of software products developed or purchased for internal
use, including when such costs should be capitalized. CareerBuilder does not
expect SOP 98-1, which is effective for CareerBuilder beginning January 1, 1999,
to have a material effect on CareerBuilder's financial condition or results of
operations.
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BUSINESS
CareerBuilder is a leading provider of comprehensive online recruitment
offerings for employers and job seekers. Through its network of more than 550
subscriber customers, job seekers who have registered over 320,000 Personal
Search Agents and 18 premier interactive media companies, CareerBuilder brings
employers and job seekers together by:
- providing employers with the ability to advertise job openings and manage
their online recruitment efforts on a premier network of integrated
Internet sites, including CareerBuilder.com and career sites for 18
interactive media companies such as cYnet, Business Week, USA Today and
NBC Interactive; and
- providing both active job seekers and passive job seekers, individuals
who are not actively looking for new jobs, with the tools to find,
explore, evaluate and compare job opportunities.
INDUSTRY BACKGROUND
RECRUITMENT MARKET
Employee recruiting is one of the most critical business processes
performed by companies today. According to industry sources, businesses in the
United States spent in excess of $13 billion in 1997 to hire new employees by
advertising job openings in newspapers and by hiring recruitment search firms.
Recruiting employees has become increasingly more challenging in recent
years as a result of the following trends:
- GROWING LABOR SHORTAGE: CareerBuilder believes that the labor pool is
growing more slowly than it has in the past, making it more difficult for
employers to find adequate staffing. The U.S. Bureau of Census projects a
continued growth in the elderly population, with one in five United
States citizens being considered elderly by the year 2030. Additionally,
the U.S. Bureau of Labor Statistics estimates the growth in the labor
force to drop to 11% during the period from 1996 to 2006 compared to 14%
over the previous ten year period. This indicates both a large population
leaving the workforce and fewer replacements for them.
- LABOR SUPPLY AND DEMAND DISPARITY: CareerBuilder believes that many
industries are creating more jobs than there are qualified individuals
available to fill them. For example, an Information Technology
Association of America study indicates that 10% of three core information
technology positions, programmers, systems analysts and computer
engineers, are currently vacant.
- REDUCED TENURE: CareerBuilder believes that employees currently change
jobs more often than in the past, making it more difficult for employers
to retain qualified, experienced individuals.
Traditionally, businesses have recruited employees by advertising job
openings in newspapers, magazines and other print and broadcast media as well as
using third party services, including recruitment search firms, temporary
staffing agencies, career fairs and college recruiters. These traditional
recruiting methods have inherent limitations for both employers and job seekers.
It is difficult for employers, using traditional methods, to effectively
advertise their job openings to a broad base of people while efficiently
targeting their reach to select communities of potential employees, especially
passive job seekers. Traditional methods tend to focus on a geographically
limited pool of potential employees, making it hard for employers to recruit
outside of their particular geographies. From the job seekers' perspective, it
is relatively difficult to search for, find, compare, evaluate and apply for
employment opportunities using traditional methods. Traditional methods are also
relatively slow, both in the time it takes for an employer to effectively
advertise a job and for the job seeker to locate the job and respond to it.
Finally, traditional methods are expensive. For example, according to a 1997
case study conducted by iLogos Corporation, a research firm, an employer with
several years of prior online recruiting experience spent approximately $5,000
for each employee recruited primarily through print media and approximately
$12,500 for each employee recruited using a recruiting search firm.
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ONLINE RECRUITMENT MARKET
The Internet is emerging as a medium that affords users the opportunity to
reach millions of individuals worldwide, provide and exchange more information
and streamline business processes. International Data Corporation, an
independent research organization, estimates that the total number of individual
Internet users worldwide will grow from approximately 69 million in 1997 to 320
million in 2002. In 1997, 69% of Internet users were between the ages of 18 and
44, according to eStat, a research firm, and 64% had at least a college degree.
CareerBuilder believes that job seekers in these age and education brackets are
highly sought after by employers.
The emergence of the Internet and the growth in its use have created an
opportunity to more efficiently recruit job seekers. For employers, online
recruiting can provide increased breadth, increased speed and more effective
targeting of their recruiting efforts. Employers using online recruiting have
the potential to quickly and easily advertise job openings. By advertising job
openings on selected Internet sites, employers have the opportunity to reach and
communicate with specific communities of potential active and passive job
seekers. Job advertisements on the Internet can be accessed anywhere in the
world, allowing businesses to recruit both globally and locally. Internet
recruiting can also be a cost-effective alternative to traditional recruiting
methods, as CareerBuilder believes it generally costs a company less to recruit
over the Internet than through traditional methods. According to the iLogos case
study described above, the same employer spent approximately $1,000 to recruit
each employee using online recruiting, representing approximately 20% of its
cost of recruiting an employee through print media and approximately 8% of its
cost of recruiting an employee using a recruiting search firm.
For job seekers, online recruiting can provide the ability to rapidly and
more easily conduct job searches and gather information about employers. In
addition, the Internet allows individuals to access information from many
different sources and view job advertisements from specific geographies and
industries. Online recruiting may also help to reduce the time of a job search
by permitting job seekers to define their specific job needs and be contacted
automatically when jobs that match their needs become available. Furthermore,
online recruiting can enable job seekers to compare and evaluate job
opportunities and apply for jobs electronically.
MARKET OPPORTUNITY
As Internet usage becomes more widespread, companies from a broad range of
industries are expected to do at least a portion of their employee recruitment
over the Internet. Forrester estimates that the size of the online recruitment
market will be $1.7 billion by 2003, an increase from $105 million in 1998.
Forrester also forecasts that, by 2003, most large companies, 60% of
medium-sized companies and 20% of small companies will use the Internet for
recruitment purposes.
While many online recruitment offerings available today provide significant
advantages over traditional methods, they do not take full advantage of the
benefits of the Internet. For example, certain recruiting search firms and
Internet career sites provide services that permit employers to post job
advertisements solely to a single Internet site. Because these services restrict
the potential interaction between the employer and the job seeker to a single
site, they do not utilize the Internet's capabilities to provide employers with
increased breadth and more effective targeting in their recruiting efforts.
Newspapers and other print media also advertise job openings on their Internet
sites in conjunction with print job advertisements. These services, including
consortia of newspapers, typically permit job seekers to search only one
publication at a time. These services also generally sell job advertisements to
employers on a per-publication basis, requiring employers to independently
contact many publications if the employer wants the job advertisement to be
placed in a variety of sources. Large Internet information hubs, or portals,
provide collections of job advertisements from their own customers as well as
other sources of online job advertisements. CareerBuilder believes Internet
portals provide these services mainly to add additional content to their
Internet offerings for consumers and, consequently, they do not adequately
address employers' online recruitment needs.
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CareerBuilder believes there is significant need for online recruitment
offerings that leverage the attributes of the Internet by:
- enabling employers both to advertise job openings on a wide variety of
sites and to focus their recruitment efforts on select communities of
potential employees;
- making Internet recruiting easily accessible to employers and allowing
them to effectively manage their online recruiting efforts; and
- allowing job seekers to easily locate and compare job openings, including
informing them of new job openings that match their interests.
THE CAREERBUILDER SOLUTION
CareerBuilder provides comprehensive, online recruitment offerings for
employers and job seekers. CareerBuilder's offerings consist of:
- THE CAREERBUILDER NETWORK. The CareerBuilder Network consists of
CareerBuilder.com and career sites located on the Internet sites of 18
premier interactive media companies, including cYnet, Business Week, USA
Today and NBC Interactive. Through the use of the CareerBuilder Network,
an employer can directly solicit and target job seekers in a broad range
of online communities.
- CAREERBUILDER.COM. CareerBuilder.com is the flagship site of the
CareerBuilder Network and one of the largest independent career sites on
the Internet.
- TEAMBUILDER. TeamBuilder consists of TeamBuilder Online and TeamBuilder
Software. Through the use of TeamBuilder, employers can access the
CareerBuilder Network to post job advertisements and manage their online
recruiting efforts.
CareerBuilder's offerings are differentiated from other recruitment
offerings, because they:
ENABLE EMPLOYERS TO REACH AND TARGET JOB SEEKERS ACROSS A WIDE VARIETY OF
PREMIER INTERNET SITES. Through the CareerBuilder Network, CareerBuilder's
employer customers have access to a diverse and expansive audience of potential
job seekers. By using the CareerBuilder Network, employers can choose their
desired reach and focus for each job opening. For example, a company with a job
opening wishing to reach as broad an audience as possible may advertise job
openings on major career sites such as CareerBuilder.com and USA Today's Career
Center, while a company with more specific industry, geographic or diversity
needs may choose to advertise job openings on key vertical industry sites such
as cYnet and American Banker Online, geographic sites such as the Dallas Morning
News, Chancellor Media's CareerFuture.com and NBC Interactive or major diversity
sites such as Microsoft Black Entertainment Television, Black Enterprise Online,
HISPANIC Online and WomenCONNECT.com. By becoming part of the CareerBuilder
Network, major interactive media companies can provide a complete, branded
career service to their online customers without having to build and maintain
their own career site and job advertising engines. This enables major
interactive media companies to take advantage of CareerBuilder's established
customer base and sales channels and create a new source of revenue.
PROVIDE EMPLOYERS WITH THE ABILITY TO EASILY ACCESS AND MANAGE ONLINE
RECRUITING. TeamBuilder enables an employer, using a single point of access, to
post job advertisements across their choice of sites on the CareerBuilder
Network and receive resumes from interested job seekers. Using TeamBuilder,
employers can manage and maximize the effectiveness of their online recruiting
efforts. TeamBuilder facilitates management of the recruiting process by
enabling employers to measure their online recruiting efforts by tracking the
number of times a job advertisement is viewed, the number of resumes received
for each job advertisement and the quality of the resumes received. TeamBuilder
also provides internal workflow and resume management capabilities.
PROVIDE JOB SEEKERS WITH THE ABILITY TO EASILY RESEARCH, FIND, COMPARE AND
APPLY FOR JOBS. CareerBuilder.com and each of the other sites on the
CareerBuilder Network are easily accessible and searchable databases of jobs
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and employer information. Job seekers can search CareerBuilder.com and the other
sites on the CareerBuilder Network based on a set of job characteristics that
they establish and can then easily send in their resumes electronically. Job
seekers may also establish a Personal Search Agent that reflects their profile
and job search characteristics. Job seekers with Personal Search Agents receive
by email specific job postings that match their search criteria, with electronic
links to more information regarding those positions.
STRATEGY
CareerBuilder's objective is to be the leading provider of online
recruitment offerings. The key elements of CareerBuilder's strategy are to:
ENHANCE AND EXPAND CAREERBUILDER'S ONLINE RECRUITMENT
OFFERINGS. CareerBuilder intends to continue to devote substantial resources to
enhance and expand its current offerings and add new and innovative services and
products to enable employers and job seekers to more effectively leverage the
benefits of the Internet. Current efforts include adding features that allow
employers to more effectively target potential job seekers through interactive
job advertising, improving job search capabilities and migrating features, such
as advanced search tracking and advanced workflow capability, from TeamBuilder
Software to TeamBuilder Online.
EMPLOY A MULTI-CHANNEL SALES STRATEGY TO ADDRESS A GREATER PORTION OF THE
RECRUITMENT MARKET. CareerBuilder uses a three-part channel strategy to expand
its reach into employers' human resources departments: (1) CareerBuilder's
direct sales force focuses on large employers, (2) its telesales force focuses
on small employers and companies outside of the direct sales force's targeted
geographies and (3) CareerBuilder utilizes ADP's 470-person Major Accounts
Division direct sales force to focus on medium-sized employers. CareerBuilder
intends to leverage its direct and telesales sales forces and its relationship
with ADP to reach a broad customer base. By building and strengthening ties to
employers' human resources departments, CareerBuilder believes it can increase
the use of its services and products by employers and also improve its online
recruitment offerings through better knowledge of employers' recruiting needs.
EXPAND THE CAREERBUILDER NETWORK. CareerBuilder intends to continue to
grow the CareerBuilder Network by adding major interactive media affiliates in
strategic, broad-based vertical, geographic and diversity categories.
CareerBuilder believes this expansion will enhance the ability of employers both
to widely disseminate their job advertisements and to reach passive job seekers
through focused recruiting efforts, thereby offering the greatest choice to
employers seeking to maximize recruiting across the Internet.
STRENGTHEN CAREERBUILDER.COM AS A PREMIER BRANDED CAREER SITE ON THE
INTERNET. CareerBuilder intends to strengthen its CareerBuilder.com brand
through increased marketing efforts and expanded and enhanced features and
functionalities. CareerBuilder believes that building its CareerBuilder.com
brand is important to the success of the CareerBuilder Network because it will
increase job seeker traffic to CareerBuilder.com, thereby increasing the
CareerBuilder Network's effectiveness as a recruiting tool.
EXPAND INTERNATIONALLY. CareerBuilder believes there is a significant need
for online recruitment offerings in international markets. Recent demographic
and technology adoption trends in countries around the world, particularly in
Europe, have created a growing opportunity for CareerBuilder to leverage its
technology and business expertise in these markets. CareerBuilder believes
international expansion will enable it to offer services and products to a new
and expansive client base, and provide existing customers the ability to reach a
much wider and more diverse group of prospective job seekers. CareerBuilder
expects to reach these markets of employers and job seekers through a
combination of partnerships, acquisitions and business expansion.
PURSUE ACQUISITIONS OF PROVIDERS OF RELATED ONLINE RECRUITMENT
SERVICES. CareerBuilder intends to become a driver of industry consolidation in
the worldwide online recruitment market. CareerBuilder has developed its
technology and its business model to quickly assimilate other career internet
sites. CareerBuilder believes that there are many geographically or vertically
specific Internet job sites that could provide incremental customers to the
CareerBuilder Network and additional job advertising options to CareerBuilder's
customers. CareerBuilder believes that scale is a key ingredient in the value of
online recruitment solutions and that by growing the
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employer and job seeker base of the CareerBuilder Network through related
acquisitions, CareerBuilder will improve the competitiveness of its offerings
and improve the efficiency of its operations.
PRODUCTS AND SERVICES
THE CAREERBUILDER NETWORK
The CareerBuilder Network is a growing network of 19 premier Internet
sites, including CareerBuilder.com, which allows employers to directly solicit,
reach and target job seekers in a broad range of online communities. By becoming
part of the CareerBuilder Network, major interactive media companies can provide
a complete, branded career service to their online customers without having to
build and maintain their own career site and job advertising engines. This
enables major interactive media companies to take advantage of CareerBuilder's
established customer base and sales channels and create a new source of revenue.
Using proprietary technology, CareerBuilder can quickly build a private label
career site for an interactive media partner, seamlessly integrated with that of
the interactive media organization's existing web site, including its "look and
feel." CareerBuilder hosts the sites and provides and maintains the search
engine and other technological features of the sites, as well as providing
customer support. The sites are also located on servers operated by
CareerBuilder. Each site is integrated into the CareerBuilder Network and
employers can readily advertise job openings on any site on the CareerBuilder
Network. Employers can immediately access information on the demographics of the
community of users of each site on the CareerBuilder Network, which helps
employers plan where to advertise their job openings. Employers are also able to
quickly measure the response to each job advertisement, which enables employers
to continually refine their recruiting efforts to more selectively reach their
intended audience and generate better responses. The CareerBuilder Network
consists of:
<TABLE>
<S> <C> <C>
American Banker Online Dallas Morning News NBC Interactive (under
Black Enterprise Online developer.com construction)
Business Week ONLINE EDN Access Phillips Business Information
CareerBuilder.com HISPANIC Online QuestLink
Chancellor Media's Internet.com Test & Measurement World
CareerFuture.com Medical Economics USA Today
cYnet Microsoft Black Entertainment WomanCONNECT.com
Television
</TABLE>
Companies' job advertisements placed on CareerBuilder.com will also appear
on Yahoo! and AOL's Digital City. For an additional fee, job advertisements can
also appear on CareerMosaic.
CAREERBUILDER.COM
The CareerBuilder.com career site is the flagship site of the CareerBuilder
Network and one of the largest independent Internet career sites.
CareerBuilder.com provides a broad career advisory experience for its community
of active and passive job seekers, including an easily accessible and searchable
database of jobs. Job seekers are able to search CareerBuilder.com, as well as
each of the other sites on the CareerBuilder Network, using a user-defined set
of job characteristics or through a Personal Search Agent. CareerBuilder has
developed content on its career site to attract multiple visits by potential job
seekers. For example, approximately 40,000 subscribers receive CareerBuilder's
online magazine Achieve. CareerBuilder also offers job seekers a free private
email account, permitting them to confidentially receive emails concerning
Personal Search Agent job matches.
TEAMBUILDER ONLINE AND TEAMBUILDER SOFTWARE
TeamBuilder Online and TeamBuilder Software are the service offering and
software package that enable employers to advertise their job openings on one or
more of the career sites on the CareerBuilder Network and manage their online
recruiting efforts. Employers use TeamBuilder to create and modify job
advertisements,
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determine where the job will be advertised, review and manage resumes from job
applicants, and review reports on effectiveness of their online recruiting
efforts. Job advertisements posted to sites on the CareerBuilder Network are
quickly accessible to job seekers visiting those sites. In addition, the job
advertisement is emailed to any of the Personal Search Agents on that site whose
profile matches the job description. Employers may also use TeamBuilder to
create a career Internet site that can easily be integrated into the employers'
existing home Internet sites. The TeamBuilder functionality may be deployed
either as an online service through TeamBuilder Online or as a client-server
application product through TeamBuilder Software.
TeamBuilder Online permits employers to:
- start or modify their online recruiting efforts in minutes;
- advertise job openings and receive resumes;
- document and track their online recruiting efforts;
- establish an online employment site on their home Internet sites;
- measure the effectiveness of their online recruiting efforts; and
- use a single control point to manage their online recruiting efforts.
TeamBuilder Software is a robust Windows NT-based, client-server product
that incorporates the functionality of TeamBuilder Online, with the following
additional features:
- enhanced resume and workflow management capability, including features to
create internal workflow processes to organize resumes and evaluate
candidates;
- enhanced ability to establish a customized online employment site on an
employer's home Internet site; and
- enterprise-wide functionality and advanced workflow capabilities.
For a monthly fee, which generally lists from $500 to over $6,000 for 10 to
over 500 job posting slots, employers can post to a fixed number of job posting
slots on the CareerBuilder Network career sites of their choice. Customers may
also subscribe on an individual posting basis. TeamBuilder Software customers
also pay a one-time software license fee, which averaged approximately $8,100
for sales made in 1998, including associated features.
SERVICES
CareerBuilder's total customer care organization helps new CareerBuilder
customers establish their online recruiting programs by assisting them in
organizing, planning and placing their job advertisements. This organization
regularly contacts customers to help them integrate CareerBuilder's offerings
into their recruiting efforts and also provides technical support. For an
additional fee, the total customer care organization offers customers assistance
in designing and enhancing their online recruiting strategies as well as
assisting them with advertising specific job openings.
TECHNOLOGY
CareerBuilder believes that one of its principal strengths is the
proprietary technology it has developed and deployed in its service and product
offerings, and that the investments it has made and plans to make in its
technologies result in a superior solution for its customers.
The key architectural components of the CareerBuilder offering, including
the CareerBuilder Network and TeamBuilder, are proprietary to CareerBuilder.
These components employ an object-oriented design and implementation methodology
that can be quickly and efficiently upgraded to deliver new features and
functionality. CareerBuilder implements code in a wide variety of languages and
technologies, including C++, Java, Java Script, HTML, DHTML and XML. The core of
the components is a modern SQL compliant database architecture, with extensive
use of a text search engine. As newer alternative languages and technologies
become available, each is evaluated for suitability and employed where
appropriate. CareerBuilder's
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components use a proprietary scripting language to rapidly develop templates
that enable dynamic content replacement in the web pages that comprise much of
the job advertisement and job search applications. This scripting language
enables efficient access to databases, text search engines, operating system
structures and compiled-code constructs and provides a powerful and extensible
programming language for extending the functionality of CareerBuilder's
offerings.
CUSTOMERS
At December 31, 1998, CareerBuilder's customer base included more than 550
subscriber customers in industries such as technology, financial services,
health care, professional services, retail and
telecommunications/communications. Representative companies for which
CareerBuilder recognized at least $5,000 in revenue in the quarter ended
December 31, 1998 include:
TECHNOLOGY
Ascend Communications, Inc.
EMC Corporation
Microsoft Corporation
Network Associates, Inc.
Network Equipment Technologies, Inc.
Orbital Sciences Corporation
Sterling Software, Inc.
The Vantive Corporation
Veritas Software Corporation
FINANCIAL SERVICES
Capital One Financial Corporation
Edward D. Jones & Co.
Freddie Mac
West Coast Life Insurance Company
HEALTH CARE
Bristol-Myers Squibb Company
Children's Hospital
Owen Healthcare Inc.
PROFESSIONAL SERVICES
ABB Systems Control, Inc.
Bowne & Co., Inc.
ICMA Retirement Corporation
The MITRE Corporation
Trinity Consultants, Inc.
RETAIL
The Stop & Shop Supermarket Company
Taco Bell
24 Hour Fitness, Inc.
TELECOMMUNICATIONS/COMMUNICATIONS
ALLTEL Corporation
Bell Atlantic Network Integration
Frontier Communication
GTE Internetworking
Omnipoint Corporation
SBC Technology Resources, Inc.
Teleglobe Inc.
Thomson Technology Services Group
West Group
SALES, MARKETING AND BUSINESS DEVELOPMENT
SALES
CareerBuilder sells its offerings in the United States through a sales and
marketing organization which consisted of 64 employees as of December 31, 1998.
These employees are located at CareerBuilder's headquarters in Reston, Virginia,
and in CareerBuilder's offices in Atlanta, Boston, Chicago, Dallas, Houston, Los
Angeles, New York, San Francisco and Seattle. The sales organization is divided
into three dedicated groups:
- a direct sales force which focuses on employer customers with more than
500 employees;
- a telesales force which focuses on employer customers with under 100
employees, and on customers in geographies not actively addressed by the
direct sales force; and
- a channel sales force that currently supports ADP's CareerBuilder sales
efforts across the United States, which is generally focused on customers
with 100 to 1,000 employees.
MARKETING
To support and actively promote the CareerBuilder.com and CareerBuilder
Network brands among Internet users and particularly online job seekers, and to
support its direct and ADP sales efforts, CareerBuilder conducts comprehensive
marketing programs. These programs include public relations, local radio
advertising, targeted and national online advertising, online recruiting
seminars, print advertising, trade shows and customer communication programs.
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BUSINESS DEVELOPMENT
CareerBuilder has formed a business development group to identify, evaluate
and recruit appropriate interactive media companies as affiliate members of the
CareerBuilder Network. The business development group establishes key categories
of affiliates, based on the recruiting needs of CareerBuilder's customers, and
focuses on soliciting leading interactive media companies in each category.
ADP RELATIONSHIP
In January 1998, CareerBuilder and ADP entered into a joint marketing and
sales representative agreement. CareerBuilder and ADP amended this agreement in
March 1999. The agreement provides for ADP to market CareerBuilder's services to
ADP's customers using ADP's 470-person Major Accounts Division direct sales
force. CareerBuilder and ADP introduced CareerBuilder's products to this sales
force between April and September 1998. Sales of CareerBuilder's services by ADP
accounted for approximately 21% of CareerBuilder's total revenue in the quarter
ended December 31, 1998, up from 9% in the quarter ended September 30, 1998, and
CareerBuilder expects ADP's contribution to its revenues to continue to increase
at least until the year 2000. Although the agreement with ADP provides certain
financial incentives for ADP to market CareerBuilder's online recruitment
services, and ADP is subject to certain sales and marketing commitments, ADP is
not required to achieve specific revenue targets. The agreement generally
prohibits ADP's Employer Services Division, during the term of the agreement,
from entering into any new joint marketing, reseller, distribution or other
arrangement with another provider of Internet recruitment offerings which offers
products or services similar to TeamBuilder Online in the United States or
Canada. However, under the terms of this agreement, it is possible that ADP
could, under certain limited circumstances, seek to market alternative online
recruitment services, including those of CareerBuilder's competitors, during the
term of the agreement. This agreement also generally provides that, during the
term of the agreement, CareerBuilder will not enter into any new reseller,
distribution or similar agreement with any provider of human resource
information systems which offers payroll software or payroll processing services
similar to those offered by ADP to sell CareerBuilder's online recruiting
offerings in the United States or Canada, or with another payroll or benefits
administration provider. The ADP agreement may be terminated by ADP at any time
after January 23, 2002 upon at least 120 days notice.
In connection with the execution of the joint marketing and sales
representative agreement and its amendment and the sale of shares of capital
stock to ADP, CareerBuilder issued a warrant to ADP. See "Certain
Transactions -- Transactions with ADP" and Note 14 of Notes to Financial
Statements.
COMPETITION
CareerBuilder competes with companies, including recruiting search firms,
that offer a single database "job board" solution, such as Monster.com and
Career Mosaic, as well as newspapers, magazines and other traditional media
companies that provide online job search services, such as CareerPath.com.
CareerBuilder also competes with large Internet information hubs, or portals,
such as AOL.com. CareerBuilder may experience competition from potential
customers to the extent that they develop their own online recruitment solutions
internally. In addition, CareerBuilder competes with traditional recruiting
services, such as newspapers and employee recruiting agencies, for a share of
employers' total recruiting budgets. CareerBuilder believes that there will be
rapid business consolidation in the online recruitment industry. Accordingly,
competitors may rapidly acquire significant market share. CareerBuilder expects
to face additional competition as other established and emerging companies,
including print media companies and employee recruiting agencies with
established brands, enter the online recruitment market.
Although CareerBuilder believes it competes favorably in the online
recruitment market, the online recruitment market is intensely competitive and a
number of factors could adversely affect CareerBuilder's ability to compete in
the future.
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<PAGE> 41
PROPRIETARY RIGHTS
CareerBuilder relies upon a combination of copyright, trade secret and
trademark laws, and non-disclosure and other contractual arrangements to protect
its proprietary rights. There can be no assurance that the steps CareerBuilder
has taken to protect its proprietary rights, however, will be adequate to deter
misappropriation of proprietary information, and CareerBuilder may not be able
to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights. Although CareerBuilder believes that its products
and services do not infringe upon the intellectual property rights of others and
that it has all rights necessary to utilize the intellectual property employed
in its business, CareerBuilder is subject to the risk of claims alleging
infringement of third-party intellectual property rights. Any such claims could
require CareerBuilder to spend significant sums on litigation, pay damages,
delay product installments, develop non-infringing intellectual property or
acquire licenses to intellectual property that is the subject of any such
infringement. Therefore, such claims could have a material adverse effect on
CareerBuilder's business, operating results and financial condition.
EMPLOYEES
As of December 31, 1998, CareerBuilder had a total of 111 employees. Of
these employees, 64 were involved in sales, marketing and business development,
34 were involved in technical support and engineering and 13 were involved in
finance, administration and corporate operations. None of CareerBuilder's
employees is represented by a labor union. CareerBuilder has not experienced any
work stoppages and considers relations with its employees to be good.
FACILITIES
CareerBuilder currently leases approximately 27,000 square feet of space at
its headquarters in Reston, Virginia under two separate leases. These leases
expire as to various portions of the facilities at various times from July 1999
to September 2001. CareerBuilder also maintains field sales offices in Atlanta,
Boston, Chicago, Dallas, Houston, Los Angeles, New York, San Francisco and
Seattle.
CareerBuilder contracts with Global Center to host substantially all of its
communications hardware and certain of its computer hardware operations that
maintain the CareerBuilder Network. Global Center provides site hosting, systems
management, network optimization, and environmental security consistent with
accepted standards for high availability around-the-clock data center
operations.
LEGAL PROCEEDINGS
CareerBuilder is not a party to any material legal proceedings.
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<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of CareerBuilder, their
ages and position as of February 28, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Executive officers and directors:
Robert J. McGovern......................... 37 Chairman of the Board of Directors, President
and Chief Executive Officer
James A. Tholen............................ 39 Senior Vice President, Chief Financial
Officer, Secretary and Director
Eugene J. Austin........................... 40 Senior Vice President of Sales
James A. Winchester, Jr.................... 47 Senior Vice President of Engineering and
Chief Technology Officer
Peter Barris (1)........................... 47 Director
Gary C. Butler (1)......................... 52 Director
D. Jarrett Collins (2)..................... 37 Director
J. Neil Weintraut.......................... 40 Director
David C. Wetmore (2)....................... 50 Director
Other key employees:
Partho Choudhury........................... 39 Vice President of Marketing
Joseph G. Monteil.......................... 40 Vice President of Client Services
William A. Klanke.......................... 42 Vice President of Business Development
</TABLE>
- -------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
ROBERT J. MCGOVERN is the founder of CareerBuilder, and has served as
Chairman of the Board of Directors, President and Chief Executive Officer of
CareerBuilder since its founding in November 1995. From May 1993 until August
1995, he served as Vice President and General Manager of the Availability and
Performance Management Group, a division of Legent Corporation. Prior to that
time, he served in various senior positions in sales with Hewlett-Packard
Company.
JAMES A. THOLEN has served as a director of CareerBuilder since its
founding in November 1995 and as Senior Vice President and Chief Financial
Officer of CareerBuilder since September 1998. From April 1997 until September
1998, he served as Chief Operating Officer and Chief Financial Officer of FTP
Software, Inc., a software applications development company. From September 1995
to February 1997, he served as Chief Financial Officer of The Compucare Company,
a healthcare information systems provider. From August 1993 until August 1995,
he served as Vice President of Corporate Strategy and Development for Legent
Corporation.
EUGENE J. AUSTIN has served as Senior Vice President of Sales of
CareerBuilder since July 1996. From November 1994 to July 1996, he served as
Vice President of Marketing for the Systems Division of Compaq Computer
Corporation.
JAMES A. WINCHESTER, JR. has served as Senior Vice President of Engineering
and Chief Technology Officer of CareerBuilder since November 1995. From November
1987 until August 1995, he served as Manager and Director of Software
Development with Legent Corporation.
PETER BARRIS has served as a director of CareerBuilder since July 1996. Mr.
Barris has been a General Partner with New Enterprise Associates L.P., a private
investment firm, since 1992. Prior to that, he served as President and Chief
Operating Officer of Legent Corporation from 1988 to 1990. Prior to that, Mr.
Barris served
41
<PAGE> 43
as Senior Vice President and General Manager of the Systems Software Division of
UCCEL and held a variety of marketing and general management positions with
General Electric Company. Mr. Barris serves as a director of Mobius Management
Systems, Inc. and pcOrder.com, Inc.
GARY C. BUTLER has served as a director of CareerBuilder since January
1998. Mr. Butler has served as President, Chief Operating Officer and a director
of Automatic Data Processing, Inc. ("ADPI") since April 1998. From January 1995
to April 1998, he served as Group President of the Employer Services Group of
ADPI. Prior to that time, he served as Group President for the Dealer Services
Group of ADPI for more than five years. Mr. Butler serves as a director of
Convergys Corporation.
D. JARRETT COLLINS has served as a director of CareerBuilder since
September 1997. Mr. Collins has served as Director of TTC Ventures, a subsidiary
of Thomson Holdings, a publishing company, since September 1995. From July 1989
to September 1995, Mr. Collins was a principal in Copley Venture Partners, a
venture capital partnership.
J. NEIL WEINTRAUT has served as a director of CareerBuilder since January
1997. Mr. Weintraut has been a General Partner of 21st Century Internet Venture
Partners, a private investment firm, since October 1996. From 1987 to June 1996,
Mr. Weintraut held various positions at Hambrecht Quist, most recently as a
general partner.
DAVID C. WETMORE has served as a director of CareerBuilder since December
1995. Mr. Wetmore has served as Managing Director of Updata Capital, Inc., a
private investment firm, since November 1995. From 1992 to August 1995, Mr.
Wetmore served as Chief Operating Officer and a director of Legent Corporation.
From 1988 to 1992, he served as President, Chief Operating Officer and a
director of Goal Systems International, Inc., a systems software company, and
served as its Chief Executive Officer from 1989 to 1992 and its Chairman from
1991 to 1992. Mr. Wetmore serves as a director of Walker Interactive Systems,
Inc. and Nationwide Investing Foundation.
PARTHO CHOUDHURY has served as Vice President of Marketing of CareerBuilder
since December 1998. From January 1998 to December 1998, he served as Vice
President of Marketing of the Sprint PCS Division of Sprint Corporation, and
from January 1995 to December 1997, he served as the Director of Marketing for
the Sprint PCS Division. From April 1993 to December 1994, he served as the
Director of Marketing for the L'eggs Products Division of Sara Lee Corporation.
Prior to that time, he held marketing positions with Warner-Lambert Company and
Proctor & Gamble Company.
JOSEPH G. MONTEIL has served as Vice President of Client Services of
CareerBuilder since October 1997. From January 1997 to September 1997, he served
as Vice President, Client Services for Best Software, Inc. From June 1995 to
January 1997, he served as a Senior Manager with KPMG LLP. From December 1986 to
June 1995, he served as a Vice President of Client Services for Legent
Corporation.
WILLIAM A. KLANKE has served as Vice President of Business Development of
CareerBuilder since November 1997. From September 1994 to November 1997, he
served as an Associate Publisher with Cahners Publishing Company, a publishing
company.
Following this offering, the Board of Directors of CareerBuilder will be
divided into three classes, each of whose members will serve for a staggered
three-year term. The Board will consist of two Class I Directors (Messrs.
Collins and Weintraut), two Class II Directors (Messrs. Barris and Butler) and
three Class III Directors (Messrs. McGovern, Tholen and Wetmore). At each annual
meeting of stockholders, a class of directors will be elected for a three-year
term to succeed the directors of the same class whose terms are then expiring.
CareerBuilder's Amended and Restated By-laws provide that such directors are
elected by a plurality of all votes cast at such meeting. The terms of the Class
I Directors, Class II Directors and Class III Directors expire upon the election
and qualification of successor directors at the annual meeting of stockholders
held during the calendar years 2000, 2001 and 2002, respectively.
42
<PAGE> 44
Each executive officer serves at the discretion of the Board of Directors
and holds office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. There are no family relationships
among any of the directors or executive officers of CareerBuilder.
Holders of shares of each of the Class B convertible preferred stock and
Class C convertible preferred stock were entitled prior to the offering to elect
one representative to the Board of Directors. Mr. Barris was elected as the
representative of the holders of Class B convertible preferred stock and Mr.
Weintraut was elected as the representative of the holders of Class C
convertible preferred stock.
Holders of shares of Class D convertible preferred stock were entitled
prior to the offering to elect two representatives to the Board of Directors.
Mr. Collins and Mr. Butler were elected as the representatives of the holders of
Class D convertible preferred stock.
Holders of shares of each of Class E convertible preferred stock and Class
F convertible preferred stock were entitled prior to the offering to have one
individual present to observe all meetings of the Board of Directors. Mr. Gene
Riechers of FBR Technology Venture Partners, L.P. was designated as the observer
for the holders of Class E convertible preferred stock. Mr. Carlos Monfiglio of
GE Capital Equity Investments, Inc. was designated as the observer for the
holders of the Class F convertible preferred stock.
NOMINATION AND OBSERVER RIGHTS AFTER THE OFFERING
Under the terms of the amendment to the joint marketing and sales
representative agreement, CareerBuilder has committed to nominate one
representative of ADP to stand for election to the Board of Directors at every
third annual meeting commencing in 2001. CareerBuilder's obligation to nominate
an ADP representative ends upon the termination of the joint marketing and sales
representative agreement.
After the offering and subject to certain conditions, each of New
Enterprise Associates VI, Limited Partnership, 21st Century Internet Fund, L.P.,
TTC Ventures, Inc. and ADP has the right pursuant to their respective preferred
stock purchase agreements to have one representative attend each meeting of the
Board of Directors so long as they each own at least 500,000 shares of the
common stock they receive upon the automatic conversion of the Class B
convertible preferred stock, the Class C convertible preferred stock and the
Class D convertible preferred stock, respectively.
After the offering and subject to certain conditions, FBR Technology
Venture Partners, L.P. has the right pursuant to the Class E convertible
preferred stock purchase agreement to have one representative attend each
meeting of the Board of Directors so long as it owns at least 250,000 shares of
the common stock it received upon the automatic conversion of the Class E
convertible preferred stock.
After the offering and subject to certain conditions, each of GE Capital
Equity Investments, Inc. and General Electric Pension Trust have the right
pursuant to the Class F convertible preferred stock agreement to have a
representative attend each meeting of the Board of Directors so long as they
own, individually or in the aggregate, at least 250,000 shares of the common
stock they received upon the automatic conversion of the Class F convertible
preferred stock.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee composed of Messrs.
Barris and Butler, which makes recommendations concerning salaries and incentive
compensation for employees of and consultants to CareerBuilder and administers
and grants stock options pursuant to CareerBuilder's stock option plans. The
Board of Directors also has an Audit Committee composed of Messrs. Collins and
Wetmore, which reviews the results and scope of the audit and other services
provided by CareerBuilder's independent public accountants and reviews
CareerBuilder's internal controls.
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<PAGE> 45
DIRECTOR COMPENSATION
Directors do not receive any cash fees for their services on the Board, but
are reimbursed for expenses incurred in connection with their attendance at
Board and committee meetings. On November 24, 1997, CareerBuilder's six
non-employee directors were each granted a non-qualified stock option to
purchase 5,000 shares of common stock at a purchase price of $0.40 per share
pursuant to CareerBuilder's Stock Option Plan. These options vested on December
31, 1998. In addition, non-employee directors of CareerBuilder will be eligible
to receive stock options under CareerBuilder's 1999 Director Stock Option Plan.
See " -- Stock Plans -- 1999 Director Stock Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1998 for CareerBuilder's Chief Executive Officer and
its two other most highly compensated executive officers whose salary and bonus
totaled at least $100,000 for the year ended December 31, 1998 (together, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2)
--------------------------- -------- ------ ---------------
<S> <C> <C> <C>
Robert J. McGovern.......................................... $145,000 $2,902 $2,125
Chairman of the Board, President and Chief Executive
Officer
Eugene J. Austin............................................ 130,000 5,804 2,809
Senior Vice President of Sales
James A. Winchester......................................... 115,000 -- 2,382
Senior Vice President of Engineering and
Chief Technology Officer
</TABLE>
- -------------------------
(1) Represents the number of shares covered by options to purchase shares of
common stock granted during 1998.
(2) Represents premiums paid by CareerBuilder for executive disability
insurance.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning the value of
options exercised by each of the Named Executive Officers as of December 31,
1998 and the number and value of unexercised options held by each of the Named
Executive Officers on December 31, 1998. CareerBuilder granted no stock options
to any Named Executive Officers in 1998.
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<PAGE> 46
1998 OPTION EXERCISES AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
UNEXERCISED OPTIONS
AT FISCAL YEAR END(3)
SHARES ACQUIRED ---------------------------
NAME ON EXERCISE VALUE REALIZED(2) EXERCISABLE UNEXERCISABLE
---- --------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert J. McGovern................... -- -- -- --
Eugene J. Austin..................... 125,000(1) $307,500 105,161 126,506
James A. Winchester.................. -- -- -- --
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
OPTIONS AT FISCAL
YEAR-END(2)
---------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Robert J. McGovern................... -- --
Eugene J. Austin..................... $361,907 $431,860
James A. Winchester.................. -- --
</TABLE>
- -------------------------
(1) The indicated shares are subject to a right of repurchase at the fair market
value of the shares in favor of CareerBuilder in the event of the owner's
termination of employment with CareerBuilder or death and the owner shall
not transfer the shares without first offering them to CareerBuilder on the
same terms and conditions as those offered to the proposed transferee.
(2) Represents the difference between (a) the exercise price and (b) the fair
market value of the common stock at the date of exercise, in the case of
value received upon exercise ($2.50 per share), and at fiscal year end, in
the case of value at year end ($3.50 per share). These fair market values
were determined by CareerBuilder's Board of Directors.
(3) Shares purchased upon exercise of the indicated options are subject to a
right of repurchase at the fair market value of the shares in favor of
CareerBuilder in the event of the optionee's termination of employment with
CareerBuilder or death and the optionees shall not transfer the shares
purchased upon exercise of the indicated options without first offering them
to CareerBuilder on the same terms and conditions as those offered to the
proposed transferee.
STOCK PLANS
A total of 3,300,000 shares of common stock have been reserved for issuance
in the aggregate under CareerBuilder's four stock option plans described below.
STOCK OPTION PLAN
CareerBuilder's Stock Option Plan (the "Stock Option Plan") provides for
the grant of incentive stock options intended to qualify under Section 422 of
the Internal Revenue Code and nonstatutory stock options. As of February 28,
1999, options to purchase 1,428,655 shares of common stock were outstanding
under the Stock Option Plan. Following this offering, the Board of Directors has
provided that no additional grants or awards will be made under the Stock Option
Plan.
1999 STOCK INCENTIVE PLAN
Under CareerBuilder's 1999 Stock Incentive Plan (the "1999 Plan"), a
variety of stock-based awards may be granted to officers, employees, directors,
consultants and advisors of CareerBuilder and its subsidiaries. The Board of
Directors has authorized the Compensation Committee to administer the 1999 Plan.
While CareerBuilder currently anticipates that most grants under the 1999 Plan
will consist of incentive stock options or nonstatutory stock options,
CareerBuilder could also grant other stock-based awards, including stock
appreciation rights, which represent the right to receive any excess in value of
the shares of common stock over the exercise price; restricted stock awards,
which entitle recipients to acquire shares of common stock, subject to the right
of CareerBuilder to repurchase all or part of such shares at their purchase
price in the event that the conditions specified in the award are not satisfied;
or unrestricted stock awards, which represent grants of shares to participants
free of any restrictions under the 1999 Plan. Options or other awards that are
granted under the Incentive Plan but expire unexercised are available for future
grants. As of February 28, 1999, no options to purchase common stock or other
awards have been granted under the 1999 Plan.
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<PAGE> 47
1999 DIRECTOR STOCK OPTION PLAN
Under CareerBuilder's 1999 Director Stock Option Plan (the "Director
Plan"), directors of CareerBuilder who are not employees of CareerBuilder are
eligible to receive nonstatutory options to purchase shares of common stock. The
Director Plan provides (i) in the case of an outside director who is serving on
CareerBuilder's Board of Directors on the effective date of this offering and
who continues to serve on the Board of Directors after the closing of this
offering (an "IPO Director"), for the grant to such director on such effective
date of an option to purchase shares of common stock, (ii) that each
IPO Director who is serving on the Board of Directors at the adjournment of
CareerBuilder's annual meeting of stockholders held in the year 2000 or the
adjournment of any subsequent annual meeting shall be granted an option to
purchase shares of common stock on the date of each such adjournment,
up to a maximum of five such grants, (iii) in the case of an outside director
elected to the Board of Directors after this offering (a "Non-IPO Director"),
for the grant to such director on such election date of an option to purchase
shares of common stock, and (iv) that each Non-IPO Director who is
serving on the Board of Directors at the adjournment of any annual meeting of
stockholders held after the date of his or her election shall be granted an
option to purchase shares of common stock on the date of each such
adjournment, up to a maximum of five such grants. All options granted under the
Director Plan will have an exercise price equal to the fair market value of the
common stock on the date of grant as determined pursuant to the terms of the
Director Plan and shall vest on the first anniversary of the date of grant. As
of February 28, 1999, no options to purchase common stock have been granted
under the Director Plan.
1999 EMPLOYEE STOCK PURCHASE PLAN
Under CareerBuilder's 1999 Employee Stock Purchase Plan (the "Purchase
Plan"), employees of CareerBuilder (including directors of CareerBuilder who are
employees and all employees of designated subsidiaries of CareerBuilder) who
meet certain eligibility requirements are able to participate in quarterly plan
offerings in which payroll deductions may be used to purchase shares of common
stock. The purchase price of shares purchased under the Purchase Plan is 85% of
the closing price of the common stock on the first business day of the
applicable plan offering period or the last business day of the applicable plan
offering period, whichever is less. The first offering period under the Purchase
Plan will not commence until after the completion of this offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Barris and Wetmore served during the year ended December 31, 1998
as members of the Compensation Committee of the Board of Directors. No executive
officer of CareerBuilder has served as a director of or member of the
compensation committee (or other committee serving an equivalent function) of
any other entity, any of whose executive officers serve as a director of or
member of the Compensation Committee of the Board of Directors.
46
<PAGE> 48
CERTAIN TRANSACTIONS
TRANSACTIONS WITH ADP
In January 1998, CareerBuilder entered into the ADP joint marketing and
sales representative agreement with ADP, which was amended in March 1999. Under
the terms of this agreement, ADP agreed to market CareerBuilder's services to
ADP's current and prospective clients using, at a minimum, ADP's major accounts
division direct sales force. This sales force is currently comprised of
approximately 470 salespeople and is generally responsible for selling to
companies with between 100 and 1,000 employees. Under the terms of the
agreement, ADP has the right, but not the obligation, to market CareerBuilder
online recruitment offerings on a worldwide basis. The agreement provides for
ADP to market CareerBuilder's online recruitment offerings using a co-branding
strategy, which allows ADP to sell CareerBuilder's online recruitment offerings
using materials incorporating ADP's name and logo. As its commission for sales
made to ADP clients and prospects through orders procured by ADP, ADP is
entitled to retain a percentage of total monthly revenue to CareerBuilder for
job advertisements on CareerBuilder.com purchased through such ADP orders and a
percentage of total monthly revenue to CareerBuilder for job advertisements on
the other sites on the CareerBuilder Network purchased through such ADP orders.
ADP is also entitled to receive a percentage of CareerBuilder's revenue from
TeamBuilder Software sales to ADP customers and prospects whose orders were
procured by ADP and a percentage of CareerBuilder's revenue from sales of
online, radio and banner advertising to ADP customers and prospects whose orders
were procured by ADP, as well as certain other fees associated with account
installation and support. The agreement also generally prohibits ADP's Employer
Services Division, during the term of the agreement, from entering into any new
joint marketing, reseller, distribution or other arrangement with any other
provider of Internet recruitment offerings that offers products or services
similar to TeamBuilder Online in the United States or Canada. However, under the
terms of this agreement, it is possible that ADP could, under certain limited
circumstances, seek to market alternative online recruitment services, including
those of CareerBuilder's competitors, during the term of the agreement. The
agreement generally provides that, during the term of the agreement,
CareerBuilder will not enter into any new reseller, distribution or similar
agreement with any provider of human resources information systems offering
payroll software or payroll processing services similar to those offered by ADP
to sell CareerBuilder's online recruitment offerings in the United States or
Canada, or with another payroll or benefits administration provider. The ADP
agreement continues until January 23, 2002, and thereafter continues
automatically unless terminated by either of the parties. ADP can terminate the
agreement at any time after January 23, 2002 by giving CareerBuilder at least
120 days written notice. CareerBuilder can terminate the agreement at any time
after January 23, 2002, after giving written notice to ADP ranging from one to
three years depending upon the total revenue generated from ADP customers and
prospects whose orders were procured by ADP, provided such revenue does not meet
certain targets. Notwithstanding termination of the ADP agreement for any
reason, ADP will be entitled to continue to receive on an ongoing basis its
allocated share of recurring revenue to CareerBuilder derived from an ADP-
acquired customer for as long as such customer continues to receive any of
CareerBuilder's online recruitment offerings for which orders were procured by
ADP.
In connection with the execution of the joint marketing and sales
representative agreement and its amendment and the sale of shares of capital
stock to ADP, CareerBuilder issued a warrant to ADP, which vests in three
installments. The first installment of 380,000 shares vested at the signing of
the amendment. The exercise price of the first installment is $12.00 per share.
Warrants for the second and third installments of up to 457,026 shares of common
stock each will vest based on net revenue received by CareerBuilder from ADP
pursuant to the joint marketing and sales representative agreement. The exercise
price for the second and third installment is $5.00 per share. If CareerBuilder
issues additional equity securities primarily for financing purposes, and not
including the shares of common stock sold in this offering, the number of shares
of common stock issuable upon exercise of the warrant will increase up to a
maximum of 502,729 shares for each of the second and third installments. The
first, second and third installments are each exercisable, to the extent vested,
during the five year period following March 4, 1999, March 31, 2001 and March
31, 2002, respectively.
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<PAGE> 49
As the ADP warrant vests, CareerBuilder may be required to record
significant expenses. See Note 14 of Notes to Financial Statements.
STOCK PURCHASES BY AFFILIATES
In November 1995, in connection with the founding of CareerBuilder,
CareerBuilder issued to Robert J. McGovern for an aggregate price of $80,000,
and James A. Winchester for an aggregate price of $20,000, 3,431,250 and 693,750
shares of Class A common stock, respectively, and issued 80 shares of Class B
non-voting liquidating preferred stock to Mr. McGovern and 20 shares of Class B
non-voting liquidating preferred stock. Messrs. McGovern and Winchester
currently serve as officers of CareerBuilder and Mr. McGovern currently serves
as the Chairman of the Board.
In December 1995, CareerBuilder issued to David C. Wetmore 468,750 shares
of Class A common stock, and 150 shares of Class B non-voting liquidating
preferred stock at an aggregate purchase price of $150,000. Mr. Wetmore
currently serves as a director of CareerBuilder.
In July 1996, CareerBuilder converted the 3,431,250 shares of Class A
common stock and the 80 shares of Class B non-voting liquidating preferred
issued to Mr. McGovern into 250,000 shares of Class A convertible preferred
stock and 3,181,250 shares of common stock, converted the 693,750 shares of
Class A common stock issued to Mr. Winchester into 693,750 shares of common
stock, and converted the 468,750 shares of Class A common stock and the 150
shares of Class B non-voting liquidating preferred issued to Mr. Wetmore into
468,750 shares of Class A convertible preferred stock. Upon completion of this
offering, each share of Class A convertible preferred stock will automatically
convert into one share of common stock.
In July 1996, CareerBuilder issued shares of Class B convertible preferred
stock to David C. Wetmore and to certain stockholders of CareerBuilder at a
purchase price of $0.76 per share. The number of shares of Class B convertible
preferred stock issued to each individual and entity is set forth below. Upon
completion of this offering, each share of Class B convertible preferred stock
will automatically convert into one share of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CLASS B
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ----------------------------
<S> <C>
David C. Wetmore........................................ 135,730
New Enterprise Associates VI, Limited Partnership....... 1,710,527
NEA President's Fund, L.P............................... 78,947
</TABLE>
In January 1997, CareerBuilder issued shares of Class C convertible
preferred stock to certain stockholders of CareerBuilder at a purchase price of
$1.44 per share. The number of shares of Class C convertible preferred stock
issued to each entity is set forth below. Upon completion of this offering, each
share of Class C convertible preferred stock will automatically convert into one
share of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CLASS C
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ----------------------------
<S> <C>
21st Century Internet Fund, L.P......................... 1,800,000
New Enterprise Associates VI, Limited Partnership....... 1,388,889
</TABLE>
In September 1997 and January 1998, CareerBuilder issued shares of Class D
convertible preferred stock to certain entities affiliated with directors of
CareerBuilder and certain stockholders of CareerBuilder at a purchase price of
$3.57 per share. The number of shares of Class D convertible preferred stock
issued to each entity is set
48
<PAGE> 50
forth below. Upon completion of this offering, each share of Class D convertible
preferred stock will automatically convert into one share of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CLASS D
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ----------------------------
<S> <C>
21st Century Internet Fund, L.P......................... 327,557
New Enterprise Associates VI, Limited Partnership....... 317,667
ADP..................................................... 840,337
</TABLE>
In July 1998, CareerBuilder issued shares of Class E convertible preferred
stock to certain entities affiliated with directors of CareerBuilder and certain
stockholders of CareerBuilder at a purchase price of $4.93 share. The number of
shares of Class E convertible preferred stock issued to each entity is set forth
below. Upon completion of this offering, each share of Class E convertible
preferred stock will automatically convert into one share of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CLASS E
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ---------------------------
<S> <C>
21st Century Internet Venture Partners, LLC............. 143,068
New Enterprise Associates VI, Limited Partnership....... 235,091
</TABLE>
In January 1999, CareerBuilder issued shares of Class F convertible
preferred stock to certain entities affiliated with directors of CareerBuilder
and certain stockholders of CareerBuilder at a purchase price of $5.45 per
share. The number of shares of Class F convertible preferred stock issued to
each entity is set forth below. Upon completion of this offering, each share of
Class F convertible preferred stock will automatically convert into one share of
common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CLASS F
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ---------------------------
<S> <C>
GE Capital Equity Investments, Inc....................... 917,431
21st Century Internet Venture Partners, LLC.............. 171,389
New Enterprise Associates VI, Limited Partnership........ 279,792
ADP...................................................... 63,232
</TABLE>
OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to the Certificate of Incorporation, CareerBuilder's board of
directors currently consists of one director designated by the holders of Class
A convertible preferred stock, one director designated by the holders of Class B
convertible preferred stock, one director designated by the holders of Class C
convertible preferred stock, two directors designated by the holders of common
stock, one director designated by Thomson U.S. Inc. on behalf of the holders of
Class D convertible preferred stock and one director designated by ADP also on
behalf of the holders of Class D convertible preferred stock. This arrangement
will terminate upon the completion of the offering.
CareerBuilder has adopted a policy providing that all material transactions
between CareerBuilder and its officers, directors and other affiliates must:
- be approved by a majority of the members of CareerBuilder's Board of
Directors and by a majority of the disinterested members of the Board of
Directors; and
- be on terms no less favorable to CareerBuilder than could be obtained
from unaffiliated third parties.
49
<PAGE> 51
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the common stock of CareerBuilder as of February 28, 1999 by each
person or entity known to CareerBuilder to own beneficially more than 5% of the
common stock, each of the directors of CareerBuilder, each of the Named
Executive Officers, each of the selling stockholders and all directors and
executive officers as a group. Unless otherwise indicated, each person or entity
named in the table has sole voting power and investment power (or shares such
power with his or her spouse) with respect to all shares of capital stock listed
as owned by such person or entity.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED NUMBER OF BENEFICIALLY OWNED
PRIOR TO OFFERING(1) SHARES AFTER OFFERING(1)
----------------------- OFFERED ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE FOR SALE NUMBER PERCENTAGE
------------------------ ---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
New Enterprise Associates (2)............... 4,022,551 23.9% -- 4,022,551 %
1119 St. Paul Street
Baltimore, MD 21202
21st Century Internet Venture Partners, LLC
(3)....................................... 2,449,097 14.5 -- 2,449,097
Two South Park
San Francisco, CA 94107
ADP, Inc. (5)............................... 1,283,569 7.6 -- 1,283,569
1 ADP Boulevard
Roseland, NJ 07068
GE Capital Equity Investments, Inc.......... 917,431 5.4 -- 917,431
120 Long Ridge Road
Stamford, CT 06927
Robert J. McGovern (6)...................... 3,350,540 2.0 -- 3,350,540
Eugene J. Austin (7)........................ 327,386 1.9 -- 327,386
James A. Tholen (8)......................... 22,500 * -- 22,500
James A. Winchester......................... 693,750 4.1 -- 693,750
Peter J. Barris (9)......................... 4,037,551 24.0 -- 4,307,551
Gary C. Butler (10)......................... 1,288,569 7.7 -- 1,288,569
D. Jarrett Collins (11)..................... 649,891 3.9 -- 649,891
J. Neil Weintraut (12)...................... 2,454,097 14.6 -- 2,454,097
David C. Wetmore (13)....................... 586,980 3.5
John F. Burton (14)......................... 431,052 2.6
Bernard Goldsmith (15)...................... 544,480 3.2
All executive officers and directors as a
group (9 persons) (16).................... 13,411,264 79.2
</TABLE>
- -------------------------
* Less than 1%
(1) Assumes no exercise of the underwriters' over-allotment option. The number
of shares of common stock outstanding prior to this offering includes
16,837,615 shares of common stock outstanding as of February 28, 1999 and,
with respect to each person, the shares issuable by CareerBuilder pursuant
to options held by such persons which may be exercised within 60 days
following February 28, 1999 ("Presently
50
<PAGE> 52
Exercisable Options"). The number of shares beneficially owned by each
stockholder is determined under rules promulgated by the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual or entity has sole
or shared voting power or investment power and any shares as to which the
individual or entity has the right to acquire beneficial ownership within
60 days after February 28, 1999 through the exercise of any stock option,
warrant or other right. The inclusion herein of such shares, however, does
not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares.
(2) Consists of 3,930,446 shares of common stock held of record by New
Enterprise Associates VI, Limited Partnership, 78,947 shares of common
stock held of record by NEA President's Fund, L.P. and 13,158 shares of
common stock held of record by NEA Ventures 1996, L.P.
(3) Includes 2,127,557 shares of common stock held of record by 21st Century
Internet Fund, L.P.
(4) Includes 380,000 shares of common stock issuable upon exercise of the
warrant issued to ADP in January 1998.
(5) Includes 250,000 shares of common stock held of record by the Robert
McGovern Bypass Trust. Mr. McGovern disclaims beneficial ownership of
shares held of record by such trust.
(6) Includes 44,053 shares subject to Presently Exercisable Options.
(7) Includes 7,500 shares subject to Presently Exercisable Options.
(8) Includes 3,930,446 shares of common stock held of record by New Enterprise
Associates VI, Limited Partnership, 78,947 shares of common stock held of
record by NEA President's Fund, L.P. and 13,158 shares of common stock held
of record by NEA Ventures 1996, L.P. Mr. Barris disclaims beneficial
ownership of all such shares of common stock. Also includes 15,000 shares
subject to Presently Exercisable Options.
(9) Consists of 903,569 shares of common stock held of record by ADP and 380,000
shares of common stock issuable upon exercise of the warrant issued to ADP
in January 1998. Mr. Butler disclaims beneficial ownership of all such
shares of common stock. Also includes 5,000 shares subject to Presently
Exercisable Options.
(10) Includes 644,891 shares of common stock held of record by Thomson U.S. Inc.
Mr. Collins disclaims beneficial ownership of all such shares of common
stock. Also includes 5,000 shares subject to Presently Exercisable Options.
(11) Includes 321,540 shares of common stock held of record by 21st Century
Internet Venture Partners, LLC and 2,127,557 shares of common stock held of
record by 21st Century Internet Fund, L.P. Mr. Weintraut disclaims
beneficial ownership of all such shares of common stock. Also includes
5,000 shares subject to Presently Exercisable Options.
(12) Includes 7,500 shares subject to Presently Exercisable Options. Excludes
40,000 shares of common stock held of record by adult children of Mr.
Wetmore.
(13) Includes 10,000 shares of common stock held of record by Camden D. Burton,
10,000 shares of common stock held of record by Casey L. Burton and 10,000
shares of common stock held of record by Haley F. Burton. Mr. Burton
disclaims beneficial ownership of all such shares of common stock.
(14) Includes 20,000 shares of common stock held of record by the Goldsmith
Family Irrevocable Life Insurance Trust. Mr. Goldsmith disclaims beneficial
ownership of all such shares of common stock. Excludes 20,000 shares of
common stock held of record by Daphne Kennedy, 20,000 shares of common
51
<PAGE> 53
stock held of record by David Goldsmith and 20,000 shares of common stock
held of record by Sarah Goldsmith.
(15) See footnotes (5) through (14) above.
52
<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
Following this offering, the authorized capital stock of CareerBuilder will
consist of 50,000,000 shares of common stock and 10,000,000 shares of preferred
stock, $.001 par value per share. As of February 28, 1999, assuming conversion
of all shares of convertible preferred stock into common stock, there would have
been 16,837,615 shares of Common Stock outstanding held by 81 stockholders.
The following summary of certain provisions of CareerBuilder's common
stock, preferred stock, Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and Amended and Restated By-laws (the "By-laws")
is not intended to be complete and is qualified by reference to the provisions
of applicable law and to CareerBuilder's Certificate of Incorporation, By-laws
and other agreements included as exhibits to the Registration Statement of which
this prospectus is a part. See "Additional Information."
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Holders of common stock are entitled to receive ratably such dividends,
if any, as may be declared by the Board of Directors out of funds legally
available therefor, subject to any preferential dividend rights of outstanding
preferred stock. Upon the dissolution or liquidation of CareerBuilder, subject
to the prior rights of any outstanding preferred stock, the holders of common
stock are entitled to receive ratably the net assets of CareerBuilder available
after the payment of all debts and other liabilities. Holders of common stock
have no preemptive, subscription or redemption rights. The outstanding shares of
common stock are, and the shares of common stock offered by CareerBuilder in
this offering will be, when issued and paid for, fully paid and nonassessable.
The rights, preferences and privileges of holders of common stock are subject
to, and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which CareerBuilder may designate and issue in the
future. Certain holders of common stock have the right to require CareerBuilder
to effect the registration of their shares of common stock in certain
circumstances. See "Shares Eligible for Future Sale -- Registration Rights."
At present, there is no established trading market for the common stock. We
will apply to list the shares of the common stock on The Nasdaq Stock Market's
National Market under the symbol "CBDR".
PREFERRED STOCK
Under the terms of the Certificate of Incorporation, the Board of Directors
is authorized, subject to any limitations prescribed by law, without stockholder
approval, to issue up to 10,000,000 shares of preferred stock in one or more
series. Each such series of preferred stock shall have such rights, preferences,
privileges and restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be determined by the Board of Directors.
The purpose of authorizing the Board of Directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of CareerBuilder. CareerBuilder has no
present plans to issue any shares of preferred stock.
WARRANTS
In January 1998, CareerBuilder issued to ADP a warrant, which was amended
in March 1999, which currently represents the right to purchase up to 1,294,052
shares of common stock vesting in three installments. The first installment for
380,000 shares of common stock at an exercise price of $12.00 per share vested
at the time of the amendment in March 1999. The remaining two installments have
an exercise price of $5.00 per share and vest subject to ADP achieving certain
revenue targets. See "Certain Transactions -- Transactions with ADP."
53
<PAGE> 55
In December 1998, CareerBuilder issued to PNC a warrant to purchase up to
40,568 shares of common stock at a purchase price of $4.93 per share. This
warrant expires on December 29, 2008. PNC also has the right to require
CareerBuilder, in certain circumstances, to effect the registration of the
shares of common stock issuable upon exercise of this warrant. See "Shares
Eligible for Future Sale -- Registration Rights."
In March 1999, CareerBuilder issued to NBC a warrant to purchase up to
93,750 shares of common stock at a purchase price of $8.00 per share and a
warrant to purchase up to 53,571 shares of common stock at a purchase price of
$14.00 per share. Both warrants vest in two installments and expire on March 5,
2004.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
CareerBuilder is subject to the provisions of Section 203 of the Delaware
General Corporation Law statute. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, assets sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
The Certificate of Incorporation and By-laws provide for the division of
the Board of Directors into three classes as nearly equal in size as possible
with staggered three-year terms. See "Management." In addition, the Certificate
of Incorporation provides that directors may be removed only for cause by the
affirmative vote of the holders of 75% of the shares of capital stock entitled
to vote. Under the Certificate of Incorporation and By-laws, any vacancy on the
Board of Directors, including a vacancy resulting from an enlargement of the
Board of Directors, may only be filled by vote of a majority of the directors
then in office. The classification of the Board of Directors and the limitation
on removal of directors and filling of vacancies could make it more difficult
for a third party to acquire, or discourage a third party from acquiring,
control of CareerBuilder.
The Certificate of Incorporation and By-laws also provide that after this
offering, any action required or permitted to be taken by the stockholders of
CareerBuilder at an annual meeting or special meeting of stockholders may only
be taken if it is properly brought before such meeting and may not be taken by
written action in lieu of a meeting. The Certificate of Incorporation and
By-laws further provide that special meetings of the stockholders may only be
called by the Chairman of the Board, the President or the Board of Directors.
In order for any matter to be considered "properly brought" before an
annual meeting, a stockholder must comply with advance notice and information
disclosure requirements. The stockholder must deliver written notice of the
matter to the Secretary of CareerBuilder, to be received not less than 60 days
nor more than 90 days prior to the meeting. However, if less than 70 days'
notice or prior public disclosure of the date of the meeting is given to
stockholders, the notice would have to be received by the Secretary not later
than the close of business on the 10th day following the date on which the
notice of the meeting was mailed or such public disclosure was made, whichever
occurs first. If the matter relates to the election of directors of
CareerBuilder, the notice must set forth specific information regarding each
nominee and the nominating stockholder. For any other matter, the notice must
set forth a brief description of the business desired to be brought and the
reasons for conducting such business at the annual meeting and certain
information regarding the proponent stockholder. These provisions could have the
effect of delaying until the next annual stockholders meeting stockholder
actions which are favored by the holders of a majority of the outstanding voting
securities of CareerBuilder. These provisions could also discourage a third
party from making a tender offer for the common stock, because even if it
acquired a majority of the outstanding voting securities of CareerBuilder, the
third party would be able to take action as a stockholder (such as electing new
directors or approving a merger) only at a duly called annual stockholders'
meeting, and not by written consent.
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
54
<PAGE> 56
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. The By-laws require the affirmative vote of
holders of at least 75% of the votes which all the stockholders would be
entitled to cast to amend or repeal any of the provisions described in the prior
three paragraphs.
The Certificate of Incorporation contains certain provisions permitted
under the Delaware General Corporation Law relating to the liability of
directors. The provisions eliminate a director's liability for monetary damages
for a breach of fiduciary duty, except in certain circumstances involving
wrongful acts, such as the breach of a director's duty of loyalty or acts or
omissions which involve intentional misconduct or a knowing violation of law.
Further, the Certificate of Incorporation contains provisions to indemnify
CareerBuilder's directors and officers to the fullest extent permitted by the
Delaware General Corporation Law. CareerBuilder believes that these provisions
will assist CareerBuilder in attracting and retaining qualified individuals to
serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be .
55
<PAGE> 57
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the common
stock of CareerBuilder. Future sales of substantial amounts of common stock in
the public market could adversely affect prevailing market prices from time to
time. Furthermore, since only a limited number of shares will be available for
sale shortly after the offering because of certain contractual and legal
restrictions on resale described below, sales of substantial amounts of common
stock in the public market after the restrictions lapse could adversely affect
the prevailing market price and the ability of CareerBuilder to raise equity
capital in the future.
Upon completion of the offering, CareerBuilder will have
shares of common stock outstanding, assuming no exercise of currently
outstanding options. Of these shares, the shares sold in this
offering (plus any additional shares sold upon exercise of the underwriters'
over-allotment option) will be freely transferable without restriction under the
Securities Act, unless they are purchased by an existing "affiliate" of
CareerBuilder as that term is used under the Securities Act and the regulations
promulgated thereunder. The remaining 16,837,615 shares of common stock held by
existing stockholders are "restricted securities" as that term is defined in
Rule 144 of the Securities Act (the "Restricted Shares"). Restricted Shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or Rule 701 under the Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the offering, an affiliate of CareerBuilder, or a person
(or persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least one year is entitled to sell within any three-month period a
number of shares that does not exceed the greater of (i) one percent of the then
outstanding shares of common stock or (ii) the average weekly trading volume of
common stock in the Nasdaq National Market during the four calendar weeks
immediately preceding the date on which notice of the sale is filed with the
Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to the manner of sale, notice, and the availability of current public
information about CareerBuilder. A person (or persons whose shares are
aggregated) who was not an affiliate of CareerBuilder at any time during the 90
days immediately preceding the sale and who has beneficially owned restricted
shares for at least two years is entitled to sell such shares under Rule 144(k)
without regard to the limitations described above.
An employee, officer or director of or consultant to CareerBuilder who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits affiliates and
non-affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this prospectus. In addition, non-affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144.
As a result of contractual restrictions and the provisions of Rules 144 and
701, additional shares will be available for sale in the public market as
follows:
- no Restricted Shares will be eligible for immediate sale on the date
of this prospectus;
- approximately 33,625 Restricted Shares will be eligible for sale
beginning 90 days after the date of this prospectus, subject in some
cases to compliance with Rule 144;
- approximately 14,721,765 additional Restricted Shares will be
eligible for sale beginning 180 days after the effective date of
this offering upon expiration of lock-up agreements, subject in some
cases to compliance with Rule 144; and
- the remainder of the Restricted Shares will be eligible for sale
from time to time thereafter, subject in some cases to compliance
with Rule 144.
In addition, CareerBuilder expects to file a registration statement on Form
S-8 registering up to 3,300,000 shares of common stock subject to outstanding
stock options or reserved for issuance under
56
<PAGE> 58
CareerBuilder's equity incentive plans. Shares registered under such
registration statement will, subject to Rule 144 volume limitations applicable
to affiliates, be available for sale in the open market, unless such shares are
subject to vesting restrictions with CareerBuilder or the lock-up agreements
described above.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement with CareerBuilder, certain
current stockholders will be entitled following this offering to certain rights
to register under the Securities Act a total of approximately 15,888,795 shares
of common stock.
Subject to certain restrictions, the registration rights agreement
generally provides that stockholders with registration rights may require
CareerBuilder to prepare and file a registration statement under the Securities
Act for their shares at any time beginning July 12, 1999, provided that the
reasonably anticipated aggregate price to the public is at least $5.0 million,
with certain exceptions. CareerBuilder is generally not required to effect more
than two demand registration requests for any stockholder with registration
rights or file a registration statement within 120 days after the effective date
of any other registration statement filed by CareerBuilder. In addition, this
agreement provides that, at such time as CareerBuilder is entitled to file a
registration statement on Form S-3, subject to certain restrictions,
stockholders with registration rights may require CareerBuilder to prepare and
file a registration statement on Form S-3, provided that the reasonably
anticipated aggregate price to the public is at least $1.0 million. Stockholders
with registration rights are entitled to an unlimited number of demand
registration requests on Form S-3.
The registration rights agreement generally provides that if CareerBuilder
proposes to register any of its securities under the Securities Act,
stockholders with registration rights will be entitled to include shares in such
offering. The managing underwriter of any underwritten public offering would,
however, have the right, for marketing reasons, to limit the number of shares
that such stockholders could include in such registration, except that in no
event may less than one-third of the shares of common stock to be sold in the
offering be made available for certain of the shares subject to this agreement,
on a pro rata basis.
CareerBuilder's obligations to register shares under the registration
rights agreement terminate in July 2011.
Pursuant to an agreement with PNC, if CareerBuilder proposes to register
any of its common stock under the Securities Act, including a registration made
at the request of a stockholder exercising demand registration rights, PNC is
entitled to include in such offering shares of common stock issuable upon
exercise of the warrant held by PNC. The managing underwriter of any
underwritten public offering would, however, have the right, for marketing
reasons, to limit the number of shares that such PNC could include in such
registration, except that in no event may less than one-third of the shares of
common stock to be sold in the offering be made available for PNC if any shares
are to be included in the registration for the account of CareerBuilder or
certain stockholders with registration rights.
57
<PAGE> 59
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we and the selling stockholders have
agreed to sell to the underwriters named below, for whom Credit Suisse First
Boston Corporation, BancBoston Robertson Stephens Inc., Hambrecht & Quist LLC
and Friedman, Billings, Ramsey & Co., Inc., are acting as representatives, the
following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
BancBoston Robertson Stephens Inc. .........................
Hambrecht & Quist LLC.......................................
Friedman, Billings, Ramsey & Co., Inc. .....................
--------
Total.............................................
========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all of 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 of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares 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 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 public
offering price and concession and discount to dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
and the selling stockholders will pay.
<TABLE>
<CAPTION>
TOTAL
-------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions paid by us...... $ $ $
Expenses payable by us................................. $ $ $
Underwriting discounts and commissions paid by the
selling stockholders................................. $ $ $
Expenses payable by the selling stockholders........... $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our directors and officers, and substantially all of our stockholders
and optionholders have agreed that we and they will not offer, sell, contract to
sell, pledge or otherwise dispose of, directly or indirectly, or, in our case
file with the Securities and Exchange Commission a registration statement under
the Securities Act relating to, any additional 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 such offer, sale,
58
<PAGE> 60
pledge or disposal without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the initial public offering of
the common stock.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of common stock for employees, directors and
certain 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 such persons
purchase such 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 certain liabilities under the Securities Act, or contribute to payments
which the underwriters may be required to make in respect thereof.
We will apply to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "CBDR".
FBR Technology Venture Partners, L.P., an affiliate of Friedman, Billings,
Ramsey and Company, Inc., owns preferred stock, which will automatically convert
into 465,810 shares of common stock upon closing of the offering. FBR eComm,
L.P., an affiliate of Friedman, Billings, Ramsey and Company, Inc., owns
preferred stock, which will automatically convert into 220,890 shares of common
stock upon closing of the offering.
Prior to the offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors to be considered in
determining the public offering price include:
- the information set forth in this prospectus and otherwise available to
the underwriters;
- our history and prospects and the history and prospects of the industry
in which we compete;
- an assessment of our management;
- the prospects for, and the timing of, our future earnings;
- the present state of our development and our current financial condition;
- the general condition of the securities markets at the time of the
offering;
- the recent market prices of, and the demand for, publicly-traded common
stock of companies in businesses similar to ours;
- market conditions for initial public offerings; and
- other relevant factors.
There can be no assurance that an active trading market will develop for the
common stock or that the common stock will trade in the market subsequent to the
offering at or above the initial public offering price.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids in accordance with Regulation
M under the Securities Exchange Act. Over-allotment involves syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. 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.
Penalty bids permit the representatives to reclaim a selling concession from a
syndicate member when the common stock originally sold by such syndicate member
are purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.
59
<PAGE> 61
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 CareerBuilder prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of common stock are effected. Accordingly, any resale of
the common stock in Canada must be made in accordance with applicable securities
laws which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to CareerBuilder and the dealer from
whom such purchase confirmation is received that (i) such purchaser is entitled
under applicable provincial securities laws to purchase such common stock
without the benefit of a prospectus qualified under such securities laws, (ii)
where required by law, such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be readily available,
including common law rights of action for damages or recision or rights of
action under the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein 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 the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from CareerBuilder. Only one
such report must be filed in respect of common stock acquired on the same date
and under the same prospectus exemption.
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 with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
Legislation.
60
<PAGE> 62
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for CareerBuilder by Hale and Dorr LLP, Washington, D.C., and for the
underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The financial statements and schedule of CareerBuilder, Inc. as of December
31, 1997 and 1998 and for each of the years in the three-year period ended
December 31, 1998 have been included herein and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have filed a Registration Statement on Form S-1 with the Securities and
Exchange Commission. This prospectus, which is a part of the Registration
Statement, does not contain all of the information included in the Registration
Statement. Certain information is omitted and you should refer to the
Registration Statement and its exhibits. With respect to references made in this
prospectus to any contract, agreement or other document of CareerBuilder, such
references are not necessarily complete and you should refer to the exhibits
attached to the Registration Statement for copies of the actual contract,
agreement or other document. You may review a copy of the Registration
Statement, including exhibits, at the Commission's public reference room at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or Seven World
Trade Center, 13th Floor, New York, New York 10048 or Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the Commission
at 1-800-SEC-0330 for further information on the operation of the public
reference rooms.
We will also file annual, quarterly and current reports, proxy statements
and other information with the Commission. You may read and copy any reports,
statements or other information on file at the public reference rooms. You can
also request copies of these documents, for a copying fee, by writing to the
Commission.
Our Commission filings and the Registration Statement can also be reviewed
by accessing the Commission's Internet site at http://www.sec.gov, which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
61
<PAGE> 63
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report................................ F-2
Balance Sheets as of December 31, 1997 and 1998............. F-3
Statements of Operations for the years ended December 31,
1996, 1997 and 1998....................................... F-4
Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1996, 1997 and 1998.................... F-5
Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998....................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 64
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
CareerBuilder, Inc.:
We have audited the accompanying balance sheets of CareerBuilder, Inc. (the
"Company") as of December 31, 1997 and 1998, and the related statements of
operations, stockholders' equity (deficit), and cash flows for each of the years
in the three-year period ended December 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CareerBuilder, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
McLean, VA
February 12, 1999, except for note 14
which is as of March 5, 1999
F-2
<PAGE> 65
CAREERBUILDER, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 1,909 $ 2,709
Accounts receivable, net of allowance of $38 and $135,
respectively.......................................... 585 1,581
Other.................................................. 16 442
------- --------
Total current assets.............................. 2,510 4,732
Property and equipment, net of accumulated depreciation and
amortization of $383 and $1,254, respectively............. 1,000 1,213
Other....................................................... 79 97
------- --------
Total assets...................................... $ 3,589 $ 6,042
======= ========
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 1,039 $ 1,514
Accrued expenses....................................... 531 1,474
Lines of credit........................................ 676 3,450
Deferred revenue....................................... 395 2,193
------- --------
Total current liabilities......................... 2,641 8,631
------- --------
Total liabilities............................ 2,641 8,631
------- --------
Convertible redeemable preferred stock...................... 10,700 18,931
------- --------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $.001 par value, 17,500 shares
authorized, 4,371 and 4,855 shares issued and
outstanding, respectively............................. 4 5
Additional paid-in capital............................. 26 244
Accumulated deficit.................................... (9,782) (21,769)
------- --------
Total stockholders' equity (deficit).............. (9,752) (21,520)
------- --------
$ 3,589 $ 6,042
======= ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 66
CAREERBUILDER, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Service fees........................................... $ 94 $ 1,263 $ 6,648
Software license fees.................................. 44 662 358
------- ------- --------
Total revenue..................................... 138 1,925 7,006
------- ------- --------
Cost of revenue:
Service fees........................................... 30 197 1,629
Software license fees.................................. 6 120 62
------- ------- --------
Total cost of revenue............................. 36 317 1,691
------- ------- --------
Gross profit................................................ 102 1,608 5,315
------- ------- --------
Operating expenses:
Product development.................................... 521 1,310 2,293
General and administrative............................. 663 1,267 2,305
Sales and marketing.................................... 1,330 6,452 12,735
------- ------- --------
Total operating expenses.......................... 2,514 9,029 17,333
------- ------- --------
Income (loss) from operations............................... (2,412) (7,421) (12,018)
------- ------- --------
Net interest income (expense)............................... (4) 107 31
------- ------- --------
Income (loss) before income taxes........................... (2,416) (7,314) (11,987)
Income taxes................................................ -- -- --
------- ------- --------
Net income (loss)........................................... (2,416) (7,314) (11,987)
------- ------- --------
Preferred stock dividend requirements....................... (71) (549) (1,128)
Net income (loss) available to common stockholders.......... $(2,487) $(7,863) $(13,115)
======= ======= ========
Basic and diluted net income (loss) available per share..... $ (0.48) $ (1.80) $ (2.92)
Shares used to compute basic and diluted net income (loss)
available per share....................................... 5,133 4,366 4,494
Unaudited pro forma basic and diluted net income (loss) per
share..................................................... $ (0.87)
Shares used to compute unaudited pro forma basic and diluted
net income (loss) per share............................... 13,850
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 67
CAREERBUILDER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS B
NON-VOTING
LIQUIDATING
PREFERRED
STOCK COMMON STOCK ADDITIONAL TOTAL
--------------- --------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
------ ------ ------ ------ ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995... 1 $ -- 5,876 $ 6 $ 522 $ (52) $ 476
Recapitalization of the
Company.................. (1) -- (1,563) (2) (498) -- (500)
Net income (loss).......... -- -- -- -- -- (2,416) (2,416)
--- ---- ------ --- ----- -------- --------
Balances at December 31, 1996... -- -- 4,313 4 24 (2,468) (2,440)
Exercise of stock
options.................. -- -- 58 -- 2 -- 2
Net income (loss).......... -- -- -- -- -- (7,314) (7,314)
--- ---- ------ --- ----- -------- --------
Balances at December 31, 1997... -- -- 4,371 4 26 (9,782) (9,752)
Conversion of Class A
convertible redeemable
preferred stock.......... -- -- 55 -- 18 -- 18
Conversion of Class B
convertible redeemable
preferred stock.......... -- -- 80 -- 61 -- 61
Exercise of stock
options.................. -- -- 349 1 30 -- 31
Issuance of warrants....... -- -- -- -- 109 -- 109
Net income (loss).......... -- -- -- -- -- (11,987) (11,987)
--- ---- ------ --- ----- -------- --------
Balances at December 31, 1998... -- $ -- 4,855 $ 5 $ 244 $(21,769) $(21,520)
=== ==== ====== === ===== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 68
CAREERBUILDER, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Cash flows used by operating activities:
Net income (loss)......................................... $(2,416) $(7,314) $(11,987)
Adjustments to reconcile net income (loss) to net cash
provided:
Noncash items included in net income (loss):
Depreciation and amortization........................ 49 334 871
Allowance for doubtful accounts and returns.......... 18 225 653
(Increase) decrease in assets:
Accounts receivable.................................. (89) (739) (1,649)
Other operating assets............................... (5) (12) (317)
Increase (decrease) in liabilities:
Accounts payable..................................... 169 871 475
Accrued expenses..................................... 109 421 943
Deferred revenue..................................... -- 395 1,798
------- ------- --------
Net cash used by operating activities............. (2,165) (5,819) (9,213)
------- ------- --------
Cash flows used by investing activities:
Purchases of property and equipment....................... (232) (1,128) (1,084)
Increase in other assets.................................. (10) (69) (18)
------- ------- --------
Net cash used in investing activities............. (242) (1,197) (1,102)
------- ------- --------
Cash flows from financing activities:
Issuance of Class B convertible redeemable preferred
stock.................................................. 1,635 -- --
Issuance of Class C convertible redeemable preferred
stock.................................................. -- 4,566 --
Issuance of Class D convertible redeemable preferred
stock.................................................. -- 3,999 3,280
Issuance of Class E convertible redeemable preferred
stock.................................................. -- -- 5,030
Exercise of stock options................................. -- 2 31
Advances on line of credit, net........................... 400 276 2,774
------- ------- --------
Net cash provided by financing activities......... 2,035 8,843 11,115
------- ------- --------
Net change in cash and cash equivalents..................... (372) 1,827 800
Cash and cash equivalents, beginning of year................ 454 82 1,909
------- ------- --------
Cash and cash equivalents, end of year...................... $ 82 $ 1,909 $ 2,709
======= ======= ========
Supplemental disclosures of cash flow information:
Cash paid during the year:
Interest............................................... $ 4 $ 37 $ 98
Income taxes........................................... -- -- --
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 69
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION
CareerBuilder, Inc. ("CareerBuilder" or the "Company") was established as
NetStart, Inc. on November 6, 1995, through incorporation in the State of
Delaware. In March 1998, the Company amended its articles of incorporation to
change its name to CareerBuilder, Inc. The Company is a provider of
comprehensive online recruitment offerings for employers and job seekers. The
Company's revenue is derived principally from service fees and, to a lesser
extent, license fees for TeamBuilder Software. Service fees include subscription
fees which allow customers to post up to a specific number of job advertisements
per month on the career sites that constitute the CareerBuilder Network banner
and other employment advertising fees and fees for recruiting services provided
by the Company. Software license fees are generated from sales of TeamBuilder
Software. The Company earns revenue through the sale of software to its
customers, and through monthly service fees for posting employment positions to
a network of Company-owned and third party internet sites ("affiliates").
The Company operates in a highly competitive environment and inherent in
the Company's business are various risks and uncertainties including its limited
operating history and unproven business model. The Company's success may depend
in part upon the emergence of the Internet as a communications medium,
prospective product and service development efforts, and the acceptance of the
Company's offerings by the marketplace. The Company expects to expand its
operations through continued capital investment. The Company is not currently
generating sufficient cash flows from operations to support its current
operating and capital requirements and is dependent on additional financing to
fund these requirements.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) REVENUE RECOGNITION
Service revenue consists of the sale of classified employment advertising
on Company-owned and affiliate websites and is recognized ratably over the
subscription period. Revenue from the sale of software is recorded upon shipment
of the product to the buyer, net of estimated returns.
Deferred revenue represents amounts billed or payments received in advance
of the subscription period and is recognized as revenue ratably over the
subscription period.
(b) COST OF REVENUE
Cost of revenue includes both cost of service and cost of software license
fees. Cost of service fees includes costs associated with hosting the network,
including depreciation expense and commissions and fees paid to ADP, Inc.
("ADP") and affiliates. Amounts incurred for affiliates and ADP commissions were
approximately $644,000 in 1998. No such amounts were incurred in 1996 and 1997.
Cost of software license fees consist of royalties paid to third parties for an
embedded database included in the software license.
(c) CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The carrying amounts
reported in balance sheets for cash and cash equivalents approximate their fair
value.
(d) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, which include
cash equivalents, accounts receivable, accounts payable, accrued expenses and
convertible redeemable preferred stock, approximate their fair values as of
December 31, 1998.
F-7
<PAGE> 70
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(e) CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of accounts receivable. The Company extends
credit to its customers on an unsecured basis in the normal course of business.
(f) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets which
range from two to five years. The costs of leasehold improvements are
capitalized and amortized using the straight-line method over the shorter of
their useful lives or the terms of the respective leases.
(g) PRODUCT DEVELOPMENT COSTS
Product development costs include expenses incurred by the Company for
research, design and development of the Company's proprietary technology
incorporated in the TeamBuilder offerings and the CareerBuilder Network. Product
development costs are expensed as incurred. Software development costs are
required to be capitalized when a product's technological feasibility has been
established by completion of a working model of the product and ending when a
product is available for general release to customers. To date, completion of a
working model of the Company's products and general release have substantially
coincided. As a result, the Company has not capitalized any software
developments costs because such costs have not been significant.
(h) STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation arrangements in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and complies with the
disclosure provisions of Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation." Under APB No. 25,
compensation expense is based upon the difference, if any, on the date of grant,
between the fair value of the Company's stock and the exercise price.
(i) INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. 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. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(j) NET INCOME (LOSS) PER SHARE
The Company computes net income (loss) available per share in accordance
with SFAS No. 128, "Earnings Per Share" and SEC Staff Accounting Bulletin No. 98
("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic net income
(loss) available per share is computed by dividing the net income (loss)
available to common stockholders for the period by the weighted average number
of common shares outstanding during the period. Diluted net income (loss)
available per share is computed by dividing the net income (loss) for the period
by the weighted average number of common and dilutive common equivalent shares
outstanding
F-8
<PAGE> 71
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
during the period. The Company has presented historical basic and diluted net
income (loss) available per share in accordance with SFAS No. 128. As the
Company had a net loss in each of the periods presented, basic and diluted net
income (loss) available per share is the same. Pro forma basic and diluted net
income (loss) per share has been calculated assuming the conversion of all
shares of preferred stock outstanding at December 31, 1998 into common stock, as
if the shares had converted immediately upon their issuance.
(K) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
(L) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. To date, the Company has not had any
transactions that are required to be reported as other comprehensive income.
(M) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for the way companies report information about
operating segments in annual financial statements. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The Company has determined that it does not have any separately
reportable business segments as of December 31, 1998.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 98-1, "Software for Internal Use,"
which provides guidance on accounting for the cost of computer software
developed or obtained for internal use. SOP 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. The Company does
not expect that the adoption of SOP 98-1 will have a material impact on its
financial statements.
F-9
<PAGE> 72
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment.......................................... $ 978 $1,774
Furniture and equipment..................................... 294 533
Leasehold improvements...................................... 111 160
------ ------
1,383 2,467
Less: accumulated depreciation and amortization............. 383 1,254
------ ------
$1,000 $1,213
====== ======
</TABLE>
NOTE 4 -- LINES OF CREDIT
The Company had several lines of credit for up to $1,997,500 with a
commercial bank throughout 1997 and 1998. The lines of credit bore interest at a
rate of prime plus one to prime plus two percent. The lines of credit had
expiration dates through June 5, 2001 and contained certain financial covenants
which were required to be maintained by the Company. Substantially all of the
Company's assets served as collateral for the lines of credit. As of December
31, 1997, the Company had outstanding balances of approximately $676,000 on
these lines of credit at interest rates of 9.25 percent to 9.75 percent.
On December 29, 1998, the Company obtained two lines of credit from another
commercial bank and canceled and repaid the outstanding balances on the existing
lines of credit. The new lines of credit are collateralized by substantially all
of the Company's assets. The new lines of credit contain certain financial
covenants which are required to be maintained by the Company.
The first line of credit is for up to $2,000,000, bears interest at a rate
of prime plus one-half percent and matures on December 28, 1999. Borrowings are
available on this line of credit based upon the Company's accounts receivable
and property and equipment balances. At December 31, 1998, the available
borrowings were approximately $1,518,000. The Company had a balance of
approximately $1,450,000 outstanding under this line of credit at December 31,
1998 at an interest rate of 8.25 percent.
The second line of credit is for up to $4,000,000 and matures June 30, 1999
or earlier in the event of certain equity contributions. This line of credit
bears interest at a rate of prime plus four percent for the first ninety days of
the term and then increases to prime plus five percent thereafter. Borrowings
are available under this line as follows: $2,000,000 upon closing on the line of
credit and an additional $1,000,000 at the end of each of the two months
thereafter. The Company had a balance of approximately $2,000,000 under this
line of credit as of December 31, 1998 at an interest rate of 11.75 percent.
In connection with the new lines of credits, the Company incurred a
commitment fee of $60,000 which is included in other assets. Additionally, the
Company granted warrants to purchase 40,568 shares of Common Stock at a purchase
price of $4.93 per share on the date of the grant as consideration for obtaining
the lines of credit. The estimated value of the warrants at the grant date of
$109,000 is also included in other assets. Both the commitment fee and the costs
of the warrants will be amortized into interest expense over the term of the
line of credit using the interest method.
F-10
<PAGE> 73
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- STOCKHOLDERS' EQUITY (DEFICIT)
The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue 17,500,000 shares of common stock (see note 14).
As of December 31, 1998, the Company had reserved shares of common stock
for future issuance as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Conversion of Class A convertible redeemable preferred
stock..................................................... 1,508
Conversion of Class B convertible redeemable preferred
stock..................................................... 2,071
Conversion of Class C convertible redeemable preferred
stock..................................................... 3,189
Conversion of Class D convertible redeemable preferred
stock..................................................... 2,046
Conversion of Class E convertible redeemable preferred
stock..................................................... 1,024
Exercise of stock options under stock option plan........... 1,484
Exercise of warrants........................................ 1,181
------
12,503
======
</TABLE>
On July 12, 1996, the Company was recapitalized through the exchange of
1,250,000 shares of Class A common stock and 400 shares of Class B non-voting
liquidating preferred stock purchased on December 1, 1995 for 1,250,000 shares
of Class A convertible redeemable preferred stock and the exchange of the
4,625,000 shares of Class A common stock and 100 shares of Class B non-voting
liquidating preferred stock, both purchased on November 6, 1995, for 312,500
shares of Class A convertible redeemable preferred stock and 4,312,500 shares of
new common stock.
During 1998, several existing common stockholders exercised their rights to
convert a portion of their shares of Class A convertible redeemable preferred
stock into 55,000 shares of common stock and a portion of their shares of Class
B convertible redeemable preferred stock into 80,000 shares of common stock.
NOTE 6 -- CONVERTIBLE REDEEMABLE PREFERRED STOCK
Convertible redeemable preferred stock as of December 31, 1998 consisted of
the following:
<TABLE>
<CAPTION>
SHARES LIQUIDATION REDEMPTION
AUTHORIZED OUTSTANDING AMOUNT AMOUNT
---------- ----------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Class A....................................... 1,563 1,508 $ 565 $ 481
Class B....................................... 2,151 2,071 1,847 1,574
Class C....................................... 3,189 3,189 5,202 4,567
Class D....................................... 2,046 2,046 7,862 7,279
Class E....................................... 1,024 1,024 5,203 5,030
</TABLE>
The holders of the preferred stock have various rights and preferences as
follows:
(A) VOTING RIGHTS AND PROTECTIVE PROVISIONS
The Class A, B, C, D, and E stockholders may vote with the common stock as
a single class on all actions to be taken by the stockholders. The Class A
stockholders are entitled to separately elect one member of the
F-11
<PAGE> 74
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- CONVERTIBLE REDEEMABLE PREFERRED STOCK -- (CONTINUED)
Board of Directors, provided the Class A stock represents at least 10 percent of
the outstanding common stock assuming the conversion of all outstanding
preferred stock. The Class B and C stockholders each are entitled to separately
elect one member of the Board of Directors, provided each of the Class B and C
stock represents at least 5 percent of the outstanding common stock assuming the
conversion of all outstanding preferred stock. The holders of the preferred
stock also have a right of first refusal to match the purchase price for any
subsequent issuance of stock to retain their voting interest in the Company.
Furthermore, consent of the holders of at least a majority of Class B, C and D
stock and at least 40 percent of holders of Class E stock, voting as a separate
class is required for: (i) the sale by the Company of substantially all of its
assets; (ii) merger, liquidation or winding up of the Company; and (iii) the
payment of dividends.
(b) DIVIDENDS
Class A, B, C, D, and E stock accrues cumulative dividends at a rate of
$0.0224, $0.0532, $0.1008, $0.2499, and $0.3451 per share per annum,
respectively, whether or not the dividends are declared by the Board of
Directors. Unpaid and undeclared dividends on the Class A, B, C, D, and E stock
was approximately $620,000 and $1,748,000 as of December 31, 1997 and 1998,
respectively.
(c) LIQUIDATION
Class B, C, D, and E stock, each with a par value of $.001 is senior to the
Class A stock and all other issuances of stock in liquidation. Class A stock,
par value, $.001 has a liquidation preference over the common stock or any other
issuances of stock, except for the Class B, C, D, and E stock. In the event of
liquidation as defined in the Preferred Stock Purchase Agreements, the Class A,
B, C, D, and E stockholders are entitled to receive an amount equal to the
original share price paid plus any unpaid cumulative dividends, whether or not
declared.
(d) REDEMPTION
Class B, C, D, and E stock contain mandatory redemption requirements. The
Company must redeem Class B, C, D, and E Stock as follows:
<TABLE>
<S> <C>
September 11, 2002 33 1/3% of all Class B, C, D, and E outstanding as of that
date
September 11, 2003 50% of all Class B, C, D, and E outstanding as of that date
September 11, 2004 100% of all Class B, C, D, and E outstanding as of that date
</TABLE>
Class A, B, C, D, and E stock have a redemption value of $0.32, $0.76,
$1.44, $3.57, and $4.93 per share, plus declared but unpaid dividends thereon,
respectively.
(e) CONVERSION
The Class A, B, C, D, and E stock is convertible on a one-for-one basis
into shares of common stock at the option of the holder. The Class A, B, C, D,
and E stock is automatically converted into common stock in the event of an
initial public offering of shares of common stock, in which the price paid by
the public is at least $4.32 per share and the aggregate proceeds is at least
$15,000,000 (note 14). The Class A, B, C, D, and E stock is automatically
converted into common stock upon a merger or sale of the Company as defined in
the Preferred Stock Purchase Agreements, in which the holders of the Class A, B,
C, D, and E stock will receive, on an as-converted basis, at least $1.28, $3.04,
$5.76, $6.03 and $6.03 per share, respectively.
F-12
<PAGE> 75
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- RELATED PARTY TRANSACTION
In January 1998, the Company entered into a sales agent agreement with ADP.
ADP is related to the Company through its ownership of 840,337 shares of Class D
Convertible Redeemable Preferred Stock. ADP also has the right to appoint and
nominate one member of the Board of Directors, as long as ADP beneficially owns
at least 2 percent of the outstanding common stock, assuming conversion of all
outstanding preferred stock. The agreement expires in January 2000.
Per the agreement, ADP sells the Company's software products and classified
employment advertising services on a commission basis. Under the agreement, ADP
performs all billing and collections on behalf of the Company and remits amounts
due to the Company, net of its commissions. In connection with the agreement,
ADP made a prepayment of expected sales to the Company of $1,500,000. This
amount has been included in deferred revenue and has been reduced by amounts
earned of $405,000 as of December 31, 1998. The agreement expires in January
2000, unless extended at the option of the parties. In 1998, commission expense
under the ADP agreement was approximately $328,000. See note 14.
NOTE 8 -- STOCK COMPENSATION
(A) STOCK OPTIONS
The Company has a stock option plan which provides for the granting of
options to directors and employees of the Company to purchase shares of its
common stock within prescribed periods. Options are granted at an exercise price
equal to the estimated fair value on the grant date, as determined by the Board
of Directors. The options generally vest over four years, one-fourth of the
shares on each of the first through fourth anniversaries of the date of grant.
As of December 31, 1998, the Company has reserved 1,950,000 shares of common
stock for issuance under the plan (see note 14).
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options rather than the alternative fair value
accounting method allowed by SFAS No. 123. APB 25 provides that compensation
expense relative to the Company's employee stock options is measured based upon
the intrinsic value of the stock option. SFAS No. 123 requires companies that
continue to follow APB 25 to provide a pro forma disclosure of the impact of
applying the fair value method of SFAS No. 123.
Under APB 25, because the exercise price of the Company's employee stock
options equaled the fair value of the underlying stock on the date of grant, no
compensation expense has been recognized. Had compensation expense for the
Company's stock option plan been determined based upon the fair value
methodology under SFAS No. 123, the Company's net loss would have increased to
these pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
-------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss) available to common stockholders:
As reported............................................ $(2,487) $(7,863) $(13,115)
Pro forma.............................................. (2,488) (7,869) (13,140)
Basic and diluted net income (loss) available per share:
As reported............................................ $ (0.48) $ (1.80) $ (2.92)
Pro forma.............................................. (0.48) (1.80) (2.92)
</TABLE>
F-13
<PAGE> 76
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- STOCK COMPENSATION -- (CONTINUED)
The fair value of these options was estimated at the date of grant using
the Black-Scholes option pricing model on the date of grant using the following
assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rates.................................... 6.0% 6.0% 5.5%
Expected lives (in years)................................... 5.0 5.0 4.0
Dividend yield.............................................. -- -- --
Expected volatility......................................... -- -- --
</TABLE>
The weighted-average fair value of stock options granted during 1996, 1997,
and 1998 was $0.01, $0.07 and $0.22, respectively.
A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
SHARES WEIGHTED AVERAGE
UNDER OPTION EXERCISE PRICE
------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Balance, December 31, 1995............................... 20 $0.04
Granted.................................................. 755 0.06
Exercised................................................ -- --
Canceled................................................. -- --
-----
Balance, December 31, 1996............................... 775 0.06
Granted.................................................. 585 0.30
Exercised................................................ 58 0.04
Canceled................................................. 14 0.27
-----
Balance, December 31, 1997............................... 1,288 0.17
Granted.................................................. 632 1.26
Exercised................................................ 349 0.09
Canceled................................................. 87 0.40
-----
Balance, December 31, 1998............................... 1,484 0.64
=====
</TABLE>
F-14
<PAGE> 77
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- STOCK COMPENSATION -- (CONTINUED)
The following table summarizes information concerning currently outstanding
and exercisable options at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
NUMBER WEIGHTED-AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 12/31/98 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/98 EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
(IN THOUSANDS, EXCEPT YEARS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
$0.04 - $0.16............... 576 7.8 years $0.09 174 $0.09
$0.35 - $0.40............... 411 9.0 years 0.38 103 0.38
$1.25 - $3.50............... 497 9.8 years 1.48 -- --
----- ---
1,484 8.8 years 0.64 277 0.20
===== ===
</TABLE>
(B) WARRANTS
In connection with the ADP agreement (note 7), the Company granted warrants
to purchase up to 1,140,000 shares of the Company's common stock at an exercise
price of $5.00 per share. The warrants vest up to 380,000 shares per year on
March 31, 1999, 2000 and 2001, based upon sales levels obtained by ADP during
the one-year periods ending on the respective vesting dates. The warrants
contain anti-dilution provisions, which increase the number of shares ratably in
connection with certain additional equity issuances by the Company. In
connection with the issuance of Class E convertible redeemable preferred stock
in July 1998, warrants in December 1998 and Class F convertible redeemable
preferred stock in January 1999, the number of shares purchasable under the
warrants was increased to 1,294,052 (see note 14).
The Company begins to record expense for such warrants when it is probable
that ADP will obtain the necessary sales levels to vest in the warrants. The
expense is measured based upon the fair value of the warrants at the vesting
date. As of December 31, 1998, the Company believes it is not yet probable that
ADP will achieve the necessary sales level to earn the warrants vesting on March
31, 1999, or any other date, and accordingly, no expense has been recorded.
In December 1998, the Company granted warrants to purchase 40,568 shares of
common stock at an exercise price of $4.93 per share as consideration for
obtaining a line of credit (note 4). The warrants expire in ten years.
F-15
<PAGE> 78
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- LEASES
The Company is obligated under several noncancelable operating leases for
office space. The future minimum lease obligations under these noncancelable
operating leases as of December 31, 1998 are approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------ (IN THOUSANDS)
<S> <C>
1999........................................................ $389
2000........................................................ 284
2001........................................................ 219
2002........................................................ 48
----
$940
====
</TABLE>
Rent expense under noncancelable operating leases was approximately
$47,000, $279,000 and $422,000 for years ended December 31, 1996, 1997 and 1998,
respectively.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
(a) RETIREMENT AND HEALTH PLANS
The Company sponsors a defined contribution plan available to substantially
all employees. The Company's contributions under the Plan are discretionary.
There were no Company contributions made to the Plan during any of the periods
presented.
The Company is self-insured for group health below certain specified
limits.
(b) AFFILIATE PAYMENTS
The Company has a commitment to purchase approximately $2,030,000 in
Internet advertising from one of its affiliates during 1999. The Company can
reduce such commitment through the payment of commissions to the affiliate from
the sale of classified employment advertising on the affiliate's websites.
In September 1998, the Company entered into an affiliate agreement which
required a payment of $400,000 at inception for marketing and development
activities. Such amount has been included in other assets and is being amortized
into sales and marketing expense over the term of the agreement. Additionally,
the agreement requires the Company to purchase approximately $600,000 in
Internet advertising during 1999. These amounts will be expensed in the period
incurred.
NOTE 11 -- INCOME TAXES
No provision for federal or state income taxes has been recorded as the
Company incurred net operating losses for all periods presented. As of December
31, 1998, the Company had net operating loss carryforwards available to offset
future taxable income of approximately $19,692,000, $6,944,000 of which expire
in 2018, with the remainder expiring in 2011 and 2012. Further, as a result of
certain capital transactions, an annual limitation on the future utilization of
the net operating loss carryforward may have occurred. The actual income tax
benefit differed from the income tax benefit which would be computed based upon
the statutory federal tax rates as a result of recording of a valuation
allowance. The valuation allowance was recorded as it is not more likely than
not that the deferred tax assets will be recoverable.
F-16
<PAGE> 79
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- INCOME TAXES -- (CONTINUED)
Temporary differences that give rise to deferred tax assets and liabilities
at December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
1997 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 3,730 $ 7,877
Accounts receivable....................................... 15 54
Property and equipment.................................... 27 155
Accrued expenses.......................................... 104 219
Deferred revenue.......................................... -- 438
------- -------
Total gross deferred tax assets................... 3,876 8,743
Less: valuation allowance................................... (3,876) (8,743)
------- -------
Net deferred tax assets........................... $ -- $ --
======= =======
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1997 and
1998 was $986,000 and $3,876,000 respectively. The net change in the valuation
allowance for the years ended December 31, 1997 and 1998, was an increase of
$2,890,000 and $4,867,000, respectively.
NOTE 12 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
NONCASH INVESTING AND FINANCING ACTIVITIES
In 1998, several existing common stockholders exercised their rights to
convert 55,000 shares of Class A convertible redeemable preferred stock and
80,000 shares of Class B convertible redeemable preferred stock into 135,000
shares of common stock. In connection with the transactions, approximately
$79,000 of convertible redeemable preferred stock was reclassified to additional
paid-in capital.
In 1998, the Company issued warrants to purchase 40,568 shares of common
stock as consideration in obtaining a line of credit. As a result, the estimated
value of the warrants of approximately $109,000 was recorded as an other asset
with the offsetting amount recorded as additional paid-in capital.
In 1996, in connection with the recapitalization of the Company,
approximately $500,000 was reclassified from additional paid-in capital to
convertible redeemable preferred stock.
NOTE 13 -- BASIC AND DILUTED NET LOSS PER SHARE
The Company computes net income (loss) per share in accordance SFAS No.128,
"Earnings Per Share", which requires certain disclosures relating to the
calculation of earnings per common share. The following is a
F-17
<PAGE> 80
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- BASIC AND DILUTED NET LOSS PER SHARE -- (CONTINUED)
reconciliation of the numerators and denominators of the basic and diluted
earnings per common share computations for net income (loss).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1997 1998
-------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss)....................................... $(2,416) $(7,314) $(11,987)
Preferred stock dividend requirements................... (71) (549) (1,128)
------- ------- --------
Net income (loss) available to common stockholders...... $(2,487) $(7,863) $(13,115)
======= ======= ========
Weighted average shares of common stock outstanding..... 5,133 4,366 4,494
======= ======= ========
Basic and diluted net income (loss) available per common
share................................................. $ (0.48) $ (1.80) $ (2.92)
======= ======= ========
</TABLE>
NOTE 14 -- SUBSEQUENT EVENTS
On January 26, 1999, the Company issued 2,018,350 shares of newly
authorized Class F convertible redeemable preferred stock to new and existing
investors for approximately $11,000,000. The Class F preferred stock is
convertible on a one-for-one basis into shares of common stock at the option of
the holder. The Class F preferred stock is automatically converted into common
stock in the event of an initial public offering of shares of common stock in
which the price paid per share by the public is at least $7.00 per share and the
aggregate proceeds is at least $30,000,000. The Class A, B, C, D, and E
preferred stock conversion features were amended to conform to the Class F
preferred stock as a result of the issuance of Class F preferred stock. In
connection with the issuance of Class F preferred stock, the Company amended its
Certificate of Incorporation to increase authorized shares of common stock to
21,000,000 and increased the number of shares of common stock authorized for
issuance under the Company's stock option plan to 2,100,000.
On March 5, 1999, the Company entered into an agreement with NBC
Multimedia. Under this agreement, the Company will host the NBC Interactive
career sites for participating NBC affiliates and NBC.com. Under this agreement,
Careerbuilder granted warrants to purchase 93,750 shares of common stock at an
exercise price of $8.00 per share and 53,571 shares at an exercise price of
$14.00 per share. The warrants become exercisable in various amounts on the
first, second, and third anniversary of the agreement and expire five years from
the date of grant. In addition, the Company is required to make certain
mandatory payments to NBC Interactive in 1999 and 2000.
On March 5, 1999, the Company and ADP amended their joint marketing and
sales representative agreement, extending the initial term of the agreement
through January 2002. The Company amended and restated the warrant granted in
January 1998, and the first installment exercisable for 380,000 shares of common
stock, at an exercise price of $12.00 per share, was vested at that time. The
remaining 914,052 shares of common stock underlying the warrant vest in equal
amounts of 457,026 shares of common stock on each of March 31, 2001 and 2002, at
an exercise price of $5.00 per share, based upon sales levels attained by ADP
during the one-year period ending on the respective vesting date. If the Company
issues additional equity securities primarily for financing purposes, and not
including the shares of common stock sold in an underwritten public offering,
the number of shares of common stock issuable upon exercise of the warrant will
increase for each of the second and third installments.
F-18
<PAGE> 81
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- SUBSEQUENT EVENTS -- (CONTINUED)
If and when it becomes probable that the net revenue the Company will
receive from ADP will reach the necessary level for either installment of the
warrant to vest, the Company would begin to record an expense reflecting the
fair value of the warrant, which will be determined in part based on the market
price of the common stock. The Company would begin to recognize this expense on
the determination of probability that the revenue targets would be achieved,
continuing through the actual vesting date. The Company would initially estimate
the amount of the expense at the time of the determination that achievement is
probable, based in part on the market price of the common stock at that time. At
the time of actual vesting, the fair value of the warrant would be remeasured
and, if different from the value used in initially estimating the expense, the
difference would be reflected as an additional charge or credit at that time.
F-19
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $14,387
NASD filing fee............................................. 5,675
Nasdaq National Market listing fee.......................... *
Blue Sky fees and expenses.................................. *
Transfer Agent and Registrar fees........................... *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Printing and mailing expenses............................... *
Miscellaneous............................................... *
-------
$ *
=======
</TABLE>
- -------------------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Eighth of the Registrant's Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") provides that no
director of the Registrant shall be personally liable for any monetary damages
for any breach of fiduciary duty as a director, except to the extent that the
Delaware General Corporation Law prohibits the elimination or limitation of
liability of directors for breach of fiduciary duty.
Article Ninth of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any litigation
or other legal proceeding (other than an action by or in the right of the
Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount advanced
if it is ultimately determined that he is not entitled to indemnification for
such expenses.
II-1
<PAGE> 83
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article Ninth of the Registrant's Restated Certificate of Incorporation
further provides that the indemnification provided therein is not exclusive, and
provides that in the event that the Delaware General Corporation Law is amended
to expand the indemnification permitted to directors or officers, then the
Registrant must indemnify those persons to the fullest extent permitted by such
law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Under Section 7 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Reference is made to
the form of Underwriting Agreement filed as Exhibit 1 hereto.
The Registrant intends to purchase an insurance policy insuring the
officers and directors of the Registrant against certain liabilities incurred by
them in the discharge of their functions as such officers and directors,
including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding shares of capital stock issued,
warrants issued and options granted by the Registrant since January 1, 1996.
(a) Issuances of Capital Stock and Warrants
In July 1996, the Registrant sold 2,151,420 shares of Class B convertible
preferred stock to a group of private investors for an aggregate sale price of
$1,635,079.
In January 1997, the Registrant sold 3,188,889 shares of Class C
convertible preferred stock to a group of private investors for an aggregate
sale price of $4,592,000.
In September 1997, the Registrant sold 1,120,448 shares of Class D
convertible preferred stock to a group of private investors for an aggregate
sale price of $3,999,999. In January 1998, the Registrant sold an additional
925,337 shares of Class D convertible preferred stock to a group of private
investors for an aggregate sale price of $3,303,453. In January 1998, in
connection with the execution of the ADP Joint Marketing and Sales
Representative Agreement and the issuance of Class D convertible preferred stock
to ADP, Inc. ("ADP"), the Registrant issued to ADP a warrant to purchase up to
1,294,052 shares of common stock.
In July 1998, the Registrant sold 1,024,351 shares of Class E convertible
preferred stock to a group of private investors for an aggregate sale price of
$5,050,050.
II-2
<PAGE> 84
In December 1998, in connection with the execution of a Loan Agreement with
PNC Bank, N.A. ("PNC"), the Registrant issued to PNC a warrant to purchase up to
40,568 shares of common stock.
In January 1999, the Registrant sold 2,018,350 shares of Class F
convertible preferred stock to a group of investors for an aggregate sale price
of $11,000,008.
In March 1999, in connection with an agreement with NBC, the Registrant
issued a warrant to purchase 93,750 shares of common stock at an exercise price
of $8.00 per share and a warrant to purchase 53,571 shares of common stock at
$14.00 per share.
(b) Grants and Exercises of Stock Options
The Registrant's Stock Option Plan (the "Stock Plan") was adopted by the
Board of Directors and approved by the stockholders of the Registrant in March
1996. As of February 28, 1999, options to purchase 1,428,655 shares of Common
Stock were outstanding under the Stock Plan, and the Registrant had issued
533,820 shares of Common Stock upon the exercise of options granted under such
plan. The Registrant's 1999 Stock Incentive Plan (the "Incentive Plan") and 1999
Director Stock Option Plan (the "Director Plan") were adopted by the Board of
Directors and approved by the stockholders of the Registrant in March 1999. As
of February 28, 1999, no options had been granted under either the Incentive
Plan or the Director Plan. The Registrant's 1999 Employee Stock Purchase Plan
(the "Purchase Plan") was adopted by the Board of Directors and approved by the
stockholders in March 1999. The Purchase Plan will not become effective until
the closing of the offering.
The Registrant has reserved an aggregate of 3,300,000 shares of Common
Stock for issuance in the aggregate under the Stock Plan, Incentive Plan,
Director Plan and Purchase Plan.
The securities issued in the foregoing transactions were either (i) offered
and sold in reliance upon exemptions from Securities Act registration set forth
in Sections 3(b) and 4(2) of the Securities Act, or any regulations promulgated
thereunder, relating to sales by an issuer not involving any public offering,
(ii) in the case of certain options to purchase shares of Common Stock and
shares of Common Stock issued upon the exercise of such options, such offers and
sales were made in reliance upon an exemption from registration under Rule 701
of the Securities Act. No underwriters were involved in the foregoing sales of
securities.
II-3
<PAGE> 85
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant (to be effective upon the closing of the
offering).
3.3 By-Laws of the Registrant.
3.4 Form of Amended and Restated By-Laws of the Registrant (to
be effective upon the closing of the offering).
4.1* Specimen certificate for shares of Common Stock.
5* Opinion of Hale and Dorr LLP.
10.1 Stock Option Plan.
10.2* 1999 Stock Incentive Plan.
10.3* 1999 Director Stock Option Plan.
10.4* 1999 Employee Stock Purchase Plan.
10.5 Third Amended and Restated Registration Rights Agreement,
dated as of January 26, 1999, by and among the Registrant
and certain stockholders.
10.6 Amended and Restated Stock Restriction Agreement, dated as
of January 26, 1999, by and among the Registrant and certain
stockholders.
+10.7* Amendment Agreement, dated March 5, 1999, between the
Registrant and ADP, Inc.
10.8 Class D Convertible Preferred Stock Purchase Agreement,
dated as of September 11, 1997, by and among the Registrant
and certain stockholders.
10.9 Amendment Agreement to the Class D Convertible Preferred
Stock Purchase Agreement, dated as of January 23, 1998, by
and among the Registrant and certain stockholders.
10.10 Class E Convertible Preferred Stock Purchase Agreement,
dated as of July 6, 1998, by and among the Registrant and
certain stockholders.
10.11 Class F Convertible Preferred Stock Purchase Agreement,
dated as of January 26, 1999, between the Registrant and
certain stockholders.
+10.12* ADP Joint Marketing/Sales Representative Agreement, dated as
of January 23, 1998, between the Registrant and ADP, Inc.
+10.13* Common Stock Purchase Warrant, dated as of January 23, 1998,
issued to ADP, Inc.
10.14 Loan Agreement, dated as of December 29, 1998, between the
Registrant and PNC Bank, N.A.
10.15 Revolving Credit Note, dated as of December 29, 1998, issued
to PNC Bank, N.A.
10.16 Bridge Loan Note, dated as of December 29, 1998, issued to
PNC Bank, N.A.
10.17 Security Agreement, dated as of December 29, 1998, between
the Registrant and PNC Bank, N.A.
10.18 Warrant Agreement, dated as of December 29, 1998, between
the Registrant and PNC Bank, N.A.
10.19 Lease, dated September 11, 1997, as amended, for Reston, VA.
10.20 Sublease, dated August 14, 1998, for Reston, VA.
11 Computation of earnings per common share.
23.1 Consent of Hale and Dorr LLP (included in Exhibit 5).
</TABLE>
II-4
<PAGE> 86
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
23.2 Consent of KPMG LLP.
24 Power of Attorney (included on page II-5).
27 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
+ Application has been filed for confidential treatment.
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required or
because the required information is given in the Registrant's Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation of the Registrant and the laws of the State of Delaware, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-5
<PAGE> 87
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 Reston, Virginia on this 5th day of
March, 1999.
CAREERBUILDER, INC.
By: /s/ ROBERT J. MCGOVERN
------------------------------------------
Robert J. McGovern
Chairman of the Board, President and Chief
Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of CareerBuilder, Inc., hereby
severally constitute and appoint Robert J. McGovern, James A. Tholen and David
Sylvester, and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-1 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement, and any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b), and generally to do all such
things in our names and on our behalf in our capacities as officers and
directors to enable CareerBuilder, Inc. to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys, or any of them, to said Registration Statement
and any and all amendments thereto or to any subsequent Registration Statement
for the same offering which may be filed under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT J. MCGOVERN Chairman of the Board, President and Chief March 5,1999
- --------------------------------------------- Executive Officer (Principal Executive
Robert J. McGovern Officer)
/s/ JAMES A. THOLEN Director (Principal Financial and Accounting March 5, 1999
- --------------------------------------------- Officer)
James A. Tholen
/s/ PETER BARRIS Director March 5, 1999
- ---------------------------------------------
Peter Barris
/s/ GARY C. BUTLER Director March 5, 1999
- ---------------------------------------------
Gary C. Butler
/s/ D. JARRETT COLLINS Director March 5, 1999
- ---------------------------------------------
D. Jarrett Collins
</TABLE>
II-6
<PAGE> 88
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. NEIL WEINTRAUT Director March 5, 1999
- ---------------------------------------------
J. Neil Weintraut
/s/ DAVID C. WETMORE Director March 5, 1999
- ---------------------------------------------
David C. Wetmore
</TABLE>
II-7
<PAGE> 89
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1996
Allowances for doubtful accounts and
sales returns.......................... $-- $ 4 $ 14 $ -- $ 18
1997
Allowances for doubtful accounts and
sales returns.......................... 18 88 137 (205) 38
1998
Allowances for doubtful accounts and
sales returns.......................... 38 591 62 (556) 135
</TABLE>
S-1
<PAGE> 1
TH&T DRAFT: 2/25/99
[____________] SHARES
CAREERBUILDER, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
[____________], 1999
Credit Suisse First Boston Corporation
Hambrecht & Quist LLC
BancBoston Robertson Stephens Inc.
Friedman, Billings, Ramsey & Co., Inc.
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. CareerBuilder, Inc., a Delaware corporation
("COMPANY") proposes to issue and sell [_________] shares of its common stock,
$.001 par value per share ("SECURITIES") and the stockholders listed in Schedule
A hereto ("SELLING STOCKHOLDERS") propose severally to sell an aggregate of
[NUMBER] outstanding shares of the Securities (such [NUMBER] shares of
Securities being hereinafter referred to as the "FIRM SECURITIES"). The Company
also proposes to sell to the Underwriters, at the option of the Underwriters, an
aggregate of not more than [# SHOE] additional shares of its Securities, as set
forth below (such [# SHOE] additional shares being hereinafter referred to as
the "OPTIONAL SECURITIES"). The Firm Securities and the Optional Securities are
herein collectively called the "OFFERED SECURITIES". The Company and the Selling
Stockholders hereby agree with the several Underwriters named in Schedule B
hereto ("UNDERWRITERS") as follows:
2. Representations and Warranties of the Company and the Selling
Stockholders. (a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) A registration statement (No. 333- ) relating to the
Offered Securities, including a form of prospectus, has been filed with the
Securities and Exchange Commission ("Commission") and either (A) has been
declared effective under
<PAGE> 2
2 TH&T DRAFT: 2/25/99
the Securities Act of 1933, as amended ("ACT") and is not proposed to be amended
or (B) is proposed to be amended by amendment or post-effective amendment. If
such registration statement (the "INITIAL REGISTRATION STATEMENT") has been
declared effective, either (A) an additional registration statement (the
"ADDITIONAL REGISTRATION STATEMENT") relating to the Offered Securities may have
been filed with the Commission pursuant to Rule 462(b) ("RULE 462(b)") under the
Act and, if so filed, has become effective upon filing pursuant to such Rule and
the Offered Securities all have been duly registered under the Act pursuant to
the initial registration statement and, if applicable, the additional
registration statement or (B) such an additional registration statement is
proposed to be filed with the Commission pursuant to Rule 462(b) and will become
effective upon filing pursuant to such Rule and upon such filing the Offered
Securities will all have been duly registered under the Act pursuant to the
initial registration statement and such additional registration statement. If
the Company does not propose to amend the initial registration statement or if
an additional registration statement has been filed and the Company does not
propose to amend it, and if any post-effective amendment to either such
registration statement has been filed with the Commission prior to the execution
and delivery of this Agreement, the most recent amendment (if any) to each such
registration statement has been declared effective by the Commission or has
become effective upon filing pursuant to Rule 462(c) ("RULE 462(c)") under the
Act or, in the case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "EFFECTIVE TIME" with respect to the initial
registration statement or, if filed prior to the execution and delivery of this
Agreement, the additional registration statement means (A) if the Company has
advised the Representatives to the several Underwriters named herein (the
"REPRESENTATIVES") that it does not propose to amend such registration
statement, the date and time as of which such registration statement, or the
most recent post-effective amendment thereto (if any) filed prior to the
execution and delivery of this Agreement, was declared effective by the
Commission or has become effective upon filing pursuant to Rule 462(c), or (B)
if the Company has advised the Representatives that it proposes to file an
amendment or post-effective amendment to such registration statement, the date
and time as of which such registration statement, as amended by such amendment
or post-effective amendment, as the case may be, is declared effective by the
Commission. If an additional registration statement has not been filed prior to
the execution and delivery of this Agreement but the Company has advised the
Representatives that it proposes to file one, "EFFECTIVE TIME" with respect to
such additional registration statement means the date and time as of which such
registration statement is filed and becomes effective pursuant to Rule 462(b).
"EFFECTIVE DATE" with respect to the initial registration statement or the
additional registration statement (if any) means the date of the Effective Time
thereof. The initial registration statement, as amended at its Effective Time,
including all information contained in the additional registration statement (if
any) and deemed to be a part of the initial registration statement as of the
Effective Time of the additional registration statement pursuant to the General
Instructions of the Form on which it is filed and including all information (if
any) deemed to be a part of the initial registration statement as of its
Effective Time pursuant to Rule 430A(b) ("RULE 430A(b)") under the Act, is
hereinafter referred to as the "INITIAL
<PAGE> 3
3 TH&T DRAFT: 2/25/99
REGISTRATION STATEMENT". The additional registration statement, as amended at
its Effective Time, including the contents of the initial registration statement
incorporated by reference therein and including all information (if any) deemed
to be a part of the additional registration statement as of its Effective Time
pursuant to Rule 430A(b), is hereinafter referred to as the "ADDITIONAL
REGISTRATION STATEMENT". The Initial Registration Statement and the Additional
Registration Statement are hereinafter referred to collectively as the
"REGISTRATION STATEMENTS" and individually as a "REGISTRATION STATEMENT". The
form of prospectus relating to the Offered Securities, as first filed with the
Commission pursuant to and in accordance with Rule 424(b) ("RULE 424(b)") under
the Act or (if no such filing is required) as included in a Registration
Statement, is hereinafter referred to as the "PROSPECTUS". No document has been
or will be prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial Registration
Statement conformed in all material respects to the requirements of the Act and
the rules and regulations of the Commission ("RULES AND REGULATIONS") and did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (B) on the Effective Date of the Additional Registration
Statement (if any), each Registration Statement conformed or will conform, in
all respects to the requirements of the Act and the Rules and Regulations and
did not include, or will not include, any untrue statement of a material fact
and did not omit, or will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, (C) on the date of this
Agreement, the Initial Registration Statement and, if the Effective Time of the
Additional Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at the time
of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is
required) at the Effective Date of the Additional Registration Statement in
which the Prospectus is included, each Registration Statement and the Prospectus
will conform, in all material respects to the requirements of the Act and the
Rules and Regulations, and neither of such documents includes, or will include,
any untrue statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
and (D) no stop order suspending the effectiveness of a Registration Statement
or any part thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Act. If the Effective
Time of the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus will conform in
all material respects to the requirements of the Act and the Rules and
Regulations, neither of such documents will include any untrue statement of a
material fact or will omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
<PAGE> 4
4 TH&T DRAFT: 2/25/99
circumstances in which they were made, not misleading, and no Additional
Registration Statement has been or will be filed. The two preceding sentences do
not apply to statements in or omissions from a Registration Statement or the
Prospectus based upon written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein, it being
understood and agreed that the only such information is that described as such
in Section 7(c) hereof.
(iii) The Company has not distributed and, prior to the later
of (a) any Closing Date (as defined herein) and (b) the completion of the
distribution of the Offered Securities, will not distribute any offering
material in connection with the offering of the Offered Securities other than a
Registration Statement, any preliminary prospectus contained therein or the
Prospectus or any amendment or supplement thereto.
(iv) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus; and the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would not have a
material adverse effect on the condition (financial or other), business,
prospects, properties or results of operations of the Company ("MATERIAL ADVERSE
EFFECT").
(v) The Company has no subsidiaries.
(vi) The Offered Securities and all other outstanding shares
of capital stock of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and when the Offered Securities have
been delivered and paid for in accordance with this Agreement on each Closing
Date such Offered Securities will have been, validly issued, fully paid and
nonassessable; the offered Securities and all other outstanding shares of
Capital Stock of the Company conform to the description thereof contained in the
Prospectus; and no stockholder of the Company has any preemptive rights with
respect to the Securities. The information set forth [under the caption]
[PRECEDING THE CAPTION?] "CAPITALIZATION" [NOTE: WE'LL NEED TO REVISE THIS
BEFORE WE FILE BASED ON HOW THE TABLES COME OUT] in the Prospectus is true and
correct. The descriptions of the Company's stock option, stock bonus and other
stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth or incorporated by reference in the Prospectus,
accurately and fairly present the information required to be shown with respect
to such plans, arrangements, options and rights. Without limiting the preceding
sentence, there are no outstanding options, warrants or other rights granted to
or by the Company to purchase Securities or other securities of the Company,
other than as described in the Prospectus.
<PAGE> 5
5 TH&T DRAFT: 2/25/99
(vii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder's fee or other like payment in connection with this
offering.
(viii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such securities
in the securities registered pursuant to a Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Act.
(ix) The Offered Securities have been approved for listing
subject to notice of issuance on the Nasdaq Stock Market's National Market.
(x) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in connection
with the issuance and sale by the Company of the Offered Securities, except such
as have been obtained and made under the Act and such as may be required under
state securities laws or by the by-laws and rules of the National Association of
Securities Dealers, Inc. ("NASD").
(xi) The Company has full legal right, power and authority to
enter into this Agreement, the Irrevocable Power of Attorney of Selling
Stockholder by and between each Selling Stockholder and the Attorney-in-Fact
named therein, dated as of February [__], 1999 ("POWER OF Attorney") and the
Custody Agreement by and between each Selling Stockholder and the Custodian
named therein, dated as of February [__], 1999 (the "CUSTODY AGREEMENT"), and to
perform the transactions contemplated hereby and thereby. Each of this
Agreement, the Power of Attorney and the Custody Agreement have been duly
authorized, executed and delivered by the Company and is a valid and binding
agreement on the part of the Company, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
(xii) The execution, delivery and performance of this
Agreement, the Power of Attorney and the Custody Agreement, and the consummation
of the transactions herein and therein contemplated, will not result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any governmental agency or
body or any court, domestic or foreign, having jurisdiction over the Company or
any of their properties, or any agreement or instrument to which the Company is
a party or by which the Company is bound or to which any of
<PAGE> 6
6 TH&T DRAFT: 2/25/99
the properties of the Company is subject, or the charter or by-laws of the
Company, and the Company has full power and authority to authorize, issue and
sell the Offered Securities as contemplated in this Agreement.
(xiii) Except as disclosed in the Prospectus, the Company has
good and marketable title to all real properties and all other properties and
assets owned by it, in each case free from liens, encumbrances and defects that
would materially affect the value thereof or materially interfere with the use
made or to be made thereof by it; and except as disclosed in the Prospectus, the
Company holds any leased real or personal property under valid and enforceable
leases with no exceptions that would materially interfere with the use made or
to be made thereof by it.
(xiv) The Company possesses adequate certificates, authorities
or permits issued by appropriate governmental agencies or bodies necessary to
conduct the business now operated by it and has not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company, would
individually or in the aggregate have a Material Adverse Effect. The Company is
not in violation of its charter or by-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company is a party or by which it or its properties may be bound; and the
Company is not in material violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or over its
properties of which it has knowledge.
(xv) No labor dispute with the employees of the Company exists
or, to the knowledge of the Company, is imminent that might have a Material
Adverse Effect.
(xvi) The Company has the right to use all trademarks, trade
names, trade secrets, servicemarks, inventions, patent rights, mask works,
copyrights, licenses, software code, audiovisual works, formats, algorithms and
underlying data required to operate its business as presently being conducted
and proposed to be conducted as described in the Prospectus, and the Company has
all required approvals and governmental authorizations now used in, or which are
necessary for fulfillment of its obligations or the conduct of its business as
now conducted or proposed to be conducted as described in the Prospectus; and
the Company is not infringing any trademark, trade name rights, patent rights,
mask works, copyrights, licenses, trade secrets, servicemarks or other similar
rights of others, and there is no claim being made against the Company, and the
Company has not received any notice regarding, trademark, trade name, patent,
mask work, copyright, license, trade secrets or other infringement or assertion
of intellectual property rights which could have a Material Adverse Effect. The
Company has agreements in place with each employee, consultant or other person
or party engaged
<PAGE> 7
7 TH&T DRAFT: 2/25/99
by the Company for the assignment to the Company, as the case may be, of all
intellectual property and exploitation rights in the work performed and the
protection of the trade secrets and confidential information of the Company and
of third parties which have been developed by such person for or on behalf of
the Company. The Company's internal computer software and systems, software
products, including TeamBuilder Software, and online product and service
offerings, including TeamBuilder Online (collectively, the "SOFTWARE") is
MILLENNIUM COMPLIANT (as defined below). For the purposes of this Agreement,
"MILLENNIUM COMPLIANT" means: (a) the functions, calculations, and other
computing processes of the Software (collectively, "PROCESSES") perform in an
accurate manner regardless of the date in time on which the Processes are
actually performed and regardless of the date input to the Software, and whether
or not the dates are affected by leap years; (b) the Software can accept, store,
sort, extract, sequence, and otherwise manipulate date inputs and date values,
and return and display date values, in a materially accurate manner regardless
of the dates used or format of the date input; (c) the Software will function
without interruptions caused by the date in time on which the Processes are
actually performed or by the date input to the Software; (d) the Software
accepts and responds to four (4) digit year date input in a manner that resolves
any material ambiguities as to the century in an accurate manner; and (e) the
Software displays, prints and provides electronic output of date information in
ways that are unambiguous as to the determination of the century.
(xvii) Except as disclosed in the Prospectus, the Company is
not in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "ENVIRONMENTAL LAWS"), owns or operates any real
property contaminated with any substance that is subject to any environmental
laws, is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any environmental
laws, which violation, contamination, liability or claim could individually or
in the aggregate have a Material Adverse Effect; and the Company is not aware of
any pending investigation which might lead to such a claim.
(xviii) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the Company, or any
of its properties that, if determined adversely to the Company, could
individually or in the aggregate have a Material Adverse Effect or could
materially and adversely affect the ability of the Company to perform its
obligations under this Agreement and no such actions, suits or proceedings are
threatened or, to the Company's knowledge, contemplated.
(xix) KPMG Peat Marwick LLP, who has certified the financial
statements filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the Rules and
Regulations. The Company maintains a system of internal accounting controls
sufficient to provide
<PAGE> 8
8 TH&T DRAFT: 2/25/99
reasonable assurances that (a) transactions are executed in accordance with
management's general or specific authorization; (b) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; and (c) access to assets is permitted only in accordance with
management's general or specific authorization.
(xx) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of the
Company as of the dates shown and its results of operations and cash flows for
the periods shown, and such financial statements have been prepared in
conformity with generally accepted accounting principles in the United States;
and the schedules included in each Registration Statement present fairly the
information required to be stated therein. No other financial statements or
schedules are required to be included in the Registration Statement.
(xxi) Except as disclosed in the Prospectus, since the date of
the latest audited financial statements included in the Prospectus, there has
been no Material Adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business prospects, properties or results of operations of the Company, and,
except as disclosed in or contemplated by the Prospectus, there has been no
dividend or distribution of any kind declared, paid or made by the Company on
any class of its capital stock.
(xxii) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed by it or has requested
extensions thereof (except in any case in which the failure so to file would not
have a Material Adverse Effect) and the Company has paid all material taxes
required to be paid by it and any other assessment, fine or penalty levied
against it, to the extent that any of the foregoing is due and payable, except
for any such assessment, fine or penalty that is currently being contested in
good faith.
(xxiii) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "INVESTMENT COMPANY" as
defined in the Investment Company Act of 1940.
(xxiv) The Company carries, or is covered by, insurance in
such amounts and covering such risks as is adequate for the conduct of its
businesses and the value of its respective properties and as is customary for
companies engaged in similar businesses.
(xxv) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "REPORTABLE EVENT" (as defined in
ERISA) has occurred with respect to any "PENSION PLAN" (as defined in ERISA) for
which the Company would have any
<PAGE> 9
9 TH&T DRAFT: 2/25/99
liability; the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal from,
any "PENSION PLAN" or (ii) Section 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder ("CODE"); and each "PENSION PLAN" for which the Company would have
any liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such qualification.
(xxvi) Except as set forth in each Registration Statement and
the Prospectus, there are no agreements, claims, payment, issuances,
arrangements or understandings, whether oral or written, for services in the
nature of finder's, consulting or origination fees with respect to the sale of
the Offered Securities or any other arrangements, agreements, understandings,
payments or issuances with respect to the Company or any of its officers,
directors, shareholders, partners, employees, or affiliates that may affect the
Underwriters' compensation as determined by the NASD.
(xxvii) Except as set forth in each Registration Statement and
the Prospectus, no officer, director or shareholder of the Company or any
"AFFILIATE" or "ASSOCIATE" (as these terms are defined in Rule 405 under the
Act) of any of the foregoing persons or entities has or has had, either directly
or indirectly (a) an interest in any person or entity that (x) furnishes or
sells services or products which are furnished or sold or that are proposed to
be furnished or sold by the Company, or (y) purchases from or sells or furnishes
to the Company any goods or services, or (b) a beneficial interest in any
contract or agreement to which the Company is a party or by which it may be
bound or affected. Except as set forth in each Registration Statement and the
Prospectus under the caption "CERTAIN TRANSACTIONS" and "MANAGEMENT", there are
no existing or proposed agreements, arrangements, understandings or transactions
between or among the Company and any officer, director, or principal shareholder
of the Company or any partner, affiliate or associate of any of the foregoing
persons or entities.
(xxviii) The minute books of the Company made available to the
Underwriters contain a complete summary of all meetings and actions of the
directors and shareholders of the Company since the time of its incorporation
and reflect accurately and fairly in all respects all transactions referred to
in such minutes.
(xxix) No receiver or liquidator (or similar person) has been
appointed in respect of the Company or in respect of any part of the assets of
the Company; no resolution, order of any court, regulatory body, governmental
body or otherwise, or petition or application for an order, has been passed,
made or presented for the winding up of the Company or for the protection of the
Company from its creditors; and the Company has not, stopped or suspended
payments of its debts, become unable to pay its debts or otherwise become
insolvent.
<PAGE> 10
10 TH&T DRAFT: 2/25/99
(b) Each Selling Stockholder severally represents and warrants to, and
agrees with, the several Underwriters that:
(i) Such Selling Stockholder has and on the First Closing Date
will have valid and unencumbered title to the Offered Securities to be delivered
by such Selling Stockholder on such Closing Date and full right, power and
authority to enter into this Agreement, the Power of Attorney and the Custody
Agreement, and to sell, assign, transfer and deliver the Offered Securities to
be delivered by such Selling Stockholder on such Closing Date hereunder; such
Selling Stockholder has duly executed and delivered this Agreement, the Power of
Attorney, and the Custody Agreement, and, in connection herewith and therewith,
such Selling Stockholder further represents, warrants and agrees that such
Selling Stockholder has deposited, or caused to be deposited, in custody with
[the Company], as Custodian (the "Custodian"), under the Custody Agreement,
certificates in negotiable form for the Offered Securities to be sold hereunder
by such Selling Stockholder, for the purpose of further delivery pursuant to
this Agreement; and upon the delivery of and payment for the Offered Securities
on the First Closing Date hereunder the several Underwriters will acquire valid
and unencumbered title to the Offered Securities to be delivered by such Selling
Stockholder on such Closing Date. Each of the persons appointed as such Selling
Stockholder's attorneys-in-fact pursuant to the Power of Attorney, acting alone,
is authorized to execute and deliver this Agreement and any certificate required
to be delivered by such Selling Stockholder pursuant to Section 6 on behalf of
such Selling Stockholder, to determine the price to be paid by the several
Underwriters to such Selling Stockholder as provided in Section 3, to authorize
the delivery of the Offered Securities to be sold by such Selling Stockholder
hereunder, to duly endorse (in blank or otherwise) the certificate or
certificates representing such Offered Securities or a stock power or powers
with respect thereto, to accept payment therefore, and otherwise to act on
behalf of such Selling Stockholder in connection with this Agreement, the Power
of Attorney and the Custody Agreement and the transactions contemplated hereby
and thereby.
(ii) Such Selling Stockholder has reviewed the Prospectus and
the Registration Statement, and the information regarding the Selling
Stockholder set forth under the caption "PRINCIPAL AND SELLING STOCKHOLDERS" is
complete and accurate.
(iii) To the knowledge of such Selling Stockholder, the
Registration Statement, on the Effective Date, and the Prospectus on the
Effective Date and on any Closing Date, do not, and will not, include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(iv) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial Registration
Statement conformed in all respects to the requirements of the Act and the Rules
and Regulations and did not include any untrue
<PAGE> 11
11 TH&T DRAFT: 2/25/99
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, (B)
on the Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all respects to the
requirements of the Act and the Rules and Regulations and did not include, or
will not include, any untrue statement of a material fact and did not omit, or
will not omit, to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, (C) on the date of this Agreement, the
Initial Registration Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and delivery of this Agreement,
the Additional Registration Statement each conforms, and at the time of filing
of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at
the Effective Date of the Additional Registration Statement in which the
Prospectus is included, each Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (D) no stop order suspending the effectiveness of a Registration
Statement or any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Act. If
the Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement: on the Effective Date of the Initial
Registration Statement, the Initial Registration Statement and the Prospectus
will conform in all respects to the requirements of the Act and the Rules and
Regulations, neither of such documents will include any untrue statement of a
material fact or will omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading. The two
preceding sentences apply only to the extent that any statements in or omissions
from a Registration Statement or the Prospectus are based on written information
furnished to the Company by such Selling Stockholder specifically for use
therein.
(v) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between such Selling Stockholder and any
person that would give rise to a valid claim against such Selling Stockholder or
any Underwriter for a brokerage commission, finder's fee or other like payment
in connection with this offering.
(vi) The execution, delivery and performance of this
Agreement, the Power of Attorney and the Custody Agreement, and the consummation
of the transactions herein and therein contemplated will not result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, any statute, rule, regulation or order of any governmental agency or body
or any court, domestic or foreign, having jurisdiction over the Selling
Stockholder or any of its properties, or any agreement or instrument to which
the Selling Stockholder is a party or by which the Selling Stockholder is bound
or to which any of the properties of the Selling Stockholder is subject.
<PAGE> 12
12 TH&T DRAFT: 2/25/99
(vii) All consents, approvals, authorizations and orders
necessary for the execution and delivery by the Selling Stockholder of this
Agreement, the Power of Attorney and the Custody Agreement (assuming the making
of all filings required under Rule 424(b) or Rule 430A) have been obtained.
(viii) The Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to, or which has constituted,
or which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Securities of the Company and, other than as
permitted by the Act, the Selling Stockholder has not distributed, and will not
distribute, any prospectus or other offering material in connection with the
Offered Securities.
(ix) Neither the Selling Stockholder nor any of its affiliates
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or has any other association
with (within the meaning of Article I, Section (m) of the by-laws of the NASD),
any member firm of the NASD.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and each Selling
Stockholder agrees, severally and not jointly, to sell to each Underwriter, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
and each Selling Stockholder, at a purchase price of $____ per share, that
number of Firm Securities (rounded up or down, as determined by Credit Suisse
First Boston Corporation ("CSFBC") in its discretion, in order to avoid
fractions) obtained by multiplying [_______] Firm Securities in the case of the
Company and the number of Firm Securities set forth opposite the name of such
Selling Stockholder in Schedule A hereto, in the case of a Selling Stockholder,
in each case by a fraction, the numerator of which is the number of Firm
Securities set forth opposite the name of such Underwriter in Schedule B hereto
and the denominator of which is the total number of Firm Securities.
Certificates in negotiable form for the Offered Securities to be sold
by the Selling Stockholders hereunder have been placed in custody, for delivery
under this Agreement, under the Custody Agreements. Each Selling Stockholder
agrees that the shares represented by the certificates held in custody for the
Selling Stockholders under such Custody Agreement are subject to the interests
of the Underwriters hereunder, that the arrangements made by the Selling
Stockholders for such custody are to that extent irrevocable, and that the
obligations of the Selling Stockholders hereunder shall not be terminated by
operation of law, whether by the death of any individual Selling Stockholder or
the occurrence of any other event. If any individual Selling Stockholder should
die, or if any other such event should occur, before the delivery of the Offered
Securities hereunder, certificates for such Offered Securities shall be
delivered by the Custodian in accordance with the terms and conditions of this
Agreement as if such death
<PAGE> 13
13 TH&T DRAFT: 2/25/99
or other event or termination had not occurred, regardless of whether or not the
Custodian shall have received notice of such death or other event or
termination.
The Company and the Custodian will deliver the Firm Securities to the
Representatives for the accounts of the Underwriters, at the office of Hale and
Dorr LLP, 1455 Pennsylvania Avenue N.W., Washington, D.C. 20004, against payment
of the purchase price in Federal (same day) funds by official bank check or
checks or wire transfer to an account at a bank acceptable to CSFBC at 10:00
A.M., New York time, on _________ [__], 1999, or at such other time not later
than seven full business days thereafter as CSFBC and the Company determine,
such time being herein referred to as the "FIRST CLOSING DATE". The certificates
for the Firm Securities so to be delivered will be in definitive form, in such
denominations and registered in such names as CSFBC requests and will be made
available for checking and packaging at the above office of Hale and Dorr at
least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectus, the
Underwriters may purchase all or less than all of the Optional Securities at the
purchase price per Security to be paid for the Firm Securities. The Company
agrees to sell to the Underwriters the number of Optional Securities specified
in such notice and the Underwriters agree, severally and not jointly, to
purchase such Optional Securities. Such Optional Securities shall be purchased
for the account of each Underwriter in the same proportion as the number of Firm
Securities set forth opposite such Underwriter's name bears to the total number
of Firm Securities (subject to adjustment by CSFBC to eliminate fractions) and
may be purchased by the Underwriters only for the purpose of covering
over-allotments made in connection with the sale of the Firm Securities. No
Optional Securities shall be sold or delivered unless the Firm Securities
previously have been, or simultaneously are, sold and delivered. The right to
purchase the Optional Securities or any portion thereof may be exercised from
time to time and to the extent not previously exercised may be surrendered and
terminated at any time upon notice by CSFBC to the Company and the Selling
Stockholders.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, at the office of
Hale and Dorr LLP, 1455 Pennsylvania Avenue N.W., Washington, DC 20004, against
payment of the purchase price therefor in Federal (same day) funds by official
bank check or checks or wire transfer to an account at a bank acceptable to
CSFBC. The certificates for the Optional Securities being purchased on each
Optional Closing Date will be in definitive form, in such denominations and
registered in such names as CSFBC
<PAGE> 14
14 TH&T DRAFT: 2/25/99
requests upon reasonable notice prior to such Optional Closing Date and will be
made available for checking and packaging at the above office of Hale and Dorr
LLP at a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company and the Selling Stockholders. Each
of the Company and, with respect to clauses (e), (i), (j) and (l) below only,
each Selling Stockholder, agrees with the several Underwriters that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the Company
will file the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CSFBC, subparagraph
(4) of Rule 424(b)) not later than the earlier of (A) the second business day
following the execution and delivery of this Agreement or (B) the fifteenth
business day after the Effective date of the Initial Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the Offered
Securities under the Act but the Effective Time thereof has not occurred as of
such execution and delivery, the Company will file the additional registration
statement or, if filed, will file a post-effective amendment thereto with the
Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00
P.M., New York time, on the date of this Agreement or, if earlier, on or prior
to the time the Prospectus is printed and distributed to any Underwriter, or
will make such filing at such later date as shall have been consented to by
CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration statement as
filed or the related prospectus or the Initial Registration Statement, the
Additional Registration Statement (if any) or the Prospectus and will not effect
such amendment or supplementation without CSFBC's consent; and the Company will
also advise CSFBC promptly of the effectiveness of each Registration Statement
(if its Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of a Registration Statement
or the Prospectus and of the institution by the Commission of any stop order
proceedings in respect of a Registration Statement and will use its best efforts
to prevent the issuance of any such stop order and to obtain as soon as possible
its lifting, if issued.
(c) The Company will comply with the Act, the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT") and the Rules and
Regulations so as to permit the completion of the distribution of the Offered
Securities as contemplated in this
<PAGE> 15
15 TH&T DRAFT: 2/25/99
Agreement, each Registration Statement and the Prospectus. If, at any time when
a prospectus relating to the Offered Securities is required to be delivered
under the Act in connection with sales by any Underwriter or dealer, any event
occurs as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Company will promptly notify
CSFBC of such event and will promptly prepare and file with the Commission, at
its own expense, an amendment or supplement which will correct such statement or
omission or an amendment which will effect such compliance. Neither CSFBC's
consent to, nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally available
to its securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration Statement
(or, if later, the Effective Date of the Additional Registration Statement)
which will satisfy the provisions of Section 11(a) of the Act. For the purpose
of the preceding sentence, "AVAILABILITY DATE" means the 45th day after the end
of the fourth fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last quarter
of the Company's fiscal year, "AVAILABILITY DATE" means the 90th day after the
end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement ((4) of which will be signed and will include all
exhibits), each related preliminary prospectus, and, so long as a prospectus
relating to the Offered Securities is required to be delivered under the Act in
connection with sales by any Underwriter or dealer, the Prospectus and all
amendments and supplements to such documents, in each case in such quantities as
CSFBC requests. The Prospectus shall be so furnished on or prior to 3:00 P.M.,
New York time, on the business day following the later of the execution and
delivery of this Agreement or the Effective Time of the Initial Registration
Statement. All other such documents shall be so furnished as soon as available.
The Company and the Selling Stockholders will pay the expenses of printing and
distributing to the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as required
for the distribution.
(g) During the period of five years hereafter, the Company
will furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a copy
of its annual report to stockholders for such year; and the Company will furnish
to the Representatives, (i) as soon as available, a copy of each report and any
definitive proxy statement of the Company filed with the
<PAGE> 16
16 TH&T DRAFT: 2/25/99
Commission under the Exchange Act or mailed to stockholders, and (ii) from time
to time, such other information concerning the Company as CSFBC may reasonably
request.
(h) For a period of 180 days after the date of the initial
public offering of the Offered Securities, the Company will not without the
prior written consent of CSFBC: (i) offer, sell, contract to sell, pledge,
transfer, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or otherwise
dispose of, directly or indirectly, or file with the Commission a registration
statement under the Act relating to, any shares of Securities or securities
convertible into or exchangeable or exercisable for any shares of Securities, or
publicly disclose the intention to make any such offer, sale, pledge, transfer
or other disposition or filing, except issuances of Securities pursuant to the
conversion or exchange of convertible or exchangeable securities or the exercise
of warrants or options, in each case outstanding on the date hereof, grants of
employee stock options pursuant to the terms of a plan in effect on the date
hereof, or issuances of Securities pursuant to the exercise of such options.
Prior to the First Closing, the Company will obtain and provide to counsel for
the Underwriters the executed Lock-up Agreements (as defined below).
(i) The Company and each Selling Stockholder agree with the
several Underwriters that the Company and such Selling Stockholder will pay all
expenses incident to the performance of the obligations of the Company and such
Selling Stockholder, as the case may be, under this Agreement, including,
without limitation, (i) for any filing fees and other expenses (including fees
and disbursements of counsel) in connection with qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC designates and
the printing of memoranda relating thereto; (ii) the filing fee incident to, and
the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the NASD of the Offered Securities; (iii) for any
travel expenses of the Company's officers and employees and any other expenses
of the Company in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities; (iv) any transfer taxes on the sale by the
Selling Stockholders of the Offered Securities to the Underwriters; and (v)
expenses incurred in distributing preliminary prospectuses and the Prospectus
(including any amendments and supplements thereto) to the Underwriters.
(j) Each Selling Stockholder agrees to deliver to CSFBC,
attention: Transactions Advisory Group, on or prior to the First Closing Date, a
properly completed and executed United States Treasury Department Form W9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
(k) The Company shall apply the net proceeds of its sale of
the Offered Securities as set forth in the Prospectus.
<PAGE> 17
17 TH&T DRAFT: 2/25/99
(l) Neither the Company nor any Selling Stockholder will take,
directly or indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company, including the
Securities.
(m) If at any time during the 25-day period after a
Registration Statement becomes effective or during the period prior to any
Closing Date, any rumor, publication or event relating to or affecting the
Company shall occur as a result of which in the Representatives' reasonable
judgment the market price of the Securities has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after notice from the Representatives advising the Company to the effect set
forth above, forthwith prepare, consult with the Representatives concerning the
substance of, and disseminate a press release or other public statement
reasonably satisfactory to the Representatives, responding to or commenting on
such rumor, publication or event.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholders of their obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received on each Closing
Date a letter from KPMG Peat Marwick LLP, in form and substance satisfactory to
the Representatives in their sole judgment, dated such Closing Date, confirming
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations; and, based upon the procedures described in such letter delivered
to you concurrently with the execution of this Agreement (herein called the
"ORIGINAL LETTER"), but carried out to a date not more than three (3) business
days prior to such Closing Date: (i) confirming, to the extent true, that the
statements and conclusions set forth in the Original Letter are accurate as of
such Closing Date, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in the sole judgment of the Representatives, is material and
adverse and that makes it, in the sole judgment of the Representatives,
impracticable or inadvisable to proceed with the initial public offering of the
Offered Securities as contemplated by the Prospectus and this Agreement. The
Original Letter from KPMG
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18 TH&T DRAFT: 2/25/99
Peat Marwick LLP shall be addressed to or for the use of the Underwriters in
form and substance satisfactory to the Representatives in their sole judgment,
and shall: (i) represent that KPMG Peat Marwick LLP are independent certified
public accountants with respect to the Company within the meaning of the Act and
the applicable published Rules and Regulations, (ii) set forth their opinion
with respect to their examination of the consolidated balance sheet of the
Company as of December 31, 1998 and related consolidated statements of
operations, stockholders' equity, and cash flows for the twelve (12) months
ended December 31, 1998, and (iii) address such other matters agreed upon by
KPMG Peat Marwick LLP and the Representatives. In addition, the Representatives
shall have received from KPMG Peat Marwick LLP a letter addressed to the Company
and made available to the Representatives for the use of the Underwriters
stating that their review of the Company's system of internal accounting
controls, to the extent they deemed necessary in establishing the scope of their
examination of the Company's consolidated financial statements as of December
31, 1998, did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York time, on
the date of this Agreement or such later date as shall have been consented to by
CSFBC. If the Effective Time of the Additional Registration Statement (if any)
is not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the date
of this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later date as
shall have been consented to by CSFBC. If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this Agreement,
the Prospectus shall have been filed with the Commission in accordance with the
Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing
Date, no stop order suspending the effectiveness of a Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company, the Selling Stockholders or the
Representatives, shall be contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any development or
event involving a prospective change in the condition (financial or other),
business, properties or results of operations of the Company which, in the
judgment of a majority in interest of the Underwriters including the
Representatives, is material and adverse and makes it impractical or inadvisable
to proceed with completion of the public offering or the sale of and payment for
the Offered Securities; (ii) any downgrading in the rating of any debt
securities of the Company by any "NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATION" (as defined for purposes of Rule 436(g) under the Act), or any
public announcement that any such organization has under surveillance or review
its rating of any debt securities of the Company (other than an announcement
with positive implications of a possible upgrading, and no implication of a
possible downgrading, of
<PAGE> 19
19 TH&T DRAFT: 2/25/99
such rating); (iii) any suspension or limitation of trading in securities
generally including, without limitation, the Offered Securities, on the Nasdaq
National Market, or any setting of minimum prices for trading on such exchange,
or any suspension of trading of any securities of the Company on any exchange or
in the over-the-counter market; (iv) any banking moratorium declared by U.S.
Federal or New York authorities; or (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the judgment of a majority in interest of the Underwriters
including the Representatives, the effect of any such outbreak, escalation,
declaration, calamity or emergency makes it impractical or inadvisable to
proceed with completion of the public offering or the sale of and payment for
the Offered Securities.
(d) The Representatives shall have received an opinion, dated
such Closing Date, of Hale and Dorr LLP, counsel for the Company, to the effect
that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus; and the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would have a
Material Adverse Effect;
(ii) The Offered Securities delivered on such Closing
Date and all other outstanding shares of capital stock of the Company have been
duly authorized; all outstanding shares of capital stock of the Company are,
and, when the Offered Securities have been delivered and paid for in accordance
with this Agreement on each Closing Date, such Offered Securities will have
been, validly issued, fully paid and nonassessable and will conform to the
description thereof contained in the Prospectus; the Company has authorized and
outstanding capital stock as set forth under the caption "CAPITALIZATION" in the
Prospectus as of the date specified therein; the certificates for the Offered
Securities, assuming they are in the form filed with the Commission, are in due
and proper form; and no stockholder of the Company has any preemptive rights
with respect to the Securities pursuant to any statute, the Company's
Certificate of Incorporation, by-laws, or, to such counsel's knowledge, any
agreement with the Company;
(iii) Except as described in the Prospectus, there
are no contracts, agreements or understandings known to such counsel between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered pursuant to any
other registration statement filed by the Company under the Act; and all holders
of securities of the Company having rights known to such counsel to
<PAGE> 20
20 TH&T DRAFT: 2/25/99
registration of securities of the Company, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights;
(iv) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court is required to be
obtained or made by the Company or any Selling Stockholder for the consummation
of the transactions contemplated by this Agreement or the Custody Agreement in
connection with the sale of the Offered Securities, except such as have been
obtained and made under the Act and such as may be required under state
securities laws;
(v) The execution, delivery and performance of this
Agreement, the Power of Attorney and the Custody Agreement and the consummation
of the transactions herein and therein contemplated will not result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any governmental agency or
body or any court having jurisdiction over the Company or any of its properties,
or any agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of the properties of the Company is subject, or
the charter or by-laws of the Company;
(vi) The Initial Registration Statement was declared
effective under the Act as of the date and time specified in such opinion, the
Additional Registration Statement (if any) was filed and became effective under
the Act as of the date and time (if determinable) specified in such opinion, the
Prospectus either was filed with the Commission pursuant to the subparagraph of
Rule 424(b) specified in such opinion on the date specified therein or was
included in the Initial Registration Statement or the Additional Registration
Statement (as the case may be), and, to the knowledge of such counsel after due
inquiry, no stop order suspending the effectiveness of a Registration Statement
or any part thereof has been issued and no proceedings for that purpose have
been instituted or are pending or contemplated under the Act, and each
Registration Statement and the Prospectus, and each amendment or supplement
thereto, as of their respective effective or issue dates, complied as to form in
all material respects with the requirements of the Act and the Rules and
Regulations; such counsel have no reason to believe that any part of a
Registration Statement or any amendment thereto, as of its effective date or as
of such Closing Date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus or any
amendment or supplement thereto, as of its issue date or as of such Closing
Date, contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and the
descriptions in the Registration Statements and Prospectus of statutes, legal
and governmental proceedings and contracts and other documents are accurate in
all material respects and fairly present the information required to be shown;
it being understood that such counsel need express no
<PAGE> 21
21 TH&T DRAFT: 2/25/99
opinion as to the financial statements or other financial data contained in the
Registration Statements or the Prospectus;
(vii) The Company has full legal right, power and
authority to enter into this Agreement, the Power of Attorney and the Custody
Agreement; each of this Agreement, the Power of Attorney and the Custody
Agreement have been duly authorized, executed and delivered by the Company; and
the Power of Attorney and Custody Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(viii) All of the Offered Securities have been duly
authorized and accepted for quotation on the Nasdaq National Market, subject to
official notice of issuance;
(ix) The Company is not and, after giving effect to
the offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Prospectus, will not be, an "investment
company" as defined in the Investment Company Act of 1940, as amended;
(x) Such counsel does not know of any legal or
governmental proceedings or investigations pending or threatened to which the
Company is a party or to which the property of the Company is subject that are
required to be described in any Registration Statement or the Prospectus and are
not described therein or any statutes, regulations, contracts or other documents
that are required to be described in any Registration Statement or the
Prospectus or to be filed as exhibits to any Registration Statement that are not
described therein or filed as required; and
(xi) Except as described in the Prospectus, to the
knowledge of such counsel, there are no outstanding securities of the Company
convertible or exchangeable into or evidencing the right to purchase or
subscribe for any shares of capital stock of the Company and there are no
outstanding or authorized options, warrants or other securities obligating the
Company to issue any shares of its capital stock or any securities convertible
or exchangeable into or evidencing the right to purchase or subscribe for any
shares of such capital stock. The descriptions of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted and exercised thereunder, set forth or incorporated by reference
in the Prospectus, accurately and fairly present the information required to be
shown with respect to such plans, arrangements, options and rights.
(e) The Representatives shall have received the opinion
contemplated in the Power of Attorney dated the First Closing Date, of Hale and
Dorr LLP, counsel for the Selling Stockholders, to the effect that:
<PAGE> 22
22 TH&T DRAFT: 2/25/99
(i) Each Selling Stockholder had valid and
unencumbered title to the Offered Securities delivered by such Selling
Stockholder on such Closing Date and had full right, power and authority to
sell, assign, transfer and deliver the Offered Securities delivered by such
Selling Stockholder on such Closing Date hereunder; and the several Underwriters
have acquired valid and unencumbered title to the Offered Securities purchased
by them from the Selling Stockholders on such Closing Date hereunder;
(ii) No consent, approval, authorization or order of,
or filing with, any governmental agency or body or any court is required to be
obtained or made by any Selling Stockholder for the consummation of the
transactions contemplated by the Power of Attorney, Custody Agreement or this
Agreement in connection with the sale of the Offered Securities sold by the
Selling Stockholders, except such as have been obtained and made under the Act
and such as may be required under state securities laws;
(iii) The execution, delivery and performance of the
Power of Attorney, the Custody Agreement and this Agreement and the consummation
of the transactions therein and herein contemplated will not result in a breach
or violation of any of the terms and provisions of, or constitute a default
under, any statute, any rule, regulation or order of any governmental agency or
body or any court having jurisdiction over any Selling Stockholder or any of its
properties or any agreement or instrument to which any Selling Stockholder is a
party or by which any Selling Stockholder is bound or to which any of the
properties of any Selling Stockholder is subject; and
(iv) This Agreement, the Power of Attorney and the
Custody Agreement with respect to each Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and constitute
valid and legally binding obligations of each such Selling Stockholder,
enforceable in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(f) The Representatives shall have received from Testa,
Hurwitz & Thibeault, LLP, counsel for the Underwriters, such opinion or
opinions, dated such Closing Date, with respect to the incorporation of the
Company, the validity of the Offered Securities delivered on such Closing Date,
the Registration Statements, the Prospectus and other related matters as the
Representatives may require, and the Selling Stockholders and the Company shall
have furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters. In rendering such opinion, Testa,
Hurwitz & Thibeault, LLP may rely as to the incorporation of the Company upon
the opinion of Hale and Dorr LLP referred to above.
<PAGE> 23
23 TH&T DRAFT: 2/25/99
(g) The Representatives shall have received from the Selling
Stockholders, each person who is a director or executive officer of the Company,
and from all other holders of shares of Securities or securities convertible
into or exchangeable or exercisable for any shares of Securities, an agreement
dated on or before the date of this Agreement (collectively, the "Lock-up
Agreements"), to the effect that, for a period of 180 days after the initial
public offering of Securities pursuant to this Agreement, such person will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of Securities or securities convertible into or
exchangeable or exercisable for any shares of Securities, or publicly disclose
the intention to make any such offer, sale, pledge, or disposal, without the
prior written consent of CSFBC.
(h) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers shall
state that: the representations and warranties of the Company in this Agreement
are true and correct; the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of subparagraphs (1)
and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of
the applicable filing fee in accordance with Rule 111(a) or (b) under the Act,
prior to the time the Prospectus was printed and distributed to any Underwriter;
and, subsequent to the dates of the most recent financial statements in the
Prospectus, there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company; except as set forth in or contemplated by the Prospectus or as
described in such certificate, such officer has carefully examined each
Registration Statement and the Prospectus and, in his opinion, as of the
Effective Date of the Initial Registration Statement (and, if applicable, the
Additional Registration Statement), the statements contained in the Registration
Statement and the Prospectus were true and correct, and such Registration
Statement and Prospectus did not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and since the
Effective Date of the Registration Statement, no event has occurred which should
have been set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment; and
If any of the conditions hereinabove provided for in this
Section 6 shall not have been fulfilled when and as required by this Agreement
to be fulfilled, the obligations of the Underwriters hereunder may be terminated
by the Representatives by notifying the Company of such termination in writing
or by telegram at or prior to the First Closing Date and each Optional Closing
Date.
<PAGE> 24
24 TH&T DRAFT: 2/25/99
The Selling Stockholders and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably requests. CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) Subject to the provisions of
paragraph (f) of this Section 7, the Company and the Selling Stockholders will
jointly and severally indemnify and hold harmless each Underwriter, its
partners, directors and officers and each person or entity, if any, who controls
such Underwriter within the meaning of Section 15 of the Act, against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company and the Selling
Stockholders will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (b) below.
(b) Each Underwriter will severally and not jointly indemnify
and hold harmless the Company, its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the Act, and
each Selling Stockholder against any losses, claims, damages or liabilities to
which the Company or such Selling Stockholder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically
<PAGE> 25
25 TH&T DRAFT: 2/25/99
for use therein, and will reimburse any legal or other expenses reasonably
incurred by the Company and each Selling Stockholder in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by any Underwriter consists of the following information
in the Prospectus furnished on behalf of each Underwriter: [(i) the table under
the first paragraph under the caption "UNDERWRITING," (ii) the concession and
reallowance figures appearing in the fourth paragraph under the caption
"UNDERWRITING," (iii) the information contained in the sixth paragraph under the
caption "UNDERWRITING" with respect to the number of shares reserved by the
Underwriters' for sale at the initial public offering price of Common Stock for
employees, directors and certain other persons associated with CareerBuilder,
(iv) the information contained in the ninth paragraph under the caption
"UNDERWRITING" with respect to [any stockholder/underwriter affiliations], and
(v) the information contained in the tenth paragraph under the caption
"UNDERWRITING" with respect to the representatives' engaging in over-allotments,
stabilizing transactions, syndicate covering transactions, and penalty bids.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative
<PAGE> 26
26 TH&T DRAFT: 2/25/99
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Selling Stockholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Stockholders bear to
the total underwriting discounts and commissions received by the Underwriters.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Selling Stockholders or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company and the Selling
Stockholders under this Section shall be in addition to any liability which the
Company and the Selling Stockholders may otherwise have and shall extend, upon
the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
(f) The aggregate liability of each Selling Stockholder under
the indemnity agreements contained in the provisions of this Section 7 hereof
shall be limited
<PAGE> 27
27 TH&T DRAFT: 2/25/99
to an amount equal to the lesser of (i) the initial public offering price of the
Offered Securities sold by such Selling Stockholder to the Underwriters and (ii)
that percentage of the total amount of the losses, claims, damages and
liabilities obtained by dividing the total number of Offered Securities sold by
such Selling Stockholder hereunder by the total number of shares of Securities
sold hereunder. The Underwriters agree that each Selling Stockholder shall have
no liability under Section 7(a) to indemnify any Underwriter with respect to any
amount unless the Underwriters shall have first requested payment of such amount
by the Company and the Company shall have failed, within fourteen days, to pay
the requested amount to the Underwriters. The Company and each Selling
Stockholders may agree, as between themselves and without limiting the rights of
the Underwriters under this Agreement, as to the respective amounts of such
liability for which they each shall be responsible.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company and the Selling Stockholders for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC, the Company and the Selling Stockholders for the purchase of such Offered
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "UNDERWRITER" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Selling Stockholders, of the Company or its officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, any Selling
Stockholder, the Company or any of their respective
<PAGE> 28
28 TH&T DRAFT: 2/25/99
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Offered Securities. If this Agreement is
terminated pursuant to Section 8 or if for any reason the purchase of the
Offered Securities by the Underwriters is not consummated, the Company and the
Selling Stockholders shall remain responsible for the expenses to be paid or
reimbursed by them pursuant to Section 5 and the respective obligations of the
Company, the Selling Stockholders, and the Underwriters pursuant to Section 7
shall remain in effect, and if any Offered Securities have been purchased
hereunder the representations and warranties in Section 2 and all obligations
under Section 5 shall also remain in effect. If the purchase of the Offered
Securities by the Underwriters is not consummated for any reason other than
solely because of the termination of this Agreement pursuant to Section 8 or the
occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c),
the Company and the Selling Stockholders will, jointly and severally, reimburse
the Underwriters for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and will
be mailed, delivered or telegraphed and confirmed as follows:
If sent to the Underwriters and/or the Representatives:
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010-3629
Attention: Investment Banking Department - Transactions Advisory Group
If sent to the Company:
CareerBuilder, Inc.,
11495 Sunset Hills Road, Suite 210
Reston, VA 20190
Attention: President
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29 TH&T DRAFT: 2/25/99
If sent to the Selling Stockholders; or any of them:
[INSERT NAME OF SELLING STOCKHOLDERS' REPRESENTATIVE]
provided, however, that any notice to an Underwriter pursuant to Section 7 will
be mailed, delivered or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives
and successors and the officers and directors and controlling persons referred
to in Section 7, and no other person will have any right or obligation
hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters. [POA NAME] will act for the
Selling Stockholders in connection with such transactions, and any action under
or in respect of this Agreement taken by [POA NAME] will be binding upon the
Selling Stockholders.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law and Venue. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to principles of conflicts of laws.
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30 TH&T DRAFT: 2/25/99
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement among the
Selling Stockholders, the Company and the several Underwriters in accordance
with its terms.
Very truly yours,
---------------------------------------------
[INSERT NAME OR NAMES OF SELLING STOCKHOLDERS]
CAREERBUILDER, INC.
By:
------------------------------------------
Name: Robert J. McGovern
Title: President
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of
the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
HAMBRECHT & QUIST LLC
BANCBOSTON ROBERTSON STEPHENS INC.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
Acting on behalf of themselves
and as the Representatives of
the several Underwriters.
BY: CREDIT SUISSE FIRST BOSTON CORPORATION
By:
------------------------
Name:
Title:
<PAGE> 31
31 TH&T DRAFT: 2/25/99
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
FIRM
SECURITIES
SELLING STOCKHOLDER TO BE SOLD
------------------- ----------
<S> <C>
----------
Total
==========
</TABLE>
<PAGE> 32
32 TH&T DRAFT: 2/25/99
SCHEDULE B
<TABLE>
<CAPTION>
NUMBER OF
FIRM SECURITIES
UNDERWRITER TO BE PURCHASED
----------- ---------------
<S> <C>
Credit Suisse First Boston Corporation
Hambrecht & Quist LLC
BancBoston Robertson Stephens Inc.
Friedman, Billings, Ramsey & Co., Inc.
--------------
Total
==============
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF CAREERBUILDER, INC.
CareerBuilder, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company is hereby amended to read as follows:
FOURTH. The aggregate number of shares which the Company shall have
authority to issue is 32,991,295 shares consisting of five classes of stock:
21,000,000 shares of Common Stock ($.001 par value per share); 1,562,500 shares
of Class A Convertible Preferred Stock ($.001 par value per share); 2,151,420
shares of Class B Convertible Preferred Stock ($.001 par value per share);
3,188,889 shares of Class C Convertible Preferred Stock ($.001 par value per
share); 2,045,785 shares of Class D Convertible Preferred Stock ($.001 par value
per share); 1,024,351 shares of Class E Convertible Preferred Stock ($.001 par
value per share) and 2,018,350 shares of Class F Convertible Preferred Stock
($.001 par value per share). Except as other provided by law or as set forth in
this Amendment, each of the outstanding shares shall have one vote for the
pupose of electing directors and for all other purposes, including but not
limited to an equal participation in any dividends or other distribution by the
Company. All other relative rights, preferences and limitations of the shares of
each class of stock are set forth in Exhibit A attached hereto and incorporated
herein by this reference.
SECOND: That all stockholders of the Company entitled to vote on the
matter contained in such Amendment have duly adopted such Amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said Company has caused this certificate to be
signed by its authorized officer, this 26th day of January, 1999.
CAREERBUILDER, INC.
By: /s/ Robert J. McGovern
-------------------------------------
Robert J. McGovern
President
<PAGE> 2
TERMS OF PREFERRED STOCK
I. Number of Shares. There shall be six classes of Preferred
Stock. The Class A Convertible Preferred Stock shall consist of 1,562,500
shares, the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, the Class C Convertible Preferred Stock shall consist of 3,188,889
shares, the Class D Convertible Preferred Stock shall consist of 2,045,785
shares, the Class E Convertible Preferred Stock shall consist of 1,024,351
shares and the Class F Convertible Preferred Stock shall consist of 2,018,350
shares. The Class A Convertible Preferred Stock, the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock, the Class E Convertible Preferred Stock and the
Class F Convertible Preferred Stock shall sometimes be referred to herein
collectively as the "Preferred Stock."
II. Voting.
2A. General. Except as may be otherwise provided in
these terms of the Preferred Stock or by law, the Preferred Stock shall vote
together with all other classes and class of stock of the Corporation as a
single class on all actions to be taken by the stockholders of the Corporation,
including, but not limited to actions amending the Certificate of Incorporation
of the Corporation to increase the number of authorized shares of Common Stock.
Each share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
2B. Board Size. The Corporation shall not, without
the written consent or affirmative vote of the holders of at least two-thirds of
the then outstanding shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock, Class E
Convertible Preferred Stock and Class F Convertible Preferred Stock consenting
or voting (as the case may be) as a single class, given in writing or by vote at
a meeting, increase the maximum number of directors constituting the Board of
Directors to a number in excess of seven.
2C. Board Seats. So long as the outstanding Class A
Convertible Preferred Stock represents at least 10% of the outstanding Common
Stock of the Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class A Convertible Preferred Stock, acting as a
separate class, shall be entitled to elect one director of the Corporation. So
long as the outstanding Class B Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class B Convertible
Preferred Stock, acting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class B Director"). So long as the outstanding
Class C Convertible Preferred Stock represents at least 5% of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class C Convertible Preferred Stock, acting
as a separate class, shall be entitled to elect one director of the Corporation
(the "Class C Director"). The holders
<PAGE> 3
of the Common Stock, acting as a separate class, shall be entitled to elect two
directors of the Corporation. So long as Thomson U.S. Inc. ("TTC Ventures")
owns, beneficially or of record, at least two percent (2%) of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class D Convertible Preferred Stock (as
adjusted in accordance with subparagraph 6F or 6G), acting as a separate class,
shall be entitled to appoint one director of the Corporation (the "Class D
Director") and such Class D Director shall be nominated and appointed by TTC
Ventures on behalf of the holders of Class D Convertible Preferred Stock. So
long as ADP, Inc. ("ADP") owns beneficially or of record, at least two percent
(2%) of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock) and there are shares of Class D Convertible
Preferred Stock outstanding, the holders of the Class D Convertible Preferred
Stock (as adjusted in accordance with subparagraph 6F or 6G), acting as a
separate class, shall be entitled to appoint an additional director of the
Corporation (the "Other Class D Director and together with the Class D Director,
the "Class D Directors") and such Other Class D Director shall be nominated and
appointed by ADP on behalf of the holders of Class D Convertible Preferred
Stock. At any meeting (or in a written consent in lieu thereof) held for the
purpose of electing directors, the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of Class D
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Class D Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class D Convertible Preferred Stock, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class C Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class C Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class C
Convertible Preferred Stock, the presence in person or by proxy (or the written
consent) of the holders of a majority of the shares of Class B Convertible
Preferred Stock then outstanding shall constitute a quorum of the Class B
Convertible Preferred Stock for the election of the director to be elected
solely by the holders of the Class B Convertible Preferred Stock, and the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class A Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class A Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class A
Convertible Preferred Stock. A vacancy in any directorship elected by the
holders of the Class A Convertible Preferred Stock, Class B Convertible
Preferred Stock or Class C Convertible Preferred Stock shall be filled only by
vote or written consent of the holders of the Class A Convertible Preferred
Stock, Class B Convertible Preferred Stock or Class C Convertible Preferred
Stock respectively; a vacancy in the directorship allocated to the holders of
Class D Convertible Preferred Stock shall be filled only by the appointment by
or written consent of TTC Ventures; a vacancy in the other directorship
allocated to the holders of Class D Convertible Preferred Stock and nominated by
ADP shall be filled only by the appointment by or written consent of ADP; and a
vacancy in any directorship elected by the holders of the Common Stock shall be
filled only by vote or written consent of the holders of the Common Stock.
<PAGE> 4
2D. Board Observer. FBR Technology Venture Partners,
L.P. ("FBR") shall have the right to assign an observer to the Board of
Directors of the Corporation to attend each meeting of the Board of Directors of
the Corporation and each meeting of any Committee thereof. Each of GE Capital
Equity Investments, Inc. ("GECE") and General Electric Pension Trust ("GEPT")
shall have the right to assign an observer to the Board of Directors of the
Corporation to attend each meeting of the Board of Directors of the Corporation
and each meeting of any Committee thereof. Each person so designated by GECE and
GEPT as an observer on its respective behalf shall be sent all materials
provided to members of the Corporation's Board of Directors at the same time and
in the same manner as the Corporation's Board of Directors.
III. Dividends. The holders of the Class A Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of the
Corporation, quarterly dividends at the rate per annum of $0.0224 per share (the
"Class A Accruing Dividends"). The holders of the Class B Convertible Preferred
Stock shall be entitled to receive, out of funds legally available therefor, (i)
when and if declared by at least four members of the Board of Directors, or (ii)
upon any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.0532 per share (the "Class B Accruing
Dividends"). The holders of the Class C Convertible Preferred Stock shall be
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.1008 per share (the "Class C Accruing Dividends").
The holders of the Class D Convertible Preferred Stock shall be entitled to
receive, out of funds legally available therefor, (i) when and if declared by at
least four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at the rate
per annum of $0.2499 per share (the "Class D Accruing Dividends"). The holders
of the Class E Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least four
members of the Board of Directors, or (ii) upon any liquidation, dissolution or
winding up of the Corporation, quarterly dividends at the rate per annum of
$0.3451 per share (the "Class E Accruing Dividends"). The holders of the Class F
Convertible Preferred Stock shall be entitled to receive, out of funds legally
available therefor, (i) when and if declared by at least four members of the
Board of Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.3850 per share
(the "Class F Accruing Dividends"). The Class A Accruing Dividends, the Class B
Accruing Dividends, and the Class C Accruing Dividends, the Class D Accruing
Dividends, the Class E Accruing Dividends and the Class F Accruing Dividends are
sometimes referred to herein collectively as the "Accruing Dividends." Accruing
Dividends shall accrue from day to day, whether or not earned or declared, and
shall be cumulative. No dividend shall be paid on the Preferred Stock, other
than Accruing Dividends, or on the Common Stock, other than pursuant to Section
5D herein.
<PAGE> 5
IV. Liquidation.
4A. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the shares
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock, Class E Convertible Preferred Stock and
Class F Convertible Preferred Stock shall first be entitled, before any
distribution or payment is made upon any stock ranking on liquidation junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock, the Class E Convertible
Preferred Stock and the Class F Convertible Preferred Stock, to be paid an
amount equal to $0.76, $1.44, $3.57, $4.93 and $5.45 per share, respectively,
plus, in the case of each share of Class B Convertible Preferred Stock, an
amount equal to all Class B Accruing Dividends unpaid thereon (whether or not
declared) and any other dividends declared but unpaid thereon, in the case of
each share of Class C Convertible Preferred Stock, an amount equal to all Class
C Accruing Dividends unpaid thereon (whether or not declared) and any other
dividends declared but unpaid thereon, in the case of each share of Class D
Convertible Preferred Stock, an amount equal to all Class D Accruing Dividends
unpaid thereon (whether or not declared) and any other dividends declared but
unpaid thereon, in the case of each share of Class E Convertible Preferred
Stock, an amount equal to all Class E Accruing Dividends unpaid thereon (whether
or not declared) and any other dividends declared but unpaid thereon, in the
case of each share of Class F Convertible Preferred Stock, an amount equal to
all Class F Accruing Dividends unpaid thereon (whether or not declared) and any
other dividends declared but unpaid thereon, computed to the date payment
thereof is made available, such amount payable with respect to one share of
Class B Convertible Preferred Stock being sometimes referred to as the "Class B
Liquidation Preference Payment," such amount payable with respect to one share
of Class C Convertible Preferred Stock being sometimes referred to as the "Class
C Liquidation Preference Payment," such amount payable with respect to one share
of Class D Convertible Preferred Stock being sometimes referred to as the "Class
D Liquidation Preference Payment," such amount payable with respect to one share
of Class E Convertible Preferred Stock being sometimes referred to a the "Class
E Liquidation Preference Payment," such amount payable with respect to one share
of Class F Convertible Preferred Stock being sometimes referred to as the "Class
F Liquidation Preference Payment," and with respect to all shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock being sometimes referred to as the "Classes B, C, D,
E and F Liquidation Preference Payments." If upon such liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the assets
to be distributed among the holders of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock, Class
E Convertible Preferred Stock and Class F Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class F Convertible
Preferred Stock of the Classes B, C, D, E and F Liquidation Preference Payments,
then the entire assets of the Corporation to be so distributed shall be
<PAGE> 6
distributed ratably, on an as-converted basis, among the holders of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock.
4B. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after the holders of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock shall have been paid in full the amounts to which
they shall be entitled pursuant to paragraph 4A, the holders of the shares of
Class A Convertible Preferred Stock shall then be entitled, before any
distribution or payment is made upon any stock ranking in liquidation junior to
the Class A Convertible Preferred Stock, to be paid an amount equal to $0.32 per
share plus, in the case of each share, an amount equal to all Class A Accruing
Dividends unpaid thereon (whether or not declared) computed to the date payment
thereof is made available, such amount payable with respect to one share of
Class A Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payment" and with respect to all shares of Class A
Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payments." The Class A Liquidation Preference Payments
and the Classes B, C, D, E and F Liquidation Preference Payments are sometimes
referred to herein collectively as the "Liquidation Preference Payments." If
upon such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Class A Convertible Preferred Stock shall be insufficient to permit payment in
full to the holders of Class A Convertible Preferred Stock of the Class A
Liquidation Preference Payments, then the entire remaining assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Class A Convertible Preferred Stock.
4C. Upon any such liquidation, dissolution or winding
up of the Corporation, immediately after the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock, Class F Convertible
Preferred Stock and Class A Convertible Preferred Stock shall have been paid in
full their respective Liquidation Preference Payments, the remaining net assets
of the Corporation available for distribution shall be distributed ratably among
the holders of Preferred Stock and Common Stock (with each share of Preferred
Stock being deemed, for such purpose, to be equal to the number of shares of
Common Stock (including fractions of a share) into which such share of Preferred
Stock is convertible immediately prior to the close of business on the business
day fixed for such distribution). Unless otherwise agreed by holders of at least
two-thirds of the Class B Convertible Preferred Stock and the Class C
Convertible Preferred Stock, each acting as a separate class, and a majority of
the Class D Convertible Preferred Stock and at least forty percent (40%) of each
of the Class E Convertible Preferred Stock and the Class F Convertible Preferred
Stock then outstanding, each acting as a separate class, the consolidation or
merger of the Corporation into or with any other entity or entities which
results in the exchange of outstanding shares of the Corporation for cash or
marketable securities issued or paid or caused to be issued or paid by any such
entity
<PAGE> 7
or affiliate thereof (other than a merger to reincorporate the Corporation in a
different jurisdiction), and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets (each such
event a "Liquidity Event"), shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the provisions of this
paragraph 4.
4D. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the Liquidation Preference
Payments and the place where said Liquidation Preference Payments shall be
payable, shall be delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or telex, not less than 20 days
prior to the payment date stated therein, to the holders of record of Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation. For purposes hereof, the Common Stock shall
rank on liquidation junior to the Class A Convertible Preferred Stock, the Class
B Convertible Preferred Stock, the Class C Convertible Preferred Stock, the
Class D Convertible Preferred Stock, the Class E Convertible Preferred Stock and
the Class F Convertible Preferred Stock.
V. Restrictions. At any time when shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock are outstanding, except where the vote or written
consent of the holders of a greater number of shares of the Corporation is
required by law or by the Certificate of Incorporation, and in addition to any
other vote required by law or the Certificate of Incorporation, without the
approval of the holders of at least a majority of the then outstanding shares of
the Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and at least forty percent (40%) of each
of the Class E Convertible Preferred Stock and the Class F Convertible Preferred
Stock then outstanding, consenting or voting (as the case may be) as separate
classes, given in writing or by vote at a meeting, the Corporation will not:
5A. Create or authorize the creation of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock, the Class E Convertible
Preferred Stock and the Class F Convertible Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation,
redemption and the payment of dividends, or increase the authorized amount of
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock, the Class E Convertible
Preferred Stock or the Class F Convertible Preferred Stock or increase the
authorized amount of any additional class or series of shares of stock unless
the same ranks junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock, the Class D Convertible Preferred Stock, the Class
E Convertible Preferred Stock and the Class F Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, or create or authorize any
obligation or security convertible into shares of Class B Convertible
<PAGE> 8
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock or the Class F Convertible
Preferred Stock or into shares of any other class or series of stock unless the
same ranks junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock, the Class D Convertible Preferred Stock, the Class
E Convertible Preferred Stock and the Class F Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise.
5B. Notwithstanding any other provisions herein,
consent to any Liquidity Event, unless such action would result in the receipt
of consideration that would result in an annualized rate of return of at least
30% on the initial investment of the holders of each of the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock, the Class E Convertible Preferred Stock and the
Class F Convertible Preferred Stock, calculated on a class by class basis. As
used in the previous sentence, "consideration" means cash or marketable
securities. For any publicly traded securities, the value shall be deemed to be
the average of the closing prices or closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days prior to the
closing of the Liquidity Event. If there is no active public market for the
securities, the value shall be the fair market value of such securities as
mutually determined by the Corporation and the holders of at least a majority of
the voting power of each class of the then outstanding shares of Convertible
Preferred Stock, voting on a class by class basis. In the event that no
agreement can be reached by the parties as to valuation of such consideration,
each of the Corporation and the holders of Convertible Preferred Stock shall
have three (3) days to designate in writing one person or entity, and such
designated persons shall have five (5) days to choose an independent appraiser,
who shall then, within five (5) days, make a determination as to the valuation
of consideration that shall be final and binding upon all parties. All costs
incurred as a result of such appraisal shall be borne by the Corporation;
5C. Amend, alter or repeal its Certificate of
Incorporation or By-Laws if the effect would be materially detrimental or
adverse in any manner with respect to the rights of the holders of the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock, the Class E Convertible Preferred Stock and/or
the Class F Convertible Preferred Stock;
5D. Purchase or set aside any sums for the purchase
of, or pay any dividend or make any distribution on, any shares of stock other
than the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock, the Class E Convertible
Preferred Stock and the Class F Convertible Preferred Stock, except for (i)
Class A Accruing Dividends, (ii) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock, and (iii)
the purchase of shares of Common Stock from former employees of the Corporation
who acquired such shares directly from the Corporation,
<PAGE> 9
if each such purchase is made pursuant to contractual rights held by the
Corporation relating to the termination of employment of such former employee
and the purchase price (except in the case of agreements executed prior to July
12, 1996) does not exceed the original issue price paid by such former employee
to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock except as expressly authorized in paragraph 7 hereof
or pursuant to a purchase offer made on a pro rata basis on such date to all
holders of the shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock, Class E
Convertible Preferred Stock and Class F Convertible Preferred Stock.
VI. Conversions. The holders of shares of Preferred Stock
shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holder of any share or shares of Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Preferred Stock into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Preferred Stock so to be converted by the Original Purchase Price of such share
(which shall be $0.32 in the case of the Class A Convertible Preferred Stock,
$.76 in the case of Class B Convertible Preferred Stock, $1.44 in the case of
Class C Convertible Preferred Stock, $3.57 in the case of Class D Convertible
Preferred Stock, $4.93 in the case of Class E Convertible Preferred Stock and
$5.45 in the case of Class F Convertible Preferred Stock) and (ii) dividing the
result by the Original Purchase Price of such share or, in case an adjustment of
such price has taken place pursuant to the further provisions of this paragraph
6, then by the conversion price as last adjusted and in effect at the date any
share or shares of Preferred Stock are surrendered for conversion (such price,
or such price as last adjusted, being referred to as the "Conversion Price,"
with respect to the Class B Convertible Preferred Stock, the "Class B Conversion
Price," with respect to the Class C Convertible Preferred Stock, the "Class C
Conversion Price," with respect to the Class D Convertible Preferred Stock, the
"Class D Conversion Price," with respect to the Class E Convertible Preferred
Stock, the "Class E Conversion Price" and with respect to the Class F
Convertible Preferred Stock, the "Class F Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written notice
that the holder elects to convert a stated number of shares of Preferred Stock
into Common Stock and by surrender of a certificate or certificates for the
shares so to be converted to the Corporation at its principal office (or such
other office or agency of the Corporation as the Corporation may designate by
notice in writing to the holders of the Preferred Stock) at any time during its
usual business hours on the date set forth in such notice, together with a
statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued.
<PAGE> 10
6B. Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice referred to in
subparagraph 6A and surrender of the certificate or certificates for the share
or shares of Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected and the Conversion Price shall
be determined as of the close of business on the date on which such written
notice shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of Preferred
Stock shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion.
No fractional shares shall be issued upon conversion of Preferred Stock into
Common Stock. No payment or adjustment shall be made for any cash dividends upon
the Common Stock issued as a result of a conversion. At the time of each
conversion, the Corporation shall pay in cash an amount equal to all dividends,
excluding Accruing Dividends, accrued and unpaid on the shares of Preferred
Stock surrendered for conversion to the date upon which such conversion is
deemed to take place as provided in subparagraph 6B. In case the number of
shares of Preferred Stock represented by the certificate or certificates
surrendered pursuant to subparagraph 6A exceeds the number of shares converted,
the Corporation shall, upon such conversion, execute and deliver to the holder,
at the expense of the Corporation, a new certificate or certificates for the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
subparagraph 6C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Preferred Stock for conversion an amount in cash equal to the current market
price of such fractional share as determined in good faith by the Board of
Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 6E, if and whenever the Corporation
shall issue or sell, or is, in accordance with subparagraphs 6D(1) through
6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than (i) the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, (ii) the Class C Conversion
Price in effect immediately prior to the time of such issue or sale, (iii) the
Class D Conversion Price in effect immediately prior to the time of such issue
or sale, (iv) the Class E Conversion Price in effect immediately prior to the
time of such issue or sale or (v) the Class F Conversion Price in effect
immediately prior to the time of such issue or sale, then, forthwith upon such
issue or sale, the Class B Conversion Price, the Class C Conversion Price, the
Class D Conversion Price, the Class E
<PAGE> 11
Conversion Price and/or the Class F Conversion Price, as the case may be, shall
be reduced to the price determined by dividing (i) an amount equal to the sum of
(a) the number of shares of Common Stock outstanding or deemed outstanding
immediately prior to such issue or sale multiplied by the then existing Class B
Conversion Price, the then existing Class C Conversion Price, the then existing
Class D Conversion Price, the then existing Class E Conversion Price or the then
existing Class F Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding or deemed
outstanding immediately after such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any
time the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or security convertible into or exchangeable for Common Stock (such
warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price, the Class E Conversion Price
and/or the Class F Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding. Except
as otherwise provided in this subparagraph or in subparagraph 6D(3), no
adjustment of the Class B Conversion Price, the Class C Conversion Price, the
Class D Conversion Price, the Class E Conversion Price and/or the Class F
Conversion Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.
<PAGE> 12
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or other-wise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Class B Conversion Price, the Class C Conversion Price,
the Class D Conversion Price, the Class E Conversion Price and/or the Class F
Conversion Price in effect immediately prior to the time of such issue or sale,
then the total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the issue or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding,
provided that (a) except as otherwise provided in subparagraph 6D(3), no
adjustment of the Class B Conversion Price, the Class C Conversion Price, the
Class D Conversion Price, the Class E Conversion Price and/or the Class F
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) if any such issue
or sale of such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the Class B
Conversion Price and/or the Class C Conversion Price and/or the Class D
Conversion Price and/or the Class E Conversion Price and/or the Class F
Conversion Price have been or are to be made pursuant to other provisions of
this subparagraph or subparagraph 6D, no further adjustment of the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price,
the Class E Conversion Price and/or the Class F Conversion Price shall be made
by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate
at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(other than changes under or by reason of provisions designed to protect against
dilution), the Class B Conversion Price, the Class C Conversion Price, the Class
D Conversion Price, the Class E Conversion Price and/or the Class F Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Class B Conversion Price, Class C Conversion Price, the Class D Conversion
Price, the Class E Conversion Price or the Class F Conversion Price, as the case
may be, which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such
adjustment the Class B Conversion Price, the Class C Conversion
<PAGE> 13
Price, the Class D Conversion Price, the Class E Conversion Price and/or the
Class F Conversion Price then in effect hereunder is thereby reduced; and on the
termination or expiration of any such Option or any such right to convert or
exchange such Convertible Securities, the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price, the Class E Conversion Price
and/or the Class F Conversion Price then in effect hereunder shall forthwith be
increased to the Class B Conversion Price, Class C Conversion Price, the Class D
Conversion Price, the Class E Conversion Price or Class F Conversion Price, as
the case may be, which would have been in effect at the time of such termination
or expiration had such Option or Convertible Securities, to the extent
outstanding immediately prior to such termination or expiration, never been
issued.
6D(4) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation (other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such consideration
as determined in good faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take
a record of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the
<PAGE> 14
account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this subparagraph
6D.
6E. Certain Issues of Common Stock Excepted. Anything
herein to the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price, the Class E Conversion Price or the Class F
Conversion Price in the case of the issuance from and after the date of filing
of these terms of the Preferred Stock of up to an aggregate of 2,100,000 shares
(appropriately adjusted to reflect the occurrence of any event described in
subparagraphs 6F or 6G) (the "Reserved Shares") of Common Stock to directors,
officers, employees or consultants of the Corporation in connection with their
service as directors of the Corporation, less the number of shares issued
pursuant to subscriptions, warrants, options, convertible securities, or other
rights outstanding on the date hereof, their employment by the Corporation or
their retention as consultants by the Corporation (provided that the number of
Reserved Shares may be increased with the approval of a majority of the Board of
Directors.
6F. Subdivision or Combination of Common Stock. In
case the Corporation shall at any time subdivide (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares (by reverse stock split or otherwise), the Conversion Price in
effect immediately prior to such combination shall be proportionately increased.
In the case of any such subdivision, no further adjustment shall be made
pursuant to subparagraph 6D by reason thereof.
6G. Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore receivable upon
the conversion of such share or shares of Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization or reclassification not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
<PAGE> 15
6H. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare
any dividend upon its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(3) there shall be any capital
reorganization or reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into another entity or
entities, or a sale, lease, abandonment, transfer or other disposition of all or
substantially all its assets; or
(4) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, (a) at least 20 days'
prior written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for deter-mining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, at
least 20 days' prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance upon the conversion of Preferred Stock as herein
provided, such number of
<PAGE> 16
shares of Common Stock as shall then be issuable upon the conversion of all
outstanding shares of Preferred Stock. The Corporation covenants that all shares
of Common Stock which shall be so issued shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, and, without limiting the generality of the
foregoing, the Corporation covenants that it will from time to time take all
such action as may be required to assure that the par value per share of the
Common Stock is at all times equal to or less than the Conversion Price in
effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. Non-reissuance of Preferred Stock. Shares of
Preferred Stock which are converted into shares of Common Stock as provided
herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for
shares of Common Stock upon conversion of Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Preferred Stock which
is being converted.
6M. Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6N. Definition of Common Stock. As used in this
paragraph 6, the term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, par value $.001 per share, as constituted on the date
of filing of these terms of the Preferred Stock, and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
not be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of Common Stock receivable upon conversion
of shares of Preferred Stock shall include only shares designated as Common
Stock of the Corporation on the date of filing of this instrument, or in case of
any reorganization or reclassification of the outstanding shares thereof, the
stock, securities or assets provided for in subparagraph 6G.
<PAGE> 17
6O. Mandatory Conversion. If at any time (i) the
Corporation shall effect a firm commitment underwritten public offering of
shares of Common Stock in which (A) the aggregate price paid for such shares by
the public shall be at least $30,000,000 and (B) the price paid by the public
for such shares shall be at least $7.00 per share (appropriately adjusted to
reflect the occurrence of any event described in subparagraph 6F), or (ii) a
Liquidity Event shall occur in which (a) the holders of shares of any class of
Preferred Stock would receive consideration for all of such shares (as if
converted to Common Stock) of at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class A Convertible Preferred Stock is convertible; at least $3.04 for
(i) each share of Class B Convertible Preferred Stock or (ii) all shares of
Common Stock into which such share of Class B Convertible Preferred Stock is
convertible; at least $5.76 for (i) each share of Class C Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class C
Convertible Preferred Stock is convertible; at least $6.03 per share for (i)
each share of Class D Convertible Preferred Stock or (ii) all shares of Common
Stock into which such share of Class D Convertible Preferred Stock is
convertible; or at least $6.03 per share for (i) each share of Class E
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class E Convertible Preferred Stock is convertible; at least $6.03 per
share for (i) each share of Class F Convertible Preferred Stock or (ii) all
shares of Common Stock into which such share of Class F Convertible Preferred
Stock is convertible, then effective upon the closing of the sale of such shares
by the Corporation pursuant to such public offering or immediately prior to the
occurrence of such Liquidity Event, as the case may be, all outstanding shares
of Preferred Stock (in the case of a public offering) or such class of Preferred
Stock (in the case of a Liquidity Event) shall automatically convert to shares
of Common Stock on the basis set forth in this paragraph 6. Holders of shares of
Preferred Stock so converted may deliver to the Corporation at its principal
office (or such other office or agency of the Corporation as the Corporation may
designate by notice in writing to such holders) during its usual business hours,
the certificate or certificates for the shares so converted. As promptly as
practicable thereafter, the Corporation shall issue and deliver to such holder a
certificate or certificates for the number of whole shares of Common Stock to
which such holder is entitled, together with any cash dividends and payment in
lieu of fractional shares to which such holder may be entitled pursuant to
subparagraph 6C. Until such time as a holder of shares of Preferred Stock shall
surrender his or its certificates therefor as provided above, such certificates
shall be deemed to represent the shares of Common Stock to which such holder
shall be entitled upon the surrender thereof.
VII. Redemption. The shares of Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock, the Class D Convertible
Preferred Stock, the Class E Convertible Preferred Stock and the Class F
Convertible Preferred Stock shall be redeemed as follows:
7A. Mandatory Redemption. On September 11, 2002, and
on each of the next two anniversaries thereafter (the "Redemption Dates," and
each a "Redemption Date"), the Corporation shall redeem any outstanding shares
of Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D
<PAGE> 18
Convertible Preferred Stock, the Class E Convertible Preferred Stock and the
Class F Convertible Preferred Stock according to the percentages listed below:
Date of Redemption Percentage of Shares of Class B
Convertible Preferred Stock,
Class C Convertible Preferred
Stock, Class D Convertible
Preferred Stock, Class E
Convertible Preferred Stock and
Class F Convertible Preferred
Stock then Outstanding to be
Redeemed
September 11, 2002 33-1/3% of all the shares of
Class B Convertible Preferred
Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred Stock,
Class E Convertible Preferred
Stock and Class F Convertible
Preferred Stock outstanding on
September 11, 2002
September 11, 2003 50% of all the shares of Class B
Convertible Preferred Stock,
Class C Convertible Preferred
Stock, Class D Convertible
Preferred Stock, Class E
Convertible Preferred Stock and
Class F Convertible Preferred
Stock outstanding on September
11, 2003
September 11, 2004 100% of all the shares of Class B
Convertible Preferred Stock,
Class C Convertible Preferred
Stock, Class D Convertible
Preferred Stock, Class E
Convertible Preferred Stock and
Class F Convertible Preferred
Stock outstanding on September
11, 2004
7B. Redemption Price and Payment. The shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock to be redeemed on any Redemption Date shall be
redeemed by paying for each share in cash an amount equal to $0.76, $1.44,
$3.57, $4.93 and $5.45 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G), respectively,
plus, in the case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but unpaid thereon, computed to such Redemption
Date, such amount being referred to as the "Redemption Price." Such payment
shall be made in full on the applicable Redemption Date to the holders entitled
thereto.
7C. Redemption Mechanics. At least 20 but not more
than 30 days prior to each Redemption Date, written notice (the "Redemption
Notice") shall be given by the Corporation by delivery in person, certified or
registered mail, return receipt requested, telecopier or telex, to each holder
of record (at the close of business on the business day next preceding the day
on which the Redemption Notice is given) of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class F Convertible
Preferred Stock notifying such holder of the redemption and specifying the
Redemption Price, such Redemption Date, the number of shares of Class B
Convertible
<PAGE> 19
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and/or Class F Convertible
Preferred Stock to be redeemed from such holder (computed on a pro rata basis in
accordance with the number of such shares held by all holders thereof) and the
place where said Redemption Price shall be payable. The Redemption Notice shall
be addressed to each holder at his address as shown by the records of the
Corporation. From and after the close of business on a Redemption Date, unless
there shall have been a default in the payment of the Redemption Price, all
rights of holders of shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock, Class E
Convertible Preferred Stock and Class F Convertible Preferred Stock (except the
right to receive the Redemption Price) shall cease with respect to the shares to
be redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock, Class E Convertible
Preferred Stock and Class F Convertible Preferred Stock on a Redemption Date are
insufficient to redeem the total number of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class F Convertible
Preferred Stock to be redeemed on such Redemption Date, the holders of such
shares shall share ratably in any funds legally available for redemption of such
shares according to the respective amounts which would be payable to them if the
full number of shares to be redeemed on such Redemption Date were actually
redeemed. The shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock, Class E Convertible
Preferred Stock and Class F Convertible Preferred Stock required to be redeemed
but not so redeemed shall remain outstanding and entitled to all rights and
preferences provided herein. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of such shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set forth
above.
7D. Redeemed or Otherwise Acquired Shares to be
Retired. Any shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock, Class E Convertible
Preferred Stock and Class F Convertible Preferred Stock redeemed pursuant to
this paragraph 7 or otherwise acquired by the Corporation in any manner
whatsoever shall be canceled and shall not under any circumstances be reissued;
and the Corporation may from time to time take such appropriate corporate action
as may be necessary to reduce accordingly the number of authorized shares of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class
D Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock.
<PAGE> 20
7E. Delay of Redemption. Notwithstanding paragraph 7A
hereof, the Corporation shall not be required to redeem any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock, Class E Convertible Preferred Stock and Class F
Convertible Preferred Stock on any Redemption Date if the cost to the
Corporation of such redemption would be greater than one-half of the
Corporation's available average cash (including cash equivalents and to the
extent not prohibited by the Delaware General Corporate Law, marketable
securities) working capital balance for the quarter immediately preceding such
Redemption Date. If a redemption is delayed pursuant to this Paragraph 7E, the
Corporation shall redeem the shares to be so redeemed within 120 days of such
Redemption Date.
VIII Amendments. No provision of these terms of the Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then outstanding
shares of Class B Convertible Preferred Stock and Class C Convertible Preferred
Stock and at least a majority of the then outstanding shares of Class D
Convertible Preferred Stock and at least forty percent (40%) of each of the
Class E Convertible Preferred Stock and the Class F Convertible Preferred Stock
then outstanding; provided, however, that so long as TTC Ventures holds at least
two percent (2%) of the outstanding shares of Common Stock of the
Corporation(assuming the conversion of all outstanding Preferred Stock), no
amendment shall be made to the provisions of Section 2C relating to the
representation of the holders of Class D Convertible Preferred Stock without the
consent of TTC Ventures and that so long as ADP holds at least two percent (2%)
of the outstanding shares of Common Stock of the Corporation (assuming the
conversion of all outstanding Preferred Stock), no amendment shall be made to
the provisions of the sixth sentence of Section 2C relating to the
representation of the holders of Class D Convertible Preferred Stock without the
consent of ADP; provided further, however, that so long as FBR holds at least
two percent (2%) of the outstanding shares of Common Stock of the Corporation
(assuming the conversion of all outstanding Preferred Stock), no amendment shall
be made to the provisions of Section 2D relating to the board observer rights of
the holders of Class E Convertible Preferred Stock without the consent of FBR
and, that so long as GECE and/or GEPT together or individually hold, in the
aggregate, at least 250,000 shares of the Class F Convertible Preferred Stock or
the amount of Common Stock into which such shares of Class F Convertible
Preferred Stock is convertible, no amendment shall be made to the provisions of
Section 2D relating to the board observer rights of the holders of Class F
Convertible Preferred Stock without the consent of GECE and GEPT.
<PAGE> 21
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CAREERBUILDER, INC.
PURSUANT TO SECTION 242
CareerBuilder, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company shall remain in the form in which it was most recently filed, except
that the following sentence shall be added as the final sentence to Article
FOURTH: "The following sentence shall be appended as the final sentence to
Article III of the description of other relative rights, preferences and
limitations of the shares of each class of stock attached hereto as Exhibit A:
'Further, no cash dividend shall be paid on the Preferred Stock or Common Stock,
including the Accruing Dividends, until any outstanding indebtedness by the
Corporation to PNC Bank, N.A. or any successor to PNC Bank, N.A. is paid in
full.' "
SECOND: That an appropriate number of stockholders of the Company
entitled to vote on the matter contained in such Amendment have duly adopted
such Amendment in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by its authorized officer, this 29th day of December, 1998.
CAREERBUILDER, INC.
By: /s/ Robert J. McGovern
-----------------------------------
Robert J. McGovern
President
<PAGE> 22
TERMS OF PREFERRED STOCK
I. Number of Shares. There shall be five classes of Preferred
Stock. The Class A Convertible Preferred Stock shall consist of 1,562,500
shares, the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, the Class C Convertible Preferred Stock shall consist of 3,188,889
shares, the Class D Convertible Preferred Stock shall consist of 2,045,785
shares and the Class E Convertible Preferred Stock shall consist of 1,024,351
shares. The Class A Convertible Preferred Stock, the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and the Class E Convertible Preferred shall
sometimes be referred to herein collectively as the "Preferred Stock."
II. Voting.
2A. General. Except as may be otherwise provided in
these terms of the Preferred Stock or by law, the Preferred Stock shall vote
together with all other classes and class of stock of the Corporation as a
single class on all actions to be taken by the stockholders of the Corporation,
including, but not limited to actions amending the Certificate of Incorporation
of the Corporation to increase the number of authorized shares of Common Stock.
Each share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
2B. Board Size. The Corporation shall not, without
the written consent or affirmative vote of the holders of at least two-thirds of
the then outstanding shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock consenting or voting (as the case may be) as a
single class, given in writing or by vote at a meeting, increase the maximum
number of directors constituting the Board of Directors to a number in excess of
seven.
2C. Board Seats. So long as the outstanding Class A
Convertible Preferred Stock represents at least 10% of the outstanding Common
Stock of the Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class A Convertible Preferred Stock, acting as a
separate class, shall be entitled to elect one director of the Corporation. So
long as the outstanding Class B Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class B Convertible
Preferred Stock, acting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class B Director"). So long as the outstanding
Class C Convertible Preferred Stock represents at least 5% of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class C Convertible Preferred Stock, acting
as a separate class, shall be entitled to elect one director of the Corporation
(the "Class C Director"). The holders of the Common Stock, acting as a separate
class, shall be entitled to elect two directors of the Corporation. So long as
Thomson U.S. Inc. ("TTC Ventures") owns, beneficially or of record, at least two
percent (2%) of the outstanding Common Stock of the Corporation (assuming the
conversion of all outstanding Preferred Stock), the holders of the Class D
Convertible Preferred Stock (as adjusted in accordance with subparagraph 6F or
6G), acting as a separate class, shall be entitled to appoint one director of
the Corporation (the "Class D Director") and
<PAGE> 23
such Class D Director shall be nominated and appointed by TTC Ventures on behalf
of the holders of Class D Convertible Preferred Stock. So long as ADP, Inc.
("ADP") owns beneficially or of record, at least two percent (2%) of the
outstanding Common Stock of the Corporation (assuming the conversion of all
outstanding Preferred Stock) and there are shares of Class D Convertible
Preferred Stock outstanding, the holders of the Class D Convertible Preferred
Stock (as adjusted in accordance with subparagraph 6F or 6G), acting as a
separate class, shall be entitled to appoint an additional director of the
Corporation (the "Other Class D Director and together with") and such Other
Class D Director shall be nominated and appointed by ADP on behalf of the
holders of Class D Convertible Preferred Stock. At any meeting (or in a written
consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class D Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class D Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class D
Convertible Preferred Stock, the presence in person or by proxy (or the written
consent) of the holders of a majority of the shares of Class C Convertible
Preferred Stock then outstanding shall constitute a quorum of the Class C
Convertible Preferred Stock for the election of the director to be elected
solely by the holders of the Class C Convertible Preferred Stock, the presence
in person or by proxy (or the written consent) of the holders of a majority of
the shares of Class B Convertible Preferred Stock then outstanding shall
constitute a quorum of the Class B Convertible Preferred Stock for the election
of the director to be elected solely by the holders of the Class B Convertible
Preferred Stock, and the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Class A Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class A Convertible
Preferred Stock for the election of the director to be elected solely by the
holders of the Class A Convertible Preferred Stock. A vacancy in any
directorship elected by the holders of the Class A Convertible Preferred Stock,
Class B Convertible Preferred Stock or Class C Convertible Preferred Stock shall
be filled only by vote or written consent of the holders of the Class A
Convertible Preferred Stock, Class B Convertible Preferred Stock or Class C
Convertible Preferred Stock respectively; a vacancy in the directorship
allocated to the holders of Class D Convertible Preferred Stock shall be filled
only by the appointment by or written consent of TTC Ventures; a vacancy in the
other directorship allocated to the holders of Class D Convertible Preferred
Stock and nominated by ADP shall be filled only by the appointment by or written
consent of ADP; and a vacancy in any directorship elected by the holders of the
Common Stock shall be filled only by vote or written consent of the holders of
the Common Stock.
2D. Board Observer. FBR Technology Venture Partners,
L.P. ("FBR") shall have the right to assign an observer to the Board of
Directors of the Company to attend each meeting of the Board of Directors of the
Company and each meeting of any Committee thereof.
III. Dividends. The holders of the Class A Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least
<PAGE> 24
four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at the rate
per annum of $0.0224 per share (the "Class A Accruing Dividends"). The holders
of the Class B Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least four
members of the Board of Directors, or (ii) upon any liquidation, dissolution or
winding up of the Corporation, quarterly dividends at the rate per annum of
$0.0532 per share (the "Class B Accruing Dividends"). The holders of the Class C
Convertible Preferred Stock shall be entitled to receive, out of funds legally
available therefor, (i) when and if declared by at least four members of the
Board of Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.1008 per share
(the "Class C Accruing Dividends"). The holders of the Class D Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of the
Corporation, quarterly dividends at the rate per annum of $0.2499 per share (the
"Class D Accruing Dividends"). The holders of the Class E Convertible Preferred
Stock shall be entitled to receive, out of funds legally available therefor, (i)
when and if declared by at least four members of the Board of Directors, or (ii)
upon any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.3451 per share (the "Class E Accruing
Dividends"). The Class A Accruing Dividends, the Class B Accruing Dividends, and
the Class C Accruing Dividends, the Class D Accruing Dividends and the Class E
Accruing Dividends are sometimes referred to herein collectively as the
"Accruing Dividends." Accruing Dividends shall accrue from day to day, whether
or not earned or declared, and shall be cumulative. No dividend shall be paid on
the Preferred Stock, other than Accruing Dividends, or on the Common Stock.
IV. Liquidation.
4A. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the shares
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and the Class E Convertible Preferred Stock
shall first be entitled, before any distribution or payment is made upon any
stock ranking on liquidation junior to the Class B Convertible Preferred Stock,
the Class C Convertible Preferred Stock, the Class D Convertible Preferred Stock
and the Class E Convertible Preferred Stock, to be paid an amount equal to
$0.76, $1.44, $3.57 and $4.93 per share, respectively, plus, in the case of each
share of Class B Convertible Preferred Stock, an amount equal to all Class B
Accruing Dividends unpaid thereon (whether or not declared) and any other
dividends declared but unpaid thereon, in the case of each share of Class C
Convertible Preferred Stock, an amount equal to all Class C Accruing Dividends
unpaid thereon (whether or not declared), in the case of each share of Class D
Convertible Preferred Stock, an amount equal to all Class D Accruing Dividends
paid thereon (whether or not declared), in the case of each share of Class E
Convertible Preferred Stock, an amount equal to all Class E Accruing Dividends
paid thereon (whether or not declared), and any other dividends declared but
unpaid thereon, computed to the date payment thereof is made available, such
amount payable with respect to one share of Class B Convertible Preferred Stock
being sometimes referred to as the "Class B Liquidation Preference Payment,"
such amount payable with respect to one share of Class C Convertible Preferred
Stock being sometimes referred to as the "Class C Liquidation Preference
Payment," such amount payable with respect to one share of Class D Convertible
Preferred Stock being sometimes referred to as the "Class D Liquidation
Preference Payment", such amount payable with respect to one share of Class E
Convertible Preferred Stock being sometimes referred to as the "Class E
Liquidation Preference Payment," and with respect to all shares of
<PAGE> 25
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class
D Convertible Preferred Stock and Class E Convertible Preferred Stock being
sometimes referred to as the "Classes B, C, D and E Liquidation Preference
Payments." If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock and Class E Convertible
Preferred Stock shall be insufficient to permit payment in full to the holders
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and Class E Convertible Preferred Stock of
the Classes B, C, D and E Liquidation Preference Payments, then the entire
assets of the Corporation to be so distributed shall be distributed ratably, on
an as-converted basis, among the holders of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock and
Class E Convertible Preferred Stock.
4B. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after the holders of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock shall have
been paid in full the amounts to which they shall be entitled pursuant to
paragraph 4A, the holders of the shares of Class A Convertible Preferred Stock
shall then be entitled, before any distribution or payment is made upon any
stock ranking on liquidation junior to the Class A Convertible Preferred Stock,
to be paid an amount equal to $.32 per share plus, in the case of each share, an
amount equal to all Class A Accruing Dividends unpaid thereon (whether or not
declared) computed to the date payment thereof is made available, such amount
payable with respect to one share of Class A Convertible Preferred Stock being
sometimes referred to as the "Class A Liquidation Preference Payment" and with
respect to all shares of Class A Convertible Preferred Stock being sometimes
referred to as the "Class A Liquidation Preference Payments." The Class A
Liquidation Preference Payments and the Classes B, C, D and E Liquidation
Preference Payments are sometimes referred to herein collectively as the
"Liquidation Preference Payments." If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class A Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders of Class A Convertible
Preferred Stock of the Class A Liquidation Preference Payments, then the entire
remaining assets of the Corporation to be so distributed shall be distributed
ratably among the holders of Class A Convertible Preferred Stock.
4C. Upon any such liquidation, dissolution or winding
up of the Corporation, immediately after the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class A Convertible
Preferred Stock shall have been paid in full their respective Liquidation
Preference Payments, the remaining net assets of the Corporation available for
distribution shall be distributed ratably among the holders of Preferred Stock
and Common Stock (with each share of Preferred Stock being deemed, for such
purpose, to be equal to the number of shares of Common Stock (including
fractions of a share) into which such share of Preferred Stock is convertible
immediately prior to the close of business on the business day fixed for such
distribution). Unless otherwise agreed by holders of at least two-thirds of the
Class B Convertible Preferred Stock and the Class C Convertible Preferred Stock,
each acting as a separate class, and a majority of the Class D Convertible
Preferred Stock and at least forty
<PAGE> 26
percent (40%) of the Class E Convertible Preferred Stock then outstanding, each
acting as a separate class, the consolidation or merger of the Corporation into
or with any other entity or entities which results in the exchange of
outstanding shares of the Corporation for securities or other consideration
issued or paid or caused to be issued or paid by any such entity or affiliate
thereof (other than a merger to reincorporate the Corporation in a different
jurisdiction), and the sale, lease, abandonment, transfer or other disposition
by the Corporation of all or substantially all its assets (each such event a
"Liquidity Event"), shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of the provisions of this paragraph 4.
4D. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the Liquidation Preference
Payments and the place where said Liquidation Preference Payments shall be
payable, shall be delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or telex, not less than 20 days
prior to the payment date stated therein, to the holders of record of Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation. For purposes hereof, the Common Stock shall
rank on liquidation junior to the Class A Convertible Preferred Stock, the Class
B Convertible Preferred Stock, the Class C Convertible Preferred Stock, the
Class D Convertible Preferred Stock and the Class E Convertible Preferred Stock.
V. Restrictions. At any time when shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least a majority of the then outstanding shares of the Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, the Class D Convertible
Preferred Stock and at least forty percent (40%) of the Class E Convertible
Preferred Stock then outstanding, consenting or voting (as the case may be) as
separate classes, given in writing or by vote at a meeting, the Corporation will
not:
5A. Create or authorize the creation of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible Stock
as to the distribution of assets on the liquidation, dissolution or winding up
of the Corporation, redemption and the payment of dividends, or increase the
authorized amount of the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock, the Class D Convertible Preferred Stock or the
Class E Convertible Preferred Stock or increase the authorized amount of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible
Preferred Stock as to the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, redemption and the payment of dividends, or
create or authorize any obligation or security convertible into shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock or the Class E Convertible Preferred Stock or into
shares of any
<PAGE> 27
other class or series of stock unless the same ranks junior to the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock and the Class E Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise; provided, that such
consent shall not be unreasonably withheld for the creation or issuance of an
additional class or series of shares ranking senior to the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and the Class E Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends (a "Senior Security"), but
provided further, that if, within a reasonable time of the submission of a
proposal for the issuance of a Senior Security, information comes to light
indicating that such consent was withheld solely or primarily for the purpose of
negotiating the price of an additional investment by the holders of the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock and/or the Class E Convertible Preferred Stock,
then such consent shall be deemed to have been unreasonably withheld for
purposes of this subparagraph 5A.
5B. Consent to any liquidation, dissolution or
winding up of the Corporation or consolidate or merge into or with any other
entity or entities or sell, lease, abandon, transfer or otherwise dispose of all
or substantially all its assets, unless such action would result in an
annualized return to the holders of the Class B Convertible Preferred Stock, the
Class C Convertible Preferred Stock, the Class D Convertible Preferred Stock and
the Class E Convertible Preferred Stock of at least 30%;
5C. Amend, alter or repeal its Certificate of
Incorporation or By-Laws if the effect would be materially detrimental or
adverse in any manner with respect to the rights of the holders of the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock and/or the Class E Convertible Preferred Stock;
5D. Purchase or set aside any sums for the purchase
of, or pay any dividend or make any distribution on, any shares of stock other
than the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible
Preferred Stock, except for (i) Class A Accruing Dividends, (ii) dividends or
other distributions payable on the Common Stock solely in the form of additional
shares of Common Stock, and (iii) the purchase of shares of Common Stock from
former employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the termination of employment of such former
employee and the purchase price (except in the case of agreements executed prior
to July 12, 1996) does not exceed the original issue price paid by such former
employee to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock except as
expressly authorized in paragraph 7 hereof or pursuant to a purchase offer made
pro rata to all holders of the shares of Class B Convertible
<PAGE> 28
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock and Class E Convertible Preferred Stock on the basis of the
aggregate number of outstanding shares of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock and/or
Class E Convertible Preferred Stock then held by each such holder.
VI. Conversions. The holders of shares of Preferred Stock
shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holder of any share or shares of Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Preferred Stock into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Preferred Stock so to be converted by the Original Purchase Price of such share
(which shall be $0.32 in the case of the Class A Convertible Preferred Stock,
$.76 in the case of Class B Convertible Preferred Stock, $1.44 in the case of
Class C Convertible Preferred Stock, $3.57 in the case of Class D Convertible
Preferred Stock and $4.93 in the case of Class E Convertible Preferred Stock)
and (ii) dividing the result by the conversion price of the Original Purchase
Price of such share or, in case an adjustment of such price has taken place
pursuant to the further provisions of this paragraph 6, then by the conversion
price as last adjusted and in effect at the date any share or shares of
Preferred Stock are surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Conversion Price," with respect to the
Class B Convertible Preferred Stock, the "Class B Conversion Price," with
respect to the Class C Convertible Preferred Stock, the "Class C Conversion
Price", with respect to the Class D Convertible Preferred Stock, the "Class D
Conversion Price" and with respect to the Class E Convertible Preferred Stock,
the "Class E Conversion Price"). Such rights of conversion shall be exercised by
the holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Preferred Stock into Common Stock and by surrender of
a certificate or certificates for the shares so to be converted to the
Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holders
of the Preferred Stock) at any time during its usual business hours on the date
set forth in such notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued.
6B. Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice referred to in
subparagraph 6A and surrender of the certificate or certificates for the share
or shares of Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected and the Conversion Price shall
be determined as of the close of business on the date on which such written
notice shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of Preferred
Stock shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
<PAGE> 29
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion.
No fractional shares shall be issued upon conversion of Preferred Stock into
Common Stock and no payment or adjustment shall be made upon any conversion on
account of any cash dividends on the Common Stock issued upon such conversion.
At the time of each conversion, the Corporation shall pay in cash an amount
equal to all dividends, excluding Accruing Dividends, accrued and unpaid on the
shares of Preferred Stock surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in subparagraph 6B. In case the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A exceeds the number of
shares converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted. If any
fractional share of Common Stock would, except for the provisions of the first
sentence of this subparagraph 6C, be delivered upon such conversion, the
Corporation, in lieu of delivering such fractional share, shall pay to the
holder surrendering the Preferred Stock for conversion an amount in cash equal
to the current market price of such fractional share as determined in good faith
by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 6E, if and whenever the Corporation
shall issue or sell, or is, in accordance with subparagraphs 6D(1) through
6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than (i) the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, (ii) the Class C Conversion
Price in effect immediately prior to the time of such issue or sale, (iii) the
Class D Conversion Price in effect immediately prior to the time of such issue
or sale, or (iv) the Class E Conversion Price in effect immediately prior to the
time of such issue or sale, then, forthwith upon such issue or sale, the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price, as the case may be, shall be reduced to the
price determined by dividing (i) an amount equal to the sum of (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Class B Conversion Price, the then existing
Class C Conversion Price, the then existing Class D Conversion Price or the then
existing Class E Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any
time the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or security convertible into or exchangeable for Common Stock (such
warrants, rights or options being called "Options" and such convertible or
<PAGE> 30
exchangeable stock or securities being called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Class B Conversion Price, the Class C Conversion Price, the Class D
Conversion Price and/or the Class E Conversion Price in effect immediately prior
to the time of the granting of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued for such price per share as of the date of granting of such Options
or the issuance of such Convertible Securities and thereafter shall be deemed to
be outstanding. Except as otherwise provided in subparagraph 6D(3), no
adjustment of the Class B Conversion Price, the Class C Conversion Price, the
Class D Conversion Price and/or the Class E Conversion Price shall be made upon
the actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or other-wise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Class B Conversion Price, the Class C Conversion Price,
the Class D Conversion Price and/or the Class E Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maxi-mum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities and (b)
if any such issue or sale of such Convertible Securities is made upon exercise
of any Options to purchase any such Convertible Securities for which adjustments
of the Class B Conversion Price and/or the Class C Conversion Price and/or the
Class D Conversion Price
<PAGE> 31
and/or the Class E Conversion Price have been or are to be made pursuant to
other provisions of this subparagraph 6D, no further adjustment of the Class B
Conversion Price, the Class C Conversion Price, The Class D Conversion Price
and/or the Class E Conversion Price shall be made by reason of such issue or
sale.
6D(3) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate
at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price and/or the Class E Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Class B Conversion Price, Class C Conversion Price, the Class D Conversion Price
or the Class E Conversion Price, as the case may be, which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold, but
only if as a result of such adjustment the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price and/or the Class E Conversion
Price then in effect hereunder is thereby reduced; and on the termination or
expiration of any such Option or any such right to convert or exchange such
Convertible Securities, the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price and/or the Class E Conversion Price then in
effect hereunder shall forthwith be increased to the Class B Conversion Price,
Class C Conversion Price, the Class D Conversion Price or Class E Conversion
Price, as the case may be, which would have been in effect at the time of such
termination or expiration had such Option or Convertible Securities, to the
extent outstanding immediately prior to such termination or expiration, never
been issued.
6D(4) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation (other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any Options shall be issued in connection with the issue and sale of other
securities of the
<PAGE> 32
Corporation, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued for such consideration as determined in good
faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take
a record of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares shall
be considered an issue or sale of Common Stock for the purpose of this
subparagraph 6D.
6E. Certain Issues of Common Stock Excepted. Anything
herein to the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price or the Class E Conversion Price in the case
of the issuance from and after the date of filing of these terms of the
Preferred Stock of up to an aggregate of 1,950,000 shares (appropriately
adjusted to reflect the occurrence of any event described in subparagraphs 6F or
6G) (the "Reserved Shares") of Common Stock to directors, officers, employees or
consultants of the Corporation in connection with their service as directors of
the Corporation, their employment by the Corporation or their retention as
consultants by the Corporation (provided that the number of Reserved Shares may
be increased (a) prior to December 31, 1998, with the approval of a majority of
the Board of Directors including the Class B Director, the Class C Director and
the Class D Directors and [(b) after December 31, 1998, with the approval of
either (i) a majority of the Board of Directors including the Class B Director,
the Class C Director and the Class D Directors or (ii) all directors other than
the Class B Director, the Class C Director and the Class D Directors), plus such
number of shares of Common Stock which are repurchased by the Corporation from
such persons after such date pursuant to contractual rights held by the
Corporation and at repurchase prices not exceeding the respective original
purchase prices paid by such persons to the Corporation therefor.
6F. Subdivision or Combination of Common Stock. In
case the Corporation shall at any time subdivide (by any stock split, stock
dividend or otherwise) its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased. In the case of any such subdivision, no
further adjustment shall be made pursuant to subparagraph 6D by reason thereof.
<PAGE> 33
6G. Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore receivable upon
the conversion of such share or shares of Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization or reclassification not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare
any dividend upon its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(3) there shall be any capital
reorganization or reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into another entity or
entities, or a sale, lease, abandonment, transfer or other disposition of all or
substantially all its assets; or
(4) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the
Corporation shall give, by delivery in person, certified or registered mail,
return receipt requested, telecopier or telex, addressed to each holder of any
shares of Preferred Stock at the address of such holder as shown on the books of
the Corporation, (a) at least 20 days' prior written notice of the date on which
the books of the Corporation shall close or a record shall be taken for such
dividend, distribution
<PAGE> 34
or subscription rights or for deter-mining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance upon the conversion of Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. Non-reissuance of Preferred Stock. Shares of
Preferred Stock which are converted into shares of Common Stock as provided
herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for
shares of Common Stock upon conversion of Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Preferred Stock which
is being converted.
6M. Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6N. Definition of Common Stock. As used in this
paragraph 6, the term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, par value
<PAGE> 35
$.001 per share, as constituted on the date of filing of these terms of the
Preferred Stock, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Preferred Stock
shall include only shares designated as Common Stock of the Corporation on the
date of filing of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 6G.
6O. Mandatory Conversion. If at any time (i) the
Corporation shall effect a firm commitment underwritten public offering of
shares of Common Stock in which (A) the aggregate price paid for such shares by
the public shall be at least $15,000,000 and (B) the price paid by the public
for such shares shall be at least $4.32 per share (appropriately adjusted to
reflect the occurrence of any event described in subparagraph 6F), or (ii) a
Liquidity Event shall occur in which (a) the holders of shares of any class of
Preferred Stock would receive consideration for all of such shares (as if
converted to Common Stock) of at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class A Convertible Preferred Stock is convertible; at least $3.04 for
(i) each share of Class B Convertible Preferred Stock or (ii) all shares of
Common Stock into which such share of Class B Convertible Preferred Stock is
convertible; at least $5.76 for (i) each share of Class C Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class C
Convertible Preferred Stock is convertible; at least $6.03 per share for (i)
each share of Class D Convertible Preferred Stock or (ii) all shares of Common
Stock into which such share of Class D Convertible Preferred Stock is
convertible; or at least $6.03 per share for (i) each share of Class E
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class E Convertible Preferred Stock is convertible, then effective upon
the closing of the sale of such shares by the Corporation pursuant to such
public offering or immediately prior to the occurrence of such Liquidity Event,
as the case may be, all outstanding shares of Preferred Stock (in the case of a
public offering) or such class of Preferred Stock (in the case of a Liquidity
Event) shall automatically convert to shares of Common Stock on the basis set
forth in this paragraph 6. Holders of shares of Preferred Stock so converted may
deliver to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to such holders) during its usual business hours, the certificate or
certificates for the shares so converted. As promptly as practicable thereafter,
the Corporation shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to which such holder
is entitled, together with any cash dividends and payment in lieu of fractional
shares to which such holder may be entitled pursuant to subparagraph 6C. Until
such time as a holder of shares of Preferred Stock shall surrender his or its
certificates therefor as provided above, such certificates shall be deemed to
represent the shares of Common Stock to which such holder shall be entitled upon
the surrender thereof.
VII. Redemption. The shares of Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and the Class E Convertible Preferred Stock shall be
redeemed as follows:
<PAGE> 36
7A. Mandatory Redemption. On September 11, 2002, and
on each of the next two anniversaries thereafter (the "Redemption Dates," and
each a "Redemption Date"), the Corporation shall redeem any outstanding shares
of Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and the Class E Convertible Preferred
Stock according to the percentages listed below:
Percentage of Shares of
Class B Convertible Preferred
Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred Stock and
Class E Convertible Preferred
Stock then Outstanding to be
Date of Redeemed
Redemption
September 33-1/3% of all the shares
11, 2002 of Class B Convertible Preferred
Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred and Class E
Convertible Preferred Stock
outstanding on September 11, 2002
September 50% of all the shares of
Class B Convertible Preferred
11, 2003 Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred Stock and
Class E Convertible Preferred
Stock outstanding on September
11, 2003
September 100% of all the shares of
11, 2004 Class B Convertible Preferred
Stock, Class C Convertible
Preferred Stock, Class D
Convertible Preferred and Class E
Convertible Preferred Stock
outstanding on September 11, 2004
7B. Redemption Price and Payment. The shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock to be
redeemed on any Redemption Date shall be redeemed by paying for each share in
cash an amount equal to $0.76, $1.44, $3.57 and $4.93 per share (appropriately
adjusted to reflect the occurrence of any event described in subparagraphs 6F or
6G), respectively, plus, in the case of each share, an amount equal to all
dividends, excluding Accruing Dividends, declared but unpaid thereon, computed
to such Redemption Date, such amount being referred to as the "Redemption
Price". Such payment shall be made in full on the applicable Redemption Date to
the holders entitled thereto.
7C. Redemption Mechanics. At least 20 but not more
than 30 days prior to each Redemption Date, written notice (the "Redemption
Notice") shall be given by the Corporation by delivery in person, certified or
registered mail, return receipt requested, telecopier or telex, to each holder
of record (at the close of business on the business day next preceding the day
on which the Redemption Notice is given) of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock and Class E Convertible Preferred Stock notifying such holder of
the redemption and specifying the Redemption Price, such Redemption Date, the
number of shares of Class B Convertible Preferred Stock,
<PAGE> 37
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock and/or
Class E Convertible Preferred Stock to be re-deemed from such holder (computed
on a pro rata basis in accordance with the number of such shares held by all
holders thereof) and the place where said Redemption Price shall be payable. The
Redemption Notice shall be addressed to each holder at his address as shown by
the records of the Corporation. From and after the close of business on a
Redemption Date, unless there shall have been a default in the payment of the
Redemption Price, all rights of holders of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock and Class E Convertible Preferred Stock (except the right to
receive the Redemption Price) shall cease with respect to the shares to be
redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock and Class E Convertible
Preferred Stock on a Redemption Date are insufficient to redeem the total number
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock to be redeemed on such Redemption Date, the holders of such shares shall
share ratably in any funds legally available for redemption of such shares
according to the respective amounts which would be payable to them if the full
number of shares to be redeemed on such Redemption Date were actually redeemed.
The shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock required to be redeemed but not so redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At any time thereafter
when additional funds of the Corporation are legally available for the
redemption of such shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set forth
above.
7D. Redeemed or Otherwise Acquired Shares to be
Retired. Any shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock and Class E Convertible
Preferred Stock redeemed pursuant to this paragraph 7 or otherwise acquired by
the Corporation in any manner whatsoever shall be canceled and shall not under
any circumstances be reissued; and the Corporation may from time to time take
such appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock.
7E. Delay of Redemption. Notwithstanding paragraph 7A
hereof, the Corporation shall not be required to redeem any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock on any
Redemption Date if the cost to the Corporation of such redemption would be
greater than one-half of the Corporation's available average cash working
<PAGE> 38
capital balance for the quarter immediately preceding such Redemption Date. If a
redemption is delayed pursuant to this Paragraph 7E, the Corporation shall
redeem the shares to be so redeemed within 120 days of such Redemption Date.
VIII Amendments. No provision of these terms of the
Preferred Stock may be amended, modified or waived without the written consent
or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock and at least a majority of the then outstanding
shares of Class D Convertible Preferred Stock and at least forty percent (40%)
of the Class E Convertible Preferred Stock then outstanding; provided, however,
that so long as TTC Ventures holds at least two percent (2%) of the outstanding
shares of Common Stock of the Corporation(assuming the conversion of all
outstanding Preferred Stock), no amendment shall be made to the provisions of
Section 2C relating to the representation of the holders of Class D Convertible
Preferred Stock without the consent of TTC Ventures and that so long as ADP
holds at least two percent (2%) of the outstanding shares of Common Stock of the
Corporation (assuming the conversion of all outstanding Preferred Stock), no
amendment shall be made to the provisions of the sixth sentence of Section 2C
relating to the representation of the holders of Class D Convertible Preferred
Stock without the consent of APD; PROVIDED FURTHER, HOWEVER, THAT SO LONG AS FBR
HOLDS AT LEAST TWO PERCENT (2%) OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE
CORPORATION (ASSUMING THE CONVERSION OF ALL OUTSTANDING PREFERRED STOCK), NO
AMENDMENT SHALL BE MADE TO THE PROVISIONS OF SECTION 2C RELATING TO THE BOARD
OBSERVER RIGHTS OF THE HOLDERS OF CLASS E CONVERTIBLE PREFERRED STOCK WITHOUT
THE CONSENT OF FBR.
<PAGE> 39
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CAREERBUILDER, INC.
CareerBuilder, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company is hereby amended to read as follows:
FOURTH. The aggregate number of shares which the Company shall
have authority to issue 27,472,945 shares consisting of five
classes of stock: 17,500,000 shares of Common Stock ($.001 par
value per share); 1,562,500 shares of Class A Convertible
Preferred Stock ($.001 par value per share); 2,151,420 shares
of Class B Convertible Preferred Stock ($.001 par value per
share); 3,188,889 shares of Class C Convertible Preferred
Stock ($.001 par value per share); 2,045,785 shares of Class D
Convertible Preferred Stock ($.001 par value per share); and
1,024,351 shares of Class E Convertible Preferred Stock ($.001
par value per share). Except as other provided by law or as
set forth in this Amendment, each of the outstanding shares
shall have one vote for the purpose of electing directors and
for all other purposes, including but not limited to an equal
participation in any dividends or other distribution by the
Company. All other relative rights, preferences and
limitations of the shares of each class of stock are set forth
in Exhibit A attached hereto and incorporated herein by this
reference.
SECOND: That all stockholders of the Company entitled to vote on the
matter contained in such Amendment have duly adopted such Amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
<PAGE> 40
IN WITNESS WHEREOF, said Company has caused this certificate to be
signed by its authorized officer, this 30th day of June, 1998.
CAREERBUILDER, INC.
By: /s/ Robert McGovern
------------------------------------
Robert McGovern
President
<PAGE> 41
TERMS OF PREFERRED STOCK
I. Number of Shares. There shall be five classes of Preferred
Stock. The Class A Convertible Preferred Stock shall consist of 1,562,500
shares, the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, the Class C Convertible Preferred Stock shall consist of 3,188,889
shares, the Class D Convertible Preferred Stock shall consist of 2,045,785
shares and the Class E Convertible Preferred Stock shall consist of 1,024,351
shares. The Class A Convertible Preferred Stock, the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and the Class E Convertible Preferred shall
sometimes be referred to herein collectively as the "Preferred Stock."
II. Voting.
2A. General. Except as may be otherwise provided in
these terms of the Preferred Stock or by law, the Preferred Stock shall vote
together with all other classes and class of stock of the Corporation as a
single class on all actions to be taken by the stockholders of the Corporation,
including, but not limited to actions amending the Certificate of Incorporation
of the Corporation to increase the number of authorized shares of Common Stock.
Each share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
2B. Board Size. The Corporation shall not, without
the written consent or affirmative vote of the holders of at least two-thirds of
the then outstanding shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock consenting or voting (as the case may be) as a
single class, given in writing or by vote at a meeting, increase the maximum
number of directors constituting the Board of Directors to a number in excess of
seven.
2C. Board Seats. So long as the outstanding Class A
Convertible Preferred Stock represents at least 10% of the outstanding Common
Stock of the Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class A Convertible Preferred Stock, acting as a
separate class, shall be entitled to elect one director of the Corporation. So
long as the outstanding Class B Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class B Convertible
Preferred Stock, acting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class B Director"). So long as the outstanding
Class C Convertible Preferred Stock represents at least 5% of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class C Convertible Preferred Stock, acting
as a separate class, shall be entitled to elect one director of the Corporation
(the "Class C Director"). The holders of the Common Stock, acting as a separate
class, shall be entitled to elect two directors of the Corporation. So long as
Thomson U.S. Inc. ("TTC Ventures") owns, beneficially or of record, at least two
percent (2%) of the outstanding Common Stock of the Corporation (assuming the
conversion of all outstanding Preferred Stock), the holders of the Class D
Convertible Preferred Stock (as adjusted in accordance with subparagraph 6F or
6G), acting as a separate
<PAGE> 42
class, shall be entitled to appoint one director of the Corporation (the "Class
D Director") and such Class D Director shall be nominated and appointed by TTC
Ventures on behalf of the holders of Class D Convertible Preferred Stock. So
long as ADP, Inc. ("ADP") owns beneficially or of record, at least two percent
(2%) of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock) and there are shares of Class D Convertible
Preferred Stock outstanding, the holders of the Class D Convertible Preferred
Stock (as adjusted in accordance with subparagraph 6F or 6G), acting as a
separate class, shall be entitled to appoint an additional director of the
Corporation (the "Other Class D Director and together with") and such Other
Class D Director shall be nominated and appointed by ADP on behalf of the
holders of Class D Convertible Preferred Stock. At any meeting (or in a written
consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class D Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class D Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class D
Convertible Preferred Stock, the presence in person or by proxy (or the written
consent) of the holders of a majority of the shares of Class C Convertible
Preferred Stock then outstanding shall constitute a quorum of the Class C
Convertible Preferred Stock for the election of the director to be elected
solely by the holders of the Class C Convertible Preferred Stock, the presence
in person or by proxy (or the written consent) of the holders of a majority of
the shares of Class B Convertible Preferred Stock then outstanding shall
constitute a quorum of the Class B Convertible Preferred Stock for the election
of the director to be elected solely by the holders of the Class B Convertible
Preferred Stock, and the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Class A Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class A Convertible
Preferred Stock for the election of the director to be elected solely by the
holders of the Class A Convertible Preferred Stock. A vacancy in any
directorship elected by the holders of the Class A Convertible Preferred Stock,
Class B Convertible Preferred Stock or Class C Convertible Preferred Stock shall
be filled only by vote or written consent of the holders of the Class A
Convertible Preferred Stock, Class B Convertible Preferred Stock or Class C
Convertible Preferred Stock respectively; a vacancy in the directorship
allocated to the holders of Class D Convertible Preferred Stock shall be filled
only by the appointment by or written consent of TTC Ventures; a vacancy in the
other directorship allocated to the holders of Class D Convertible Preferred
Stock and nominated by ADP shall be filled only by the appointment by or written
consent of ADP; and a vacancy in any directorship elected by the holders of the
Common Stock shall be filled only by vote or written consent of the holders of
the Common Stock.
2D. Board Observer. FBR Technology Venture Partners,
L.P. ("FBR") shall have the right to assign an observer to the Board of
Directors of the Company to attend each meeting of the Board of Directors of the
Company and each meeting of any Committee thereof.
III. Dividends. The holders of the Class A Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of the
Corporation, quarterly dividends at the rate per annum of $0.0224 per share (the
"Class A Accruing Dividends"). The holders of the Class B Convertible Preferred
Stock shall be
<PAGE> 43
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.0532 per share (the "Class B Accruing Dividends").
The holders of the Class C Convertible Preferred Stock shall be entitled to
receive, out of funds legally available therefor, (i) when and if declared by at
least four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at the rate
per annum of $0.1008 per share (the "Class C Accruing Dividends"). The holders
of the Class D Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least four
members of the Board of Directors, or (ii) upon any liquidation, dissolution or
winding up of the Corporation, quarterly dividends at the rate per annum of
$0.2499 per share (the "Class D Accruing Dividends"). The holders of the Class E
Convertible Preferred Stock shall be entitled to receive, out of funds legally
available therefor, (i) when and if declared by at least four members of the
Board of Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.3451 per share
(the "Class E Accruing Dividends"). The Class A Accruing Dividends, the Class B
Accruing Dividends, and the Class C Accruing Dividends, the Class D Accruing
Dividends and the Class E Accruing Dividends are sometimes referred to herein
collectively as the "Accruing Dividends." Accruing Dividends shall accrue from
day to day, whether or not earned or declared, and shall be cumulative. No
dividend shall be paid on the Preferred Stock, other than Accruing Dividends, or
on the Common Stock.
IV. Liquidation.
4A. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the shares
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and the Class E Convertible Preferred Stock
shall first be entitled, before any distribution or payment is made upon any
stock ranking on liquidation junior to the Class B Convertible Preferred Stock,
the Class C Convertible Preferred Stock, the Class D Convertible Preferred Stock
and the Class E Convertible Preferred Stock, to be paid an amount equal to
$0.76, $1.44, $3.57 and $4.93 per share, respectively, plus, in the case of each
share of Class B Convertible Preferred Stock, an amount equal to all Class B
Accruing Dividends unpaid thereon (whether or not declared) and any other
dividends declared but unpaid thereon, in the case of each share of Class C
Convertible Preferred Stock, an amount equal to all Class C Accruing Dividends
unpaid thereon (whether or not declared), in the case of each share of Class D
Convertible Preferred Stock, an amount equal to all Class D Accruing Dividends
paid thereon (whether or not declared), in the case of each share of Class E
Convertible Preferred Stock, an amount equal to all Class E Accruing Dividends
paid thereon (whether or not declared), and any other dividends declared but
unpaid thereon, computed to the date payment thereof is made available, such
amount payable with respect to one share of Class B Convertible Preferred Stock
being sometimes
<PAGE> 44
referred to as the "Class B Liquidation Preference Payment," such amount payable
with respect to one share of Class C Convertible Preferred Stock being sometimes
referred to as the "Class C Liquidation Preference Payment," such amount payable
with respect to one share of Class D Convertible Preferred Stock being sometimes
referred to as the "Class D Liquidation Preference Payment", such amount payable
with respect to one share of Class E Convertible Preferred Stock being sometimes
referred to as the "Class E Liquidation Preference Payment," and with respect to
all shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock being sometimes referred to as the "Classes B, C, D and E Liquidation
Preference Payments." If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock, Class D Convertible Preferred Stock and Class E Convertible
Preferred Stock shall be insufficient to permit payment in full to the holders
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and Class E Convertible Preferred Stock of
the Classes B, C, D and E Liquidation Preference Payments, then the entire
assets of the Corporation to be so distributed shall be distributed ratably, on
an as-converted basis, among the holders of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock, Class D Convertible Preferred Stock and
Class E Convertible Preferred Stock.
4B. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, after the holders of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock shall have
been paid in full the amounts to which they shall be entitled pursuant to
paragraph 4A, the holders of the shares of Class A Convertible Preferred Stock
shall then be entitled, before any distribution or payment is made upon any
stock ranking on liquidation junior to the Class A Convertible Preferred Stock,
to be paid an amount equal to $.32 per share plus, in the case of each share, an
amount equal to all Class A Accruing Dividends unpaid thereon (whether or not
declared) computed to the date payment thereof is made available, such amount
payable with respect to one share of Class A Convertible Preferred Stock being
sometimes referred to as the "Class A Liquidation Preference Payment" and with
respect to all shares of Class A Convertible Preferred Stock being sometimes
referred to as the "Class A Liquidation Preference Payments." The Class A
Liquidation Preference Payments and the Classes B, C, D and E Liquidation
Preference Payments are sometimes referred to herein collectively as the
"Liquidation Preference Payments." If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class A Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders of Class A Convertible
Preferred Stock of the Class A Liquidation Preference Payments, then the entire
remaining assets of the Corporation to be so distributed shall be distributed
ratably among the holders of Class A Convertible Preferred Stock.
4C. Upon any such liquidation, dissolution or winding
up of the Corporation, immediately after the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, Class D Convertible
Preferred Stock, Class E Convertible Preferred Stock and Class A Convertible
Preferred Stock shall have been paid in full their respective Liquidation
Preference Payments, the remaining net assets of the Corporation available for
distribution shall be distributed ratably among the holders of Preferred Stock
and Common Stock (with each share of Preferred Stock being deemed, for such
purpose, to be equal to the number of shares of Common Stock (including
fractions of a share) into which such share of Preferred Stock is convertible
immediately prior to the close of business on the business day fixed for such
distribution). Unless otherwise agreed by holders of at least two-thirds of the
Class B Convertible Preferred Stock and the Class C Convertible Preferred Stock,
each acting as a
<PAGE> 45
separate class, and a majority of the Class D Convertible Preferred Stock and at
least forty percent (40%) of the Class E Convertible Preferred Stock then
outstanding, each acting as a separate class, the consolidation or merger of the
Corporation into or with any other entity or entities which results in the
exchange of outstanding shares of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or affiliate thereof (other than a merger to reincorporate the Corporation in a
different jurisdiction), and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets (each such
event a "Liquidity Event"), shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the provisions of this
paragraph 4.
4D. Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the Liquidation Preference
Payments and the place where said Liquidation Preference Payments shall be
payable, shall be delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or telex, not less than 20 days
prior to the payment date stated therein, to the holders of record of Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation. For purposes hereof, the Common Stock shall
rank on liquidation junior to the Class A Convertible Preferred Stock, the Class
B Convertible Preferred Stock, the Class C Convertible Preferred Stock, the
Class D Convertible Preferred Stock and the Class E Convertible Preferred Stock.
V. Restrictions. At any time when shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least a majority of the then outstanding shares of the Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock, the Class D Convertible
Preferred Stock and at least forty percent (40%) of the Class E Convertible
Preferred Stock then outstanding, consenting or voting (as the case may be) as
separate classes, given in writing or by vote at a meeting, the Corporation will
not:
5A. Create or authorize the creation of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible Stock
as to the distribution of assets on the liquidation, dissolution or winding up
of the Corporation, redemption and the payment of dividends, or increase the
authorized amount of the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock, the Class D Convertible Preferred Stock or the
Class E Convertible Preferred Stock or increase the authorized amount of any
additional class or series of shares of stock unless the same ranks junior to
the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible
Preferred Stock as to the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, redemption and the payment of dividends, or
create or authorize any obligation or security convertible into shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
<PAGE> 46
Convertible Preferred Stock or the Class E Convertible Preferred Stock or into
shares of any other class or series of stock unless the same ranks junior to the
Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and the Class E Convertible Preferred
Stock as to the distribution of assets on the liquidation, dissolution or
winding up of the Corporation, redemption and the payment of dividends, whether
any such creation, authorization or increase shall be by means of amendment to
the Certificate of Incorporation or by merger, consolidation or otherwise;
provided, that such consent shall not be unreasonably withheld for the creation
or issuance of an additional class or series of shares ranking senior to the
Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and the Class E Convertible Preferred
Stock as to the distribution of assets on the liquidation, dissolution or
winding up of the Corporation, redemption and the payment of dividends (a
"Senior Security"), but provided further, that if, within a reasonable time of
the submission of a proposal for the issuance of a Senior Security, information
comes to light indicating that such consent was withheld solely or primarily for
the purpose of negotiating the price of an additional investment by the holders
of the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and/or the Class E Convertible
Preferred Stock, then such consent shall be deemed to have been unreasonably
withheld for purposes of this subparagraph 5A.
5B. Consent to any liquidation, dissolution or
winding up of the Corporation or consolidate or merge into or with any other
entity or entities or sell, lease, abandon, transfer or otherwise dispose of all
or substantially all its assets, unless such action would result in an
annualized return to the holders of the Class B Convertible Preferred Stock, the
Class C Convertible Preferred Stock, the Class D Convertible Preferred Stock and
the Class E Convertible Preferred Stock of at least 30%;
5C. Amend, alter or repeal its Certificate of
Incorporation or By-Laws if the effect would be materially detrimental or
adverse in any manner with respect to the rights of the holders of the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock, the Class
D Convertible Preferred Stock and/or the Class E Convertible Preferred Stock;
5D. Purchase or set aside any sums for the purchase
of, or pay any dividend or make any distribution on, any shares of stock other
than the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock, the Class D Convertible Preferred Stock and the Class E Convertible
Preferred Stock, except for (i) Class A Accruing Dividends, (ii) dividends or
other distributions payable on the Common Stock solely in the form of additional
shares of Common Stock, and (iii) the purchase of shares of Common Stock from
former employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the termination of employment of such former
employee and the purchase price (except in the case of agreements executed prior
to July 12, 1996) does not exceed the original issue price paid by such former
employee to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock except as
expressly authorized in paragraph 7 hereof or
<PAGE> 47
pursuant to a purchase offer made pro rata to all holders of the shares of Class
B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock on the basis
of the aggregate number of outstanding shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D Convertible Preferred Stock
and/or Class E Convertible Preferred Stock then held by each such holder.
VI. Conversions. The holders of shares of Preferred Stock
shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holder of any share or shares of Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Preferred Stock into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Preferred Stock so to be converted by the Original Purchase Price of such share
(which shall be $0.32 in the case of the Class A Convertible Preferred Stock,
$.76 in the case of Class B Convertible Preferred Stock, $1.44 in the case of
Class C Convertible Preferred Stock, $3.57 in the case of Class D Convertible
Preferred Stock and $4.93 in the case of Class E Convertible Preferred Stock)
and (ii) dividing the result by the conversion price of the Original Purchase
Price of such share or, in case an adjustment of such price has taken place
pursuant to the further provisions of this paragraph 6, then by the conversion
price as last adjusted and in effect at the date any share or shares of
Preferred Stock are surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Conversion Price," with respect to the
Class B Convertible Preferred Stock, the "Class B Conversion Price," with
respect to the Class C Convertible Preferred Stock, the "Class C Conversion
Price", with respect to the Class D Convertible Preferred Stock, the "Class D
Conversion Price" and with respect to the Class E Convertible Preferred Stock,
the "Class E Conversion Price"). Such rights of conversion shall be exercised by
the holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Preferred Stock into Common Stock and by surrender of
a certificate or certificates for the shares so to be converted to the
Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holders
of the Preferred Stock) at any time during its usual business hours on the date
set forth in such notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued.
6B. Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice referred to in
subparagraph 6A and surrender of the certificate or certificates for the share
or shares of Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected and the Conversion Price shall
be determined as of the close of business on the date on which such written
notice shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of Preferred
Stock shall cease, and the person or persons in whose
<PAGE> 48
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion.
No fractional shares shall be issued upon conversion of Preferred Stock into
Common Stock and no payment or adjustment shall be made upon any conversion on
account of any cash dividends on the Common Stock issued upon such conversion.
At the time of each conversion, the Corporation shall pay in cash an amount
equal to all dividends, excluding Accruing Dividends, accrued and unpaid on the
shares of Preferred Stock surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in subparagraph 6B. In case the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A exceeds the number of
shares converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted. If any
fractional share of Common Stock would, except for the provisions of the first
sentence of this subparagraph 6C, be delivered upon such conversion, the
Corporation, in lieu of delivering such fractional share, shall pay to the
holder surrendering the Preferred Stock for conversion an amount in cash equal
to the current market price of such fractional share as determined in good faith
by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 6E, if and whenever the Corporation
shall issue or sell, or is, in accordance with subparagraphs 6D(1) through
6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than (i) the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, (ii) the Class C Conversion
Price in effect immediately prior to the time of such issue or sale, (iii) the
Class D Conversion Price in effect immediately prior to the time of such issue
or sale, or (iv) the Class E Conversion Price in effect immediately prior to the
time of such issue or sale, then, forthwith upon such issue or sale, the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price, as the case may be, shall be reduced to the
price determined by dividing (i) an amount equal to the sum of (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Class B Conversion Price, the then existing
Class C Conversion Price, the then existing Class D Conversion Price or the then
existing Class E Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any
time the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or security convertible into or exchangeable for
<PAGE> 49
Common Stock (such warrants, rights or options being called "Options" and such
convertible or exchangeable stock or securities being called "Convertible
Securities") whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon the exercise
of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding. Except
as otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such Options or
upon the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or other-wise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Class B Conversion Price, the Class C Conversion Price,
the Class D Conversion Price and/or the Class E Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maxi-mum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price, the Class D Conversion Price
and/or the Class E Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities and (b)
if any such issue or sale of such Convertible Securities is made upon exercise
of any Options to purchase any such Convertible Securities for which adjustments
of the Class B
<PAGE> 50
Conversion Price and/or the Class C Conversion Price and/or the Class D
Conversion Price and/or the Class E Conversion Price have been or are to be made
pursuant to other provisions of this subparagraph 6D, no further adjustment of
the Class B Conversion Price, the Class C Conversion Price, The Class D
Conversion Price and/or the Class E Conversion Price shall be made by reason of
such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate
at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price and/or the Class E Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Class B Conversion Price, Class C Conversion Price, the Class D Conversion Price
or the Class E Conversion Price, as the case may be, which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold, but
only if as a result of such adjustment the Class B Conversion Price, the Class C
Conversion Price, the Class D Conversion Price and/or the Class E Conversion
Price then in effect hereunder is thereby reduced; and on the termination or
expiration of any such Option or any such right to convert or exchange such
Convertible Securities, the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price and/or the Class E Conversion Price then in
effect hereunder shall forthwith be increased to the Class B Conversion Price,
Class C Conversion Price, the Class D Conversion Price or Class E Conversion
Price, as the case may be, which would have been in effect at the time of such
termination or expiration had such Option or Convertible Securities, to the
extent outstanding immediately prior to such termination or expiration, never
been issued.
6D(4) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation (other than the Common Stock) payable in Common Stock, Options or
Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
<PAGE> 51
any Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such consideration
as determined in good faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take
a record of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common Stock, Options
or Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares shall
be considered an issue or sale of Common Stock for the purpose of this
subparagraph 6D.
6E. Certain Issues of Common Stock Excepted. Anything
herein to the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Class B Conversion Price, the Class C Conversion
Price, the Class D Conversion Price or the Class E Conversion Price in the case
of the issuance from and after the date of filing of these terms of the
Preferred Stock of up to an aggregate of 1,950,000 shares (appropriately
adjusted to reflect the occurrence of any event described in subparagraphs 6F or
6G) (the "Reserved Shares") of Common Stock to directors, officers, employees or
consultants of the Corporation in connection with their service as directors of
the Corporation, their employment by the Corporation or their retention as
consultants by the Corporation (provided that the number of Reserved Shares may
be increased (a) prior to December 31, 1998, with the approval of a majority of
the Board of Directors including the Class B Director, the Class C Director and
the Class D Directors and [(b) after December 31, 1998,
<PAGE> 52
with the approval of either (i) a majority of the Board of Directors including
the Class B Director, the Class C Director and the Class D Directors or (ii) all
directors other than the Class B Director, the Class C Director and the Class D
Directors), plus such number of shares of Common Stock which are repurchased by
the Corporation from such persons after such date pursuant to contractual rights
held by the Corporation and at repurchase prices not exceeding the respective
original purchase prices paid by such persons to the Corporation therefor.
6F. Subdivision or Combination of Common Stock. In case
the Corporation shall at any time subdivide (by any stock split, stock dividend
or otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
<PAGE> 53
proportionately increased. In the case of any such subdivision, no further
adjustment shall be made pursuant to subparagraph 6D by reason thereof.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Preferred Stock, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare
any dividend upon its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(3) there shall be any capital
reorganization or reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into another entity or
entities, or a sale, lease, abandonment, transfer or other disposition of all or
substantially all its assets; or
(4) there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder
<PAGE> 54
of any shares of Preferred Stock at the address of such holder as shown on the
books of the Corporation, (a) at least 20 days' prior written notice of the date
on which the books of the Corporation shall close or a record shall be taken for
such dividend, distribution or subscription rights or for deter-mining rights to
vote in respect of any such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up and (b) in the case
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up, at least 20 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto and such notice in accordance
with the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, as
the case may be.
6J. Stock to be Reserved. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance upon the conversion of Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. Non-reissuance of Preferred Stock. Shares of Preferred
Stock which are converted into shares of Common Stock as provided herein shall
not be reissued.
6L. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6M. Closing of Books. The Corporation will at no time
close its transfer books against the transfer of any Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes
<PAGE> 55
with the timely conversion of such Preferred Stock, except as may otherwise be
required to comply with applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph
6, the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the date of filing of
these terms of the Preferred Stock, and shall also include any capital stock of
any class of the Corporation thereafter authorized which shall not be limited to
a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation; provided
that the shares of Common Stock receivable upon conversion of shares of
Preferred Stock shall include only shares designated as Common Stock of the
Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 6G.
6O. Mandatory Conversion. If at any time (i) the
Corporation shall effect a firm commitment underwritten public offering of
shares of Common Stock in which (A) the aggregate price paid for such shares by
the public shall be at least $15,000,000 and (B) the price paid by the public
for such shares shall be at least $4.32 per share (appropriately adjusted to
reflect the occurrence of any event described in subparagraph 6F), or (ii) a
Liquidity Event shall occur in which (a) the holders of shares of any class of
Preferred Stock would receive consideration for all of such shares (as if
converted to Common Stock) of at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class A Convertible Preferred Stock is convertible; at least $3.04 for
(i) each share of Class B Convertible Preferred Stock or (ii) all shares of
Common Stock into which such share of Class B Convertible Preferred Stock is
convertible; at least $5.76 for (i) each share of Class C Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class C
Convertible Preferred Stock is convertible; at least $6.03 per share for (i)
each share of Class D Convertible Preferred Stock or (ii) all shares of Common
Stock into which such share of Class D Convertible Preferred Stock is
convertible; or at least $6.03 per share for (i) each share of Class E
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class E Convertible Preferred Stock is convertible, then effective upon
the closing of the sale of such shares by the Corporation pursuant to such
public offering or immediately prior to the occurrence of such Liquidity Event,
as the case may be, all outstanding shares of Preferred Stock (in the case of a
public offering) or such class of Preferred Stock (in the case of a Liquidity
Event) shall automatically convert to shares of Common Stock on the basis set
forth in this paragraph 6. Holders of shares of Preferred Stock so converted may
deliver to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to such holders) during its usual business hours, the certificate or
certificates for the shares so converted. As promptly as practicable thereafter,
the Corporation shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to which such holder
is entitled, together with any cash dividends and payment in lieu of fractional
shares to which such holder may be entitled pursuant to subparagraph 6C. Until
such time as a holder of shares of Preferred Stock shall surrender his or its
certificates therefor as provided above, such certificates shall be deemed to
represent the shares of Common Stock to which such holder shall be entitled upon
the surrender thereof.
<PAGE> 56
VII. Redemption. The shares of Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock, the Class D Convertible
Preferred Stock and the Class E Convertible Preferred Stock shall be redeemed as
follows:
7A. Mandatory Redemption. On September 11, 2002, and on
each of the next two anniversaries thereafter (the "Redemption Dates," and each
a "Redemption Date"), the Corporation shall redeem any outstanding shares of
Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock and the Class E Convertible Preferred
Stock according to the percentages listed below:
<TABLE>
<S> <C>
Percentage of Shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible
Preferred Stock then Outstanding to be Redeemed
Date of Redemption
- --------- ---------- -------------------------------------------------------------
September 11, 2002 33-1/3% of all the shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred and Class E Convertible Preferred
Stock outstanding on September 11, 2002
September 11, 2003 50% of all the shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible
Preferred Stock outstanding on September 11, 2003
September 11, 2004 100% of all the shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred and Class E Convertible Preferred
Stock outstanding on September 11, 2004
</TABLE>
7B. Redemption Price and Payment. The shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, the Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock to be
redeemed on any Redemption Date shall be redeemed by paying for each share in
cash an amount equal to $0.76, $1.44, $3.57 and $4.93 per share (appropriately
adjusted to reflect the occurrence of any event described in subparagraphs 6F or
6G), respectively, plus, in the case of each share, an amount equal to all
dividends, excluding Accruing Dividends, declared but unpaid thereon, computed
to such Redemption Date, such amount being referred to as the "Redemption
Price". Such payment shall be made in full on the applicable Redemption Date to
the holders entitled thereto.
7C. Redemption Mechanics. At least 20 but not more than 30
days prior to each Redemption Date, written notice (the "Redemption Notice")
shall be given by the Corporation by delivery in person, certified or registered
mail, return receipt requested, telecopier or telex, to each holder of record
(at the close of business on the business day next preceding the day on which
the Redemption Notice is given) of shares of Class B Convertible Preferred
<PAGE> 57
Stock, Class C Convertible Preferred Stock, Class D Convertible Preferred Stock
and Class E Convertible Preferred Stock notifying such holder of the redemption
and specifying the Redemption Price, such Redemption Date, the number of shares
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock,
Class D Convertible Preferred Stock and/or Class E Convertible Preferred Stock
to be re-deemed from such holder (computed on a pro rata basis in accordance
with the number of such shares held by all holders thereof) and the place where
said Redemption Price shall be payable. The Redemption Notice shall be addressed
to each holder at his address as shown by the records of the Corporation. From
and after the close of business on a Redemption Date, unless there shall have
been a default in the payment of the Redemption Price, all rights of holders of
shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock (except the right to receive the Redemption Price) shall cease with
respect to the shares to be redeemed on such Redemption Date, and such shares
shall not thereafter be transferred on the books of the Corporation or be deemed
to be outstanding for any purpose whatsoever. If the funds of the Corporation
legally available for redemption of shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D Convertible Preferred Stock
and Class E Convertible Preferred Stock on a Redemption Date are insufficient to
redeem the total number of shares of Class B Convertible Preferred Stock, Class
C Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock to be redeemed on such Redemption Date, the holders
of such shares shall share ratably in any funds legally available for redemption
of such shares according to the respective amounts which would be payable to
them if the full number of shares to be redeemed on such Redemption Date were
actually redeemed. The shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock required to be redeemed but not so redeemed shall
remain outstanding and entitled to all rights and preferences provided herein.
At any time thereafter when additional funds of the Corporation are legally
available for the redemption of such shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock, Class D Convertible Preferred Stock
and Class E Convertible Preferred Stock, such funds will be used, at the end of
the next succeeding fiscal quarter, to redeem the balance of such shares, or
such portion thereof for which funds are then legally available, on the basis
set forth above.
7D. Redeemed or Otherwise Acquired Shares to be Retired.
Any shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock, Class D Convertible Preferred Stock and Class E Convertible Preferred
Stock redeemed pursuant to this paragraph 7 or otherwise acquired by the
Corporation in any manner whatsoever shall be canceled and shall not under any
circumstances be reissued; and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock, Class D Convertible Preferred Stock and Class E
Convertible Preferred Stock.
7E. Delay of Redemption. Notwithstanding paragraph 7A
hereof, the Corporation shall not be required to redeem any shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, Class D
Convertible Preferred Stock and Class E Convertible Preferred Stock on any
Redemption Date if the cost to the Corporation of such redemption would be
greater than one-half of the Corporation's available average cash working
<PAGE> 58
capital balance for the quarter immediately preceding such Redemption Date. If a
redemption is delayed pursuant to this Paragraph 7E, the Corporation shall
redeem the shares to be so redeemed within 120 days of such Redemption Date.
VIII Amendments. No provision of these terms of the Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then outstanding
shares of Class B Convertible Preferred Stock and Class C Convertible Preferred
Stock and at least a majority of the then outstanding shares of Class D
Convertible Preferred Stock and at least forty percent (40%) of the Class E
Convertible Preferred Stock then outstanding; provided, however, that so long as
TTC Ventures holds at least two percent (2%) of the outstanding shares of Common
Stock of the Corporation(assuming the conversion of all outstanding Preferred
Stock), no amendment shall be made to the provisions of Section 2C relating to
the representation of the holders of Class D Convertible Preferred Stock without
the consent of TTC Ventures and that so long as ADP holds at least two percent
(2%) of the outstanding shares of common stock of the corporation (assuming the
conversion of all outstanding preferred stock), no amendment shall be made to
the provisions of the sixth sentence of section 2c relating to the
representation of the holders of class d convertible preferred stock without the
consent of apd; PROVIDED FURTHER, HOWEVER, THAT SO LONG AS FBR HOLDS AT LEAST
TWO PERCENT (2%) OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE CORPORATION
(ASSUMING THE CONVERSION OF ALL OUTSTANDING PREFERRED STOCK), NO AMENDMENT SHALL
BE MADE TO THE PROVISIONS OF SECTION 2C RELATING TO THE BOARD OBSERVER RIGHTS OF
THE HOLDERS OF CLASS E CONVERTIBLE PREFERRED STOCK WITHOUT THE CONSENT OF FBR.
<PAGE> 59
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
NetStart, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That at a meeting of the Board of Directors of the Company,
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and requesting in writing the consent of the stockholders of said
corporation for consideration thereof. The resolutions setting forth the
proposed amendment are as follows:
RESOLVED, that the name of the Corporation be change to
CareerBuilder, Inc.
FURTHER RESOLVED, that the Board deems it advisable and in the
best interests of the Corporation and its stockholders that
the Certificate of Incorporation, as amended, be further
amended to reflect such name change.
ARTICLE FIRST shall be amended to read as follows:
"The name of the Corporation is CareerBuilder, Inc."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, said amendment was consented to in writing by the stockholders of the
corporation, in accordance with Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE> 60
IN WITNESS WHEREOF, said Company has caused this certificate to be
signed by its President, its authorized officer, this 26th day of February 1998.
NETSTART, INC.
By: /s/ Robert J. McGovern
-----------------------------------
Name: Robert J. McGovern
Title: CEO & Chairman
<PAGE> 61
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
ADOPTED PURSUANT TO THE PROVISIONS OF SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
NetStart, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company")
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company is hereby amended to read as follows:
FOURTH The aggregate number of shares which the Corporation
shall have authority to issue is 25,948,594 shares consisting of five classes of
stock: 17,000,000 shares of Common Stock ($.001 par value per share); 1,562,500
shares of Class A Convertible Preferred Stock ($.001 par value per share);
2,151,420 shares of Class B Convertible Preferred Stock ($.001 par value per
share); 3,188,889 shares of Class C Convertible Preferred Stock ($.001 par value
per share) and 2,045,785 shares of Class D Convertible Preferred Stock ($.001
par value per share). Except as otherwise provided by law or as set forth in
this Amendment, each of the outstanding shares shall have one vote for the
purpose of electing directors and for all other purposes, including but not
limited to an equal participation in any dividends, or other distribution by the
Company. All other relative rights, preferences and limitations of the shares of
each class of stock are set forth in Exhibit A attached hereto and incorporated
herein by this reference.
SECOND: That all stockholders of the Company entitled to vote on the
matters contained in such amendment have duly adopted such amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
<PAGE> 62
IN WITNESS WHEREOF, the Company has caused this certificate of
Amendment to be executed by a duly authorized officer this 22nd day of January,
1998.
NETSTART, INC.
By: /s/ Robert J. McGovern
------------------------------------
Name: Robert J. McGovern
Title: President
Attest:
/s/ Gene Austin
---------------------------------
Name: Gene Austin
Title: Secretary
<PAGE> 63
EXHIBIT A TO
CERTIFICATE OF AMENDMENT
TERMS OF PREFERRED STOCK
1. Number of Shares. There shall be four classes of Preferred Stock. The
Class A Convertible Preferred Stock shall consist of 1,562,500 shares,
the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, the Class C. Convertible Preferred Stock shall consist of
3,188,889 shares and the Class D Convertible Preferred Stock shall
consist of 2,045,785 shares. The Class A. Convertible Preferred Stock,
the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock shall
sometimes be referred to herein collectively as the "Preferred Stock."
2. Voting.
a. 2A. General. Except as may be otherwise
provided in these terms of the Preferred Stock or by law, the Preferred Stock
shall vote together with all other classes and class of stock of the Corporation
as a single class on all actions to be taken by the stockholders of the
Corporation, including, but not limited to actions amending the Certificate of
Incorporation of the Corporation to increase the number of authorized shares of
Common Stock. Each share of Preferred Stock shall entitle the holder thereof to
such number of votes per share on each such action as shall equal the number of
shares of Common Stock (including fractions of a share) into which each share of
Preferred Stock is then convertible.
b. 2B. Board Size. The Corporation shall not,
without the written consent or affirmative vote of the holders of at least two
thirds of the then outstanding shares of Class B Convertible Preferred Stock and
Class D Convertible Preferred Stock consenting or voting (as the case may be) as
a single class, given in writing or by vote at a meeting, increase the maximum
number of directors constituting the Board of directors to a number in excess of
seven.
c. 2C. Board Seats. So long as the outstanding
Class A Convertible Preferred Stock represents at least 10% of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class A. Convertible Preferred Stock,
acting as a separate class, shall be entitled to elect one director of the
Corporation. So long as the outstanding Class B Convertible Preferred Stock
represents at least 5% of the outstanding Common Stock of the Corporation
(assuming the conversion of all outstanding Preferred Stock), the holders of the
Class B Convertible Preferred Stock, acting as a separate class, shall be
entitled to elect one director of the Corporation (the "Class B. Director"). So
long as the outstanding Class C Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock),
<PAGE> 64
the holders of the Class C Convertible Preferred Stock, acting as a separate
class, shall be entitled to elect one director of the Corporation (the "Class C
Director"). The holders of the Common Stock, acting as a separate class, shall
be entitled to elect two directors of the Corporation. So long as Thomson U.S.
Inc. ("TTC Ventures") owns, beneficially or of record, at least two percent (2%)
of the outstanding Common Stock of the Corporation (assuming the conversion of
all outstanding Preferred Stock) and there are shares of Class D Convertible
Preferred Stock outstanding, the holders of the Class D Convertible Preferred
Stock (as adjusted in accordance with subparagraph 6F or 6G), acting as a
separate class, shall be entitled to appoint one director of the Corporation
(the "Class D Director") and such Class D Director shall be nominated and
appointed by TTC Ventures on behalf of the holders of Class D Convertible
Preferred Stock. So long as ADP, Inc. ("ADP") owns, beneficially or of record,
at least two percent (2%) of the outstanding Common Stock of the Corporation
(assuming the conversion of all outstanding Preferred Stock) and there are
shares of Class D Convertible Preferred Stock outstanding, the holders of the
Class D Convertible Preferred Stock (as adjusted in accordance with subparagraph
6F or 6G), acting as a separate class, shall be entitled to appoint an
additional director of the Corporation (the "Other Class D Director") and such
Other Class D Director shall be nominated and appointed by ADP on behalf of the
holders of Class D Convertible Preferred Stock. At any meeting (or in a written
consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class D Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class D Convertible Preferred Stock for the
election of the director or directors to be elected solely by the holders of the
Class D Convertible Preferred Stock, the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of Class C
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Class C Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class C convertible Preferred Stock, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class B Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class B Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class B
Convertible Preferred Stock and the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of Class A
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Class A Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class A Convertible Preferred Stock. A
vacancy in any directorship elected by the holders of the Class A Convertible
Preferred Stock, Class B Convertible Preferred Stock or Class C Convertible
Preferred Stock shall be filled only by vote or written consent of the holders
of the Class A Convertible Preferred Stock, Class B Convertible Preferred Stock
or Class C Convertible Preferred Stock respectively; a vacancy in the
directorship allocated to the holders of Class D Convertible Preferred Stock and
nominated by TTC shall be filled only by the appointment by or written consent
of TTC Ventures; a vacancy in the other directorship allocated to the holders of
Class D Convertible Preferred Stock and nominated by ADP shall be filled only by
the appointment by or written consent of ADP; and a vacancy in any directorship
elected by the holders of the Common Stock shall be filled only by vote or
written consent of the holders of the Common Stock.
<PAGE> 65
3. Dividends. The holders of the Class A Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor,
(i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.0224
per share (the "Class A Accruing Dividends"). The holders of the Class
B Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least
four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at
the rate per annum of $0.0532 per share (the "Class B Accruing
Dividends"). The holders of the Class C Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor,
(i) when and if declared by at least four members of the Board of
Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.1008
per share (the 'Class C Accruing Dividends"). The holders of the Class
D Convertible Preferred Stock shall be entitled to receive, out of
funds legally available therefor, (i) when and if declared by at least
four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at
the rate per annum of $0.2499 per share (the "Class D Accruing
Dividends"). The Class A Accruing Dividends, the Class B Accruing
Dividends, and the Class C Accruing Dividends and the Class D Accruing
Dividends are sometimes referred to herein collectively as the
"Accruing Dividends." Accruing Dividends shall accrue from day to day,
whether or not earned or declared, and shall be cumulative. No dividend
shall be paid on the Preferred Stock, other than Accruing Dividends, or
on the Common Stock.
4. Liquidation.
a. 4A. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock shall first be entitled, before
any distribution or payment is made upon any stock ranking on liquidation junior
to the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and the Class D Convertible Preferred Stock, to be paid an amount equal to
$0.76, $1.44 and $3.57 per share, respectively, plus, in the case of each share
of Class B Convertible Preferred Stock, an amount equal to all Class B Accruing
Dividends unpaid thereon (whether or not declared) and any other dividends
declared but unpaid thereon, in the case of each share of Class C convertible
Preferred Stock, an amount equal to all Class C Accruing Dividends unpaid
thereon (whether or not declared) and in the case of each share of Class D
Convertible Preferred Stock, an amount equal to all Class D Accruing Dividends
paid thereon (whether or not declared), and any other dividends declared but
unpaid thereon, computed to the date payment thereof is made available, such
amount payable with respect to one share of Class B Convertible Preferred Stock
being sometimes referred to as the "Class B
<PAGE> 66
Liquidation Preference Payment," such amount payable with respect to one share
of Class C Convertible Preferred Stock being sometimes referred to as the "Class
C Liquidation Preference Payment," such amount payable with respect to one share
of Class D Convertible Preferred Stock being sometimes referred to as the "Class
D Liquidation Preference Payment", and with respect to all shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock and Class D
Convertible Preferred Stock being sometimes referred to as the "Class B, C and D
Liquidation Preference Payments." If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock of the Classes B, C and D Liquidation Preference Payments, then
the entire assets of the Corporation to be so distributed shall be distributed
ratably, on an as-converted basis, among the holders of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock.
b. 4B. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after the
holders of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock shall have been paid in full the
amounts to which they shall be entitled pursuant to paragraph 4A, the holders of
the shares of Class A. Convertible Preferred Stock shall then be entitled,
before any distribution or payment is made upon any stock ranking on liquidation
junior to the Class A Convertible Preferred Stock, to be paid an amount equal to
$.32 per share plus, in the case of each share, an amount equal to all Class A
Accruing Dividends unpaid thereon (whether or not declared) computed to the date
payment thereof is made available, such amount payable with respect to one share
of Class A convertible Preferred Stock being sometimes referred to as the "Class
A Liquidation Preference Payment" and with respect to all shares of Class A
Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payments." The Class A Liquidation Preference Payments
and the Classes B, C and D Liquidation Preference Payments are sometimes
referred to herein collectively as the "Liquidation Preference Payments." If
upon such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Class A Convertible Preferred Stock shall be insufficient to permit payment in
full to the holders of Class A Convertible Preferred Stock of the Class A
Liquidation Preference Payments, then the entire remaining assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Class A Convertible Preferred Stock.
c. 4C. Upon any such liquidation,
dissolution or winding up of the corporation, immediately after the holders of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class
D Convertible Preferred Stock and Class A Convertible Preferred Stock shall have
been paid in full their respective Liquidation Preference Payments, the
remaining net assets of the Corporation available for
<PAGE> 67
distribution shall be distributed ratably among the holders of Preferred Stock
and Common Stock (with each share of Preferred Stock being deemed, for such
purpose, to be equal to the number of shares of common Stock (including
fractions of a share) into which such share of Preferred Stock is convertible
immediately prior to the close of business on the business day fixed for such
distribution). Unless otherwise agreed by holders of at least two-thirds of the
Class B Convertible Preferred Stock and the Class C Convertible Preferred Stock,
each acting as a separate class, and a majority of the Class D Convertible
Preferred Stock, acting as a separate class, the consolidation or merger of the
Corporation into or with any other entity or entities which results in the
exchange of outstanding shares of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or affiliate thereof (other than a merger to reincorporate the Corporation in a
different jurisdiction), and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets (each such
event a "Liquidity Event"), shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the provisions of this
paragraph 4.
d. 4D. Written notice of such liquidation,
dissolution or winding up, stating a payment date, the amount of the Liquidation
preference Payments and the place where said Liquidation Preference Payments
shall be payable, shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or telex, not
less than 20 days prior to the payment date stated therein, to the holders of
record of Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation. For purposes hereof, the
Common Stock shall rank on liquidation junior to the Class A Convertible
Preferred Stock, the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock.
5. Registrations. At any time when shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D
Convertible Preferred Stock are outstanding, except where the vote or
written consent of the holders of a greater number of shares of the
Corporation is required by law or by the Certificate of Incorporation,
and in addition to any other vote required by law or the Certificate of
Incorporation, without the approval of the holders of at least a
majority of the then outstanding shares of the Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and the Class D
Convertible Preferred Stock, consenting or voting (as the case may be)
as separate classes, given in writing or by vote at a meeting, the
corporation will not:
a. 5A. Create or authorize the creation of
any additional class or series of shares of stock unless the same ranks junior
to the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and the Class D Convertible Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation,
redemption and the payment of dividends, or increase the authorized amount of
the Class B Convertible Preferred Stock, the Class C Convertible
<PAGE> 68
Preferred Stock or the Class D Convertible Preferred Stock or increase the
authorized amount of any additional class or series of shares of stock unless
the same ranks junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, or create or authorize any
obligation or security convertible into shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock or Class D Convertible Preferred
Stock or into shares of any other class or series of stock unless the same ranks
junior to the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise; provided, that such
consent shall not be unreasonably withheld for the creation or issuance of an
additional class or series of shares ranking senior to the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock and the Class D
Convertible Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, redemption and the payment of
dividends (a "Senior Security"), but provided further, that if, within a
reasonable time of the submission of a proposal for the issuance of a Senior
Security, information comes to light indicating that such consent was withheld
solely or primarily for the purpose of negotiating the price of an additional
investment by the holders of the Class B Convertible Preferred Stock, the Class
C Convertible Preferred Stock and/or the Class D Convertible Preferred Stock,
then such consent shall be deemed to have been unreasonably withheld for
purposes of this subparagraph 5A.
b. 5B. Consent to any liquidation,
dissolution or winding up of the Corporation or consolidate or merge
into or with any other entity or entities or sell, lease, abandon,
transfer or otherwise dispose of all or substantially all its assets,
unless such action would result in an annualized return to the holders
of the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock of at least
30%;
c. 5C. Amend, alter or repeal its
Certificate of Incorporation or By-Laws if the effect would be materially
detrimental or adverse in any manner with respect to the rights of the holders
of the Class B convertible Preferred Stock, the Class C Convertible Preferred
Stock and/or the Class D Convertible Preferred Stock;
d. 5D. Purchase or set aside any sums for
the purchase of, or pay any dividend or make any distribution on, any shares of
stock other than the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock, except
for (i) Class A Accruing Dividends, (ii) dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock, and (iii) the purchase of shares of Common Stock from former employees of
the Corporation who acquired such shares directly from the Corporation,
<PAGE> 69
if each such purchase is made pursuant to contractual rights held by the
Corporation relating to the termination of employment of such former employee
and the purchase price (except in the case of agreements executed prior to July
12, 1996) does not exceed the original issue price paid by such former employee
to the Corporation for such shares; or
e. 5E. Redeem or otherwise acquire any
shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock except as expressly authorized in
paragraph 7 hereof or pursuant to a purchase offer made pro rata to all holders
of the shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock on the basis of the
aggregate number of outstanding shares of Class B Convertible Preferred Stock,
Class C Convertible Preferred Stock and/or Class D Convertible Preferred Stock
then held by each such holder.
Prior to the completion of the sale of up to 2,045,785 shares of Class
D Convertible Preferred Stock as set forth in the Class D Convertible Preferred
Stock Purchase Agreement, dated as of September 11, 1997, as amended, if a vote
concerning any of the matters set forth in this Section 5 results in a tie and
the results of such vote would equally affect each of the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock and the Class D
Convertible Preferred Stock, the tie-breaking vote shall be cast by the Chief
Executive Officer of the Company. Upon the completion of such sale of the Class
D Convertible Preferred Stock, the provisions of this paragraph shall no longer
remain in effect.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
a. 6A. Right to Convert. Subject to the
terms and conditions of this paragraph 6, the holder of any share or shares of
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Preferred Stock into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Preferred Stock so to be converted by the Original Purchase Price of such share
(which shall be $0.32 in the case of the Class A convertible Preferred Stock,
$.76 in the case of Class B Convertible Preferred Stock, $1.44 in the case of
Class C Convertible Preferred Stock and $3.57 in the case of Class D Convertible
Preferred Stock) and (ii) dividing the result by the conversion price equal to
the Original Purchase Price of such share or, in case an adjustment of such
price has taken place pursuant to the further provisions of this paragraph 6,
then by the conversion price as last adjusted and in effect at the date any
share or shares of Preferred Stock are surrendered for conversion (such price,
or such price as last adjusted, being referred to as the "Conversion Price,"
with respect to the Class B Convertible Preferred Stock, the "Class B Conversion
Price," with respect to the Class C Convertible Preferred Stock, the "Class C
Conversion Price" and, with respect to the Class D Convertible Preferred Stock,
the "Class D Conversion Price"). Such rights of conversion shall be exercised by
the
<PAGE> 70
holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Preferred Stock into Common Stock and by surrender of
a certificate or certificates for the shares so to be converted to the
corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holders
of the Preferred Stock) at any time during its usual business hours on the date
set forth in such notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued.
b. 6B. Issuance of Certificates; Time
Conversion Effected. Promptly after the receipt of the written notice referred
to in subparagraph 6A and surrender of the certificate or certificates for the
share or shares of Preferred Stock to be converted, the Corporation shall issue
and deliver, or cause to be issued and delivered, to the holder, registered in
such name or names as such holder may direct, a certificate or certificates for
the number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected and the Conversion Price shall
be determined as of the close of business on the date on which such written
notice shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of Preferred
Stock shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby.
c. 6C. Fractional Shares; Dividends;
Partial Conversion. No fractional shares shall be issued upon conversion of
Preferred Stock into Common Stock and no payment or adjustment shall be made
upon any conversion on account of any cash dividends on the Common Stock issued
upon such conversion. At the time of each conversion, the Corporation shall pay
in cash an amount equal to all dividends, excluding Accruing Dividends, accrued
and unpaid on the shares of Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in
subparagraph 6B. In case the number of shares of Preferred Stock represented by
the certificate or certificates surrendered pursuant to subparagraph 6A exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Preferred Stock
represented by the certificate or certificates surrendered which are not to be
converted. If any fractional share of Common Stock would, except for the
provisions of the first sentence of this subparagraph 6C, be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional share, shall
pay to the holder surrendering the Preferred Stock for conversion an amount in
cash equal to the current market price of such fractional share as determined in
good faith by the Board of Directors of the Corporation.
<PAGE> 71
d. 6D. Adjustment of Price Upon Issuance of
Common Stock. Except as provided in subparagraph 6E, if and whenever the
Corporation shall issue or sell, or is, in accordance with subparagraphs 6D(1)
through 6D(7), deemed to have issued or sold, any shares or Common Stock for a
consideration per share less than (i) the Class B Conversion Price in effect
immediately prior to the time of such issue or sale, (ii) the Class C Conversion
Price in effect immediately prior to the time of such issue or sale, or (iii)
the Class D Conversion Price in effect immediately prior to the time of such
issue or sale, then, forthwith upon such issue or sale, the Class B Conversion
Price, the Class C Conversion Price and/or the Class D Conversion Price, as the
case may be, shall be reduced to the price determined by dividing (i) an amount
equal to the sum of (a) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the then existing Class B
Conversion Price, the then existing Class C Conversion Price or the then
existing Class D Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
i) 6D(1) Issuance of Rights or
Options. In case at any time the Corporation shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any warrants or other rights
to subscribe for or to purchase, or any options for the purchase of, Common
Stock or any stock or security convertible into or exchangeable for Common Stock
(such warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Class B Conversion Price, the Class C Conversion Price and/or the Class
D Conversion Price in effect immediately prior to the time of the granting of
such Options, then the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to have been for such price per share as of the date of
granting of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise provided in
subparagraph 6D(3), no adjustment of the Class B Conversion Price, the Class C
<PAGE> 72
Conversion Price and/or the Class D Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
ii) 6D(2) Issuance of Convertible
Securities. In case the Corporation shall in any manner issue (whether directly
or by assumption in a merger or otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert any such Convertible Securities
are immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (i) the total
amount received or receivable by the Corporation as consideration for which the
issue or sale of such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that (a)
except as otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Class B Conversion
Price and/or the Class C Conversion Price and/or the Class D Conversion Price
have been or are to be made pursuant to other provisions of this subparagraph
6D, no further adjustment of the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price shall be made by reason of
such issue or sale.
iii) 6D(3) Change in Option Price or
Conversion Rate. Upon the happening of any of the following events, namely, if
the purchase price provided for in any Option referred to in subparagraph 6D(1),
the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the
rate at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2)
are convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price in effect at the time of
such event shall forthwith be readjusted to the Class B Conversion Price, Class
C Conversion Price or the Class D Conversion Price, as the case may be, which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or
<PAGE> 73
conversion rate, as the case may be, at the time initially granted, issued or
sold, but only if as a result of such adjustment the Class B Conversion Price,
the Class C Conversion Price and/or the Class D Conversion Price then in effect
hereunder is thereby reduced; and on the termination or expiration of any such
Option or any such right to convert or exchange such Convertible Securities, the
Class B Conversion Price, the Class C Conversion Price and/or the Class D
Conversion Price then in effect hereunder shall forthwith be increased to the
Class B Conversion Price, Class C Conversion Price or Class D Conversion Price,
as the case may be, which would have been in effect at the time of such
termination or expiration had such Option or Convertible Securities, to the
extent outstanding immediately prior to such termination or expiration, never
been issued.
iv) 6D(4) Stock Dividends. In case
the Corporation shall declare a dividend or make any other distribution upon any
stock of the Corporation (other than the Common Stock) payable in Common Stock,
Options or Convertible Securities, then any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
v) 6D(5) Consideration of Stock. In
case any shares of Common Stock, Options or Convertible Securities shall be
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor, without deduction therefrom
of any expenses incurred or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In case any shares of Common
Stock Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Corporation shall be deemed to be the fair value of such
consideration as determined in good faith by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Corporation.
vi) 6D(6) Record Date. In case the
Corporation shall take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
<PAGE> 74
vii) 6D(7) Treasury Shares. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation, and the disposition of
any such shares shall be considered an issue or sale or Common Stock for the
purpose of this subparagraph 6D.
e. 6E. Certain Issues of Common Stock
Excepted. Anything herein to the contrary notwithstanding, the Corporation shall
not be required to make any adjustment of the Class B Conversion Price, the
Class C Conversion Price or the Class D Conversion Price in the case of the
issuance from and after the date of filing of these terms of the Preferred Stock
of up to an aggregate of 1,950,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G) (the "Reserved
Shares") of Common Stock to directors, officers, employees or consultants of the
Corporation in connection with their service as directors of the Corporation,
their employment by the Corporation or their retention as consultants by the
Corporation (provided that the numbers of Reserved Shares may be increased (a)
prior to December 31, 1998, with the approval of a majority of the Board of
Directors including the Class B Director, the Class C Director, the Class D
Director and the Other Class D Director and (b) after December 31, 1998, with
the approval of either (i) a majority of the Board of Directors including the
Class B Director, the Class C Director, the Class D Director and the Other Class
D Director or (ii) all directors other than the Class B Director, the Class C
Director, the Class D Director and the Other Class D Director), plus such number
of shares of Common Stock which are repurchased by the Corporation from such
persons after such date pursuant to contractual rights held by the Corporation
and at repurchase prices not exceeding the respective original purchase price
paid by such persons to the Corporation therefor.
f. 6F. Subdivision or Combination of Common
Stock. In case the corporation shall at any time subdivide (by any stock split,
stock dividend or otherwise) its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased. In the case of any such subdivision, no
further adjustment shall be made pursuant to subparagraph 6D by reason thereof.
g. 6G. Reorganization or Reclassification.
If any capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of common Stock immediately theretofore receivable upon
the conversion of such share or shares of Preferred Stock, such shares of stock,
securities or assets as
<PAGE> 75
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversions Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
h. 6H. Notice of Adjustment. Upon any
adjustment of the Conversion Price, then and in each such case the Corporation
shall give written notice thereof, by delivery in person, certified or
registered mail, return receipt requested, telecopier or telex, addressed to
each holder of shares or Preferred Stock at the address of such holder as shown
on the books of the Corporation, which notice shall state the Conversion Price
resulting from such adjustment, setting forth in reasonable detail the method
upon which such calculation is based.
i. 6I. Other Notices. In case at any time:
(1) the Corporation shall
declare any dividend upon its Common Stock payable in cash or stock or make any
other distribution to the holders of its Common Stock;
(2) the Corporation shall offer
for subscription pro rata to the holders of its Common Stock any additional
shares for stock of any class or other rights;
(3) there shall be any equal
reorganization or reclassification of the capital stock of the Corporation, or a
consideration or merger of the Corporation with or into another equity or
entities; or a sale, lease, abandonment, transfer or other disposition of all or
substantially all its assets; or
(4) there shall be a voluntary
or involuntary dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder or any shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, (a) at least 20 days'
prior written notice of the date on which the books of the Corporation shall
close or record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding
<PAGE> 76
up, at least 20 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto and such
notice in accordance with the foregoing clause (b) shall also specify the date
on which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up, as the case may be.
J. 6J. Stock to be Reserved. The
Corporation will at all times reserve and keep available out of its authorized
Common Stock, solely for the purpose of issuance upon the conversion of
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of
Preferred Stock. The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed. The Corporation will not take any
action which results in any adjustment of the Conversion Price if the total
number of shares of Common Stock issued and issuable after such action upon
conversion of the Preferred Stock would exceed the total number of shares of
Common Stock then authorized by the Certificate of Incorporation.
K. 6K. Non Reissuance of Preferred Stock.
Shares of Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
L. 6L. Issue Tax. The issuance of
certificates for shares of Common Stock upon conversion of Preferred Stock shall
be made without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Preferred Stock which is being converted.
M. 6M. Closing of Books. The Corporation
will at no time close its transfer books against the transfer of any Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion of
any shares of Preferred Stock in any manner which interferes with the timely
conversion of such Preferred Stock, except as may otherwise be required to
comply with applicable securities laws.
<PAGE> 77
N. 6N. Definition of Common Stock. As used
in this paragraph 6, the term Common Stock" shall mean and include the
Corporation's authorized Common Stock, par value $.001 per share, as constituted
on the date of filing of these terms of the Preferred Stock, and shall also
include any capital stock of any class of the Corporation thereafter authorized
which shall not be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends or in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Preferred Stock shall include only shares designated as
Common Stock of the Corporation on the date of filing of this instrument, or in
case of any reorganization of reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in subparagraph 6G.
O. 6O. Mandatory Conversion. If at any
time (i) the Corporation shall effect a firm commitment underwritten public
offering of shares of Common Stock in which (A) the aggregate price paid for
such shares by the public shall be at least $15,000,000 and (B) the price paid
by the public for such shares shall be at least $4.32 per share (appropriately
adjusted to reflect the occurrence of any event described in subparagraph 6F),
or (ii) a Liquidity Event shall occur in which (a) the holders of shares of any
class of Preferred Stock would receive consideration for all of such shares (as
if converted to Common Stock) of at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class A Convertible Preferred Stock is convertible; at least $3.04 for
(i) each share of Class B Convertible Preferred Stock is convertible; at least
$5.76 for (i) each share of Class C Convertible Preferred Stock or (ii) all
shares of Common Stock into which such share of Class C Convertible Preferred
Stock is convertible; or at least $6.03 per share for (i) each share of Class D
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class D Convertible Preferred Stock is convertible, then effective upon
the closing of the sale of such shares by the Corporation pursuant to such
public offering or immediately prior to the occurrence of such Liquidity Event,
as the case may be, all outstanding shares of Preferred Stock (in the case of a
public offering) or such class of Preferred Stock (in the case of a Liquidity
Event) shall automatically convert to shares of Common Stock on the basis set
forth in this paragraph 6. Holders of shares of Preferred Stock so converted may
deliver to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to such holders) during its usual business hours, the certificate or
certificates for the shares so converted. As promptly as practicable thereafter,
the Corporation shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to which such holder
is entitled, together with any cash dividends and payment in lieu of fractional
shares to which such holder may be entitled pursuant to subparagraph 6C. Until
such time as a holder of shares of Preferred Stock shall surrender his or its
certificates therefor as provided above, such certificates shall be deemed to
represent the shares of Common Stock to which such holder shall be entitled upon
the surrender thereof.
<PAGE> 78
VII. Redemption. The shares of Class B Convertible Preferred Stock, the
Class C Convertible Preferred Stock and the Class D Convertible
Preferred Stock shall be redeemed as follows:
A. 7A. Mandatory Redemption. On September
11, 2002, and on each of the next two anniversaries thereafter (the "Redemption
Dates," and each a "Redemption Date"), the Corporation shall redeem any
outstanding shares of Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock
according to the percentages listed below:
Date of Redemption Percentage of Shares of Class B Convertible Preferred
Stock, Class C Conver tible Preferred Stock and
Class D Conver tible Preferr ed Stock then Outsta
nding to be Redeemed
September 11, 2002 33-1/3% of all the shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock
outstanding on September 11, 2002.
September 11, 2003 50% of all the shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock
outstanding on September 11, 2003
September 11, 2004 100% of all the shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock
outstanding on September 11, 2004
B. 7B. Redemption Price and Payment. The
shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock to be redeemed on any Redemption
Date shall be redeemed by paying for each share in cash an amount equal to
$0.76, $1.44 and $3.57 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G), respectively,
plus, in the case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but upon thereon, computed to such Redemption Date,
such amount being referred to as the "Redemption Price." Such payment shall be
made in full on the applicable Redemption Date to the holders entitled thereto.
C. 7C. Redemption Mechanics. At least 20
but not more than 30 days prior to each Redemption Date, written notice (the
"Redemption Notice") shall be given by the Corporation by delivery in person,
certified or registered mail, return receipt requested, telecopier or telex, to
each holder of record (at the close of business on the business day next
preceding the day on which the Redemption Notice is given)
<PAGE> 79
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock notifying such holder of the
redemption and specifying the Redemption Price, such Redemption Date, the number
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and/or Class D Convertible Preferred Stock to be redeemed from such holder
(computed on a pro rata basis in accordance with the number of such shares held
by all holders thereof) and the place where said Redemption Price shall be
payable. The Redemption Notice shall be addressed to each holder at his address
as shown by the records of the Corporation. From and after the close of business
on a Redemption Date, unless there shall have been a default in the payment of
the Redemption Price, all rights of holder of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock (except the right to receive the Redemption Price) shall cease
with respect to the shares to be redeemed on such Redemption Date, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock on a Redemption Date are insufficient to redeem the total number
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock to be redeemed on such Redemption
Date, the holders of such shares shall share ratably in any funds legally
available for redemption of such shares according to the respective amounts
which would be payable to them if the full number of shares to be redeemed on
such Redemption Date were actually redeemed. The shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock required to be redeemed but not so redeemed shall remain
outstanding and entitled to all rights and preferences provided herein. At any
time thereafter when additional funds of the Corporation are legally available
for the redemption of such shares of Class B Convertible Preferred Stock, Class
C Convertible Preferred Stock and Class D Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available, on the basis set forth above.
D. 7D. Redeemed or Otherwise Acquired
Shares to be Retired. Any shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock redeemed
pursuant to this paragraph 7 or otherwise acquired by the Corporation in any
manner whatsoever shall be canceled and shall not under any circumstances be
reissued; and the Corporation may from time to time take such appropriate
corporate action as may be necessary to reduce accordingly the number of
authorized shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock.
E. 7E. Delay of Redemption.
Notwithstanding paragraph 7A hereof, the Corporation shall not be required to
redeem any shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock on any Redemption Date
if the cost to the Corporation of such redemption would be greater than one-half
of the Corporation's available average
<PAGE> 80
cash working capital balance for the quarter immediately preceding such
Redemption Date. If a redemption is delayed pursuant to this Paragraph 7E, the
Corporation shall redeem the shares to be so redeemed within 120 days of such
Redemption Date.
VIII. Amendments. No provision of these terms of the Preferred Stock may be
amended, modified or waived without the written consent or affirmative
vote of the holders of at least two-thirds of the then outstanding
shares of Class D Convertible Preferred Stock and Class C Convertible
Preferred Stock and at least a majority of the then outstanding shares
of Class D Convertible Preferred Stock; provided, however, that so long
as TTC Ventures holds at least two percent (2%) of the outstanding
shares of Common Stock of the Corporation (assuming the conversion of
all outstanding Preferred Stock), no amendment shall be made to the
provisions of Section 2C relating to the representation of the holders
of Class D Convertible Preferred Stock without the consent of TTC
Ventures and that so long as ADP holds at least two percent (2%) of the
outstanding shares of Common Stock of the Corporation (assuming
the conversion of all outstanding Preferred Stock), no amendment shall
be made to the provisions of the sixth sentence of Section 2C relating
to the representation of the holders of Class D Convertible Preferred
Stock without the consent of ADP.
<PAGE> 81
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
ADOPTED PURSUANT TO THE PROVISIONS OF SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
NetStart, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company")
does hereby certify:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Company is hereby amended to read as follows:
FOURTH. The aggregate number of shares which the Corporation
shall have authority to issue is 24,948,594 shares consisting
of five classes of stock: 16,000,000 shares of Common Stock
($.001 par value per share); 1,562,500 shares of Class A
Convertible Preferred Stock ($.001 par value per share);
2,151,420 shares of Class B Convertible Preferred Stock ($.001
par value per share); 3,188,889 shares of Class C Convertible
Preferred Stock ($.001 par value per share) and 2,045,785
shares of Class D Convertible Preferred Stock ($.001 par value
per share). Except as otherwise provided by law or as set
forth in this Amendment, each of the outstanding shares shall
have one vote for the purpose of electing directors and for
all other purposes, including but not limited to an equal
participation in any dividends, or other distribution by the
Company. All other relative rights, preferences and
limitations of the shares of each class of stock are set forth
in Exhibit A attached hereto and incorporated herein by this
reference.
SECOND: That all stockholders of the Company entitled to vote on the
matters contained in such amendment have duly adopted such amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
<PAGE> 82
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to be executed by a duly authorized officer this 8th day of September,
1997.
NETSTART, INC.
By: /s/ Robert J. McGovern
-----------------------------------
Name: Robert J. McGovern
Title: President
Attest:
/s/ Thomas J. Young
------------------------------
Name: Thomas J. Young
Title: Assistant Secretary
<PAGE> 83
TERMS OF PREFERRED STOCK
I. Number of Shares. There shall be four classes
of Preferred Stock. The Class A Convertible Preferred Stock shall consist of
1,562,500 shares, the Class B Convertible Preferred Stock shall consist of
2,151,420 shares, the Class C Convertible Preferred Stock shall consist of
3,188,889 shares and the Class D Convertible Preferred Stock shall consist of
2,045,785 shares. The Class A Convertible Preferred Stock, the Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock and the
Class D Convertible Preferred Stock shall sometimes be referred to herein
collectively as the "Preferred Stock."
II. Voting.
A. 2A. General. Except as may be
otherwise provided in these terms of the Preferred Stock or by law, the
Preferred Stock shall vote together with all other classes and class of stock of
the Corporation as a single class on all actions to be taken by the stockholders
of the Corporation, including, but not limited to actions amending the
Certificate of Incorporation of the Corporation to increase the number of
authorized shares of Common Stock. Each share of Preferred Stock shall entitle
the holder thereof to such number of votes per share on each such action as
shall equal the number of shares of Common Stock (including fractions of a
share) into which each share of Preferred Stock is then convertible.
B. 2B. Board Size. The
Corporation shall not, without the written consent or affirmative vote of the
holders of at least two-thirds of the then outstanding shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock and Class D
Convertible Preferred Stock consenting or voting (as the case may be) as a
single class, given in writing or by vote at a meeting, increase the maximum
number of directors constituting the Board of Directors to a number in excess of
seven.
C. 2C. Board Seats. So long as
the outstanding Class A Convertible Preferred Stock represents at least 10% of
the outstanding Common Stock of the Corporation (assuming the conversion of all
outstanding Preferred Stock), the holders of the Class A Convertible Preferred
Stock, acting as a separate class, shall be entitled to elect one director of
the Corporation. So long as the outstanding Class B Convertible Preferred Stock
represents at least 5% of the outstanding Common Stock of the Corporation
(assuming the conversion of all outstanding Preferred Stock), the holders of the
Class B Convertible Preferred Stock, acting as a separate class, shall be
entitled to elect one director of the Corporation (the "Class B Director"). So
long as the outstanding Class C Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class C Convertible
Preferred Stock, acting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class C Director"). The holders
<PAGE> 84
of the Common Stock, acting as a separate class, shall be entitled to elect two
directors of the Corporation. So long as Thomson U.S. Inc. ("TTC Ventures")
owns, beneficially or of record, at least two percent (2%) of the outstanding
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), the holders of the Class D Convertible Preferred Stock (as
adjusted in accordance with subparagraph 6F or 6G), acting as a separate class,
shall be entitled to appoint one director of the Corporation (the "Class D
Director") and such Class D Director shall be nominated and appointed by TTC
Ventures on behalf of the holders of Class D Convertible Preferred Stock. A
seventh director of the Corporation shall be such person, if any, who has
received a majority vote of the holders of each of the Class B Convertible
Preferred Stock, the Class C Convertible Preferred Stock and the Class D
Convertible Preferred Stock, each acting as a separate class, and a majority
vote of the holders of the Common Stock, acting as a separate class. At any
meeting (or in a written consent in lieu thereof) held for the purpose of
electing directors, the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Class D Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class D Convertible
Preferred Stock for the election of the director to be elected solely by the
holders of the Class D Convertible Preferred Stock, the presence in person or by
proxy (or the written consent) of the holders of a majority of the shares of
Class C Convertible Preferred Stock then outstanding shall constitute a quorum
of the Class C Convertible Preferred Stock for the election of the director to
be elected solely by the holders of the Class C Convertible Preferred Stock, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class B Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class B Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class B
Convertible Preferred Stock, and the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of Class A
Convertible Preferred Stock then outstanding shall constitute a quorum of the
Class A Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class A Convertible Preferred Stock. A
vacancy in any directorship elected by the holders of the Class A Convertible
Preferred Stock, Class B Convertible Preferred Stock or Class C Convertible
Preferred Stock shall be filled only by vote or written consent of the holders
of the Class A Convertible Preferred Stock, Class B Convertible Preferred Stock
or Class C Convertible Preferred Stock respectively; a vacancy in the
directorship allocated to the holders of Class D Convertible Preferred Stock
shall be filled only by the appointment by or written consent of TTC Ventures;
and a vacancy in any directorship elected by the holders of the Common Stock
shall be filled only by vote or written consent of the holders of the Common
Stock.
III. Dividends. The holders of the Class A
Convertible Preferred Stock shall be entitled to receive, out of funds legally
available therefor, (i) when and if declared by at least four members of the
Board of Directors, or (ii) upon any liquidation, dissolution or winding up of
the Corporation, quarterly dividends at the rate per annum of $0.0224 per share
(the "Class A Accruing Dividends"). The holders of the Class B Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, (i) when and if declared by at least four members of the Board of
Directors, or
<PAGE> 85
(ii) upon any liquidation, dissolution or winding up of the Corporation,
quarterly dividends at the rate per annum of $0.0532 per share (the "Class B
Accruing Dividends"). The holders of the Class C Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor, (i) when
and if declared by at least four members of the Board of Directors, or (ii) upon
any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.1008 per share (the "Class C Accruing
Dividends"). The holders of the Class D Convertible Preferred Stock shall be
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.2499 per share (the "Class D Accruing Dividends").
The Class A Accruing Dividends, the Class B Accruing Dividends, and the Class C
Accruing Dividends and the Class D Accruing Dividends are sometimes referred to
herein collectively as the "Accruing Dividends." Accruing Dividends shall accrue
from day to day, whether or not earned or declared, and shall be cumulative. No
dividend shall be paid on the Preferred Stock, other than Accruing Dividends, or
on the Common Stock.
IV. Liquidation.
A. 4A. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock shall first
be entitled, before any distribution or payment is made upon any stock ranking
on liquidation junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock, to be
paid an amount equal to $0.76, $1.44 and $3.57 per share, respectively, plus, in
the case of each share of Class B Convertible Preferred Stock, an amount equal
to all Class B Accruing Dividends unpaid thereon (whether or not declared) and
any other dividends declared but unpaid thereon, in the case of each share of
Class C Convertible Preferred Stock, an amount equal to all Class C Accruing
Dividends unpaid thereon (whether or not declared) and in the case of each share
of Class D Convertible Preferred Stock, an amount equal to all Class D Accruing
Dividends paid thereon (whether or not declared), and any other dividends
declared but unpaid thereon, computed to the date payment thereof is made
available, such amount payable with respect to one share of Class B Convertible
Preferred Stock being sometimes referred to as the "Class B Liquidation
Preference Payment," such amount payable with respect to one share of Class C
Convertible Preferred Stock being sometimes referred to as the "Class C
Liquidation Preference Payment," such amount payable with respect to one share
of Class D Convertible Preferred Stock being sometimes referred to as the "Class
D Liquidation Preference Payment", and with respect to all shares of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock and Class D
Convertible Preferred Stock being sometimes referred to as the "Classes B, C and
D Liquidation Preference Payments." If upon such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock shall be
insufficient to permit payment in full to the holders
<PAGE> 86
of Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and
Class D Convertible Preferred Stock of the Classes B, C and D Liquidation
Preference Payments, then the entire assets of the Corporation to be so
distributed shall be distributed ratably, on an as-converted basis, among the
holders of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock.
B. 4B. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after the holders of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock shall have been paid in
full the amounts to which they shall be entitled pursuant to paragraph 4A, the
holders of the shares of Class A Convertible Preferred Stock shall then be
entitled, before any distribution or payment is made upon any stock ranking on
liquidation junior to the Class A Convertible Preferred Stock, to be paid an
amount equal to $.32 per share plus, in the case of each share, an amount equal
to all Class A Accruing Dividends unpaid thereon (whether or not declared)
computed to the date payment thereof is made available, such amount payable with
respect to one share of Class A Convertible Preferred Stock being sometimes
referred to as the "Class A Liquidation Preference Payment" and with respect to
all shares of Class A Convertible Preferred Stock being sometimes referred to as
the "Class A Liquidation Preference Payments." The Class A Liquidation
Preference Payments and the Classes B, C and D Liquidation Preference Payments
are sometimes referred to herein collectively as the "Liquidation Preference
Payments." If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Class A Convertible Preferred Stock shall be insufficient
to permit payment in full to the holders of Class A Convertible Preferred Stock
of the Class A Liquidation Preference Payments, then the entire remaining assets
of the Corporation to be so distributed shall be distributed ratably among the
holders of Class A Convertible Preferred Stock.
C. 4C. Upon any such liquidation,
dissolution or winding up of the Corporation, immediately after the holders of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock, Class
D Convertible Preferred Stock and Class A Convertible Preferred Stock shall have
been paid in full their respective Liquidation Preference Payments, the
remaining net assets of the Corporation available for distribution shall be
distributed ratably among the holders of Preferred Stock and Common Stock (with
each share of Preferred Stock being deemed, for such purpose, to be equal to the
number of shares of Common Stock (including fractions of a share) into which
such share of Preferred Stock is convertible immediately prior to the close of
business on the business day fixed for such distribution). Unless otherwise
agreed by holders of at least two-thirds of the Class B Convertible Preferred
Stock and the Class C Convertible Preferred Stock, each acting as a separate
class, and a majority of the Class D Convertible Preferred Stock, acting as a
separate class, the consolidation or merger of the Corporation into or with any
other entity or entities which results in the exchange of outstanding shares of
the Corporation for securities or other consideration issued or paid or caused
to be issued or paid by any such entity or affiliate thereof (other than a
merger to reincorporate the Corporation in a different jurisdiction), and the
sale, lease,
<PAGE> 87
abandonment, transfer or other disposition by the Corporation of all or
substantially all its assets (each such event a "Liquidity Event"), shall be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of the provisions of this paragraph 4.
D. 4D. Written notice of such
liquidation, dissolution or winding up, stating a payment date, the amount of
the Liquidation Preference Payments and the place where said Liquidation
Preference Payments shall be payable, shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, not less than 20 days prior to the payment date stated therein, to the
holders of record of Preferred Stock, such notice to be addressed to each such
holder at its address as shown by the records of the Corporation. For purposes
hereof, the Common Stock shall rank on liquidation junior to the Class A
Convertible Preferred Stock, the Class B Convertible Preferred Stock, the Class
C Convertible Preferred Stock and the Class D Convertible Preferred Stock.
V. Restrictions. At any time when shares of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and
Class D Convertible Preferred Stock are outstanding, except where the vote or
written consent of the holders of a greater number of shares of the Corporation
is required by law or by the Certificate of Incorporation, and in addition to
any other vote required by law or the Certificate of Incorporation, without the
approval of the holders of at least a majority of the then outstanding shares of
the Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and
the Class D Convertible Preferred Stock, consenting or voting (as the case may
be) as separate classes, given in writing or by vote at a meeting, the
Corporation will not:
A. 5A. Create or authorize the
creation of any additional class or series of shares of stock unless the same
ranks junior to the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, or increase the authorized
amount of the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock or the Class D Convertible Preferred Stock or increase the
authorized amount of any additional class or series of shares of stock unless
the same ranks junior to the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, or create or authorize any
obligation or security convertible into shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock or Class D Convertible Preferred
Stock or into shares of any other class or series of stock unless the same ranks
junior to the Class B Convertible Preferred Stock, the Class C Convertible
Preferred Stock and the Class D Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends, whether any such creation,
authorization or increase shall be
<PAGE> 88
by means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise; provided, that such consent shall not be
unreasonably withheld for the creation or issuance of an additional class or
series of shares ranking senior to the Class B Convertible Preferred Stock, the
Class C Convertible Preferred Stock and the Class D Convertible Preferred Stock
as to the distribution of assets on the liquidation, dissolution or winding up
of the Corporation, redemption and the payment of dividends (a "Senior
Security"), but provided further, that if, within a reasonable time of the
submission of a proposal for the issuance of a Senior Security, information
comes to light indicating that such consent was withheld solely or primarily for
the purpose of negotiating the price of an additional investment by the holders
of the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and/or the Class D Convertible Preferred Stock, then such consent shall be
deemed to have been unreasonably withheld for purposes of this subparagraph 5A.
B. 5B. Consent to any liquidation,
dissolution or winding up of the Corporation or consolidate or merge into or
with any other entity or entities or sell, lease, abandon, transfer or otherwise
dispose of all or substantially all its assets, unless such action would result
in an annualized return to the holders of the Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock and the Class D Convertible
Preferred Stock of at least 30%;
C. 5C. Amend, alter or repeal its
Certificate of Incorporation or By-Laws if the effect would be materially
detrimental or adverse in any manner with respect to the rights of the holders
of the Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and/or the Class D Convertible Preferred Stock;
D. 5D. Purchase or set aside any
sums for the purchase of, or pay any dividend or make any distribution on, any
shares of stock other than the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock, except
for (i) Class A Accruing Dividends, (ii) dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock, and (iii) the purchase of shares of Common Stock from former employees of
the Corporation who acquired such shares directly from the Corporation, if each
such purchase is made pursuant to contractual rights held by the Corporation
relating to the termination of employment of such former employee and the
purchase price (except in the case of agreements executed prior to July 12,
1996) does not exceed the original issue price paid by such former employee to
the Corporation for such shares; or
E. 5E. Redeem or otherwise acquire
any shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock except as expressly authorized in
paragraph 7 hereof or pursuant to a purchase offer made pro rata to all holders
of the shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D
<PAGE> 89
Convertible Preferred Stock on the basis of the aggregate number of outstanding
shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and/or Class D Convertible Preferred Stock then held by each such holder.
Prior to the completion of the sale of up to 2,045,785 shares of Class
D Convertible Preferred Stock as set forth in the Class D Convertible Preferred
Stock Purchase Agreement, dated as of September 11, 1997, if a vote concerning
any of the matters set forth in this Section 5 results in a tie and the results
of such vote would equally affect each of the Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock and the Class D Convertible
Preferred Stock, the tie- breaking vote shall be cast by the Chief Executive
Officer of the Company. Upon the completion of such sale of the Class D
Convertible Preferred Stock, the provisions of this paragraph shall no longer
remain in effect.
VI. Conversions. The holders of shares of
Preferred Stock shall have the following conversion rights:
A. 6A. Right to Convert. Subject
to the terms and conditions of this paragraph 6, the holder of any share or
shares of Preferred Stock shall have the right, at its option at any time, to
convert any such shares of Preferred Stock into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Preferred Stock so to be converted by the Original Purchase
Price of such share (which shall be $0.32 in the case of the Class A Convertible
Preferred Stock, $.76 in the case of Class B Convertible Preferred Stock, $1.44
in the case of Class C Convertible Preferred Stock and $3.57 in the case of
Class D Convertible Preferred Stock) and (ii) dividing the result by the
conversion price of the Original Purchase Price of such share or, in case an
adjustment of such price has taken place pursuant to the further provisions of
this paragraph 6, then by the conversion price as last adjusted and in effect at
the date any share or shares of Preferred Stock are surrendered for conversion
(such price, or such price as last adjusted, being referred to as the
"Conversion Price," with respect to the Class B Convertible Preferred Stock, the
"Class B Conversion Price," with respect to the Class C Convertible Preferred
Stock, the "Class C Conversion Price" and, with respect to the Class D
Convertible Preferred Stock, the "Class D Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written notice
that the holder elects to convert a stated number of shares of Preferred Stock
into Common Stock and by surrender of a certificate or certificates for the
shares so to be converted to the Corporation at its principal office (or such
other office or agency of the Corporation as the Corporation may designate by
notice in writing to the holders of the Preferred Stock) at any time during its
usual business hours on the date set forth in such notice, together with
a statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued.
B. 6B. Issuance of Certificates;
Time Conversion Effected. Promptly after the receipt of the written notice
referred to in subparagraph 6A
<PAGE> 90
and surrender of the certificate or certificates for the share or shares of
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of such share or
shares of Preferred Stock. To the extent permitted by law, such conversion shall
be deemed to have been effected and the Conversion Price shall be determined as
of the close of business on the date on which such written notice shall have
been received by the Corporation and the certificate or certificates for such
share or shares shall have been surrendered as aforesaid, and at such time the
rights of the holder of such share or shares of Preferred Stock shall cease, and
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares represented thereby.
C. 6C. Fractional Shares;
Dividends; Partial Conversion. No fractional shares shall be issued upon
conversion of Preferred Stock into Common Stock and no payment or adjustment
shall be made upon any conversion on account of any cash dividends on the Common
Stock issued upon such conversion. At the time of each conversion, the
Corporation shall pay in cash an amount equal to all dividends, excluding
Accruing Dividends, accrued and unpaid on the shares of Preferred Stock
surrendered for conversion to the date upon which such conversion is deemed to
take place as provided in subparagraph 6B. In case the number of shares of
Preferred Stock represented by the certificate or certificates surrendered
pursuant to subparagraph 6A exceeds the number of shares converted, the
Corporation shall, upon such conversion, execute and deliver to the holder, at
the expense of the Corporation, a new certificate or certificates for the number
of shares of Preferred Stock represented by the certificate or certificates
surrendered which are not to be converted. If any fractional share of Common
Stock would, except for the provisions of the first sentence of this
subparagraph 6C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Preferred Stock for conversion an amount in cash equal to the current market
price of such fractional share as determined in good faith by the Board of
Directors of the Corporation.
D. 6D. Adjustment of Price Upon
Issuance of Common Stock. Except as provided in subparagraph 6E, if and whenever
the Corporation shall issue or sell, or is, in accordance with subparagraphs
6D(1) through 6D(7), deemed to have issued or sold, any shares of Common Stock
for a consideration per share less than (i) the Class B Conversion Price in
effect immediately prior to the time of such issue or sale, (ii) the Class C
Conversion Price in effect immediately prior to the time of such issue or sale,
or (iii) the Class D Conversion Price in effect immediately prior to the time of
such issue or sale, then, forthwith upon such issue or sale, the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price, as the case may be, shall be reduced to the price determined by dividing
(i) an amount equal to the sum of (a) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the then
existing Class B Conversion Price, the then existing Class C Conversion Price or
the then existing Class D Conversion Price, as the
<PAGE> 91
case may be, and (b) the consideration, if any, received by the Corporation upon
such issue or sale, by (ii) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
1. 6D(1) Issuance of Rights
or Options. In case at any time the Corporation shall in any manner grant
(whether directly or by assumption in a merger or otherwise) any warrants or
other rights to subscribe for or to purchase, or any options for the purchase
of, Common Stock or any stock or security convertible into or exchangeable for
Common Stock (such warrants, rights or options being called "Options" and such
convertible or exchangeable stock or securities being called "Convertible
Securities") whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon the exercise
of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price in effect immediately prior to the time of the granting of such Options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of the date of
granting of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise provided in
subparagraph 6D(3), no adjustment of the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
2. 6D(2) Issuance of
Convertible Securities. In case the Corporation shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon such conversion or exchange (determined
by dividing (i) the total amount received or receivable by the
<PAGE> 92
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that (a)
except as otherwise provided in subparagraph 6D(3), no adjustment of the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Convertible Securities and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Class B Conversion
Price and/or the Class C Conversion Price and/or the Class D Conversion Price
have been or are to be made pursuant to other provisions of this subparagraph
6D, no further adjustment of the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price shall be made by reason of
such issue or sale.
3. 6D(3) Change in Option
Price or Conversion Rate. Upon the happening of any of the following events,
namely, if the purchase price provided for in any Option referred to in
subparagraph 6D(1), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2), or the rate at which Convertible Securities referred to in
subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for Common
Stock shall change at any time (including, but not limited to, changes under or
by reason of provisions designed to protect against dilution), the Class B
Conversion Price, the Class C Conversion Price and/or the Class D Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Class B Conversion Price, Class C Conversion Price or the Class D Conversion
Price, as the case may be, which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold, but only if as a result of such
adjustment the Class B Conversion Price, the Class C Conversion Price and/or the
Class D Conversion Price then in effect hereunder is thereby reduced; and on the
termination or expiration of any such Option or any such right to convert or
exchange such Convertible Securities, the Class B Conversion Price, the Class C
Conversion Price and/or the Class D Conversion Price then in effect hereunder
shall forthwith be increased to the Class B Conversion Price, Class C Conversion
Price or Class D Conversion Price, as the case may be, which would have
been in effect at the time of such termination or expiration had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
termination or expiration, never been issued.
<PAGE> 93
4. 6D(4) Stock Dividends.
In case the Corporation shall declare a dividend or make any other distribution
upon any stock of the Corporation (other than the Common Stock) payable in
Common Stock, Options or Convertible Securities, then any Common Stock, Options
or Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.
5. 6D(5) Consideration for
Stock. In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any shares of Common Stock, Options or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by the Corporation shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Corporation.
6. 6D(6) Record Date. In
case the Corporation shall take a record of the holders of its Common Stock for
the purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
7. 6D(7) Treasury Shares.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Corporation, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock for the purpose of this subparagraph 6D.
E. 6E. Certain Issues of Common
Stock Excepted. Anything herein to the contrary notwithstanding, the Corporation
shall not be required to make any adjustment of the Class B Conversion Price,
the Class C Conversion Price or the Class D Conversion Price in the case of the
issuance from and after the date of filing of these terms of the Preferred Stock
of up to an aggregate of 1,950,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G) (the "Reserved
Shares") of Common Stock to directors, officers,
<PAGE> 94
employees or consultants of the Corporation in connection with their service as
directors of the Corporation, their employment by the Corporation or their
retention as consultants by the Corporation (provided that the number of
Reserved Shares may be increased (a) prior to December 31, 1998, with the
approval of a majority of the Board of Directors including the Class B Director,
the Class C Director and the Class D Director and (b) after December 31, 1998,
with the approval of either (i) a majority of the Board of Directors including
the Class B Director, the Class C Director and the Class D Director or (ii) all
directors other than the Class B Director, the Class C Director and the Class D
Director), plus such number of shares of Common Stock which are repurchased by
the Corporation from such persons after such date pursuant to contractual rights
held by the Corporation and at repurchase prices not exceeding the respective
original purchase prices paid by such persons to the Corporation therefor.
F. 6F. Subdivision or Combination
of Common Stock. In case the Corporation shall at any time subdivide (by any
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased. In the case of any such
subdivision, no further adjustment shall be made pursuant to subparagraph 6D by
reason thereof.
G. 6G. Reorganization or
Reclassification. If any capital reorganization or reclassification of the
capital stock of the Corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization or reclassification, lawful and adequate provisions shall be made
whereby each holder of a share or shares of Preferred Stock shall thereupon have
the right to receive, upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore
receivable upon the conversion of such share or shares of Preferred Stock, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore receivable
upon such conversion had such reorganization or reclassification not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of such holder to the end that the provisions hereof
(including without limitation provisions for adjustments of the Conversion
Price) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
of such conversion rights.
H. 6H. Notice of Adjustment. Upon
any adjustment of the Conversion Price, then and in each such case the
Corporation shall give written notice thereof, by delivery in person, certified
or registered mail, return receipt
<PAGE> 95
requested, telecopier or telex, addressed to each holder of shares of Preferred
Stock at the address of such holder as shown on the books of the Corporation,
which notice shall state the Conversion Price resulting from such adjustment,
setting forth in reasonable detail the method upon which such calculation is
based.
I. 6I. Other Notices. In case at
any time:
(1) the Corporation
shall declare any dividend upon its Common Stock payable in cash or stock or
make any other distribution to the holders of its Common Stock;
(2) the Corporation
shall offer for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or other rights;
(3) there shall be any
capital reorganization or reclassification of the capital stock of the
Corporation, or a consolidation or merger of the Corpo ration with or into
another entity or entities, or a sale, lease, abandonment, transfer or other
dispo sition of all or substantially all its assets; or
(4) there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation; then, in any one or more of said cases, the Corporation shall give,
by delivery in person, certified or registered mail, return receipt requested,
telecopier or telex, addressed to each holder of any shares of Preferred Stock
at the address of such holder as shown on the books of the Corporation, (a) at
least 20 days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
J. 6J. Stock to be Reserved. The
Corporation will at all times reserve and keep available out of its authorized
Common Stock, solely for the purpose of issuance upon the conversion of
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of
Preferred Stock. The Corporation covenants that all shares of
<PAGE> 96
Common Stock which shall be so issued shall be duly and validly issued and fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share of the Common Stock is at
all times equal to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed. The Corporation will not take any
action which results in any adjustment of the Conversion Price if the total
number of shares of Common Stock issued and issuable after such action upon
conversion of the Preferred Stock would exceed the total number of shares of
Common Stock then authorized by the Certificate of Incorporation.
K. 6K. No Reissuance of Preferred
Stock. Shares of Preferred Stock which are converted into shares of Common Stock
as provided herein shall not be reissued.
L. 6L. Issue Tax. The issuance of
certificates for shares of Common Stock upon conversion of Preferred Stock shall
be made without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Preferred Stock which is being converted.
M. 6M. Closing of Books. The
Corporation will at no time close its transfer books against the transfer of any
Preferred Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Preferred Stock in any manner which
interferes with the timely conversion of such Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
N. 6N. Definition of Common Stock.
As used in this paragraph 6, the term "Common Stock" shall mean and include the
Corporation's authorized Common Stock, par value $.001 per share, as constituted
on the date of filing of these terms of the Preferred Stock, and shall also
include any capital stock of any class of the Corporation thereafter authorized
which shall not be limited to a fixed sum or percentage in respect of the rights
of the holders thereof to participate in dividends or in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Preferred Stock shall include only shares designated as
Common Stock of the Corporation on the date of filing of this instrument, or in
case of any reorganization or reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in subparagraph 6G.
<PAGE> 97
O. 6O. Mandatory Conversion. If
at any time (i) the Corpo ration shall effect a firm commitment underwritten
public offering of shares of Common Stock in which (A) the aggregate price paid
for such shares by the public shall be at least $15,000,000 and (B) the price
paid by the public for such shares shall be at least $4.32 per share
(appropriately adjusted to reflect the occurrence of any event described in
subparagraph 6F), or (ii) a Liquidity Event shall occur in which (a) the holders
of shares of any class of Preferred Stock would receive consideration for all of
such shares (as if converted to Common Stock) of at least $1.28 for (i) each
share of Class A Convertible Preferred Stock or (ii) all shares of Common Stock
into which such share of Class A Convertible Preferred Stock is convertible; at
least $3.04 for (i) each share of Class B Convertible Preferred Stock or (ii)
all shares of Common Stock into which such share of Class B Convertible
Preferred Stock is convertible; at least $5.76 for (i) each share of Class C
Convertible Preferred Stock or (ii) all shares of Common Stock into which such
share of Class C Convertible Preferred Stock is convertible; or at least $6.03
per share for (i) each share of Class D Convertible Preferred Stock or (ii) all
shares of Common Stock into which such share of Class D Convertible Preferred
Stock is convertible, then effective upon the closing of the sale of such shares
by the Corporation pursuant to such public offering or immediately prior to the
occurrence of such Liquidity Event, as the case may be, all outstanding shares
of Preferred Stock (in the case of a public offering) or such class of Preferred
Stock (in the case of a Liquidity Event) shall automatically convert to shares
of Common Stock on the basis set forth in this paragraph 6. Holders of shares of
Preferred Stock so converted may deliver to the Corporation at its principal
office (or such other office or agency of the Corporation as the Corporation may
designate by notice in writing to such holders) during its usual business hours,
the certificate or certificates for the shares so converted. As promptly as
practicable thereafter, the Corporation shall issue and deliver to such holder a
certificate or certificates for the number of whole shares of Common Stock to
which such holder is entitled, together with any cash dividends and payment in
lieu of fractional shares to which such holder may be entitled pursuant to
subparagraph 6C. Until such time as a holder of shares of Preferred Stock shall
surrender his or its certificates therefor as provided above, such certificates
shall be deemed to represent the shares of Common Stock to which such holder
shall be entitled upon the surrender thereof.
VII. Redemption. The shares of Class B
Convertible Preferred Stock, the Class C Convertible Preferred Stock and the
Class D Convertible Preferred Stock shall be redeemed as follows:
A. 7A. Mandatory Redemption. On
September 11, 2002, and on each of the next two anniversaries thereafter (the
"Redemption Dates," and each a "Redemption Date"), the Corporation shall redeem
any outstanding shares of Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Class D Convertible Preferred Stock
according to the percentages listed below:
Date of Redemption Percentage of Shares of Class B Convertible
Preferred
<PAGE> 98
Stock, Class C Convertible Preferred Stock
and Class D Convertible Preferred Stock then
Outstanding to be Redeemed
September 11, 2002 33-1/3% of all the shares of Class B
Convert ible Preferred Stock, Class C
Convertible Preferred Stock and Class
D Convertible Preferred Stock
outstanding on September 11, 2002
September 11, 2003 50% of all the shares of Class B
Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class
D Convertible Preferred Stock
outstanding on September 11, 2003
September 11, 2004 100% of all the shares of Class B
Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class
D Convertible Preferred Stock
outstanding on September 11, 2004
B. 7B. Redemption Price and
Payment. The shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock to be redeemed on any
Redemption Date shall be redeemed by paying for each share in cash an amount
equal to $0.76, $1.44 and $3.57 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6F or 6G), respectively,
plus, in the case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but unpaid thereon, computed to such Redemption
Date, such amount being referred to as the "Redemption Price". Such payment
shall be made in full on the applicable Redemption Date to the holders entitled
thereto.
C. 7C. Redemption Mechanics. At
least 20 but not more than 30 days prior to each Redemption Date, written notice
(the "Redemption Notice") shall be given by the Corporation by delivery in
person, certified or registered mail, return receipt requested, telecopier or
telex, to each holder of record (at the close of business on the business day
next preceding the day on which the Redemption Notice is given) of shares of
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and
Class D Convertible Preferred Stock notifying such holder of the redemption and
specifying the Redemption Price, such Redemption Date, the number of shares of
<PAGE> 99
Class B Convertible Preferred Stock, Class C Convertible Preferred Stock and/or
Class D Convertible Preferred Stock to be redeemed from such holder (computed on
a pro rata basis in accordance with the number of such shares held by all
holders thereof) and the place where said Redemption Price shall be payable. The
Redemption Notice shall be addressed to each holder at his address as shown by
the records of the Corporation. From and after the close of business on a
Redemption Date, unless there shall have been a default in the payment of the
Redemption Price, all rights of holders of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock (except the right to receive the Redemption Price) shall cease
with respect to the shares to be redeemed on such Redemption Date, and such
shares shall not thereafter be transferred on the books of the Corporation or be
deemed to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock on a Redemption Date are insufficient to redeem the total number
of shares of Class B Convertible Preferred Stock, Class C Convertible Preferred
Stock and Class D Convertible Preferred Stock to be redeemed on such Redemption
Date, the holders of such shares shall share ratably in any funds legally
available for redemption of such shares according to the respective amounts
which would be payable to them if the full number of shares to be redeemed on
such Redemption Date were actually redeemed. The shares of Class B Convertible
Preferred Stock, Class C Convertible Preferred Stock and Class D Convertible
Preferred Stock required to be redeemed but not so redeemed shall remain
outstanding and entitled to all rights and preferences provided herein. At any
time thereafter when additional funds of the Corporation are legally available
for the redemption of such shares of Class B Convertible Preferred Stock, Class
C Convertible Preferred Stock and Class D Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available, on the basis set forth above.
D. 7D. Redeemed or Otherwise
Acquired Shares to be Retired. Any shares of Class B Convertible Preferred
Stock, Class C Convertible Preferred Stock and Class D Convertible Preferred
Stock redeemed pursuant to this paragraph 7 or otherwise acquired by the
Corporation in any manner whatsoever shall be canceled and shall not under any
circumstances be reissued; and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of Class B Convertible Preferred Stock, Class C
Convertible Preferred Stock and Class D Convertible Preferred Stock.
E. 7E. Delay of Redemption.
Notwithstanding paragraph 7A hereof, the Corporation shall not be required to
redeem any shares of Class B Convertible Preferred Stock, Class C Convertible
Preferred Stock and Class D Convertible Preferred Stock on any Redemption Date
if the cost to the Corporation of such redemption would be greater than one-half
of the Corporation's available average cash working capital balance for the
quarter immediately preceding such Redemption
<PAGE> 100
Date. If a redemption is delayed pursuant to this Paragraph 7E, the Corporation
shall redeem the shares to be so redeemed within 120 days of such Redemption
Date.
VIII. Amendments. No provision of these terms of
the Preferred Stock may be amended, modified or waived without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock and at least a majority of the then outstanding
shares of Class D Convertible Preferred Stock; provided, however, that so long
as TTC Ventures holds at least two percent (2%) of the outstanding shares of
Common Stock of the Corporation (assuming the conversion of all outstanding
Preferred Stock), no amendment shall be made to the provisions of Section 2C
relating to the representation of the holders of Class D Convertible Preferred
Stock without the consent of TTC Ventures.
<PAGE> 101
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
ADOPTED PURSUANT TO THE PROVISIONS OF SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
NetStart, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company")
does hereby certify:
FIRST: That Article FOURTH of the Certificate of incorporation of the
Company is hereby amended to read as follows:
FOURTH. The aggregate number of shares which Corporation shall
have authority to issue is 21,902,809 shares consisting of
four classes of stock: 15,000,000 shares of Common Stock
($.001 par value per share); 1,562,500 shares of Class A
Convertible Preferred Stock ($.001 par value per share);
2,151,420 shares of Class B Convertible Preferred Stock ($.001
par value per share) and 3,188,889 shares of Class C
Convertible Preferred Stock ($.001 par value per share).
Except as otherwise provided by law or as set forth in this
Amendment, each of the outstanding shares shall have one vote
for the purpose of electing directors and for all other
purposes, including but not limited to an equal participation
in any dividends, or other distribution by the Company. All
other relative rights, preferences and limitations of the
shares of each class of stock are set forth in Exhibit A
attached hereto and incorporated herein by this reference.
SECOND: That all stockholders of the Company entitled to vote on the
matters contained in such amendment have duly adopted such amendment in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
<PAGE> 102
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to be executed by a duly authorized officer this 9th day of January,
1997.
NETSTART, INC.
By: /s/ Robert J. McGovern
-----------------------------------
Name: Robert J. McGovern
Title: President
Attest:
/s/ Thomas Young
-----------------------------
Name: Thomas Young
Title: Assistant Secretary
<PAGE> 103
TERMS OF PREFERRED STOCK
1. Number of Shares. There shall be three classes of Preferred
Stock. The Class A Convertible Preferred Stock shall consist of 1,562,500
shares, the Class B Convertible Preferred Stock shall consist of 2,151,420
shares, and the Class C Convertible Preferred Stock shall consist of 3,188,889
shares. The Class A Convertible Preferred Stock, the Class B Convertible
Preferred Stock, and the Class C Convertible Preferred Stock shall sometimes be
referred to herein collectively as the "Preferred Stock."
2. Voting.D. 2A. General. Except as may be otherwise provided
in these terms of the Preferred Stock or by law, the Preferred Stock shall vote
together with all other classes and class of stock of the Corporation as a
single class on all actions to be taken by the stockholders of the Corporation,
including, but not limited to actions amending the Certificate of Incorporation
of the Corporation to increase the number of authorized shares of Common Stock.
Each share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
B. 2B. Board Size. The Corporation shall not, without
the written consent or affirmative vote of the holders of at least
two-thirds of the then outstanding shares of Class B Convertible
Preferred Stock and Class C Convertible Preferred Stock, consenting or
voting (as the case may be) as a single class, given in writing or by
vote at a meeting, increase the maximum number of directors
constituting the Board of Directors to a number in excess of six.
C. 2C. Board Seats. So long as the outstanding Class
A Convertible Preferred Stock represents at least 10% of the
outstanding Common Stock of the Corporation (assuming the conversion of
all outstanding Preferred Stock), the holders of the Class A
Convertible Preferred Stock, voting as a separate class, shall be
entitled to elect one director of the Corporation. So long as the
outstanding Class B Convertible Preferred Stock represents at least 5%
of the outstanding Common Stock of the Corporation (assuming the
conversion of all outstanding Preferred Stock), the holders of the
Class B Convertible Preferred Stock, voting as a separate class, shall
be entitled to elect one director of the Corporation (the "Class B
Director"). So long as the outstanding Class C Convertible Preferred
Stock represents at least 5% of the outstanding Common Stock of the
Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class C Convertible Preferred Stock, voting
as a separate class, shall be entitled to elect one director of the
Corporation (the "Class C Director"). The holders of the Common Stock,
voting as a separate class, shall be entitled to elect two directors of
the Corporation. A sixth director of the Corporation shall be such
person, if any, who has received a majority vote of both the holders of
the Class B Convertible Preferred Stock and the Class C Convertible
Preferred Stock, voting as separate classes, and a majority vote of the
holders of the Common Stock, voting as a separate class. At any meeting
(or in a written consent in lieu thereof) held for the purpose of
electing
<PAGE> 104
directors, the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Class C Convertible
Preferred Stock then outstanding shall constitute a quorum of the Class
C Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class C Convertible Preferred
Stock or jointly by the holders of the Class C Convertible Preferred
Stock, the Class B Convertible Preferred Stock, and the Common Stock,
the presence in person or by proxy (or the written consent) of the
holders of a majority of the shares of Class B Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class B
Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class B Convertible Preferred
Stock or jointly by the holders of the Class B Convertible Preferred
Stock, the Class C Convertible Preferred Stock, and the Common Stock,
and the presence in person or by proxy (or the written consent) of the
holders of a majority of the shares of Class A Convertible Preferred
Stock then outstanding shall constitute a quorum of the Class A
Convertible Preferred Stock for the election of the director to be
elected solely by the holders of the Class A Convertible Preferred
Stock. A vacancy in any directorship elected by the holders of the
Class A Convertible Preferred Stock, Class B Convertible Preferred
Stock, or Class C Convertible Preferred Stock shall be filled only by
vote or written consent of the holders of the Class A Convertible
Preferred Stock, Class B Convertible Preferred Stock, or Class C
Convertible Preferred Stock, respectively; a vacancy in any
directorship elected by the holders of the Common Stock shall be filled
only by vote or written consent of the holders of the Common Stock; and
a vacancy in the directorship elected jointly by the holders of the
Class B Convertible Preferred Stock, the Class C Convertible Preferred
Stock and the Common Stock shall be filled only by vote or written
consent of the Class B Convertible Preferred Stock, the Class C
Convertible Preferred Stock and the Common Stock as provided above.
3. Dividends. The holders of the Class A Convertible Preferred
Stock shall be entitled to receive, out of funds legally available therefor, (i)
when and if declared by at least four members of the Board of Directors, or (ii)
upon any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.0224 per share (the "Class A Accruing
Dividends"). The holders of the Class B Convertible Preferred Stock shall be
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.0532 per share (the "Class B Accruing Dividends").
The holders of the Class C Convertible Preferred Stock shall be entitled to
receive, out of funds legally available therefor, (i) when and if declared by at
least four members of the Board of Directors, or (ii) upon any liquidation,
dissolution or winding up of the Corporation, quarterly dividends at the rate
per annum of $0.1008 per share (the "Class C Accruing Dividends"). The Class A
Accruing Dividends, the Class B Accruing Dividends, and the Class C Accruing
Dividends are sometimes referred to herein collectively as the "Accruing
Dividends." Accruing Dividends shall accrue from day to day, whether or not
earned or declared, and shall be cumulative. No dividend shall be paid on the
Preferred Stock, other than Accruing Dividends, or on the Common Stock.
<PAGE> 105
4. Liquidation.
A. 4A. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of
the shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock shall first be entitled, before any
distribution or payment is made upon any stock ranking on liquidation
junior to the Class B Convertible Preferred Stock and the Class C
Convertible Preferred Stock, to be paid an amount equal to $0.76 and
$1.44 per share, respectively, plus, in the case of each share of Class
B Convertible Preferred Stock, an amount equal to all Class B Accruing
Dividends unpaid thereon (whether or not declared) and any other
dividends declared but unpaid thereon, and in the case of each share of
Class C Convertible Preferred Stock, an amount equal to all Class C
Accruing Dividends unpaid thereon (whether or not declared) and any
other dividends declared but unpaid thereon, computed to the date
payment thereof is made available, such amount payable with respect to
one share of Class B Convertible Preferred Stock being sometimes
referred to as the "Class B Liquidation Preference Payment," such
amount payable with respect to one share of Class C Convertible
Preferred Stock being sometimes referred to as the "Class C Liquidation
Preference Payment," and with respect to all shares of Class B
Convertible Preferred Stock and Class C Convertible Preferred Stock
being sometimes referred to as the "Class B and Class C Liquidation
Preference Payments." If upon such liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class B Convertible Preferred Stock
and Class C Convertible Preferred Stock shall be insufficient to permit
payment in full to the holders of Class B Convertible Preferred Stock
and Class C Convertible Preferred Stock of the Liquidation Preference
Payments, then the entire assets of the Corporation to be so
distributed shall be distributed ratably, on an as-converted basis,
among the holders of Class B Convertible Preferred Stock and Class C
Convertible Stock.
B. 4B. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, after the
holders of Class B Convertible Preferred Stock and Class C Convertible
Preferred Stock shall have been paid in full the amounts to which they
shall be entitled pursuant to paragraph 4A, the holders of the shares
of Class A Convertible Preferred Stock shall then be entitled, before
any distribution or payment is made upon any stock ranking on
liquidation junior to the Class A Convertible Preferred Stock, to be
paid an amount equal to $.32 per share plus, in the case of each share,
an amount equal to all Class A Accruing Dividends unpaid thereon
(whether or not declared) computed to the date payment thereof is made
available, such amount payable with respect to one share of Class A
Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payment" and with respect to all shares of Class
A Convertible Preferred Stock being sometimes referred to as the "Class
A Liquidation Preference Payments." The Class A Liquidation Preference
Payments and the Class B and Class C Liquidation Preference Payments
are sometimes referred to herein collectively as the "Liquidation
Preference Payments." If upon such liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the assets to
be distributed among the holders of Class A Convertible
<PAGE> 106
Preferred Stock shall be insufficient to permit payment in full to the
holders of Class A Convertible Preferred Stock of the Class A
Liquidation Preference Payments, then the entire remaining assets of
the Corporation to be so distributed shall be distributed ratably among
the holders of Class A Convertible Preferred Stock.
C. 4C. Upon any such liquidation, dissolution or
winding up of the Corporation, immediately after the holders of Class B
Convertible Preferred Stock, Class C Convertible Preferred Stock, and
Class A Convertible Preferred Stock shall have been paid in full their
respective Liquidation Preference Payments, the remaining net assets of
the Corporation available for distribution shall be distributed ratably
among the holders of Preferred Stock and Common Stock (with each share
of Preferred Stock being deemed, for such purpose, to be equal to the
number of shares of Common Stock (including fractions of a share) into
which such share of Preferred Stock is convertible immediately prior to
the close of business on the business day fixed for such distribution).
Unless otherwise agreed by holders of at least two-thirds of the Class
B Convertible Preferred Stock and Class C Convertible Preferred Stock,
voting as separate classes, the consolidation or merger of the
Corporation into or with any other entity or entities which results in
the exchange of outstanding shares of the Corporation for securities or
other consideration issued or paid or caused to be issued or paid by
any such entity or affiliate thereof (other than a merger to
reincorporate the Corporation in a different jurisdiction), and the
sale, lease, abandonment, transfer or other disposition by the
Corporation of all or substantially all its assets (each such event a
"Liquidity Event"), shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of the provisions of
this paragraph 4.
D. 4D. Written notice of such liquidation,
dissolution or winding up, stating a payment date, the amount of the
Liquidation Preference Payments and the place where said Liquidation
Preference Payments shall be payable, shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or
sent by telecopier or telex, not less than 20 days prior to the payment
date stated therein, to the holders of record of Preferred Stock, such
notice to be addressed to each such holder at its address as shown by
the records of the Corporation. For purposes hereof, the Common Stock
shall rank on liquidation junior to the Class A Convertible Preferred
Stock, the Class B Convertible Preferred Stock, and the Class C
Convertible Preferred Stock.
5. Restrictions. At any time when shares of Class B
Convertible Preferred Stock or Class C Convertible Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least a majority of the then outstanding shares of both the Class B Convertible
Preferred Stock and Class C Preferred Stock, consenting or voting (as the case
may be) as separate classes, given in writing or by vote at a meeting, the
Corporation will not:
<PAGE> 107
A. 5A. Create or authorize the creation of any
additional class or series of shares of stock unless the same ranks
junior to the Class B Convertible Preferred Stock and the Class C
Convertible Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Corporation, redemption
and the payment of dividends, or increase the authorized amount of the
Class B Convertible Preferred Stock or the Class C Convertible
Preferred Stock or increase the authorized amount of any additional
class or series of shares of stock unless the same ranks junior to the
Class B Convertible Preferred Stock and the Class C Convertible
Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, redemption and the
payment of dividends, or create or authorize any obligation or security
convertible into shares of Class B Convertible Preferred Stock or Class
C Convertible Preferred Stock or into shares of any other class or
series of stock unless the same ranks junior to the Class B Convertible
Preferred Stock and the Class C Convertible Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of
the Corporation, redemption and the payment of dividends, whether any
such creation, authorization or increase shall be by means of amendment
to the Certificate of Incorporation or by merger, consolidation or
otherwise; provided, that such consent shall not be unreasonably
withheld for the creation or issuance of an additional class or series
of shares ranking senior to the Class B Convertible Preferred Stock and
the Class C Convertible Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the
Corporation, redemption and the payment of dividends (a "Senior
Security"), but provided further, that if, within a reasonable time of
the submission of a proposal for the issuance of a Senior Security,
information comes to light indicating that such consent was withheld
solely or primarily for the purpose of negotiating the price of an
additional investment by the holders of the Class B Convertible
Preferred Stock and/or the Class C Convertible Preferred Stock, then
such consent shall be deemed to have been unreasonably withheld for
purposes of this subparagraph 5A.
B. 5B. Consent to any liquidation, dissolution or
winding up of the Corporation or consolidate or merge into or with any
other entity or entities or sell, lease, abandon, transfer or otherwise
dispose of all or substantially all its assets, unless such action
would result in an annualized return to the holders of the Class B
Convertible Preferred Stock and the Class C Convertible Preferred Stock
of at least 30%;
C. 5C. Amend, alter or repeal its Certificate of
Incorporation or ByLaws if the effect would be materially detrimental
or adverse in any manner with respect to the rights of the holders of
the Class B Convertible Preferred Stock and/or the Class C Convertible
Preferred Stock;
D. 5D. Purchase or set aside any sums for the
purchase of, or pay any dividend or make any distribution on, any
shares of stock other than the Class B Convertible Preferred Stock and
the Class C Convertible Preferred Stock, except for (i) Class A
Accruing Dividends, (ii) dividends or other distributions payable on
the Common Stock solely in the form of additional shares of Common
Stock, and (iii) the purchase of shares of Common Stock from former
employees of the Corporation who acquired such
<PAGE> 108
shares directly from the Corporation, if each such purchase is made
pursuant to contractual rights held by the Corporation relating to the
termination of employment of such former employee and the purchase
price (except in the case of agreements executed prior to July 12,
1996) does not exceed the original issue price paid by such former
employee to the Corporation for such shares; or
E. 5E. Redeem or otherwise acquire any
shares of Class B Convertible Preferred Stock or Class C Convertible
Preferred Stock except as expressly authorized in paragraph 7 hereof or
pursuant to a purchase offer made pro rata to all holders of the shares
of Class B Convertible Preferred Stock and Class C Convertible
Preferred Stock on the basis of the aggregate number of outstanding
shares of Class B Convertible Preferred Stock and/or Class C
Convertible Preferred Stock then held by each such holder.
6. Conversions. The holders of shares of Preferred
Stock shall have the following conversion rights:
A. 6A. Right to Convert. Subject to the terms and
conditions of this paragraph 6, the holder of any share or shares of
Preferred Stock shall have the right, at its option at any time, to
convert any such shares of Preferred Stock into such number of fully
paid and nonassessable shares of Common Stock as is obtained by (i)
multiplying the number of shares of Preferred Stock so to be converted
by the Original Purchase Price of such share (which shall be $0.32 in
the case of the Class A Convertible Preferred Stock, $.76 in the case
of Class B Convertible Preferred Stock, and $1.44 in the case of Class
C Convertible Preferred Stock) and (ii) dividing the result by the
conversion price of the Original Purchase Price of such share or, in
case an adjustment of such price has taken place pursuant to the
further provisions of this paragraph 6, then by the conversion price as
last adjusted and in effect at the date any share or shares of
Preferred Stock are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Conversion Price,"
with respect to the Class B Convertible Preferred Stock, the "Class B
Conversion Price," and, with respect to the Class C Convertible
Preferred Stock, the "Class C Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written
notice that the holder elects to convert a stated number of shares of
Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at
its principal office (or such other office or agency of the Corporation
as the Corporation may designate by notice in writing to the holders of
the Preferred Stock) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or
names (with address) in which the certificate or certificates for
shares of Common Stock shall be issued.
B. 6B. Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice referred to
in subparagraph 6A and surrender of the certificate or certificates for
the share or shares of Preferred Stock to be converted, the Corporation
shall issue and deliver, or cause to be issued and delivered, to the
holder, registered in such name or names as such holder may direct, a
certificate
<PAGE> 109
or certificates for the number of whole shares of Common Stock issuable
upon the conversion of such share or shares of Preferred Stock. To the
extent permitted by law, such conversion shall be deemed to have been
effected and the Conversion Price shall be determined as of the close
of business on the date on which such written notice shall have been
received by the Corporation and the certificate or certificates for
such share or shares shall have been surrendered as aforesaid, and at
such time the rights of the holder of such share or shares of Preferred
Stock shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby.
C. 6C. Fractional Shares; Dividends; Partial
Conversion. No fractional shares shall be issued upon conversion of
Preferred Stock into Common Stock and no payment or adjustment shall be
made upon any conversion on account of any cash dividends on the Common
Stock issued upon such conversion. At the time of each conversion, the
Corporation shall pay in cash an amount equal to all dividends,
excluding Accruing Dividends, accrued and unpaid on the shares of
Preferred Stock surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in subparagraph 6B. In
case the number of shares of Preferred Stock represented by the
certificate or certificates surrendered pursuant to subparagraph 6A
exceeds the number of shares converted, the Corporation shall, upon
such conversion, execute and deliver to the holder, at the expense of
the Corporation, a new certificate or certificates for the number of
shares of Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any
fractional share of Common Stock would, except for the provisions of
the first sentence of this subparagraph 6C, be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional
share, shall pay to the holder surrendering the Preferred Stock for
conversion an amount in cash equal to the current market price of such
fractional share as determined in good faith by the Board of Directors
of the Corporation.
D. 6D. Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 6E, if and whenever the
Corporation shall issue or sell, or is, in accordance with
subparagraphs 6D(1) through 6D(7), deemed to have issued or sold, any
shares of Common Stock for a consideration per share less than (i) the
Class B Conversion Price in effect immediately prior to the time of
such issue or sale, or (ii) the Class C Conversion Price in effect
immediately prior to the time of such issue or sale, then, forthwith
upon such issue or sale, the Class B Conversion Price and/or the Class
C Conversion Price, as the case may be, shall be reduced to the price
determined by dividing (i) an amount equal to the sum of (a) the number
of shares of Common Stock outstanding immediately prior to such issue
or sale multiplied by the then existing Class B Conversion Price or the
then existing Class C Conversion Price, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or
sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale.
<PAGE> 110
For purposes of this subparagraph 6D, the following
subparagraphs 6D(1) to 6D(7) shall also be applicable:
1. 6D(1) Issuance of Rights or Options. In case at
any time the Corporation shall in any manner grant (whether directly or
by assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or receivable by the Corporation
as consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise
of such Options) shall be less than the Class B Conversion Price and/or
the Class C Conversion Price in effect immediately prior to the time of
the granting of such Options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed
to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise
provided in subparagraph 6D(3), no adjustment of the Class B Conversion
Price and/or the Class C Conversion Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
2. 6D(2) Issuance of Convertible Securities. In case
the Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Class B Conversion
Price and/or the Class C Conversion Price in effect immediately prior
to the time of such issue or sale, then the total maximum number of
shares of Common
<PAGE> 111
Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per share
as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except
as otherwise provided in subparagraph 6D(3), no adjustment of the Class
B Conversion Price and/or the Class C Conversion Price shall be made
upon the actual issue of such Common Stock upon conversion or exchange
of such Convertible Securities and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the
Class B Conversion Price and/or the Class C Conversion Price have been
or are to be made pursuant to other provisions of this subparagraph 6D,
no further adjustment of the Class B Conversion Price and/or the Class
C Conversion Price shall be made by reason of such issue or sale.
3. 6D(3) Change in Option Price or Conversion
Rate. Upon the happening of any of the following events, namely, if the
purchase price provided for in any Option referred to in subparagraph
6D(1), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
subparagraph 6D(1) or 6D(2), or the rate at which Convertible
Securities referred to in subparagraph 6D(1) or 6D(2) are convertible
into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Class B
Conversion Price and/or the Class C Conversion Price in effect at the
time of such event shall forthwith be readjusted to the Class B
Conversion Price or Class C Conversion Price, as the case may be, which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such
adjustment the Class B Conversion Price and/or the Class C Conversion
Price then in effect hereunder is thereby reduced; and on the
termination or expiration of any such Option or any such right to
convert or exchange such Convertible Securities, the Class B Conversion
Price and/or the Class C Conversion Price then in effect hereunder
shall forthwith be increased to the Class B Conversion Price or Class C
Conversion Price, as the case may be, which would have been in effect
at the time of such termination or expiration had such Option or
Convertible Securities, to the extent outstanding immediately prior to
such termination or expiration, never been issued.
4. 6D(4) Stock Dividends. In case the Corporation
shall declare a dividend or make any other distribution upon any stock
of the Corporation (other than the Common Stock) payable in Common
Stock, Options or Convertible Securities, then any Common Stock,
Options or Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have been
issued or sold without consideration.
5. 6D(5) Consideration for Stock. In case any shares
of Common Stock, Options or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions
<PAGE> 112
or concessions paid or allowed by the Corporation in connection
therewith. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration
as determined in good faith by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case any Options shall be
issued in connection with the issue and sale of other securities of the
Corporation, together comprising one integral transaction in which no
specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of
the Corporation.
6. 6D(6) Record Date. In case the Corporation shall
take a record of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in Common Stock, Options or Convertible Securities or (ii) to
subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
7. 6D(7) Treasury Shares. The number of shares of
Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Corporation, and the
disposition of any such shares shall be considered an issue or sale of
Common Stock for the purpose of this subparagraph 6D.
E. 6E. Certain Issues of Common Stock Excepted.
Anything herein to the contrary notwithstanding, the Corporation shall
not be required to make any adjustment of the Class B Conversion Price
or the Class C Conversion Price in the case of the issuance from and
after the date of filing of these terms of the Preferred Stock of up to
an aggregate of 1,540,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraphs 6E or 6F) (the
"Reserved Shares") of Common Stock to directors, officers, employees or
consultants of the Corporation in connection with their service as
directors of the Corporation, their employment by the Corporation or
their retention as consultants by the Corporation (provided that the
number of Reserved Shares may be increased (a) prior to July 12, 1997,
with the approval of a majority of the Board of Directors including the
Class B Director and the Class C Director and (b) after July 12, 1997,
with the approval of either (i) a majority of the Board of Directors
including the Class B Director and the Class C Director or (ii) all
directors other than the Class B Director or the Class C Director),
plus such number of shares of Common Stock which are repurchased by the
Corporation from such persons after such date pursuant to contractual
rights held by the Corporation and at repurchase prices not exceeding
the respective original purchase prices paid by such persons to the
Corporation therefor.
F. 6F. Subdivision or Combination of Common Stock. In
case the Corporation shall at any time subdivide (by any stock split,
stock dividend or otherwise)
<PAGE> 113
its outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller
number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased. In the case of any
such subdivision, no further adjustment shall be made pursuant to
subparagraph 6D by reason thereof.
G. 6G. Reorganization or Reclassification. If any
capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as a condition of
such reorganization or reclassification, lawful and adequate provisions
shall be made whereby each holder of a share or shares of Preferred
Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore receivable upon the
conversion of such share or shares of Preferred Stock, such shares of
stock, securities or assets as may be issued or payable with respect to
or in exchange for a number of outstanding shares of such Common Stock
equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without
limitation provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise of such conversion rights.
H. 6H. Notice of Adjustment. Upon any adjustment of
the Conversion Price, then and in each such case the Corporation shall
give written notice thereof, by delivery in person, certified or
registered mail, return receipt requested, telecopier or telex,
addressed to each holder of shares of Preferred Stock at the address of
such holder as shown on the books of the Corporation, which notice
shall state the Conversion Price resulting from such adjustment,
setting forth in reasonable detail the method upon which such
calculation is based.
I. 6I. Other Notices. In case at any time:
(1) the Corporation shall
declare any dividend upon its Common Stock payable in cash or stock or
make any other distribution to the holders of its Common Stock;
(2) the Corporation shall offer
for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or other rights;
(3) there shall be any capital
reorganization or reclassification of the capital stock of the
Corporation, or a consolidation or merger of the
<PAGE> 114
Corporation with or into another entity or entities, or a sale, lease,
abandonment, transfer or other disposition of all or substantially all
its assets; or
(4) there shall be a voluntary
or involuntary dissolution, liquidation or winding up of the
Corporation;
then, in any one or more of said cases, the Corporation shall give, by
delivery in person, certified or registered mail, return receipt requested,
telecopier or telex, addressed to each holder of any shares of Preferred Stock
at the address of such holder as shown on the books of the Corporation, (a) at
least 20 days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
J. 6J. Stock to be Reserved. The Corporation will at
all times reserve and keep available out of its authorized Common
Stock, solely for the purpose of issuance upon the conversion of
Preferred Stock as herein provided, such number of shares of Common
Stock as shall then be issuable upon the conversion of all outstanding
shares of Preferred Stock. The Corporation covenants that all shares of
Common Stock which shall be so issued shall be duly and validly issued
and fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will
from time to time take all such action as may be requisite to assure
that the par value per share of the Common Stock is at all times equal
to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to assure
that all such shares of Common Stock may be so issued without violation
of any applicable law or regulation, or of any requirement of any
national securities exchange upon which the Common Stock may be listed.
The Corporation will not take any action which results in any
adjustment of the Conversion Price if the total number of shares of
Common Stock issued and issuable after such action upon conversion of
the Preferred Stock would exceed the total number of shares of Common
Stock then authorized by the Certificate of Incorporation.
K. 6K. No Reissuance of Preferred Stock.
Shares of Preferred Stock which are converted into shares of Common
Stock as provided herein shall not be reissued.
<PAGE> 115
L. 6L. Issue Tax. The issuance of certificates for
shares of Common Stock upon conversion of Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of
the holder of the Preferred Stock which is being converted.
M. 6M. Closing of Books. The Corporation will at no
time close its transfer books against the transfer of any Preferred
Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Preferred Stock in any manner which
interferes with the timely conversion of such Preferred Stock, except
as may otherwise be required to comply with applicable securities laws.
N. 6N. Definition of Common Stock. As used in this
paragraph 6, the term "Common Stock" shall mean and include the
Corporation's authorized Common Stock, par value $.001 per share, as
constituted on the date of filing of these terms of the Preferred
Stock, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall not be limited to a fixed
sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Preferred Stock shall include only shares
designated as Common Stock of the Corporation on the date of filing of
this instrument, or in case of any reorganization or reclassification
of the outstanding shares thereof, the stock, securities or assets
provided for in subparagraph 6G.
O. 6O. Mandatory Conversion. If at any time (i) the
Corporation shall effect a firm commitment underwritten public offering
of shares of Common Stock in which (A) the aggregate price paid for
such shares by the public shall be at least $15,000,000 and (B) the
price paid by the public for such shares shall be at least $4.32 per
share (appropriately adjusted to reflect the occurrence of any event
described in subparagraph 6F), or (ii) a Liquidity Event shall occur in
which (a) the holders of shares of any class of Preferred Stock would
receive consideration for all of such shares (as if converted to Common
Stock) of at least four (4) times the original purchase price of such
shares (for example, at least $1.28 for (i) each share of Class A
Convertible Preferred Stock or (ii) all shares of Common Stock into
which such share of Class A Convertible Preferred Stock is convertible;
at least $3.04 for (i) each share of Class B Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class
B Convertible Preferred Stock is convertible; or at least $5.76 for (i)
each share of Class C Convertible Preferred Stock or (ii) all shares of
Common Stock into which such share of Class C Convertible Preferred
Stock is convertible), then effective upon the closing of the sale of
such shares by the Corporation pursuant to such public offering or
immediately prior to the occurrence of such Liquidity Event, as the
case may be, all outstanding shares of Preferred Stock (in the case of
a public offering) or such class of Preferred Stock (in the case of a
Liquidity Event) shall automatically convert to shares of Common Stock
on
<PAGE> 116
the basis set forth in this paragraph 6. Holders of shares of Preferred
Stock so converted may deliver to the Corporation at its principal
office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to such holders) during
its usual business hours, the certificate or certificates for the
shares so converted. As promptly as practicable thereafter, the
Corporation shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to which
such holder is entitled, together with any cash dividends and payment
in lieu of fractional shares to which such holder may be entitled
pursuant to subparagraph 6C. Until such time as a holder of shares of
Preferred Stock shall surrender his or its certificates therefor as
provided above, such certificates shall be deemed to represent the
shares of Common Stock to which such holder shall be entitled upon the
surrender thereof.
7. Redemption. The shares of Class B and Class C
Convertible Preferred Stock shall be redeemed as follows:
A. 7A. Mandatory Redemption. On June 30, 2001, and on
each of the next two anniversaries thereafter (the "Redemption Dates,"
and each a "Redemption Date"), the Corporation shall redeem any
outstanding shares of Class B and Class C Convertible Preferred Stock
according to the percentages listed below:
<PAGE> 117
Percentage of Shares of
Class B and Class C Convertible
Preferred Stock then
Date of Redemption Outstanding to be Redeemed
June 30, 2001 33-1/3% of all the shares of Class B and Class
C Convertible Preferred Stock Outstanding on
June 30, 2001
June 30, 2002 50% of all the shares of Class B and Class C
Convertible Preferred Stock outstanding on June
30, 2002
June 30, 2003 100% of all the shares of Class B and Class C
Convertible Preferred Stock outstanding on June
30, 2003
B. 7B. Redemption Price and Payment. The shares of
Class B and Class C Convertible Preferred Stock to be redeemed on any
Redemption Date shall be redeemed by paying for each share in cash an
amount equal to $0.76 and $1.44 per share, respectively, plus, in the
case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but unpaid thereon, computed to such
Redemption Date, such amount being referred to as the "Redemption
Price". Such payment shall be made in full on the applicable Redemption
Date to the holders entitled thereto.
C. 7C. Redemption Mechanics. At least 20 but not more
than 30 days prior to each Redemption Date, written notice (the
"Redemption Notice") shall be given by the Corporation by delivery in
person, certified or registered mail, return receipt requested,
telecopier or telex, to each holder of record (at the close of business
on the business day next preceding the day on which the Redemption
Notice is given) of shares of Class B Convertible Preferred Stock and
Class C Convertible Preferred Stock notifying such holder of the
redemption and specifying the Redemption Price, such Redemption Date,
the number of shares of Class B Convertible Preferred Stock and/or
Class C Convertible Preferred Stock to be redeemed from such holder
(computed on a pro rata basis in accordance with the number of such
shares held by all holders thereof) and the place where said Redemption
Price shall be payable. The Redemption Notice shall be addressed to
each holder at his address as shown by the records of the Corporation.
From and after the close of business on a Redemption Date, unless there
shall have been a default in the payment of the Redemption Price, all
rights of holders of shares of Class B Convertible Preferred Stock and
Class C Convertible Preferred Stock (except the right to receive the
Redemption Price) shall cease with respect to the shares to be redeemed
on such Redemption Date, and such shares shall not thereafter be
transferred on the books
<PAGE> 118
of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for
redemption of shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock on a Redemption Date are insufficient to
redeem the total number of shares of Class B Convertible Preferred
Stock and Class C Convertible Preferred Stock to be redeemed on such
Redemption Date, the holders of such shares shall share ratably in any
funds legally available for redemption of such shares according to the
respective amounts which would be payable to them if the full number of
shares to be redeemed on such Redemption Date were actually redeemed.
The shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock required to be redeemed but not so redeemed
shall remain outstanding and entitled to all rights and preferences
provided herein. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of such shares of
Class B Convertible Preferred Stock and Class C Convertible Preferred
Stock, such funds will be used, at the end of the next succeeding
fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set
forth above.
D. 7D. Redeemed or Otherwise Acquired Shares to be
Retired. Any shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock redeemed pursuant to this paragraph 7 or
otherwise acquired by the Corporation in any manner whatsoever shall be
canceled and shall not under any circumstances be reissued; and the
Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce accordingly the number of
authorized shares of Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock.
E. 7E. Delay of Redemption. Notwithstanding paragraph
7A hereof, the Corporation shall not be required to redeem any shares
of Class B Convertible Preferred Stock and Class C Convertible
Preferred Stock on any Redemption Date if the cost to the Corporation
of such redemption would be greater than one-half of the Corporation's
available average cash working capital balance for the quarter
immediately preceding such Redemption Date. If a redemption is delayed
pursuant to this Paragraph 7E, the Corporation shall redeem the shares
to be so redeemed within 120 days of such Redemption Date.
8. Amendments. No provision of these terms of the Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then outstanding
shares of Preferred Stock.
<PAGE> 119
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION as amended
OF
NETSTART, INC.
NETSTART, INC., a corporation organized under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST. That the Board of Directors of said corporation at a meeting
fully convened and held, adopt the following resolution:
RESOLVED that the Board of Directors hereby declares it advisable and
in the best interest of the Company that Article Fourth of the Certificate of
Incorporation dated November 6, 1995 and amended by a Corrected Certificate of
Incorporation, dated December 4, 1995 be, and it hereby is, amended by changing
Article Fourth to read as follows:
FOURTH. The aggregate number of shares which the
Corporation shall have authority to issue is 13, 713,
920 shares consisting of three classes of stock:
10,000,000 shares of Common Stock ($.001 par value
per share); 1,562,500 shares of Class A Convertible
Preferred Stock ($.001 par value per share); and
2,151,420 of shares of Class B Convertible Preferred
Stock ($.001 par value per share). Except as
otherwise provided by law or as set forth in this
Amendment, each of the outstanding shares shall have
one vote for the purpose of electing directors and
for all other purposes, including but not limited to
an equal participation in any dividends, or other
distribution by the corporation. All other relative
rights, preferences and limitations of the shares of
each class of stock are set forth in Exhibit A
attached hereto and incorporated herein by this
reference.
SECOND. That the said amendment has been consented to and authorized by
the holders of a majority of the issued and outstanding stock entitled to vote
by written consent given in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
<PAGE> 120
THIRD. That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate of
Amendment to be signed by this 11th day of July, A.D. 1996.
/s/ Eugene J. Austin
---------------------------------------
Authorized Officer
<PAGE> 121
CLASS A PREFERRED STOCK AND CLASS B PREFERRED STOCK
1. Number of Shares. There shall be two classes of Preferred Stock. The
Class A Convertible Preferred Stock shall consist of 1,562,500 shares, and the
Class B Convertible Preferred Stock shall consist of 2,151,420 shares. The Class
A Convertible Preferred Stock and the Class B Convertible Preferred Stock shall
sometimes be referred to herein collectively as the "Preferred Stock."
2. Voting.
2A. General. Except as may be otherwise provided in these
terms of the Preferred Stock or by law, the Preferred Stock shall vote together
with all other classes and class of stock of the Corporation as a single class
on all actions to be taken by the stockholders of the Corporation, including,
but not limited to actions amending the Certificate of Incorporation of the
Corporation to increase the number of authorized shares of Common Stock. Each
share of Preferred Stock shall entitle the holder thereof to such number of
votes per share on each such action as shall equal the number of shares of
Common Stock (including fractions of a share) into which each share of Preferred
Stock is then convertible.
2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Class B Convertible Preferred Stock, given in writing or
by vote at a meeting, consenting or voting (as the case may be) separately as a
class, increase the maximum number of directors constituting the Board of
Directors to a number in excess of five.
2C. Board Seats. So long as the outstanding Class A
Convertible Preferred Stock represents at least 10% of the outstanding Common
Stock of the Corporation (assuming the conversion of all outstanding Preferred
Stock), the holders of the Class A Convertible Preferred Stock, voting as a
separate class, shall be entitled to elect one director of the Corporation. So
long as the outstanding Class B Convertible Preferred Stock represents at least
5% of the outstanding Common Stock of the Corporation (assuming the conversion
of all outstanding Preferred Stock), the holders of the Class B Convertible
Preferred Stock, voting as a separate class, shall be entitled to elect one
director of the Corporation (the "Class B Director"). The holders of the Common
Stock, voting as a separate class, shall be entitled to elect two directors of
the Corporation. A fifth director of the Corporation shall be such person, if
any, who has received a majority vote of the holders of the Class B Convertible
Preferred Stock, voting as a separate class, and a majority vote of the holders
of the Common Stock, voting as a separate class. At any meeting (or in a written
consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class B Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class B Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class B
Convertible Preferred Stock or jointly by the holders of the Class B
<PAGE> 122
Convertible Preferred Stock and the Common Stock, and the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Class A Convertible Preferred Stock then outstanding
shall constitute a quorum of the Class A Convertible Preferred Stock for the
election of the director to be elected solely by the holders of the Class A
Convertible Preferred Stock. A vacancy in an directorship elected by the holders
of the Class A Convertible Preferred Stock or Class B Convertible Preferred
Stock shall be filled only by vote or written consent of the holders of the
Class A Convertible Preferred Stock or Class B Convertible Preferred Stock,
respectively; a vacancy in any directorship elected by the holders of the Common
Stock shall be filled only by vote or written consent of the holders of the
Common Stock; and a vacancy in the directorship elected jointly by the holders
of the Class B Convertible Preferred Stock and the Common Stock shall be filled
only by vote or written consent of the Class B Convertible Preferred Stock and
the Common Stock as provided above.
3. Dividends. The holders of the Class A Convertible Preferred Stock
shall be entitled to receive, out of funds legally available therefor, (i) when
and if declared by at least four members of the Board of Directors, or (ii) upon
any liquidation, dissolution or winding up of the Corporation, quarterly
dividends at the rate per annum of $0.0224 per share (the "Class A Accruing
Dividends"). The holders of the Class B Convertible Preferred Stock shall be
entitled to receive, out of funds legally available therefor, (i) when and if
declared by at least four members of the Board of Directors, or (ii) upon any
liquidation, dissolution or winding up of the Corporation, quarterly dividends
at the rate per annum of $0.0532 per share (the "Class B Accruing Dividends").
The Class A Accruing Dividends and the Class B Accruing Dividends are sometimes
referred to herein collectively as the "Accruing Dividends." Accruing Dividends
shall accrue from day to day, whether or not earned or declared, and shall be
cumulative. No dividend shall be paid on the Preferred Stock, other than
Accruing Dividends, or on the Common Stock.
4. Liquidation.
4A. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Class B Convertible Preferred Stock shall first be entitled, before any
distribution or payment is made upon any stock ranking on liquidation junior to
the Class B Convertible Preferred Stock, to be paid an amount equal to $0.76 per
share plus, in the case of each share, an amount equal to all Class B Accruing
Dividends unpaid thereon (whether or not declared) and any other dividends
declared but unpaid thereon, computed to the date payment thereof is made
available, such amount payable with respect to one share of Class B Convertible
Preferred Stock being sometimes referred to as the "Class B Liquidation
Preference Payment" and with respect to all shares of Class B Convertible
Preferred Stock being sometimes referred to as the "Class B Liquidation
Preference Payments." If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Class B Convertible Preferred Stock shall be insufficient
to permit payment in full to the holders of Class B Convertible Preferred Stock
of the Class B Liquidation Preference Payments, then the entire assets of the
Corporation to be so distributed shall be distributed ratably among the holders
of Class B Convertible Preferred Stock.
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4B. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the holders of Class B
Convertible Preferred Stock shall have been paid in full the amounts to which
they shall be entitled pursuant to paragraph 4A, the holders of the shares of
Class A Convertible Preferred Stock shall then be entitled, before any
distribution or payment is made upon any stock ranking on liquidation junior to
the Class A Convertible Preferred Stock, to b paid an amount equal to $.32 per
share plus, in the case of each share, an amount equal to all Class A Accruing
Dividends unpaid thereon (whether or not declared) computed to the date payment
thereof is made available, such amount payable with respect to one share of
Class A Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payment" and with respect to all shares of Class A
Convertible Preferred Stock being sometimes referred to as the "Class A
Liquidation Preference Payments." The Class A Liquidation Preference Payments
and the Class B Liquidation Preference Payments are sometimes referred to herein
collectively as the "Liquidation Preference Payments." If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Class A Convertible Preferred
Stock shall be insufficient to permit payment in full to the holders of Class A
Convertible Preferred Stock of the Class A Liquidation Preference Payments, then
the entire remaining assets of the Corporation to be so distributed shall be
distributed ratably among the holders of Class A Convertible Preferred Stock.
4C. Upon any such liquidation, dissolution or winding up of
the Corporation, immediately after the holders of Class B Convertible Preferred
Stock and Class A Convertible Preferred Stock shall have been paid in full their
respective Liquidation Preference Payments, the remaining net assets of the
Corporation available for distribution shall be distributed ratably among the
holders of Preferred Stock and Common Stock (with each share of Preferred Stock
being deemed, for such purpose, to b equal to the number of shares of Common
Stock (including fractions of a share) into which such share of Preferred Stock
is convertible immediately prior to the close of business on the business day
fixed for such distribution). The consolidation or merger of the Corporation
into or with any other entity or entities which results in the exchange of
outstanding shares of the Corporation for securities or other consideration
issued or paid or caused to be issued or paid by any such entity or affiliate
thereof (other than a merger to reincorporate the Corporation in a different
jurisdiction), and the sale, lease, abandonment, transfer or other disposition
by the Corporation of all or substantially all its assets (each such event a
"Liquidity Event"), shall be deemed to be a liquidation, dissolution or winding
up of the Corporation within the meaning of the provisions of this paragraph 4.
4D. Written notice of such liquidation, dissolution or winding
up, stating a payment date, the amount of the Liquidation Preference Payments
and the place where said Liquidation Preference Payments shall be payable, shall
be delivered in person, mailed by certified or registered mail, return receipt
requested, or sent by telecopier or telex, not less than 20 days prior to the
payment date stated therein, to the holders of record of Preferred Stock, such
notice to be addressed to each such holder at its address as shown by the
records of the Corporation. For purposes hereof, the Common Stock shall rank on
liquidation junior to the Class B Convertible Preferred Stock and Class A
Convertible Preferred Stock.
<PAGE> 124
5. Restrictions. At any time when shares of Class B Convertible
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Corporation is required by law or
by the Certificate of Incorporation, and in addition to any other vote required
by law or the Certificate of Incorporation, without the approval of the holders
of at least two-thirds of the then outstanding shares of Class B Convertible
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may be) separately as a class, the Corporation will not:
5A. Create or authorize the creation of any additional class
or series of shares of stock unless the same ranks junior to the Class B
Convertible Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, redemption and the payment of
dividends, or increase the authorized amount of the Class B Convertible
Preferred Stock or increase the authorized amount of any additional class or
series of shares of stock unless the same ranks junior to the Class B
Convertible Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, redemption and the payment of
dividends, or create or authorize any obligation or security convertible into
shares of Class B Convertible Preferred Stock or into shares of any other class
or series of stock unless the same ranks junior to the Class B Convertible
Preferred Stock as to the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, redemption and the payment of dividends,
whether any such creation, authorization or increase shall be by means of
amendment to the Certificate of Incorporation or by merger, consolidation or
otherwise; provided, that such consent shall not be unreasonably withheld for
the creation or issuance of an additional class or series of shares ranking
senior to the Class B Convertible Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation
redemption and the payment of dividends (a "Senior Security"), but provided
further, that if, within a reasonable time of the submission of a proposal for
the issuance of a Senior Security, information comes to light indicating that
such consent was withheld solely or primarily for the purpose of negotiating the
price of an additional investment by the holders of the Class B Convertible
Preferred Stock, then such consent shall be deemed to have been unreasonably
withheld for purposes of this subparagraph 5A.
5B. Consent to any liquidation, dissolution or winding up of
the Corporation or consolidate or merge into or with any other entity or
entities or sell, lease, abandon, transfer or otherwise dispose of all or
substantially all its assets, unless such action would result in an annualized
return to the holders of the Class B Convertible Preferred Stock of at least
30%;
5C. Amend, alter or repeal its Certificate of Incorporation or
By-Laws if the effect would be materially detrimental or adverse in any manner
with respect to the rights of the holders of the Class B Convertible Preferred
Stock;
5D. Purchase or set aside any sums for the purchase of, or pay
any dividend or make any distribution on, any shares of stock other than the
Class B Convertible Preferred Stock, except for (i) Class A Accruing Dividends,
(ii) dividends or other distributions payable on the Common Stock solely in the
form of additional shares of Common Stock, and (iii) the purchase
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of shares of Common Stock from former employees of the Corporation who acquired
such shares directly from the Corporation if each such purchase is made pursuant
to contractual rights held by the Corporation relating to the termination of
employment of such former employee and the purchase price (except in the case of
agreements executed prior to July 12, 1996) does not exceed the original issue
price paid by such former employee to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Class B
Convertible Preferred Stock except as expressly authorized in paragraph 7 hereof
or pursuant to a purchase offer made pro rata to all holders of the shares of
Class B Convertible Preferred Stock on the basis of the aggregate number of
outstanding shares of Class B Convertible Preferred Stock then held by each such
holder.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of
this paragraph 6, the holder of any share or shares of Preferred Stock shall
have the right, at its option at any time, to convert any such shares of
Preferred Stock into such number of fully paid and nonassessable shares of
Common Stock as is obtained by (i) multiplying the number of shares of Preferred
Stock so to be converted by the Original Purchase Price of such share (which
shall be $0.32 in the case of the Class A Convertible Preferred Stock and $.76
in the case of Class B Convertible Preferred Stock) and (ii) dividing the result
by the conversion price of the Original Purchase Price of such share or, in case
an adjustment of such price has taken place pursuant to the further provisions
of this paragraph 6, then by the conversion price as last adjusted and in effect
at the date any share or shares of Preferred Stock are surrendered for
conversion (such price, or such price as last adjusted, being referred to as the
"Conversion Price" and, with respect to the Class B Convertible Preferred Stock,
the "Class B Conversion Price"). Such rights of conversion shall be exercised by
the holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Preferred Stock into Common Stock and by surrender of
a certificate or certificates for the shares so to be converted to the
Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to the holders
of the Preferred Stock) at any time during its usual business hours on the date
set forth in such notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued.
6B. Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in subparagraph 6A
and surrender of the certificate or certificates for the share or shares of
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of such share or
shares of Preferred Stock. To the extent permitted by law, such conversion shall
be deemed to have been effected and the Conversion Price shall be determined as
of the close of business on the date on which such written notice shall have
been received by the Corporation and the certificate or certificates for such
share or shares shall have been surrendered as aforesaid, and at such time the
rights of the holder of such
<PAGE> 126
share or shares of Preferred Stock shall cease, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby.
6C. Fractional Shares; Dividends; Partial Conversion. No
fractional shares shall be issued upon conversion of Preferred Stock into Common
Stock and no payment or adjustment shall be made upon any conversion on account
of any cash dividends on the Common Stock issued upon such conversion. At the
time of each conversion, the Corporation shall pay in cash an amount equal to
all dividends, excluding Accruing Dividends, accrued and unpaid on the shares of
Preferred Stock surrendered fo conversion to the date upon which such conversion
is deemed to take place as provided in subparagraph 6B. In case the number of
shares of Preferred Stock represented by the certificate or certificates
surrendered pursuant to subparagraph 6A exceeds the number of shares converted,
the Corporation shall, upon such conversion, execute and deliver to the holder,
at the expense of the Corporation, a new certificate or certificates for the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. If any fractional share
of Common Stock would, except for the provisions of the first sentence of this
subparagraph 6C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder surrendering the
Preferred Stock for conversion an amount in cash equal to the current market
price of such fractional share as determined in good faith by the Board of
Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except
as provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(7), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Class B Conversion Price in effect immediately prior to the time
of such issue or sale, then, forthwith upon such issue or sale, the Class B
Conversion Price shall be reduced t the price determined by dividing (i) an
amount equal to the sum of (a) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the then existing Class B
Conversion Price and (b) the consideration, if any, received by the Corporation
upon such issue or sale, by (ii) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or
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receivable by the Corporation as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options, plus,
in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the
Class B Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed
to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise
provided in subparagraph 6D(3), no adjustment of the Class B Conversion
Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Class B Conversion
Price in effect immediately prior to the time of such issue or sale,
then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date of
the issue or sale of such Convertible Securities and thereafter shall
be deemed to be outstanding, provided that (a) except as otherwise
provided in subparagraph 6D(3), no adjustment of the Class B Conversion
Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b if any
such issue or sale of such Convertible Securities is made upon exercise
of any Options to purchase any such Convertible Securities for which
adjustments of the Class B Conversion Price have been or are to be made
pursuant to other provisions of this subparagraph 6D, no further
adjustment of the Class B Conversion Price shall be made by reason of
such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1), the
additional consideration, if any, payable upon the conversion
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or exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2), or the rate at which Convertible Securities referred to
in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Class B Conversion Price in effect at the time of such
event shall forthwith be readjusted to the Class B Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold, but only if
as a result of such adjustment the Class B Conversion Price then in
effect hereunder is thereby reduced; and on the termination of any such
Option or any such right to convert or exchange such Convertible
Securities, the Class B Conversion Price then in effect hereunder shall
forthwith be increased to the Class B Conversion Price which would have
been in effect at the time of such termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to
such termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation (other than the Common Stock) payable in Common Stock,
Options or Convertible Securities, then any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold
without consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued o sold for a consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of th Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to
have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the
<PAGE> 129
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the
purpose of this subparagraph 6D.
6E. Certain Issues of Common Stock Excepted. Anything herein
to the contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Class B Conversion Price in the case of the issuance from
and after the date of filing of these terms of the Preferred Stock of up to an
aggregate of 925,000 shares (appropriately adjusted to reflect the occurrence of
any event described in subparagraphs 6E or 6F) (the "Reserved Shares") of Common
Stock to directors, officers, employees or consultants of the Corporation in
connection with their service as directors of the Corporation, their employment
by the Corporation or their retention as consultants by the Corporation
(provided that the number of Reserved Shares may be increased (a) prior to July
12, 1997, with the approval of a majority of the Board of Directors including
the Class B Director and (b) after July 12, 1997, with the approval of either
(i) a majority of the Board of Directors including the Class B Director or (ii)
all directors other than the Class B Director), plus such number of shares of
Common Stock which are repurchased by the Corporation from such persons after
such date pursuant to contractual rights held by the Corporation and at
repurchase prices not exceeding the respective original purchase prices paid by
such persons to the Corporation therefor.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased. In the case of any such subdivision, no further
adjustment shall be made pursuant to subparagraph 6D(4) by reason thereof.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon hav the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Preferred Stock, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with
<PAGE> 130
respect to the rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Conversion Price) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detai the method upon which such
calculation is based.
6I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into another entity or entities, or a sale,
lease, abandonment, transfer or other disposition of all or substantially all
its assets; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, (a) at least 20 days'
prior written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, at
least 20 days' prior written notice of the date when the same shall take place.
Such notice in accordance with the foregoing clause (a) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding up, as the case may be.
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6J. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Preferred Stock as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6K. No Reissuance of Preferred Stock. Shares of Preferred
Stock which are converted into shares of Common Stock as provided herein shall
not be reissued.
6L. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6M. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Preferred Stock or of any shares
of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the date of filing of
these terms of the Preferred Stock, and shall also include any capital stock of
any class of the Corporation thereafter authorized which shall not be limited to
a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation; provided
that the shares of Common Stock receivable upon conversion of shares of
Preferred Stock shall include only shares designated as Common Stock of the
Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 6G.
<PAGE> 132
6O. Mandatory Conversion. If at any time (i) the Corporation
shall effect a firm commitment underwritten public offering of shares of Common
Stock in which (A) the aggregate price paid for such shares by the public shall
be at least $15,000,000 and (B) the price paid by the public for such shares
shall be at least $3.80 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraph 6F), or (ii) a Liquidity Event
shall occur in which (a) the holders o shares of any class of Preferred Stock
would receive consideration for all of such shares (as if converted to Common
Stock) of at least four (4) times the original purchase price of such shares
(for example, at least $3.04 for (i) each share of Class B Convertible Preferred
Stock or (ii) all shares of Common Stock into which such share of Class B
Convertible Preferred Stock is convertible), then effective upon the closing of
the sale of such shares by the Corporation pursuant to such public offering or
immediately prior to the occurrence of such Liquidity Event, as the case may be,
all outstanding shares of Preferred Stock (in the case of a public offering) or
such class of Preferred Stock (in the case of a Liquidity Event) shall
automatically convert to shares of Common Stock on the basis set forth in this
paragraph 6. Holders of shares of Preferred Stock so converted may deliver to
the Corporation at its principal office (or such other office or agency of the
Corporation as the Corporation may designate by notice in writing to such
holders) during its usual business hours, the certificate or certificates for
the shares so converted. As promptly as practicable thereafter, the Corporation
shall issue and deliver to such holder a certificate or certificates for the
number of whole shares of Common Stock to which such holder is entitled,
together with any cash dividends and payment in lieu of fractional shares to
which such holder may be entitled pursuant to subparagraph 6C. Until such time
as a holder of shares of Preferred Stock shall surrender his or its certificates
therefor as provided above, such certificates shall be deemed to represent the
shares of Common Stock to which such holder shall be entitled upon the surrender
thereof.
7. Redemption. The shares of Class B Convertible Preferred Stock shall
be redeemed as follows:
7A. Mandatory Redemption. On June 30, 2001, and on each of the
next two anniversaries thereafter (the "Redemption Dates," and each a
"Redemption Date"), the Corporation shall redeem any outstanding shares of Class
B Convertible Preferred Stock according to the percentages listed below:
Percentage of Shares of
Class B Convertible
Preferred Stock then
Date of Redemption Outstanding to be Redeemed
June 30, 2001 33-1/3% of all the shares of
Class B Convertible Preferred
Stock Outstanding on June 30,
2001
June 30, 2002 50% of all the shares of Class
B Convertible Preferred Stock
outstanding on June 30, 2002
<PAGE> 133
June 30, 2003 100% of all the shares of
Class B Convertible Preferred
Stock outstanding on June 30,
2003
7B. Redemption Price and Payment. The shares of Class B
Convertible Preferred Stock to be redeemed on any Redemption Date shall be
redeemed by paying for each share in cash an amount equal to $0.76 per share
plus, in the case of each share, an amount equal to all dividends, excluding
Accruing Dividends, declared but unpaid thereon, computed to such Redemption
Date, such amount being referred to as the "Redemption Price". Such payment
shall be made in full on the applicable Redemption Date to the holders entitled
thereto.
7C. Redemption Mechanics. At least 20 but not more than
30 days prior to each Redemption Date, written notice (the "Redemption Notice")
shall be given by the Corporation by delivery in person, certified or registered
mail, return receipt requested, telecopier or telex, to each holder of record
(at the close of business on the business day next preceding the day on which
the Redemption Notice is given) of shares of Class B Convertible Preferred Stock
notifying such holder of the redemption and specifying the Redemption Price,
such Redemption Date, the number of shares of Class B Convertible Preferred
Stock to be redeemed from such holder (computed on a pro rata basis in
accordance with the number of such shares held by all holders thereof) and the
place where said Redemption Price shall be payable. The Redemption Notice shall
be addressed to each holder at his address as shown by the records of the
Corporation. From and after the close of business on a Redemption Date, unless
there shall have been a default in the payment of the Redemption Price, all
rights of holders of shares of Class B Convertible Preferred Stock (except the
right to receive the Redemption Price) shall cease with respect to the shares to
be redeemed on such Redemption Date, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. If the funds of the Corporation legally available for
redemption of shares of Class B Convertible Preferred Stock on a Redemption Date
are insufficient to redeem the total number of shares of Class B Convertible
Preferred Stock to be redeemed on such Redemption Date, the holders of such
shares shall share ratably in any funds legally available for redemption of such
shares according to the respective amounts which would be payable to them if the
full number of shares to be redeemed on such Redemption Date were actually
redeemed. The shares of Class B Convertible Preferred Stock required t be
redeemed but not so redeemed shall remain outstanding and entitled to all rights
and preferences provided herein. At any time thereafter when additional funds of
the Corporation are legally available for the redemption of such shares of Class
B Convertible Preferred Stock, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available, on the basis set forth
above.
7D. Redeemed or Otherwise Acquired Shares to be Retired.
Any shares of Class B Convertible Preferred Stock redeemed pursuant to this
paragraph 7 or otherwise acquired by the Corporation in any manner whatsoever
shall be canceled and shall not under any circumstances be reissued; and the
Corporation may from time to time take such appropriate corporate action as may
be necessary to reduce accordingly the number of authorized shares of Class B
Convertible Preferred Stock.
7E. Delay of Redemption. Notwithstanding paragraph 7A
hereof, the Corporation shall not be required to redeem any shares of Class B
Convertible Preferred Stock on any Redemption Date if the cost to the
Corporation of such redemption would be greater than one-half of the
Corporation's available average cash working capital balance for the quarter
immediately preceding such Redemption Date. If a redemption is delayed pursuant
to this Paragraph 7E, the Corporation shall redeem the shares to be so redeemed
within 120 days of such Redemption Date.
8. Amendments. No provision of these terms of the Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then outstanding
shares of Preferred Stock.
<PAGE> 134
CORRECTED CERTIFICATE OF INCORPORATION
OF
METSTART, INC.
METSTART, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST. That a Certificate of Incorporation of METSTART, INC., properly
executed, was filed with the Secretary of State of Delaware on November 6, 1995,
in good faith and with all belief that such incorporation was accurate and
correct.
SECOND. That the Certificate of Incorporation was filed with the
incorrect name and stock.
THIRD. That the Certificate of Incorporation should be corrected to
read in its entirety as follows as Exhibit A:
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by its sole incorporator this fourth day of December, A.D. 1995.
/s/ Jane S. Krayer
---------------------------------------
Jane S. Krayer
Incorporator
<PAGE> 135
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
NETSTART, INC.
-------------------------------------------
FIRST. The name of this corporation shall be:
NETSTART, INC.
SECOND. Its registered office in the State of Delaware is to be located
at 1013 Centre Road, in the City of Wilmington, County of New Castle and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
Ten Million Five Hundred (10,000,500) shares with a par value of One
Cent ($.01) per share, which shall be divided into Ten Million (10,000,000)
shares of common stock with a par value of One Cent ($.01), amounting to One
Hundred Thousand Dollars ($100,000) and Five Hundred (500) shares of Class B
Non-Voting Liquidating Preferred stock with a par value of One Cent ($.01),
amounting to Five Dollars ($5.00).
The corporation shall have the power, in addition to and not in
limitation of other powers, to adopt a plan or plans pursuant to section 1244 of
the Internal Revenue Code and issue stock pursuant thereto.
<PAGE> 136
FIFTH. The names and address of the incorporator is as follows:
Jane S. Krayer
Corporation Service Company
1013 Centre road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by- laws.
SEVENTH. No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this certificate of
incorporation this fourth day of December, A.D., 1995.
/s/ Jane S. Krayer
----------------------------------------
Jane S. Krayer
Incorporator
<PAGE> 137
CERTIFICATE OF INCORPORATION
OF
METSTART, INC.
---------------------------------
FIRST. The name of this corporation shall be:
METSTART, INC.
SECOND. Its registered office in the State of Delaware is to be located
at 1013 Centre Road in the City of Wilmington, County of New Castle and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
Ten Million (10,000,000) shares of Common Stock with a par value of One
Cent $.01 per share, amounting to One Hundred Thousand Dollars ($100,000.00).
The Corporation shall have the power in addition to and not in
limitation of other powers, to adopt a plan or plans pursuant to section 1244 of
the Internal Revenue Code and issue stock pursuant thereto.
FIFTH. The name and address of the incorporator is as follows:
Jane Krayer
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
<PAGE> 138
SEVENTH. No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article Seventh
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator
hereinbefore named, has executed, signed and acknowledged this certificate of
incorporation this sixth day of November, A.D., 1995.
/s/ Jane Krayer
---------------------------------------
Jane Krayer
Incorporator
<PAGE> 1
EXHIBIT 3.2
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CAREERBUILDER, INC.
FIRST. The name of the Corporation is: CareerBuilder, Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
by the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is 60 million shares, consisting of (i) 50 million
shares of Common Stock, $.001 par value per share (the "Common Stock"), and (ii)
10 million shares of Preferred Stock, $.001 par value per share ("Preferred
Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the
holders of the Common Stock are subject to and qualified by the rights of the
holders of the Preferred Stock of any series as may be designated by the Board
of Directors upon any issuance of the Preferred Stock of any series.
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<PAGE> 2
2. Voting. The holders of the Common Stock are entitled to one vote
for each share held at all meetings of stockholders (and written actions in lieu
of meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges to the full extent now or hereafter
permitted by the General Corporation Law of Delaware. Without limiting the
generality of the foregoing, the resolutions providing for the issuance of any
series of Preferred Stock may provide that such series shall be
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<PAGE> 3
superior or rank equally or be junior to the Preferred Stock of any other series
to the extent permitted by law. Except as otherwise provided in this Amended and
Restated Certificate of Incorporation, no vote of the holders of Preferred Stock
or Common Stock shall be a prerequisite to the designation or issuance of any
shares of any series of the Preferred Stock authorized by and complying with the
conditions of this Amended and Restated Certificate of Incorporation, the right
to have such vote being expressly waived by all present and future holders of
the capital stock of the Corporation.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
FIFTH. The Corporation shall have a perpetual existence.
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt,
amend or repeal the By-Laws of the Corporation.
SEVENTH. Except to the extent that the General Corporation Law of
Delaware prohibits the elimination or limitation of liability of directors for
breaches of fiduciary duty, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. No amendment to or repeal of this provision shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
EIGHTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or
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<PAGE> 4
omissions of such director occurring prior to such amendment. Notwithstanding
any other provisions of law, the Amended and Restated Certificate of
Incorporation or the By-Laws of the Corporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article
EIGHTH.
NINTH. 1. Actions, Suits and Proceedings Other than by or in the Right of
the Corporation. The Corporation shall indemnify each 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, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he 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 his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
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
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 7
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation. Notwithstanding anything to the contrary in this Article, the
Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is
reimbursed from the proceeds of insurance, and in the event the Corporation
makes any indemnification payments to an Indemnitee and such Indemnitee is
subsequently reimbursed from the proceeds of insurance, such Indemnitee shall
promptly refund such indemnification payments to the Corporation to the extent
of such insurance reimbursement.
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<PAGE> 5
2. Actions or Suits by or in the Right of the Corporation. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which
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<PAGE> 6
indemnity will or could be sought. With respect to any action, suit, proceeding
or investigation of which the Corporation is so notified, the Corporation will
be entitled to participate therein at its own expense and/or to assume the
defense thereof at its own expense, with legal counsel reasonably acceptable to
the Indemnitee. After notice from the Corporation to the Indemnitee of its
election so to assume such defense, the Corporation shall not be liable to the
Indemnitee for any legal or other expenses subsequently incurred by the
Indemnitee in connection with such claim, other than as provided below in this
Section 4. The Indemnitee shall have the right to employ his own counsel in
connection with such claim, but the fees and expenses of such counsel incurred
after notice from the Corporation of its assumption of the defense thereof shall
be at the expense of the Indemnitee unless (i) the employment of counsel by the
Indemnitee has been authorized by the Corporation, (ii) counsel to the
Indemnitee shall have reasonably concluded that there may be a conflict of
interest or position on any significant issue between the Corporation and the
Indemnitee in the conduct of the defense of such action or (iii) the Corporation
shall not in fact have employed counsel to assume the defense of such action, in
each of which cases the fees and expenses of counsel for the Indemnitee shall be
at the expense of the Corporation, except as otherwise expressly provided by
this Article. The Corporation shall not be entitled, without the consent of the
Indemnitee, to assume the defense of any claim brought by or in the right of the
Corporation or as to which counsel for the Indemnitee shall have reasonably made
the conclusion provided for in clause (ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter;
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. Such undertaking shall be accepted without reference to the
financial ability of the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification
or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
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<PAGE> 7
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines within such 60-day period that the Indemnitee did not
meet the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority vote
of the directors of the Corporation consisting of persons who are not at that
time parties to the action, suit or proceeding in question ("disinterested
directors"), whether or not a quorum, (b) a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
whether or not a quorum, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) independent
legal counsel (who may, to the extent permitted by law, be regular legal counsel
to the Corporation), or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
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<PAGE> 8
9. Other Rights. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
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<PAGE> 9
13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware
is amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
16. Amendments to Article. Notwithstanding any other provisions of
law, this Amended and Restated Certificate of Incorporation or the By-Laws of
the Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Article NINTH.
TENTH. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and this
Amended and Restated Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ELEVENTH. This Article is inserted for the management of the business and
for the conduct of the affairs of the Corporation.
1. Number of Directors. The number of directors of the Corporation
shall not be less than three. The exact number of directors within the
limitations specified in the preceding sentence shall be fixed from time to time
by, or in the manner provided in, the Corporation's By-Laws.
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2. Classes of Directors. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the designated number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class I, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class I and one of the extra directors
shall be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors. The initial members of each class
immediately following the filing of this Amended and Restated Certificate of
Incorporation shall be determined by resolution adopted by the Board of
Directors.
3. Election of Directors. Elections of directors need not be by
written ballot except as and to the extent provided in the By-Laws of the
Corporation.
4. Terms of Office. Each director shall serve for a term ending on
the date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting in 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting in 2001; and each initial director in Class III shall serve for a term
ending on the date of the annual meeting in the year 2002; and provided
further, that the term of each director shall be subject to the election and
qualification of his successor and to his earlier death, resignation or
removal.
5. Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any time
in office shall constitute a quorum for the transaction of business. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required
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quorum shall be reduced by one for each director so disqualified, provided that
in no case shall less than one-third of the number of directors fixed pursuant
to Section 1 above constitute a quorum. If at any meeting of the Board of
Directors there shall be less than such a quorum, a majority of those present
may adjourn the meeting from time to time. Every act or decision done or made by
a majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors unless a greater
number is required by law, by the By-Laws of the Corporation or by this Amended
and Restated Certificate of Incorporation.
7. Removal. Directors of the Corporation may be removed only for
cause by the affirmative vote of the holders of at least seventy-five percent
(75%) of the shares of capital stock of the Corporation issued and outstanding
and entitled to vote.
8. Vacancies. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the board, shall
be filled only by a vote of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. A director elected to fill
a vacancy shall be elected to hold office until the next election of the class
for which such director shall have been chosen, subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
9. Stockholder Nominations and Introduction of Business, Etc. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided by the By-Laws of the Corporation.
10. Amendments to Article. Notwithstanding any other provisions of
law, this Amended and Restated Certificate of Incorporation or the By-Laws of
the Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Article ELEVENTH.
TWELFTH. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting. Notwithstanding any other provisions of
law, the Amended and Restated Certificate of Incorporation or the By-Laws of the
Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the shares of capital stock of the Corporation issued and
outstanding and entitled to
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<PAGE> 12
vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article TWELFTH.
THIRTEENTH. Special meetings of stockholders may be called at any time by
only the Chairman of the Board of Directors, the President or the Board of
Directors. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting. Notwithstanding any other provision of law, this Amended and Restated
Certificate of Incorporation or the By-Laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article THIRTEENTH.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Amended and Restated Certificate of Incorporation to be
signed by its President this ___ day of _______________, 1999.
CAREERBUILDER, INC.
By:
---------------------------------
Robert J. McGovern,
President
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<PAGE> 1
EXHIBIT 3.3
AMENDMENT TO THE BY-LAWS
OF NETSTART, INC.
The undersigned does hereby certify that the following amendments to the
By-Laws of NetStart, Inc. (the "Corporation") have been approved and ratified by
the Board of Directors and the Stockholders of Corporation:
FIRST: Article III, Section 4(a) regarding the Board of Directors is
restated in its entirety as follows:
(a) Special meetings of the Board of Directors shall be held
whenever called by any of the following: (i) any two directors,
(ii) the President of the Corporation, (iii) Thomson U.S., Inc.,
(iv) New Enterprise Associates, VI, Limited Partnership, but not
its assignees, (v) 21st Century Internet Fund, L.P. or (vi) ADP,
Inc. Special meetings of the Board of Directors may be held at
such time and place as may be specified in the respective notices
or waivers of notice thereof.
All other provisions of the By-Laws of the Corporation, attached hereto
as Exhibit A, not specifically herein amended remain in force.
IN WITNESS WHEREOF, this Amendment is executed on the 21st day of
January, 1998.
NETSTART, INC.
By: /s/ GENE AUSTIN
-----------------------------
Gene Austin
Secretary
<PAGE> 2
AMENDMENT TO THE BY-LAWS
OF NETSTART, INC.
The undersigned does hereby certify that the following amendments to the
By-Laws of NetStart, Inc. (the "Corporation") have been approved and ratified by
the Board of Directors and the Stockholders of Corporation:
FIRST: Article III, Section 1(a) regarding the Board of Directors is
restated in its entirety as follows:
(a) The authorized number of directors of the Corporation shall be
seven unless and until otherwise determined by a vote of the
majority of the entire Board of Directors.
SECOND: Article III, Section 4(a) regarding the Board of Directors is
restated in its entirety as follows:
(a) Special meetings of the Board of Directors shall be held
whenever called by any of the following: (i) any two directors,
(ii) the President of the Corporation, (iii) Thomson U.S., Inc.,
(iv) New Enterprise Associates, VI, Limited Partnership, but not
its assignees, or (v) 21st Century Internet Fund, L.P. Special
meetings may be held at such time and place as may be specified in
the respective notices or waivers of notice thereof.
All other provisions of the By-Laws of the Corporation, attached hereto
as Exhibit A, not specifically herein amended remain in force.
IN WITNESS WHEREOF, this Amendment is executed on the 18th day of
September, 1997.
NETSTART, INC.
By: /s/ EUGENE J. AUSTIN
---------------------------
Gene Austin
Secretary
<PAGE> 3
AMENDMENT TO THE BY-LAWS
OF NETSTART, INC.
The undersigned does hereby certify that the following amendments to the
By-Laws of NetStart, Inc. (the "Corporation") have been approved and ratified by
the Board of Directors and the Stockholders of Corporation:
FIRST: Article III, Section 1(a) regarding the Board of Directors is
restated in its entirety as follows:
(a) The authorized number of directors of the Corporation shall be
six unless and until otherwise determined by a vote of the
majority of the entire Board of Directors.
SECOND: Article III, Section 4(a) regarding the Board of Directors is
restated in its entirety as follows:
(a) Special meetings of the Board of Directors shall be held
whenever called by any of the following: (i) any two directors,
(ii) the President of the Corporation, (iii) New Enterprise
Associates, VI, Limited Partnership, but not its assignees, or
(iv) 21st Century Internet Fund, L.P. Special meetings may be held
at such time and place as may be specified in the respective
notices or waivers of notice thereof.
All other provisions of the By-Laws of the Corporation, attached hereto
as Exhibit A, not specifically herein amended remain in force.
IN WITNESS WHEREOF, this Amendment is executed on the 10th day of
January, 1997.
NETSTART, INC.
By: /s/ THOMAS YOUNG
---------------------------
Thomas Young
Assistant Secretary
<PAGE> 4
BY-LAWS
OF
NETSTART, INC.
ARTICLE 1 - OFFICES
The office of the Corporation shall be located in the City and State designated
in the Articles of Incorporation. The Corporation may also maintain offices at
such other places within or without the United States as the officers or Board
of Directors may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1- Annual Meetings:
The annual meeting of the shareholders of the Corporation shall be held within
five months after the close of the fiscal year of the Corporation, for the
purpose of electing directors, and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
Special meetings of the shareholders may be called at any time by the Board of
Directors or by the President, and shall be called by the President or the
Secretary at the written request of the holders of fifty per cent (50%) of the
shares then outstanding and entitled to vote thereat, or as otherwise required
under the provisions of the Business Corporation Act.
Section 3 - Place of Meetings:
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
<PAGE> 5
Section 4 - Notice of Meetings:
(a) Except as otherwise provided by Statute, written notice of each meeting of
shareholders, whether annual or special, stating the time when and place where
it is to be held, shall be served either personally or by mail, not less than
ten or more than fifty days before the meeting, upon each shareholder of record
entitled to vote at such meeting, and to any other shareholder to whom the
giving of notice may be required by law. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If at any meeting, action is proposed to be taken
that would, if taken, entitle shareholders to receive payment for their shares
pursuant to Statute, the notice of such meeting shall include a statement of
that purpose and to that effect. If mailed, such notice shall be directed to
each such shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of shareholders
need not be given, unless otherwise required by statute.
Section 5 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in the Certificate of
Incorporation (such Certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to constitute a quorum for
the transaction of any business. The withdrawal of any shareholder after the
commencement of a meeting shall have no effect on the existence of a quorum,
after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present any business may be transacted at
the meeting as originally called if a quorum had been present.
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<PAGE> 6
Section 6- Voting:
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the shareholder
himself, or by his attorney-in-fact thereunto duly authorized in writing. No
proxy shall be valid after the expiration of eleven months from the date of its
execution, unless the persons executing it shall have specified therein the
length of time it is to continue in force. Such instrument shall be exhibited to
the Secretary at the meeting and shall be filed with the records of the
Corporation.
(d) Any resolution in writing, signed by all of the shareholders entitled to
vote thereon, shall be and constitute action by such shareholders to the effect
therein expressed, with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of shareholders and such
resolution so signed shall be inserted in the Minute Book of the Corporation
under its proper date.
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall be five unless and
until otherwise determined by vote of a majority of the entire Board of
Directors. The number of Directors shall not be less than three, unless all of
the outstanding shares are owned beneficially and of record by less than three
shareholders, in which event the number of directors shall not be less than the
number of shareholders permitted by statute.
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares, present in person or by
proxy, entitled to vote in the election.
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(c) Each director shall hold office until the annual meeting of the shareholders
next succeeding his election, and until his successor is elected and qualified,
or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
The Board of Directors shall be responsible for the control and management of
the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the shareholders.
Section 3 - Annual and Regular Meetings: Notice:
(a) A regular annual meeting of the Board of Directors shall be held immediately
following the annual meeting of the shareholders, at the place of such annual
meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by resolution for the
holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) of Section 4 of this Article III, with respect to special
meetings, unless such notice shall be waived in the manner set forth in
paragraph C of such Section 4.
Section 4 - Special Meetings: Notice:
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statue, notice of special meetings shall be
mailed directly to each director, addressed to him at his residence or usual
place of business, at least two (2) days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegram, radio or cable,
or shall be delivered to him personally or given to him orally, not later than
the day before the day on which the meeting is to be held. A notice, or waiver
of notice, except as required by Section 8 of this Article III, need not specify
the purpose of the meeting.
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<PAGE> 8
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
At all meeting of the Board of Directors the chairman of the Board, if any and
if present, shall preside. If there shall be no chairman, or he shall be absent,
then the President shall preside, and in his absence, a Chairman chosen by the
directors shall preside.
Section 6 - Quorum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn the same from time to
time without notice, until a quorum shall be present.
Section 7 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section 8 - Vacancies:
Any vacancy in the Board of directors occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, disqualification,
removal (unless a vacancy created by the removal of a director by the
shareholders shall be filled by the shareholders at the meeting at which the
removal was effected) or inability to act of any director, or otherwise, shall
be filled for the unexpired portion
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<PAGE> 9
of the term by a majority vote of the remaining directors, though less than a
quorum, at any regular meeting or special meeting of the Board of directors
called for that purpose.
Section 9 - Resignation:
Any director may resign at any time by giving written notice to the Board of
directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
Section 10 - Removal:
Any director may be removed with or without cause at any time by the affirmative
vote of shareholders holding of record in the aggregate at least a majority of
the outstanding shares of the Corporation at a special meeting of the
shareholders called for that purpose, and may be removed for cause by action of
the Board.
Section 11 - Salary:
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of the Board of Directors are eligible
to receive stock option grants.
Section 12 - Contracts:
(a) No contract or other transaction between this Corporation and any other
Corporation shall be impaired, affected or invalidated, nor shall any director
be liable in any way by reason of the fact that any one or more of the directors
of this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other Corporation, provided that such facts are
disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum,
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notwithstanding the presence of any such director at the meeting at which such
action is taken. Such director or directors may be counted in determining the
presence of a quorum at such meeting. This section shall not be construed to
impair or invalidate or in any way affect any contract or other transaction
which would otherwise be valid under the law (common, statutory or otherwise)
applicable thereto.
Section 13 - Committees:
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, and alternate members thereof, as they deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
Section 1 - Number, Qualifications. Election and Term of Office:
(a) The officers of the Corporation shall consist of a President, a Secretary, a
Treasurer, and such other officers, including a Chairman of the Board of
Directors, and one or more Vice Presidents, as the Board of Directors may from
time to time deem advisable. Any officer other than the Chairman of the Board of
Directors may be, but is not required to be, a director of the Corporation. Any
two or more offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
elected and qualified, or until his death, resignation or removal.
Section 2 - Resignation:
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or by such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
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Section 3 - Removal:
Any officer may be removed, either with or without cause, and a successor
elected by a majority of the Board of Directors at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by the Board of Directors.
Section 5 - Duties of Officers:
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these By-Laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
Section 6- Sureties and Bonds:
In case the Board of Directors shall so require, any officer, employee or agent
of the Corporation shall execute to the corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
Section 7- Shares of Other Corporations:
Whenever the Corporation is the holder of shares of any other Corporation, any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the Corporation by
the President, any Vice President, or such other person as the Board of
Directors may authorize.
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock:
(a) The certificates representing shares of the Corporation shall be in such
form as shall be adopted by the Board of Directors, and shall be numbered and
registered in the order issued. They shall bear the holder's name and the number
of shares, and shall be signed by (i) the Chairman of the Board or the President
or a Vice President,
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<PAGE> 12
and (ii) the Secretary or Treasurer, or any Assistant Secretary or Assistant
Treasurer, and shall bear the corporate seal.
(b) No certificate representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share which shall entitle the holder
to exercise voting rights, receive dividends and participate in liquidating
distributions, in proportion to the fractional holdings; or it may authorize the
payment in cash of the fair value of fractions of a share as of the time when
those entitled to receive such infractions are determined; or it may authorize
the issuance, subject to such conditions as may be permitted by law, of scrip in
registered or bearer form over the signature of an officer or agent of the
Corporation, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder, except as therein
provided.
Section 2- Lost or Destroyed Certificates:
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The Corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as the Board of
Directors in its discretion may require, the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper to do so.
Section 3 - Transfers of Shares:
(a) Transfers of shares of the Corporation shall be made on the share records of
the Corporation only by the holder of record thereof, in person or by his duly
authorized attorney, upon surrender for cancellation of the certificate or
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with such proof of the
authenticity of the signature and of authority to transfer and of payment of
transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any share
or shares as the absolute owner thereof for all purposes and, accordingly, shall
not be
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<PAGE> 13
bound to recognize any legal, equitable or other claim to, or interest in, such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly provided by law.
Section 4 - Record Date:
In lieu of closing the share records of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding fifty days, nor less than ten days, as
the record date for the determination of shareholders entitled to receive notice
of, or to vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividends, or allotment of any rights, or for the purpose
of any other action. If no record date is fixed, the record date for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the directors relating thereto is adopted. When a determination of shareholders
of record entitled to notice of or to vote at any meeting of shareholders has
been made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as the
Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of directors from
time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
Section 1 - By Shareholders:
All by-laws of the Corporation shall be subject to alteration or repeal, and new
by-laws may be made, by the affirmative vote of shareholders holding of record
in
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<PAGE> 14
the aggregate at least a majority of the outstanding shares entitled to vote in
the election of directors at any annual or special meeting of shareholders,
provided that the notice or waiver of notice of such meeting shall have
summarized or set forth in full therein, the proposed amendment.
Section 2- By Directors:
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, by-laws of the Corporation; provided, however, that the
shareholders entitled to vote with respect thereto as in this Article IX
above-provided may alter, amend or repeal by-laws made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meetings of shareholders or of the Board of Directors, or to change
any provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
ARTICLE X - INDEMNITY
(a) Any person made a party to any action, suit or proceeding, by reason of the
fact that he, his testator or intestate representative is or was a director,
officer or employee of the Corporation, or of any Corporation in which he served
as such at the request of the Corporation, shall be indemnified by the
Corporation against the reasonable expenses, including attorney's fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceedings, or in connection with any appeal therein that such officer,
director or employee is liable for negligence or misconduct in the performance
of his duties.
(b) The foregoing right of indemnification shall not be deemed exclusive of any
other rights to which any officer or director or employee may be entitled apart
from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be entitled
shall be fixed by the Board of Directors, except that in any case where there is
no disinterested majority of the Board available, the amount shall be fixed by
arbitration pursuant to then existing rules of the American Arbitration
Association.
The undersigned Incorporator certifies that he has adopted the
foregoing by-laws as the first by-laws of the Corporation.
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<PAGE> 15
Dated: 11/7/95
------------------
/s/ ROBERT MCGOVERN
-----------------------------------
Incorporator
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<PAGE> 1
EXHIBIT 3.4
FORM OF
AMENDED AND RESTATED BY-LAWS
OF
CAREERBUILDER, INC.
<PAGE> 2
FORM OF
AMENDED AND RESTATED BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 - Stockholders............................................................1
1.1 Place of Meetings.......................................................1
1.2 Annual Meeting..........................................................1
1.3 Special Meetings........................................................1
1.4 Notice of Meetings......................................................1
1.5 Voting List.............................................................2
1.6 Quorum..................................................................2
1.7 Adjournments............................................................2
1.8 Voting and Proxies......................................................2
1.9 Action at Meeting.......................................................2
1.10 Nomination of Directors.................................................3
1.11 Notice of Business at Annual Meetings...................................3
1.12 Action without Meeting..................................................4
1.13 Organization............................................................5
ARTICLE 2 - Directors...............................................................6
2.1 General Powers..........................................................6
2.2 Number; Election and Qualification......................................6
2.3 Classes of Directors....................................................6
2.4 Terms of Office.........................................................6
2.5 Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors....................................6
2.6 Vacancies...............................................................7
2.7 Resignation.............................................................7
2.8 Regular Meetings........................................................7
2.9 Special Meetings........................................................7
2.10 Notice of Special Meetings..............................................7
2.11 Meetings by Telephone Conference Calls..................................8
2.12 Quorum..................................................................8
2.13 Action at Meeting.......................................................8
2.14 Action by Consent.......................................................8
2.15 Removal.................................................................8
2.16 Committees..............................................................8
2.17 Compensation of Directors...............................................9
ARTICLE 3 - Officers................................................................9
3.1 Enumeration.............................................................9
3.2 Election................................................................9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
3.3 Qualification...........................................................9
3.4 Tenure..................................................................9
3.5 Resignation and Removal................................................10
3.6 Vacancies..............................................................10
3.7 Chairman of the Board and Vice Chairman of the Board...................10
3.8 President..............................................................10
3.9 Vice Presidents........................................................10
3.10 Secretary and Assistant Secretaries....................................11
3.11 Treasurer and Assistant Treasurers.....................................11
3.12 Salaries...............................................................12
ARTICLE 4 - Capital Stock..........................................................12
4.1 Issuance of Stock......................................................12
4.2 Certificates of Stock..................................................12
4.3 Transfers..............................................................12
4.4 Lost, Stolen or Destroyed Certificates.................................13
4.5 Record Date............................................................13
ARTICLE 5 - General Provisions.....................................................13
5.1 Fiscal Year............................................................13
5.2 Corporate Seal.........................................................14
5.3 Waiver of Notice.......................................................13
5.4 Voting of Securities...................................................14
5.5 Evidence of Authority..................................................14
5.6 Certificate of Incorporation...........................................14
5.7 Transactions with Interested Parties...................................14
5.8 Severability...........................................................15
5.9 Pronouns...............................................................15
ARTICLE 6 - Amendments.............................................................15
6.1 By the Board of Directors..............................................15
6.2 By the Stockholders....................................................15
6.3 Certain Provisions.....................................................15
</TABLE>
ii
<PAGE> 4
FORM OF
AMENDED AND RESTATED BY-LAWS
OF
CAREERBUILDER, INC.
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held
at such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held within six months after the
end of each fiscal year of the corporation on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-Laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be
called at any time by the Chairman of the Board of Directors, the President or
the Board of Directors. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of stockholders, whether annual or special, shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notices of all
meetings shall state the place, date and hour of the meeting. The notice of a
special meeting shall state, in addition, the purpose or purposes for which the
meeting is called. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the corporation.
<PAGE> 5
1.5 Voting List. The officer who has charge of the stock ledger of
the corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city where the meeting is to
be held. The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to
any other time and to any other place at which a meeting of stockholders may be
held under these By-Laws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no stockholder
is present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for
each share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by the General Corporation Law of the State of Delaware, the Certificate of
Incorporation or these By-Laws. Each stockholder of record entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may vote or express such consent or dissent in person
or may authorize another person or persons to vote or act for him by written
proxy executed by the stockholder or his authorized agent and delivered to the
Secretary of the corporation. No such proxy shall be voted or acted upon after
three years from the date of its execution, unless the proxy expressly provides
for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or
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<PAGE> 6
represented and voting on a matter) shall decide any matter to be voted upon by
the stockholders at such meeting, except when a different vote is required by
express provision of law, the Certificate of Incorporation or these By-Laws. Any
election by stockholders shall be determined by a plurality of the votes cast by
the stockholders entitled to vote at the election.
1.10 Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nomination for election to the Board of Directors of the corporation
at a meeting of stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
1.10. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary, and received not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary not later than the close of business on the 10th day
following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever occurs first. Such notice shall set forth (a) as
to each proposed nominee (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee, and (iv) any
other information concerning the nominee that must be disclosed as to nominees
in proxy solicitations pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to be named as
a nominee and to serve as a director if elected); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the corporation's
books, of such stockholder and (ii) the class and number of shares of the
corporation which are beneficially owned by such stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
1.11 Notice of Business at Annual Meetings. At an annual meeting of
the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought
3
<PAGE> 7
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before an annual meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, if
such business relates to the election of directors of the corporation, the
procedures in Section 1.10 must be complied with. If such business relates to
any other matter, the stockholder must have given timely notice thereof in
writing to the Secretary. To be timely, a stockholder's notice must be delivered
to or mailed and received at the principal executive offices of the corporation
not less than 60 days nor more than 90 days prior to the meeting; provided,
however, that in the event that less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the date on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever occurs
first. A stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. Notwithstanding anything in these By-Laws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 1.11 and except that
any stockholder proposal which complies with Rule 14a-8 of the proxy rules (or
any successor provision) promulgated under the Securities Exchange Act of 1934,
as amended, and is to be included in the corporation's proxy statement for an
annual meeting of stockholders shall be deemed to comply with the requirements
of this Section 1.11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 1.11, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.
1.12 Action without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required or permitted to be taken by
stockholders for or in connection with any corporate action may be taken without
a meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock 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 shares
entitled to vote thereon were present and voted and shall be delivered to the
corporation by delivery to its registered office in Delaware by hand or
certified or registered mail, return receipt requested, to its principal place
of business or to an officer or agent of the corporation having custody of the
book in
4
<PAGE> 8
which proceedings of meetings of stockholders are recorded. Each such written
consent shall bear the date of signature of each stockholder who signs the
consent. No written consent shall be effective to take the corporate action
referred to therein unless written consents signed by a number of stockholders
sufficient to take such action are delivered to the corporation in the manner
specified in this paragraph within sixty days of the earliest dated consent so
delivered.
If action is taken by consent of stockholders and in accordance with the
foregoing, there shall be filed with the records of the meetings of stockholders
the writing or writings comprising such consent.
If action is taken by less than unanimous consent of stockholders, prompt
notice of the taking of such action without a meeting shall be given to those
who have not consented in writing and a certificate signed and attested to by
the Secretary of the corporation that such notice was given shall be filed with
the records of the meetings of stockholders.
In the event that the action which is consented to is such as would have
required the filing of a certificate under any provision of the General
Corporation Law of the State of Delaware, if such action had been voted upon by
the stockholders at a meeting thereof, the certificate filed under such
provision shall state, in lieu of any statement required by such provision
concerning a vote of stockholders, that written consent has been given under
Section 228 of said General Corporation Law and that written notice has been
given as provided in such Section 228.
Notwithstanding the foregoing, if at any time the corporation shall have
a class of stock registered pursuant to the provisions of the Securities
Exchange Act of 1934, as amended, for so long as such class is registered, any
action by the stockholders of such class must be taken at an annual or special
meeting of stockholders and may not be taken by written consent.
1.13 Organization. The Chairman of the Board, or in his absence the
Vice Chairman of the Board designated by the Chairman of the Board, or the
President, in the order named, shall call meetings of the stockholders to order,
and shall act as chairman of such meeting; provided, however, that the Board of
Directors may appoint any stockholder to act as chairman of any meeting in the
absence of the Chairman of the Board. The Secretary of the corporation shall act
as secretary at all meetings of the stockholders; but in the absence of the
Secretary at any meeting of the stockholders, the presiding officer may appoint
any person to act as secretary of the meeting.
5
<PAGE> 9
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the corporation
shall be managed by or under the direction of a Board of Directors, who may
exercise all of the powers of the corporation except as otherwise provided by
law, the Certificate of Incorporation or these By-Laws. In the event of a
vacancy in the Board of Directors, the remaining directors, except as otherwise
provided by law, may exercise the powers of the full Board until the vacancy is
filled.
2.2 Number; Election and Qualification. The number of directors
which shall constitute the whole Board of Directors shall be determined by
resolution of the Board of Directors, but in no event shall be less than three.
The number of directors may be decreased at any time and from time to time by a
majority of the directors then in office, but only to eliminate vacancies
existing by reason of the death, resignation, removal or expiration of the term
of one or more directors. The directors shall be elected at the annual meeting
of stockholders by such stockholders as have the right to vote on such election.
Directors need not be stockholders of the corporation.
2.3 Classes of Directors. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class.
2.4 Terms of Office. Each director shall serve for a term ending on
the date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting of stockholders in
2000; each initial director in Class II shall serve for a term ending on the
date of the annual meeting of stockholders in 2000; and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 2002; and provided further, that the term of each director shall
be subject to the election and qualification of his successor and to his earlier
death, resignation or removal.
2.5 Allocation of Directors Among Classes in the Event of Increases
or Decreases in the Number of Directors. In the event of any increase or
decrease in the authorized number of directors, (i) each director then serving
as such shall nevertheless continue as a director of the class of which he is a
member and (ii) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors among
the three classes of directors so as to ensure that no one class has more than
one director more than any other class. To the extent possible, consistent with
the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be
6
<PAGE> 10
subtracted from those classes whose terms of offices are to expire at the
earliest dates following such allocation, unless otherwise provided from time to
time by resolution adopted by the Board of Directors. The initial members of
each class immediately following the effective date of these Amended and
Restated By-laws shall be determined by resolution adopted by the Board of
Directors.
2.6 Vacancies. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the Board, shall
be filled only by vote of a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office,
and a director chosen to fill a position resulting from an increase in the
number of directors shall hold office until the next election of the class for
which such director shall have been chosen, subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
2.7 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.8 Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; provided that any director who is absent when such a determination is
made shall be given notice of the determination. A regular meeting of the Board
of Directors may be held without notice immediately after and at the same place
as the annual meeting of stockholders.
2.9 Special Meetings. Special meetings of the Board of Directors
may be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board, President, two or more
directors, or by one director in the event that there is only a single director
in office.
2.10 Notice of Special Meetings. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy,
or telex, or delivering written notice by hand, to his last known business or
home address at least 24 hours in advance of the meeting, or (iii) by mailing
written notice to his last known business or home address at least 72 hours in
advance of the meeting. A notice or waiver of notice of a meeting of the Board
of Directors need not specify the purposes of the meeting.
7
<PAGE> 11
2.11 Meetings by Telephone Conference Calls. Directors or any
members of any committee designated by the directors may participate in a
meeting of the Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall constitute presence in person at such meeting.
2.12 Quorum. A majority of the directors at any time in office
shall constitute a quorum at all meetings of the Board of Directors. In the
event one or more of the directors shall be disqualified to vote at any meeting,
then the required quorum shall be reduced by one for each such director so
disqualified; provided, however, that in no case shall less than one-third (1/3)
of the number so fixed constitute a quorum. In the absence of a quorum at any
such meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.13 Action at Meeting. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-Laws.
2.14 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee of the Board
of Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.15 Removal. Directors of the corporation may be removed only for
cause by the affirmative vote of the holders of seventy-five percent (75%) of
the shares of capital stock of the corporation issued and outstanding and
entitled to vote.
2.16 Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation
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to be affixed to all papers which may require it. Each such committee shall keep
minutes and make such reports as the Board of Directors may from time to time
request. Except as the Board of Directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless otherwise provided by
the directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these By-laws for the Board of
Directors.
2.17 Compensation of Directors. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE 3 - Officers
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be
elected annually by the Board of Directors at its first meeting following the
annual meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or
more offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate
of Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering
his written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of
a majority of the entire number of directors then in office.
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Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Secretary. Each such successor shall hold office for
the unexpired term of his predecessor and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
3.7 Chairman of the Board and Vice Chairman of the Board. The Board
of Directors may appoint a Chairman of the Board. If the Board of Directors
appoints a Chairman of the Board, he shall perform such duties and possess such
powers as are assigned to him by the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him by the Board
of Directors.
3.8 President. The President shall, subject to the direction of the
Board of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties
and possess such powers as the Board of Directors or the President may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall
perform such duties and shall have such powers as the Board of Directors or the
President may
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from time to time prescribe. In addition, the Secretary shall perform such
duties and have such powers as are incident to the office of the secretary,
including without limitation the duty and power to give notices of all meetings
of stockholders and special meetings of the Board of Directors, to attend all
meetings of stockholders and the Board of Directors and keep a record of the
proceedings, to maintain a stock ledger and prepare lists of stockholders and
their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall
perform such duties and shall have such powers as may from time to time be
assigned to him by the Board of Directors or the President. In addition, the
Treasurer shall perform such duties and have such powers as are incident to the
office of treasurer, including without limitation the duty and power to keep and
be responsible for all funds and securities of the corporation, to deposit funds
of the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to
such salaries, compensation or reimbursement as shall be fixed or allowed from
time to time by the Board of Directors.
ARTICLE 4 - Capital Stock
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4.1 Issuance of Stock. Unless otherwise voted by the stockholders
and subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
corporation or the whole or any part of any unissued balance of the authorized
capital stock of the corporation held in its treasury may be issued, sold,
transferred or otherwise disposed of by vote of the Board of Directors in such
manner, for such consideration and on such terms as the Board of Directors may
determine.
4.2 Certificates of Stock. Every holder of stock of the corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him in the corporation. Each such certificate shall be signed by, or in
the name of the corporation by, the Chairman or Vice Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws,
applicable securities laws or any agreement among any number of stockholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and
regulations adopted by the Board of Directors, and subject to applicable law,
shares of stock may be transferred on the books of the corporation by the
surrender to the corporation or its transfer agent of the certificate
representing such shares properly endorsed or accompanied by a written
assignment or power of attorney properly executed, and with such proof of
authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may
issue a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen, or destroyed, upon such terms and conditions
as the Board of Directors may prescribe, including the presentation of
reasonable evidence of such loss, theft or
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destruction and the giving of such indemnity as the Board of Directors may
require for the protection of the corporation or any transfer agent or
registrar.
4.5 Record Date. The Board of Directors may fix in advance a date
as a record date for the determination of the stockholders entitled to notice of
or to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - General Provisions
5.1 Fiscal Year. Except as from time to time otherwise designated
by the Board of Directors, the fiscal year of the corporation shall begin on the
first day of January in each year and end on the last day of December in each
year.
5.2 Corporate Seal. The corporate seal shall be in such form as
shall be approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is required to
be given by law, by the Certificate of Incorporation or by these By-Laws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or any
other available method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such meeting in person or
by proxy, shall be deemed equivalent to such notice.
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5.4 Voting of Securities. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these By-Laws
to the Certificate of Incorporation shall be deemed to refer to the Certificate
of Incorporation of the corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or
transaction between the corporation and one or more of the directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or a
committee of the Board of Directors which authorizes the contract or transaction
or solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
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5.8 Severability. Any determination that any provision of these
By-Laws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these By-Laws.
5.9 Pronouns. All pronouns used in these By-Laws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 6 - Amendments
6.1 By the Board of Directors. These By-Laws may be altered,
amended or repealed or new by-laws may be adopted by the affirmative vote of a
majority of the directors present at any regular or special meeting of the Board
of Directors at which a quorum is present.
6.2 By the Stockholders. Except as otherwise provided in Section
6.3, these By-Laws may be altered, amended or repealed or new by-laws may be
adopted by the affirmative vote of the holders of a majority of the shares of
the capital stock of the corporation issued and outstanding and entitled to vote
at any regular or special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such regular or special meeting.
6.3 Certain Provisions. Notwithstanding any other provision of law,
the Certificate of Incorporation or these By-Laws, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least seventy-five percent (75%) of the shares of the capital
stock of the corporation issued and outstanding and entitled to vote shall be
required to amend or repeal, or to adopt any provision inconsistent with Section
1.3, Section 1.10, Section 1.11, Section 1.12, Section 1.13, Article 2 or
Article 6 of these By-Laws.
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EXHIBIT 10.1
NETSTART, Inc.
STOCK OPTION PLAN
The NetStart Company (the "Employer") sets forth herein the terms of this
Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Employer by
providing eligible individuals (as designated pursuant to Section 4 below) with
an opportunity to acquire or increase a proprietary interest in the Employer,
which thereby will create a stronger incentive to expend maximum effort for the
growth and success of the Employer, and will encourage such eligible individuals
to remain in the employ or deliver outstanding services to the Employer. Each
stock option granted under the Plan (an "Option") is intended to be an
"incentive stock option" within the meaning of Section 422A of the Internal
Revenue Code of 1986, or the corresponding provision of any subsequently-enacted
tax statute, as amended from time to time (the "Code") ("Incentive Stock
Option"), except to the extent that any such Option would exceed the limitations
set forth in Section 7 below, and except for Options specifically designated at
the time of grant as not being "incentive stock options". Options granted to
non-employees of the Employer are not Incentive Stock Options.
2. ADMINISTRATION
(a) Board. The Plan shall be administered by the Board of Directors
of the Employer (the "Board"), which shall have the full power and authority to
take all actions, and to make all determinations required or provided for under
the Plan or any Option granted or Option Agreement (as defined in Section 8
below) entered into hereunder and all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan deemed by the
Board to be necessary or appropriate to the administration of the Plan or any
Option granted or Option Agreement entered into hereunder. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting at which any issue relating to the Plan is
properly raised for consideration or by unanimous consent of the Board executed
in writing in accordance with the Employer's Certificate of Incorporation and
bylaws, and with applicable law. The interpretation and construction by the
Board of any provision of the Plan or of any Option granted or Option Agreement
entered into hereunder shall be final and conclusive.
(b) Committee. The Board may from time to time appoint a Stock Option
Committee (the "Committee") consisting of not less than two members of the
Board. The Board, in its sole discretion, may provide that the role of the
Committee shall be limited to making recommendations to the Board concerning any
determinations to be made and actions to be taken by the Board pursuant to or
with respect to the Plan, or the Board may delegate to the Committee such powers
and authorities related to the administration of the Plan, as set forth in
Section 2(a) above, as the Board shall determine, consistent with the
Certificate of Incorporation and bylaws of the Employer and applicable law. The
Board may remove members, add members, and fill vacancies on the Committee from
time to time, all in accordance with the Employer's Certificate of Incorporation
and bylaws, and with applicable law. The majority vote of the Committee, or acts
reduced to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
(c) No Liability. No member of the Board or of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted or Option Agreement entered into hereunder.
(d) Delegation to the Committee. In the event that the Plan or any
Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in Section 2(b) above. Unless otherwise expressly determined by the Board,
any such action or determination by the Committee shall be final and conclusive.
3. STOCK
<PAGE> 2
The stock that may be issued pursuant to Options granted under the
Plan shall be shares of Common Stock, par value $.01 per share, of the Employer
(the "Stock"), which shares may be: (i) treasury shares; (ii) authorized but
unissued shares (such treasury shares and authorized but unissued shares being
hereinafter sometimes referred to collectively as, the "Employer Stock"); or
(iii) the 375,000 shares allocated by Robert J. McGovern (hereafter referred to
as "Employer's Stock") at the time the Company was founded. The number of shares
of Stock that may be issued pursuant to Options granted under the Plan shall not
exceed in the aggregate 375,000 shares, which number of shares is subject to
adjustment as hereinafter provided in Section 18 below. The Board of Directors
of the Employer shall have sole discretion in determining whether the stock that
may be issued or transferred pursuant to the exercise of Options granted under
the Plan shall be obtained from the Employer Stock or newly issued Stock. If any
Option expires, terminates, or is terminated for any reason prior to exercise in
full, the shares of Stock that were subject to the unexercised portion of such
Option, or if any Option (or portion thereof) is forfeited for any reason, the
shares of stock subject to such forfeited Option (or portion), shall be
available for future Options granted under the Plan.
4. ELIGIBILITY
Options may be granted under the Plan to any key employee of the
Employer (including any such key employee who is an officer or director of the
Employer), any Board Member, vendor, consultant or service provider as the Board
shall determine and designate from time to time prior to expiration or
termination of the Plan.
An individual may hold more than one Option, subject to such
restrictions as are provided herein.
5. EFFECTIVE DATE AND TERM OF THE PLAN
(a) Effective Date. The Plan shall be effective as of the date of
adoption by the Board, which date is set forth below, subject to approval of the
Plan within one year of such effective date by an affirmative vote of
stockholders who hold at least a majority of the outstanding shares of stock of
the Employer entitled to vote thereon, in person or by proxy, at a duly called
meeting of the stockholders; provided, however, that upon approval of the Plan
by the stockholders of the Employer as set forth above, all Options granted
under the Plan on or after the effective date shall be fully effective as if the
stockholders of the Employer had approved the Plan on the effective date.
(b) Term. The Plan shall terminate on the date ten years from the
effective date.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board may, at
any time and from time to time, prior to the date of termination of the Plan,
grant to such eligible individuals as the Board may determine ("Optionees"),
Options to purchase such number of shares of the Stock on such terms and
conditions as the Board may determine, including any terms or conditions which
may be necessary to qualify such Options as "incentive stock options" under
Section 422A of the Code. The date on which the Board approves the grant of an
Option shall be considered the date on which such Option is granted.
7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option shall constitute an Incentive Stock Option only to the
extent that the aggregate fair market value (determined at the time the Option
is granted) of the stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
the Plan and all other plans of the Optionee's employer corporation and its
parent and subsidiary corporations within the meaning of Section 422A(b)(7) of
the Code) does not exceed $100,000.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by
written agreements ("Option Agreements"), to be executed by the Employer and by
the Optionee, in such form or forms as the Board shall from time to time
determine. Option Agreements covering Options granted from time to time or at
the same time need not contain similar provisions; provided, however, that all
such Option Agreements shall comply with all terms of the Plan.
<PAGE> 3
9. OPTION PRICE
The purchase price of each share of the Stock subject to an Option
(the "Option Price") shall be fixed by the Board and stated in each Option
Agreement, and, in the case of an Incentive Stock Option, shall be not less than
the greater of par value or one hundred percent (100%) of the fair market value
of a share of the Stock on the date the Option is granted (as determined in good
faith by the Board); provided, however, that in the event the Optionee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422A(b)(6) and 425(d) of the Code (relating to stock
ownership of more than ten percent), the Option Price of an Option which is
intended to be an Incentive Stock Option shall be not less than the greater of
par value or one hundred and ten percent (110%) of the fair market value of a
share of Stock at the time such Option is granted. In the event that the Stock
is listed on an established national or regional stock exchange, is admitted to
quotation on the National Association of Securities Dealers Automated Quotation
System, or is publicly traded in an established securities market, in
determining the fair market value of the Stock, the Board shall use the closing
price of the Stock on such exchange or System or in such market (the highest
such closing price if there is more than one such exchange or market) on the
trading date immediately before the Option is granted (or, if there is no such
closing price, then the Board shall use the mean between the highest bid and
lowest asked price or between the high or low prices on such date), or, if no
sale of the Stock has been made on such day, on the next preceding day in which
any such sale shall have been made.
10. TERM AND EXERCISE OF OPTIONS
(a) Term. Each Option granted under the Plan shall terminate and all
rights to purchase shares thereunder shall cease upon the expiration of ten
years from the date such Option is granted, or on such date prior thereto as may
be fixed by the Board and stated in the Option Agreement relating to such
Option; provided, however, that in the event the Optionee would otherwise be
ineligible to receive an Incentive Stock Option by reason of the provisions of
Sections 422A(b)(6) and 425(d) of the Code (relating to stock ownership of more
than ten percent), an Option granted to such Optionee which is intended to be an
Incentive Stock Option shall in no event be exercisable after the expiration of
five years from the date it is granted.
(b) Option Period and Limitations on Exercise. Each Option granted
under the Plan shall be exercisable, in whole or in part, at any time and from
time to time, over a period commencing on or after the date of grant and ending
upon the expiration or termination of the Option, as the Board shall determine
and set forth in the Option Agreement relating to such Option. Without limiting
the foregoing, the Board, subject to the terms and conditions of the Plan, may
in its sole discretion provide that an Option shall become exercisable in whole
or in part only upon the satisfaction of certain conditions specified in the
Option Agreement relating to the Optionee's continued employment during any
period or periods of time, the attainment of performance goals or objectives
established or to be established by the Board or such other factors as the Board
may deem appropriate, and that failure to satisfy such conditions shall result
in forfeiture of the Options or a portion thereof; provided, however, that any
such limitation or condition on the exercise of an Option, or portion thereof,
contained in any Option Agreement may be rescinded, modified or waived by the
Board, in its sole discretion, at any time and from time to time after the date
of grant of such Option (but prior to the forfeiture of the Option, or portion
thereof, as a result of failure to satisfy such limitation or condition) so as
to accelerate the time at which the Option may be exercised. Notwithstanding any
other provision of the Plan, no Option granted to an Optionee under the Plan
shall be exercisable in whole or in part prior to the date the Plan is approved
by the stockholders of the Employer as provided in Section 5 above.
(c) Method of Exercise. An Option that is exercisable hereunder may
be exercised by delivery to the Employer on any business day, at its principal
office, addressed to the attention of the Committee, of written notice of
exercise, which notice shall specify the number of shares with respect to which
the Option is being exercised, and shall be accompanied by payment in full of
the Option Price of the shares for which the Option is being exercised. The
minimum number of shares of Stock with respect to which an Option may be
exercised, in whole or in part, at any time shall be the lesser of 100 shares or
the maximum number of shares available for purchase under the Option at the time
of exercise. Payment of the Option Price for the shares of Stock purchased
pursuant to the exercise of an Option shall be made, as determined by the Board
and set forth in the Option Agreement pertaining to an Option, either (i) in
cash or in cash equivalents; (ii) through the tender to the Employer of shares
of Stock, which shares shall be valued, for purposes of determining the extent
to which the Option Price has been paid thereby, at their fair market value
(determined in the manner described in Section 9 above) on the date of exercise;
or (iii) by a combination of the methods described in (i) and (ii); provided,
however, that the Board may in its discretion impose and set forth in the Option
Agreement pertaining
<PAGE> 4
to an Option such limitations or prohibitions on the use of shares of Stock to
exercise Options as it deems appropriate. An attempt to exercise any Option
granted hereunder other than as set forth above shall be invalid and of no force
and effect. Promptly after the exercise of an Option and the payment in full of
the Option Price of the shares of Stock covered thereby, the individual
exercising the Option shall be entitled to the issuance of a Stock certificate
or certificates evidencing his ownership of such shares. A separate Stock
certificate or certificates shall be issued for any shares purchased pursuant to
the exercise of an Option which is an Incentive Stock Option, which certificate
or certificates shall not include any shares which were purchased pursuant to
the exercise of an Option which is not an Incentive Stock Option. An individual
holding or exercising an Option shall have none of the rights of a stockholder
until the shares of Stock covered thereby are fully paid and issued to him and,
except as provided in Section 18 below, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
11. THIS SECTION INTENTIONALLY LEFT BLANK.
12. RESTRICTIONS ON TRANSFER AND REPURCHASE RIGHTS
(a) Transferability of Options. During the lifetime of an Optionee to
whom an Option is granted, only such Optionee (or, in the event of legal
incapacity or incompetency, the Optionee's guardian or legal representative) may
exercise the Option. No Option shall be assignable or transferable by the
Optionee to whom it is granted, other than by will or the laws of descent and
distribution.
(b) Repurchase Rights of Employer. Except as otherwise provided in an
Option Agreement, (1) upon the termination of an Optionee's employment with the
Employer or a "subsidiary corporation" within the meaning of Section 425(f) of
the Code (a "Subsidiary") for any reason, the Employer shall have the right, for
a period of 90 days following such termination of employment to repurchase any
or all of the shares purchased by the optionee pursuant to an Option granted
under this Plan, including shares purchased during any period following such
termination of employment in which the Option remains exercisable pursuant to
Section 13, below (but excluding shares that were previously transferred by the
Optionee pursuant to Subsection 12(c) below) at a price equal to the fair market
value of such shares on the date of termination; and (2) upon the exercise,
pursuant to Section 14 below, of an Option following the Optionee's termination
of employment due to the death or "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code) of the Optionee, the Employer shall
have the right, for a period of 90 days following such exercise, to repurchase
any or all such shares at a price equal to the fair market value of such shares
on the date of exercise. "Fair market value," for purposes of this Subsection
12(b), shall be determined by the Board in the same manner used by it in good
faith to determine fair market value for purposes of determining the Option
Price pursuant to Section 9 above.
(c) Transferability of Shares. An Optionee (or such other individual
who is entitled, pursuant to Section 14 below, to exercise an Option following
the death of the Optionee) shall not transfer any shares purchased pursuant to
an Option to anyone without first offering them to the Employer for purchase on
the same terms and conditions as those offered the proposed transferee. Any
individual who proposes such a transfer shall notify the Employer, in writing,
of the identity of the transferee and the terms and conditions of such transfer.
The Employer may exercise this right of first refusal within 45 days after
receiving such notice of the proposed transfer. If the Employer fails to
exercise such right of first refusal during this 45 day period, the stockholder
may proceed with the proposed transfer free of any further restrictions (except
as provided in Subsection (b) above) at any time within the next 45 days, and if
he does not do so, the restrictions of this Subsection shall re-apply.
13. TERMINATION OF EMPLOYMENT
Upon the termination of the employment of an Optionee with the
Employer or any Subsidiary, other than by reason of the death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, any Option granted to an Optionee pursuant to the Plan shall terminate
and such Optionee shall have no further right to purchase shares of Stock
pursuant to such Option; provided, however, that by inclusion of appropriate
language in an Option Agreement, the Board may, in its discretion, provide that
an Option shall be exercisable for up to 30 days following such termination of
employment, unless earlier terminated pursuant to Section 10(a) above. Whether a
leave of absence or leave on military or government service shall constitute a
termination of employment for purposes of the Plan shall be determined by the
Board, which determination shall be final and conclusive. For purposes of the
Plan, a
<PAGE> 5
termination of employment with the Employer or a Subsidiary shall not be deemed
to occur if the Optionee is immediately thereafter employed with the Employer or
any other Subsidiary.
14. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
(a) Death. If an Optionee dies while employed by the Employer or a
Subsidiary or within the period following the termination of employment during
which the Option is exercisable under Section 14(b) below, the executors or
administrators or legatees or distributees of such Optionee's estate shall have
the right (subject to the general limitations on exercise set forth in Section
10(b) and Section 11(f) above), at any time within one year after the date of
such Optionee's death and prior to termination of the Option pursuant to Section
10(a) above, to exercise any Option held by such Optionee at the date of such
Optionee's death to the extent the Option was exercisable immediately prior to
the Optionee's death, except as is otherwise provided in the Option Agreement
relating to such Option.
(b) Disability. If an Optionee terminates employment with the
Employer or a Subsidiary by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Optionee, then such
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 10(b) and Section 11(f) above), at any time within one year
after such termination of employment and prior to termination of the Option
pursuant to Section 10(a) above, to exercise, in whole or in part, any Option
held by such Optionee at the date of such termination of employment to the
extent the Option was exercisable immediately prior to the Optionee's
termination of employment, except as is otherwise provided in the Option
Agreement relating to such Option. Whether a termination of employment is to be
considered by reason of "permanent and total disability" for purposes of this
Plan shall be determined by the Board, which determination shall be final and
conclusive.
15. USE OF PROCEEDS
The proceeds received by the Employer from the sale of Employer Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Employer.
16. REQUIREMENTS OF LAW
Violations of Law. The Employer shall not be required to sell, issue
or transfer any shares of Stock under any Option if the sale, issuance or
transfer of such shares would constitute a violation by the individual
exercising the Option, by the Employer of any provisions of any law or
regulation of any governmental authority, including without limitation any
federal or state securities laws or regulations. Specifically, in connection
with the Securities Act of 1933, as amended (the "Act"), upon exercise of any
Option, unless a registration statement under such Act is in effect with respect
to the shares of Stock covered by such Option, the Employer shall not be
required to sell, issue or transfer such shares unless the Board has received
evidence satisfactory to it that the holder of such Option may acquire such
shares pursuant to an exemption from registration under such Act. Any
determination in this connection by the Board shall be final, binding, and
conclusive. The Employer shall not be obligated to take any affirmative action
in order to cause the exercise of an Option or the issuance or the transfer of
shares pursuant thereto to comply with any law or regulation of any governmental
authority. As to any jurisdiction that expressly imposes the requirement that an
Option shall not be exercisable unless and until the shares of Stock covered by
such Option are registered or are subject to an available exemption from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction apply) shall be deemed conditioned upon the effectiveness
of such registration or the availability of such an exemption.
17. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted; provided, however, that no amendment by the Board shall, without
approval by the affirmative vote of stockholders who hold at least a majority of
outstanding shares of stock of the Employer entitled to vote thereon and who
vote in person or by proxy at a duly constituted stockholders' meeting, (a)
materially change the requirements as to eligibility to receive Options; (b)
increase the maximum number of shares of Stock in the aggregate that may be sold
pursuant to Options granted under the Plan (except as permitted under Section 18
hereof); (c) change the minimum Option Price set forth in Section 9 hereof
(except as permitted under Section 18 hereof); (d) increase the maximum period
during which Options may be exercised; (e) extend the term of the Plan; or
<PAGE> 6
(f) materially increase the benefits accruing to eligible individuals under the
Plan. Except as permitted under Section 18 hereof, no amendment, suspension or
termination of the Plan shall, without the consent of the holder of the Option,
alter or impair rights or obligations under any Option theretofore granted under
the Plan.
18. EFFECT OF CHANGES IN CAPITALIZATION
(a) Changes in Stock. If the outstanding shares of Stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Employer by reason of any
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares effected without receipt of
consideration by the Employer, occurring after the effective date of the Plan,
the number and kinds of shares for the purchase of which Options may be granted
under the Plan shall be adjusted proportionately and accordingly by the
Employer. In addition, the number and kind of shares for which Options are
outstanding shall be adjusted proportionately and accordingly so that the
proportionate interest of the holder of the Option immediately following such
event shall, to the extent practicable, be the same as immediately prior to such
event. Any such adjustment in outstanding Options shall not change the aggregate
Option Price payable with respect to shares subject to the unexercised portion
of the Option outstanding but shall include a corresponding proportionate
adjustment in the Option Price per share.
(b) Reorganization in Which the Employer Is the Surviving
Corporation. Subject to Subsection (c) hereof, if the Employer shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Employer with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger, or consolidation.
(c) Reorganization in Which the Employer Is Not the Surviving
Corporation or Sale of Assets or Stock. Upon the dissolution or liquidation of
the Employer, or upon a merger, consolidation or reorganization of the Employer
with one or more other corporations in which the Employer is not the surviving
corporation, or upon a sale of substantially all of the assets of the Employer
to another corporation, or upon any transaction (including, without limitation,
a merger or reorganization in which the Employer is the surviving corporation)
approved by the Board which results in any person or entity owning eighty
percent (80%) or more of the combined voting power of all classes of stock of
the Employer, except to the extent provision is made in writing in connection
with such transaction for the continuation of the Plan and/or the assumption of
the Options theretofore granted, or for the substitution for such Options of new
options covering the stock of a successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of shares and
exercise prices, in which event the Plan and Options theretofore granted shall
continue in the manner and under the terms so provided. Not withstanding the
immediately preceding sentence, the Board of Directors shall have the right in
its sole discretion to terminate the Option Plan herein. In the event of any
such termination of the Plan, each individual holding an Option shall have the
right (subject to the general limitations on exercise set forth in Section 10(b)
and Section 11(f) above), immediately prior to the occurrence of such
termination and during such period occurring prior to such termination as the
Board in its sole discretion shall determine and designate, to exercise such
Option in whole or in part, whether or not such Option was otherwise exercisable
at the time such termination occurs. The Board shall send written notice of an
event that will result in such a termination to all individuals who hold Options
not later than the time at which the Employer gives notice thereof to its
stockholders.
(d) Adjustments. Adjustments under this Section 18 related to stock
or securities of the Employer shall be made by the Board, whose determination in
that respect shall be final, binding, and conclusive. No fractional shares of
Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Employer. The grant of an Option pursuant to
the Plan shall not affect or limit in any way the right or power of the Employer
to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge, consolidate, dissolve or liquidate,
or to sell or transfer all or any part of its business or assets.
19. DISCLAIMER OF RIGHTS
<PAGE> 7
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Employer, or to interfere in
any way with the right and authority of the Employer either to increase or
decrease the compensation of any individual at any time, or to terminate any
employment or other relationship between any individual and the Employer.
20. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to
the stockholders of the Employer for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options or stock
appreciation rights otherwise then under the Plan.
* * *
This Plan was duly adopted and approved by the Board of Directors of the
Employer by resolution at a meeting held on the______________ day of
_____________, 1995.
Secretary of the Employer
This Plan was duly approved by the stockholders of the Employer by
resolutions set forth in a unanimous consent dated on the____________day
of___________,_________
Secretary of the Employer
<PAGE> 1
EXHIBIT 10.5
THIRD AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Third Amended and Restated Registration Rights Agreement is made as
of the 26th day of January, 1999 by and among CareerBuilder, Inc., a Delaware
corporation (the "Company"), investors listed on Schedule I hereto (the "Prior
Investors") and the investors listed on Schedule II hereto (the "New Investors",
and together with the Prior Investors, the "Investors").
Whereas the Company and certain of the Prior Investors are parties to the
Class C Convertible Preferred Stock Purchase Agreement dated as of January 10,
1997 (the "Class C Agreement"), pursuant to which the Company sold shares of
Class C Convertible Preferred Stock, par value $.001 per share (the "Class C
Convertible Preferred Stock") to certain of the Prior Investors and in order to
induce certain of the Prior Investors to invest funds in the Company pursuant to
the Class C Agreement, the Company and certain of the Prior Investors entered
into a Registration Rights Agreement dated as of January 10, 1997 (the "Original
Agreement") granting certain of the Prior Investors certain rights to cause the
Company to register shares of Common Stock issuable to certain of the Prior
Investors and certain other matters as set forth therein.
Whereas the Company and certain of the Prior Investors are parties to the
Class D Convertible Preferred Stock Purchase Agreement dated as of September 11,
1997 (the "Class D Agreement"), pursuant to which the Company sold shares of
Class D Convertible Preferred Stock, par value $.001 per share (the "Class D
Convertible Preferred Stock") to certain of the Prior Investors and in order to
induce certain of the Prior Investors to invest funds in the Company pursuant to
the Class D Agreement, the Company and certain of the Prior Investors agreed to
extend to certain of the Prior Investors similar rights and to amend and restate
the Original Agreement accordingly (the "Amended Agreement").
Whereas the Company and certain of the Prior Investors are parties to the
Class E Convertible Preferred Stock Purchase Agreement dated as of July 6, 1998
(the "Class E Agreement"), pursuant to which the Company sold shares of Class E
Convertible Preferred Stock, par value $.001 per share (the "Class E Convertible
Preferred Stock") to certain of the Prior Investors and in order to induce
certain of the Prior Investors to invest funds in the Company pursuant to the
Class E Agreement, the Company and certain of the Prior Investors agreed to
extend to certain of the Prior Investors similar rights and to amend and restate
the Amended Agreement accordingly (the "Second Amended Agreement")
Whereas the Company, certain of the Prior Investors and the New Investors
are parties to the Class F Convertible Preferred Stock Purchase Agreement dated
as of an even date herewith (the "Class F Agreement"), pursuant to which the
Company sold shares of Class F Convertible Preferred Stock, par value $.001 per
share (the "Class F Convertible Preferred Stock") to certain of the Prior
Investors and the New Investors and in order to induce certain of the Prior
Investors and the New Investors to invest funds in the Company pursuant to the
Class F Agreement, the Company and the Prior Investors have agreed to extend to
certain of the Prior Investors and the
<PAGE> 2
New Investors similar rights and to amend and restate the Second Amended
Agreement accordingly. Each Investor will execute a counterpart signature page
to, and become a party to, the resulting Third Amended and Restated Registration
Rights Agreement (the "Third Amended Agreement").
Whereas the Second Amended Agreement provides that it may be amended with
the written consent of (i) the Company, (ii) the holders of a majority of the
Class B Restricted Stock (as defined below), (iii) the holders of a majority of
the Class C Restricted Stock (as defined below), (iv) the holders of a majority
of the Class D Restricted Stock (as defined below), (v) the holders of a
majority of the Class E Restricted Stock (as defined below) and (vi) the holders
of at least two-thirds of the outstanding shares of Registrable Securities (as
defined below).
Intending to be legally bound, and in consideration of the mutual
agreements stated below, the parties hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Class A Restricted Stock" shall mean the shares of Common Stock issued
upon conversion of the Class A Convertible Preferred Stock, par value $.001 per
share (the "Class A Convertible Preferred Stock"), excluding such shares which
have been (a) registered under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in accordance with the
registration statement covering them or (b) publicly sold pursuant to Rule 144
under the Securities Act.
"Class B Restricted Stock" shall mean the shares of Common Stock issued
upon conversion of the Class B Convertible Preferred Stock, par value $.001 per
share (the "Class B Convertible Preferred Stock"), excluding such shares which
have been (a) registered under the Securities Act pursuant to an effective
registration statement filed thereunder and disposed of in accordance with the
registration statement covering them or (b) publicly sold pursuant to Rule 144
under the Securities Act.
"Class C Restricted Stock" shall mean the shares of Common Stock issued
upon conversion of the Class C Convertible Preferred Stock, excluding such
shares which have been (a) registered under the Securities Act pursuant to an
effective registration statement filed thereunder and disposed of in accordance
with the registration statement covering them or (b) publicly sold pursuant to
Rule 144 under the Securities Act.
"Class D Restricted Stock" shall mean the shares of Common Stock issued
upon conversion of the Class D Convertible Preferred Stock, excluding such
shares which have been (a) registered under the Securities Act pursuant to an
effective registration statement filed thereunder and disposed of in accordance
with the registration statement covering them or (b) publicly sold pursuant to
Rule 144 under the Securities Act.
"Class E Restricted Stock" shall mean the shares of Common Stock issued
upon conversion of the Class E Convertible Preferred Stock, excluding such
shares which have been (a) registered under the Securities Act pursuant to an
effective registration statement filed thereunder
2
<PAGE> 3
and disposed of in accordance with the registration statement covering them or
(b) publicly sold pursuant to Rule 144 under the Securities Act.
"Class F Restricted Stock" shall mean the shares of Common Stock issued
upon conversion of the Class F Convertible Preferred Stock, excluding such
shares which have been (a) registered under the Securities Act pursuant to an
effective registration statement filed thereunder and disposed of in accordance
with the registration statement covering them or (b) publicly sold pursuant to
Rule 144 under the Securities Act.
"Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
conversion of the Preferred Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Individual Stockholders" shall mean John Burton, Barry Goldsmith, Mark
Gruhin, Robert McGovern, David Wetmore and James Winchester.
"Individuals' Common Stock" shall mean (a) shares of Common Stock held by
the Individual Stockholders on the date hereof and (b) shares of Common Stock
issuable upon conversion of shares of Class A Preferred Stock held by the
Individual Stockholders on the date hereof (the "Class A Preferred Shares"),
excluding such shares which have been (a) registered under the Securities Act
pursuant to an effective registration statement filed thereunder and disposed of
in accordance with the registration statement covering them or (b) publicly sold
pursuant to Rule 144 under the Securities Act.
"Preferred Shares" shall mean the shares of Class A Convertible Preferred
Stock, the shares of Class B Convertible Preferred Stock, the shares of Class C
Convertible Preferred Stock, the shares of Class D Convertible Preferred Stock,
the shares of Class E Convertible Preferred Stock and the shares of Class F
Convertible Preferred Stock.
"Preferred Stock" shall mean the Class A Convertible Preferred Stock, the
Class B Convertible Preferred Stock, the Class C Convertible Preferred Stock,
the Class D Convertible Preferred Stock, the Class E Convertible Preferred Stock
and the Class F Convertible Preferred Stock.
"Registrable Securities" shall mean the Individuals' Common Stock, the
Class A Restricted Stock, the Class B Restricted Stock, the Class C Restricted
Stock, the Class D Restricted Stock, the Class E Restricted Stock and the Class
F Restricted Stock.
"Registration Expenses" shall mean the expenses so described in Section
8.
3
<PAGE> 4
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 8.
2. Restrictive Legend. Each certificate representing Preferred Shares
or Conversion Shares shall, except as otherwise provided in this Section 2 or in
Section 3, be stamped or otherwise imprinted with a legend substantially in the
following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT
AND ALL SUCH APPLICABLE LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel reasonably
satisfactory to the Company the securities represented thereby may be publicly
sold without registration under the Securities Act and any applicable state
securities laws.
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
Preferred Shares or Conversion Shares (other than under the circumstances
described in Sections 4, 5 or 6), the holder thereof shall give written notice
to the Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel reasonably satisfactory to the
Company to the effect that the proposed transfer may be effected without
registration under the Securities Act and any applicable state securities laws,
whereupon the holder of such stock shall be entitled to transfer such stock in
accordance with the terms of its notice; provided, however, that no such opinion
of counsel shall be required for a transfer (i) to one or more partners of the
transferor (in the case of a transferor that is a partnership) or (ii) to an
affiliated corporation (in the case of a transferor that is a corporation). Each
certificate for Preferred Shares or Conversion Shares transferred as above
provided shall bear the legend set forth in Section 2, except that such
certificate shall not bear such legend if (i) such transfer is in accordance
with the provisions of Rule 144 (or any other rule permitting public sale
without registration under the Securities Act) or (ii) the opinion of counsel
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act. The restrictions provided for in this Section 3 shall not apply
to securities which are not required to bear the legend prescribed by Section 2
in accordance with the provisions of that Section.
4. Required Registration. (a) At any time after the earliest of (i) six
months after any registration statement covering a public offering of securities
of the Company under the Securities Act shall have become effective (other than
a registration statement on Form S-4, Form S-8 or another form not available for
registering the Registrable Securities for sale to the public), (ii) six months
after the Company shall have become a reporting company under Sections 12 or 15
of the Exchange Act, and (iii) July 12, 1999, the holders of Class F Restricted
Stock constituting at least 40% of the total shares of Class F Restricted Stock
then outstanding, the holders of Class E Restricted Stock constituting at least
40% of the total shares of Class E Restricted Stock then
4
<PAGE> 5
outstanding, the holders of Class D Restricted Stock constituting at least 40%
of the total shares of Class D Restricted Stock then outstanding, the holders of
Class C Restricted Stock constituting at least 40% of the total shares of Class
C Restricted Stock then outstanding, the holders of Class B Restricted Stock
constituting at least 40% of the total shares of Class B Restricted Stock then
outstanding or the holders of Class A Restricted Stock constituting at least 40%
of the total shares of Class A Restricted Stock then outstanding may request the
Company to register under the Securities Act all or any portion of the
Registrable Securities held by such requesting holder or holders for sale in the
manner specified in such notice, provided that the shares of Registrable
Securities for which registration has been requested shall constitute the
smaller of (A) at least 20% of the total shares of any of Class B Restricted
Stock, Class C Restricted Stock, Class D Restricted Stock, Class E Restricted
Stock or Class F Restricted Stock originally issued or (B) at least 20% of the
total shares of Class A Restricted Stock then outstanding if such holder or
holders shall request the registration of less than all shares of Registrable
Securities then held by such holder or holders (or any lesser percentage if the
reasonably anticipated aggregate price to the public of such public offering
would exceed $5,000,000). Notwithstanding any provision herein to the contrary,
GEPT may initiate such a request on behalf of the holders of Class F Restricted
Stock so long as it holds at least 20% of the total shares of Class F Restricted
Stock then outstanding, provided that the Company shall be required to so
register such shares only if the reasonably anticipated aggregate price to the
public of such public offering would exceed $5,000,000. For purposes of this
Section 4 and Sections 5, 6, 13(a) and 13(d), the terms "Class B Restricted
Stock," "Class C Restricted Stock," "Class D Restricted Stock," "Class E
Restricted Stock," "Class F Restricted Stock" and "Registrable Securities" shall
be deemed to include the number of Registrable Securities which would be
issuable to a holder of Preferred Shares upon conversion of all Preferred Shares
held by such holder at such time, provided, however, that the only securities
which the Company shall be required to register pursuant hereto shall be shares
of Common Stock, and provided, further, however, that, in any underwritten
public offering contemplated by this Section 4 or Sections 5 and 6, the holders
of Preferred Shares shall be entitled to sell such Preferred Shares to the
underwriters for conversion and sale of the shares of Common Stock issued upon
conversion thereof. Notwithstanding anything to the contrary contained herein,
no request may be made under this Section 4 within 120 days after the effective
date of a registration statement filed by the Company covering a firm commitment
underwritten public offering in which the holders of Registrable Securities
shall have been entitled to join pursuant to Sections 5 or 6 and in which there
shall have been effectively registered all Registrable Securities as to which
registration shall have been requested.
(b) Following receipt of any notice under this Section 4, the Company
shall immediately notify all holders of Registrable Securities from whom notice
has not been received and shall use its best efforts to register under the
Securities Act, for public sale in accordance with the method of disposition
specified in such notice from requesting holders, the number of shares of
Registrable Securities specified in such notice (and in all notices received by
the Company from other holders within 30 days after the giving of such notice by
the Company). If such method of disposition shall be an underwritten public
offering, the holders of a majority of the shares of Registrable Securities to
be sold in such offering may designate the managing underwriter of such
offering, subject to the approval of the Company, which approval shall not be
unreasonably withheld or delayed. The Company shall be obligated to register
Registrable Securities pursuant to this Section 4 for two demands only by any
holder of any class of Restricted Stock, provided, however, that such obligation
shall be deemed satisfied only when a registration statement
5
<PAGE> 6
covering all shares of Registrable Securities specified in notices received as
aforesaid, for sale in accordance with the method of disposition specified by
the requesting holders, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares
shall have been sold pursuant thereto.
c) The Company shall be entitled to include in any registration
statement referred to in this Section 4, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account, except as and to the extent that, in
the opinion of the managing underwriter (if such method of disposition shall be
an underwritten public offering), such inclusion would adversely affect the
marketing of the Registrable Securities to be sold. Except for registration
statements on Form S-4, S-8 or any successor thereto, the Company will not file
with the Commission any other registration statement with respect to its Common
Stock, whether for its own account or that of other stockholders, from the date
of receipt of a notice from requesting holders pursuant to this Section 4 until
the completion of the period of distribution of the registration contemplated
thereby.
5. Piggyback Registration. If the Company at any time proposes to
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4, S-8 or another
form not available for registering the Registrable Securities for sale to the
public), each such time it will give prompt written notice to all holders of
Registrable Securities of its intention so to do. Upon the written request of
any such holder, received by the Company within 30 days after the giving of any
such notice by the Company, to register any of its Registrable Securities, the
Company will use its best efforts to cause the Registrable Securities as to
which registration shall have been so requested to be included in the securities
to be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the
holder of such Registrable Securities so registered. In the event that any
registration pursuant to this Section 5 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of shares of
Registrable Securities to be included in such an underwriting may be reduced
(pro rata among the requesting holders based upon the number of shares of
Registrable Securities owned by such holders) if and to the extent that the
managing underwriter shall be of the opinion that such inclusion would
materially and adversely affect the marketing of the securities to be sold by
the Company therein, provided, however, that such number of shares of
Registrable Securities shall not be reduced if any shares are to be included in
such underwriting for the account of any person other than the Company or
requesting holders of Registrable Securities, and provided, further, however,
that in no event may less than one-third of the total number of shares of Common
Stock to be included in such underwriting be made available for shares of Class
B Restricted Stock, Class C Restricted Stock, Class D Restricted Stock, Class E
Restricted Stock and Class F Restricted Stock on a pro-rata basis.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 5 without thereby incurring
any liability to the holders of Registrable Securities.
6. Registration on Form S-3. If at any time (i) a holder or holders of
Registrable Securities requests that the Company file a registration statement
on Form S-3 or any successor thereto for a public offering of all or any portion
of the shares of Registrable Securities held by
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<PAGE> 7
such requesting holder or holders, the reasonably anticipated aggregate price to
the public of which would exceed $1,000,000, and (ii) the Company is a
registrant entitled to use Form S-3 or any successor thereto to register such
shares, then the Company shall use its best efforts to effect the prompt
registration under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such
notice, of the number of shares of Registrable Securities specified in such
notice. Whenever the Company is required by this Section 6 to use its best
efforts to effect the registration of Registrable Securities, each of the
procedures and requirements of Section 4 (including but not limited to the
requirement that the Company notify all holders of Registrable Securities from
whom notice has not been received and provide them with the opportunity to
participate in the offering) shall apply to such registration, provided,
however, that there shall be no limitation on the number of registrations on
Form S-3 which may be requested and obtained under this Section 6, and provided,
further, however, that the requirements contained in the first sentence of
Section 4(a) shall not apply to any registration on Form S-3 which may be
requested and obtained under this Section 6.
7. Registration Procedures. If and whenever the Company is required by
the provisions of Sections 4, 5 or 6 to use its best efforts to effect the
registration of any shares of Registrable Securities under the Securities Act,
the Company will, as expeditiously as possible:
a) prepare and file within 60 days thereafter with the Commission a
registration statement (which, in the case of an underwritten public offering
pursuant to Section 4, shall be on Form S-1 or other form of general
applicability satisfactory to the managing underwriter selected as therein
provided) with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become and remain effective for the
period of the distribution contemplated thereby (determined as hereinafter
provided);
b) prepare and promptly file with the Commission such amendments,
post-effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the period specified in paragraph (a) above
and to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such registration statement
in accordance with the sellers' intended method of disposition set forth in such
registration statement for such period, but in no event for a period of more
than six (6) months after such registration statement becomes effective;
c) furnish to each seller of Registrable Securities and to each
underwriter such number of copies of the registration statement and any
amendments, post-effective amendments and supplements thereto and the prospectus
included therein (including each preliminary prospectus and summary prospectus)
as such persons reasonably may request in order to facilitate the public sale or
other disposition of the Registrable Securities covered by such registration
statement in accordance with the intended method of disposition set forth
therein;
d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registrable Securities or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request, provided however, that the Company shall not for any such purpose
be required to qualify generally to transact business as a foreign corporation
in any
7
<PAGE> 8
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
e) use its best efforts to list the Registrable Securities covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed, if such listing is then permitted under the
rules of such exchange, or if such listing is not practicable, to secure
designation of such securities as a Nasdaq "national market system security"
within the meaning of Rule 11Aa2-1 under the Exchange Act or, failing that, to
secure Nasdaq authorization for such Registrable Securities, and, without
limiting the foregoing, to arrange for at least two market makers to register as
such with respect to such Registrable Securities with the NASD, and to provide a
transfer agent and registrar for such Registrable Securities not later than the
effective date of such registration statement;
f) immediately notify each seller of Registrable Securities and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event or existence of any fact of which the Company has
knowledge as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing, and prepare and furnish to each such seller, as promptly thereafter as
is practicable, a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that such prospectus shall not include
an untrue statement or material fact or omit to state a material fact required
to be stated therein or necessary to make the statement therein not misleading
in light of the circumstances then existing;
g) if the offering is underwritten and at the request of any seller
of Registrable Securities, use its best efforts to furnish on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration: (i) an opinion dated such date of counsel representing the
Company for the purposes of such registration, addressed to the underwriters and
to such seller, stating that such registration statement has become effective
under the Securities Act and that (A) to the best knowledge of such counsel, no
stop order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or contemplated
under the Securities Act, (B) the registration statement, the related prospectus
and each amendment or supplement thereof comply as to form in all material
respects with the requirements of the Securities Act (except that such counsel
need not express any opinion as to financial statements contained therein), and
(C) to such other effects as reasonably may be requested by counsel for the
underwriters or by such seller or its counsel and (ii) a letter dated such date
from the independent public accountants retained by the Company, addressed to
the underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;
and
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<PAGE> 9
h) make available for inspection by each seller of Registrable
Securities, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement of the Company
(in form complying with the provisions of Rule 158 under the Securities Act)
covering the period of at least 12 months, but not more than 18 months,
beginning with the first month after the effective date of the registration
statement;
j) notify each seller of any Registrable Securities covered by such
registration statement (i) when the prospectus or any prospectus supplement or
post-effective amendment has become effective, (ii) of any request by the
Commission for amendments or supplements to such registration statement or to
amend or to supplement such prospectus or for additional information after the
effectiveness of such registration statement, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of such registration
statement or the initiation of any proceedings for that purpose and (iv) of the
suspension of the qualification of such securities for offering or sale in any
jurisdiction, or of the institution of any proceedings for any of such purposes;
k) use reasonable effort to obtain the lifting of any stop order
that might be issued suspending the effectiveness of such registration statement
at the earliest possible moment;
l) use its best efforts to (i) cause all such Registrable Securities
to be listed on each such securities exchange or automated quotation system on
which similar securities issued by the Company are then listed, and (ii) to
provide a transfer agent and registrar for such Registrable Securities not later
than the effective date of such registration statement; and
m) enter into such agreements and take such other actions as the
sellers of Registrable Securities or the underwriters reasonably request in
order to expedite or facilitate the disposition of such Registrable Securities,
including, without limitation, preparing for, and participating in, such number
of "road shows" and all such other customary selling efforts as the underwriters
reasonably request in order to expedite or facilitate such disposition provided,
however, that the Company shall not be required in connection with this
paragraph (m) to qualify as a foreign corporation or execute a general consent
to service of process in any jurisdiction.
For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of
distribution of Registrable Securities in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Registrable Securities in any other registration shall be deemed to extend
until the earlier of the sale of all Registrable Securities covered thereby and
120 days after the effective date thereof.
In connection with each registration hereunder, the sellers of Registrable
Securities will furnish to the Company in writing such information with respect
to themselves and the proposed
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<PAGE> 10
distribution by them as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Sections 4, 5 or 6
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
8. Expenses. All expenses incurred by the Company in complying with
Sections 4, 5 and 6, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., fees and expenses
associated with listing securities on an exchange or for quotation on Nasdaq,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fees and disbursements of one counsel for the sellers of Registrable Securities,
but excluding any Selling Expenses, are called "Registration Expenses." All
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities are called "Selling Expenses."
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 4, 5 or 6. All Selling Expenses in
connection with each registration statement under Sections 4, 5 or 6 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
9. Indemnification and Contribution. (a) In the event of a registration
of any of the Registrable Securities under the Securities Act pursuant to
Sections 4, 5 or 6, the Company will indemnify and hold harmless each seller of
such Registrable Securities thereunder and the officers, directors, trustees and
controlling persons of such seller, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such
indemnified person or underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Securities Act pursuant to Sections 4, 5 or 6, any
preliminary prospectus or final prospectus or summary prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each such seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus.
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<PAGE> 11
In the event of a registration of any of the Registrable Securities under the
Securities Act pursuant to Sections 4, 5 or 6, each seller of such Registrable
Securities thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities to which the Company or such
officer, director, underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Securities Act pursuant to Sections 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
(including any post-effective amendment) or supplement thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that such seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such seller, as such, furnished
in writing to the Company by such seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
liability of each seller hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of the shares sold by such seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by such seller from the sale of Registrable Securities covered by such
registration statement.
(b) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 9 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof jointly with any other
indemnifying party similarly notified, except in the event one of the
indemnifying parties is the Company, in which case the Company may, in its sole
discretion, assume and undertake such defense on its own, with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party
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<PAGE> 12
and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to
those available to the indemnifying party or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party and that it is advisable that such indemnified party be
represented by separate counsel, the indemnified party shall have the right to
select a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the expenses and fees of a
maximum of one such separate counsel for all such indemnified parties and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
(c) No indemnifying party, in defense of any such claim or
litigation, shall, except with the consent of such indemnified party, which
consent shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which does not include as a term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Securities exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 9 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 9 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 9; then, and in each such case, the Company and such
holder will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
so that such holder is responsible for the portion represented by the percentage
that the public offering price of its Registrable Securities offered by the
registration statement bears to the public offering price of all securities
offered by such registration statement, and the Company is responsible for the
remaining portion; provided, however, that, in any such case, (A) no such holder
will be required to contribute any amount in excess of the public offering price
of all such Registrable Securities offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
10. Changes in Common Stock or Preferred Stock. If, and as often as,
there is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock or
the Preferred Stock as so changed.
11. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, at all
times after 90 days after any registration
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<PAGE> 13
statement covering a public offering of securities of the Company under the
Securities Act shall have become effective, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) furnish to each holder of Registrable Securities forthwith
upon request a written statement by the Company as to its compliance
with the reporting requirements of such Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports
and documents so filed by the Company as such holder may reasonably
request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any Registrable Securities
without registration.
12. Representations and Warranties. (a) The Company represents and
warrants to the Investors as follows:
(i) The execution, delivery and performance of this
Agreement by the Company have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, the Charter or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(ii) This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, subject, as to enforcement of
remedies, to the discretion of courts in awarding equitable relief and to
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting the rights of creditors generally.
(b) Each Investor represents and warrants to the Company and
the other Investors as follows:
(i) The execution, delivery and performance of this
Agreement by such Investor has been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency or government, the Charter or By-Laws (or similar organization
documents) of such Investor or any provision of any indenture, agreement or
other instrument to which it or any of its properties or assets is bound,
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of such Investor.
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<PAGE> 14
(ii) This Agreement has been duly executed and delivered by such
Investor and constitutes the legal, valid and binding obligation of such
Investor, enforceable in accordance with its terms, subject, as to enforcement
of remedies, to the discretion of courts in awarding equitable relief and to
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting the rights of creditors generally.
13. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of Registrable Securities), whether so expressed or not,
provided, however, that registration rights conferred herein on the holders of
Registrable Securities shall only inure to the benefit of a transferee of
Registrable Securities if (i) there is transferred to such transferee at least
20% of the total shares of Registrable Securities originally issued pursuant to,
or held as of the date of, the Purchase Agreement to the direct or indirect
transferor of such transferee or (ii) such transferee is a family member,
partner, shareholder or affiliate of a party hereto.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(i) if to the Company or any other party hereto, at the address
of such party set forth in the purchase agreement by which such
party acquired Preferred Stock from the Company;
(ii) if to any subsequent holder of Preferred Shares or
Registrable Securities, to it at such address as may have been
furnished to the Company in writing by such holder; or
(iii) in any case, at such other address or addresses as shall
have been furnished in writing to the Company (in the case of a
holder of Registrable Securities) or to the holders of
Registrable Securities (in the case of the Company) in
accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of (i) the Company, (ii)
the holders of a majority of the Class B Restricted Stock, (iii) the
holders of a majority of the Class C Restricted Stock, (iv) the holders of
a majority of the Class D Restricted Stock, (v) the holders of a majority
of the Class E Restricted Stock, (vi) the holders of a majority of the
Class F Restricted Stock and (vii) the holders of at least two-thirds of
the outstanding shares of Registrable Securities.
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<PAGE> 15
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(f) The obligations of the Company to register shares of
Registrable Securities under Sections 4, 5 or 6 shall terminate on
July 12, 2011.
(g) If requested in writing by the underwriters for the
initial underwritten public offering of securities of the Company,
each holder of Registrable Securities who is a party to this
Agreement shall agree not to sell publicly any shares of Registrable
Securities or any other shares of Common Stock (other than shares of
Registrable Securities or other shares of Common Stock being
registered in such offering), without the consent of such
underwriters, for a period of not more than 180 days following the
effective date of the registration statement relating to such
offering; provided, however, that all persons entitled to
registration rights with respect to shares of Common Stock who are
not parties to this Agreement, all other persons selling shares of
Common Stock in such offering, all persons holding in excess of 1%
of the capital stock of the Company on a fully diluted basis and all
executive officers and directors of the Company shall also have
agreed not to sell publicly their Common Stock under the
circumstances and pursuant to the terms set forth in this Section
13(g).
(h) Notwithstanding the provisions of Section 7(a), the
Company's obligation to file a registration statement, or cause such
registration statement to become and remain effective, shall be
suspended for a period not to exceed 90 days in any 24 month period
if there exists at the time material nonpublic information relating
to the Company which, in the reasonable opinion of the Company,
should not be disclosed.
(i) The Company shall not grant to any third party any
registration rights more favorable than or inconsistent with any of
those contained herein, so long as any of the registration rights
under this Agreement remains in effect.
(j) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not
in any manner affect or render illegal, invalid or unenforceable any
other provision of this Agreement, and this Agreement shall be
carried out as if any such illegal, invalid or unenforceable
provision were not contained herein.
(k) The parties to this Agreement that are also parties to the
Second Amended Agreement agree that this Third Amended Agreement
supersedes the Second Amended Agreement and that the Second Amended
Agreement is terminated in its entirety upon execution of this
Agreement.
Please indicate your acceptance of the foregoing by signing and
returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between the Company and you.
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Very truly yours,
CAREERBUILDER, INC.
By: /s/ ROBERT MCGOVERN
-----------------------------
Name: Robert McGovern
Title: CEO
AGREED TO AND ACCEPTED as of the date first written above:
PRIOR INVESTORS
21ST CENTURY INTERNET VENTURE
PARTNERS, LLC
By: 21st CENTURY INTERNET FUND
By: /s/ J. NEIL WEINTRAUT
-----------------------
Name: J. Neil Weintraut
Title:
16
<PAGE> 17
NEW ENTERPRISE ASSOCIATES VI,
LIMITED PARTNERSHIP
By: NEA PARTNERS VI, LIMITED
PARTNERSHIP
By: /s/ PETER BARRIS
--------------------------
Name:
Title:
THOMSON U.S. INC.
By: /s/ JAMES R. SCHURR
---------------------------------
Name: James R. Schurr
Title: Vice President
ADP, INC.
By: /s/ GARY C. BUTLER
---------------------
Name:
Title:
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FBR TECHNOLOGY VENTURE
PARTNERS, L.P.
By: /s/ GENE RIECHERS
-------------------------
Name: Gene Riechers
Title: Managing Director
FBR ECOMM, L.P.
By: /s/ GENE RIECHERS
-------------------------
Name: Gene Riechers
Title: Managing Director
/s/ JOHN BURTON
------------------------------
JOHN BURTON, INDIVIDUALLY
/s/ BARRY GOLDSMITH
------------------------------
BARRY GOLDSMITH, INDIVIDUALLY
/s/ MARK GRUHIN
------------------------------
MARK GRUHIN, INDIVIDUALLY
/s/ ROBERT MCGOVERN
------------------------------
ROBERT MCGOVERN, INDIVIDUALLY
/s/ DAVID WETMORE
------------------------------
DAVID WETMORE, INDIVIDUALLY
/s/ JAMES WINCHESTER
------------------------------
JAMES WINCHESTER, INDIVIDUALLY
18
<PAGE> 19
NEW INVESTORS
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ TONY J. PANTUSO
----------------------------------
Name: Tony J. Pantuso
Title: Dept Ops Manager
GENERAL ELECTRIC PENSION TRUST
By: /s/ DONALD W. TOREY
----------------------------------
Name: Donald W. Torey
Title: Executive Vice President
/s/ SUZANNE HOOPER KING
-----------------------------------------
SUZANNE HOOPER KING, INDIVIDUALLY
19
<PAGE> 20
Schedule I
Prior Investors
FBR Technology Venture Partners, L.P.
FBR eComm, L.P.
21st Century Internet Venture Partners, LLC
New Enterprise Associates VI, Limited Partnership
NEA Presidents' Fund, L.P.
John Burton
Barry Goldsmith
Mark Gruhin
Robert McGovern
David Wetmore
James Winchester
Thomson U.S. Inc.
ADP, Inc.
20
<PAGE> 21
Schedule II
New Investors
GE Capital Equity Investments, Inc.
General Electric Pension Trust
Susanne Hooper King
21
<PAGE> 1
EXHIBIT 10.6
AMENDED AND RESTATED STOCK RESTRICTION AGREEMENT
This AMENDED AND RESTATED AGREEMENT, made as of this 26th day of January,
1999, by and among CareerBuilder, Inc., a Delaware corporation (the "Company"),
Robert McGovern ("Mr. McGovern") and James Winchester ("Mr. Winchester") (each a
"Stockholder" and together, the "Stockholders"), the persons listed on Schedule
I hereto (the "Initial Purchasers") and the persons listed on Schedule II hereto
(the "Class F Purchasers," and together with the Initial Purchasers, the
"Purchasers"), amends and restates certain Stock Restriction Agreements, made as
of the 12th day of July, 1996, by and among the Company, Mr. McGovern, and the
persons listed as Purchasers in the signature pages thereto and by and among the
Company, Mr. Winchester, and the persons listed as Purchasers in the signature
pages thereto.
WHEREAS, Mr. McGovern is the holder of an aggregate of 2,901,250 shares
of common stock, par value $.001 per share, of the Company (the "Common Stock")
and 199,290 shares of Class A Convertible Preferred Stock, par value $.001 per
share (the "Class A Convertible Preferred Stock");
WHEREAS, Mr. Winchester is the holder of an aggregate of 693,750 shares
of Common Stock;
WHEREAS, the Class F Purchasers are acquiring an aggregate of 2,018,350
shares of Class F Convertible Preferred Stock, par value $.001 per share (the
"Class F Convertible Preferred Stock") of the Company pursuant to the terms of
the Class F Convertible Preferred Stock Purchase Agreement, dated of even date
herewith, between the Company and the Class F Purchasers (the "Purchase
Agreement"); and
WHEREAS, the parties hereto agree to be bound by the provisions hereof;
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company and to further the interests of the Company and its present and
future stockholders, the parties hereby agree with each other as follows:
1. Certain Defined Terms. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) "Stock" shall mean and include all shares of Common Stock,
and all other securities of the Company which may be convertible into, issued in
exchange for or in respect of shares of Common Stock (whether by way of stock
split, stock dividend, combination, reclassification, reorganization, or any
other means).
<PAGE> 2
(b) "Shares" shall mean and include all shares of Stock now
owned or hereafter acquired by either (i) Mr. McGovern, (ii) Mr. Winchester,
(iii) any Initial Purchaser or (iv) any Class F Purchaser, as the case may be.
(c) "Sell," "Sale" or "Sold" shall mean to sell or in any way,
directly or indirectly, transfer, assign, exchange, distribute or otherwise
dispose of for any form of consideration.
2. Prohibited Transfers. (a) The Stockholders shall not Sell any of
their Shares except as expressly provided in this Agreement. Notwithstanding the
foregoing, each Stockholder may transfer all or any of his Shares (i) by way of
gift to any member of his family or to any trust for the benefit of any such
family member or the Stockholder, provided that any such transferee shall agree
in writing with the Company and the Purchasers, as a condition to such Sale, to
be bound by all of the provisions of this Agreement to the same extent as if
such transferee were a Stockholder, or (ii) by will or the laws of descent and
distribution, in which event each such transferee shall be bound by all of the
provisions of this Agreement to the same extent as if such transferee were a
Stockholder. As used herein, the word "family" shall include any spouse, lineal
ancestor or descendant, brother or sister.
(b) In addition to the foregoing, if requested by the
underwriters for the initial underwritten public offering of Stock, the
Stockholders shall agree not to Sell all or any of their Shares, without the
written consent of such underwriters, for a period of not more than 180 days
following the effective date of the registration statement relating to such
offering. This Section 2(b) shall expressly survive a termination of this
Agreement pursuant to clause (a) of Section 7 hereof.
(c) The Stockholders shall not pledge, mortgage, encumber or
hypothecate their Shares.
3. Right of First Refusal on Dispositions.
(a) If at any time a Stockholder desires to Sell all or any
part of his Shares pursuant to a bona fide offer from a third party
(the "Proposed Transferee"), the Stockholder shall submit a written offer (the
"Offer"), in accordance with Section 11 of this Agreement, to Sell such Shares
(the "Offered Shares") to the Company on terms and conditions, including price
per Share, not less favorable to the Company than those on which the
Stockholder proposes to Sell such Offered Shares to the Proposed Transferee.
The Offer shall disclose the identity of the Proposed Transferee, the Offered
Shares proposed to be Sold, the total number of Shares owned by the
Stockholder, the terms and conditions, including price per Share, of the
proposed Sale, and any other material facts relating to the proposed Sale. The
Offer shall further state that the Company may acquire, in accordance with the
provisions of this Agreement, all or any portion of the Offered Shares for the
price and upon the other terms and
-2-
<PAGE> 3
conditions, including deferred payment (if applicable), set forth therein. If
the consideration to be paid by the Proposed Transferee is anything other than
cash, the Company, at its option, may purchase the Offered Shares for the cash
equivalent of such non-cash consideration.
(b) If the Company desires to purchase all or any part of the
Offered Shares, the Company shall communicate in writing its election to
purchase to the Stockholder, which communication shall state the number of
Offered Shares the Company desires to purchase and shall be given to the
Stockholder in accordance with Section 11 below within thirty days of the date
the Offer was made. Such communication shall, when taken in conjunction with the
Offer, be deemed to constitute a valid, legally binding and enforceable
agreement for the Sale and purchase of such Offered Shares. Sales of the Offered
Shares pursuant to this Section 3 shall be made at the offices of the Company on
the 45th day following the date the Offer was made (or if such 45th day is not a
business day, then on the next succeeding business day). Such Sales shall be
effected by the Stockholder's delivery to the Company of a certificate or
certificates evidencing the Offered Shares to be purchased by it, duly endorsed
for transfer to the Company, against payment to the Stockholder of the purchase
price therefor by the Company.
(c) If the Company does not purchase all of the Offered Shares,
the Offered Shares not so purchased may be Sold by the Stockholder at any time
within 90 days after the date the Offer was made, subject to the provisions of
Sections 4, 5 and 6. Any such Sale shall be to the Proposed Transferee, at not
less than the price and upon other terms and conditions, if any, not more
favorable to the Proposed Transferee than those specified in the Offer. Any
Offered Shares not Sold within such 90-day period shall continue to be subject
to the requirements of a prior offer pursuant to this Section 3. If Offered
Shares are Sold pursuant to this Section 3 to any purchaser who is not a party
to this Agreement, the Offered Shares so Sold shall no longer be subject to this
Agreement, but shall remain subject, if applicable by their terms, to the Third
Amended and Restated Registration Rights Agreement and the Class B Stock
Purchase Agreement dated July 12, 1996 and the Class F Stock Purchase Agreement
of even date herewith, as the case may be.
4. Right of Participation in Sales.
(a) Rights of the Initial Purchasers and Certain Class A
Stockholders. If at any time a Stockholder desires to Sell all or any part of
the Shares owned by him (the "Offered Shares") to any person or entity other
than one or more of the Initial Purchasers or a Class F Purchaser (the
"Buyer"), each of the Initial Purchasers, and John Burton, Barry Goldsmith,
Mark Gruhin and David Wetmore (the "Class A Stockholders") shall have the right
to Sell to the Buyer, as a condition to such Sale by the Stockholder, at the
same price per share and on the same terms and conditions as involved in such
Sale by such Stockholder, such number of Shares as is determined by multiplying
the number of Offered Shares by a fraction, the numerator of
-3-
<PAGE> 4
which is the number of Shares owned by such Stockholder or Participating
Purchaser, as the case may be, and the denominator of which is the sum of all
shares owned by such Stockholder and all the Participating Purchasers,
calculated immediately prior to the proposed Sale.
(b) Rights of the Class F Purchasers. Notwithstanding anything
set forth in Section 4(a), if at any time a Stockholder desires to Sell to any
bona fide third party purchaser (a "Third Party Purchaser") a number of Offered
Shares, other than pursuant to Section 2 of this Agreement, that will cause the
amount of Shares owned by him to decrease to a number that is 50% or less than
the number of Shares owned by such Stockholder on the date hereof, the
respective rights of such Stockholder, each Initial Purchaser, each Class A
Stockholder and each Class F Stockholder shall be governed by this Section 4(b).
As a condition of any such Sale to a Third Party Purchaser by any Stockholder,
each Participating Purchaser and such Stockholder shall have the right to Sell
to the Third Party Purchaser, at the same price per Share and on the same terms
and conditions as received by such Stockholder, such number of Shares as is
determined by multiplying the number of Offered Shares by a fraction, the
numerator of which is the number of Shares owned by such Stockholder or
Participating Purchaser, as the case may be, and the denominator of which is the
sum of all shares owned by such Stockholder and all the Participating
Purchasers, calculated immediately prior to the proposed Sale. For purposes of
this paragraph (b), the Class F Purchasers may participate to the full extent
allowed by the provisions of this paragraph in the Sale transaction that brings
the number of Shares owned by a Stockholder to 50% or less than the number of
Shares owned by such Stockholder on the date hereof and in any subsequent Sale
by such Stockholder.
(c) If the consideration to be paid pursuant to paragraphs (a)
and (b) above is anything other than cash, the Participating Purchaser (as
defined below) may, at its option, Sell the Offered Shares for the cash
equivalent of such non-cash consideration.
(d) The Stockholder shall give twenty (20) days prior written
notice of the terms and conditions of any proposed Sale subject to this Section
4 to the Initial Purchasers, Class A Stockholders and, if applicable, Class F
Stockholders. Such notification shall be given in accordance with Section 11
below. Until such time as the Class F Stockholders are eligible to participate
in any such Sale pursuant to paragraph (b) above, the Stockholder shall notify
the Class F Stockholders of the number of Shares Sold by him and the percentage
that such Shares are of the Stockholder's total Shares at least three days prior
to the date of such Sale.
(e) Each Initial Purchaser, Class A Stockholder or, if allowable
under the provisions of paragraph (b) above, Series F Purchaser wishing to so
participate in any Sale under this Section 4 (the "Participating Purchasers")
shall notify the Stockholder in writing of such intention within twenty days
after the date the Offer was made. Such notification shall be given to such
Stockholder in accordance with Section 11 below.
-4-
<PAGE> 5
(f) The Stockholder and each Participating Purchaser shall Sell
all, or at the option of the Buyer or the Third Party Purchaser, as the case may
be, any part of the Shares proposed to be Sold by them at the same price and
upon other terms and conditions, if any, not more favorable to the Buyer or the
Third Party Purchaser, as the case may be, than those in the Offer provided by
the Stockholder under Section 3 above;
(g) Any Shares Sold by the Stockholder or a Participating
Purchaser pursuant to this Section 4 shall no longer be subject to this
Agreement, but shall remain subject, if applicable by their terms, to the Third
Amended and Restated Stock Purchase Agreement dated July 12, 1996 and the Class
F Stock Purchase Agreement of even date herewith, as the case may be.
(h) The Participating Purchasers right to participate in Sales
pursuant to this Section 4 shall not apply with respect to Sales of Shares to
the Company under Section 3 herein.
5. Further Limitation as to Transfers by the Stockholders. In
addition to the other restrictions provided in this Agreement, the Stockholders
agree not to transfer any Restricted Shares (as defined in Section 6(b)), other
than to the Company, provided that the restrictions for this Section 5 shall
terminate upon the earlier to occur of (a) a Qualifying Public Offering (as
defined in Section 7), or (b) upon the involuntary termination of a
Stockholder's employment with the Company due to illness, a death in the family
or acts of God outside of such Stockholder's control, other than for cause (as
defined in Section 6(e)).
6. Option of Company Upon Termination of Employment.
(a) If a Stockholder shall for any reason, other than illness, a
death in the family or acts of God, other than for cause (as defined in Section
6(e)), voluntarily terminates his employment in any capacity by the Company or
any of its subsidiaries, the Company may within 140 days from the date upon
which the Stockholder shall so terminate his employment, purchase from such
Stockholder up to all of his Restricted Shares in accordance with this Section
6.
(b) "Restricted Shares" shall mean 33-1/3% of a Stockholder's
Shares owned as of the date hereof until July 12, 1999 and no Shares thereafter.
(c) The purchase price of any Restricted Share for which the
Company exercises its option under this Section 6 (the "Option Price") shall be
the Fair Value Per Share multiplied by the number of Restricted Shares that the
Company elects to purchase. "Fair Value Per Share" shall mean, as of the date of
determination, the fair value of each Share determined in good faith by the
Board of Directors of the Company (without the participation of the Stockholder)
and the Stockholder, except as otherwise determined
-5-
<PAGE> 6
pursuant to this Section 6(c). If the Board of Directors and the Stockholder
agree upon the fair value of each Share within thirty (30) days of the date upon
which the Company's option to purchase the Shares commenced, such agreement
shall determine the Fair Value Per Share. In the event that no such agreement is
reached before the end of such 30-day period, the Fair Value Per Share shall be
determined by an independent appraiser selected jointly by the Board of
Directors of the Company (without the participation of the Stockholder) and the
Stockholder. Such independent appraiser shall be selected by the Board of
Directors of the Company (without the participation of the Stockholder) and the
Stockholder within ten (10) days of the expiration of such thirty (30) day
period, and such appraiser shall determine the fair value of each Shares within
twenty (20) days of such appointment. If the Board of Directors of the Company
(without the participation of the Stockholder) and the Stockholder are unable to
reach an agreement as to the identity of an independent appraiser within this
ten (10) day period, then the Board of Directors of the Company (without the
participation of the Stockholder) and the Stockholder shall each have an
addition ten (10) days to separately appoint an independent appraiser. Each of
the Board of Directors of the Company (without the participation of the
Stockholder) and the Stockholder will cause the appraiser appointed by them to
determine, independently, the fair value of each Share, within twenty (20) days
after the time of their respective appointment. If the lesser of the two
appraised values so determined (the "Low Value") exceeds or is equal to ninety
percent (90%) of the value of the greater of the two appraised values (the "High
Value"), then the Fair Value Per Share will be deemed to be equal to the average
of the two appraisals. If the Low Value is less than ninety percent (90%) of the
High Value, then the two appraisers will themselves appoint a third appraiser
within ten (10) days after the two appraisals have been rendered. Such third
appraiser will have twenty (20) days from the date of his or her appointment in
which to select, independently, either the High Value or the Low Value as the
Fair Value Per Share. Such determination shall be binding on all parties
concerned. The expenses of the appraisals will be borne equally by the Company
and the Stockholder. The Fair Value Per Share shall not be discounted by the
Company or any appraiser on account of the Shares being held by a minority
stockholder.
(d) If the Company desires to exercise its option to purchase,
it shall do so by communicating in writing its election to purchase to the
Stockholder which shall sell his Restricted Shares, which communication shall
state the number of Restricted Shares the Company is electing to purchase and
the Option Price and shall be given to the Stockholder in accordance with
Section 11 below within the 120-day period after the Stockholder terminates his
employment. The Sale of the Restricted Shares to be sold to the Company pursuant
to this Section 6 shall be made at the offices of the Company on the 20th day
following the determination of the Fair Value Per Share pursuant to Section 6(c)
or if such 20th day is not a business day, then on the next succeeding business
day). Such Sale shall be effected by the Stockholder's delivery to the Company
of a certificate or certificates evidencing the Restricted Shares to be
purchased by it, duly endorsed for transfer to the Company, against payment to
-6-
<PAGE> 7
the Stockholder by the Company of the Option Price for each Restricted Share to
be purchased by the Company.
(e) If a Stockholder's employment is terminated for cause (as
defined below), the Company may elect to purchase the Restricted Shares as
calculated above, or have the Stockholder appoint the Company to act as his
irrevocable proxy and attorney-in-fact with respect to all of his Shares for the
purpose of voting his Shares (or rendering any written consent in lieu thereof)
for all purposes. "Cause" as used throughout this Agreement shall mean (i)
conviction of fraud; (ii) conviction of a felony (other than a vehicular-related
felony) that seriously impairs the Stockholder's ability to perform his duties
as an employee of the Company; or (iii) the Stockholder's willful or deliberate
failure to adhere to the Company's policies or to perform his employment
responsibilities in the best interests of the Company.
(f) In addition to the other restrictions provided in this
Agreement, in no event shall a Stockholder Sell any Shares (including the
Restricted Shares) pursuant to this Agreement if, upon completing such Sale, the
Stockholder would be unable to meet his obligations (whether accrued or
contingent) under this Section 6.
7. Term. This Agreement shall terminate (a) immediately prior to the
consummation of the first firm commitment underwritten public offering pursuant
to an effective registration statement on Form S-1 (or its then equivalent)
under the Securities Act of 1933, as amended, pursuant to which the aggregate
price paid by the public for the purchase of Stock is at least $30,000,000 and
the price paid by the public for such shares shall be at least $7.00 per share,
as adjusted for any stock split, stock dividend, recapitalization or other such
event (unless such qualifying amount is waived under the Class F Convertible
Preferred Stock Purchase Agreement and/or the Third Amended and Restated
Registration Rights Agreement, both of even date herewith) or (b) July 12, 2003,
whichever occurs first.
8. Failure to Deliver Shares. If a Stockholder becomes obligated to
Sell any Shares to the Company under this Agreement and fails to deliver such
Shares in accordance with the terms of this Agreement, the Company may, at its
option, in addition to all other remedies it may have, send to the Stockholder
the purchase price for such Shares as is herein specified. Thereupon, the
Company upon written notice to the Stockholder, (a) shall cancel on its books
the certificate or certificates representing the Shares to be Sold and (b) shall
issue, in lieu thereof, in the name of the Company, a new certificate or
certificates representing such Shares, and thereupon all of the Stockholder's
rights in and to such Shares shall terminate.
9. Specific Enforcement. The Stockholders expressly agree that the
Purchasers and the Company will be irreparably damaged if this Agreement is not
specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by the Stockholders, the
Purchasers and the Company shall, in addition to all other remedies,
-7-
<PAGE> 8
each be entitled to a temporary or permanent injunction, without showing any
action damage, and/or a decree for specific performance, in accordance with the
provisions hereof.
10. Legend. Each certificate evidencing any of the Shares owned by a
Stockholder shall bear a legend substantially as follows:
"The shares represented by this certificate are subject to
restrictions on transfer and may not be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of except
in accordance with and subject to all the terms and conditions of a
certain Amended and Restated Stock Restriction Agreement dated as
of January 26, 1999, a copy of which the Company will furnish to
the holder of this certificate upon request and without charge."
11. Notices. Notices given hereunder shall be deemed to have been
duly given on the date of personal delivery, on the date of postmark if mailed
by certified or registered mail, return receipt requested, or on the date sent
by telecopier or telex to the party being notified at his or its address
specified on the applicable signature page hereto or such other address as the
addressee may subsequently notify the other parties of in writing.
12. Entire Agreement and Amendments. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the parties hereto;
provided, however, that Initial Purchasers owning at least two-thirds of the
Shares owned by all Initial Purchasers and the Class F Purchasers owning at
least two-thirds of the Shares owned by all Class F Purchasers, with the Initial
Purchasers and the Class F Purchasers voting as separate classes, may effect any
such waiver, modification, amendment or termination on behalf of all of the
Purchasers. To the extent any term or other provision of any other indenture,
agreement or instrument by which any party hereto is bound conflicts with this
Agreement, this Agreement shall have precedence over such conflicting term or
provision.
13. Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of Delaware and shall be binding upon the heirs, personal
representatives, executors, administrators, successors and assigns of the
parties.
14. Waivers. No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.
15. Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only
-8-
<PAGE> 9
to such provision and shall not in any manner affect or render illegal, invalid
or unenforceable any other provision of this Agreement, and this Agreement shall
be carried out as if any such illegal, invalid or unenforceable provision were
not contained herein.
16. Captions. Captions are for convenience only and are not deemed
to be part of this Agreement.
17. Continuation of Employment. Nothing in this Agreement shall
create an obligation on the Company or the Purchasers to continue the
Stockholders' employment with the Company.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-9-
<PAGE> 10
Executed on this 26th day of January, 1999.
CAREERBUILDER, INC.
By: /s/ ROBERT MCGOVERN
-----------------------------
Name: Robert McGovern
Title: CEO
PURCHASERS
21ST CENTURY INTERNET VENTURE
PARTNERS, LLC
By: 21st Century Internet Fund
By: /s/ J. NEIL WEINTRAUT
---------------------------
Name:
Title:
NEW ENTERPRISE ASSOCIATES VI,
LIMITED PARTNERSHIP
By: NEA Partners VI, Limited Partnership
By: /s/ PETER BARRIS
---------------------------
Name:
Title:
-10-
<PAGE> 11
THOMSON U.S. INC.
By: /s/ JAMES R. SCHURR
-----------------------------------
Name: James R. Schurr
Title: Vice President
ADP, INC.
By: /s/ GARY C. BUTLER
-----------------------------------
Name:
Title:
FBR TECHNOLOGY VENTURE
PARTNERS, L.P.
By: /s/ GENE RIECHERS
-----------------------------------
Name: Gene Riechers
Title: Managing Director
FBR eCOMM, L.P.
By: /s/ GENE RIECHERS
-----------------------------------
Name: Gene Riechers
Title: Managing Director
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ THOMAS W. NAUGHTON, IV
-----------------------------------
Name: Thomas W. Naughton, IV
Title: Region Operations Manager
-11-
<PAGE> 12
GENERAL ELECTRIC PENSION TRUST
By: /s/ DONALD W. TOREY
----------------------------------
Name: Donald W. Torey
Title: Executive Vice President
/s/ SUZANNE HOOPER KING
-----------------------------------------
SUZANNE HOOPER KING, INDIVIDUALLY
/s/ JOHN BURTON
--------------------------------
JOHN BURTON, INDIVIDUALLY
/s/ BARRY GOLDSMITH
--------------------------------
BARRY GOLDSMITH, INDIVIDUALLY
/s/ MARK GRUHIN
--------------------------------
MARK GRUHIN, INDIVIDUALLY
/s/ DAVID WETMORE
--------------------------------
DAVID WETMORE, INDIVIDUALLY
STOCKHOLDERS
/s/ ROBERT MCGOVERN
--------------------------------
ROBERT MCGOVERN, INDIVIDUALLY
/s/ JAMES WINCHESTER
--------------------------------
JAMES WINCHESTER, INDIVIDUALLY
-12-
<PAGE> 13
Schedule I
Prior Investors
FBR Technology Venture Partners, L.P.
FBR eComm, L.P.
21st Century Internet Venture Partners, LLC
New Enterprise Associates VI, Limited Partnership
NEA Presidents' Fund, L.P.
John Burton
Barry Goldsmith
Mark Gruhin
Robert McGovern
David Wetmore
James Winchester
Thomson U.S. Inc.
ADP, Inc.
13
<PAGE> 14
Schedule II
New Investors
GE Capital Equity Investments, Inc.
General Electric Pension Trust
Suzanne Hooper King
14
<PAGE> 1
EXHIBIT 10.8
CLASS D CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
between
NETSTART, INC.
and
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
Dated as of September 11, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
ARTICLE I THE PREFERRED SHARES........................................................... 1
1.1 Issuance, Sale and Delivery
of the Preferred Shares........................................ 1
1.2 Closing .......................................................... 1
1.3 Subsequent Authorizations and Sales............................... 1
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.................................................... 2
2.1 Organization, Qualifications and
Corporate Power .............................. 2
2.2 Authorization of Agreements, Etc. 2
2.3 Validity .............................. 3
2.4 Authorized Capital Stock.......................................... 3
2.5 Financial Statements.............................................. 4
2.6 Events Subsequent to the Date of the
Balance Sheet .............................. 5
2.7 Litigation; Compliance with Law................................... 5
2.8 Proprietary Information of Third Parties.......................... 6
2.9 Patents, Trademarks, Etc.......................................... 6
2.10 Title to Properties .............................. 7
2.11 Leasehold Interests .............................. 7
2.12 Insurance .............................. 7
2.13 Taxes .............................. 7
2.14 Other Agreements .............................. 8
2.15 Loans and Advances................................................ 10
2.16 Assumptions, Guaranties, Etc.
of Indebtedness of Other Persons............................... 10
2.17 Significant Customers and Suppliers............................... 10
2.18 Governmental Approvals............................................ 10
2.19 Disclosure .............................. 10
2.20 Offering of the Preferred Shares.................................. 11
2.21 Brokers .............................. 11
2.22 Officers .............................. 11
2.23 Transactions With Affiliates...................................... 11
2.24 Employees .............................. 11
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
2.25 U.S. Real Property Holding Corporation............................ 12
2.26 ERISA .............................. 12
2.27 Disqualified Persons.............................................. 13
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS.................................. 13
ARTICLE IV CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASERS.................................. 14
ARTICLE V COVENANTS OF THE COMPANY.......................................... 19
5.1 Financial Statements, Reports, Etc. .............................. 19
5.2 Right of First Offer .............................. 20
5.3 Reserve for Conversion Shares..................................... 22
5.4 Corporate Existence............................................... 22
5.5 Properties, Business, Insurance................................... 22
5.6 Inspection, Consultation and Advice............................... 23
5.7 Restrictive Agreements Prohibited................................. 23
5.8 Transactions with Affiliates...................................... 23
5.9 Use of Proceeds .............................. 23
5.10 Board of Directors Meetings....................................... 23
5.11 Compensation .............................. 24
5.12 By-laws .............................. 24
5.13 Performance of Contracts.......................................... 24
5.14 Vesting of Reserved Employee Shares............................... 24
5.15 Employee Nondisclosure and
Developments Agreements........................................ 24
5.16 Activities of Subsidiaries........................................ 24
5.17 Compliance with Laws.............................................. 24
5.18 Keeping of Records and Books of Account........................... 25
5.19 Change in Nature of Business...................................... 25
5.20 U.S. Real Property Interest Statement............................. 25
5.21 Rule 144A Information............................................. 25
5.22 Termination of Covenants 26
ARTICLE VI MISCELLANEOUS................................................................. 26
6.1 Expenses .............................. 26
6.2 Survival of Agreements............................................ 26
</TABLE>
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<TABLE>
<S> <C> <C> <C>
6.3 Brokerage .............................. 26
6.4 Parties in Interest .............................. 26
6.5 Notices .............................. 27
6.6 Governing Law .............................. 27
6.7 Entire Agreement .............................. 27
6.8 Counterparts .............................. 27
6.9 Amendments .............................. 27
6.10 Severability .............................. 27
6.11 Titles and Subtitles .............................. 27
6.12 Assignment .............................. 27
6.13 Certain Defined Terms............................................. 28
</TABLE>
INDEX TO SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Security Holders
SCHEDULE IV Agreements
SCHEDULE V Disqualified Persons
INDEX TO EXHIBITS
EXHIBIT A Form of Amended and Restated Registration Rights Agreement
EXHIBIT B Charter and All Amendments Thereto
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THIS CLASS D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is made as of September 11, 1997 between NetStart, Inc., a Delaware
corporation (the "Company"), and the several purchasers named in the attached
Schedule I (individually a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of up to 2,045,785 shares (the "Preferred Shares") of the authorized
but unissued Class D Convertible Preferred Stock, $.001 par value, of the
Company (the "Class D Convertible Preferred Stock") in a transaction involving
two or more separate closing dates; and
WHEREAS, the Purchasers, severally, wish to purchase the Preferred
Shares on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE PREFERRED SHARES
1.1 Issuance, Sale and Delivery of the Preferred Shares. The
Company agrees to issue and sell to each Purchaser, and each Purchaser hereby
agrees to purchase from the Company, the number of Preferred Shares set forth
opposite the name of such Purchaser under the heading "Number of Preferred
Shares to be Purchased" on Schedule I, at the aggregate purchase price set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase Price
for Preferred Shares" on Schedule I.
1.2 Closing. The first closing shall take place at the offices
of Hale and Dorr LLP, 1455 Pennsylvania Avenue, N.W., Washington, D.C. 20004, at
10 a.m., on September 11, 1997, or at such other location, date and time as may
be agreed upon between the Purchasers and the Company (such closing being called
the "Closing" and such date and time being called the "Closing Date"). At the
Closing, the Company shall issue and deliver to each Purchaser a stock
certificate or certificates in definitive form, registered in the name of such
Purchaser, representing the Preferred Shares being purchased by it at the
Closing. As payment in full for the Preferred Shares being purchased by it under
this Agreement, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date each Purchaser shall (i) deliver to
the Company a check payable to the order of the Company, in the amount set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase Price
for Preferred Shares" on the "First Closing" list of Schedule I, (ii) transfer
such sum to the account of the Company by wire transfer, (iii) deliver to the
Company for cancellation
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promissory notes issued by the Company in the amount of such sum, or (iv)
deliver or transfer such sum to the Company by any combination of such methods
of payments.
1.3 Subsequent Authorizations and Sales. At any time on or
before the 90th day following the Closing, the Company may sell shares of Class
D Convertible Preferred Stock up to the total number of such shares authorized
by the Company's Certificate of Incorporation, as amended (the "Charter") less
any amounts already sold at the Closing, provided that at least one new
investor, which is unaffiliated with any then-current investor in the Company,
shall participate in such sale by purchasing at least a majority of the shares
of Class D Convertible Preferred Stock offered in such sale. All such sales
shall be made on the terms and conditions set forth in this Agreement and the
purchasers thereof shall be "Purchasers" under this Agreement; provided,
however, that the representations and warranties of the Company set forth in
this Agreement, its Exhibits and the disclosure set forth on Schedules II, III,
IV and V. shall speak as of the Closing and shall not be revised to reflect any
changes in the representations and warranties occurring after the Closing for
any such future closings. Should any such sales be made, the Company shall
prepare and distribute to the Purchasers a revised Schedule I reflecting such
sales.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that, except as
set forth in the Disclosure Schedule attached as Schedule II:
2.1 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification. The Company has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement and the Amended and Restated Registration Rights Agreement with the
Purchasers in the form attached as Exhibit A (the "Amended Registration Rights
Agreement"), to issue, sell and deliver the Preferred Shares and to issue and
deliver the shares of Common Stock, $.001 par value, of the Company ("Common
Stock") issuable upon conversion of the Preferred Shares (the "Conversion
Shares").
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(b) The Company has no subsidiaries. The Company does not (i)
own of record or beneficially, directly or indirectly, (A) any shares of capital
stock or securities convertible into capital stock of any other corporation or
(B) any participating interest in any partnership, joint venture or other
non-corporate business enterprise or (ii) control, directly or indirectly, any
other entity.
2.2 Authorization of Agreements, Etc.
(a) The execution and delivery by the Company of this Agreement
and the Amended Registration Rights Agreement, the performance by the Company of
its obligations hereunder and thereunder, the issuance, sale and delivery of the
Preferred Shares, and the issuance and delivery of the Conversion Shares have
been duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government, the
Charter or the By- laws of the Company, as amended, or any provision of any
indenture, agreement or other instrument to which the Company or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company. To the best of
the Company's knowledge, no provision of any of the Stock Restriction Agreements
dated July 12, 1996 (the "Stock Restriction Agreements") violates, conflicts
with, results in a breach of or constitutes (with due notice or lapse of time or
both ) a default by any other party under any other indenture, agreement or
instrument. The Purchasers shall not become, by virtue of this Agreement or any
documents related hereto, parties to or third party beneficiaries of such Stock
Restriction Agreements.
(b) The Preferred Shares have been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Class D Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or through the
Company except as set forth in the Amended Registration Rights Agreement and the
Charter. The Conversion Shares have been duly reserved for issuance upon
conversion of the Preferred Shares and, when so issued, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock with no
personal liability attaching to the ownership thereof and will be free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or
through the Company except as set forth in the Amended Registration Rights
Agreement. Neither the issuance, sale or delivery of the Preferred Shares nor
the issuance or delivery of the Conversion Shares is subject to any preemptive
right of stockholders of the Company, or to any right of first refusal or other
right in favor of any person, which have not been duly and validly waived.
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<PAGE> 8
2.3 Validity. This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms. The Amended Registration
Rights Agreement, when executed and delivered in accordance with this Agreement,
will constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms.
2.4 Authorized Capital Stock. The authorized capital stock of the
Company consists of (i) 1,562,500 shares of Class A Convertible Preferred Stock,
$.001 par value (the "Class A Preferred Stock"), (ii) 2,151,420 shares of Class
B Convertible Preferred Stock, $.001 par value (the "Class B Preferred Stock"),
(iii) 3,188,889 shares of Class C Convertible Preferred Stock, $.001 par value,
(the "Class C Preferred Stock"), (iv) 2,045,785 shares of Class D Convertible
Preferred Stock, $.001 par value, and (v) 16,000,000 shares of Common Stock.
Immediately prior to the Closing, 4,312,500 shares of Common Stock, 1,562,500
shares of Class A Preferred Stock, 2,151,420 shares of Class B Preferred Stock
and 3,188,889 shares of Class C Preferred Stock will be validly issued and
outstanding, fully paid and nonassessable with no personal liability attaching
to the ownership thereof and no shares of Class D Preferred Stock will have been
issued. The stockholders of record and holders of subscriptions, warrants,
options, convertible securities, and other rights (contingent or other) to
purchase or otherwise acquire equity securities of the Company, and the number
of shares of Common Stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by each, are as set
forth in the attached Schedule III. The designations, powers, preferences,
rights, qualifications, limitations and restrictions in respect of each class
and series of authorized capital stock of the Company are as set forth in the
Charter, a copy of which is attached as Exhibit B, and all such designations,
powers, preferences, rights, qualifications, limitations and restrictions are
valid, binding and enforceable and in accordance with all applicable laws.
Except as set forth in the attached Schedule III, (i) no person owns of record
or is known to the Company to own beneficially any share of Common Stock, Class
A Preferred Stock, Class B Preferred Stock or Class C Preferred Stock, (ii) no
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of the Company is
authorized or outstanding, and (iii) there is no commitment by the Company to
issue shares, subscriptions, warrants, options, convertible securities or other
such rights or to distribute to holders of any of its equity securities any
evidence of indebtedness or asset. Except as provided for in the Charter or as
set forth in the attached Schedule II, the Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interest therein or to pay any dividend or make any other
distribution in respect thereof. Except as set forth in Schedule II, to the best
of the Company's knowledge there are no voting trusts or agreements,
stockholders' agreements, pledge agreements, buy-sell agreements, rights of
first refusal, preemptive rights or proxies relating to any securities of the
Company (whether or not the Company is a party thereto). All of the outstanding
securities of the
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Company were issued in compliance with all applicable Federal and state
securities laws.
2.5 Financial Statements.
(a) The Company has furnished to the Purchasers the audited
balance sheet of the Company as of September 30, 1996 and the related audited
statements of income, stockholders' equity and cash flows of the Company for the
fiscal year ended September 30, 1996. All such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial position of the Company as
of September 30, 1996 and the results of its operations and cash flows for the
fiscal year ended September 30, 1996.
(b) The Company has furnished to the Purchasers the unaudited
balance sheet of the Company as of June 30, 1997 (the "Balance Sheet") and the
related unaudited statements of income, stockholders' equity, and cash flows of
the Company for the nine months ended June 30, 1997. All such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except that such unaudited financial statements
do not contain all of the required footnotes and are subject to normal year-end
adjustment) and fairly present the financial position of the Company as of June
30, 1997 and the results of its operations and cash flows for the nine months
ended June 30, 1997. Since the date of the Balance Sheet, (i) there has been no
change in the assets, liabilities or financial condition of the Company from
that reflected in the Balance Sheet except for changes in the ordinary course of
business which in the aggregate have not been materially adverse and (ii) none
of the business, prospects, financial condition, operations, property or affairs
of the Company have been materially adversely affected by any subsequent
occurrence or development, individually or in the aggregate, whether or not
insured against.
2.6 Events Subsequent to the Date of the Balance Sheet. Since the date
of the Balance Sheet, the Company has not (i) issued any stock, bond or
other corporate security, (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Balance Sheet and current liabilities incurred
since the date of the Balance Sheet in the ordinary course of business, (iv)
declared or made any payment or distribution to stockholders or purchased or
redeemed any shares of its capital stock or other security, (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or canceled any debt or claim, (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service mark,
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copyright, trade secret or other intangible asset, (viii) suffered any loss of
property or waived any right of substantial value whether or not in the ordinary
course of business, (ix) made any change in officer compensation except in the
ordinary course of business and consistent with past practice, (x) made any
material change in the manner of business or operations of the Company, (xi)
entered into any transaction except in the ordinary course of business or as
otherwise contemplated hereby or (xii) entered into any commitment (contingent
or otherwise) to do any of the foregoing.
2.7 Litigation; Compliance with Law. There is no (i) action, suit,
claim, proceeding or investigation pending or, to the best of the Company's
knowledge, threatened against or specifically affecting the Company, at law or
in equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise or (iii) governmental inquiry
pending or, to the best of the Company's knowledge, threatened against or
specifically affecting the Company (including without limitation any inquiry as
to the qualification of the Company to hold or receive any license or permit),
nor is the Company aware that there is any basis for the foregoing. The Company
has not received any opinion or memorandum or legal advice from legal counsel to
the effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business, prospects, financial
condition, operations, property or affairs. The Company is not in default with
respect to any order, writ, injunction or decree known to or served upon the
Company of any court or of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign. There is no action or suit by the Company pending or threatened against
others. To the best of the Company's knowledge, the Company has complied with
all laws, rules, regulations and orders applicable to its business, operations,
properties, assets, products and services, the Company has all necessary
permits, licenses and other authorizations required to conduct its business as
conducted and as proposed to be conducted, and the Company has been operating
its business pursuant to and in compliance with the terms of all such permits,
licenses and other authorizations. There is no existing law, rule, regulation or
order, and the Company after due inquiry is not aware of any proposed law, rule,
regulation or order, whether Federal, state, county or local, which would
prohibit or restrict the Company from, or otherwise materially adversely affect
the Company in, conducting its business in any jurisdiction in which it is now
conducting business or in which it proposes to conduct business.
2.8 Proprietary Information of Third Parties. To the best of the
Company's knowledge, no third party has claimed or has reason to claim that any
person employed by or affiliated with the Company has (a) violated or may be
violating any of the terms or conditions of his employment, non-competition or
non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third
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<PAGE> 11
party or (c) interfered or may be interfering in the employment relationship
between such third party and any of its present or former employees. No third
party has requested information from the Company which suggests that such a
claim might be contemplated. To the best of the Company's knowledge, no person
employed by or affiliated with the Company has employed or proposes to employ
any trade secret or any information or documentation proprietary to any former
employer, and to the best of the Company's knowledge, no person employed by or
affiliated with the Company has violated any confidential relationship which
such person may have had with any third party, in connection with the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Company, and the
Company has no reason to believe there will be any such employment or violation.
To the best of the Company's knowledge, none of the execution or delivery of
this Agreement, or the carrying on of the business of the Company as officers,
employees or agents by any officer, director or key employee of the Company, or
the conduct or proposed conduct of the business of the Company, will conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which any
such person is obligated.
2.9 Patents, Trademarks, Etc. Set forth in Schedule II is a list and
brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each case a brief description of the nature of
such right. The Company owns or possesses adequate licenses or other rights to
use all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know how (collectively,
"Intellectual Property") necessary or desirable to the conduct of its business
as conducted and as proposed to be conducted, and no claim is pending or, to the
best of the Company's knowledge, threatened to the effect that the operations of
the Company infringe upon or conflict with the asserted rights of any other
person under any Intellectual Property, and there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, and there is no basis for any such claim (whether or not pending or
threatened). All prior art known to the Company which may be or may have been
pertinent to the examination of any United States patent or patent application
listed in Schedule II has been cited to the United States Patent and Trademark
Office. To the best of the Company's knowledge, all technical information
developed by and belonging to the Company which has not been patented has been
kept confidential. The Company has not granted or assigned to any other person
or entity any right to manufacture, have manufactured,
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assemble or sell the products or proposed products or to provide the services or
proposed services of the Company.
2.10 Title to Properties. The Company has good, clear and marketable
title to its properties and assets reflected on the Balance Sheet or acquired by
it since the date of the Balance Sheet (other than properties and assets
disposed of in the ordinary course of business since the date of the Balance
Sheet), and all such properties and assets are free and clear of mortgages,
pledges, security interests, liens, charges, claims, restrictions and other
encumbrances (including without limitation, easements and licenses), except
liens for or current taxes not yet due and payable and minor imperfections of
title, if any, not material in nature or amount and not materially detracting
from the value or impairing the use of the property subject thereto or impairing
the operations or proposed operations of the Company, including without
limitation, the ability of the Company to secure financing using such properties
and assets as collateral. To the best of the Company's knowledge after due
inquiry, there are no condemnation, environmental, zoning or other land use
regulation proceedings, either instituted or planned to be instituted, which
would adversely affect the use or operation of the Company's properties and
assets for their respective intended uses and purposes, or the value of such
properties, and the Company has received no notice of any special assessment
proceedings which would affect such properties and assets.
2.11 Leasehold Interests. Each lease or agreement to which the Company
is a party under which it is a lessee of any property, real or personal, is a
valid and subsisting agreement, duly authorized and entered into, without any
default of the Company thereunder and, to the best of the Company's knowledge,
without any default thereunder of any other party thereto. No event has occurred
and is continuing which, with due notice or lapse of time or both, would
constitute a default or event of default by the Company under any such lease or
agreement or, to the best of the Company's knowledge, by any other party
thereto. The Company's possession of such property has not been disturbed and,
to the best of the Company's knowledge after due inquiry, no claim has been
asserted against the Company adverse to its rights in such leasehold interests.
2.12 Insurance. The Company holds valid policies covering all of the
insurance required to be maintained by it under Section 5.5.
2.13 Taxes. The Company has filed all tax returns, Federal, state,
county and local, required to be filed by it, and the Company has paid all taxes
shown to be due by such returns as well as all other taxes, assessments and
governmental charges which have become due or payable, including without
limitation all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors and third parties. The Company has established
adequate reserves for all taxes accrued but not yet payable. All tax elections
have been made by the Company in accordance with generally accepted practice.
The Federal income tax returns of the Company have never
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been audited by the Internal Revenue Service. No deficiency assessment with
respect to or proposed adjustment of the Company's Federal, state, county or
local taxes is pending or, to the best of the Company's knowledge, threatened.
There is no tax lien, whether imposed by any Federal, state, county or local
taxing authority, outstanding against the assets, properties or business of the
Company. Neither the Company nor any of its present or former stockholders has
ever filed an election pursuant to Section 1362 of the Internal Revenue Code of
1986, as amended (the "Code"), that the Company be taxed as an S corporation.
2.14 Other Agreements. Except as set forth in the attached Schedule IV,
the Company is not a party to or otherwise bound by any written or oral
agreement, instrument, commitment or restriction which individually or in the
aggregate could materially adversely affect the business, prospects, financial
condition, operations, property or affairs of the Company. Except as set forth
in the attached Schedule IV, the Company is not a party to or otherwise bound by
any written or oral:
(a) distributor, dealer, manufacturer's representative or sales
agency agreement which is not terminable on less than ninety (90) days' notice
without cost or other liability to the Company (except for agreements which, in
the aggregate, are not material to the business of the Company);
(b) sales agreement which entitles any customer to a rebate or
right of set-off, to return any product to the Company after acceptance thereof
or to delay the acceptance thereof, or which varies in any material respect from
the Company's standard form agreements;
(c) agreement with any labor union (and, to the knowledge of
the Company, no organizational effort is being made with respect to any of its
employees);
(d) agreement with any supplier containing any provision
permitting any party other than the Company to renegotiate the price or other
terms, or containing any pay-back or other similar provision, upon the
occurrence of a failure by the Company to meet its obligations under the
agreement when due or the occurrence of any other event;
(e) agreement for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(f) agreement for the employment of any officer, employee or
other person (whether of a legally binding nature or in the nature of an
informal understanding) on a full-time or consulting basis which is not
terminable on notice
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without cost or other liability to the Company, except normal severance
arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement, hospi-
talization, insurance, stock purchase, stock option or other plan, agreement or
understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans applicable to employees generally);
(h) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company;
(i) guaranty of any obligation for borrowed money or otherwise;
(j) voting trust or agreement, stockholders' agreement,
pledge agreement, buy-sell agreement or first refusal or preemptive rights
agreement relating to any securities of the Company;
(k) agreement, or group of related agreements with the
same party or any group of affiliated parties, under which the Company has
advanced or agreed to advance money or has agreed to lease any property as
lessee or lessor;
(l) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities;
(m) assignment, license or other agreement with respect to any
form of intangible property;
(n) agreement under which it has granted any person any
registration rights, other than the Amended Registration Rights Agreement;
(o) agreement under which it has limited or restricted its
right to compete with any person in any respect;
(p) other agreement or group of related agreements with
the same party involving more than $50,000 or continuing over a period of more
than six months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by the Company without penalty upon notice of thirty (30) days or
less, but excluding any agreement or group of agreements with a customer of the
Company for the sale, lease or rental of the Company's products or services if
such agreement or group of agreements was entered into by the Company in the
ordinary course of business; or
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(q) other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the Securities
and Exchange Commission (the "Commission") as an exhibit to a registration
statement on Form S-1 if the Company were registering securities under the
Securities Act of 1933, as amended (the "Securities Act").
The Company, and to the best of the Company's knowledge after due inquiry, each
other party thereto have in all material respects performed all the obligations
required to be performed by them to date (or each non-performing party has
received a valid, enforceable and irrevocable written waiver with respect to its
non-performance), have received no notice of default and are not in default
(with due notice or lapse of time or both) under any agreement, instrument,
commitment, plan or arrangement to which the Company is a party or by which it
or its property may be bound. The Company has no present expectation or
intention of not fully performing all its obligations under each such agreement,
instrument, commitment, plan or arrangement, and the Company has no knowledge of
any breach or anticipated breach by the other party to any agreement,
instrument, commitment, plan or arrangement to which the Company is a party. The
Company is in full compliance with all of the terms and provisions of its
Charter and By-laws, as amended.
2.15 Loans and Advances. The Company does not have any outstanding
loans or advances to any person and is not obligated to make any such loans or
advances, except, in each case, for advances to employees of the Company in
respect to reimbursable business expenses anticipated to be incurred by them in
connection with their performance of services for the Company.
2.16 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
The Company has not assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on any indebtedness of any other person (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor, or otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
2.17 Significant Customers and Suppliers. No customer or supplier which
was significant to the Company during the period covered by the financial
statements referred to in Section 2.5 or which has been significant to the
Company there after, has terminated, materially reduced or threatened to
terminate or materially reduce its purchases from or provision of products or
services to the Company, as the case may be.
2.18 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other
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governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by the Company of this Agreement or the
Amended Registration Rights Agreement, the issuance, sale and delivery of the
Preferred Shares or, upon conversion thereof, the issuance and delivery of the
Conversion Shares, other than (i) filings pursuant to state securities laws (all
of which filings have been made by the Company, other than those which are
required to be made after the Closing and which will be duly made on a timely
basis) in connection with the sale of the Preferred Shares and (ii) with respect
to the Amended Registration Rights Agreement, the registration of the shares
covered thereby with the Commission and filings pursuant to state securities
laws.
2.19 Disclosure. Neither this Agreement, nor any Schedule or
Exhibit to this Agreement, nor the Business Plan of the Company dated July 28,
1997 (the "Business Plan"), contains an untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein not misleading. None of the statements, documents, certificates or other
items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not disclosed to the Purchasers and their
counsel in writing and of which the Company is aware which materially and
adversely affects or could materially and adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company.
The financial projections and other estimates contained in the Business Plan
were prepared by the Company based on the Company's experience in the industry
and on assumptions of fact and opinion as to future events which the Company, at
the date of the issuance of the Business Plan, believed to be reasonable, but
which the Company cannot and does not assure or guarantee the attainment of in
any manner. As of the date hereof no facts have come to the attention of the
Company which would, in its opinion, require the Company to revise or amplify
the assumptions underlying such projections and other estimates or the
conclusions derived therefrom.
2.20 Offering of the Preferred Shares. Neither the Company nor any
person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or any
security of the Company similar to the Preferred Shares has offered the
Preferred Shares or any such similar security for sale to, or solicited any
offer to buy the Preferred Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with Preferred Shares under the
Securities Act or the rules and regulations of the Commission thereunder), in
either case so as to subject the offering, issuance or sale of the Preferred
Shares to the registration provisions of the Securities Act.
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2.21 Brokers. The Company has no contract, arrangement or understanding
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
2.22 Officers. Set forth in Schedule II is a list of the names of the
officers of the Company, together with the title or job classification of each
such person and the total compensation anticipated to be paid to each such
person by the Company in 1997. None of such persons has an employment agreement
or understanding, whether oral or written, with the Company, which is not
terminable on notice by the Company without cost or other liability to the
Company.
2.23 Transactions With Affiliates. No director, officer, employee
or stockholder of the Company, or member of the family of any such person, or
any corporation, partnership, trust or other entity in which any such person, or
any member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with the Company, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm, other than employment at will
arrangements in the ordinary course of business.
2.24 Employees. Each of the officers of the Company, each key employee
and each other employee now employed by the Company who has access to
confidential information of the Company has executed an Employee Nondisclosure
and Developments Agreement (collectively, the "Employee Nondisclosure and
Developments Agreements"), and such agreements are in full force and effect. No
officer or key employee of the Company has advised the Company (orally or in
writing) that he intends to terminate employment with the Company. The Company
has complied in all material respects with all applicable laws relating to the
employment of labor, including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of Social Security and other
taxes, and with the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
2.25 U.S. Real Property Holding Corporation. The Company is not now and
has never been a "United States real property holding corporation," as defined
in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service, and the Company has filed with the
Internal Revenue Service all statements, if any, with its United States income
tax returns that are required under Section 1.897-2(h) of such Regulations.
2.26 ERISA.
(a) Schedule II lists each Employee Plan that covers any
employee of the Company, copies or descriptions of all of which have previously
been
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made available or furnished to the Purchasers. With respect to each Employee
Plan, the Company has provided the most recently filed Form 5500 and an accurate
summary description of such plan. The Company has provided the Purchasers with
complete age, salary, service and related data as of the most recent practicable
date for employees of the Company.
(b) Schedule II also includes a list of each Benefit
Arrangement of the Company, copies or descriptions of all of which have been
made available or furnished previously to the Purchasers.
(c) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. The Company and its Affiliates have not
incurred any liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
(d) None of the Employee Plans or other arrangements listed on
Schedule II covers any non-United States employee or former employee of the
Company.
(e) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.
(f) No Employee Plan is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
(g) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan or Benefit Arrangement.
(h) All contributions and payments accrued under each Employee
Plan and Benefit Arrangement, determined in accordance with prior funding and
accrual practices, as adjusted to include proportional accruals for the period
ending on the Closing Date, will be discharged and paid on or prior to the
Closing Date except to the extent reflected on the Balance Sheet. Except as
disclosed in writing to the Purchasers prior to the date hereof, there has been
no amendment to, written interpretation of or announcement (whether or not
written) by the Company or any of its ERISA Affiliates relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended prior to the date hereof.
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that, individually or
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collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(j) No tax under Section 4980B of the Code has been incurred in
respect of any Employee Plan that is a group health plan, as defined in Section
5000(b)(1) of the Code.
(k) With respect to the employees and former employees of the
Company, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code.
(l) No employee of the Company will become entitled to any
bonus, retirement, severance or similar benefit or enhanced benefit solely as a
result of the transactions contemplated hereby.
(m) The Company does not have, nor is it reasonably expected to
have, any liability under Title IV of ERISA.
2.27 Disqualified Persons. To the Company's knowledge, none of the
persons listed on Schedule V hereto holds, directly or indirectly, any
securities of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of
Rule501 under the Securities Act and was not organized for the specific purpose
of acquiring the Preferred Shares;
(b) it received any materials in connection with the offering
of the Preferred Shares and first learned of such offering in the state listed
as its address set forth on Schedule I hereto, and intends that the state
securities laws of that state alone shall govern its purchase of Preferred
Shares;
(c) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof;
(d) it has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management;
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<PAGE> 20
(e) the Preferred Shares being purchased by it are being
acquired for its own account for the purpose of investment and not with a view
to or for sale in connection with any distribution thereof;
(f) it understands that (i) the Preferred Shares and the
Conversion Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act, (ii) the Preferred Shares and, upon conversion
thereof, the Conversion Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration, (iii) the Preferred Shares and the Conversion Shares will
bear a legend to such effect and (iv) the Company will make a notation on its
transfer books to such effect; and
(g) if it sells any Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary steps in order
to perfect the exemption from registration provided thereby, including (i)
obtaining on behalf of the Company information to enable the Company to
establish a reasonable belief that the purchaser is a qualified institutional
buyer and (ii) advising such purchaser that Rule 144A is being relied upon with
respect to such resale.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the Preferred
Shares being purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall have
received from Hale and Dorr LLP, counsel for the Company, an opinion dated as of
the Closing Date, in form and scope satisfactory to the Purchasers and their
counsel, to the effect that:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. To the knowledge of such counsel, the Company has no
subsidiaries. The Company is duly licensed or qualified to transact business as
a foreign corporation and is in good standing in Virginia. The Company has the
corporate power and authority to own and hold its properties and to carry on its
business as currently conducted and as proposed to be conducted. The Company has
the corporate power and authority to execute, deliver and perform this Agreement
and the Amended Registration Rights Agreement, to issue, sell and deliver the
Preferred Shares and, upon conversion thereof, to issue and deliver the
Conversion Shares.
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<PAGE> 21
(ii) This Agreement and the Amended Registration Rights
Agreement have been duly authorized, executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms (subject, as to enforcement of
remedies, to the discretion of courts in awarding equitable relief and to
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting the rights of creditors generally), except that such counsel need not
express any opinion as to the validity or enforceability of the indemnification
and contribution provisions of the Amended Registration Rights Agreement.
(iii) The execution and delivery by the Company of this
Agreement and the Amended Registration Rights Agreement, the performance by the
Company of its obligations hereunder and thereunder, the issuance, sale and
delivery of the Preferred Shares and, upon conversion thereof, the issuance and
delivery of the Conversion Shares, will not violate any provision of law
applicable to the Company, the Charter or By-laws, as amended, of the Company,
any order of any court or other agency of government specifically applicable to
the Company or its property or any agreement of the Company listed on Schedule
II hereto, or conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, or result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever upon any of
the properties or assets of the Company. In rendering the foregoing opinion,
such counsel may assume full disclosure to the Purchasers of all material facts
and, with respect to performance by the Company of its obligations under the
Amended Registration Rights Agreement, may assume compliance by the Company at
such time with the registration requirements of the Securities Act and with
applicable state securities laws and may disclaim any opinion as to the validity
or enforceability of the indemnification and contribution provisions of the
Amended Registration Rights Agreement.
(iv) The authorized capital stock of the Company as of
the date hereof consists of (i) 1,562,500 shares of Class A Convertible
Preferred Stock, $.001 par value (the "Class A Preferred Stock"), (ii) 2,151,420
shares of Class B Convertible Preferred Stock, $.001 par value (the "Class B
Preferred Stock"), (iii) 3,188,889 shares of Class C Convertible Preferred
Stock, $.001 par value (the "Class C Preferred Stock"), (iv) 2,045,785 shares of
Class D Convertible Preferred Stock, $.001 par value (the "Class D Convertible
Preferred Stock") and (v) 16,000,000 shares of Common Stock. Immediately prior
to the Closing, 4,312,500 shares of Common Stock, 1,562,500 shares of Class A
Preferred Stock, 2,151,420 shares of Class B Preferred Stock and 3,188,889
shares of Class C Preferred Stock will be validly issued and outstanding, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof and no shares of Class D Preferred Stock will have been issued.
Immediately prior to the Closing, based on a review by such counsel of the stock
record and minute books of the Company, the stockholders of record and holders
of record of subscriptions, warrants,
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options, convertible securities, and other rights (contingent or other) to
purchase or otherwise acquire equity securities of the Company, and the number
of shares of Common Stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by each, will be as
set forth in Schedule II and Schedule III. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
each class or series of authorized capital stock of the Company are as set forth
in the Charter, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
against the Company and in accordance with all applicable laws (subject, as to
enforcement, to the discretion of courts in awarding equitable relief and to
applicable bankruptcy, reorgani zation, insolvency, moratorium and similar laws
affecting the rights of creditors generally). Except as set forth in Schedule
II, to the knowledge of such counsel, immediately prior to the Closing no
subscription, warrant, option, convertible security, or other right (contingent
or otherwise) to purchase or acquire equity securities of the Company will be
authorized or outstanding and there will be no commitment by the Company to
issue shares, subscriptions, warrants, options, convertible securities, or other
such rights or to distribute to holders of any of its equity securities any
evidence of indebtedness or asset. Except as set forth in Schedule II or as
provided for in the Charter, to the knowledge of such counsel, the Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof.
(v) The Preferred Shares and the Conversion Shares have
been duly authorized. The issuance, sale and delivery of the Preferred Shares
and the issuance and delivery of the Conversion Shares upon conversion of the
Preferred Shares have been duly authorized by all required corporate action; the
Preferred Shares have been validly issued, are fully paid and nonassessable with
no personal liability attaching to the ownership thereof and, to the knowledge
of such counsel, are free and clear of all liens, charges, restrictions, claims
and encumbrances imposed by or through the Company except as set forth in the
Amended Registration Rights Agreement; and the Conversion Shares have been duly
reserved for issuance upon conversion of the Preferred Shares and, when so
issued, will be validly issued, fully paid and nonassessable with no personal
liability attaching to the ownership thereof and, to the knowledge of such
counsel, will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in the
Amended Registration Rights Agreement. Neither the issuance, sale or delivery of
the Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company arising under law
or the Charter or By-laws of the Company, each as amended, or, to the knowledge
of such counsel, to any contractual right of first refusal or other right in
favor of any person, except as set forth on Schedule II.
(vi) Except as described in Schedule II, to the knowledge
of such counsel there is no (A) action, suit, claim, proceeding or investigation
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pending or threatened against or affecting the Company, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (B)
arbitration proceeding relating to the Company pending under collective
bargaining agreements or (C) governmental inquiry pending or threatened against
or affecting the Company (including, without limitation, any inquiry as to the
qualification of the Company to hold or receive any license or permit). To the
knowledge of such counsel, the Company is not in default with respect to any
order, writ, injunction or decree known to such counsel of any court or of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign.
(vii) To the knowledge of such counsel, no third party has
claimed that any person employed by or affiliated with the Company has violated
or may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such third party, or disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or interfered or
may be interfering in the employment relationship between such third party and
any of its present or former employees.
(viii) Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Article III, the offer and sale of the
Series D Preferred Stock pursuant to the terms of this Agreement and the Amended
Registration Rights Agreement are exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended, and, under such securities
laws as they presently exist, the issuance of Common Stock upon conversion of
the Series D Preferred Stock will also be exempt from such registration and
qualification requirements.
(b) Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President and Treasurer of the Company shall have certified to such effect to
the Purchasers in writing.
(c) Performance. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the President and Treasurer of the
Company shall have certified to the Purchasers in writing to such effect and to
the further effect that all of the conditions set forth in this Article IV have
been satisfied.
(d) All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be
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satisfactory in form and substance to the Purchasers and their counsel, and the
Purchasers and their counsel shall have received all such counterpart originals
or certified or other copies of such documents as they reasonably may request.
(e) Supporting Documents. The Purchasers and their counsel
shall have received copies of the following documents:
(i) (A) the Charter, certified as of a recent date by
the Secretary of State of the State of Delaware and (B) a certificate of said
Secretary dated as of a recent date as to the due incorporation and good
standing of the Company, the payment of all excise taxes by the Company and
listing all documents of the Company on file with said Secretary;
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and certifying: (A) that
attached thereto is a true and complete copy of the By-laws of the Company as in
effect on the date of such certification; (B) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of Directors or the
stockholders of the Company authorizing the execution, delivery and performance
of this Agreement and the Amended Registration Rights Agreement, the issuance,
sale and delivery of the Preferred Shares and the reservation, issuance and
delivery of the Conversion Shares, and that all such resolutions are in full
force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement and the Amended Registration Rights
Agreement; (C) that the Charter has not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to clause (i)(B)
above; and (D) to the incumbency and specimen signature of each officer of the
Company executing this Agreement and the Amended Registration Rights Agreement,
the stock certificates representing the Preferred Shares and any certificate or
instrument furnished pursuant hereto, and a certification by another officer of
the Company as to the incumbency and signature of the officer signing the
certificate referred to in this clause (ii); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs of the Company as the
Purchasers or their counsel reasonably may request.
(f) Amended Registration Rights Agreement. The Company and each
Prior Investor (as such term is defined therein) shall have executed and
delivered the Amended Registration Rights Agreement.
(g) Non-Competition Agreements. Copies of the Non-Competition
Agreements with the Company signed by each of Robert McGovern, James Winchester
and Gene Austin (collectively, the "Non-Competition Agreements") shall have been
delivered to counsel for the Purchasers.
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(h) Charter. The Charter shall read in its entirety as set
forth in Exhibit B. The Charter shall have been duly amended, if necessary, to
provide that: (i) all directors of the Company shall be indemnified against, and
absolved of, liability to the Company and its stockholders to the maximum extent
permitted under the laws of the State of Delaware, and (ii) the number of shares
of authorized Common Stock of the Company may be increased or decreased (but not
below the number then outstanding) by the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of the Company entitled to
vote thereon, voting together as a single class notwithstanding the provisions
of Section 242(b)(2) of the General Corporation Law of the State of Delaware.
(i) By-Laws. The Company's By-laws shall have been amended, if
necessary, to provide that (i) unless otherwise required by the laws of the
State of Delaware, any two directors, TTC Ventures, New Enterprise Associates
VI, Limited Partnership, or 21st Century Internet Fund, L.P. shall have the
right to call a meeting of the Board of Directors and (ii) the number of
directors fixed in accordance therewith shall in no event conflict with any of
the terms or provisions of the Class D Convertible Preferred Stock as set forth
in the Charter.
(j) Employee Agreements. Copies of the Employee Nondisclosure
and Developments Agreements shall have been delivered to counsel for the
Purchasers.
(k) Election of Directors. The number of directors
constituting the entire Board of Directors shall have been fixed at seven and
the following persons shall have been elected as the directors and shall each
hold such position as of the Closing Date: Robert McGovern and James Tholen as
the directors elected solely by the holders of the Common Stock, David Wetmore
as the director elected solely by the holders of the Class A Preferred Stock,
Peter Barris as the director elected solely by the holders of the Class B
Preferred Stock (the "Class B Director"), J. Neil Weintraut as the director
elected solely by the holders of the Class C Preferred Stock (the "Class C
Director"), and D. Jarrett Collins as the director appointed by TTC Ventures on
behalf of the holders of the Class D Convertible Preferred Stock (the "Class D
Director"). The director to be elected solely by the holders of the Common
Stock, acting as a separate class, and approved by the holders of the Class B
Preferred Stock, the Class C Preferred Stock and the Class D Convertible
Preferred Stock, each acting as a separate class, shall be nominated and elected
at a later date.
(l) Preemptive Rights. All stockholders of the Company having
any preemptive, first refusal or other rights with respect to the issuance of
the Preferred Shares or the Conversion Shares shall have irrevocably exercised
or waived the same in writing.
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(m) Fees of Purchasers' Counsel. The Company shall have paid in
accordance with Section 6.1 the fees and disbursements of Purchasers' counsel
invoiced at the Closing.
(n) Blue Sky. The Preferred Shares shall have been qualified
under applicable state securities laws.
All such documents shall be satisfactory in form and substance to the
Purchasers and each of their counsels.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers that:
5.1 Financial Statements, Reports, Etc. The Company shall furnish to
each Purchaser holding at least 100,000 Preferred Shares, and to each
stockholder listed on Schedule III hereto (individually, an "Existing
Stockholder" and collectively, the "Existing Stockholders"), so long as such
Existing Stockholder holds at least 50% of the outstanding stock of the Company
held by such Existing Stockholder as of the date hereof (calculated on a
fully-diluted basis and adjusting for stock splits, stock dividends and the
like):
(a) within ninety (90) days after the end of each fiscal year of
the Company a consolidated balance sheet of the Company and its subsidiaries as
of the end of such fiscal year and the related consolidated statements of
income, stockholders' equity and cash flows for the fiscal year then ended,
prepared in accordance with generally accepted accounting principles and
certified by a firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company;
(b) within thirty (30) days after the end of each quarter in
each fiscal year (other than the last quarter in each fiscal year) a
consolidated balance sheet of the Company and its subsidiaries and the related
consolidated statements of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with generally accepted accounting
principles and certified by the Chief Executive Officer or Chief Financial
Officer of the Company, such consolidated balance sheet to be as of the end of
such quarter and such consolidated statements of income, stockholders' equity
and cash flows to be for such quarter and for the period from the beginning of
the fiscal year to the end of such quarter, in each case with comparative
statements for the prior fiscal year, provided
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that the Company's obligations under this Section 5.1(b) shall terminate upon
the completion of a firm commitment underwritten public offering of the
Company's securities;
(c) at the time of delivery of each quarterly statement
pursuant to Section 5.1(b), a management narrative report explaining all
significant variances from forecasts and all significant current developments in
staffing, marketing, sales and operations;
(d) no later than fifteen (15) days prior to the start of each
fiscal year, consolidated capital and operating expense budgets, cash flow
projections and income and loss projections for the Company and its subsidiaries
in respect of such fiscal year, all itemized in reasonable detail and prepared
on a monthly basis, and, promptly after preparation, any revisions to any of the
foregoing;
(e) promptly following receipt by the Company, each audit
response letter, accountant's management letter and other written report
submitted to the Company by its independent public accountants in connection
with an annual or interim audit of the books of the Company or any of its
subsidiaries;
(f) promptly upon sending, making available or filing the same,
all press releases, reports and financial statements that the Company sends or
makes available to its stockholders or directors or files with the Commission;
and
(g) promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations, property or
affairs of the Company and its subsidiaries as such Purchaser reasonably may
request.
5.2 Right of First Offer. So long as any shares of Class A Preferred
Stock, Class B Preferred Stock, Class C Preferred Stock or Class D Convertible
Preferred Stock are outstanding, the Company shall, prior to any issuance by the
Company of any of its securities (other than debt securities with no equity
feature), offer to each Purchaser and to each then existing holder of such
Preferred Stock (an "Existing Stockholder") by written notice the right, for a
period of thirty (30) days, to purchase all of such securities for cash at an
amount equal to the price or other consideration for which such securities are
to be issued; provided, however, that the first refusal rights of the Purchasers
and Existing Stockholders pursuant to this Section 5.2 shall not apply to
securities issued (A) upon conversion of any of the Preferred Shares, (B) as a
stock dividend or upon any subdivision of shares of Common Stock, provided that
the securities issued pursuant to such stock dividend or subdivision are limited
to additional shares of Common Stock, (C) pursuant to subscriptions, warrants,
options, convertible securities, or other rights which are listed in Schedule
III as being outstanding on the date of this Agreement, (D) solely in
consideration for the acquisition (whether by merger or otherwise) by
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<PAGE> 28
the Company or any of its subsidiaries of all or substantially all of the stock
or assets of any other entity, (E) pursuant to a firm commitment underwritten
public offering, and (F) pursuant to the exercise of options to purchase Common
Stock granted to directors, officers, employees or consultants of the Company in
connection with their service to the Company, not to exceed in the aggregate
1,950,000 shares (appropriately adjusted to reflect stock splits, stock
dividends, combinations of shares and the like with respect to the Common Stock)
less the number of shares (as so adjusted) issued pursuant to subscriptions,
warrants, options, convertible securities, or other rights outstanding on the
date of this Agreement and listed in Schedule III pursuant to clause (C) above
(the shares exempted by this clause (F) being hereinafter referred to as the
"Reserved Employee Shares") provided that the number of Reserved Employee Shares
may be increased prior to December 31, 1998, with the approval of a majority of
the Board of Directors including the Class B Director, the Class C Director and
the Class D Director and at any time after December 31, 1998, with the approval
of either (i) a majority of the Board of Directors including the Class B
Director, the Class C Director and the Class D Director or (ii) all directors
other than the Class B Director, the Class C Director or the Class D Director.
The Company's written notice to the Purchasers and Existing Stockholders shall
describe the securities proposed to be issued by the Company and specify the
number, price and payment terms. Each Purchaser and Existing Stockholder may
accept the Company's offer as to the full number of securities offered to it or
any lesser number, by written notice thereof given by it to the Company prior to
the expiration of the aforesaid thirty (30) day period, in which event the
Company shall promptly sell and such Purchaser or Existing Stockholder shall
buy, upon the terms specified, the number of securities agreed to be purchased
by such Purchaser or Existing Stockholder. Notwithstanding the foregoing, if the
Purchasers and Existing Stockholders agree, in the aggregate, to purchase more
than the full number of securities offered by the Company, then each Purchaser
and Existing Stockholder accepting the Company's offer shall first be allocated
the lesser of (i) the number of securities which such Purchaser or Existing
Stockholder agreed to purchase and (ii) the number of securities as is equal to
the full number of securities offered by the Company multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock held by
such Purchaser or Existing Stockholder as of the date of the Company's notice of
offer (treating such Purchaser or Existing Stockholder, for the purpose of such
calculation, as the holder of the number of shares of Common Stock which would
be issuable to such Purchaser or Existing Stockholder upon conversion, exercise
or exchange of all securities (including but not limited to the Preferred
Shares) held by such Purchaser or Existing Stockholder on the date such offer is
made, that are convertible, exercisable or exchangeable into or for (whether
directly or indirectly) shares of Common Stock) and the denominator of which
shall be the aggregate number of shares of Common Stock (calculated as
aforesaid) held on such date by all Purchasers and Existing Stockholders who
accepted the Company's offer, and the balance of the securities (if any) offered
by the Company shall be allocated among the Purchasers and Existing Stockholders
accepting the Company's offer in proportion to their
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<PAGE> 29
relative equity ownership interests in the Company (calculated as aforesaid),
provided that no Purchaser or Existing Stockholder shall be allocated more than
the number of securities which such Purchaser or Existing Stockholder agreed to
purchase and provided further that in cases covered by this sentence all
Purchasers and Existing Stockholders shall be allocated among them the full
number of securities offered by the Company. The Company shall be free at any
time prior to ninety (90) days after the date of its notice of offer to the
Purchasers and Existing Stockholders, to offer and sell to any third party or
parties the number of such securities not agreed by the Purchasers and Existing
Stockholders to be purchased by them, at a price and on payment terms no less
favorable to the Company than those specified in such notice of offer to the
Purchasers and Existing Stockholders. However, if such third party sale or sales
are not consummated within such ninety (90) day period, the Company shall not
sell such securities as shall not have been purchased within such period without
again complying with this Section 5.2.
5.3 Reserve for Conversion Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Preferred Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
5.4 Corporate Existence. The Company shall maintain and, except as
otherwise permitted by Section 5.16, cause each of its subsidiaries to maintain,
their respective corporate existence, rights and franchises in full force and
effect.
5.5 Properties, Business, Insurance. The Company shall maintain and
cause each of its subsidiaries to maintain as to their respective properties and
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient. The Company shall also maintain in effect "key
person" life insurance policies, payable to the Company, on the life of Robert
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<PAGE> 30
McGovern (so long as he remains an employee of the Company), in the amount of
$2,000,000. The Company shall not cause or permit any assignment or change in
beneficiary and shall not borrow against such policy. If requested by Purchasers
holding at least a majority of the outstanding Preferred Shares, the Company
will add one designee of such Purchasers as a notice party for such policy and
shall request that the issuer of such policy provide such designee with ten (10)
days' notice before such policy is terminated (for failure to pay premiums or
otherwise) or assigned or before any change is made in the beneficiary thereof.
5.6 Inspection, Consultation and Advice. The Company shall permit and
cause each of its subsidiaries to permit each Purchaser and such persons as it
may designate, at such Purchaser's expense, to visit and inspect any of the
properties of the Company and its subsidiaries, examine their books and take
copies and extracts there from, discuss the affairs, finances and accounts of
the Company and its subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
such Purchaser and such designees such affairs, finances and accounts), and
consult with and advise the management of the Company and its subsidiaries as to
their affairs, finances and accounts, all at reasonable times and upon
reasonable notice.
5.7 Restrictive Agreements Prohibited. Neither the Company nor any of
its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement, the Amended Registration
Rights Agreement or the Charter.
5.8 Transactions with Affiliates. Except for transactions contemplated
by this Agreement or as otherwise approved by the Board of Directors, neither
the Company nor any of its subsidiaries shall enter into any transaction with
any director, officer, employee or holder of more than 5% of the outstanding
capital stock of any class or series of capital stock of the Company or any of
its subsidiaries, affiliates, member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or
member of the family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding capital stock thereof,
except for transactions on customary terms related to such person's employment.
5.9 Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Shares solely for working capital.
5.10 Board of Directors Meetings. The Company shall use its best
meetings of its Board of Directors are held at least four
times each year and at least once each quarter. The Company shall permit TTC
Ventures and 21st Century Internet Fund L.P. ("21st Century Internet Fund"), so
long as they, individually, (i) hold of record or beneficially at least 500,000
Preferred
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<PAGE> 31
Shares and/or Conversion Shares and (ii) are not represented on the Board of
Directors, directly or by one of its affiliates ("Unrepresented"), to have one
representative attend each meeting of the Board of Directors of the Company and
each meeting of any Committee thereof. While either or both of TTC Ventures and
21st Century Internet Fund is Unrepresented, the Company shall send to such
Unrepresented party a notice containing the time and place of all Board meetings
in the same manner and at the same time as it shall send such notice to its
directors or committee members, as the case may be, and shall provide to such
Unrepresented party copies of all notices, reports, minutes and consents at the
time and in the manner as they are provided to the Board of Directors or
committee, except for information reasonably designated as proprietary
information by the Board of Directors.
5.11 Compensation. The Company shall not pay to its management
compensation in excess of that compensation customarily paid to management in
companies of similar size, of similar maturity, and in similar businesses
without the written consent of a majority of the members of the Board of
Directors of the Company.
5.12 By-laws. The Company shall at all times cause its By-laws to
provide that, (a) unless otherwise required by the laws of the State of
Delaware, any two directors, TTC Ventures, New Enterprise Associates VI, Limited
Partnership or 21st Century Internet Fund shall have the right to call a meeting
of the Board of Directors or stockholders and (b) the number of directors fixed
in accordance therewith shall in no event conflict with any of the terms or
provisions of the Class D Convertible Preferred Stock as set forth in the
Charter. The Company shall at all times maintain provisions in its By-laws
and/or Charter indemnifying all directors against liability and absolving all
directors from liability to the Company and its stockholders to the maximum
extent permitted under the laws of the State of Delaware.
5.13 Performance of Contracts. The Company shall not amend, modify,
terminate, waive or otherwise alter, in whole or in part, any of the Employee
Nondisclosure and Developments Agreements or the Non-Competition Agreements
without the written consent of a majority of the members of the Board of
Directors of the Company.
5.14 Vesting of Reserved Employee Shares. The Company shall not grant
to any of its employees options to purchase Reserved Employee Shares which will
become exercisable at a rate in excess of 25% per annum from the date of such
grant (except as set forth on Schedule II) without the consent of the Board of
Directors.
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<PAGE> 32
5.15 Employee Nondisclosure and Developments Agreements. The Company
shall use its best efforts to obtain, and shall cause its subsidiaries to use
their best efforts to obtain, an Employee Nondisclosure and Developments
Agreement from all future officers, key employees and other employees who will
have access to confidential information of the Company or any of its
subsidiaries, upon their employment by the Company or any of its subsidiaries.
5.16 Activities of Subsidiaries. The Company shall not permit any
subsidiary to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any subsidiary may (i) consolidate or
merge into or with or sell or transfer assets to any other subsidiary, or (ii)
merge into or sell or transfer assets to the Company. The Company shall not sell
or otherwise transfer any shares of capital stock of any subsidiary, except to
the Company or another subsidiary, or permit any subsidiary to issue, sell or
otherwise transfer any shares of its capital stock or the capital stock of any
subsidiary, except to the Company or another subsidiary. The Company shall not
permit any subsidiary to purchase or set aside any sums for the purchase of, or
pay any dividend or make any distribution on, any shares of its stock, except
for dividends or other distributions payable to the Company or another
subsidiary.
5.17 Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
5.18 Keeping of Records and Books of Account. The Company shall keep,
and cause each subsidiary to keep, adequate records and books of account, in
which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
5.19 Change in Nature of Business. The Company shall not make, or
permit any subsidiary to make, any material change in the nature of its business
as set forth in the Business Plan.
5.20 U.S. Real Property Interest Statement. The Company shall provide
prompt written notice to each Purchaser following any "determination date" (as
defined in Treasury Regulation Section 1.897-2(c)(i)) on which the Company
becomes a United States real property holding corporation. In addition, upon a
written request by any Purchaser, the Company shall provide such Purchaser with
a written statement informing the Purchaser whether such Purchaser's interest in
the Company constitutes a U.S. real property interest. The Company's
determination
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<PAGE> 33
shall comply with the requirements of Treasury Regulation Section 1.897-2(h)(1)
or any successor regulation, and the Company shall provide timely notice to the
Internal Revenue Service, in accordance with and to the extent required by
Treasury Regulation Section 1.897-2(h)(2) or any successor regulation, that such
statement has been made. The Company's written statement to any Purchaser shall
be delivered to such Purchaser within ten (10) days of such Purchaser's written
request therefor. The Company's obligation to furnish a written statement
pursuant to this Section 5.20 shall continue notwithstanding the fact that a
class of the Company's stock may be regularly traded on an established
securities market.
5.21 Rule 144A Information. The Company shall, at all times during
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, provide
in writing, upon the written request of any Purchaser or a prospective buyer of
Preferred Shares or Conversion Shares from any Purchaser, all information
required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the
Commission under the Securities Act ("Rule 144A Information"). The Company also
shall, upon the written request of any Purchaser or any stockholder listed on
Schedule III, cooperate with and assist such Purchaser or any member of the
National Association of Securities Dealers, Inc. PORTAL system in applying to
designate and thereafter maintain the eligibility of the Preferred Shares or
Conversion Shares, as the case may be, for trading through PORTAL. The Company's
obligations under this Section 5.21 shall at all times be contingent upon the
relevant Purchaser's obtaining from the prospective buyer of Preferred Shares or
Conversion Shares a written agreement to take all reasonable precautions to
safeguard the Rule 144A Information from disclosure to anyone other than a
person who will assist such buyer in evaluating the purchase of any Preferred
Shares or Conversion Shares.
5.22 Termination of Covenants. The covenants set forth in Sections 5.20
and 5.21 shall terminate and be of no further force or effect as to each of the
Purchasers when such Purchaser no longer holds any shares of capital stock of
the Company. Except as otherwise provided above, all of the other covenants set
forth in this Article V shall terminate and be of no further force or effect as
to each of the Purchasers when such Purchaser owns less than 50% of the
Preferred Shares purchased by it on the date hereof (appropriately adjusted to
reflect stock splits, stock dividends, combinations of shares and the like with
respect to the Class D Convertible Preferred Stock).
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<PAGE> 34
ARTICLE VI
MISCELLANEOUS
6.1 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall
pay the fees and disbursements, up to $10,000, of the Purchasers' counsel in
connection with such transactions and any subsequent amendment, waiver, consent
or enforcement thereof.
6.2 Survival of Agreements. All covenants, agreements,
representations and warranties made herein or in the Amended Registration
Rights Agreement, or any certificate or instrument delivered to the Purchasers
pursuant to or in connection with this Agreement or the Amended Registration
Rights Agreement, shall survive the execution and delivery of this Agreement
and the Amended Registration Rights Agreement, the issuance, sale and delivery
of the Preferred Shares, and the issuance and delivery of the Conversion
Shares, and all statements contained in any certificate or other instrument
delivered by the Company hereunder or thereunder or in connection herewith or
therewith shall be deemed to constitute representations and warranties made by
the Company.
6.3 Brokerage. Each party hereto will indemnify and hold harmless
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
6.4 Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting
the generality of the foregoing, all representations, covenants and agreements
benefiting the Purchasers shall inure to the benefit of any and all subsequent
holders from time to time of Preferred Shares or Conversion Shares.
6.5 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at 11495 Sunset Hills Road, Reston, VA
20190, Attention: President, with a copy to David Sylvester, Hale and Dorr LLP,
1455 Pennsylvania Avenue, N.W., Washington, D.C. 20004; and
(b) if to any Purchaser, at the address of such Purchaser set
forth in Schedule I, with a copy to David W. Heleniak, Shearman & Sterling, 599
Lexington Avenue, New York, New York 10022;
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<PAGE> 35
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
6.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
6.7 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
6.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.9 Amendments. This Agreement may not be amended or modified, and
no provisions hereof may be waived, without the written consent of the Company
and the holders of at least two-thirds of the outstanding shares of Common
Stock issued or issuable upon conversion of the Preferred Shares.
6.10 Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
6.11 Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing
or interpreting any term or provision of this Agreement.
6.12 Assignment. The rights granted pursuant to this Agreement may be
assigned or otherwise conveyed by any Purchaser or by any subsequent transferee
of any such rights to any transferee, other than a competitor of the Company,
only if such transferee (i) acquires at least 100,000 Preferred Shares and/or
Common Stock issuable upon conversion of the Preferred Shares and (ii) is an
affiliate or constituent partner of any Purchaser or a direct or indirect
subsidiary of The Thomson Corporation. Such assignment, transfer or conveyance
may not be made without the prior written consent of the Company, such consent
not to be unreasonably withheld.
6.13 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
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<PAGE> 36
(a) "Benefit Arrangement" means each employment, severance or
other similar contract, arrangement or policy (written or oral) and each plan
or arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (i)
is not an Employee Plan and (ii) covers any employee or former employee of the
Company.
(b) "Employee Plan" means each "employee benefit plan," as
such term is defined in Section 3(3) of ERISA, that (A)(i) is subject to any
provision of ERISA and (ii) is maintained or contributed to by the Company, or
(B)(i) is subject to any provision of Title IV of ERISA and (ii) is maintained
or contributed to by any of the Company's ERISA Affiliates.
(c) "ERISA" means the Employment Retirement Income Security
Act of 1974, as amended.
(d) "ERISA Affiliate" of any entity means any other entity
that, together with such entity, would be treated as a single employer under
Section 414 of the Code.
(e) "Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
(f) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency or
any agency or political subdivision thereof, or other entity.
(g) "subsidiary" shall mean, as to the Company, any
corporation of which more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by
the Company, or by one or more of its subsidiaries, or by the Company and one
or more of its subsidiaries.
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<PAGE> 37
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Class D Convertible Preferred Stock Purchase Agreement as of the day and year
first above written.
NETSTART, INC.
By: /s/ ROBERT MCGOVERN
---------------------------
[Corporate Seal] Title:
-------------------
Attest:
/s/ EUGENE J. AUSTIN
- ---------------------------
Secretary
PURCHASERS:
Thomson U.S. Inc.
By:
-----------------------------
By: /s/ JAMES R. SCHURR
-------------------------
Name: James R. Schurr
Title: Vice President
21st Century Internet Fund, L.P.
By: 21st Century Internet Fund, L.P.
By: /s/ J. NEIL WEINTRAUT
---------------------------
Name:
Title:
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<PAGE> 38
New Enterprise Associates VI, Limited
Partnership
By: NEA Partners VI, Limited
Partnership
By: /s/ PETER BARRIS
-----------------------
Name: Peter Barris
Title: General Partner
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<PAGE> 39
SCHEDULE I
Purchasers
FIRST CLOSING
<TABLE>
<CAPTION>
Number of
Aggregate
Preferred Purchase
Price
Name and Shares to be for Preferred
Address of Purchaser Purchased Shares
- -------------------- ------------- -------------
<S> <C> <C>
Thomson U.S. Inc. 560,224 $1,999,999.68
c/o TTC Ventures
One Main Street
Cambridge, MA 02142
21st Century Internet 242,557 865,928.49
Fund L.P.
Two South Park
Second Floor
San Francisco, CA 94107
New Enterprise 317,667 1,134,071.19
Associates VI, Limited
Partnership
1119 St. Paul Street
Baltimore, MD 21202
TOTAL: 1,120,448 $3,999,999.36
</TABLE>
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<PAGE> 40
Purchasers
SECOND CLOSING
<TABLE>
<CAPTION>
Number of
Aggregate
Preferred Purchase Price
Name and Shares to be for Preferred
Address of Purchaser Purchased Shares
- -------------------- ------------- --------------
<S> <C> <C>
21st Century Internet 85,000 $ 303,450
Fund L.P.
Two South Park
Second Floor
San Francisco, CA 94107
[Other Investors to be 840,337 3,000,003
Determined]
UP TO UP TO
TOTAL: 925,337 $3,303,453
</TABLE>
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<PAGE> 1
EXHIBIT 10.9
AMENDMENT AGREEMENT
This Agreement is made and entered into as of the 23rd day of January,
1998, by and among NetStart, Inc., a Delaware corporation (the "Company"), and
the persons and entities listed on Schedule I hereto (collectively, the
"Purchasers").
WITNESSETH:
WHEREAS, the Company and the Purchasers entered into a Series D
Convertible Preferred Stock Purchase Agreement dated as of September 11, 1997
(the "Purchase Agreement"); and
WHEREAS, the Company and the Purchasers desire to amend the Purchase
Agreement as provided herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Amendment and Restatement of Section 1.3 of the Purchase Agreement.
Section 1.3 of the Purchase Agreement is hereby amended and restated in its
entirety to read as follows:
"1.3 Subsequent Authorizations and Sales. At any time on or before
the 130th day following the Closing, the Company may sell shares of
Class D Convertible Preferred Stock up to the total number of such
shares authorized by the Company's Certification of Incorporation,
as amended (the "Charter"), less any amounts already sold at the
Closing, provided that at least one new investor, which is
unaffiliated with any then-current investor in the Company, shall
participate in such sale by purchasing at least a majority of the
shares of Class D Convertible Preferred Stock offered in such sale.
All such sales shall be made on the terms and conditions set forth
in this Agreement and the purchasers thereof shall be "Purchasers"
under this Agreement and "New Investors" under the Amended
Registration Rights Agreement (as defined below); provided, however,
that the representations and warranties of the Company set forth in
this Agreement, its Exhibits and the disclosure set forth on
Schedules II, III, IV and V to this Agreement shall speak only as of
the Closing and shall not be revised to reflect any changes in the
<PAGE> 2
representations and warranties occurring after the Closing for any
such future closings. Should any such sales be made, the Company
shall prepare and distribute to the Purchasers a revised Schedule I
to this Agreement and a revised Schedule II to the Amended
Registration Rights Agreement reflecting such sales."
2. Amendment and Restatement of Section 5.2 of the Purchase Agreement.
Section 5.2 of the Purchase Agreement is hereby amended and restated in its
entirety to read as follows:
"5.2 Right of First Offer. So long as any shares of Class A
Preferred Stock, Class B Preferred Stock, Class C Preferred Stock or
Class D Convertible Preferred Stock are outstanding, the Company
shall, prior to any issuance by the Company of any of its securities
(other than debt securities with no equity feature), offer to each
Purchaser and to each then existing holder of such Preferred Stock
(an "Existing Stockholder") by written notice the right, for a
period of thirty (30) days, to purchase all of such securities for
cash at an amount equal to the price or other consideration for
which such securities are to be issued; provided, however, that the
first refusal rights of the Purchasers and Existing Stockholders
pursuant to this Section 5.2 shall not apply to securities issued
(A) upon conversion of any of the Preferred Shares, (B) as a stock
dividend or upon any subdivision of shares of Common Stock, provided
that the securities issued pursuant to such stock dividend or
subdivision are limited to additional shares of Common Stock, (C)
pursuant to subscriptions, warrants, options, convertible
securities, or other rights which are listed in Schedule III as
being outstanding on the date of this Agreement, (D) solely in
consideration for the acquisition (whether by merger or otherwise)
by the Company or any of its subsidiaries of all or substantially
all of the stock or assets of any other entity, (E) pursuant to a
firm commitment underwritten public offering, (F) pursuant to the
exercise of the warrants issued to ADP, Inc. ("ADP") in connection
with its purchase of Class D Convertible Preferred Stock from the
Company, and (G) pursuant to the exercise of options to purchase
Common Stock granted to directors, officers, employees or
consultants of the Company in connection with their service to the
Company, not to exceed in the aggregate 1,950,000 shares
(appropriately adjusted to reflect stock splits, stock dividends,
combinations of shares
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<PAGE> 3
and the like with respect to the Common Stock) less the number of
shares (as so adjusted) issued pursuant to subscriptions,
warrants, options, convertible securities, or other rights
outstanding on the date of this Agreement and listed in Schedule
III pursuant to clause (C) above (the shares exempted by this
clause (G) being hereinafter referred to as the "Reserved Employee
Shares") provided that the number of Reserved Employee Shares may
be increased prior to December 31, 1998, with the approval of a
majority of the Board of Directors including the Class B Director,
the Class C Director, the Class D Director and Gary C. Butler as
the director appointed by ADP on behalf of the holders of Class D
Convertible Preferred Stock (the "Other Class D Director") and at
any time after December 31, 1998, with the approval of either (i)
a majority of the Board of Directors including the Class B
Director, the Class C Director the Class D Director and the Other
Class D Director or (ii) all directors other than the Class B
Director, the Class C Director, the Class D Director or the Other
Class D Director. The Company's written notice to the Purchasers
and Existing Stockholders shall describe the securities proposed
to be issued by the Company and specify the number, price and
payment terms. Each Purchaser and Existing Stockholder may accept
the Company's offer as to the full number of securities offered to
it or any lesser number, by written notice thereof given by it to
the Company prior to the expiration of the aforesaid thirty (30)
day period, in which event the Company shall promptly sell and
such Purchaser or Existing Stockholder shall buy, upon the terms
specified, the number of securities agreed to be purchased by such
Purchaser or Existing Stockholder. Notwithstanding the forgoing,
if the Purchasers and Existing Stockholders agree, in the
aggregate, to purchase more than the full number of securities
offered by the Company, then each Purchaser and Existing
Stockholder accepting the Company's offer shall first be allocated
the lesser of (i) the number of securities which such Purchaser or
Existing Stockholder agreed to purchase and (ii) the number of
securities as is equal to the full number of securities offered by
the Company multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock held by such Purchaser or
Existing Stockholder agreed to purchase and (ii) the number of
securities as is equal to the full number of securities offered by
the Company multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock held by such
-3-
<PAGE> 4
Purchaser or Existing Stockholder as of the date of the Company's
notice of offer (treating such Purchaser or Existing Stockholder,
for the purpose of such calculation, as the holder of the number
of shares of Common Stock which would be issuable to such
Purchaser or Existing Stockholder upon conversion, exercise or
exchange of all securities (including but not limited to the
Preferred Shares) held by such Purchaser or Existing Stockholder
on the date such offer is made that are then convertible,
exercisable or exchangeable into or for (whether directly or
indirectly) shares of Common Stock) and the denominator of which
shall be the aggregate number of shares of Common Stock
(calculated as aforesaid) held on such date by all Purchasers and
Existing Stockholders who accepted the Company's offer, and the
balance of the securities (if any) offered by the Company shall be
allocated among the Purchasers and Existing Stockholders accepting
the Company's offer in proportion to their relative equity
ownership interests in the Company (calculated as aforesaid),
provided that no Purchaser or Existing Stockholder shall be
allocated more than the number of securities which such Purchaser
or Existing Stockholder agreed to purchase and provided further
that in cases covered by this sentence all Purchasers and Existing
Stockholders shall be allocated among them the full number of
securities offered by the Company. The Company shall be free at
any time prior to ninety (90) days after the date of its notice of
offer to the Purchasers and Existing Stockholders, to offer and
sell to any third party or parties the number of such securities
not agreed by the Purchasers and Existing Stockholders to be
purchased by them, at a price and on payment terms no less
favorable to the Company than those specified in such notice of
offer to the Purchasers and Existing Stockholders. However, if
such third party sale or sales are not consummated within such
ninety (90) day period, the Company shall not sell such securities
as shall not have been purchased within such period without again
complying with this Section 5.2."
3. Amendment and Restatement of Section 5.10 of the Purchase
Agreement. Section 5.10 of the Purchase Agreement is hereby amended and
restated in its entirety to read as follows:
"5.10 Board of Directors Meetings. The Company shall use its best
efforts to ensure that meetings of its Board of Directors are held
at least four times each year and at least once each
-4-
<PAGE> 5
quarter. The Company shall permit TTC Ventures, 21st Century
Internet Fund L.P. ("21st Century Internet Fund") and ADP, so long
as they, individually, (i) hold of record or beneficially at least
500,000 Preferred Shares and/or Conversion Shares and (ii) are not
represented on the Board of Directors, directly or by one of its
affiliates ("Unrepresented"), to have one representative attend
each meeting of the Board of Directors of the Company and each
meeting of any Committee thereof. While any or all of TTC
Ventures, 21st Century Internet Fund and ADP is Unrepresented, the
Company shall send to such Unrepresented party a notice containing
the time and place of all Board meetings in the same manner and at
the same time as it shall send such notice to its directors or
committee members, as the case may be, and shall provide to such
Unrepresented party copies of all notices, reports, minutes and
consents at the time and in the manner as they are provided to the
Board of Directors or committee, except for information reasonably
designated as proprietary information by the Board of Directors.
4. Amendment and Restatement of Section 5.12 of the Purchase
Agreement. Section 5.12 of the Purchase Agreement is hereby amended and
restated to read as follows:
"5.12 By-laws. The Company shall at all times cause its By-laws to
provide that, (a) unless otherwise required by the laws of the State
of Delaware, any two directors, TTC Ventures, New Enterprise
Associates VI, Limited Partnership, 21st Century Internet Fund or
ADP shall have the right to call a meeting of the Board of Directors
or stockholders and (b) the number of directors fixed in accordance
therewith shall in no event conflict with any of the terms or
provisions of the Class D Convertible Preferred Stock as set forth
in the Charter. The Company shall at all times maintain provisions
in its By-laws and/or Charter indemnifying all directors against
liability and absolving all directors from liability to the Company
and its stockholders to the maximum extent permitted under the laws
of the State of Delaware.
5. Amendment and Restatement of Schedule I to the Purchase Agreement.
Schedule I to the Purchase Agreement is hereby amended and restated as provided
on Schedule I hereto.
6. Effect of Modification. In the event of any inconsistency between
the provisions of the Purchase Agreement and the applicable provisions of this
Agreement, the
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<PAGE> 6
provisions of this Agreement shall control in all respects. Otherwise, the
Purchase Agreement shall remain in full force and effect. Pursuant to Section
6.9 of the Purchase Agreement, the agreements contained herein shall become
effective and binding upon the Company and each of the Purchasers when the
Company has obtained the signatures of Purchasers holding at least two-thirds of
the outstanding shares of Common Stock issued or issuable upon conversion of the
Preferred Shares (as such term is defined in this Purchase Agreement).
7. Successors and Assigns; Governing Law. Subject to the restrictions in
the Purchase Agreement as amended hereby, this Agreement shall inure to the
benefit of and bind the respective heirs, personal representatives, successors
and assigns of the parties hereto and shall be governed by and construed in
accordance with the laws of the State of Delaware.
8. Severability; Modifications. Should one or more of the provisions of
this Agreement be determined by a court of law to be illegal or unenforceable,
the other provisions shall nevertheless remain effective and shall be
enforceable. This Agreement shall not be modified without the prior consent of
the Company and Purchasers holding at least two-thirds of the outstanding shares
of Common Stock issued or issuable upon conversion of the Preferred Shares.
9. Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed an
original and such counterparts together shall constitute one instrument.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth below.
Effective date of this Agreement: January 23, 1998.
THE COMPANY:
NETSTART, INC.
By: /s/ ROBERT J. MCGOVERN
---------------------------------
Robert J. McGovern, President
THE PURCHASERS:
THOMSON U.S. INC.
By: /s/ JAMES R. SCHURR
---------------------------------
Name: James R. Schurr
Title: Vice President
21st CENTURY INTERNET
MANAGEMENT PARTNERS LLC
By: 21st CENTURY INTERNET
MANAGEMENT PARTNERS LLC
By: /s/ J. NEIL WEINTRAUT
---------------------------------
Name: J. Neil Weintraut
Title:
-7-
<PAGE> 8
NEW ENTERPRISE ASSOCIATES VI,
LIMITED PARTNERSHIP
By: NEA PARTNERS VI, LIMITED
PARTNERSHIP
By: /s/ PETER BARRIS
------------------------------
Name: Peter Barris
Title: Vice President
ADP, INC.
By: /s/ RICHARD HAVILAND
------------------------------
Name: Richard Haviland
Title:
-8-
<PAGE> 9
SCHEDULE I
Purchasers
FIRST CLOSING
<TABLE>
<CAPTION>
Number of
Aggregate
Preferred Purchase Price
Name and Shares to be for Preferred
Address of Purchaser Purchased Shares
- -------------------- --------- ------
<S> <C> <C>
Thomson U.S. Inc. 560,224 $1,999,999.68
c/o TTC Ventures
One Main Street
Cambridge, MA 02142
21st Century Internet 242,557 865,928.49
Management Partners LLC
Two South Park
Second Floor
San Francisco, CA 94107
New Enterprise 317,667 1,134,071.19
Associates VI, Limited
Partnership
1119 St. Paul Street
Baltimore, MD 21202
SUBTOTAL: 1,120,448 $3,999,999.36
</TABLE>
-9-
<PAGE> 10
Purchasers
SECOND CLOSING
<TABLE>
<CAPTION>
Number of
Aggregate
Preferred Purchase Price
Name and Shares to be for Preferred
Address of Purchaser Purchased Shares
- -------------------- --------- -------
<S> <C> <C>
21st Century Internet 85,000 $ 303,450
Management Partners LLC
Two South Park
Second Floor
San Francisco, CA 94107
ADP, Inc. 840,337 3,000,003
1 ADP Boulevard
Roseland, NJ 07068
SUBTOTAL: 925,337 $3,303,453
TOTAL: 2,045,785 7,303.452.36
</TABLE>
-10-
<PAGE> 1
EXHIBIT 10.10
EXECUTION COPY
CLASS E CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
between
CAREERBUILDER, INC.
and
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
----------
Dated as of July 6, 1998
<PAGE> 2
EXECUTION COPY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE PREFERRED SHARES................................................................................... 2
1.1 ISSUANCE, SALE AND DELIVERY OF THE PREFERRED SHARES...................................................... 2
--- ---------------------------------------------------
1.2 CLOSING.................................................................................................. 2
--- -------
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................... 3
2.1 ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER......................................................... 3
--- ------------------------------------------------
2.2 AUTHORIZATION OF AGREEMENTS, ETC......................................................................... 3
--- --------------------------------
2.3 VALIDI................................................................................................... 4
--- ------
2.4 AUTHORIZED CAPITAL STOCK................................................................................. 4
--- ------------------------
2.5 FINANCIAL STATEMENTS..................................................................................... 5
--- --------------------
2.6 EVENTS SUBSEQUENT TO THE DATE OF THE BALANCE SHEET....................................................... 5
--- --------------------------------------------------
2.7 LITIGATION; COMPLIANCE WITH LAW.......................................................................... 6
--- -------------------------------
2.8 PROPRIETARY INFORMATION OF THIRD PARTIES................................................................. 6
--- ----------------------------------------
2.9 PATENTS, TRADEMARKS, ETC................................................................................. 7
--- ------------------------
2.10 TITLE TO PROPERTIES...................................................................................... 7
---- -------------------
2.11 LEASEHOLD INTERESTS...................................................................................... 8
---- -------------------
2.12 INSURANCE................................................................................................ 8
---- ---------
2.13 TAXES.................................................................................................... 8
---- -----
2.14 OTHER AGREEMENTS......................................................................................... 8
---- ----------------
2.15 LOANS AND ADVANCES....................................................................................... 10
---- ------------------
2.16 ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER PERSONS........................................... 10
---- --------------------------------------------------------------
2.17 SIGNIFICANT CUSTOMERS AND SUPPLIERS...................................................................... 11
---- -----------------------------------
2.18 GOVERNMENTAL APPROVALS................................................................................... 11
---- ----------------------
2.19 DISCLOSURE............................................................................................... 11
---- ----------
2.20 OFFERING OF THE PREFERRED SHARES......................................................................... 11
---- --------------------------------
2.21 BROKERS.................................................................................................. 12
---- -------
2.22 OFFICERS................................................................................................. 12
---- --------
2.23 TRANSACTIONS WITH AFFILIATES............................................................................. 12
---- ----------------------------
2.24 EMPLOYEES................................................................................................ 12
---- ---------
2.25 U.S. REAL PROPERTY HOLDING CORPORATION................................................................... 12
---- --------------------------------------
2.26 ERISA.................................................................................................... 13
---- -----
2.27 DISQUALIFIED PERSONS..................................................................................... 14
---- -------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..................................................... 14
ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS....................................................... 15
ARTICLE V COVENANTS OF THE COMPANY............................................................................... 20
5.1 FINANCIAL STATEMENTS, REPORTS, ETC....................................................................... 20
--- ----------------------------------
5.2 RIGHT OF FIRST OFFER..................................................................................... 21
--- --------------------
</TABLE>
i
<PAGE> 3
EXECUTION COPY
<TABLE>
<S> <C>
5.3 RESERVE FOR CONVERSION SHARES............................................................................ 23
--- -----------------------------
5.4 CORPORATE EXISTENCE...................................................................................... 23
--- -------------------
5.5 PROPERTIES, BUSINESS, INSURANCE.......................................................................... 23
--- -------------------------------
5.6 INSPECTION, CONSULTATION AND ADVICE...................................................................... 23
--- -----------------------------------
5.7 RESTRICTIVE AGREEMENTS PROHIBITED........................................................................ 24
--- ---------------------------------
5.8 TRANSACTIONS WITH AFFILIATES............................................................................. 24
--- ----------------------------
5.9 PROCEEDS................................................................................................. 24
--- --------
5.10 BOARD OF DIRECTORS MEETINGS. THE COMPANY SHALL USE ITS BEST EFFORTS TO ENSURE THAT MEETINGS OF ITS
---- ---------------------------
BOARD OF DIRECTORS............................................................................................. 24
5.11 COMPENSATION............................................................................................. 24
---- ------------
5.12 BY-LAWS.................................................................................................. 25
---- -------
5.13 PERFORMANCE OF CONTRACTS................................................................................. 25
---- ------------------------
5.14 VESTING OF RESERVED EMPLOYEE SHARES...................................................................... 25
---- -----------------------------------
5.15 EMPLOYEE NONDISCLOSURE AND DEVELOPMENTS AGREEMENTS....................................................... 25
---- --------------------------------------------------
5.16 ACTIVITIES OF SUBSIDIARIES............................................................................... 25
---- --------------------------
5.17 COMPLIANCE WITH LAWS..................................................................................... 25
---- --------------------
5.18 KEEPING OF RECORDS AND BOOKS OF ACCOUNT.................................................................. 25
---- ---------------------------------------
5.19 CHANGE IN NATURE OF BUSINESS............................................................................. 26
---- ----------------------------
5.20 U.S. REAL PROPERTY INTEREST STATEMENT.................................................................... 26
---- -------------------------------------
ARTICLE VI MISCELLANEOUS......................................................................................... 28
6.1 EXPENSES................................................................................................. 28
--- --------
6.2 SURVIVAL OF AGREEMENTS................................................................................... 28
--- ----------------------
6.3 BROKERAGE................................................................................................ 28
--- ---------
6.4 PARTIES IN INTEREST...................................................................................... 28
--- -------------------
6.5 NOTICES.................................................................................................. 28
--- -------
6.6 GOVERNING LAW............................................................................................ 29
--- -------------
6.7 ENTIRE AGREEMENT......................................................................................... 29
--- ----------------
6.8 COUNTERPARTS............................................................................................. 29
--- ------------
6.9 AMENDMENTS............................................................................................... 29
--- ----------
6.10 SEVERABILITY............................................................................................. 29
---- -----------
6.11 TITLES AND SUBTITLES..................................................................................... 29
---- --------------------
6.12 ASSIGNMENT............................................................................................... 29
---- ----------
6.13 CERTAIN DEFINED TERMS.................................................................................... 29
---- ---------------------
</TABLE>
INDEX TO SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Security Holders
SCHEDULE IV Agreements
SCHEDULE V Disqualified Persons
ii
<PAGE> 4
EXECUTION COPY
THIS CLASS E CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is made as of July 6, 1998 between CareerBuilder, Inc., a Delaware
corporation (the "Company"), and the several purchasers named in the attached
Schedule I (individually a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of up to 1,024,351 shares (the "Preferred Shares") of the authorized
but unissued Class E Convertible Preferred Stock, $.001 par value, of the
Company (the "Class E Convertible Preferred Stock"); and
WHEREAS, the Purchasers, severally, wish to purchase the Preferred
Shares on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE PREFERRED SHARES
1.1 Issuance, Sale and Delivery of the Preferred Shares. The Company
agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees to
purchase from the Company, the number of Preferred Shares set forth opposite the
name of such Purchaser under the heading "Number of Preferred Shares to be
Purchased" on Schedule I, at the aggregate purchase price set forth opposite the
name of such Purchaser under the heading "Aggregate Purchase Price for Preferred
Shares" on Schedule I.
1.2 Closing. The closing shall take place at the offices of Hale and
Dorr LLP, 1455 Pennsylvania Avenue, N.W., Washington, D.C. 20004, at 10 a.m., on
July 6, 1998, or at such other location, date and time as may be agreed upon
between the Purchasers and the Company (such closing being called the "Closing"
and such date and time being called the "Closing Date"). At the Closing, the
Company shall issue and deliver to each Purchaser a stock certificate or
certificates in definitive form, registered in the name of such Purchaser,
representing the Preferred Shares being purchased by it at the Closing. As
payment in full for the Preferred Shares being purchased by it under this
Agreement, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date each Purchaser shall (i) deliver to
the Company a check payable to the order of the Company, in the amount set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase Price
for Preferred Shares" on Schedule I, (ii) transfer such sum to the account of
the Company by wire transfer, (iii) deliver to the Company for cancellation
promissory notes issued by the Company in the amount of such sum, or (iv)
deliver or transfer such sum to the Company by any combination of such methods
of payments.
1
<PAGE> 5
EXECUTION COPY
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that, except as
set forth in the Disclosure Schedule attached as Schedule II:
2.1 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and is duly licensed or qualified to transact business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification. The Company has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement and the Second Amended and Restated Registration Rights Agreement with
the Purchasers in the form attached as Exhibit A (the "Second Amended and
Restated Registration Rights Agreement"), to issue, sell and deliver the
Preferred Shares and to issue and deliver the shares of Common Stock, $.001 par
value, of the Company ("Common Stock") issuable upon conversion of the Preferred
Shares (the "Conversion Shares").
(b) The Company has no subsidiaries. The Company does not
(i) own of record or beneficially, directly or indirectly, (A) any shares of
capital stock or securities convertible into capital stock of any other
corporation or (B) any participating interest in any partnership, joint venture
or other non-corporate business enterprise or (ii) control, directly or
indirectly, any other entity.
2.2 Authorization of Agreements, Etc.
(a) The execution and delivery by the Company of this
Agreement and the Second Amended and Restated Registration Rights Agreement, the
performance by the Company of its obligations hereunder and thereunder, the
issuance, sale and delivery of the Preferred Shares, and the issuance and
delivery of the Conversion Shares have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Charter or the By-laws of the Company,
as amended, or any provision of any indenture, agreement or other instrument to
which the Company or any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company. To the best of the Company's knowledge, no provision of any of the
Stock Restriction Agreements dated July 12, 1996 (the "Stock Restriction
Agreements") violates, conflicts with, results in a breach of or constitutes
(with due notice or lapse of time or both ) a default by any other party under
any other indenture, agreement or instrument. The Purchasers shall not become,
by virtue of this
2
<PAGE> 6
EXECUTION COPY
Agreement or any documents related hereto, parties to or third party
beneficiaries of such Stock Restriction Agreements.
(b) The Preferred Shares have been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Class E Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or through the
Company except as set forth in the Amended Registration Rights Agreement and the
Charter. The Conversion Shares have been duly reserved for issuance upon
conversion of the Preferred Shares and, when so issued, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock with no
personal liability attaching to the ownership thereof and will be free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or
through the Company except as set forth in the Second Amended and Restated
Registration Rights Agreement. Neither the issuance, sale or delivery of the
Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company, or to any right
of first refusal or other right in favor of any person, which have not been duly
and validly waived.
2.3 Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms. The Second Amended and
Restated Registration Rights Agreement, when executed and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
2.4 Authorized Capital Stock. The authorized capital stock of
the Company consists of (i) 1,562,500 shares of Class A Convertible Preferred
Stock, $.001 par value (the "Class A Preferred Stock"), (ii) 2,151,420 shares of
Class B Convertible Preferred Stock, $.001 par value (the "Class B Preferred
Stock"), (iii) 3,188,889 shares of Class C Convertible Preferred Stock, $.001
par value (the "Class C Preferred Stock"), (iv) 2,045,785 shares of Class D
Convertible Preferred Stock, $.001 par value (the "Class D Preferred Stock"),
(v) 1,024,351 shares of Class E Convertible Preferred Stock, $.001 par value
(the "Class E Preferred Stock") and (vi) 17,500,000 shares of Common Stock.
Immediately prior to the Closing, 4,434,583 shares of Common Stock, 1,537,500
shares of Class A Preferred Stock, 2,151,420 shares of Class B Preferred Stock,
3,188,889 shares of Class C Preferred Stock and 2,045,785 shares of Class D
Preferred Stock will be validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof and
no shares of Class E Preferred Stock will have been issued. The stockholders of
record and holders of subscriptions, warrants, options, convertible securities,
and other rights (contingent or other) to purchase or otherwise acquire equity
securities of the Company, and the number of shares of Common Stock and the
number of such subscriptions, warrants, options, convertible securities, and
other such rights held by each, are as set forth in the attached Schedule III.
The Company has attached a copy of the post-closing capitalization schedule as a
part of Schedule III. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of the Company are as set forth in the Charter, a
copy of which is attached as Exhibit B, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable laws. Except as
set forth in the attached Schedule III, (i) no person owns of record or is known
to the
3
<PAGE> 7
EXECUTION COPY
Company to own beneficially any share of Common Stock, Class A Preferred
Stock, Class B Preferred Stock, Class C Preferred Stock or Class D Preferred
Stock, (ii) no subscription, warrant, option, convertible security, or other
right (contingent or other) to purchase or otherwise acquire equity securities
of the Company is authorized or outstanding, and (iii) there is no commitment by
the Company to issue shares, subscriptions, warrants, options, convertible
securities or other such rights or to distribute to holders of any of its equity
securities any evidence of indebtedness or asset. Except as provided for in the
Charter or as set forth in the attached Schedule II, the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof. Except as set forth in Schedule
II, to the best of the Company's knowledge there are no voting trusts or
agreements, stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to any securities
of the Company (whether or not the Company is a party thereto). All of the
outstanding securities of the Company were issued in compliance with all
applicable Federal and state securities laws.
2.5 Financial Statements.
(a) The Company has furnished to the Purchasers the audited
balance sheet of the Company as of September 30, 1996 and September 30, 1997 and
the related audited statements of income, stockholders' equity and cash flows of
the Company for the fiscal years ended September 30, 1996 and September 30,
1997. All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly present
the financial position of the Company as of September 30, 1996 and September 30,
1997 and the results of its operations and cash flows for the fiscal year ended
September 30, 1996 and September 30, 1997.
(b) The Company has furnished to the Purchasers the
unaudited balance sheet of the Company as of March 30, 1998 (the "Balance
Sheet") and the related unaudited statements of income, stockholders' equity,
and cash flows of the Company for the six months ended March 30, 1998. All such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied (except that such unaudited financial
statements do not contain all of the required footnotes and are subject to
normal year-end adjustment) and fairly present the financial position of the
Company as of March 30, 1998 and the results of its operations and cash flows
for the six months ended March 30, 1998. Since the date of the Balance Sheet,
(i) there has been no change in the assets, liabilities or financial condition
of the Company from that reflected in the Balance Sheet except for changes in
the ordinary course of business which in the aggregate have not been materially
adverse and (ii) none of the business, prospects, financial condition,
operations, property or affairs of the Company have been materially adversely
affected by any subsequent occurrence or development, individually or in the
aggregate, whether or not insured against.
2.6 Events Subsequent to the Date of the Balance Sheet. Since
the date of the Balance Sheet, the Company has not (i) issued any stock, bond or
other corporate security, (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred or
4
<PAGE> 8
EXECUTION COPY
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Balance Sheet and current liabilities incurred
since the date of the Balance Sheet in the ordinary course of business, (iv)
declared or made any payment or distribution to stockholders or purchased or
redeemed any shares of its capital stock or other security, (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or canceled any debt or claim, (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service mark, copyright, trade secret or other
intangible asset, (viii) suffered any loss of property or waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation except in the ordinary course of business and
consistent with past practice, (x) made any material change in the manner of
business or operations of the Company, (xi) entered into any transaction except
in the ordinary course of business or as otherwise contemplated hereby or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
2.7 Litigation; Compliance with Law. There is no (i) action,
suit, claim, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against or specifically affecting the Company,
at law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, (ii) arbitration proceeding relating to the Company pending
under collective bargaining agreements or otherwise or (iii) governmental
inquiry pending or, to the best of the Company's knowledge, threatened against
or specifically affecting the Company (including without limitation any inquiry
as to the qualification of the Company to hold or receive any license or
permit), nor is the Company aware that there is any basis for the foregoing. The
Company has not received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business, prospects,
financial condition, operations, property or affairs. The Company is not in
default with respect to any order, writ, injunction or decree known to or served
upon the Company of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no action or suit by the Company pending or
threatened against others. To the best of the Company's knowledge, the Company
has complied with all laws, rules, regulations and orders applicable to its
business, operations, properties, assets, products and services, the Company has
all necessary permits, licenses and other authorizations required to conduct its
business as conducted and as proposed to be conducted, and the Company has been
operating its business pursuant to and in compliance with the terms of all such
permits, licenses and other authorizations. There is no existing law, rule,
regulation or order, and the Company after due inquiry is not aware of any
proposed law, rule, regulation or order, whether Federal, state, county or
local, which would prohibit or restrict the Company from, or otherwise
materially adversely affect the Company in, conducting its business in any
jurisdiction in which it is now conducting business or in which it proposes to
conduct business.
2.8 Proprietary Information of Third Parties. To the best of the
Company's knowledge, no third party has claimed or has reason to claim that any
person employed by or affiliated with the Company has (a) violated or may be
violating any of the terms or conditions
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of his employment, non-competition or non-disclosure agreement with such third
party, (b) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party or
(c) interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Company which suggests that such a claim might be
contemplated. To the best of the Company's knowledge, no person employed by or
affiliated with the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer, and to
the best of the Company's knowledge, no person employed by or affiliated with
the Company has violated any confidential relationship which such person may
have had with any third party, in connection with the development, manufacture
or sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has no reason to
believe there will be any such employment or violation. To the best of the
Company's knowledge, none of the execution or delivery of this Agreement, or the
carrying on of the business of the Company as officers, employees or agents by
any officer, director or key employee of the Company, or the conduct or proposed
conduct of the business of the Company, will conflict with or result in a breach
of the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which any such person is obligated.
2.9 Patents, Trademarks, Etc. Set forth in Schedule II is a list
and brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each case a brief description of the nature of
such right. The Company owns or possesses adequate licenses or other rights to
use all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know how (collectively,
"Intellectual Property") necessary or desirable to the conduct of its business
as conducted and as proposed to be conducted, and no claim is pending or, to the
best of the Company's knowledge, threatened to the effect that the operations of
the Company infringe upon or conflict with the asserted rights of any other
person under any Intellectual Property, and there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, and there is no basis for any such claim (whether or not pending or
threatened). All prior art known to the Company which may be or may have been
pertinent to the examination of any United States patent or patent application
listed in Schedule II has been cited to the United States Patent and Trademark
Office. To the best of the Company's knowledge, all technical information
developed by and belonging to the Company which has not been patented has been
kept confidential. The Company has not granted or assigned to any other person
or entity any right to manufacture, have manufactured, assemble or sell the
products or proposed products or to provide the services or proposed services of
the Company.
2.10 Title to Properties. The Company has good, clear and
marketable title to its properties and assets reflected on the Balance Sheet or
acquired by it since the date of the
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Balance Sheet (other than properties and assets disposed of in the ordinary
course of business since the date of the Balance Sheet), and all such properties
and assets are free and clear of mortgages, pledges, security interests, liens,
charges, claims, restrictions and other encumbrances (including without
limitation, easements and licenses), except liens for or current taxes not yet
due and payable and minor imperfections of title, if any, not material in nature
or amount and not materially detracting from the value or impairing the use of
the property subject thereto or impairing the operations or proposed operations
of the Company, including without limitation, the ability of the Company to
secure financing using such properties and assets as collateral. To the best of
the Company's knowledge after due inquiry, there are no condemnation,
environmental, zoning or other land use regulation proceedings, either
instituted or planned to be instituted, which would adversely affect the use or
operation of the Company's properties and assets for their respective intended
uses and purposes, or the value of such properties, and the Company has received
no notice of any special assessment proceedings which would affect such
properties and assets.
2.11 Leasehold Interests. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement, duly authorized and entered into, without
any default of the Company thereunder and, to the best of the Company's
knowledge, without any default thereunder of any other party thereto. No event
has occurred and is continuing which, with due notice or lapse of time or both,
would constitute a default or event of default by the Company under any such
lease or agreement or, to the best of the Company's knowledge, by any other
party thereto. The Company's possession of such property has not been disturbed
and, to the best of the Company's knowledge after due inquiry, no claim has been
asserted against the Company adverse to its rights in such leasehold interests.
2.12 Insurance. The Company holds valid policies covering all of
the insurance required to be maintained by it under Section 5.5.
2.13 Taxes. The Company has filed all tax returns, Federal,
state, county and local, required to be filed by it, and the Company has paid
all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable, including
without limitation all taxes which the Company is obligated to withhold from
amounts owing to employees, creditors and third parties. The Company has
established adequate reserves for all taxes accrued but not yet payable. All tax
elections have been made by the Company in accordance with generally accepted
practice. The Federal income tax returns of the Company have never been audited
by the Internal Revenue Service. No deficiency assessment with respect to or
proposed adjustment of the Company's Federal, state, county or local taxes is
pending or, to the best of the Company's knowledge, threatened. There is no tax
lien, whether imposed by any Federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its present or former stockholders has ever filed an
election pursuant to Section 1362 of the Internal Revenue Code of 1986, as
amended (the "Code"), that the Company be taxed as an S corporation.
2.14 Other Agreements. Except as set forth in the attached
Schedule IV, the Company is not a party to or otherwise bound by any written or
oral agreement, instrument,
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commitment or restriction which individually or in the aggregate could
materially adversely affect the business, prospects, financial condition,
operations, property or affairs of the Company. Except as set forth in the
attached Schedule IV, the Company is not a party to or otherwise bound by any
written or oral:
(a) distributor, dealer, manufacturer's representative or
sales agency agreement which is not terminable on less than ninety (90) days'
notice without cost or other liability to the Company (except for agreements
which, in the aggregate, are not material to the business of the Company);
(b) sales agreement which entitles any customer to a rebate
or right of set-off, to return any product to the Company after acceptance
thereof or to delay the acceptance thereof, or which varies in any material
respect from the Company's standard form agreements;
(c) agreement with any labor union (and, to the knowledge of
the Company, no organizational effort is being made with respect to any of its
employees);
(d) agreement with any supplier containing any provision
permitting any party other than the Company to renegotiate the price or other
terms, or containing any payback or other similar provision, upon the occurrence
of a failure by the Company to meet its obligations under the agreement when due
or the occurrence of any other event;
(e) agreement for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(f) agreement for the employment of any officer, employee or
other person (whether of a legally binding nature or in the nature of an
informal understanding) on a full-time or consulting basis which is not
terminable on notice without cost or other liability to the Company, except
normal severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan,
agreement or understanding pursuant to which benefits are provided to any
employee of the Company (other than group insurance plans applicable to
employees generally);
(h) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company;
(i) guaranty of any obligation for borrowed money or
otherwise;
(j) voting trust or agreement, stockholders' agreement,
pledge agreement, buy-sell agreement or first refusal or preemptive rights
agreement relating to any securities of the Company;
(k) agreement, or group of related agreements with the same
party or any group of affiliated parties, under which the Company has advanced
or agreed to advance money or has agreed to lease any property as lessee or
lessor;
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(l) agreement or obligation (contingent or otherwise) to
issue, sell or otherwise distribute or to repurchase or otherwise acquire or
retire any share of its capital stock or any of its other equity securities;
(m) assignment, license or other agreement with respect to
any form of intangible property;
(n) agreement under which it has granted any person any
registration rights, other than the Second Amended and Restated Registration
Rights Agreement;
(o) agreement under which it has limited or restricted its
right to compete with any person in any respect;
(p) other agreement or group of related agreements with the
same party involving more than $50,000 or continuing over a period of more than
six months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by the Company without penalty upon notice of thirty (30) days or
less, but excluding any agreement or group of agreements with a customer of the
Company for the sale, lease or rental of the Company's products or services if
such agreement or group of agreements was entered into by the Company in the
ordinary course of business; or
(q) other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the Securities
and Exchange Commission (the "Commission") as an exhibit to a registration
statement on Form S-1 if the Company were registering securities under the
Securities Act of 1933, as amended (the "Securities Act").
The Company, and to the best of the Company's knowledge after due
inquiry, each other party thereto have in all material respects performed all
the obligations required to be performed by them to date (or each non-performing
party has received a valid, enforceable and irrevocable written waiver with
respect to its non-performance), have received no notice of default and are not
in default (with due notice or lapse of time or both) under any agreement,
instrument, commitment, plan or arrangement to which the Company is a party or
by which it or its property may be bound. The Company has no present expectation
or intention of not fully performing all its obligations under each such
agreement, instrument, commitment, plan or arrangement, and the Company has no
knowledge of any breach or anticipated breach by the other party to any
agreement, instrument, commitment, plan or arrangement to which the Company is a
party. The Company is in full compliance with all of the terms and provisions of
its Charter and By-laws, as amended.
2.15 Loans and Advances. The Company does not have any
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of the
Company in respect to reimbursable business expenses anticipated to be incurred
by them in connection with their performance of services for the Company.
2.16 Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently
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liable on any indebtedness of any other person (including, without limitation,
liability by way of agreement, contingent or otherwise, to purchase, to provide
funds for payment, to supply funds to or otherwise invest in the debtor, or
otherwise to assure the creditor against loss), except for guaranties by
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business.
2.17 Significant Customers and Suppliers. No customer or supplier
which was significant to the Company during the period covered by the financial
statements referred to in Section 2.5 or which has been significant to the
Company thereafter, has terminated, materially reduced or threatened to
terminate or materially reduce its purchases from or provision of products or
services to the Company, as the case may be.
2.18 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement or the Second Amended and Restated Registration Rights Agreement,
the issuance, sale and delivery of the Preferred Shares or, upon conversion
thereof, the issuance and delivery of the Conversion Shares, other than (i)
filings pursuant to state securities laws (all of which filings have been made
by the Company, other than those which are required to be made after the Closing
and which will be duly made on a timely basis) in connection with the sale of
the Preferred Shares and (ii) with respect to the Second Amended and Restated
Registration Rights Agreement, the registration of the shares covered thereby
with the Commission and filings pursuant to state securities laws.
2.19 Disclosure. Neither this Agreement, nor any Schedule or
Exhibit to this Agreement, nor the Business Plan of the Company dated June 4,
1997 (the "Business Plan"), contains an untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein not misleading. None of the statements, documents, certificates or other
items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not disclosed to the Purchasers and their
counsel in writing and of which the Company is aware which materially and
adversely affects or could materially and adversely affect the business,
prospects, financial condition, operations, property or affairs of the Company.
The financial projections and other estimates contained in the Business Plan
were prepared by the Company based on the Company's experience in the industry
and on assumptions of fact and opinion as to future events which the Company, at
the date of the issuance of the Business Plan, believed to be reasonable, but
which the Company cannot and does not assure or guarantee the attainment of in
any manner. As of the date hereof no facts have come to the attention of the
Company which would, in its opinion, require the Company to revise or amplify
the assumptions underlying such projections and other estimates or the
conclusions derived therefrom.
2.20 Offering of the Preferred Shares. Neither the Company nor
any person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or any
security of the Company similar to the Preferred Shares has offered the
Preferred Shares or any such similar security for sale to, or
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solicited any offer to buy the Preferred Shares or any such similar security
from, or otherwise approached or negotiated with respect thereto with, any
person or persons, and neither the Company nor any person acting on its behalf
has taken or will take any other action (including, without limitation, any
offer, issuance or sale of any security of the Company under circumstances which
might require the integration of such security with Preferred Shares under the
Securities Act or the rules and regulations of the Commission thereunder), in
either case so as to subject the offering, issuance or sale of the Preferred
Shares to the registration provisions of the Securities Act.
2.21 Brokers. The Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
2.22 Officers. Set forth in Schedule II is a list of the names of
the officers of the Company, together with the title or job classification of
each such person and the total compensation anticipated to be paid to each such
person by the Company in 1998. None of such persons has an employment agreement
or understanding, whether oral or written, with the Company, which is not
terminable on notice by the Company without cost or other liability to the
Company.
2.23 Transactions With Affiliates. No director, officer, employee
or stockholder of the Company, or member of the family of any such person, or
any corporation, partnership, trust or other entity in which any such person, or
any member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with the Company, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm, other than employment at will
arrangements in the ordinary course of business.
2.24 Employees. Each of the officers of the Company, each key
employee and each other employee now employed by the Company who has access to
confidential information of the Company has executed an Employee Nondisclosure
and Developments Agreement (collectively, the "Employee Nondisclosure and
Developments Agreements"), and such agreements are in full force and effect. No
officer or key employee of the Company has advised the Company (orally or in
writing) that he intends to terminate employment with the Company. The Company
has complied in all material respects with all applicable laws relating to the
employment of labor, including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of Social Security and other
taxes, and with the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
2.25 U.S. Real Property Holding Corporation. The Company is not
now and has never been a "United States real property holding corporation," as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service, and the Company has
filed with the Internal Revenue Service all statements, if any, with its United
States income tax returns that are required under Section 1.897-2(h) of such
Regulations.
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2.26 ERISA.
(a) Schedule II lists each Employee Plan that covers any
employee of the Company, copies or descriptions of all of which have previously
been made available or furnished to the Purchasers. With respect to each
Employee Plan, the Company has provided the most recently filed Form 5500 and an
accurate summary description of such plan. The Company has provided the
Purchasers with complete age, salary, service and related data as of the most
recent practicable date for employees of the Company.
(b) Schedule II also includes a list of each Benefit
Arrangement of the Company, copies or descriptions of all of which have been
made available or furnished previously to the Purchasers.
(c) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. The Company and its Affiliates have not
incurred any liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
(d) None of the Employee Plans or other arrangements listed
on Schedule II covers any non-United States employee or former employee of the
Company.
(e) No "prohibited transaction," as defined in Section 406
of ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.
(f) No Employee Plan is an "employee pension benefit plan"
as defined in Section 3(2) of ERISA.
(g) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan or Benefit Arrangement.
(h) All contributions and payments accrued under each
Employee Plan and Benefit Arrangement, determined in accordance with prior
funding and accrual practices, as adjusted to include proportional accruals for
the period ending on the Closing Date, will be discharged and paid on or prior
to the Closing Date except to the extent reflected on the Balance Sheet. Except
as disclosed in writing to the Purchasers prior to the date hereof, there has
been no amendment to, written interpretation of or announcement (whether or not
written) by the Company or any of its ERISA Affiliates relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended prior to the date hereof.
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
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(j) No tax under Section 4980B of the Code has been incurred
in respect of any Employee Plan that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(k) With respect to the employees and former employees of
the Company, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code.
(l) No employee of the Company will become entitled to any
bonus, retirement, severance or similar benefit or enhanced benefit solely as a
result of the transactions contemplated hereby.
(m) The Company does not have, nor is it reasonably expected
to have, any liability under Title IV of ERISA.
2.27 Disqualified Persons. To the Company's knowledge, none of
the persons listed on Schedule V hereto holds, directly or indirectly, any
securities of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of
Rule 501 under the Securities Act and was not organized for the specific purpose
of acquiring the Preferred Shares;
(b) it received any materials in connection with the
offering of the Preferred Shares and first learned of such offering in the state
listed as its address set forth on Schedule I hereto, and intends that the state
securities laws of that state alone shall govern its purchase of Preferred
Shares;
(c) it has sufficient knowledge and experience in investing
in companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its investment
in the Company and it is able financially to bear the risks thereof;
(d) it has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management;
(e) the Preferred Shares being purchased by it are being
acquired for its own account for the purpose of investment and not with a view
to or for sale in connection with any distribution thereof;
(f) it understands that (i) the Preferred Shares and the
Conversion Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act, (ii) the Preferred Shares and, upon
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conversion thereof, the Conversion Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Preferred Shares and the Conversion
Shares will bear a legend to such effect and (iv) the Company will make a
notation on its transfer books to such effect; and
(g) if it sells any Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary steps in order
to perfect the exemption from registration provided thereby, including (i)
obtaining on behalf of the Company information to enable the Company to
establish a reasonable belief that the purchaser is a qualified institutional
buyer and (ii) advising such purchaser that Rule 144A is being relied upon with
respect to such resale.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the Preferred
Shares being purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall have
received from Hale and Dorr LLP, counsel for the Company, an opinion dated as of
the Closing Date, in form and scope satisfactory to the Purchasers and their
counsel, to the effect that:
(i) The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. To the knowledge of such counsel, the Company has
no subsidiaries. The Company is duly licensed or qualified to transact business
as a foreign corporation and is in good standing in Virginia. The Company has
the corporate power and authority to own and hold its properties and to carry on
its business as currently conducted and as proposed to be conducted. The Company
has the corporate power and authority to execute, deliver and perform this
Agreement and the Second Amended and Restated Registration Rights Agreement, to
issue, sell and deliver the Preferred Shares and, upon conversion thereof, to
issue and deliver the Conversion Shares.
(ii) This Agreement and the Second Amended and
Restated Registration Rights Agreement have been duly authorized, executed and
delivered by the Company and constitute the legal, valid and binding obligations
of the Company, enforceable in accordance with their respective terms (subject,
as to enforcement of remedies, to the discretion of courts in awarding equitable
relief and to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally), except that such
counsel need not express any opinion as to the validity or enforceability of the
indemnification and contribution provisions of the Second Amended and Restated
Registration Rights Agreement.
(iii) The execution and delivery by the Company of
this Agreement and the Second Amended and Restated Registration Rights
Agreement, the performance by the Company of its obligations hereunder and
thereunder, the issuance, sale and
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delivery of the Preferred Shares and, upon conversion thereof, the issuance and
delivery of the Conversion Shares, will not violate any provision of law
applicable to the Company, the Charter or By-laws, as amended, of the Company,
any order of any court or other agency of government specifically applicable to
the Company or its property or any agreement of the Company listed on Schedule
II hereto, or conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, or result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever upon any of
the properties or assets of the Company. In rendering the foregoing opinion,
such counsel may assume full disclosure to the Purchasers of all material facts
and, with respect to performance by the Company of its obligations under the
Second Amended and Restated Registration Rights Agreement, may assume compliance
by the Company at such time with the registration requirements of the Securities
Act and with applicable state securities laws and may disclaim any opinion as to
the validity or enforceability of the indemnification and contribution
provisions of the Second Amended and Restated Registration Rights Agreement.
(iv) The authorized capital stock of the Company
as of the date hereof consists of (i) 1,562,500 shares of Class A Convertible
Preferred Stock, $.001 par value (the "Class A Preferred Stock"), (ii) 2,151,420
shares of Class B Convertible Preferred Stock, $.001 par value (the "Class B
Preferred Stock"), (iii) 3,188,889 shares of Class C Convertible Preferred
Stock, $.001 par value (the "Class C Preferred Stock"), (iv) 2,045,785 shares of
Class D Convertible Preferred Stock, $.001 par value (the "Class D Convertible
Preferred Stock"), (v) 1,024,351 shares of Class E Convertible Preferred Stock,
$.001 par value (the "Class E Preferred Stock") and (vi) 17,500,000 shares of
Common Stock. Immediately prior to the Closing, 4,434,583 shares of Common
Stock, 1,537,500 shares of Class A Preferred Stock, 2,151,420 shares of Class B
Preferred Stock, 3,188,889 shares of Class C Preferred Stock and 2,045,785
shares of Class D Preferred Stock will be validly issued and outstanding, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof and no shares of Class E Preferred Stock will have been issued.
Immediately prior to the Closing, based on a review by such counsel of the stock
record and minute books of the Company, the stockholders of record and holders
of record of subscriptions, warrants, options, convertible securities, and other
rights (contingent or other) to purchase or otherwise acquire equity securities
of the Company, and the number of shares of Common Stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each, will be as set forth in Schedule II and Schedule III. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class or series of authorized capital stock of
the Company are as set forth in the Charter, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable against the Company and in accordance with all
applicable laws (subject, as to enforcement, to the discretion of courts in
awarding equitable relief and to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of creditors
generally). Except as set forth in Schedule II, to the knowledge of such
counsel, immediately prior to the Closing no subscription, warrant, option,
convertible security, or other right (contingent or otherwise) to purchase or
acquire equity securities of the Company will be authorized or outstanding and
there will be no commitment by the Company to issue shares, subscriptions,
warrants, options, convertible securities, or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness or
asset. Except as set forth in Schedule II or as provided for in the Charter, to
the knowledge
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of such counsel, the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
(v) The Preferred Shares and the Conversion Shares
have been duly authorized. The issuance, sale and delivery of the Preferred
Shares and the issuance and delivery of the Conversion Shares upon conversion of
the Preferred Shares have been duly authorized by all required corporate action;
the Preferred Shares have been validly issued, are fully paid and nonassessable
with no personal liability attaching to the ownership thereof and, to the
knowledge of such counsel, are free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in the Second Amended and Restated Registration Rights Agreement;
and the Conversion Shares have been duly reserved for issuance upon conversion
of the Preferred Shares and, when so issued, will be validly issued, fully paid
and nonassessable with no personal liability attaching to the ownership thereof
and, to the knowledge of such counsel, will be free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the Company
except as set forth in the Second Amended and Restated Registration Rights
Agreement. Neither the issuance, sale or delivery of the Preferred Shares nor
the issuance or delivery of the Conversion Shares is subject to any preemptive
right of stockholders of the Company arising under law or the Charter or By-laws
of the Company, each as amended, or, to the knowledge of such counsel, to any
contractual right of first refusal or other right in favor of any person, except
as set forth on Schedule II.
(vi) Except as described in Schedule II, to the
knowledge of such counsel there is no (A) action, suit, claim, proceeding or
investigation pending or threatened against or affecting the Company, at law or
in equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (B) arbitration proceeding relating to the Company pending under
collective bargaining agreements or (C) governmental inquiry pending or
threatened against or affecting the Company (including, without limitation, any
inquiry as to the qualification of the Company to hold or receive any license or
permit). To the knowledge of such counsel, the Company is not in default with
respect to any order, writ, injunction or decree known to such counsel of any
court or of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
(vii) To the knowledge of such counsel, no third
party has claimed that any person employed by or affiliated with the Company has
violated or may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such third party, or disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or interfered or
may be interfering in the employment relationship between such third party and
any of its present or former employees.
(viii) Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Article III, the
offer and sale of the Series E Preferred Stock pursuant to the terms of this
Agreement and the Second Amended and Restated Registration Rights Agreement are
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended, and, under such securities laws as they presently exist, the
issuance
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of Common Stock upon conversion of the Series E Preferred Stock will
also be exempt from such registration and qualification requirements.
(b) Representations and Warranties to be True and Correct.
The representations and warranties contained in Article II shall be true,
complete and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date,
and the President and Treasurer of the Company shall have certified to such
effect to the Purchasers in writing.
(c) Performance. The Company shall have performed and
complied with all agreements contained herein required to be performed or
complied with by it prior to or at the Closing Date, and the President and
Treasurer of the Company shall have certified to the Purchasers in writing to
such effect and to the further effect that all of the conditions set forth in
this Article IV have been satisfied.
(d) All Proceedings to be Satisfactory. All corporate and
other proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such counterpart originals or certified or
other copies of such documents as they reasonably may request.
(e) Supporting Documents. The Purchasers and their counsel
shall have received copies of the following documents:
(i) (A) the Charter, certified as of a recent date
by the Secretary of State of the State of Delaware and (B) a certificate of said
Secretary dated as of a recent date as to the due incorporation and good
standing of the Company, the payment of all excise taxes by the Company and
listing all documents of the Company on file with said Secretary;
(ii) a certificate of the Secretary or an
Assistant Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the By-laws of the Company
as in effect on the date of such certification; (B) that attached thereto is a
true and complete copy of all resolutions adopted by the Board of Directors or
the stockholders of the Company authorizing the execution, delivery and
performance of this Agreement and the Second Amended and Restated Registration
Rights Agreement, the issuance, sale and delivery of the Preferred Shares and
the reservation, issuance and delivery of the Conversion Shares, and that all
such resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this Agreement and
the Second Amended and Restated Registration Rights Agreement; (C) that the
Charter has not been amended since the date of the last amendment referred to in
the certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company executing this
Agreement and the Second Amended and Restated Registration Rights Agreement, the
stock certificates representing the Preferred Shares and any certificate or
instrument furnished pursuant hereto, and a certification by another officer of
the Company as to the incumbency and signature of the officer signing the
certificate referred to in this clause (ii); and
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(iii) such additional supporting documents and
other information with respect to the operations and affairs of the Company as
the Purchasers or their counsel reasonably may request.
(f) Second Amended and Restated Registration Rights
Agreement. The Company and each Prior Investor (as such term is defined therein)
shall have executed and delivered the Second Amended and Restated Registration
Rights Agreement.
(g) Non-Competition Agreements. Copies of the
Non-Competition Agreements with the Company signed by each of Robert McGovern,
James Winchester and Gene Austin (collectively, the "Non-Competition
Agreements") shall have been delivered to counsel for the Purchasers.
(h) Charter. The Charter shall read in its
entirety as set forth in Exhibit B. The Charter shall have been duly amended, if
necessary, to provide that: (i) all directors of the Company shall be
indemnified against, and absolved of, liability to the Company and its
stockholders to the maximum extent permitted under the laws of the State of
Delaware, and (ii) the number of shares of authorized Common Stock of the
Company may be increased or decreased (but not below the number then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Company entitled to vote thereon,
voting together as a single class notwithstanding the provisions of Section
242(b)(2) of the General Corporation Law of the State of Delaware.
(i) By-Laws. The Company's By-laws shall have been amended,
if necessary, to provide that (i) unless otherwise required by the laws of the
State of Delaware, any two directors, TTC Ventures, New Enterprise Associates
VI, Limited Partnership, 21st Century Internet Venture Partners, LLC, ADP shall
have the right to call a meeting of the Board of Directors and (ii) the number
of directors fixed in accordance therewith shall in no event conflict with any
of the terms or provisions of the Class E Convertible Preferred Stock as set
forth in the Charter.
(j) Employee Agreements. Copies of the Employee
Nondisclosure and Developments Agreements shall have been delivered to counsel
for the Purchasers.
(k) Election of Directors. The number of directors
constituting the entire Board of Directors shall have been fixed at seven and
the following persons shall have been elected as the directors and shall each
hold such position as of the Closing Date: Robert McGovern and James Tholen as
the directors elected solely by the holders of the Common Stock, David Wetmore
as the director elected solely by the holders of the Class A Preferred Stock,
Peter Barris as the director elected solely by the holders of the Class B
Preferred Stock (the "Class B Director"), J. Neil Weintraut as the director
elected solely by the holders of the Class C Preferred Stock (the "Class C
Director"), and D. Jarrett Collins as the director appointed by TTC Ventures and
Gary Butler as the director appointed by ADP on behalf of the holders of the
Class D Convertible Preferred Stock (the "Class D Directors"). The director to
be elected solely by the holders of the Common Stock, acting as a separate
class, and approved by the holders of the Class B Preferred Stock, the Class C
Preferred Stock and the Class D Convertible Preferred Stock, each acting as a
separate class, shall be nominated and elected at a later date.
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(l) Board Observer. FBR shall have the right to assign an
observer to the Board of Directors of the Company to attend each meeting of the
Board of Directors of the Company and each meeting of any Committee thereof.
(m) Preemptive Rights. All stockholders of the Company
having any preemptive, first refusal or other rights with respect to the
issuance of the Preferred Shares or the Conversion Shares shall have irrevocably
exercised or waived the same in writing.
(n) Fees of Purchasers' Counsel. The Company shall have paid
in accordance with Section 6.1 the fees and disbursements of Purchasers' counsel
invoiced at the Closing.
(o) Blue Sky. The Preferred Shares shall have been qualified
under applicable state securities laws.
(p) The McGovern Transaction. Simultaneous with the Closing,
the Purchasers shall purchase an aggregate of $250,000.00 of Mr. McGovern's
Series A Convertible Preferred Stock.
All such documents shall be satisfactory in form and substance to the
Purchasers and each of their counsels.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers that:
5.1 Financial Statements, Reports, Etc. The Company shall
furnish to each Purchaser holding at least 100,000 Preferred Shares, and to each
stockholder listed on Schedule III hereto (individually, an "Existing
Stockholder" and collectively, the "Existing Stockholders"), so long as such
Existing Stockholder holds at least 50% of the outstanding stock of the Company
held by such Existing Stockholder as of the date hereof (calculated on a
fully-diluted basis and adjusting for stock splits, stock dividends and the
like):
(a) within ninety (90) days after the end of each fiscal
year of the Company a consolidated balance sheet of the Company and its
subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, stockholders' equity and cash flows for the fiscal year
then ended, prepared in accordance with generally accepted accounting
principles and certified by a firm of independent public accountants of
recognized national standing selected by the Board of Directors of the Company;
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(b) within thirty (30) days after the end of each quarter in
each fiscal year (other than the last quarter in each fiscal year) a
consolidated balance sheet of the Company and its subsidiaries and the related
consolidated statements of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with generally accepted accounting
principles and certified by the Chief Executive Officer or Chief Financial
Officer of the Company, such consolidated balance sheet to be as of the end of
such quarter and such consolidated statements of income, stockholders' equity
and cash flows to be for such quarter and for the period from the beginning of
the fiscal year to the end of such quarter, in each case with comparative
statements for the prior fiscal year, provided that the Company's obligations
under this Section 5.1(b) shall terminate upon the completion of a firm
commitment underwritten public offering of the Company's securities;
(c) at the time of delivery of each quarterly statement
pursuant to Section 5.1(b), a management narrative report explaining all
significant variances from forecasts and all significant current developments in
staffing, marketing, sales and operations;
(d) no later than fifteen (15) days prior to the start of
each fiscal year, consolidated capital and operating expense budgets, cash flow
projections and income and loss projections for the Company and its subsidiaries
in respect of such fiscal year, all itemized in reasonable detail and prepared
on a monthly basis, and, promptly after preparation, any revisions to any of the
foregoing;
(e) promptly following receipt by the Company, each audit
response letter, accountant's management letter and other written report
submitted to the Company by its independent public accountants in connection
with an annual or interim audit of the books of the Company or any of its
subsidiaries;
(f) promptly upon sending, making available or filing the
same, all press releases, reports and financial statements that the Company
sends or makes available to its stockholders or directors or files with the
Commission; and
(g) promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations, property or
affairs of the Company and its subsidiaries as such Purchaser reasonably may
request.
5.2 Right of First Offer. So long as any shares of Class A
Preferred Stock, Class B Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock or Class E Convertible Preferred Stock are outstanding, the
Company shall, prior to any issuance by the Company of any of its securities
(other than debt securities with no equity feature), offer to each Purchaser and
to each then existing holder of such Preferred Stock (an "Existing Stockholder")
by written notice the right, for a period of thirty (30) days, to purchase all
of such securities for cash at an amount equal to the price or other
consideration for which such securities are to be issued; provided, however,
that the first refusal rights of the Purchasers and Existing Stockholders
pursuant to this Section 5.2 shall not apply to securities issued (A) upon
conversion of any of the Preferred Shares, (B) as a stock dividend or upon any
subdivision of shares of Common Stock, provided that the securities issued
pursuant to such stock dividend or subdivision are limited to additional shares
of Common Stock, (C) pursuant to subscriptions, warrants, options, convertible
securities,
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or other rights which are listed in Schedule III as being outstanding on the
date of this Agreement, (D) solely in consideration for the acquisition (whether
by merger or otherwise) by the Company or any of its subsidiaries of all or
substantially all of the stock or assets of any other entity, (E) pursuant to a
firm commitment underwritten public offering, (F) pursuant to the exercise of
the warrants issued to APD, Inc. ("ADP") in connection with its purchase of
Class D Preferred Stock and (G) pursuant to the exercise of options to purchase
Common Stock granted to directors, officers, employees or consultants of the
Company in connection with their service to the Company, not to exceed in the
aggregate 1,950,000 shares (appropriately adjusted to reflect stock splits,
stock dividends, combinations of shares and the like with respect to the Common
Stock) less the number of shares (as so adjusted) issued pursuant to
subscriptions, warrants, options, convertible securities, or other rights
outstanding on the date of this Agreement and listed in Schedule III pursuant to
clause (C) above (the shares exempted by this clause (G) being hereinafter
referred to as the "Reserved Employee Shares") provided that the number of
Reserved Employee Shares may be increased prior to December 31, 1998, with the
approval of a majority of the Board of Directors including the Class B Director,
the Class C Director and the two Class D Directors and at any time after
December 31, 1998, with the approval of either (i) a majority of the Board of
Directors including the Class B Director, the Class C Director and the two Class
D Directors or (ii) all directors other than the Class B Director, the Class C
Director or the two Class D Directors. The Company's written notice to the
Purchasers and Existing Stockholders shall describe the securities proposed to
be issued by the Company and specify the number, price and payment terms. Each
Purchaser and Existing Stockholder may accept the Company's offer as to the full
number of securities offered to it or any lesser number, by written notice
thereof given by it to the Company prior to the expiration of the aforesaid
thirty (30) day period, in which event the Company shall promptly sell and such
Purchaser or Existing Stockholder shall buy, upon the terms specified, the
number of securities agreed to be purchased by such Purchaser or Existing
Stockholder. Notwithstanding the foregoing, if the Purchasers and Existing
Stockholders agree, in the aggregate, to purchase more than the full number of
securities offered by the Company, then each Purchaser and Existing Stockholder
accepting the Company's offer shall first be allocated the lesser of (i) the
number of securities which such Purchaser or Existing Stockholder agreed to
purchase and (ii) the number of securities as is equal to the full number of
securities offered by the Company multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock held by such Purchaser or
Existing Stockholder as of the date of the Company's notice of offer (treating
such Purchaser or Existing Stockholder, for the purpose of such calculation, as
the holder of the number of shares of Common Stock which would be issuable to
such Purchaser or Existing Stockholder upon conversion, exercise or exchange of
all securities (including but not limited to the Preferred Shares) held by such
Purchaser or Existing Stockholder on the date such offer is made, that are then
convertible, exercisable or exchangeable into or for (whether directly or
indirectly) shares of Common Stock) and the denominator of which shall be the
aggregate number of shares of Common Stock (calculated as aforesaid) held on
such date by all Purchasers and Existing Stockholders who accepted the Company's
offer, and the balance of the securities (if any) offered by the Company shall
be allocated among the Purchasers and Existing Stockholders accepting the
Company's offer in proportion to their relative equity ownership interests in
the Company (calculated as aforesaid), provided that no Purchaser or Existing
Stockholder shall be allocated more than the number of securities which such
Purchaser or Existing Stockholder agreed to purchase and provided further that
in cases covered by this sentence all Purchasers and Existing Stockholders
shall be allocated
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among them the full number of securities offered by the Company. The Company
shall be free at any time prior to ninety (90) days after the date of its
notice of offer to the Purchasers and Existing Stockholders, to offer and sell
to any third party or parties the number of such securities not agreed by the
Purchasers and Existing Stockholders to be purchased by them, at a price and on
payment terms no less favorable to the Company than those specified in such
notice of offer to the Purchasers and Existing Stockholders. However, if such
third party sale or sales are not consummated within such ninety (90) day
period, the Company shall not sell such securities as shall not have been
purchased within such period without again complying with this Section 5.2.
5.3 Reserve for Conversion Shares. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Preferred
Shares and otherwise complying with the terms of this Agreement, such number of
its duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
5.4 Corporate Existence. The Company shall maintain and, except
as otherwise permitted by Section 5.16, cause each of its subsidiaries to
maintain, their respective corporate existence, rights and franchises in full
force and effect.
5.5 Properties, Business, Insurance. The Company shall maintain
and cause each of its subsidiaries to maintain as to their respective properties
and business, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient. The Company shall also maintain in effect "key
person" life insurance policies, payable to the Company, on the life of Robert
McGovern (so long as he remains an employee of the Company), in the amount of
$2,000,000. The Company shall not cause or permit any assignment or change in
beneficiary and shall not borrow against such policy. If requested by Purchasers
holding at least a majority of the outstanding Preferred Shares, the Company
will add one designee of such Purchasers as a notice party for such policy and
shall request that the issuer of such policy provide such designee with ten (10)
days' notice before such policy is terminated (for failure to pay premiums or
otherwise) or assigned or before any change is made in the beneficiary thereof.
5.6 Inspection, Consultation and Advice. The Company shall
permit and cause each of its subsidiaries to permit each Purchaser and such
persons as it may designate, at such Purchaser's expense, to visit and inspect
any of the properties of the Company and its subsidiaries, examine their books
and take copies and extracts therefrom, discuss the affairs, finances and
accounts of the Company and its subsidiaries with their officers, employees and
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public accountants (and the Company hereby authorizes said accountants to
discuss with such Purchaser and such designees such affairs, finances and
accounts), and consult with and advise the management of the Company and its
subsidiaries as to their affairs, finances and accounts, all at reasonable times
and upon reasonable notice.
5.7 Restrictive Agreements Prohibited. Neither the Company nor
any of its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement, the Second Amended
Registration Rights Agreement or the Charter.
5.8 Transactions with Affiliates. Except for transactions
contemplated by this Agreement or as otherwise approved by the Board of
Directors, neither the Company nor any of its subsidiaries shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock of the
Company or any of its subsidiaries, affiliates, member of the family of any such
person, or any corporation, partnership, trust or other entity in which any such
person, or member of the family of any such person, is a director, officer,
trustee, partner or holder of more than 5% of the outstanding capital stock
thereof, except for transactions on customary terms related to such person's
employment.
5.9 Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Shares solely for working capital.
5.10 Board of Directors Meetings. The Company shall use its best
efforts to ensure that meetings of its Board of Directors are held at least four
times each year and at least once each quarter. The Company shall permit TTC
Ventures, 21st Century Internet Venture Partners, LLC ("21st Century Internet
Venture Partners") and ADP, so long as they, individually, (i) hold of record or
beneficially at least 500,000 Preferred Shares and/or Conversion Shares and (ii)
are not represented on the Board of Directors, directly or by one of its
affiliates ("Unrepresented"), to have one representative attend each meeting of
the Board of Directors of the Company and each meeting of any Committee thereof.
While any or all of TTC Ventures, 21st Century Internet Venture Partners and ADP
is Unrepresented, the Company shall send to such Unrepresented party a notice
containing the time and place of all Board meetings in the same manner and at
the same time as it shall send such notice to its directors or committee
members, as the case may be, and shall provide to such Unrepresented party
copies of all notices, reports, minutes and consents at the time and in the
manner as they are provided to the Board of Directors or committee, except for
information reasonably designated as proprietary information by the Board of
Directors. The Company shall permit FBR to have an observer attend each meeting
of the Board of Directors of the Company and each meeting of any Committee
thereof for as long as FBR shall continue to hold at least 250,000 shares of the
Company Series E Convertible Preferred Stock or Common Stock into which such
shares are convertible.
5.11 Compensation. The Company shall not pay to its management
compensation in excess of that compensation customarily paid to management in
companies of similar size, of similar maturity, and in similar businesses
without the written consent of a majority of the members of the Board of
Directors of the Company.
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5.12 By-laws. The Company shall at all times cause its By-laws to
provide that, (a) unless otherwise required by the laws of the State of
Delaware, any two directors, TTC Ventures, New Enterprise Associates VI, Limited
Partnership, 21st Century Internet Venture Partners, or ADP shall have the right
to call a meeting of the Board of Directors or stockholders and (b) the number
of directors fixed in accordance therewith shall in no event conflict with any
of the terms or provisions of the Class E Convertible Preferred Stock as set
forth in the Charter. The Company shall at all times maintain provisions in its
By-laws and/or Charter indemnifying all directors against liability and
absolving all directors from liability to the Company and its stockholders to
the maximum extent permitted under the laws of the State of Delaware.
5.13 Performance of Contracts. The Company shall not amend,
modify, terminate, waive or otherwise alter, in whole or in part, any of the
Employee Nondisclosure and Developments Agreements or the Non-Competition
Agreements without the written consent of a majority of the members of the Board
of Directors of the Company.
5.14 Vesting of Reserved Employee Shares. The Company shall not
grant to any of its employees options to purchase Reserved Employee Shares which
will become exercisable at a rate in excess of 25% per annum from the date of
such grant (except as set forth on Schedule II) without the consent of the Board
of Directors.
5.15 Employee Nondisclosure and Developments Agreements. The
Company shall use its best efforts to obtain, and shall cause its subsidiaries
to use their best efforts to obtain, an Employee Nondisclosure and Developments
Agreement from all future officers, key employees and other employees who will
have access to confidential information of the Company or any of its
subsidiaries, upon their employment by the Company or any of its subsidiaries.
5.16 Activities of Subsidiaries. The Company shall not permit any
subsidiary to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any subsidiary may (i) consolidate or
merge into or with or sell or transfer assets to any other subsidiary, or (ii)
merge into or sell or transfer assets to the Company. The Company shall not sell
or otherwise transfer any shares of capital stock of any subsidiary, except to
the Company or another subsidiary, or permit any subsidiary to issue, sell or
otherwise transfer any shares of its capital stock or the capital stock of any
subsidiary, except to the Company or another subsidiary. The Company shall not
permit any subsidiary to purchase or set aside any sums for the purchase of, or
pay any dividend or make any distribution on, any shares of its stock, except
for dividends or other distributions payable to the Company or another
subsidiary.
5.17 Compliance with Laws. The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could materially adversely affect its business
or condition, financial or otherwise.
5.18 Keeping of Records and Books of Account. The Company shall
keep, and cause each subsidiary to keep, adequate records and books of account,
in which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
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5.19 Change in Nature of Business. The Company shall not make, or
permit any subsidiary to make, any material change in the nature of its business
as set forth in the Business Plan.
5.20 U.S. Real Property Interest Statement. The Company shall
provide prompt written notice to each Purchaser following any "determination
date" (as defined in Treasury Regulation Section 1.897-2(c)(i)) on which the
Company becomes a United States real property holding corporation. In addition,
upon a written request by any Purchaser, the Company shall provide such
Purchaser with a written statement informing the Purchaser whether such
Purchaser's interest in the Company constitutes a U.S. real property interest.
The Company's determination shall comply with the requirements of Treasury
Regulation Section 1.897-2(h)(1) or any successor regulation, and the Company
shall provide timely notice to the Internal Revenue Service, in accordance with
and to the extent required by Treasury Regulation Section 1.897-2(h)(2) or any
successor regulation, that such statement has been made. The Company's written
statement to any Purchaser shall be delivered to such Purchaser within ten (10)
days of such Purchaser's written request therefor. The Company's obligation to
furnish a written statement pursuant to this Section 5.20 shall continue
notwithstanding the fact that a class of the Company's stock may be regularly
traded on an established securities market.
5.21 Rule 144A Information. The Company shall, at all times
during which it is neither subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, provide in writing, upon the written request of any Purchaser or a
prospective buyer of Preferred Shares or Conversion Shares from any Purchaser,
all information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act ("Rule 144A
Information"). The Company also shall, upon the written request of any Purchaser
or any stockholder listed on Schedule III, cooperate with and assist such
Purchaser or any member of the National Association of Securities Dealers, Inc.
PORTAL system in applying to designate and thereafter maintain the eligibility
of the Preferred Shares or Conversion Shares, as the case may be, for trading
through PORTAL. The Company's obligations under this Section 5.21 shall at all
times be contingent upon the relevant Purchaser's obtaining from the prospective
buyer of Preferred Shares or Conversion Shares a written agreement to take all
reasonable precautions to safeguard the Rule 144A Information from disclosure to
anyone other than a person who will assist such buyer in evaluating the purchase
of any Preferred Shares or Conversion Shares.
5.22 Termination of Covenants. The covenants set forth in
Sections 5.20 and 5.21 shall terminate and be of no further force or effect as
to each of the Purchasers when such Purchaser no longer holds any shares of
capital stock of the Company. Except as otherwise provided above, all of the
other covenants set forth in this Article V shall terminate and be of no further
force or effect as to each of the Purchasers when such Purchaser owns less than
50% of the Preferred Shares purchased by it on the date hereof (appropriately
adjusted to reflect stock splits, stock dividends, combinations of shares and
the like with respect to the Class E Convertible Preferred Stock).
25
<PAGE> 29
EXECUTION COPY
ARTICLE VI
MISCELLANEOUS
6.1 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall pay
the fees and disbursements, up to $15,000, of the Purchasers' counsel in
connection with such transactions and any subsequent amendment, waiver, consent
or enforcement thereof.
6.2 Survival of Agreements. All covenants, agreements,
representations and warranties made herein or in the Second Amended Registration
Rights Agreement, or any certificate or instrument delivered to the Purchasers
pursuant to or in connection with this Agreement or the Second Amended
Registration Rights Agreement, shall survive the execution and delivery of this
Agreement and the Second Amended Registration Rights Agreement, the issuance,
sale and delivery of the Preferred Shares, and the issuance and delivery of the
Conversion Shares, and all statements contained in any certificate or other
instrument delivered by the Company hereunder or thereunder or in connection
herewith or therewith shall be deemed to constitute representations and
warranties made by the Company.
6.3 Brokerage. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
6.4 Parties in Interest. All representations, covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting the Purchasers shall inure to the benefit of any and all subsequent
holders from time to time of Preferred Shares or Conversion Shares.
6.5 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at 11495 Sunset Hills Road, Reston,
VA 20190, Attention: President, with a copy to David Sylvester, Hale and Dorr
LLP, 1455 Pennsylvania Avenue, N.W., Washington, D.C. 20004; and
(b) if to any Purchaser, at the address of such Purchaser
set forth in Schedule I, with a copy to Alexander D. Lynch, Brobeck, Phleger &
Harrison LLP, 1633 Broadway, 47th Floor, New York, New York 10019;
(c) or, in any such case, at such other address or addresses
as shall have been furnished in writing by such party to the others.
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<PAGE> 30
EXECUTION COPY
6.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
6.7 Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto
are hereby incorporated herein by reference.
6.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.9 Amendments. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the holders of at least two-thirds of the outstanding shares of
Common Stock issued or issuable upon conversion of the Preferred Shares.
6.10 Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
6.11 Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
6.12 Assignment. The rights granted pursuant to this Agreement
may be assigned or otherwise conveyed by any Purchaser or by any subsequent
transferee of any such rights to any transferee, other than a competitor of the
Company, only if such transferee (i) acquires at least 100,000 Preferred Shares
and/or Common Stock issuable upon conversion of the Preferred Shares and (ii) is
an affiliate or constituent partner of any Purchaser or a direct or indirect
subsidiary of The Thomson Corporation. Such assignment, transfer or conveyance
may not be made without the prior written consent of the Company, such consent
not to be unreasonably withheld.
6.13 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Benefit Arrangement" means each employment, severance
or other similar contract, arrangement or policy (written or oral) and each plan
or arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan and (ii) covers any employee or former employee of the Company.
27
<PAGE> 31
EXECUTION COPY
(b) "Employee Plan" means each "employee benefit plan," as
such term is defined in Section 3(3) of ERISA, that (A)(i) is subject to any
provision of ERISA and (ii) is maintained or contributed to by the Company, or
(B)(i) is subject to any provision of Title IV of ERISA and (ii) is maintained
or contributed to by any of the Company's ERISA Affiliates.
(c) "ERISA" means the Employment Retirement Income Security
Act of 1974, as amended.
(d) "ERISA Affiliate" of any entity means any other entity
that, together with such entity, would be treated as a single employer under
Section 414 of the Code.
(e) "Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
(f) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency or
any agency or political subdivision thereof, or other entity.
(g) "subsidiary" shall mean, as to the Company, any
corporation of which more than 50% of the outstanding stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned by the
Company, or by one or more of its subsidiaries, or by the Company and one or
more of its subsidiaries.
28
<PAGE> 32
EXECUTION COPY
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Class D Convertible Preferred Stock Purchase Agreement as of the day and year
first above written.
CAREEBUILDERS, INC.
By: /s/ Robert McGovern
-----------------------------------------------
Title: CEO
--------------------------------------------
[Corporate Seal]
Attest:
/s/ Eugene J. Austin
- ----------------------------
Secretary
PURCHASERS:
Thomson U.S. Inc.
By:
-----------------------------------------------
By: /s/ James R. Schurr
-----------------------------------------------
Name: James R. Schurr
Title: Vice President
21st Century Internet Venture Partners, LLC
By: 21st Century Internet Partners, LLC
By: /s/ J. Neil Weintraut
----------------------------------------------
Name: J. Neil Weintraut
Title: Member
New Enterprise Associates VI, Limited Partnership
By: NEA Partners VI, Limited Partnership
By: /s/ Peter Barris
-----------------------------------------------
29
<PAGE> 33
EXECUTION COPY
Title:
FBR Technology Venture Partners, L.P.
By: FBR Venture Capital Managers, Inc.
By: /s/ Gene Riechers
-----------------------------------------------
Name: Gene Riechers
Title: Managing Director
FBR eComm, L.P.
By: Friedman, Billings, Ramsey Inv. Mgmt. Inc.
General Partner
By: /s/ George Abraham
-----------------------------------------------
Name: George Abraham
Title: Managing Director
30
<PAGE> 34
EXECUTION COPY
SCHEDULE I
Purchasers
<TABLE>
<CAPTION>
Number of Aggregate
Name and Preferred Shares to be Purchase Price
Address of Purchaser Purchased For Preferred Shares
- --------------------------- ---------------------- --------------------------
<S> <C> <C>
Thomson U.S. Inc.
c/o TTC Ventures
One Main Street
Cambridge, MA 02142 37,672 $185,722.96
21st Century Internet Venture
Partners, LLC
Two South Park
Second Floor
San Francisco, CA 94107 143,068 705,325.24
New Enterprise Associates VI,
Limited Partnership
1119 St. Paul Street
Baltimore, MD 21202 235,091 1,158,998.63
FBR Technology Venture
Partners, L.P.
Potomac Tower
1001 Nineteenth Street North
Arlingotn, VA 22209 405,680 2,000,002.40
FBR eComm, L.P.
Potomac Tower
1001 Nineteenth Street North
Arlingotn, VA 22209 202,840 1,000,001.20
TOTAL 1,024,351 $5,050,050.43
</TABLE>
31
<PAGE> 35
<PAGE> 1
EXHIBIT 10.11
CLASS F CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
between
CAREERBUILDER, INC.
and
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
Dated as of January 26, 1999
<PAGE> 2
THIS CLASS F CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (together
with the schedules and exhibits attached hereto, the "Agreement") is made as of
January 26, 1999 between CareerBuilder, Inc., a Delaware corporation (the
"Company"), and the several purchasers named in the attached Schedule I
(individually a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of up to 2,018,350 shares (the "Preferred Shares") of the authorized
but unissued Class F Convertible Preferred Stock, par value $.001 per share, of
the Company (the "Class F Convertible Preferred Stock"); and
WHEREAS, the Purchasers, severally, wish to purchase the Preferred Shares
on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE PREFERRED SHARES
1.1 Issuance, Sale and Delivery of the Preferred Shares. The Company
agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees to
purchase from the Company, the number of Preferred Shares set forth opposite the
name of such Purchaser under the heading "Number of Preferred Shares to be
Purchased" on Schedule I, at the aggregate purchase price set forth opposite the
name of such Purchaser under the heading "Aggregate Purchase Price for Preferred
Shares" on Schedule I.
1.2 Closing. The closing shall take place at the offices of Hale and
Dorr LLP, 1455 Pennsylvania Avenue, N.W., Washington, D.C. 20004, at 10 a.m., on
January 26, 1999, or at such other location, date and time as may be agreed upon
between the Purchasers and the Company or via facsimile at such date and time as
may be agreed upon between the Purchasers and the Company (such closing being
called the "Closing" and such date and time being called the "Closing Date"). At
the Closing, the Company shall issue and deliver to each Purchaser a stock
certificate or certificates in definitive form, registered in the name of such
Purchaser, representing the Preferred Shares being purchased by it at the
Closing. As payment in full for the Preferred Shares being purchased by it under
this Agreement, and against delivery of the stock certificate or certificates
therefor as aforesaid, on the Closing Date each Purchaser shall (i) deliver to
the Company a check payable to the order of the Company, in the amount set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase Price
for Preferred Shares" on Schedule I, (ii) transfer such sum to the account of
the Company by wire transfer, or (iii) deliver or transfer such sum to the
Company by any combination of such methods of payments.
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<PAGE> 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that, except as set
forth in the Disclosure Schedule attached as Schedule II (with such
representations and warranties not being affected by any due diligence
investigation undertaken by the Purchasers):
2.1 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification. The Company has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement, the Third Amended and Restated Registration Rights Agreement with the
Purchasers in the form attached as Exhibit A (the "Third Amended and Restated
Registration Rights Agreement") and the Amended and Restated Stock Restriction
Agreement of even date herewith by and among the Company, Robert McGovern, James
Winchester and the persons listed on Schedules I and II thereto (the "Amended
and Restated Stock Restriction Agreement"), to issue, sell and deliver the
Preferred Shares and to issue and deliver the shares of Common Stock, par value
$.001 per share, of the Company ("Common Stock") issuable upon conversion of the
Preferred Shares (the "Conversion Shares").
(b) The Company has no subsidiaries. The Company does not (i)
own of record or beneficially, directly or indirectly, (A) any shares of capital
stock or securities convertible into capital stock of any other corporation or
(B) any participating interest in any partnership, joint venture or other
non-corporate business enterprise or (ii) control, directly or indirectly, any
other entity.
2.2 Authorization of Agreements, Etc.
(a) The execution and delivery by the Company of this
Agreement, the Third Amended and Restated Registration Rights Agreement and the
Amended and Restated Stock Restriction Agreement, the performance by the Company
of its obligations hereunder and thereunder, the issuance, sale and delivery of
the Preferred Shares, and the issuance and delivery of the Conversion Shares (i)
have been duly authorized by all requisite corporate action, (ii) will not
violate any provision of law, any order of any court or other agency of
government, the Charter or the By-laws of the Company, as amended, or any
provision of any indenture, agreement or other instrument to which the Company
or any of its properties or assets is bound, or conflict with, result in a
breach of, constitute (with due notice or lapse of time or both) a default
under, accelerate or terminate any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or
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<PAGE> 4
assets of the Company and (iii) will not require any notice, consent or waiver
under any material indenture, agreement or other instrument to which the Company
is a party or by which any of its properties or assets are bound.
(b) The Preferred Shares have been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Class F Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or through the
Company except as set forth in the Third Amended and Restated Registration
Rights Agreement and the Charter. The Conversion Shares have been duly reserved
for issuance upon conversion of the Preferred Shares and, when so issued, will
be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock with no personal liability attaching to the ownership thereof and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in the Third
Amended and Restated Registration Rights Agreement or the Amended and Restated
Stock Restriction Agreement. Neither the issuance, sale or delivery of the
Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company, or to any right
of first refusal or other right in favor of any person, which have not been duly
and validly waived.
2.3 Validity. This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms. The Third Amended and
Restated Registration Rights Agreement and the Amended and Restated Stock
Restriction Agreement, when executed and delivered in accordance with this
Agreement, will constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms.
2.4 Authorized Capital Stock. The authorized capital stock of the
Company consists of (i) 1,562,500 shares of Class A Convertible Preferred Stock,
par value $.001 per share (the "Class A Preferred Stock"), (ii) 2,151,420 shares
of Class B Convertible Preferred Stock, par value $.001 per share (the "Class B
Preferred Stock"), (iii) 3,188,889 shares of Class C Convertible Preferred
Stock, par value $.001 per share (the "Class C Preferred Stock"), (iv) 2,045,785
shares of Class D Convertible Preferred Stock, par value $.001 per share (the
"Class D Preferred Stock"), (v) 1,024,351 shares of Class E Convertible
Preferred Stock, par value $.001 per share (the "Class E Preferred Stock"), (vi)
2,018,350 shares of Class F Convertible Preferred Stock, par value $.001 per
share (the "Class F Preferred Stock") and (vii) 21,000,000 shares of Common
Stock. Immediately prior to the Closing, 4,855,333 shares of Common Stock,
1,507,500 shares of Class A Preferred Stock, 2,151,420 shares of Class B
Preferred Stock, 3,188,889 shares of Class C Preferred Stock, 2,045,785 shares
of Class D Preferred Stock and 1,024,351 shares of Class E Preferred Stock will
be validly issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof and no shares of Class F Preferred
Stock will have been issued. The Class F Preferred Stock, when issued to the
Purchasers pursuant to the terms of this Agreement and for the consideration set
forth herein, will be validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof. The
stockholders of record and holders of subscriptions, warrants, options,
convertible securities, and other rights (contingent or other) to
-3-
<PAGE> 5
purchase or otherwise acquire equity securities of the Company, and the number
of shares of Common Stock and the number of such subscriptions, warrants,
options, convertible securities, and other such rights held by each, are as set
forth in the attached Schedule III. The Company has attached a copy of the
post-closing capitalization schedule as a part of Schedule III. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Charter, a copy of which is attached as
Exhibit B, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws. Except as set forth in the attached
Schedule III, (i) no person owns of record or is known to the Company to own
beneficially any share of Common Stock, Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock or Class D Preferred Stock, (ii) no
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of the Company is
authorized or outstanding, and (iii) there is no commitment by the Company to
issue shares, subscriptions, warrants, options, convertible securities or other
such rights or to distribute to holders of any of its equity securities any
evidence of indebtedness or asset. Except as provided for in the Charter or as
set forth in the attached Schedule II, the Company has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interest therein or to pay any dividend or make any other
distribution in respect thereof. Except as set forth in Schedule II, the Company
is not a party to any voting trusts or agreement, stockholders' agreement,
pledge agreement, buy-sell agreement, or any agreement giving rights of first
refusal, preemptive rights or proxies relating to any securities of the Company,
and to the best of the Company's knowledge there are no voting trusts or
agreements, stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to any securities
of the Company. All of the outstanding securities of the Company were issued in
compliance with all applicable Federal and state securities laws.
2.5 Financial Statements.
(a) The Company has furnished to the Purchasers the audited
balance sheet of the Company as of September 30, 1997 and the related audited
statements of income, stockholders' equity and cash flows of the Company for the
fiscal year ended September 30, 1997 (the "1997 Audited Financial Statements")
and the audited balance sheet of the Company as of September 30, 1998 (the
"Balance Sheet") and the related audited statements of income, stockholders'
equity and cash flows of the Company as of September 30, 1998 (together with the
Balance Sheet, the "1998 Audited Financial Statements"). The 1997 Audited
Financial Statements and the 1998 Audited Financial Statements and the
respective notes thereto have been prepared in accordance with generally
accepted accounting principles consistently applied and fairly present the
financial position of the Company as of their respective dates.
(b) The Company has furnished to the Purchasers the unaudited
balance sheet of the Company as of November 30, 1998 and the related unaudited
statements of income, stockholders' equity, and cash flows of the Company for
the two months ended November 30, 1998 (together, the "Unaudited Financial
Statements"). The Unaudited Financial Statements and the notes thereto have been
prepared in accordance with generally accepted accounting principles
consistently
-4-
<PAGE> 6
applied (except that such Unaudited Financial Statements do not contain all of
the required footnotes and are subject to normal year-end adjustment) and fairly
present the financial position of the Company as of November 30, 1998 and the
results of its operations, stockholders' equity and cash flows for the two
months ended November 30, 1998. Since the date of the Audited and Unaudited
Financial Statements, (i) there has been no change in the assets, liabilities
(whether accrued, fixed, contingent or other) or financial condition of the
Company from that reflected in the Unaudited Financial Statements except for
changes in the ordinary course of business which in the aggregate have not had a
Material Adverse Effect (as defined below) and (ii) no subsequent occurrence or
development, individually or in the aggregate, whether or not insured against,
has had a Material Adverse Effect (as defined below) on the business, financial
condition, operations, property, prospects or affairs of the Company. As used
herein, a "Material Adverse Effect" means any effect that is, or would
reasonably be expected to be, individually or in the aggregate, materially
adverse to the business, financial condition or operations of the Company.
2.6 Events Subsequent to the Date of the Audited Financial Statements.
Since the date of the Audited Financial Statements, the Company has not (i)
issued any stock, bond or other corporate security, (ii) borrowed any amount or
incurred or become subject to any liability (absolute, accrued or contingent),
except current liabilities incurred and liabilities under contracts entered into
in the ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the Audited Financial
Statements and current liabilities incurred since the date of the Unaudited
Financial Statements in the ordinary course of business, (iv) declared or made
any payment of dividends or distribution to stockholders or purchased or
redeemed any shares of its capital stock or other security, (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or canceled any debt or claim, (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service mark, copyright, trade secret or other
intangible asset, (viii) suffered any material damage, destruction or loss of
property (whether or not covered by insurance) or waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation except in the ordinary course of business and
consistent with past practice, (x) made any material change in the manner of
business or operations of the Company, (xi) entered into any transaction except
in the ordinary course of business or as otherwise contemplated hereby or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
2.7 Litigation; Compliance with Law. There is no (i) action, suit,
claim, proceeding or investigation pending or, to the best of the Company's
knowledge, threatened against or specifically affecting the Company or any of
its assets or its properties, at law or in equity, or before or by any Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (ii) arbitration proceeding
relating to the Company pending under collective bargaining agreements or
otherwise or (iii) governmental inquiry pending or, to the best of the Company's
knowledge, threatened against or specifically affecting the Company (including
without limitation any inquiry as to the qualification of the Company to hold or
receive any license or permit), nor is the Company aware that there is any basis
for the foregoing.
-5-
<PAGE> 7
The Company has not received any opinion or memorandum or legal advice from
legal counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business, prospects,
financial condition, operations, property or affairs. The Company is not in
default with respect to any order, writ, injunction or decree known to or served
upon the Company of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. There is no action or suit by the Company pending or
threatened against others. The Company has complied with all laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services except where failure to comply with such laws,
rules, regulations and orders would not result in a Material Adverse Effect, the
Company has all necessary permits, licenses and other authorizations required to
conduct its business as conducted and as proposed to be conducted, and the
Company has been operating its business pursuant to and in compliance with the
terms of all such permits, licenses and other authorizations. There is no
existing law, rule, regulation or order, and the Company, after due inquiry, is
not aware of any proposed law, rule, regulation or order, whether Federal,
state, county or local, which would prohibit or restrict the Company from, or
otherwise materially adversely affect the Company in, conducting its business in
any jurisdiction in which it is now conducting business or in which it proposes
to conduct business.
2.8 Proprietary Information of Third Parties. The Company has received
no notification that any third party has claimed and, to the best of the
Company's knowledge, no third party has reason to claim that, any person
employed by or affiliated with the Company has (a) violated or may be violating
any of the terms or conditions of his employment, non-competition,
non-solicitation or non-disclosure agreement with such third party, (b)
disclosed or may be disclosing or utilized or may be utilizing, without the
consent of such employer or has otherwise provided such materials to others, any
trade secret or confidential proprietary information or documentation of such
third party without the consent of such third party or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
the Company which suggests that such a claim might be contemplated. To the best
of the Company's knowledge, no person employed by or affiliated with the Company
has employed or proposes to employ, has used, disclosed or provided to others
any trade secret or any information or documentation confidential and
proprietary to any former employer or has otherwise provided such materials to
others, and to the best of the Company's knowledge, no person employed by or
affiliated with the Company has violated any confidential relationship which
such person may have had with any third party, in connection with the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Company, and the
Company has no reason to believe there will be any such employment or violation.
To the best of the Company's knowledge, the Company, in the conduct of its
business as now conducted, does not infringe upon or conflict with the rights of
any third party under any contract, covenant or instrument to which the Company
is a party.
2.9 Patents, Trademarks, Etc. Set forth in Schedule II is a list and
brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name
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of the Company, or of which the Company is a licensor or licensee or in which
the Company has any right, and in each case a brief description of the nature of
such right. The Company owns or possesses adequate licenses or other rights to
use all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know how (collectively,
"Intellectual Property") necessary or desirable to the conduct of its business
as conducted and as proposed to be conducted, and no claim is pending or, to the
best of the Company's knowledge, threatened to the effect that the operations of
the Company infringe upon or conflict with the asserted rights of any other
person under any Intellectual Property, and there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, and there is no basis for any such claim (whether or not pending or
threatened). The Company has performed all acts necessary and has paid all fees
and taxes required to maintain all registrations and applications of all such
Intellectual Property in full force and effect. The Company is not, nor will it
be, as a result of the performance of any obligations hereunder, in breach of
any license or any other agreement to which it is a party relating to any
Intellectual Property. All prior art known to the Company which may be or may
have been pertinent to the examination of any United States patent or patent
application listed in Schedule II has been cited to the United States Patent and
Trademark Office. To the best of the Company's knowledge, all technical
information developed by and belonging to the Company which has not been
patented has been kept confidential. The Company has not granted or assigned to
any other person or entity any right to manufacture, have manufactured, assemble
or sell the products or proposed products or to provide the services or proposed
services of the Company. To the Company's best knowledge, no third party is
infringing or has infringed upon any Intellectual Property of the Company nor is
the Company infringing upon the Intellectual Property of any third party.
2.10 Title to Properties. The Company has good, clear and marketable
title to its properties and assets reflected on the Unaudited Financial
Statements or acquired by it since the date of the Unaudited Financial
Statements (other than properties and assets disposed of in the ordinary course
of business since the date of the Unaudited Financial Statements), and all such
properties and assets are free and clear of mortgages, pledges, security
interests, liens, charges, claims, restrictions and other encumbrances
(including without limitation, easements and licenses), except liens for or
current taxes not yet due and payable and minor imperfections of title, if any,
not material in nature or amount and not materially detracting from the value or
impairing the use of the property subject thereto or impairing the operations or
proposed operations of the Company, including without limitation, the ability of
the Company to secure financing using such properties and assets as collateral.
The Company has not received any notice of condemnation, environmental, zoning
or other land use regulation proceedings, either instituted or planned to be
instituted, which would adversely affect the use or operation of the Company's
properties and assets for their respective intended uses and purposes, or the
value of such properties, and the Company has received no notice of any special
assessment proceedings which would affect such properties and assets. The
Company's properties and assets are in a good state of repair (normal wear and
tear excepted) and are suitable to conduct the business of the Company as it is
currently being conducted.
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2.11 Leasehold Interests. Each lease or agreement to which the Company
is a party under which it is a lessee of any property, real or personal, is a
valid and subsisting agreement, duly authorized and entered into, without any
default of the Company thereunder and, to the best of the Company's knowledge,
without any default thereunder of any other party thereto. No event has occurred
and is continuing which, with due notice or lapse of time or both, would
constitute a default or event of default by the Company under any such lease or
agreement or, to the best of the Company's knowledge, by any other party
thereto. The Company has not received any notice of termination under any such
lease. The Company's possession of such property has not been disturbed and, to
the best of the Company's knowledge after due inquiry, no claim has been
asserted against the Company adverse to its rights in such leasehold interests.
2.12 Insurance. The insurance policies set forth on Schedule II
constitute all of the policies of insurance required to be maintained by the
Company. Such policies are in full force and effect. All premiums with respect
to such policies that have become due and payable have been paid, and no notice
of cancellation or termination has been received with respect to any such
policy.
2.13 Taxes. The Company has filed, or will timely file, all tax
returns, Federal, state, county and local, required to be filed by it, and the
Company has paid, or will timely pay, all taxes shown to be due by such returns
as well as all other taxes, assessments and governmental charges which have
become due or payable, including without limitation all taxes which the Company
is obligated to withhold from amounts owing to employees, creditors and third
parties. All tax returns and amendments thereto filed by the Company are true,
complete and correct in all material respects. The Company has established
adequate reserves for all taxes accrued but not yet payable. All tax elections
have been made by the Company in accordance with generally accepted practice.
The Federal income tax returns of the Company have never been audited by the
Internal Revenue Service, no audit is currently pending, and to the best
knowledge of the Company, no audit is threatened with respect to any tax returns
filed by it. No deficiency assessment with respect to or proposed adjustment of
the Company's Federal, state, county or local taxes is pending or, to the best
of the Company's knowledge, threatened. There is no tax lien, whether imposed by
any Federal, state, county or local taxing authority, outstanding against the
assets, properties or business of the Company. Neither the Company nor any of
its present or former stockholders has ever filed an election pursuant to
Section 1362 of the Internal Revenue Code of 1986, as amended (the "Code"), that
the Company be taxed as an S corporation. The Company is not a party to any tax
sharing, cost sharing or similar agreement. The Company has not entered into any
agreement that would result in the disallowance of any tax deduction under
Section 280G of the Code. The Company has not given or been requested to give
any waiver of any statutes of limitation relating to payment of taxes or
executed powers of attorney with respect to tax matters which will be
outstanding as of the Closing Date. The Company is not currently the beneficiary
of any extension of time within which to file any tax return. The Company has
not filed a "contract" within the meaning of Section 341(f) of the Code, nor, to
the Company's knowledge, has any such contract been filed with respect to the
Company.
2.14 Other Agreements. Except as set forth in the attached Schedule IV,
the Company is not a party to or otherwise bound by any written or oral
agreement, instrument, commitment or restriction which individually or in the
aggregate could materially adversely affect the
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business, prospects, financial condition, operations, property or affairs of the
Company. Copies of all agreements, instruments and documents set forth under
Section 2.14 of Schedule IV have previously been made available or furnished to
the Purchasers and their representatives. Except as set forth in the attached
Schedule IV, the Company is not a party to or otherwise bound by any written or
oral:
(a) distributor, dealer, manufacturer's representative or sales
agency agreement which is not terminable on less than ninety (90) days' notice
without cost or other liability to the Company (except for agreements which, in
the aggregate, are not material to the business of the Company);
(b) sales agreement which entitles any customer to a rebate or
right of set-off, to return any product to the Company after acceptance thereof
or to delay the acceptance thereof, or which varies in any material respect from
the Company's standard form agreements;
(c) agreement with any labor union (and, to the knowledge of
the Company, no organizational effort is being made with respect to any of its
employees);
(d) agreement with any supplier containing any provision
permitting any party other than the Company to renegotiate the price or other
terms, or containing any payback or other similar provision, upon the occurrence
of a failure by the Company to meet its obligations under the agreement when due
or the occurrence of any other event;
(e) agreement for the future purchase of fixed assets or for
the future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(f) agreement for the employment of any officer, employee or
other person (whether of a legally binding nature or in the nature of an
informal understanding) on a full-time or consulting basis which is not
terminable on notice without cost or other liability to the Company, except
normal severance arrangements and accrued vacation pay;
(g) bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan,
agreement or understanding pursuant to which benefits are provided to any
employee of the Company (other than group insurance plans applicable to
employees generally);
(h) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company;
(i) guaranty of any obligation for borrowed money or otherwise;
(j) voting trust or agreement, stockholders' agreement, pledge
agreement, buy-sell agreement or first refusal or preemptive rights agreement
relating to any securities of the Company;
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<PAGE> 11
(k) agreement, or group of related agreements with the same
party or any group of affiliated parties, under which the Company has advanced
or agreed to advance money or has agreed to lease any property as lessee or
lessor;
(l) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities;
(m) assignment, license or other agreement with respect to any
form of intangible property;
(n) agreement under which it has granted any person any
registration rights, other than the Third Amended and Restated Registration
Rights Agreement;
(o) agreement under which it has limited or restricted its
right to compete with any person in any respect;
(p) other agreement or group of related agreements with the
same party involving more than $50,000 or continuing over a period of more than
six months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by the Company without penalty upon notice of thirty (30) days or
less, but excluding any agreement or group of agreements with a customer of the
Company for the sale, lease or rental of the Company's products or services if
such agreement or group of agreements was entered into by the Company in the
ordinary course of business;
(q) agreement or commitment for capital expenditures in excess
of $50,000; or
(r) other agreement, instrument, commitment, plan or
arrangement, a copy of which would be required to be filed with the Securities
and Exchange Commission (the "Commission") as an exhibit to a registration
statement on Form S-1 if the Company were registering securities under the
Securities Act of 1933, as amended (the "Securities Act").
The Company, and to the best of the Company's knowledge, each other party
thereto have in all material respects performed all the obligations required to
be performed by them to date (or each non-performing party has received a valid,
enforceable and irrevocable written waiver with respect to its non-performance),
have received no notice of default and are not in default (with due notice or
lapse of time or both) under any agreement, instrument, commitment, plan or
arrangement to which the Company is a party or by which it or its property may
be bound. All such agreements, instruments, commitments, plans or arrangements
constitute valid and binding obligations of the Company, and to the best
knowledge of the Company, the other parties thereto, enforceable in accordance
with their terms, except as enforcement may be limited by general principles of
equity, insolvency and similar laws affecting creditors rights generally. The
Company has no present expectation or intention of not fully performing all its
obligations under each such agreement, instrument, commitment, plan or
arrangement, and the Company has no knowledge of any breach or
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<PAGE> 12
anticipated breach by the other party to, and has not received any written
notice of intention not to renew under, any agreement, instrument, commitment,
plan or arrangement to which the Company is a party. The Company is in full
compliance with all of the terms and provisions of its Charter and By-laws, as
amended.
2.15 Loans and Advances. The Company does not have any outstanding
loans or advances to any person and is not obligated to make any such loans or
advances, except, in each case, for advances to employees of the Company in
respect to reimbursable business expenses anticipated to be incurred by them in
connection with their performance of services for the Company.
2.16 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
The Company has not assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on any indebtedness of any other person (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor, or otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
2.17 Significant Customers and Suppliers. No customer or supplier which
was significant to the Company during the period covered by the financial
statements referred to in Section 2.5 or which has been significant to the
Company thereafter, has terminated, materially reduced or threatened to
terminate or materially reduce its purchases from or provision of products or
services to the Company, as the case may be.
2.18 Governmental Approvals. Subject to the accuracy of the
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement, the Third Amended and Restated Registration Rights Agreement or
the Amended and Restated Stock Restriction Agreement, the issuance, sale and
delivery of the Preferred Shares or, upon conversion thereof, the issuance and
delivery of the Conversion Shares, other than (i) filings pursuant to state
securities laws (all of which filings have been made by the Company, other than
those which are required to be made after the Closing and which will be duly
made on a timely basis) in connection with the sale of the Preferred Shares and
(ii) with respect to the Third Amended and Restated Registration Rights
Agreement, the registration of the shares covered thereby with the Commission
and filings pursuant to state securities laws.
2.19 Disclosure. Neither this Agreement, nor any Schedule or Exhibit to
this Agreement, nor the Company's proposed plan for the 1998-1999 fiscal year
(the "1999 Plan"), nor the Audited Financial Statements or Unaudited Financial
Statements, contains an untrue statement of a material fact or omits a material
fact necessary to make the statements contained herein or therein not
misleading. None of the statements, documents, certificates or other items
prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact which the Company has not disclosed to the Purchasers and their
counsel
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<PAGE> 13
in writing and of which the Company is aware which has or could have a Material
Adverse Effect on the Company. The financial projections and other estimates
contained in the 1999 Plan were prepared by the Company based on the Company's
experience in the industry and on assumptions of fact and opinion as to future
events which the Company, at the date of the preparation of the 1999 Plan,
believed to be reasonable, but which the Company cannot and does not assure or
guarantee the attainment of in any manner. As of the date hereof no facts have
come to the attention of the Company which would, in its opinion, require the
Company to revise or amplify the assumptions underlying such projections and
other estimates or the conclusions derived therefrom. The Company has furnished,
made available to, or has caused to be furnished or made available to,
Purchasers or their representatives for review complete and correct copies of
all agreements and documents set forth on the Disclosure Schedule or any other
schedule attached hereto.
2.20 Offering of the Preferred Shares. Neither the Company nor any
person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with the offering or sale of the Preferred Shares or any
security of the Company similar to the Preferred Shares has offered the
Preferred Shares or any such similar security for sale to, or solicited any
offer to buy the Preferred Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with Preferred Shares under the
Securities Act or the rules and regulations of the Commission thereunder), in
either case so as to subject the offering, issuance or sale of the Preferred
Shares to the registration provisions of the Securities Act.
2.21 Brokers. The Company has no contract, arrangement or understanding
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
2.22 Officers. Set forth in Schedule II is a list of the names of the
officers of the Company, together with the title or job classification of each
such person and the total compensation anticipated to be paid to each such
person by the Company in 1998. None of such persons has an employment agreement
or understanding, whether oral or written, with the Company, which is not
terminable on notice by the Company without cost or other liability to the
Company.
2.23 Transactions With Affiliates. No director, officer, employee or
stockholder of the Company, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has a substantial interest or is an
officer, director, trustee, partner or holder of more than 5% of the outstanding
capital stock thereof, is a party to any transaction with the Company, including
any contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm, other than employment at will
arrangements in the ordinary course of business.
2.24 Employees. Each of the officers of the Company, each key employee
and each other employee now employed by the Company who has access to
confidential information of the
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<PAGE> 14
Company has executed an Employee Nondisclosure and Developments Agreement
(collectively, the "Employee Nondisclosure and Developments Agreements"), and
such agreements are in full force and effect. No officer or key employee of the
Company has advised the Company (orally or in writing) that he intends to
terminate employment with the Company.
2.25 U.S. Real Property Holding Corporation. The Company is not now and
has never been a "United States real property holding corporation," as defined
in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service, and the Company has filed with the
Internal Revenue Service all statements, if any, with its United States income
tax returns that are required under Section 1.897-2(h) of such Regulations.
2.26 ERISA.
(a) Schedule II lists each Employee Plan that covers any
employee of the Company, copies or descriptions of which have previously been
made available or furnished to the Purchasers. With respect to each Employee
Plan, the Company has provided the most recently filed Form 5500 and an accurate
summary description of such plan. The Company has provided the Purchasers with
complete age, salary, service and related data as of the most recent practicable
date for employees of the Company.
(b) Schedule II also includes a list of each Benefit
Arrangement of the Company, copies or descriptions of all of which have been
made available or furnished previously to the Purchasers.
(c) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. The Company and its Affiliates have not
incurred any liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
(d) None of the Employee Plans or other arrangements listed on
Schedule II covers any non-United States employee or former employee of the
Company.
(e) No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.
(f) No Employee Plan is an "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
(g) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan or Benefit Arrangement.
(h) All contributions and payments accrued under each Employee
Plan and Benefit Arrangement, determined in accordance with prior funding and
accrual practices, as adjusted
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to include proportional accruals for the period ending on the Closing Date, will
be discharged and paid on or prior to the Closing Date except to the extent
reflected on the Audited Financial Statements. Except as disclosed in writing to
the Purchasers prior to the date hereof, there has been no amendment to, written
interpretation of or announcement (whether or not written) by the Company or any
of its ERISA Affiliates relating to, or change in employee participation or
coverage under, any Employee Plan or Benefit Arrangement that would increase
materially the expense of maintaining such Employee Plan or Benefit Arrangement
above the level of the expense incurred in respect thereof for the fiscal year
ended prior to the date hereof.
(i) There is no contract, agreement, plan or arrangement
covering any employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code.
(j) No tax under Section 4980B of the Code has been incurred
in respect of any Employee Plan that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(k) With respect to the employees and former employees of the
Company, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code.
(l) No employee of the Company will become entitled to any
bonus, retirement, severance or similar benefit or enhanced benefit solely as a
result of the transactions contemplated hereby.
(m) The Company does not have, nor is it reasonably expected to
have, any liability under Title IV of ERISA.
2.27 Absence of Undisclosed Liabilities. Except for (a) liabilities as
and to the extent reflected or reserved against on the Audited Financial
Statements, (b) immaterial liabilities incurred since November 30, 1998, in the
ordinary course of business, consistent with past practice, of the Company, and
(c) ordinary course liabilities incurred under any contract not required to be
disclosed on any Schedule to this Agreement because of any applicable
materiality threshold contained in this Agreement, the Company has no
liabilities or obligations of any nature, whether known or unknown, fixed,
accrued, contingent or otherwise and whether due or to become due.
2.28 Year 2000. The computer systems and software owned, and to the
best knowledge of the Company after due inquiry, as set forth on Schedule II,
licensed, by the Company are able to accurately process, provide and/or receive
date data, including but not limited to, calculating, comparing and sequencing
from, into and between the twentieth century (through year 1999), the year 2000
and the twenty-first century, including leap year calculations. The Company has
instituted a program of questioning its material vendors and suppliers to assess
their Year 2000 readiness. Set forth under Section 2.28 of Schedule II is a
timetable showing the Company's anticipated schedule for the completion of such
interviews. In addition, attached as
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an annex to Section 2.28 of Schedule II is the questionnaire that the Company
has sent to each of its material vendors and suppliers regarding Year 2000
compliance issues, a copy of which has previously been provided to the
Purchasers. Of the vendors and suppliers that have responded to the Company's
questionnaire and inquiries to date, none have informed the Company of any
material Year 2000 compliance issues and, to the Company's knowledge, the
Company has no reason to believe otherwise.
2.29 Labor Relations. The Company is not engaged in any unfair labor
practice (under any applicable Federal or state law) that would reasonably be
expected to have a Material Adverse Effect on the Company, nor is there any
charge or complaint current or pending, nor to the Company's best knowledge,
threatened against the Company relating to such practice. The Company's
employees are not represented by a labor union and no union organizing activity
has commenced. The Company is not a party to any collective bargaining
agreement.
2.30 Environmental Matters. (a) The Company has (i) complied in all
material respects with the Environmental Laws applicable to it, (ii) provided to
the Purchasers a copy of any order, notice, permit, application, or any other
written communication or report received by the Company from any governmental
authority or any other person or sent by or for the Company to a
governmental authority in connection with any matter relating to environmental
laws applicable to the Company and (iii) has provided the Purchasers with copies
of any environmental assessment reports, certificates, engineering studies or
other written material or data the Company may have relating to environmental
laws applicable to the Company. There is no Environmental Claim pending or, to
the knowledge of the Company, threatened against the Company with respect to the
operations or business of the Company, or, to the Company's knowledge, against
any person or entity whose liability for any Environmental Claim the Company has
retained or assumed either contractually or by operation of law. To the
Company's knowledge, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that could form the basis of any Environmental Claim
against the Company, or, to the Company's knowledge, against any person or
entity whose liability for any Environmental Claim the Company has retained or
assumed either contractually or by operation of law, which would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
Schedule II sets forth (i) all on-site and to the knowledge of the Company
off-site locations where the Company has stored, disposed or arranged for the
disposal of Materials of Environmental Concern, (ii) to the knowledge of the
Company, all underground storage tanks, and the capacity and contents of such
tanks, located on property owned, leased or controlled by the Company, (iii) to
the knowledge of the Company, the location and condition of any asbestos or lead
(including furnishings or lead-based paints) contained in or forming part of any
building, building component, structure or office space owned, leased or
controlled by the Company; and (v) to the knowledge of the Company, all PCBs or
PCB-containing items that are used or stored at any property owned, leased or
controlled by the Company.
(b) For purposes of this Section 2.30 (i) "Environmental Claim"
means any claim, action, cause of action, investigation of which the Company,
including any of its management employees, are aware, or written notice by any
person alleging potential liability (including, without
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limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (a)
the presence, or release into the environment, of any Material of Environmental
Concern at any location owned, leased, used or operated by the Company, or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law; (ii) "Environmental Laws" means all Federal, state and local
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata and natural resources), including,
without limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern;
and (iii) "Materials of Environmental Concern" means chemicals, pollutants,
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials, or PCBs.
2.31 Investment Company Act. The Company is not a "registered
investment company" within the meaning of the Investment Act of 1940, as
amended.
2.32 Relationship with General Electric Company. The Company does not
have any equity, creditor or similar relationship (including without limitation
any investment in, or any debtor, revolving credit, leasing or creditor
relationship, but excluding any vendor or vendee relationship) with General
Electric Company or any subsidiary thereof.
2.33 Private Offering. Assuming the correctness of the representations
and warranties set forth in Article III hereof, the offer and sale of the
Preferred Stock to Purchasers hereunder is exempt from the registration and
prospectus delivery requirements of the Securities Act.
2.34 Holding Company. The Company is not a "holding company" or a
"subsidiary company" as such terms are defined in the Public Utility Holding
Company Act of 1934, as amended.
2.35 Disqualified Persons. To the Company's knowledge, none of the
persons listed on Schedule V hereto holds, directly or indirectly, any
securities of the Company.
2.36 Absence of Questionable Payments. To the Company's knowledge,
neither the Company nor any director, officer or employee acting on behalf of
the Company has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
foreign political activity or government officials. Neither the Company nor any
current director, officer or employee acting on behalf of the Company has
accepted or received any unlawful contributions, payments, gifts or
expenditures.
2.37 Solvency. The Company is not (a) "insolvent" (as defined in
Section 101(32) of the Bankruptcy Code of 1978, as amended (the "Bankruptcy
Code")), (b) engaged in business with unreasonably small capital or assets (as
contemplated by the Bankruptcy Code, the Uniform Fraudulent Conveyance Act, as
amended, the Uniform Fraudulent Transfer Act, as amended, or other
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similar laws) or (c) unable to pay or provide for the payment of such
liabilities and obligations as and when due.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of Rule
501 under the Securities Act and was not organized for the specific purpose of
acquiring the Preferred Shares;
(b) it received any materials in connection with the offering
of the Preferred Shares and first learned of such offering in the state listed
as its address set forth on Schedule I hereto, and intends that the state
securities laws of that state alone shall govern its purchase of Preferred
Shares;
(c) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof;
(d) it has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management;
(e) the Preferred Shares being purchased by it are being
acquired for its own account for the purpose of investment and not with a view
to or for sale in connection with any distribution thereof without prejudice,
however, to its rights at all times to sell or otherwise dispose of all or part
of such Preferred Shares, subject to the provisions of Section 6.12 of this
Agreement, or pursuant to a registration statement under the Securities Act or
pursuant to an exemption from the registration requirements under the Securities
Act;
(f) it understands that (i) the Preferred Shares and the
Conversion Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof promulgated under the Securities
Act, (ii) the Preferred Shares and, upon conversion thereof, the Conversion
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, (iii)
the Preferred Shares and the Conversion Shares will bear a legend to such effect
and (iv) the Company will make a notation on its transfer books to such effect;
and
(g) if it sells any Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary steps in order
to perfect the exemption from registration provided thereby, including (i)
obtaining on behalf of the Company information to enable
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<PAGE> 19
the Company to establish a reasonable belief that the purchaser is a qualified
institutional buyer and (ii) advising such purchaser that Rule 144A is being
relied upon with respect to such resale.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the Preferred
Shares being purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall have
received from Hale and Dorr LLP, counsel for the Company, an opinion dated as of
the Closing Date, in form and scope satisfactory to the Purchasers and their
counsel, to the effect that:
(i) The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, its jurisdiction of incorporation. To the knowledge of such
counsel, the Company has no subsidiaries. The Company is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in Virginia. The Company has the corporate power and authority to own and hold
its properties and to carry on its business as currently conducted and as
proposed to be conducted. The Company has the corporate power and authority to
execute, deliver and perform this Agreement, the Third Amended and Restated
Registration Rights Agreement and the Amended and Restated Stock Restriction
Agreement, to issue, sell and deliver the Preferred Shares and, upon conversion
thereof, to issue and deliver the Conversion Shares.
(ii) This Agreement, the Third Amended and
Restated Registration Rights Agreement and the Amended and Restated Stock
Restriction Agreement have been duly authorized, executed and delivered by the
Company and constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms (subject, as to
enforcement of remedies, to the discretion of courts in awarding equitable
relief and to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally), except that such
counsel need not express any opinion as to the validity or enforceability of the
indemnification and contribution provisions of the Third Amended and Restated
Registration Rights Agreement.
(iii) The execution and delivery by the Company of
this Agreement, the Third Amended and Restated Registration Rights Agreement and
the Amended and Restated Stock Restriction Agreement, the performance by the
Company of its obligations hereunder and thereunder, the issuance, sale and
delivery of the Preferred Shares and, upon conversion thereof, the issuance and
delivery of the Conversion Shares, will not violate any provision of law
applicable to the Company, the Charter or By-laws, as amended, of the Company,
any order of any court or other agency of government specifically applicable to
the Company or its property or any agreement
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of the Company listed on Schedule II hereto, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under, accelerate or terminate or require the consent of any party under any
material indenture, agreement or other instrument as listed on Schedule II
hereto, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company. In rendering the foregoing opinion, such
counsel may assume, with respect to performance by the Company of its
obligations under the Third Amended and Restated Registration Rights Agreement,
compliance by the Company at such time with the registration requirements of the
Securities Act and with applicable state securities laws and may disclaim any
opinion as to the validity or enforceability of the indemnification and
contribution provisions of the Third Amended and Restated Registration Rights
Agreement.
(iv) The authorized capital stock of the Company
as of the date hereof consists of (i) 1,562,500 shares of Class A Convertible
Preferred Stock, par value $.001 per share (the "Class A Preferred Stock"), (ii)
2,151,420 shares of Class B Convertible Preferred Stock, par value $.001 per
share (the "Class B Preferred Stock"), (iii) 3,188,889 shares of Class C
Convertible Preferred Stock, par value $.001 per share (the "Class C Preferred
Stock"), (iv) 2,045,785 shares of Class D Convertible Preferred Stock, par value
$.001 per share (the "Class D Convertible Preferred Stock"), (v) 1,024,351
shares of Class E Convertible Preferred Stock, par value $.001 per share (the
"Class E Preferred Stock"), (vi) 2,018,350 shares of Class F Convertible
Preferred Stock, par value $.001 per share (the "Class F Preferred Stock") and
(vii) 21,000,000 shares of Common Stock. Immediately prior to the Closing,
4,855,333 shares of Common Stock, 1,507,500 shares of Class A Preferred Stock,
2,151,420 shares of Class B Preferred Stock, 3,188,889 shares of Class C
Preferred Stock, 2,045,785 shares of Class D Preferred Stock and 1,024,351
shares of Class E Preferred Stock will be validly issued and outstanding, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof and no shares of Class F Preferred Stock will have been issued. The
Class F Preferred Stock, when issued to the Purchasers pursuant to the terms of
this Agreement and for the consideration set forth herein, will be validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof. Immediately prior to the Closing, based on a
review by such counsel of the stock record and minute books of the Company, the
amount of Common Stock issuable pursuant to warrants, options, convertible
securities, and other rights (contingent or other) to purchase or otherwise
acquire equity securities of the Company, and the number of shares of Common
Stock and the number of such subscriptions, warrants, options, convertible
securities, and other such rights held by each, will be as set forth in Schedule
II and Schedule III. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class or series
of authorized capital stock of the Company are as set forth in the Charter, and
all such designations, powers, preferences, rights, qualifications, limitations
and restrictions are valid, binding and enforceable against the Company and in
accordance with all applicable laws (subject, as to enforcement, to the
discretion of courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally). Except as set forth in Schedule II and Schedule III, to
the knowledge of such counsel, immediately prior to the Closing no Common Stock
has been issued pursuant to any subscription, warrant, option, convertible
security, or other right (contingent or otherwise) to purchase or acquire equity
securities of the Company will
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<PAGE> 21
be authorized or outstanding and there will be no commitment by the Company to
issue shares, subscriptions, warrants, options, convertible securities, or other
such rights or to distribute to holders of any of its equity securities any
evidence of indebtedness or asset. Except as set forth in Schedule II or as
provided for in the Charter, to the knowledge of such counsel, the Company has
no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof.
(v) The Preferred Shares and the Conversion
Shares have been duly authorized. The issuance, sale and delivery of the
Preferred Shares and the issuance and delivery of the Conversion Shares upon
conversion of the Preferred Shares have been duly authorized by all required
corporate action; the Preferred Shares have been validly issued, are fully paid
and nonassessable with no personal liability attaching to the ownership thereof
and, to the best knowledge of such counsel, are free and clear of all liens,
charges, restrictions, claims and encumbrances imposed by or through the Company
except as set forth in the Third Amended and Restated Registration Rights
Agreement and the Amended and Restated Stock Restriction Agreement, and the
Conversion Shares have been duly reserved for issuance upon conversion of the
Preferred Shares and, when issued in accordance with the terms of this Agreement
and the Company's Charter, as amended, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof and,
to the knowledge of such counsel, will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in the Third Amended and Restated Registration Rights Agreement.
Neither the issuance, sale or delivery of the Preferred Shares nor the issuance
or delivery of the Conversion Shares is subject to any preemptive right of
stockholders of the Company arising under law or the Charter or By-laws of the
Company, each as amended, or, to the knowledge of such counsel, to any
contractual right of first refusal or other right in favor of any person, except
as set forth on Schedule II.
(vi) Except as described in Schedule II, to the
knowledge of such counsel there is no (A) action, suit, claim, proceeding or
investigation pending or threatened against or affecting the Company, at law or
in equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (B) arbitration proceeding relating to the Company pending under
collective bargaining agreements or (C) governmental inquiry pending or
threatened against or affecting the Company (including, without limitation, any
inquiry as to the qualification of the Company to hold or receive any license or
permit). To the knowledge of such counsel, the Company is not in default with
respect to any order, writ, injunction or decree known to such counsel of any
court or of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
(vii) To the knowledge of such counsel, no third
party has claimed that any person employed by or affiliated with the Company has
violated or may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such third party, or disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or interfered or
may be interfering in the employment relationship between such third party and
any of its present or former employees.
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<PAGE> 22
(viii) Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Article III, the offer and sale of
the Series F Preferred Stock pursuant to the terms of this Agreement and the
Third Amended and Restated Registration Rights Agreement are exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, and, under such securities laws as they presently exist, the issuance
of Common Stock upon conversion of the Series F Preferred Stock will also be
exempt from such registration and qualification requirements.
(b) Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President and Treasurer of the Company shall have certified to such effect to
the Purchasers in writing.
(c) Performance. The Company shall have performed and complied
with all agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date, and the President and Treasurer of the
Company shall have certified to the Purchasers in writing to such effect and to
the further effect that all of the conditions set forth in this Article IV have
been satisfied.
(d) All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such counterpart originals or certified or
other copies of such documents as they reasonably may request.
(e) Supporting Documents. The Purchasers and their counsel
shall have received copies of the following documents:
(i) (A) the Charter, certified as of a recent
date by the Secretary of State of the State of Delaware, (B) a certificate of
said Secretary dated as of a recent date as to the due incorporation and good
standing of the Company, the payment of all excise taxes by the Company and
listing all documents of the Company on file with said Secretary, and (C)
certificates of good standing or authority to conduct business from each state
in which the absence of such good standing or authority to conduct business
would have a Material Adverse Effect on the Company;
(ii) a certificate of the Secretary or an
Assistant Secretary of the Company dated the Closing Date and certifying: (A)
that attached thereto is a true and complete copy of the By-laws of the Company
as in effect on the date of such certification; (B) that attached thereto is a
true and complete copy of all resolutions adopted by the Board of Directors or
the stockholders of the Company authorizing the execution, delivery and
performance of this Agreement, the Third Amended and Restated Registration
Rights Agreement and the Amended and Restated Stock Restriction Agreement, the
issuance, sale and delivery of the Preferred Shares and
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the reservation, issuance and delivery of the Conversion Shares, and that all
such resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this Agreement, the
Third Amended and Restated Registration Rights Agreement and the Amended and
Restated Stock Restriction Agreement; (C) that the Charter has not been amended
since the date of the last amendment referred to in the certificate delivered
pursuant to clause (i)(B) above; and (D) to the incumbency and specimen
signature of each officer of the Company executing this Agreement, the Third
Amended and Restated Registration Rights Agreement and the Amended and Restated
Stock Restriction Agreement, the stock certificates representing the Preferred
Shares and any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this clause
(ii); and
(iii) such additional supporting documents and
other information with respect to the operations and affairs of the Company as
the Purchasers or their counsel reasonably may request.
(f) Other Agreements. The Company and each Prior Investor (as
such term is defined therein) shall have executed and delivered the Third
Amended and Restated Registration Rights Agreement. The Company and each party
to (i) the Stock Restriction Agreement, dated July 12, 1996, by and among the
Company, Robert McGovern and persons listed as purchasers in the signature pages
thereto and (ii) the Stock Restriction Agreement, dated July 12, 1996, by and
among the Company, James Winchester and persons listed as purchasers in the
signature pages thereto shall have executed and delivered the Amended and
Restated Stock Restriction Agreement.
(g) Non-Competition Agreements. Copies of the Non-Competition
Agreements with the Company signed by each of Robert McGovern, James Winchester
and Gene Austin (collectively, the "Non-Competition Agreements") shall have been
delivered to counsel for the Purchasers.
(h) Charter. The Charter shall read in its entirety as set
forth in Exhibit B.
(i) Employee Agreements. Copies of the Employee Nondisclosure
and Developments Agreements shall have been delivered to counsel for the
Purchasers.
(j) Board Observer. GE Capital Equity Investments, Inc.
("GECE") and General Electric Pension Trust ("GEPT") each shall have the right
to assign an observer to the Board of Directors of the Company to attend each
meeting of the Board of Directors of the Company and each meeting of any
Committee thereof.
(k) Preemptive Rights. All stockholders of the Company having
any preemptive, first refusal or other rights with respect to the issuance of
the Preferred Shares or the Conversion Shares shall have irrevocably exercised
or waived the same in writing.
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(l) Fees of Purchasers' Counsel. The Company shall have paid in
accordance with Section 6.1 the fees and disbursements of Purchasers' counsel
invoiced at the Closing.
(m) Blue Sky. The Preferred Shares shall have been qualified
under applicable state securities laws.
All such documents shall be satisfactory in form and substance to the
Purchasers and each of their counsels.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers that:
5.1 Financial Statements, Reports, Etc. The Company shall furnish to
each Purchaser holding any Preferred Shares, and to each stockholder listed on
Schedule III hereto (individually, an "Existing Stockholder" and collectively,
the "Existing Stockholders"), until the earlier of such time as the Existing
Stockholder holds at least 50% of the outstanding stock of the Company held by
such Existing Stockholder as of the date hereof (calculated on a fully-diluted
basis and adjusting for stock splits, stock dividends and the like) or the
completion of an initial public offering of the Company's stock:
(a) within ninety (90) days after the end of each fiscal year
of the Company a consolidated balance sheet of the Company and its subsidiaries
as of the end of such fiscal year and the related consolidated statements of
income, stockholders' equity and cash flows for the fiscal year then ended,
prepared in accordance with generally accepted accounting principles and
certified by a firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company;
(b) within thirty (30) days after the end of each quarter in
each fiscal year (other than the last quarter in each fiscal year) a
consolidated balance sheet of the Company and its subsidiaries and the related
consolidated statements of income, stockholders' equity and cash flows,
unaudited but prepared in accordance with generally accepted accounting
principles and certified by the Chief Executive Officer or Chief Financial
Officer of the Company, such consolidated balance sheet to be as of the end of
such quarter and such consolidated statements of income, stockholders' equity
and cash flows to be for such quarter and for the period from the beginning of
the fiscal year to the end of such quarter, in each case with comparative
statements for the prior fiscal year, provided that the Company's obligations
under this Section 5.1(b) shall terminate upon the completion of a firm
commitment underwritten public offering of the Company's securities; provided
further that such certificate by the Chief Executive Officer or Chief Financial
Officer shall also state that during the period covered by the most recent
statement of income delivered to the Purchasers no event of default or default
has occurred under any material agreement to which the Company is a party or
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violation of any law, rule or regulation to which the Company is subject, or, if
such has occurred, specifying the nature and status thereof, the period of
existence thereof and what action the Company has taken or proposes to take with
respect thereto;
(c) at the time of delivery of each quarterly statement
pursuant to Section 5.1(b), a management narrative report explaining all
significant variances from forecasts and all significant current developments in
staffing, marketing, sales and operations;
(d) no later than fifteen (15) days prior to the start of each
fiscal year, consolidated capital and operating expense budgets, cash flow
projections and income and loss projections for the Company and its subsidiaries
in respect of such fiscal year, all itemized in reasonable detail and prepared
on a monthly basis, and, promptly after preparation, any revisions to any of the
foregoing;
(e) promptly following receipt by the Company, each audit
response letter, accountant's management letter and other written report
submitted to the Company by its independent public accountants in connection
with an annual or interim audit of the books of the Company or any of its
subsidiaries;
(f) promptly upon sending, making available or filing the same,
all press releases, reports and financial statements that the Company sends or
makes available to its stockholders or directors or files with the Commission;
and
(g) promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations, property or
affairs of the Company and its subsidiaries as such Purchaser reasonably may
request.
5.2 Right of First Offer. So long as any shares of Class A Preferred
Stock, Class B Preferred Stock, Class C Preferred Stock, Class D Preferred
Stock, Class E Convertible Preferred Stock or Class F Preferred Stock are
outstanding, the Company shall, prior to any issuance by the Company of any of
its securities (other than debt securities with no equity feature), offer to
each Purchaser and to each then existing holder of such Preferred Stock (an
"Existing Stockholder") by written notice the right, for a period of thirty (30)
days, to purchase, on a pro rata basis, all of such securities for cash at an
amount equal to the price or other consideration for which such securities are
to be issued; provided, however, that the first refusal rights of the Purchasers
and Existing Stockholders pursuant to this Section 5.2 shall not apply to
securities issued (A) upon conversion of any of the Preferred Shares, (B) as a
stock dividend or upon any subdivision of shares of Common Stock, provided that
the securities issued pursuant to such stock dividend or subdivision are limited
to additional shares of Common Stock, (C) pursuant to subscriptions, warrants,
options, convertible securities, or other rights which are listed in Schedule
III as being outstanding on the date of this Agreement, (D) solely in
consideration for the acquisition (whether by merger or otherwise) by the
Company or any subsidiaries of all or substantially all of the stock or assets
of any other entity, (E) pursuant to a firm commitment underwritten public
offering, (F) pursuant to the exercise of the warrants issued to ADP, Inc.
("ADP") in connection with its purchase of Class D Preferred Stock
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and (G) pursuant to the exercise of options to purchase Common Stock granted to
directors, officers, employees or consultants of the Company in connection with
their service to the Company, not to exceed in the aggregate 2,100,000 shares
(appropriately adjusted to reflect stock splits, stock dividends, combinations
of shares and the like with respect to the Common Stock) less the number of
shares (as so adjusted) issued pursuant to subscriptions, warrants, options,
convertible securities, or other rights outstanding on the date of this
Agreement and listed in Schedule III pursuant to clause (C) above (the shares
exempted by this clause (G) being hereinafter referred to as the "Reserved
Employee Shares") provided that the number of Reserved Employee Shares may be
increased with the approval of a majority of the Board of Directors. The
Company's written notice to the Purchasers and Existing Stockholders shall
describe the securities proposed to be issued by the Company and specify the
number, price and payment terms. Each Purchaser and Existing Stockholder may
accept the Company's offer as to the full number of securities offered to it or
any lesser number, by written notice thereof given by it to the Company prior to
the expiration of the aforesaid thirty (30) day period, in which event the
Company shall promptly sell and such Purchaser or Existing Stockholder shall
buy, upon the terms specified, the number of securities agreed to be purchased
by such Purchaser or Existing Stockholder. Notwithstanding the foregoing, if the
Purchasers and Existing Stockholders agree, in the aggregate, to purchase more
than the full number of securities offered by the Company, then each Purchaser
and Existing Stockholder accepting the Company's offer shall first be allocated
the lesser of (i) the number of securities which such Purchaser or Existing
Stockholder agreed to purchase and (ii) the number of securities as is equal to
the full number of securities offered by the Company multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock held by
such Purchaser or Existing Stockholder as of the date of the Company's notice of
offer (treating such Purchaser or Eisting Stockholder, for the purpose of such
calculation, as the holder of the number of shares of Common Stock which would
be issuable to such Purchaser or Existing Stockholder upon conversion, exercise
or exchange of all securities (including but not limited to the Preferred
Shares) held by such Purchaser or Existing Stockholder on the date such offer is
made, that are then convertible, exercisable or exchangeable into or for
(whether directly or indirectly) shares of Common Stock) and the denominator of
which shall be the aggregate number of shares of Common Stock (calculated as
aforesaid) held on such date by all Purchasers and Existing Stockholders who
accepted the Company's offer, and the balance of the securities (if any) offered
by the Company shall be allocated among the Purchasers and Existing Stockholders
accepting the Company's offer in proportion to their relative equity ownership
interests in the Company (calculated as aforesaid), provided that no Purchaser
or Existing Stockholder shall be allocated more than the number of securities
which such Purchaser or Existing Stockholder agreed to purchase and provided
further that in cases covered by this sentence all Purchasers and Existing
Stockholders shall be allocated among them the full number of securities offered
by the Company. The Company shall be free at any time prior to ninety (90) days
after the date of its notice of offer to the Purchasers and Existing
Stockholders, to offer and sell to any third party or parties the number of such
securities not agreed by the Purchasers and Existing Stockholders to be
purchased by them, at a price and on payment terms no less favorable to the
Company than those specified in such notice of offer to the Purchasers and
Existing Stockholders. However, if such third party sale or sales are not
consummated within such ninety (90) day period, the Company shall not sell such
securities as shall not have been purchased within such period without again
complying with this Section 5.2.
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<PAGE> 27
5.3 Reserve for Conversion Shares. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of the Preferred Shares and
otherwise complying with the terms of this Agreement, such number of its duly
authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.
5.4 Corporate Existence. The Company shall maintain and, except as
otherwise permitted by Section 5.16, cause any subsidiaries to maintain, their
respective corporate existence, rights and franchises in full force and effect.
5.5 Properties, Business, Insurance. The Company shall maintain and
cause any subsidiaries to maintain as to their respective properties and
business, with financially sound and reputable insurers, insurance against such
casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient. The Company shall also maintain in effect "key
person" life insurance policies, payable to the Company, on the life of Robert
McGovern (so long as he remains an employee of the Company), in the amount of
$2,000,000. The Company shall not cause or permit any assignment or change in
beneficiary and shall not borrow against such policy. If requested by Purchasers
holding at least a majority of the outstanding Preferred Shares, the Company
will add one designee of such Purchasers as a notice party for such policy and
shall request that the issuer of such policy provide such designee with ten (10)
days' notice before such policy is terminated (for failure to pay premiums or
otherwise) or assigned or before any change is made in the beneficiary thereof.
5.6 Inspection, Consultation and Advice. Until the closing of an
initial public offering of the Company's stock, the Company shall permit and
cause each of its subsidiaries to permit each Purchaser and such persons as it
may designate, at such Purchaser's expense, to visit and inspect any of the
properties of the Company and its subsidiaries, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and accounts of the
Company and its subsidiaries with their officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
such Purchaser and such designees such affairs, finances and accounts), and
consult with and advise the management of the Company and its subsidiaries as to
their affairs, finances and accounts, all at reasonable times and upon
reasonable notice.
5.7 Restrictive Agreements Prohibited. Neither the Company nor any of
its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's
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<PAGE> 28
performance of this Agreement, the Third Amended and Restated Registration
Rights Agreement the Amended and Restated Stock Restriction Agreement or the
Charter.
5.8 Transactions with Affiliates. Except for transactions contemplated
by this Agreement or as otherwise approved by the Board of Directors, neither
the Company nor any of its subsidiaries shall enter into any transaction with
any director, officer, employee or holder of more than 5% of the outstanding
capital stock of any class or series of capital stock of the Company or any of
its subsidiaries, affiliates, member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or
member of the family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding capital stock thereof,
except for transactions related to such person's employment on terms consistent
with then current industry practice and in the ordinary course of business for
the Company as it is then conducted.
5.9 Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Shares solely for working capital.
5.10 Board of Directors Meetings. The Company shall use its best
efforts to ensure that meetings of its Board of Directors are held at least four
times each year and at least once each quarter. The Company shall permit each of
GECE and GEPT to have an observer attend each meeting of the Board of Directors
of the Company and each meeting of any Committee thereof for as long as GECE
and/or GEPT together, or individually, shall continue to hold an aggregated
total of at least 250,000 shares of the Company Series F Convertible Preferred
Stock or Common Stock into which such shares are convertible. Each person so
designated by GECE and GEPT as an observer on its respective behalf shall be
sent all materials provided to members of the Company's Board of Directors at
the same time and in the same manner as the Company's Board of Directors.
5.11 Compensation. The Company shall not pay to its management
compensation in excess of that compensation customarily paid to management in
companies of similar size, of similar maturity, and in similar businesses
without the written consent of a majority of the members of the Board of
Directors of the Company.
5.12 Performance of Contracts. The Company shall not amend, modify,
terminate, waive or otherwise alter, in whole or in part, any of the Employee
Nondisclosure and Developments Agreements or the Non-Competition Agreements
without the written consent of a majority of the members of the Board of
Directors of the Company.
5.13 Vesting of Reserved Employee Shares. The Company shall not grant
to any of its employees options to purchase Reserved Employee Shares which will
become exercisable at a rate in excess of 25% per annum from the date of such
grant (except as set forth on Schedule II) without the consent of the Board of
Directors.
5.14 Employee Nondisclosure and Developments Agreements. The Company
shall use its best efforts to obtain, and shall cause its subsidiaries to use
their best efforts to obtain, an Employee Nondisclosure and Developments
Agreement from all future officers, key employees and
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<PAGE> 29
other employees who will have access to confidential information of the Company
or any of its subsidiaries, upon their employment by the Company or any of its
subsidiaries.
5.15 Activities of Subsidiaries. The Company shall not permit any
subsidiary to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any subsidiary may (i) consolidate or
merge into or with or sell or transfer assets to any other subsidiary, or (ii)
merge into or sell or transfer assets to the Company. The Company shall not sell
or otherwise transfer any shares of capital stock of any subsidiary, except to
the Company or another subsidiary, or permit any subsidiary to issue, sell or
otherwise transfer any shares of its capital stock or the capital stock of any
subsidiary, except to the Company or another subsidiary. The Company shall not
permit any subsidiary to purchase or set aside any sums for the purchase of, or
pay any dividend or make any distribution on, any shares of its stock, except
for dividends or other distributions payable to the Company or another
subsidiary.
5.16 Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations and orders
including, without limitation, the Foreign Corrupt Practices Act of 1977, as
amended, noncompliance with which could have a Material Adverse Effect on the
Company.
5.17 Keeping of Records and Books of Account. The Company shall keep,
and cause each subsidiary to keep, adequate records and books of account, in
which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
5.18 Change in Nature of Business. The Company shall not make, or
permit any subsidiary to make, any material change in the nature of its business
as currently conducted.
5.19 U.S. Real Property Interest Statement. The Company shall provide
prompt written notice to each Purchaser following any "determination date" (as
defined in Treasury Regulation Section 1.897-2(c)(i)) on which the Company
becomes a United States real property holding corporation. In addition, upon a
written request by any Purchaser, the Company shall provide such Purchaser with
a written statement informing the Purchaser whether such Purchaser's interest in
the Company constitutes a U.S. real property interest. The Company's
determination shall comply with the requirements of Treasury Regulation Section
1.897-2(h)(1) or any successor regulation, and the Company shall provide timely
notice to the Internal Revenue Service, in accordance with and to the extent
required by Treasury Regulation Section 1.897- 2(h)(2) or any successor
regulation, that such statement has been made. The Company's written statement
to any Purchaser shall be delivered to such Purchaser within ten (10) days of
such Purchaser's written request therefor. The Company's obligation to furnish a
written statement pursuant to this Section 5.19 shall continue notwithstanding
the fact that a class of the Company's stock may be regularly traded on an
established securities market.
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<PAGE> 30
5.20 Rule 144A Information. The Company shall, at all times during
which it is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, provide
in writing, upon the written request of any Purchaser or a prospective buyer of
Preferred Shares or Conversion Shares from any Purchaser, all information
required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the
Commission under the Securities Act ("Rule 144A Information"). The Company also
shall, upon the written request of any Purchaser or any stockholder listed on
Schedule III, cooperate with and assist such Purchaser or any member of the
National Association of Securities Dealers, Inc. PORTAL system in applying to
designate and thereafter maintain the eligibility of the Preferred Shares or
Conversion Shares, as the case may be, for trading through PORTAL. The Company's
obligations under this Section 5.20 shall at all times be contingent upon the
relevant Purchaser's obtaining from the prospective buyer of Preferred Shares or
Conversion Shares a written agreement to take all reasonable precautions to
safeguard the Rule 144A Information from disclosure to anyone other than a
person who will assist such buyer in evaluating the purchase of any Preferred
Shares or Conversion Shares.
5.21 Termination of Covenants. Subject to Section 6.12, the covenants
set forth in Sections 5.19 and 5.20 shall terminate and be of no further force
or effect as to each of the Purchasers when such Purchaser no longer holds any
shares of capital stock of the Company. Except as otherwise provided above, all
of the other covenants set forth in this Article V (other than Section 5.23)
shall terminate and be of no further force or effect as to each of the
Purchasers when such Purchaser owns less than 20% of the Preferred Shares
purchased by it on the date hereof (appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and the like with respect to the
Class F Convertible Preferred Stock).
5.22 Taxes. The Company shall pay and discharge, before the same shall
become delinquent, (i) all amounts of taxes, assessments and governmental
charges or levies imposed upon it or upon its property and (ii) all lawful
claims that, if unpaid, could reasonably be expected by law to become a lien on
its property; provided, however, that neither the Company nor its subsidiaries
will be required to pay or discharge any such tax, assessment, charge or claim
(y) that is being contested in good faith and by proper proceedings and as to
which appropriate reserves are being maintained or (z) the non-payment or
non-discharge of which could not reasonably be expected to be materially adverse
to the business, properties, prospects or condition (financial or otherwise) of
the Company.
5.23 Underwriters. Notwithstanding any provision herein or in the Third
Amended and Restated Registration Rights Agreement to the contrary, so long as
GEPT shall be holder of equity of the Company, in the case of any such public
offering of equity of the Company in which existing stockholders of the Company
are permitted to sell such equity, GEPT shall have the right, in its sole
discretion, to approve or disapprove of any underwriter in which General
Electric Company owns a direct or indirect interest of five percent (5%) or
more; provided that GEPT shall notify the Company, promptly after the Board's
decision to begin interviewing underwriters, as to all
-29-
<PAGE> 31
underwriters in which General Electric Company owns a direct or indirect
interest of five percent (5%) or more.
5.24 Lost Certificate Evidencing Shares; Exchange. Upon receipt of
written notice or other evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any certificate evidencing validly
issued and outstanding shares of the Company's stock and, in the case of any
such loss, theft, or destruction, upon receipt of GEPT's or GECE's unsecured
indemnity agreement, or, in the case of any other holder of the Company's
shares, other indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such certificates, the
Company, at the Company's expense, will issue and deliver in its customary
manner a new certificate in lieu of the lost, stolen, destroyed or mutilated
certificate carrying the same rights and obligations as the original
certificate.
ARTICLE VI
MISCELLANEOUS
6.1 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall pay
the fees and disbursements of the Purchasers' counsel in connection with such
transactions and any subsequent amendment, waiver, consent or enforcement
thereof.
6.2 Survival of Agreements. All covenants, agreements, representations
and warranties made herein or in the Third Amended and Restated Registration
Rights Agreement or Amended and Restated Stock Restriction Agreement, or any
certificate or instrument delivered to the Purchasers pursuant to or in
connection with this Agreement, the Third Amended and Restated Registration
Rights Agreement or the Amended and Restated Stock Restriction Agreement, shall
survive the execution and delivery of this Agreement, the Third Amended and
Restated Registration Rights Agreement and the Amended and Restated Stock
Restriction Agreement, the issuance, sale and delivery of the Preferred Shares,
and the issuance and delivery of the Conversion Shares, and all statements
contained in any certificate or other instrument delivered by the Company
hereunder or thereunder or in connection herewith or therewith shall be deemed
to constitute representations and warranties made by the Company.
6.3 Brokerage. Each party hereto will indemnify and hold harmless the
others against and in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements or understandings made or claimed to have
been made by such party with any third party.
-30-
<PAGE> 32
6.4 Parties in Interest. All representations, covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. Without limiting the generality of
the foregoing, all representations, covenants and agreements benefiting the
Purchasers shall inure to the benefit of any and all subsequent holders from
time to time of Preferred Shares or Conversion Shares.
6.5 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed as follows:
(a) if to the Company, at 11495 Sunset Hills Road, Reston, VA
20190, Attention: President, with a copy to David Sylvester, Hale and Dorr LLP,
1455 Pennsylvania Avenue, N.W., Washington, D.C. 20004; and
(b) if to GECE, at the address of GECE set forth in Schedule I,
with a copy to William F. Schwitter, Esq., Paul, Hastings, Janofsky & Walker
LLP, 399 Park Avenue, New York, New York 10022-4697;
(c) if to GEPT, at the address of GEPT set forth in Schedule I,
with a copy to E. Ann Gill, Esq., Dewey Ballantine LLP, 1301 Avenue of the
Americas, New York, New York 10019-6092;
(d) or, in any such case, at such other address or addresses as
shall have been furnished in writing by such party to the others.
6.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
principles or rules of conflicts of laws to the extent such principles or rules
would require or permit the application of the laws of another jurisdiction.
6.7 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
6.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.9 Amendments. This Agreement may not be amended or modified, and no
provisions hereof may be waived, without the written consent of the Company and
the holders of at least two-thirds of the outstanding shares of Common Stock
issued or issuable upon conversion of the Preferred Shares, provided however,
that Section 5.23 cannot be amended without the consent of GEPT.
-31-
<PAGE> 33
6.10 Severability. If any provision of this Agreement shall be declared
void or unenforceable by any judicial or administrative authority, the validity
of any other provision and of the entire Agreement shall not be affected
thereby.
6.11 Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
6.12 Assignment. The rights granted pursuant to this Agreement may be
assigned or otherwise conveyed by a Purchaser to an affiliate or successor
trustee of such Purchaser provided that (i) such assignee is not a direct
competitor of the Company and (ii) the Purchaser shall notify the Company of
such transfer prior to its occurrence.
6.13 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
(a) "Benefit Arrangement" means each employment, severance or
other similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan and (ii) covers any employee or former employee of the Company.
(b) "Employee Plan" means each "employee benefit plan," as such
term is defined in Section 3(3) of ERISA, that (A)(i) is subject to any
provision of ERISA and (ii) is maintained or contributed to by the Company, or
(B)(i) is subject to any provision of Title IV of ERISA and (ii) is maintained
or contributed to by any of the Company's ERISA Affiliates.
(c) "ERISA" means the Employment Retirement Income Security Act
of 1974, as amended.
(d) "ERISA Affiliate" of any entity means any other entity
that, together with such entity, would be treated as a single employer under
Section 414 of the Code.
(e) "Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
(f) "person" shall mean an individual, corporation, trust,
partnership, joint venture, unincorporated organization, government agency or
any agency or political subdivision thereof, or other entity.
-32-
<PAGE> 34
(g) "subsidiary" shall mean, as to the Company, any corporation
of which more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the Board of Directors of such corporation (irrespective of
whether or not at the time stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned by the Company, or
by one or more of its subsidiaries, or by the Company and one or more of its
subsidiaries.
6.14 Further Assurances. The Company shall, upon request of a
Purchaser, duly execute and deliver, or cause to be duly executed and delivered,
such further instruments as reasonably requested by such Purchaser or do, or
cause to be done, such further acts as may reasonably be necessary or proper to
carry out the provisions and purposes of this Agreement.
-33-
<PAGE> 35
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Class F Convertible Preferred Stock Purchase Agreement as of the day and year
first above written.
CAREERBUILDER, INC.
By: /s/ ROBERT McGOVERN
--------------------------------------
Name: Robert McGovern
Title: CEO
PURCHASERS:
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ TONY J. PANTUSO
--------------------------------------
Name: Tony J. Pantuso
Title: Dept Ops Manager
GENERAL ELECTRIC PENSION TRUST
By: /s/ DONALD W. TOREY
--------------------------------------
Name: Donald W. Torey
Title: Executive Vice President
THOMSON U.S. INC.
By: /s/ JAMES R. SCHURR
--------------------------------------
Name: James R. Schurr
Title: Vice President
-34-
<PAGE> 36
21st CENTURY INTERNET VENTURE
PARTNERS, LLC
By: /s/ JOHN NEIL WEINTRAUT
--------------------------------------
Name:
Title:
NEW ENTERPRISE ASSOCIATES VI, LIMITED
PARTNERSHIP
By: /s/ PETER BARRIS
--------------------------------------
Name:
Title:
FBR eCOMM, L.P.
By: /s/ PETER BARRIS
--------------------------------------
Name:
Title:
FBR TECHNOLOGY VENTURE PARTNERS, L.P.
By: /s/ GENE RIECHERS
--------------------------------------
Name: Gene Riechers
Title: Managing Director
ADP, INC.
By: /s/ GARY C. BUTLER
--------------------------------------
Name:
Title:
-35-
<PAGE> 37
/s/ JOHN BURTON
----------------------------------------
John Burton, individually
/s/ MARK GRUHIN
----------------------------------------
Mark Gruhin, individually
/s/ SUZANNE HOOPER KING
----------------------------------------
Suzanne Hooper King, individually
-36-
<PAGE> 38
SCHEDULE I
Purchasers
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Number of Purchase Price For
Name and Address of Purchaser Aggregate Preferred Preferred Shares
Shares to be
Purchased
- --------------------------------------------------------------------------------------------
<S> <C> <C>
GE Capital Equity Investments, Inc. 917,431 $4,999,998.95
120 Long Ridge Road
Stamford, CT 06927
- --------------------------------------------------------------------------------------------
General Electric Pension Trust 458,716 $2,500,002.20
3003 Summer Street
Stamford, CT 06904
- --------------------------------------------------------------------------------------------
Thomson U.S. Inc. 45,130 $245,958.50
c/o TTC Ventures
One Main Street
Cambridge, MA 02142
- --------------------------------------------------------------------------------------------
21st Century Internet Venture 171,389 $934,070.05
Partners, LLC
Two South Park
Second Floor
San Francisco, CA 94107
- --------------------------------------------------------------------------------------------
New Enterprise Associates VI, 279,792 $1,524,866.40
Limited Partnership
1119 St. Paul Street
Baltimore, MD 21202
- --------------------------------------------------------------------------------------------
FBR eComm, L.P. 8,009 $43,649.05
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209
- --------------------------------------------------------------------------------------------
FBR Technology Venture 40,047 $218,256.15
Partners, L.P.
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 39
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------
ADP, Inc. 63,232 $344,614.40
One ADP Boulevard
Roseland, NJ 07068
- --------------------------------------------------------------------------------------------
John Burton 28,066 $152,959.70
1110 Harvey St.
McLean, VA 22101
- --------------------------------------------------------------------------------------------
Mark Gruhin 4,703 $25,631.35
6 Masters Ct.
Potomac, MD 20854
- --------------------------------------------------------------------------------------------
Suzanne Hooper King
4827 North 25th St.
Arlington, VA 22207 1,835 $10,000.75
- --------------------------------------------------------------------------------------------
TOTAL 2,018,350 $11,000,007.50
</TABLE>
<PAGE> 1
Confidential Material Omitted and Filed Separately
with the Securities and Exchange Commission.
Asterisks denote such omissions
EXHIBIT 10.12
EXECUTION COPY
ADP JOINT MARKETING/SALES REPRESENTATIVE AGREEMENT
AGREEMENT dated January 23, 1998 between NetStart, Inc., a Delaware corporation
with offices at 11495 Sunset Hills Road, Reston Virginia 20190 ("NETSTART") and
ADP, Inc., a Delaware corporation with offices at One ADP Boulevard, Roseland,
New Jersey 07068 (together with its subsidiaries and affiliates, "ADP").
1. Overview.
A. ADP and NETSTART agree that ADP will conduct a pilot marketing
program to market and obtain orders for NETSTART's Internet
recruiting software (including TeamBuilder, TeamBuilder on-line,
Career Builder, and any related product or service, collectively
referred to herein as the "Products") to the current ADP client
base, and/or to potential ADP clients, using a "co-brand strategy"
(the "Pilot"). For purposes of this Agreement, "Co-brand strategy"
shall mean that (i) NETSTART will package the Products for
sale/distribution to ADP acquired clients (as defined below) with
an ADP approved ADP logo; (ii) certain NETSTART product literature
chosen by ADP will be reprinted (at ADP's cost) and will bear
ADP's name and logo (standard NETSTART reports will not be
changed); (iii) both ADP and NETSTART agree to cooperate with each
other in the use of their respective logos; provided however, that
in no event shall either party use the other party's name,
trademark(s) or logo without prior written consent; and (iv) ADP
and NETSTART will work together to develop a package of NETSTART
products/services, which will be packaged together and offered
exclusively to ADP, as provided below, including but not limited
to a customized ADP web site (which shall be similar in form and
functionality to NETSTART's existing TeamBuilder on-line web
sites). NETSTART will be solely responsible for the development
and support of the Products (including customer support);
packaging, distribution and shipment of the Products to ADP
clients and prospects and support of those clients; provided
however, that if ADP requests special or non-standard NETSTART
packaging, ADP shall pay the costs of customizing such packaging.
ADP, as sales representative for NETSTART, shall be responsible
for marketing and obtaining orders for the Products from its
clients and prospects, as well as billing such clients and
prospects for the Products, in accordance with the provisions of
this Agreement. ADP's right to market and obtain orders for the
Products is worldwide and is not limited in any respect (including
but not limited to with respect to distribution channels, target
markets and marketing strategies). Each ADP client or prospect
that has purchased a Product and with respect to which ADP has
forwarded an order form to NETSTART, shall be deemed to be an "ADP
acquired client".
2. Product Pricing and Revenue Sharing.
A. ADP, as sales representative for NETSTART, may procure orders with
no more than a * discount from NETSTART's list prices; provided
however, that orders from certain clients may reflect greater
discounts to match those being offered by NETSTART to comparably
situated clients. ADP and NETSTART agree to cooperate in
negotiating with large major and national account clients that
require special pricing. NETSTART's current list prices are set
forth in the attached Price Lists. NETSTART agrees to provide ADP
with written notice of changes in pricing at least 30 days in
advance of the effective date. NETSTART agrees that it will not
increase the pricing shown in the attached Price List unless it is
raising its prices to all customers generally. NETSTART further
agrees, that at all times during the term of this Agreement, its
charges to ADP acquired clients for services shall
<PAGE> 2
Confidential Material Omitted and Filed Separately
with the Securities and Exchange Commission.
Asterisks denote such omissions.
be at least as low as its lowest charges for such services to any
of its similarly situated customers and that it will not offer any
other sales representative, or joint marketing, reseller or
similar company, a combination of sales commissions and customer
discounts that will be greater than those offered to ADP hereunder
unless also offered to ADP.
B. As its sales commission for sales arranged on behalf of NETSTART,
ADP will be entitled to retain revenue for all sales of Products made to ADP
acquired clients as follows:
(i) Job postings to CareerBuilder and Affiliate Sites
("Affiliates" means all Internet Media Sites utilizing NETSTART'S CareerBuilder
technology):
<TABLE>
<CAPTION>
Total Quarterly Revenue* % Revenue to ADP for % Revenue to ADP for
- ------------------------ CareerBuilder Postings: Affiliate Postings:
----------------------- -------------------
<S> <C> <C>
* * *
</TABLE>
(ii) Set-Up; Misc. Monthly Fees: ADP will also retain a pass
through equal to *.
(iii) TeamBuilder Software Sales: ADP will also retain a pass
through equal to *.
(iv) Advertising: ADP will also retain a pass through equal to
*.
(v) ADP will make revenue pass through payments to NETSTART by
check, to the address indicated by NETSTART from time to time in
writing, quarterly in arrears with respect to all revenues
recognized by ADP in the previous quarter which arose under this
Agreement. All such payments will be net of any credits issued to,
'bad debt' and similar write-offs for, ADP acquired clients. The
revenue sharing percentage for CareerBuilder postings will be set
each quarter in arrears at the quarterly revenue plateau achieved
during such quarter. If the pre-paid revenue payments made by ADP
under the terms of paragraph C below have been exhausted before
June 1, 1999, then ADP shall make estimated revenue pass through
payments to NETSTART monthly during the Monthly Payment Period,
which will be reconciled quarterly in arrears. "Monthly Payment
Period" shall mean the period commencing with the first full
calendar month following the month in which the pre-paid revenue
payments have been exhausted and ending on the earlier to occur of
(1) June 30, 1999 and (2) the sixth monthly payment.
* This is a total monthly revenue number that would be recognized
under Generally Accepted Accounting Practices for all NETSTART
related products and/or services for which orders were
2
<PAGE> 3
Confidential Material Omitted and Filed Separately
with the Securities and Exchange Commission.
Asterisks denote such omissions.
procured by ADP, including CareerBuilder postings, Affiliate site postings,
TeamBuilder Software, and other TeamBuilder On-line set-up or service fees,
all as calculated without taking commissions payable to ADP into account.
ADP shall continue to receive the revenue pass through for an ADP acquired
client for as long as such client continues to receive any NETSTART product
or service for which orders were procured by ADP, regardless of the
termination or expiration of this Agreement or the status of the joint
marketing/distribution relationship between ADP and NETSTART.
C. Notwithstanding the foregoing, in recognition of certain marketing
and developments costs incurred by NETSTART in launching this Pilot, ADP
shall make a * to NETSTART, payable as follows: (i) * payable upon
execution of this Agreement by both parties, (ii) * payable to NETSTART
upon commencement of Phase 2 and (iii) * payable to NETSTART upon
commencement of Phase 3. NETSTART agrees that ADP shall be entitled to
receive * as a result of sales of the Products from orders procured by
ADP
For purposes of this Section, "Phase 2" shall mean the expansion
of ADP's involvement in marketing and obtaining orders for the Products
to clients and prospects in up to 12 of its Major Account regions which
shall occur on or before May 1, 1998 and "Phase 3" shall mean the
expansion of ADP's marketing of the Products nationally, to all of its
Major Account regions (which at the time of signing this Agreement
numbered 40) which shall occur on or before August 1, 1998. In each case
the progression to the next Phase of the joint marketing/distribution
arrangement shall be evidenced by ADP's written notification to NETSTART
setting forth the date of such advancement. ADP shall be obligated to
proceed to Phase 2 of the arrangement unless, in its reasonable business
judgment one of the following events has occurred: (i) TeamBuilder
on-line is no longer reasonably competitive in the marketplace (either in
functionality or price) or (ii) NETSTART's client base (excluding ADP
acquired clients) for its TeamBuilder on-line product is not at least *
by April 1, 1998. ADP may elect, in its sole discretion, not to proceed
to Phase 3 by giving written notice to NETSTART on or before June 1,
1998. If ADP elects not to proceed to Phase 3, then ADP shall not make
the last * prepaid revenue payment and the exclusivity provisions
contained in Section 3A and B below shall immediately terminate. If ADP
elects to proceed to Phase 3, the final pre-paid revenue payment shall be
made on or before June 30, 1998.
3. Exclusivity:
A. NETSTART agrees that it will not, without the prior written
approval of ADP, during the term of this Agreement, enter into any
new reseller, distribution or similar agreement with (i) any HRIS
provider which offers payroll software or payroll processing
services similar to those offered by ADP, to sell or distribute
any or all of the Products in the United States or Canada or (ii)
another payroll or benefits administration provider.
B. ADP agrees that it's Employer Services division will not, without
the prior written approval of NETSTART, during the term of this
Agreement, enter into any new joint marketing, reseller,
distribution or other arrangement, or any agreement similar in
nature to this Agreement with another provider of Internet
recruitment services which offers products or services similar to
NETSTART's TeamBuilder on-line product (or its successor(s)) in
the United States or Canada. Notwithstanding the foregoing, ADP
may enter into such an arrangement with a provider of a
product/service that has features/functionality not
3
<PAGE> 4
Confidential Material Omitted and Filed Separately
with the Securities and Exchange Commission.
Asterisks denote such omissions.
adequately addressed by TeamBuilder on-line or that targets a
market segment not adequately served by TeamBuilder on-line.
4. ADP Agrees to:
A. Forward, either by facsimile or electronically, to NETSTART
headquarters an order form for each ADP client or prospect
electing to contract for any of the Products, with terms and
conditions similar to the NETSTART agreement attached to this
Agreement. NETSTART may reject any order which contains terms
which are additional or different from those in such attached
agreement or is received from a customer determined by NETSTART in
its reasonable business judgment to be unacceptable.
B. Market the Products to its existing and prospective clients
through, at a minimum, its Major Accounts Division direct sales
force (the "Sales Team") and its web-site.
C. Do all billing and collections for any NETSTART or Affiliate
products and/or services for which the order was procured by or on
behalf of ADP. NETSTART will work with ADP in good faith to define
the necessary processes, procedures, and data flows to enable ADP
to perform this billing and collection function. It is also agreed
that NETSTART will, upon written request by ADP, assume
responsibility for performance of the billing and collection for
NETSTART or Affiliate products and/or services for which the order
was procured by or on behalf of ADP on a monthly basis; provided
however, that if ADP has not assumed responsibility for these
billing and collection functions prior to Phase 3, ADP's revenue
share will decrease by * until such time as ADP has assumed the
billing and collections responsibilities.
D. Allow on-site visits at NETSTART's option to ADP's place or places
of business upon reasonable prior written notice and during normal
business hours and allow NETSTART, or its accountants, to
periodically examine and make copies of all books and records of
ADP insofar as they relate to this Agreement.
E. Establish "roll-call", sales incentive and commission policies for
the Products that are consistent with those established by ADP
with respect to ADP's own products and services.
F. Not to disassemble, decompile or otherwise reverse engineer the
Products or otherwise attempt to learn the source code, structure
or algorithms or ideas underlying the Products or modify the
Products.
G. To keep NETSTART informed as to any material problems encountered
with the Products and any resolutions arrived at for those
problems, and to communicate (unless prohibited by confidentiality
obligations) promptly to NETSTART any modifications, design
changes or improvements of the Products suggested by any customer,
employee or agent. ADP will also promptly notify NETSTART of any
infringement of any trademarks or other proprietary rights to the
Products of which ADP becomes aware.
H. Defend, indemnify and hold NETSTART, its successors, assigns,
officers, directors, employees, associates or agents harmless from
and against any and all claims and causes of action brought
against NETSTART by a third party, including any and all damages,
losses, expenses, attorney's fees, costs and liabilities sustained
by NETSTART arising out
4
<PAGE> 5
of the failure of ADP to meet its obligations under this
Agreement. In any proceeding to enforce this indemnification, all
defenses to the claimed failure to meet obligations are preserved.
5. NETSTART Agrees to:
A. Assist ADP with the development of marketing materials, sales
training for the ADP sales force and the presentation of the
Products to target ADP's Major Accounts.
B. Perform all customer account set-up; customer orientation and
training (to the same extent NETSTART offers orientation and
training to its non-ADP acquired clients); order entry; customer
service; product support; order processing and delivery; and
report interpretation; as well as any other function normally
performed by NETSTART in selling (other than the marketing and
billing/collection activities expressly undertaken by ADP pursuant
to the terms of this Agreement) and supporting its products,
including without limitation the following:
(i) Manufacturing- NETSTART will manufacture all goods and
assemble the Products. NETSTART will choose all vendors
used for manufacturing, including printing, disk
duplication and assembly.
(ii) Fulfillment-NETSTART will handle all fulfillment of the
Products', sales, including warehousing, pick and pack,
labeling of package, carrier (shipper) cost and selection,
tracking of shipment as well as management of returns.
(iii) Billing Support-NETSTART will track all sales of the
Products made from orders procured by ADP and will develop
and maintain a billing summary report (the content, format
and transmission method of which will be approved by ADP)
and will forward such report to ADP within 15 days of the
end of each calendar month.
(iv) Technical Support-NETSTART will handle all technical
support for the Products' customers (from 8 AM to 8 PM
EST); all calls associated with the Products, including
customer comments, product enhancements and technical flaws
will be tracked and addressed by NETSTART. NETSTART will
make their call log available to ADP upon request.
(v) Customer Service-NETSTART will also handle all customer
service and will have representatives available from 8 AM
to 8 PM EST to receive customer calls. NETSTART will
establish and maintain a toll-free telephone number which
will be exclusively available to ADP acquired clients for
customer service and technical support (including, but not
limited to, implementation of NETSTART products and
services). NETSTART will also track all customer service
issues and a report of such customer service activities
will be made available to ADP upon request.
(vi) Packaging- NETSTART will manage all packaging activities
including design, film, printing, and assembly. ADP will
have the opportunity to proof and approve package design to
ensure that ADP's brand integrity is maintained.
5
<PAGE> 6
(vii) Updates; Product Enhancements-NETSTART will maintain an
appropriate staff (both in size and qualifications) to
continually update and enhance the Products, so that the
Products contain those features and functionality
(including but not limited to, compatibility with
state-of-the-art platforms and Internet services) required
to keep the Products competitive in the marketplace.
NETSTART will consider in good faith all Product
improvements recommended by ADP.
C. Process and fulfill orders for ADP acquired clients in the same
manner and with the same urgency and degree of care as its non-ADP
acquired clients.
D. Provide Product literature and sales tools for the ADP Sales Team
and to package the Products with the appropriate product reference
guides and instructions. It is agreed that all such packaging will
be approved in advance by ADP and NETSTART and that the
reproduction of all such literature shall be at ADP's expense.
E. Allow on-site visits at ADP's option to NETSTART's place or places
of business upon reasonable prior written notice and during normal
business hours and allow ADP, or its accountants, to periodically
examine and make copies of all books and records of NETSTART
insofar as they relate to this Agreement.
F. Use all reasonable efforts to assist ADP in integrating the
TeamBuilder on-line products with ADP products; such integration
will include, at a minimum, development of a link from ADP's PC
Payroll for Windows, HR Perspective and CSS HRizon products to
TeamBuilder on-line which will enable a user to access NETSTART's
on-line recruiting product by merely 'clicking' on an icon.
G. Develop and launch a TeamBuilder on-line site for ADP on or before
January 15, 1998. ADP's on-line recruiting web site will consist
of developing a private-label ADP career center integrating
NETSTART's Internet recruiting technology into ADP's Web site.
NETSTART will consult with ADP on the specifications and will
consider all ADP suggestions and modifications in good faith.
H. Promptly inform ADP of (a) any problems encountered with the
products or services and any resolutions arrived at for those
problems; (b) all modifications, additions or changes in the
products or services or its marketing strategy with respect
thereto; (c ) required changes in the marketing, sales or related
documentation and (d) known changes in any laws or regulations, in
each case to the extent it that would affect ADP's ability to
perform its obligations under this Agreement. For purposes of
clause (a) of this paragraph H, "promptly" shall mean within three
(3) business days of NETSTART's discovery of the problem and/or
resolution.
I. To honor the pricing set forth in each customer's order form for
the term set forth therein, regardless of termination of this
Pilot or NETSTART's marketing relationship with ADP.
J. Warrant that the TeamBuilder software, CareerBuilder and
TeamBuilder on-line services (and any successor products and
services) will (i) perform functionally as described in NETSTART's
published marketing literature and specifications and (ii) be free
from material defects in design, workmanship and materials which
prevent them from being used
6
<PAGE> 7
for their intended purposes. NETSTART MAKES NO OTHER WARRANTIES
WITH RESPECT TO THE PRODUCTS OR ANY SERVICES AND DISCLAIMS ALL
OTHER WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY,
INFRINGEMENT (EXCEPT AS SET FORTH BELOW IN PARAGRAPH K) AND
FITNESS FOR A PARTICULAR PURPOSE.
K. Defend, indemnify and hold harmless ADP, its successors,
assigns, officers, directors, employees, associates or agents
harmless from and against any and all claims and causes of action
brought against ADP by a third party, including any and all
damages, losses, expenses, attorney's fees, costs and liabilities
sustained by ADP arising out of the failure of the NETSTART to
meet its obligations under this agreement. In any proceeding to
enforce this indemnification, all defenses to the claimed failure
to meet obligations are preserved. NETSTART shall also defend,
indemnify and hold harmless ADP, at NETSTART's own cost and
expense, from any claims, actions, suits or proceedings asserted
or brought in connection with any allegations that the Products
infringe or violate any patent, copyright, trade secret or other
proprietary right of any third party and NETSTART shall hold ADP
harmless from and against any and all costs (including reasonable
attorneys' fees), damages, interest and liabilities assessed
against or incurred by ADP in connection with any such claim,
action, suit or proceeding; provided that ADP has taken all
reasonable steps to mitigate any potential damages which may
result, provided that such steps do not require ADP to incur any
out-of-pocket costs or expenses. ADP agrees to promptly notify
NETSTART of any and all threats, claims and proceedings arising
under this indemnification and to give reasonable assistance and
the opportunity to assume sole control over the defense and all
negotiations for a settlement or compromise to NETSTART. NETSTART
will not be responsible for any settlement entered into by ADP
that it did not approve in writing. The foregoing indemnification
obligation of NETSTART does not apply to the extent that the
infringing Product or portions or components thereof or
modifications thereto were not supplied or approved by NETSTART,
or were combined with other products, processes or materials not
supplied or approved by NETSTART (where the alleged infringements
relates to such combination).
6. Product Training/Meeting Attendance.
A. In addition to any specific obligations set forth above in
Sections 4 and 5, each party agrees, to the extent relevant to
this Agreement, to cooperate with the other in good faith to
educate and train such other party with respect to its business,
products and services; including without limitation, permitting
the other party to attend relevant sales or user group meetings.
The extent of each party's participation in such meetings and the
selection of which meetings to attend shall be mutually agreed
upon between ADP and NETSTART.
B. Each party also agrees to cooperate in good faith to identify and
attend appropriate seminars and conventions and, where
appropriate, to make a joint presentation or set-up a joint booth
(or its equivalent) at such events.
C. ADP and NETSTART shall each bear responsibility for the cost of
their respective foregoing meeting, seminar and convention
attendance and visits.
7
<PAGE> 8
Confidential Material Omitted and Filed Separately
with the Securities and Exchange Commission.
Asterisks denote such omissions.
7. ADP's Equity Investment
A. Pursuant to the terms of the Class D Convertible Preferred Stock
Purchase Agreement and the Warrant Agreement, each between ADP and
NETSTART and of even date herewith, ADP has purchased 5.8% of the
Class D Convertible Preferred Stock of NETSTART for the sum of $3
million. ADP and NETSTART intend to create an ongoing strategic
relationship between their two businesses, in part through the
acquisition by ADP of the minority interest in NETSTART and in
part by entering into this joint marketing/distribution agreement.
8. Term and Termination.
A. This Agreement shall continue until the second anniversary of the
date hereof (the "Initial Term"), and thereafter shall continue
automatically unless and until terminated in accordance with the
following provisions:
(i) ADP may terminate this Agreement at any time after the
Initial Term by giving NETSTART not less than one hundred
and twenty (120) days' written notice;
(ii) NETSTART may terminate the exclusivity provisions of this
Agreement (Section 3, paragraphs A & B together but not
separately) as follows: (a) by written notice to ADP within
60 days of the end of the Initial Term, if total annual
revenues generated from ADP acquired client's (without
deducting ADP's revenue pass back) did not equal or exceed
* in the Initial Term; (b) by written notice to ADP if
total annual revenues generated from ADP acquired clients
(without deducting ADP's revenue pass back) in the first
year after the Initial Term do not equal or exceed *; (c )
by written notice to ADP if total annual revenues generated
from ADP acquired clients (without deducting ADP's revenue
pass back) in the second year after the Initial Term do not
equal or exceed *; or, * in any year thereafter; or (d) by
giving 90-days prior written notice to ADP if ADP offers a
product/service for sale in the United States which is
substantially similar to TeamBuilder on-line;
(iii) NETSTART may terminate this Agreement at any time after the
third anniversary of this Agreement, as follows: (a) by
giving one year prior written notice to ADP if total annual
revenues generated from ADP acquired clients (without
deducting ADP's revenue pass back) did not equal or exceed
* in any one year; (b) by giving two years prior written
notice to ADP if total annual revenues generated from ADP
acquired clients (without deducting ADP's revenue pass
back) did not equal or exceed * in any two-year period; or
(c ) by giving three years prior written notice to ADP if
total annual revenues generated from ADP acquired clients
(without deducting ADP's revenue pass back) did not equal
or exceed * in any three-year period; and
(i) Either party may terminate this Agreement for cause
immediately upon the occurrence of an Event of Default
(defined below in Section 9).
B. Notwithstanding termination or expiration of this Agreement,
NETSTART's obligation to pay the revenue pass through to ADP shall
continue with respect to each ADP acquired client as provided for
herein.
8
<PAGE> 9
9. Events of Default.
A. The following constitute events of default under this Agreement:
(a) if the other party ceases to do business, or otherwise
terminates its business operations or if there is a material
change in control of the other; (b) if the other party materially
breaches any material provision of this Agreement and fails to
substantially cure such breach within 30 days of receipt of
written notice describing the breach; or ( c) if the other party
becomes insolvent, generally stops paying its debts as they become
due or seeks protection under any bankruptcy, receivership, trust
deed, creditors arrangement, composition or comparable proceeding,
or if any such proceeding is instituted against the other (and not
dismissed within 90 days). For purposes of this provision, a
"change of control" shall not include a registered public offering
of either company's stock pursuant to the Securities Act of 1933.
10. Dispute Resolution.
A. All disputes, controversies, or claims arising out of or relating
to this Agreement ("Disputes") shall be referred to an Advisory
Board (such Board to consist of 2 designees from each of ADP and
NETSTART) prior to escalation to Senior Management. The Advisory
Board shall meet within 5 business days, or as soon thereafter as
reasonably practicable, of receiving notice of a Dispute. In the
event that the Advisory Board is unable to resolve, or does not
anticipate resolving, the Dispute within 10 business days of the
date of the meeting during which such Dispute was considered, the
Advisory Board shall notify the senior executive selected by each
party pursuant to Section 10B below. No Dispute under this
Agreement shall be the subject of any formal legal proceeding
between ADP and NETSTART before being considered by the Advisory
Board and senior management, except for an action to seek
injunctive relief to stay a breach of this Agreement.
B. Either party may, upon notice and within 5 business days of
receipt of a notice from the Advisory Board pursuant to Section
10A, elect to utilize a non-binding resolution procedure whereby
each presents its case at a hearing (the "Hearing") before a panel
consisting of a senior executive of each of the parties. If a
party elects to use the procedure set forth in this Section 10B,
the other party shall participate. The Hearing will occur as soon
as reasonably practicable after a party serves notice to use the
procedure set forth in this Section. Each party may be represented
at the Hearing by lawyers. If the matter cannot be resolved at the
Hearing, each party's only recourse will be binding arbitration as
provided for in Section 10C below and the proceedings occurring
pursuant to this Section 10B will have been without prejudice to
the legal position of either party. No arbitration or other legal
proceeding may commence concerning the Dispute until 10 business
days have elapsed from the first day of the Hearing. The parties
shall each bear their respective costs incurred in connection with
the procedure set forth in this Section 10B, except that they
shall share equally the cost of any facility used for the Hearing.
C. If a Dispute is not resolved pursuant to Section 10B, then either
party may, within 30 days after the completion of the procedures
set forth in Sections 10A and 10B above, upon notice, submit the
dispute to formal binding arbitration. The arbitration shall be
held in New York, New York before a panel of three arbitrators.
Either ADP or NETSTART may by notice to the other party demand
arbitration, by serving on the other party a statement of the
dispute,
9
<PAGE> 10
controversy or claim, and the facts relating or giving rise
thereto, in reasonable detail and the name of the arbitrator
selected by it. Within 10 days after receipt of such notice, the
other party shall name its arbitrator, and the two arbitrators
named by the parties shall, within 10 days after the date of such
notice, select the third arbitrator. The arbitration shall be
governed by the Commercial Arbitration Rules of the American
Arbitration Association, as may be amended from time to time.
11. General Provisions.
A. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY, UNDER
ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY, FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL OR
SPECIAL DAMAGES, WHETHER FORESEEABLE OR UNFORESEEABLE.
B. All information communicated to one party by the other, whether
before or after the commencement of the Pilot, shall be and was
received in confidence and shall be used only for the purposes of
this Agreement. No such information, including the terms of this
Agreement, shall be disclosed by the recipient party, its agents
or employees, or used for any purpose other than the performance
of the terms of the Agreement without the prior written consent of
the other party. The foregoing will not prevent either party from
disclosing information which belongs to such party or is (i)
already known by the recipient party without an obligation of
confidentiality; (ii) publicly known or becomes publicly known
through no unauthorized act of the recipient party; (iii)
rightfully received from a third party; (iv) independently
developed by the recipient party without use of the confidential
information of the other party; (v) disclosed without similar
restrictions to a third party by the party owning the confidential
information; (vi) approved by the other party for disclosure; or
(vii) required to be disclosed pursuant to a requirement of a
governmental agency or law so long as the disclosing party
provides the other party with notice (if possible) of such
requirement prior to any such disclosure.
C. ADP acknowledges and agrees that the Products, and all copies
thereof, constitute valuable trade secrets of NETSTART and/or
proprietary and confidential information of NETSTART and title
thereto remains in NETSTART. Ownership of all applicable
copyrights, trade secrets, patents and other intellectual property
rights in the Products are and shall remain vested in NETSTART.
D. Both ADP and NETSTART are committed to the highest levels of
product quality and customer service and agree to work together to
identify appropriate measures of quality and service and to put in
place processes and procedures aimed at attaining these levels to
the satisfaction of both parties. Additionally, both parties agree
to conduct themselves and perform their obligations according to
the highest ethical and performance standards.
E. It is understood that any and all customers for which ADP has
obtained a NETSTART User Agreement or order form are ADP clients.
ADP retains the right to contact such clients at any time, through
any means, during and after the term of this Agreement; including,
but not limited to, for purposes of notifying such clients that
this Pilot or ADP's marketing relationship with NETSTART has
ended. It is also agreed that NETSTART has the foregoing right to
contact such clients.
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<PAGE> 11
F. During the term of this Agreement and for a period of one year
thereafter, neither party shall, without the other party's written
approval, solicit for employment nor employ (either as an
employee, contractor, independent agent or representative of
another vendor) any of the other party's employees involved in the
performance of this Agreement.
G. All aspects of the Pilot and/or joint marketing relationship not
otherwise covered in this Agreement shall be subject to the mutual
agreement of ADP and NETSTART. This Agreement may not be assigned
by either party without the written consent of the other party.
H. All notices, requests, consents and other communications provided
for by this Agreement shall be in writing and shall be deemed
given when mailed at any general branch United States Post Office
enclosed in a registered or certified postpaid envelope or sent
via overnight courier, to the parties at the addresses set forth
below or to such changed address as each party may designate by
notice to the other:
<TABLE>
<S> <C>
If to ADP: If to NETSTART:
One ADP Boulevard 11495 Sunset Hills Road
Roseland, New Jersey 07068 Reston, Virginia 20190
Attn: VP of Internet Development Attn: Thomas Young, Director of Alliances
with a copy to:
Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, New Jersey 07068
Attn: General Counsel
</TABLE>
I. ADP and NETSTART agree that each is acting independently of the
other, that they are not joint venturers, and that neither is an
agent of the other.
J. This Agreement supersedes all proposals, oral or written, all
negotiations, conversations, or discussions between or among
parties relating to the subject matter of this Agreement and all
past dealing or industry custom. If any provision in this
Agreement is held by a court of competent jurisdiction to be
illegal, invalid or unenforceable, that provision shall be limited
or eliminated to the minimum extent necessary so that this
Agreement shall otherwise remain in full force and effect and
enforceable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized representatives on the date first above set forth.
ADP, INC. NETSTART, INC.
By: /s/ GARY BUTLER By: /s/ RICHARD WATHEN
------------------------- -------------------------
(Signature) (Signature)
Name: Gary Butler Name: Richard Wathen
------------------------- -------------------------
(type or print) (type or print)
Title: Title: Controller
------------------------- -------------------------
11
<PAGE> 12
Confidential Material Omitted and Filed Separately
with the Securities and Exchange Commission.
Asterisks denote such omissions.
ADDENDUM TO THE ADP JOINT MARKETING/SALES
REPRESENTATION AGREEMENT
BETWEEN
ADP, INC. AND CAREERBUILDER, INC. (FORMERLY, NETSTART, INC.)
This Addendum, made as of November 17, 1998, by and between ADP, Inc. ("ADP")
with its principal office at One ADP Boulevard, Roseland, New Jersey 07068 and
Careerbuilder, Inc. (formerly, Netstart, Inc., "Careerbuilder"), with its
principal office at 11495 Sunset Hills Road, Reston, Virginia 20190, contains
changes, modifications, revisions and additions to the ADP Joint Marketing/Sales
Representation Agreement dated January 23, 1998 (the "Agreement").
In consideration of the mutual covenants contained in the Agreement and in this
Addendum, and for other good and valuable consideration receipt of which is
hereby acknowledged, notwithstanding anything to the contrary contained in the
Agreement, ADP and Careerbuilder agree as follows:
1. Section 2 B is amended by deleting the numbers * in the % Revenue to ADP
for Affiliate Postings column in clause (i) thereof and replacing them with
the following new numbers * for all purposes under the Agreement.
2. ADP and Careerbuilder agree that ADP is entitled to retain a pass through
on Affiliate Posting revenue in the new * percentages set forth in
paragraph 1 above, prospectively for all sales of Products made to ADP
acquired clients commencing on the date of this Addendum.
All other terms and conditions of the Agreement shall remain in full force and
effect. In the event of any conflict between the terms and conditions of this
Addendum and the terms and conditions of the Agreement, this Addendum shall
prevail. The terms defined in the Agreement and used in this Addendum shall
have the same respective meanings as set forth in the Agreement, unless
clearly otherwise defined in this Addendum.
IN WITNESS WHEREOF, this Addendum to the Agreement is hereby executed by an
authorized representative of each party hereto as of the date first above
written.
ADP, INC. CAREERBUILDER, INC.
By: /s/ GEORGE I. STOECKERT By: /s/ ROBERT MCGOVERN
---------------------------------------- --------------------------------
Name: George I. Stoeckert Name: Robert McGovern
-------------------------------------- ------------------------------
Title: President, Major Accounts Division Title: CEO
------------------------------------- -----------------------------
agrmnt/careerad
<PAGE> 1
Confidential Material Omitted and Filed Separately
with the Securities and Exchange Commission.
Asterisks denote such omissions.
EXHIBIT 10.13
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SECURITIES
ARE REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Warrant No. ADP1 Number of Shares: up to 1,140,000
(subject to adjustment)
Original
Date of Issuance: January 23, 1998
Amended on: March 5, 1999
CAREERBUILDER, INC.
Amended and Restated
Common Stock Purchase Warrant
(Void after March 30, 2007)
NetStart, Inc., a Delaware corporation (the "Company"), for value
received, hereby certifies that ADP, Inc., or its registered assigns (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company up to 1,140,000 shares (subject to adjustment) of
Common Stock, $.001 par value per share, of the Company, at a purchase price of
$12.00 per share for 380,000 shares to be issued under Tranche I and at a
purchase price of $5.00 per share for the shares to be issued under Tranches II
and III (subject to adjustment). The shares purchasable upon exercise of this
Warrant, and the purchase price per share, each as adjusted from time to time
pursuant to the provisions of this Warrant, are hereinafter referred to as the
"Warrant Shares" and the "Purchase Price," respectively.
1. Vesting and Exercise.
(a) This warrant will become exercisable ("vest") as to the
number of Warrant Shares listed in column A below if and when the total revenue
actually received by the Company pursuant to the ADP Joint
Marketing/Distribution Agreement dated January 23, 1998, by and between the
Company and ADP, Inc., as amended on March 5, 1999, equals the amount set
forth in the corresponding portion of column B below during the corresponding
period specified in column C below. Tranche I, consisting of 380,000 Warrant
Shares, will vest as of the date of this Amended and Restated Warrant.
<PAGE> 2
Confidential Material Omitted and Filed Separately
with the Securities and Exchange Commission.
Asterisks denote such omissions.
<TABLE>
<CAPTION>
A B C D
NUMBER OF NET
VESTING REVENUE RECEIVED
WARRANT SHARES BY THE COMPANY PERIOD DATE
-------------- ----------------- ------ --------
<S> <C> <C> <C> <C>
Tranche II * * 3/1/99 - 3/30/01 3/30/01
Tranche III * * 4/1/01 - 3/30/02 3/30/02
</TABLE>
The number of shares to which this Warrant vests in Tranche I and Tranche II
shall be determined ratably based on the revenue actually received by the
Company, each Tranche shall vest as of the relevant vesting date specified in
column D for that Tranche only after the minimum amount of revenue specified in
column B is actually received by the Company during the relevant period
specified in column C and each Tranche shall only be exercisable for a period of
up to five (5) years after the relevant vesting date specified in column D. In
no event shall (i) the number of shares exercisable with respect to any Tranche
exceed 380,000 shares (subject to adjustment), (ii) the total number of shares
exercisable pursuant to this Warrant exceed 1,140,000 (subject to adjustment) or
(iii) this Warrant be exercisable after April 1, 2007. Within 10 days after each
relevant vesting date the Company shall mail to the Registered Holder a
certificate setting forth for the relevant Tranche the total revenue actually
received by the Company during the relevant period and the number of Warrant
Shares, if any, then purchasable upon exercise with respect to the Tranche.
(b) Subject to Section 1(a), this Warrant may be exercised by
the Registered Holder, in whole or in part, by surrendering this Warrant, with
the purchase form appended hereto as Exhibit I duly executed by such Registered
Holder or by such Registered Holder's duly authorized attorney, at the principal
office of the Company, or at such other office or agency as the Company may
designate, accompanied by payment in full, in lawful money of the United States,
of the Purchase Price payable in respect of the number of Warrant Shares to be
purchased upon such exercise.
(c) The Registered Holder may, at its option, elect to pay
some or all of the Purchase Price payable upon an exercise of this Warrant by
cancelling a portion of this Warrant exercisable for such number of Warrant
Shares as is determined by dividing (i) the total Purchase Price payable in
respect of the number of Warrant Shares being purchased upon such exercise by
(ii) the excess of the Fair Market Value per share of Common Stock as of the
effective date of exercise, as determined pursuant to subsection 1(d) below (the
"Exercise Date") over the Purchase Price per share. If the Registered Holder
wishes to exercise this Warrant pursuant to this method of payment with respect
to the maximum number of Warrant
-2-
<PAGE> 3
Shares purchasable pursuant to this method, then the number of Warrant Shares so
purchasable shall be equal to the total number of Warrant Shares, minus the
product obtained by multiplying (x) the total number of Warrant Shares by (y) a
fraction, the numerator of which shall be the Purchase Price per share and the
denominator of which shall be the Fair Market Value per share of Common Stock as
of the Exercise Date. The Fair Market Value per share of Common Stock shall be
determined as follows:
(i) If the Common Stock is listed on a national
securities exchange, the NASDAQ National Market System, the NASDAQ system, or
another nationally recognized exchange or trading system as of the Exercise
Date, the Fair Market Value per share of Common Stock shall be deemed to be the
last reported sale price per share of Common Stock thereon on the Exercise Date;
or, if no such price is reported on such date, such price on the next preceding
business day (provided that if no such price is reported on the next preceding
business day, the Fair Market Value per share of Common Stock shall be
determined pursuant to clause (ii)).
(ii) If the Common Stock is not listed on a national
securities exchange, the NASDAQ National Market System, the NASDAQ system or
another nationally recognized exchange or trading system as of the Exercise
Date, the Fair Market Value per share of Common Stock shall be deemed to be the
amount most recently determined by the Board of Directors to represent the fair
market value per share of the Common Stock (including without limitation a
determination for purposes of granting Common Stock options or issuing Common
Stock under an employee benefit plan of the Company); and, upon request of the
Registered Holder, the Board of Directors (or a representative thereof) shall
promptly notify the Registered Holder of the Fair Market Value per share of
Common Stock. Notwithstanding the foregoing, if the Board of Directors has not
made such a determination within the three-month period prior to the Exercise
Date, then (A) the Fair Market Value per share of Common Stock shall be the
amount next determined by the Board of Directors to represent the fair market
value per share of the Common Stock (including without limitation a
determination for purposes of granting Common Stock options or issuing Common
Stock under an employee benefit plan of the Company), (B) the Board of Directors
shall make such a determination within 15 days of a request by the Registered
Holder that it do so, and (C) the exercise of this Warrant pursuant to this
subsection 1(c) shall be delayed until such determination is made.
(d) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in subsection
1(b) above. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise as provided
in subsection 1(e) below shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates.
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<PAGE> 4
(e) As soon as practicable after the exercise of this Warrant
in full or in part, and in any event within 20 days thereafter, the Company, at
its expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full
Warrant Shares to which such Registered Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such Registered Holder
would otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new warrant
or warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such Warrant Shares called
for on the face of this Warrant minus the sum of (a) the number of such Warrant
Shares purchased by the Registered Holder upon such exercise plus (b) the number
of Warrant Shares (if any) covered by the portion of this Warrant cancelled in
payment of the Purchase Price payable upon such exercise pursuant to subsection
1(c) above.
2. Adjustments.
(a) If at anytime between January 23, 1998, and April 1, 2001,
the Company sells and issues Additional Shares of Common Stock (as defined
below) primarily for financing purposes, the number of Warrant Shares
purchasable upon exercise of unvested and unexpired rights under this Warrant
shall simultaneously with the closing of the relevant transaction be increased
by a percentage that is equal to the percentage determined by dividing (i) the
number of Additional Shares of Common Stock issued in such transaction by the
(ii) Base Amount (as defined below); provided, however, that, without limiting
the generality of the foregoing, in no event shall the adjustment set forth in
this Section 2(a) apply to securities issued (A) upon conversion of any
preferred stock of the Company, (B) as a stock dividend or upon any subdivision
of shares of Common Stock, provided that the securities issued pursuant to such
stock dividend or subdivision are limited to additional shares of Common Stock,
(C) pursuant to subscriptions, warrants, options, convertible securities, or
other rights which are listed in Schedule III to the Class D Convertible
Preferred Stock Purchase Agreement dated as of September 11, 1997, as amended,
by and among the Company and the other signatories thereto (the "Purchase
Agreement") as being outstanding on September 11, 1997, (D) solely in
consideration for the acquisition (whether by merger or consolidation (where the
holders of capital stock of the Company immediately prior to such merger or
consolidation continue to hold at least 51% by voting power of the capital stock
of the surviving corporation) or otherwise) by the Company or any of its
subsidiaries of stock or assets of any other entity, provided that the Board of
Directors of the Company on or before the acquisition determines in good faith
based on pro forma financial statements prepared by the Company for the twelve
months following the acquisition that the acquisition is not dilutive (as such
term is defined
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<PAGE> 5
by the Company's independent certified public accountants) during the first
fiscal quarter of the Company following the expiration of the 12-month period
after the closing of the transaction or that the number of Additional Shares of
Common Stock issued to effect the acquisition is less than 10% of the then Base
Amount, (E) pursuant to a firm commitment underwritten public offering, (F)
pursuant to the exercise of the warrants issued to ADP, Inc. ("ADP") in
connection with its purchase of Class D Convertible Preferred Stock from the
Company, and (G) pursuant to the exercise of options to purchase Common Stock
granted to directors, officers, employees or consultants of the Company in
connection with their service to the Company, not to exceed in the aggregate
2,100,000 shares (appropriately adjusted to reflect stock splits, stock
dividends, combinations of shares and the like with respect to the Common Stock)
less the number of shares (as so adjusted) issued pursuant to subscriptions,
warrants, options, convertible securities, or other rights outstanding on
September 11, 1997, and listed in Schedule III of the Purchase Agreement
pursuant to clause (C) above (the shares exempted by this clause G being
hereinafter referred to as the "Reserved Employee Shares") provided that the
number of Reserved Employee Shares may be increased prior to December 31, 1998,
with the approval of a majority of the Board of Directors including the Class B
Director, the Class C Director, the Class D Director (as such terms are defined
in the Purchase Agreement) and Gary C. Butler as the director appointed by ADP
on behalf of the holders of the Class D Convertible Preferred Stock of the
Company (the "Other Class D Director") and at any time after December 31, 1998,
with the approval of either (i) a majority of the Board of Directors including
the Class B Director, the Class C Director, the Class D Director and the Other
Class D Director or (ii) all directors other than the Class B Director, the
Class C Director, the Class D Director or the Other Class D Director. If the
relevant acquisition specified in clause (D) of the previous sentence is
dilutive per the terms of clause D the closing of the transaction, the
applicable adjustment to the Warrant Shares pursuant to this Section 2(a) shall
be calculated using only that number of Additional Shares of Common Stock that
yield the dilution (but in no event, a number of Additional Shares of Common
Stock greater than was actually issued to effect the acquisition).
Notwithstanding anything in this Section 2 or otherwise to the contrary, (i)
after the closing of the initial firm commitment underwritten public offering of
securities (including all issuances of securities related thereto) of the
Company (the "IPO") no adjustment or adjustments shall be made pursuant to this
Section 2(a) that would result in an aggregate increase after such date in the
number of Warrant Shares that is greater than the increase from the adjustment
that would result from the sale and issuance of a number of Additional Shares of
Common Stock that is equal to a 10% increase in the Base Amount in effect
immediately after the closing of the IPO and (ii) no adjustment or adjustments
shall be made pursuant to this Section 2(a) with respect to any acquisition
(whether by merger or consolidation or otherwise) where the holders of capital
stock of the Company immediately prior to such acquisition hold immediately
after such acquisition less than 51% by voting power of the capital stock of the
surviving corporation.
(b) For purposes of Section 2(a), (i) "Base Amount" shall mean
the sum of 15,211,094 plus a number equal to the number of Additional Shares of
Common Stock previously
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<PAGE> 6
sold and issued by the Company that previously required an adjustment in the
number of Warrant Shares pursuant to this Section 2(b), (ii) Additional Shares
of Common Stock shall mean shares of Common Stock sold and issued (or, pursuant
to subsection 2(c) below, deemed to be sold and issued by the Company) and (iii)
"Convertible Securities" shall mean any equity shares or other equity securities
of the Company directly or indirectly convertible into or exchangeable for
Common Stock.
(c) If during the period and for the purpose specified in the
introductory clause of Section 2(a) above the Company shall sell and issue
Convertible Securities, then the maximum number of shares of Common Stock (as
set forth in the instrument relating thereto without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
conversion or exchange of such Convertible Securities shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue, provided
no further adjustment pursuant to Section 2(a) shall be made upon the subsequent
issue of Convertible Securities or shares of Common Stock upon the conversion or
exchange of such Convertible Securities.
(d) If outstanding shares of the Company's Common Stock shall
be subdivided into a greater number of shares or a dividend in Common Stock
shall be paid in respect of Common Stock, the Purchase Price in effect
immediately prior to such subdivision or at the record date of such dividend
shall simultaneously with the effectiveness of such subdivision or immediately
after the record date of such dividend be proportionately reduced. If
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of Warrant Shares purchasable upon the exercise of
this Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in effect
immediately prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.
(e) If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in par value
or a subdivision or combination as provided for in subsection 2(d) above), or
any consolidation or merger of the Company with or into another corporation, or
a transfer of all or substantially all of the assets of the Company, then, as
part of any such reorganization, reclassification, consolidation, merger or
sale, as the case may be, lawful provision shall be made so that the Registered
Holder of this Warrant shall have the right thereafter to receive upon the
exercise hereof the kind and amount of shares of stock or other securities or
property which such Registered Holder would have been entitled to receive if,
immediately prior to any such reorganization, reclassification, consolidation,
merger or sale, as the case may be, such Registered Holder had held the number
of shares of Common Stock which were then purchasable upon the exercise of
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<PAGE> 7
this Warrant. In any such case, appropriate adjustment (as reasonably determined
in good faith by the Board of Directors of the Company) shall be made in the
application of the provisions set forth herein with respect to the rights and
interests thereafter of the Registered Holder of this Warrant, such that the
provisions set forth in this Section 2 (including provisions with respect to
adjustment of the Purchase Price) shall thereafter be applicable, as nearly as
is reasonably practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this Warrant.
(f) When any adjustment is required to be made pursuant to
this Section 2, the Company shall promptly mail to the Registered Holder a
certificate setting forth the Purchase Price and/or the number of Warrant Shares
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment. Such certificate shall also set forth the kind and amount of
stock or other securities or property into which this Warrant shall be
exercisable following the occurrence of any of the events specified in
subsection 2(d) or (e) above.
3. Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value per share of
Common Stock, as determined pursuant to subsection 1(c) above.
4. Requirements for Transfer.
(a) This Warrant and the Warrant Shares shall not be sold or
transferred to a transferee receiving the right to acquire less than 380,000
Warrant Shares (subject to adjustment) and unless either (i) they first shall
have been registered under the Securities Act of 1933, as amended (the "Act"),
or (ii) the Company first shall have been furnished with an opinion of legal
counsel, reasonably satisfactory to the Company, to the effect that such sale or
transfer is exempt from the registration requirements of the Act.
(b) Notwithstanding the foregoing, no registration or opinion
of counsel shall be required for (i) a transfer by a Registered Holder which is
a partnership to a partner of such partnership or a retired partner of such
partnership who retires after the date hereof, or to the estate of any such
partner or retired partner, if the transferee agrees in writing to be subject to
the terms of this Section 4, or (ii) a transfer made in accordance with Rule 144
under the Act.
(c) Each certificate representing Warrant Shares shall bear a
legend substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may
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<PAGE> 8
not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered under
such Act or an opinion of counsel satisfactory to the Company is
obtained to the effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing any
Warrant Shares, at the request of the holder thereof, at such time as they
become eligible for resale pursuant to Rule 144(k) under the Act.
5. No Impairment. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
6. Notices of Record Date, etc. In case:
(a) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such
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<PAGE> 9
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up. Such notice shall be mailed at least ten (10) days
prior to the record date or effective date for the event specified in such
notice.
7. Reservation of Stock. The Company will at all times reserve and
keep available, solely for issuance and delivery upon the exercise of this
Warrant, such number of Warrant Shares and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
8. Exchange of Warrants. Upon the surrender by the Registered Holder
of any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
9. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
10. Transfers, etc.
(a) The Company will maintain a register containing the names
and addresses of the Registered Holders of this Warrant. Any Registered Holder
may change its or his address as shown on the warrant register by written notice
to the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in the form of
Exhibit II hereto) at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
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<PAGE> 10
11. Mailing of Notices, etc. All notices and other communications from
the Company to the Registered Holder of this Warrant shall be mailed by
first-class certified or registered mail, postage prepaid, to the address
furnished to the Company in writing by the last Registered Holder of this
Warrant who shall have furnished an address to the Company in writing. All
notices and other communications from the Registered Holder of this Warrant or
in connection herewith to the Company shall be mailed by first-class certified
or registered mail, postage prepaid, to the Company at its principal office set
forth below. If the Company should at any time change the location of its
principal office to a place other than as set forth below, it shall give prompt
written notice to the Registered Holder of this Warrant and thereafter all
references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
12. No Rights as Stockholder. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
13. Change or Waiver. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
14. Headings. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
15. Governing Law. This Warrant will be governed by and construed in
accordance with the laws of the State of Delaware.
CAREERBUILDER, INC.
By: /s/ JAMES THOLEN
--------------------------------
[CORPORATE SEAL] Title: CFO
-----------------------------
ATTEST:
/s/ RICHARD WATHEN
- -------------------------
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<PAGE> 11
EXHIBIT I
PURCHASE FORM
To: Dated:
----------------- --------------
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ADP1), hereby irrevocably elects to purchase _____ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$____________, representing the full purchase price for such shares at the price
per share provided for in such Warrant. Such payment takes the form of (check
applicable box or boxes):
[ ] $_________ in lawful money of the United States, and/or
[ ] the cancellation of such portion of the attached
Warrant as is exercisable for a total of ______
Warrant Shares (using a Fair Market Value of $_______
per share for purposes of this calculation).
Signature:
--------------------------
Address:
----------------------------
----------------------------
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<PAGE> 12
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant (No. ADP1) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature:
-------------- -------------------------------
Dated: Witness:
-------------- ---------------------------------
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<PAGE> 1
EXHIBIT 10.14
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "AGREEMENT"), is entered into as of December
29, 1998 (the "CLOSING DATE"), between CAREERBUILDER, INC., a Delaware
corporation (the "BORROWER"), and PNC BANK, N.A., (the "BANK").
The Borrower and the Bank, each with the intent to be legally bound
hereby, agree as follows:
1. LOAN. The following loan and credit facilities (collectively referred to
as the "LOAN"), shall be subject to and governed by this Agreement:
$2,000,000 Secured Revolving Credit ("REVOLVING CREDIT")
$4,000,000 Secured Bridge Loan ("BRIDGE LOAN")
The proceeds of each of the Revolving Credit and the Bridge Loan shall be used
for general working capital except as otherwise set forth herein.
2. TERMS AND CONDITIONS. Subject to the terms and conditions hereof and
relying upon the representations and warranties herein set forth, the
Bank agrees to make the Loan to the Borrower at any time or from time to
time on or after the date hereof in accordance with the terms of this
Agreement.
2.1 REVOLVING CREDIT. The Revolving Credit shall have the following
terms:
(a) Maturity Date: 364 days from the Closing Date; the Revolving
Credit shall be renewable annually at the Bank's discretion upon
the request of the Borrower.
(b) Interest Rate: Prime Rate (as defined hereinafter) plus .50%
per annum, but in no event greater than the maximum rate
permitted by law; the "PRIME RATE" shall be the rate of interest
per annum announced by the Bank from time to time as its Prime
Rate. Interest shall be calculated on the basis of a year of 360
days and shall be payable monthly in arrears.
(c) Facility Fee: the Borrower shall pay to the Bank a $20,000
facility fee (1.0% of the face amount of the Revolving Credit),
on the date of the closing contemplated by this Agreement (the
"Closing").
(d) Borrowing Base/Availability: the Revolving Credit shall be
available in amounts determined in accordance with the Borrowing
Base Rider in the form attached hereto as Exhibit A.
<PAGE> 2
(e) Requests. Except as otherwise provided herein, the Borrower
may from time to time prior to the Maturity Date request the
Bank to make a Loan under the Revolving Credit by delivering to
the Bank, not later than 12:00 Noon, Eastern Standard time a
request by telephone immediately confirmed in writing by letter,
facsimile or telex in such form as the Bank may require (a "LOAN
REQUEST"), it being understood that the Bank may rely on the
authority of any individual making such a telephonic request
without the necessity of receipt of such written confirmation.
Each Loan Request shall be irrevocable and shall specify (i) the
proposed borrowing date; and (ii) the aggregate amount of the
proposed Loan.
(f) Revolving Credit Note. The obligation of the Borrower to
repay the aggregate unpaid principal amount of the Revolving
Credit, together with interest thereon, shall be evidenced by a
promissory note of the Borrower ("REVOLVING CREDIT NOTE")
payable to the order of the Bank in a face amount equal to the
maximum amount of the Revolving Credit.
2.2 BRIDGE LOAN. The Bridge Loan shall have the following terms:
(a) Maturity Date: All outstanding borrowings under the Bridge
Loan shall become due and payable in their entirety upon the
earlier to occur of (i) June 30, 1999, or (ii) the date when
mandatory prepayments (as defined hereinafter) are required in
an amount equal to the then outstanding principal amount of the
Bridge Loan.
(b) Availability. The Borrower may draw up to $2,000,000 at
Closing and up to $1,000,000 on the last business day of each
month thereafter up to a maximum of $4,000,000; provided,
however, that if the Closing occurs on a date after the
fifteenth of a month, the first month-end draw after Closing
cannot be made until the last business day of the following
month.
(c) Interest Rate: Prime Rate plus 4.0% per annum for the 90 day
period commencing on the Closing Date and thereafter the Prime
Rate plus 5.0% per annum, but in no event greater than the
maximum rate permitted by law. Interest shall be calculated on
the basis of a year of 360 days and shall be payable monthly in
arrears.
(d) Facility Fee: The Borrower shall pay to the Bank a $40,000
facility fee (1.0% of the face amount of the Bridge Loan),
payable at Closing.
(e) Bridge Note. The Obligation of the Borrower to repay each
draw under the Bridge Loan, together with interest thereon,
shall be evidenced by a promissory note of the Borrower (the
"BRIDGE NOTE" and together with the Revolving Credit Note, the
"NOTES") payable to the order of the Bank.
<PAGE> 3
(f) Mandatory Prepayments. Subject to the proviso set forth
below, the Borrower shall make Mandatory Prepayments as follows:
(i) Prior to April 1, 1999. During the period from the
Closing Date and up to and including March 31, 1999
contributions to the equity of the Borrower will affect the
availability of borrowings under the Bridge Loan
("Availability") and will give rise to the obligation to make
mandatory prepayments with respect to the Bridge Loan
("Mandatory Prepayments"), as follows:
(A) aggregate equity contributions up to a maximum
of $2,500,000 will neither reduce Availability
nor trigger Mandatory Prepayments;
(B) aggregate equity contributions in excess of
$2,500,000 up to a maximum of $6,500,000 will
reduce Availability by an equivalent amount,
effective upon the receipt by Borrower of such
equity contributions; and
(C) aggregate equity contributions in excess of
$6,500,000 will trigger an obligation to make
Mandatory Prepayments in a like amount up to the
maximum aggregate amount of the principal amount
of the Bridge Loan and accrued interest thereon,
such Mandatory Prepayments to be due and payable
within five days of the receipt by the Borrower
of such equity contributions;
(ii) April 1, 1999 through Maturity. From April 1, 1999
through the Maturity Date, all contributions to the equity of
the Borrower will trigger an obligation to make a Mandatory
Prepayment in a like amount up to the maximum aggregate
amount of the principal amount of the Bridge Loan and accrued
interest thereon; and
(iii) Application of Prepayments. Amounts prepaid
pursuant to this Sub-Section 2.2(f) shall be applied first to
the prepayment of principal and thereafter to the payment of
accrued interest;
provided, however, that any equity in the Borrower resulting
from a new equity round led by General Electric Corporation
and/or its affiliates which is closed on or before January
29, 1999 shall be excluded from the foregoing provisions
regarding Mandatory Prepayments and Availability.
(g) Warrants. In consideration for the extension of credit under
the Bridge Loan, the Borrower hereby grants to the Bank warrants
to purchase the common capital stock of the Borrower (the
"WARRANTS") in accordance with and subject to
<PAGE> 4
the terms of the Warrant Agreement attached hereto as Exhibit B
(the "WARRANT AGREEMENT").
3. SECURITY.
The security for repayment of the Loan shall include but not be
limited to the collateral, guaranty and other documents heretofore,
contemporaneously or hereafter executed and delivered to the Bank (the
"SECURITY DOCUMENTS"), which shall secure repayment of the Loan and the
Notes and any amendments, extensions, renewals or increases and all
costs and expenses of the Bank incurred in the documentation,
negotiation, modification, enforcement, collection or otherwise in
connection with any of the foregoing, including but not limited to
reasonable attorneys' fees and expenses (hereinafter referred to
collectively as the "OBLIGATIONS"); provided, however, that the
Borrower's obligation to reimburse the Bank for such attorneys' fees and
expenses related to the preparation, negotiation and delivery of the
Loan Documents (as herein defined) shall not exceed $6,000. This
Agreement (including the Addendum and any Riders thereto), the Notes and
the Security Documents are collectively referred to as the "LOAN
DOCUMENTS".
4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby makes the following
representations and warranties to the Bank which shall be true and
correct as of the date of this Agreement and on the date of the making
of each extension of credit hereunder, and which shall be true and
correct except as otherwise set forth on the Addendum attached hereto
and incorporated herein by reference (the "ADDENDUM") .
4.1. EXISTENCE, POWER AND AUTHORITY. The Borrower is duly organized,
validly existing and in good standing under the laws of the
State of its incorporation or organization and has the power and
authority to own and operate its assets and to conduct its
business as now or proposed to be carried on, and is duly
qualified, licensed and in good standing to do business in all
jurisdictions where its ownership of property or the nature of
its business requires such qualification or licensing, except
where the failure to be so qualified or licensed would not have
a material adverse effect on the business, operations or
financial condition of the Borrower. The Borrower is duly
authorized to execute and deliver the Loan Documents, all
necessary action to authorize the execution and delivery of the
Loan Documents has been properly taken, and the Borrower is and
will continue to be duly authorized to borrow under this
Agreement and to perform all of the other terms and provisions
of the Loan Documents.
4.2. FINANCIAL STATEMENTS.
(a) The Borrower has delivered or caused to be delivered to the
Bank its balance sheet and income statement for the fiscal year
ended September 30, 1998 (the "HISTORICAL FINANCIAL
STATEMENTS"). The Historical Financial Statements are true,
complete and accurate in all material respects and fairly
present the
<PAGE> 5
financial condition, assets and liabilities, whether accrued,
absolute, contingent or otherwise and the result of the
Borrower's operations for the period specified therein. The
Historical Financial Statements have been prepared in accordance
with generally accepted accounting principles ("GAAP")
consistently applied from period to period except, in the case
of interim statements, such statements do not contain all of the
required footnotes and are subject to normal year-end
adjustments and to any comments and notes acceptable to the
Bank.
(b) The Borrower has delivered to the Bank projections of its
anticipated financial performance for the period beginning on
October 1, 1998 and continuing through September 30, 1999 (the
"FINANCIAL PROJECTIONS").
4.3. NO MATERIAL ADVERSE CHANGE. Since the date of the Historical
Financial Statements, the Borrower has not suffered any damage,
destruction or loss to its assets, and no event or condition has
occurred or exists, which has resulted or could reasonably be
expected to result in a material adverse change in its business,
assets, operations, financial condition or results of
operations. Subsequent to the preparation of the Financial
Projections, there has been no material adverse change in the
conditions or outlook upon which the Financial Projections are
based.
4.4. BINDING OBLIGATIONS. The Borrower has full power and authority
to enter into the transactions provided for in this Agreement
and has been duly authorized to do so by appropriate action of
its Board of Directors; and the Loan Documents, when executed
and delivered by the Borrower, will constitute the legal, valid
and binding obligations of the Borrower enforceable in
accordance with their terms, subject to normal and customary
equitable remedies.
4.5. NO DEFAULTS OR VIOLATIONS. There does not exist any Event of
Default under this Agreement or any material default or
violation by the Borrower of or under any of the terms,
conditions or obligations of: (i) its articles or certificate of
incorporation, regulations or bylaws; (ii) any material
indenture, mortgage, deed of trust, franchise agreement, permit,
contract, or other agreement or instrument to which it is a
party or by which it is bound; or (iii) any law, regulation,
ruling, order, injunction, decree, condition or other
requirement applicable to or imposed upon it by any law, the
action by any court or any governmental authority or agency; and
the consummation of this Agreement and the transactions set
forth herein will not result in any such default or violation.
4.6. TITLE TO ASSETS. The Borrower has valid title to the assets
reflected on the Historical Financial Statements, free and clear
of all liens and encumbrances, except for (i) current taxes and
assessments not yet due and payable, (ii) liens and
encumbrances, if any, reflected or noted in the Historical
Financial Statements, (iii) assets disposed of by the Borrower
in the ordinary course of business since the
<PAGE> 6
date of the Historical Financial Statements, and (iv) those
liens or encumbrances specified on the Addendum.
4.7. LITIGATION. There are no actions, suits, proceedings or
governmental investigations pending or, to the Borrower's
knowledge, threatened against the Borrower, which could
reasonably be expected to result in a material adverse change in
its business, assets, operations, financial condition or results
of operations and there is no basis known to the Borrower for
any action, suit, proceeding or investigation which could
reasonably be expected to result in such a material adverse
change. All pending or threatened litigation against the
Borrower of which Borrower has knowledge is listed on the
Addendum.
4.8. TAX RETURNS. The Borrower has filed all returns and reports that
are required to be filed by it in connection with any federal,
state or local tax, duty or charge levied, assessed or imposed
upon it or its property or withheld by it, including
unemployment, social security and similar taxes and all of such
taxes, have been either paid or adequate reserve or other
provision has been made.
4.9. EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which
the Borrower may have any liability complies in all material
respects with all applicable provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"), including
minimum funding requirements, and (i) no Prohibited Transaction
(as defined under ERISA) has occurred with respect to any such
plan, (ii) no Reportable Event (as defined under Section 4043 of
ERISA) has occurred with respect to any such plan which would
cause the Pension Benefit Guaranty Corporation to institute
proceedings under Section 4042 of ERISA, (iii) the Borrower has
not withdrawn from any such plan or initiated steps to do so,
and (iv) no steps have been taken to terminate any such plan.
4.10. ENVIRONMENTAL MATTERS. The Borrower is in compliance, in all
material respects, with all Environmental Laws, including,
without limitation, all Environmental Laws in jurisdictions in
which the Borrower owns or operates, or has owned or operated, a
facility or site, stores Collateral, arranges or has arranged
for disposal or treatment of hazardous substances, solid waste
or other waste, accepts or has accepted for transport any
hazardous substances, solid waste or other wastes or holds or
has held any interest in real property or otherwise. Except as
otherwise disclosed on the Addendum, no litigation or proceeding
arising under, relating to or in connection with any
Environmental Law is pending or, to the best of the Borrower's
knowledge, threatened against the Borrower, any real property
which the Borrower holds or has held an interest, or any past or
present operation of the Borrower. To the knowledge of the
Company, no release, threatened release or disposal of hazardous
waste, solid waste or other wastes is occurring, or to the best
of the Borrower's knowledge has occurred, on, under or to any
real property in which the Borrower holds any interest or
performs any of its operations, in material violation of any
Environmental Law. As used in this Section, "LITIGATION
<PAGE> 7
OR PROCEEDING" means any demand, claim notice, suit, suit in
equity, action, administrative action, investigation or inquiry
whether brought by a governmental authority or other person, and
"ENVIRONMENTAL LAWS" means all provisions of laws, statutes,
ordinances, rules, regulations, permits, licenses, judgments,
writs, injunctions, decrees, orders, awards and standards
promulgated by any governmental authority concerning health,
safety and protection of, or regulation of the discharge of
substances into, the environment.
4.11. INTELLECTUAL PROPERTY. The Borrower owns or has the right to use
all patents, patent rights, trademarks, trade names, service
marks, copyrights, intellectual property, technology, know-how
and processes necessary for the conduct of its business as
currently conducted that are material to the condition
(financial or otherwise), business or operations of the
Borrower.
4.12. REGULATORY MATTERS. No part of the proceeds of the Loan will be
used for "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time in effect or for any purpose
which violates the provisions of the Regulations of such Board
of Governors.
4.13. YEAR 2000. The Borrower has reviewed the areas within its
business and operations which could be adversely affected by,
and has developed or is developing a program to address on a
timely basis the risk that certain computer applications used by
the Borrower may be unable to recognize and perform properly
date-sensitive functions involving dates prior to and after
December 31, 1999 (the "YEAR 2000 PROBLEM"). The Year 2000
Problem will not have, or is not reasonably expected to have, a
material adverse effect on the business, operations, assets,
financial condition or results of operations of Borrower.
4.14. DISCLOSURE. None of the Loan Documents contains or will contain
any untrue statement of material fact or omits or will omit to
state a material fact necessary in order to make the statements
contained in this Agreement or the Loan Documents not
misleading.
4.15. REQUIRED CONSENTS. Except as set forth on the Addendum, all
consents, approvals and authorizations required by any
applicable law or any agreement to which the Borrower is a party
in connection with the execution, delivery and performance of
this Agreement and the other Loan Documents by the Borrower have
been obtained.
5. AFFIRMATIVE COVENANTS. The Borrower agrees that from the date of
execution of this Agreement until all Obligations have been fully paid
and any commitments the Bank to the Borrower have been terminated, the
Borrower will:
<PAGE> 8
5.1. BOOKS AND RECORDS. Maintain books and records in accordance with
GAAP and give representatives of the Bank access thereto at all
reasonable times following notice from the Bank, including
permission to examine, copy and make abstracts from any of such
books and records and such other information as the Bank may
from time to time reasonably request, and the Borrower will make
available to the Bank for examination copies of any reports,
statements or returns which the Borrower may make to or file
with any governmental department, bureau or agency, federal,
state or local.
5.2. INTERIM FINANCIAL STATEMENTS; CERTIFICATE OF NO DEFAULT;
ACCOUNTS RECEIVABLE. Deliver to the Bank within 20 days after
the end of each month a detailed report on its accounts
receivable, including payable aging reports, in such reasonable
detail consistent with the form currently used by the Borrower's
management. The Borrower shall also provide within 20 days of
the end of each month its Financial Statements (as defined
hereinafter) for such period, in reasonable detail, certified by
the President, Chief Executive Officer or Chief Financial
Officer of the Borrower and prepared in accordance with GAAP
applied from period to period, except that such statements do
not contain all of the required footnotes and are subject to
normal year-end adjustments. The Borrower shall also deliver,
within 20 days of the end of each month, a certificate signed by
such officer which verifies (i) compliance with applicable
financial covenants for the period then ended, and (ii) whether
or not any Event of Default exists, and, if so, the nature
thereof and the corrective measures the Borrower proposes to
take. "FINANCIAL STATEMENTS" means the Borrower's consolidated
and, if required by the Bank in its reasonable discretion,
consolidating balance sheets, income statements and statements
of cash flows for the year, month or (excepting statements of
cash flows) quarter together with year-to-date figures and
comparative figures for the corresponding periods of the prior
year.
5.3. ANNUAL FINANCIAL STATEMENTS. Deliver the Borrower's Financial
Statements to the Bank within 90 days after the end of each
fiscal year. Those Financial Statements will be prepared in
accordance with GAAP and audited by an independent certified
public accountant selected by the Borrower and satisfactory to
the Bank. Audited Financial Statements shall contain the
unqualified opinion of an independent certified public
accountant and its examination shall have been made in
accordance with GAAP consistently applied from period to period.
The Borrower will also provide filings made with any regulatory
authority and such other information reasonably requested by the
Bank, from time to time.
5.4. PAYMENT OF TAXES AND OTHER CHARGES. Pay and discharge when due
all indebtedness and all taxes, assessments, charges, levies and
other liabilities imposed upon the Borrower, its income,
profits, property or business, except those which currently are
being contested in good faith by appropriate proceedings and for
which the Borrower shall have set aside adequate reserves in
accordance with
<PAGE> 9
GAAP or made other adequate provision with respect thereto
acceptable to the Bank.
5.5. MAINTENANCE OF EXISTENCE, OPERATION AND ASSETS. Do all things
necessary to maintain, renew and keep in full force and effect
its organizational existence and all rights, permits and
franchises necessary to enable it to continue its business;
continue in operation in substantially the same manner as at
present; keep its properties in good operating condition and
repair; and make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto.
5.6. INSURANCE. Maintain with financially sound and reputable
insurers, insurance with respect to its property and business
against such casualties and contingencies, of such types and in
such amounts as is customary for established companies engaged
in the same or similar business and similarly situated.
5.7. COMPLIANCE WITH LAWS. Comply in all material respects with all
laws, rule, and regulations applicable to the Borrower and to
the operation of its business.
5.8. BANK ACCOUNTS. Establish and maintain at the Bank the Borrower's
primary depository account(s).
5.9. FINANCIAL COVENANTS. Comply with all of the financial and other
covenants, if any, set forth on the Addendum.
5.10. ADDITIONAL REPORTS. Provide prompt written notice to the Bank of
the occurrence of any of the following of which the Borrower
obtains knowledge (together with a description of the action
which the Borrower proposes to take with respect thereto): (i)
any Event of Default or potential Event of Default, (ii) any
litigation filed by or against the Borrower, (iii) any
Reportable Event or Prohibited Transaction with respect to any
Employee Benefit Plan(s) (as defined in ERISA) or (iv) any event
which might reasonably be expected to result in a material
adverse change in the business, assets, operations, financial
condition or results of operation of the Borrower. The Borrower
shall also provide to the Bank such other reports as the Bank
may reasonably request from time to time.
5.11. MEETING OF DIRECTORS. A designated representative of the Bank
shall be entitled to attend meetings of the directors of the
Borrower for the purpose of observing such proceedings. The Bank
shall be provided with copies of the minutes of each meeting of
directors promptly after the occurrence thereof. "Confidential
information," as defined in Section 10.11 of this Agreement,
received as a result of the participation of a Bank officer or
agent as a designated representative in respect of meetings of
the directors of the Borrower shall be subject to the
confidentiality provisions of said Section 10.11.
<PAGE> 10
6. NEGATIVE COVENANTS. The Borrower covenants and agrees that from the date
of execution of this Agreement until all Obligations have been fully
paid and any commitments of the Bank to the Borrower have been
terminated, the Borrower will not, except as set forth in the Addendum,
without the prior written consent of the Bank:
6.1. INDEBTEDNESS. Incur any indebtedness for borrowed money other
than: (i) the Loan and any subsequent indebtedness to the Bank;
(ii) existing indebtedness disclosed on the Borrower's
Historical Financial Statements; (iii) additional indebtedness
for capital leases in an amount not to exceed in the aggregate
at any time One Hundred Thousand Dollars ($100,000); and (iv)
such payables as are incurred in the ordinary course of
business.
6.2. LIENS AND ENCUMBRANCES. Except as provided in Section 4.6,
create, assume or permit to exist any mortgage, pledge,
encumbrance or other security interest or lien upon any assets
now owned or hereafter acquired or enter into any lease or any
arrangement for the acquisition of property subject to any
conditional sales agreement, other than capital leases permitted
under Section 6.1 or statutory liens.
6.3. GUARANTEES. Guarantee, endorse or voluntarily become
contingently liable for the obligations of any person, firm or
corporation, except in connection with the endorsement and
deposit of checks in the ordinary course of business for
collection.
6.4. LOANS OR INVESTMENTS. Purchase or hold beneficially any stock,
other securities or evidences of indebtedness of any loans or
advances to, or make any investment or acquire any interest
whatsoever in, any other person, firm or corporation, except
investments disclosed on the Borrower's Historical Financial
Statements or acceptable to the Bank.
6.5. MERGER OR TRANSFER OF ASSETS. Merge or consolidate with or into
any person, firm or corporation or lease, sell, transfer or
otherwise dispose of all or substantially all of its property or
assets, whether now owned or hereafter acquired.
6.6. CHANGE IN BUSINESS, MANAGEMENT OR OWNERSHIP. Make or permit any
material change in the nature of its business as carried on as
of the date hereof, in the composition of its current executive
management, or in its equity ownership other than (i) transfers
to heirs and beneficiaries of a stockholder upon the death of a
stockholder, or (ii) in connection with a bona fide underwritten
initial public offering or private placement of the capital
stock of the Borrower.
6.7. DIVIDENDS. Declare or pay any cash dividends on or make any
distribution with respect to any class of its equity or
ownership interest, or purchase, redeem, retire or otherwise
acquire any of its equity; provided, however, that the Company
may purchase, redeem or otherwise acquire shares of its capital
stock held by
<PAGE> 11
employees whose employment relationship with the Company is
terminating, in an aggregate amount not to exceed $50,000 during
any twelve month period; provided, further that the Borrower may
continue to accrue dividends in respect of its equity to the
extent that accrual is required by the terms of the instruments
governing such equity.
7. EVENTS OF DEFAULT. The occurrence of any of the following will be deemed
to be an "EVENT OF DEFAULT":
7.1. PAYMENT DEFAULT. The Borrower shall fail to pay any payment of
principal when due or any payment of interest within five (5)
business days following the date when due, in respect of the
Obligations.
7.2. MATERIAL ADVERSE CHANGE. There shall be a material adverse
change in the business, operations or assets of the Borrower.
7.3. COVENANT DEFAULT. The Borrower shall default in the performance
of, or violate any of, the covenants or agreements contained in
this Agreement, which default shall not have been cured within
thirty (30) business days after the occurrence thereof.
7.4. BREACH OF WARRANTY. Any Financial Statement, representation,
warranty or certificate made or furnished by the Borrower to the
Bank in connection with this Agreement shall be false, incorrect
or incomplete in any material respect when made.
7.5. BANKRUPTCY OR INSOLVENCY. A proceeding shall have been
instituted in a court having jurisdiction over the Borrower
seeking a decree or order for relief in respect of Borrower in
an involuntary case under any applicable bankruptcy, insolvency
reorganization or other similar law and such involuntary case
shall remain undismissed or unstayed and in effect for a period
of sixty (60) consecutive days, or Borrower shall commence a
voluntary case under any such law or consent to the appointment
of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or other similar official).
7.6. OTHER DEFAULT. The occurrence of an Event of Default as defined
in the Notes or any of the Security Documents, or a violation of
any of the requirements set forth in the Borrowing Base Rider.
Upon the occurrence of an Event of Default, and at any time thereafter, the Bank
may declare all Obligations hereunder immediately due and payable will have all
rights and remedies (which are cumulative and not exclusive) specified in the
Notes and the Security Documents and available under applicable law or in equity
upon the delivery of prior written notice to the Borrower.
<PAGE> 12
8. CONDITIONS. The obligations of the Bank to make any advance under the
Loan is subject to the following conditions being satisfied as of the
date of the advance:
8.1. FUNDING OF THE INITIAL ADVANCES UNDER THE REVOLVING CREDIT AND
THE BRIDGE LOAN. On the Closing Date:
(a) No Event of Default. No Event of Default or event which with
the passage of time, provision of notice or both would
constitute an Event of Default shall have occurred and be
continuing.
(b) Authorization Documents. The Borrower shall have furnished
to the Agent certified copies of resolutions of its Board of
Directors authorizing the execution of this Agreement, the
Warrant Agreement, the Notes and the Security Documents, or
other proof of authorization satisfactory to the Bank.
(c) Delivery of Loan Documents. The Borrower shall have
delivered to the Bank the Loan Documents and such other
instruments and documents which the Bank may reasonably request
in connection with the transactions provided for in this
Agreement.
(d) Collateral/Security. The Bank shall have received first
priority security interests and liens on all assets of the
Borrower and shall have received all such instruments and
documents necessary to perfect such security interests and
liens.
(e) Opinion of Counsel. Counsel for the Borrower shall have
delivered to the Bank a written opinion, dated the Closing Date,
in the form attached hereto as Exhibit C.
(f) Representations and Warranties. The representations and
warranties of the Borrower to the Bank shall be true and correct
in all material respects on and as of such date (except
representations and warranties which expressly relate solely to
an earlier date or time, which representations and warranties
shall be true and correct on and as of the specific dates or
times referred to therein).
(g) Consents. The Borrower shall have obtained all consents, if
any, required by Section 4.16.
(h) Comfort Letters. The Bank shall have received letters in the
form of Exhibit D hereto from each of New Enterprise Associates,
21st Century Investors, Friedman, Billings, Ramsey Group, Inc.,
and Thomson Technology Ventures.
8.2. FUNDING OF THE BRIDGE LOAN; ADDITIONAL ADVANCES. At the time of
making any additional advances under the Revolving Credit or
funding any draw under the Bridge Loan and after giving effect
to any such proposed extensions of credit, the
<PAGE> 13
representations and warranties of the Borrower contained in the
Loan Documents shall be true on and as of the date of such
funding with the same effect as though such representations and
warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to
an earlier date or time, which representations and warranties
shall be true and correct on and as of the specific dates or
times referred to therein) and the Borrower shall have performed
and complied with all covenants and conditions hereof; no Event
of Default or any event specified in Section 7, which, with the
giving of notice, lapse of time or both, would become an Event
of Default, shall have occurred and be continuing or shall
exist; the making of such additional advance shall not
contravene any law applicable to the Borrower or the Bank, as
applicable; and the Borrower shall have delivered to the Bank a
duly executed and completed Loan Request.
9. INCREASED COSTS. Within twenty (20) days following written demand,
together with the written evidence of the justification therefor, the
Borrower agrees to pay the Bank all direct costs incurred and any losses
suffered or payments made by the Bank as a consequence of making the
Loan by reason of any change in law or regulation or its interpretation
imposing any reserve, deposit, allocation of capital or similar
requirement (including without limitation, Regulation D of the Board of
Governors of the Federal Reserve System) on the Bank, its holding
company or any of their respective assets; provided, however, that the
Bank shall make no such written demand on the Borrower unless similar
demands have been made against all other similarly situated customers of
the Bank.
10. MISCELLANEOUS.
10.1. NOTICES. All notices, demands, requests, consents, approvals and
other communications required or permitted hereunder must be in
writing and will be effective upon receipt if delivered
personally to such party, or if sent by facsimile transmission
with confirmation of delivery, or by nationally recognized
overnight courier service, to the address set forth below or to
such other address as any party may give to the other in writing
for such purpose:
To the Bank: To the Borrower:
PNC Bank, N.A. CareerBuilder, Inc.
1401 Eye Street N.W. 11495 Sunset Hills Road
Suite 200 Reston, Virginia 20190
Washington, D.C. 20005 Attention: President
Attention: Katharine S. Kappler Facsimile No.: (703) 709-1004
<PAGE> 14
Facsimile No.: (202) 393-1545
10.2. PRESERVATION OF RIGHTS. No delay or omission on the part of the
Bank to exercise any right or power arising hereunder will
impair any such right or power or be considered a waiver of any
such right or power or any acquiescence therein, nor will the
action or inaction of the Bank impair any right or power arising
hereunder. The rights and remedies hereunder of the Bank are
cumulative and not exclusive of any other rights or remedies
which the Bank may have under other agreements, at law or in
equity.
10.3. ILLEGALITY. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
10.4. CHANGES IN WRITING. No modification, amendment or waiver of any
provision of this Agreement nor consent to any departure by
either party therefrom, will in any event be effective unless
the same is in writing and signed by each party to this
Agreement and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which
given. No notice to or demand on the Borrower in any case will
entitle the Borrower to any other or further notice or demand in
the same, similar or other circumstance.
10.5. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement
and supersedes all other prior agreements and understandings,
both written and oral, between the parties with respect to the
subject matter hereof.
10.6. COUNTERPARTS. This Agreement may be signed in any number of
counterpart copies and by the parties hereto on separate
counterparts, but all such counterparts shall constitute one and
the same instrument.
10.7. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the Borrower and the Bank and their
respective, successors and assigns; provided, however, that the
Borrower may not assign this Agreement in whole or in part
without the prior written consent of the Bank and the Bank at
any time may assign this Agreement in whole or in part, upon
prior written notice to the Borrower.
10.8. INTERPRETATION. In this Agreement, unless the Bank and the
Borrower otherwise agree in writing, the singular includes the
plural and the plural the singular; words importing any gender
include the other gender; references to statutes are to be
construed as including all statutory provisions consolidating,
amending or replacing the statute referred to; the word "or"
shall be deemed to include
<PAGE> 15
"and/or", the words "including", "includes" and "include" shall
be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections)
or exhibits are to those of this Agreement unless otherwise
indicated; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments
and other modifications to such instruments, but only to the
extent such amendments and other modifications are not
prohibited by the terms of this Agreement. Section headings in
this Agreement are included for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose. Unless otherwise specified in this Agreement, all
accounting terms shall be interpreted and all accounting
determinations shall be made in accordance with GAAP. If this
Agreement is executed by more than one party as Borrower, the
obligations of such persons or entities will be joint and
several.
10.9. EXPENSES. The Borrower agrees to pay the Bank, upon the Closing
of this Agreement, and otherwise on demand, all reasonable and
necessary out-of-pocket costs and expenses incurred by the Bank
in connection with the (i) preparation, negotiation and delivery
of this Agreement and the other Loan Documents, and any
modifications thereto, including reasonable fees and expenses of
counsel, expenses for auditors, appraisers and environmental
consultants, lien searches, recording and filing fees and taxes;
provided, however, that the Borrower's obligation to reimburse
the Bank for such attorneys' fees and expenses related to the
preparation, negotiation and delivery of the Loan Documents
shall not exceed $6,000, and (ii) collection of the Loan or
instituting, maintaining, preserving, enforcing and foreclosing
the security interest in any of the collateral securing the
Loan, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions or proceedings arising out
of or relating to this Agreement.
10.10. ASSIGNMENTS AND PARTICIPATION. Notwithstanding any other
provisions of this Agreement, the Bank may, at any time in its
sole discretion, without any notice to the Borrower, sell,
assign, transfer, negotiate, grant participation in, or
otherwise dispose of all or any part of the Bank's interest in
the Loan. The Borrower hereby authorizes the Bank to provide,
without any notice to the Borrower, any information concerning
the Borrower, including information pertaining to the Borrower's
financial condition, business operations or general
creditworthiness, to any person or entity which may succeed to
or participate in all or any part of the Bank's interest in the
Loan, provided that such person or entity agrees to maintain the
confidentiality of such information.
10.11. CONFIDENTIALITY. The Bank agrees to hold any confidential
information that it may receive from Borrower pursuant to this
Agreement or any Exhibits hereto in confidence, except for
disclosure: (a) To legal counsel, accountants and other
professional advisors to Borrower or the Bank; (b) To regulatory
officials having jurisdiction over the Bank; or (c) As required
by Law or legal process or in
<PAGE> 16
connection with any legal proceeding to which the Bank and
Borrower are adverse parties. For purposes of the foregoing,
"confidential information" shall mean any information respecting
the Borrower reasonably considered by the Borrower to be
confidential, other than (i) information previously filed with
any governmental agency and available to the public, (ii)
information previously published in any public medium not
furnished directly or indirectly by the Bank, and (iii)
information previously disclosed by the Borrower to any person
not associated or affiliated with the Borrower or any of its
officers, directors, agents, attorneys or employees without a
written confidentiality agreement.
10.12. GOVERNING LAW AND JURISDICTION. This Agreement has been
delivered to and accepted by the Bank and will be deemed to be
made in the Commonwealth of Pennsylvania. THIS AGREEMENT WILL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA, EXCLUDING ITS CONFLICT OF LAWS RULES. The Borrower
hereby irrevocably consents to the exclusive jurisdiction of any
state or federal court seated in Allegheny County, Pennsylvania,
and consents that all service of process be sent by nationally
recognized overnight courier service directed to the Borrower at
the Borrower's address set forth herein and service so made will
be deemed to be completed on the business day after deposit with
such courier; provided that nothing contained in this Agreement
will prevent the Bank from bringing any action, enforcing any
award or judgment or exercising any rights against the Borrower
individually, against any security or against any property of
the Borrower within any other county, state or other foreign or
domestic jurisdiction. the Bank and the Borrower agree that the
venue provided above is the most convenient forum for both the
Bank and the Borrower. The Borrower waives any objection to
venue and any objection based on a more convenient forum in any
action instituted under this Agreement.
10.13. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE BANK
IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING
TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
DOCUMENTS. THE BORROWER AND THE BANK ACKNOWLEDGE THAT THE
FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
[Signature Page to Follow]
<PAGE> 17
The Borrower acknowledges that it has read and understood all the provisions of
this Agreement, including the waiver of jury trial, and has been advised by
counsel as necessary or appropriate.
WITNESS the due execution of this Loan Agreement as a document under
seal, as of the date first written above.
<TABLE>
<CAPTION>
<S> <C>
ATTEST: CAREERBUILDER, INC.
By: /s/ RICHARD WATHEN By: /s/ JAMES A. THOLEN (SEAL)
------------------------------- ----------------------------------
Print Name: Richard Wathen Print Name: James A. Tholen
----------------------- -------------------------
Title: Controller Title: CFO
----------------------------- ------------------------------
PNC BANK,
NATIONAL ASSOCIATION
By: /s/ KATHARINE KAPPLER (SEAL)
----------------------------------
Print Name: Katharine Kappler
-------------------------
Title: Vice President
------------------------------
</TABLE>
<PAGE> 18
ADDENDUM
ADDENDUM to that certain Loan Agreement of even date herewith between
CAREERBUILDER, INC. and PNC BANK, N.A. Defined terms used in this Addendum shall
have the meanings provided in said Loan Agreement.
I. FINANCIAL COVENANTS
1. Revenues. The cumulative Revenues of the Borrower for fiscal year 1999,
commencing October 1, 1998, shall be in an amount at least equal to the
amounts which follow:
December 1998 $ 1,824,889
January 1999 $ 2,523,131
February 1999 $ 3,307,823
March 1999 $ 4,182,065
April 1999 $ 5,152,804
May 1999 $ 6,232,282
June 1999 $ 7,419,522
July 1999 $ 8,718,956
August 1999 $ 10,139,357
September 1999 $ 11,678,631
Compliance with this covenant shall be reported monthly, within 20 days
of the end of each month, commencing with the first month of the
Borrower's fiscal year.
2. Net Worth. The Tangible Net Worth of the Borrower shall be in an amount
at least equal to the amounts which follows:
December 1998 ($ 3,471,980)
January 1999 ($ 4,967,713)
February 1999 ($ 6,542,001)
March 1999 ($ 8,213,277)
April 1999 ($ 9,561,716)
May 1999 ($ 10,849,419)
June 1999 ($ 11,988,354)
July 1999 ($ 13,002,057)
August 1999 ($ 13,967,733)
October 1999 ($ 15,027,956)
plus all equity contributions made after the Closing Date. Compliance
with this covenant shall be reported monthly within 20 days of the end
of each month.
A-1
<PAGE> 19
DEFINITIONS:
"REVENUES" means the revenues of the Borrower calculated in accordance
with GAAP, consistently applied.
"TANGIBLE NET WORTH" means the owner's equity of the Borrower calculated
in accordance with GAAP, consistently applied, minus intangibles.
SCHEDULE II: LIENS AND ENCUMBRANCES
Silicon Valley Bank liens on substantially all the assets of the company (to be
released at close).
SCHEDULE III: OTHER DISCLOSURES
Section 4.5: NO DEFAULTS OR VIOLATIONS
On December 23, 1998 Silicon Valley Bank amended its Revolving
Line of Credit agreement (dated 11/26/97) to extend the agreement
to2/23/99 and waive compliance with the Quick Ratio covenants
from 9/30/98 to 1/15/99.
Section 4.7: LITIGATION
Mr. McGovern, as an individual, was the plaintiff in a civil suit against
his former employer, Computer Associates ("CA"), concerning a stock option
payment CA failed to make on his departure from CA. The essence of the suit
was a contractual dispute, whereby Mr. McGovern had a verbal agreement with
Legent Corporation ("Legent") for approximately $440,000 in option payments
associated with a promotion he accepted in March 1995. This payment was
promised by his former superiors at Legent but was subsequently denied by
CA. McGovern sought relief before a court in the Eastern District of
Virginia. McGovern lost the case in June 1996 on summary judgment, where the
judge cited a statute of frauds limitation barring verbal agreements in
security matters. Mr. McGovern's case was reheard on July 12 1996 for
reconsideration by the same court and the summary judgment was upheld.
During two depositions, CA's lawyers questioned Mr. McGovern concerning the
nature of NetStart's business. CA had previously argued before the court
that it was necessary to ascertain the nature of McGovern's employment, in
order to determine whether his punitive damages could be shown to be
mitigated by his new employment. In both instances the judge directed Mr.
<PAGE> 20
McGovern to only answer questions associated with his start date with
NetStart, his present rate of salary, his projected rate of salary in the
future, and the profitability of the Company.
Section 4.8: TAXES
In December 1998 the Company was informed by its tax accountants, KPMG Peat
Marwick, that it was 60 days late in filing its Form 5500 for its Fidelity
401k plan. The return is being prepared and will be filed within the next 30
days. A ONE-THOUSAND DOLLAR ($1000) penalty will be required at the time the
return is filed. No other taxes are due on the plan.
Section 4.10: ENVIRONMENTAL MATTERS:
It has been reported that there may be Asbestos Containing Material in the
building occupied by the Company located at 11495 Sunset Hills Road, Reston,
Virginia. To the Company's knowledge, no friable asbestos nor any asbestos
requiring response or repair exists and the Company has no plans to take any
action which would give rise to such response or repair.
<PAGE> 21
EXHIBIT A
TO
LOAN AGREEMENT
BORROWING BASE RIDER
THIS BORROWING BASE RIDER ("RIDER") is executed this 29th day of
December 1998 by and between CAREERBUILDER, INC., a Delaware corporation (the
"BORROWER"), and PNC BANK, N.A. (the "BANK"). This Rider is incorporated into
and made part of that certain Loan Agreement of even date herewith by and
between the Borrower and the Bank, as Exhibit A thereto, and also into such
other financing documents and security agreements as may be executed and
delivered pursuant to said Loan Agreement (all such documents including this
Rider are collectively referred to as the "LOAN DOCUMENTS"). All initially
capitalized terms not otherwise defined in this Rider shall have the meanings
ascribed to such terms in the other Loan Documents.
Pursuant to the Loan Documents, the Bank has extended the
Revolving Credit to the Borrower, under which the Borrower may borrow, repay and
reborrow funds at any time prior to the Maturity Date. As a condition to the
Bank's willingness to extend the Revolving Credit to the Borrower, the Bank and
the Borrower are entering into this Rider in order to set forth their agreement
regarding the maximum amount which may be outstanding under the Revolving Credit
at any time, and for the other purposes set forth below:
NOW, THEREFORE, in consideration of the foregoing, and intending
to be legally bound, the parties hereto covenant and agree as follows:
1. LIMITATIONS ON BORROWINGS UNDER REVOLVING CREDIT.
Notwithstanding any provisions to the contrary in any of the other Loan
Documents, at no time shall the aggregate principal amounts of indebtedness
outstanding at any one time under the Revolving Credit exceed the Borrowing Base
at such time. If at any time the aggregate principal amount of indebtedness
outstanding under the Revolving Credit exceeds the limitation set forth in this
Section 1 for any reason other than a return of goods by an account debtor, then
the Borrower shall repay the amount of such excess to the Bank in immediately
available funds within five business days of exceeding such limitation. If the
aggregate principal amount of indebtedness outstanding under the Revolving
Credit exceeds the Borrowing Base because of a return of goods by an account
debtor, the Borrower shall repay the amount of such excess to the Bank in
immediately available funds within thirty days from the date of such return
unless the account debtor accepts replacement goods prior to the expiration of
such thirty day period.
2. BORROWING BASE CERTIFICATES. In addition to any and all
provisions of the other Loan Documents which establish conditions to the
Borrower's ability to request and obtain
<PAGE> 22
any advance under the Revolving Credit, the Borrower may not request an advance
under the Revolving Credit unless a Borrowing Base Certificate shall have been
delivered to the Bank not more than five (5) calendar days prior to the date of
such proposed advance.
____________ ____________ [Bank and Borrower shall initial if the following
paragraph applies]
The Borrower shall also deliver an updated Borrowing Base Certificate upon the
Bank's request and in no event later than on or before the 20th day of each
month or the first business day following the 20th day if such day falls on a
weekend or holiday, if no new advances have been requested by the Borrower under
the Revolving Credit since the date of the preceding Borrowing Base Certificate.
3. CERTAIN DEFINED TERMS. In addition to the words and terms
defined elsewhere in this Rider or in the other Loan Documents, as used in this
Rider, the following words and terms shall have the following meanings:
"ACCOUNT" shall mean an "account" or a "general intangible" as
defined in the Uniform Commercial Code as in effect in the jurisdiction whose
Law governs the perfection of the Bank's security interest therein, whether now
owned or hereafter acquired or arising.
"ACCOUNT DEBTOR" shall mean, with respect to any Account, each
Person who is obligated to make payments to the Borrower on such Account.
"AFFILIATE" of the Borrower or any Account Debtor shall mean (a)
any Person who (either alone or with a group of Persons, and either directly or
indirectly through one or more intermediaries) is in control of, is controlled
by or is under common control with the Borrower or such Account Debtor, (b) any
director, officer, partner, employee or agent of the Borrower or such Account
Debtor, and (c) any member of the immediate family of any natural person
described in the preceding clauses (a) and (b). A Person or group of Persons
shall be deemed to be in control of the Borrower or an Account Debtor when such
Person or group of Persons possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the Borrower or
such Account Debtor, whether through the ownership of voting securities, by
contract or otherwise.
"BORROWING BASE" at any time shall mean the lesser of (a)
$2,000,000 (the maximum principal amount of the Revolving Credit) and (b) the
sum of (i) 70% of Qualified Accounts at such time and (ii) the lesser of 60% of
Eligible Equipment and $750,000. The value at any time of the collateral
described in this definition shall be determined by reference to the most recent
Borrowing Base Certificate delivered by the Borrower to the Bank.
"BORROWING BASE CERTIFICATE" shall mean each Borrowing Base
Certificate to be delivered by the Borrowers to the Bank pursuant to Section 2
of this Rider, in substantially the
- 2 -
<PAGE> 23
form attached as Exhibit A to this Rider, with blanks appropriately completed,
as amended, supplemented or otherwise modified from time to time.
"ELIGIBLE EQUIPMENT" shall mean the Net Book Value of (i)
telephone equipment based on a straight-line amortization schedule not to exceed
three years; and (ii) computer equipment based on a straight-line amortization
schedule not to exceed two years.
"LAW" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body.
"LIEN" shall mean any mortgage, pledge, security interest,
bailment, encumbrance, claim, lien or charge of any kind, including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement and any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code.
"OFFICIAL BODY" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of any government or political subdivision, or any
court, tribunal, grand jury or arbitrator, in each case whether foreign or
domestic.
"PERSON" shall mean an individual, sole proprietorship,
corporation, partnership (general or limited), trust, business trust, limited
liability company, unincorporated organization or association, joint venture,
joint-stock company, Official Body, or any other entity of whatever nature.
"QUALIFIED ACCOUNTS" shall mean Accounts which are and at all
times continue to be acceptable to the Bank in its sole discretion. Standards of
acceptability include but are not limited to the following conditions:
(a) The Account duly complies with all applicable Laws,
whether Federal, state or local, including but not limited
to usury Laws, the Federal Truth in Lending Act, the
Federal Consumer Credit Protection Act, the Fair Credit
Billing Act, and Regulation Z of the Board of Governors of
the Federal Reserve Systems;
(b) The Account was not originated in or subject to the Laws
of a jurisdiction whose Laws would make the account or the
grant of the security interest in the Account to the Bank
unlawful, invalid or unenforceable;
(c) The Account was originated by the Borrower in connection
with the rendering of services by the Borrower in the
ordinary course of business under an enforceable contract;
(d) The Account is evidenced by a written invoice or other
documentation and arises from a contract, electronic or
otherwise;
- 3 -
<PAGE> 24
(e) The Account does not arise out of a contract with, or
order from, an Account Debtor that, by its terms, forbids
or makes void or unenforceable the grant of the security
interest by the Borrower to the Bank in and to the Account
arising with respect thereto;
(f) The title of the Borrower to the Account and, except as to
the Account Debtor, is not subject to any Lien except
Liens in favor of the Bank;
(g) The Account provides for payment in United States Dollars
by the Account Debtor;
(h) The Account shall have amounts owing that are not less
than the amounts represented by the Borrower;
(i) The portion of the Account for which income has not yet
been earned or for which a deferred revenue entry has not
been made or which constitutes unearned discount, service
charges or deferred interest shall be ineligible;
(j) The Account shall be eligible only to the extent that it
is not subject to any defense, claim of reduction,
counterclaim, set-off, recoupment, or any dispute or claim
for credits, allowances or adjustments by the Account
Debtor because of unsatisfactory service, or for any other
reason;
(k) No default exists under the Account by any party thereto,
and all rights and remedies of the Borrower under the
Account are freely assignable by the Borrower;
(l) The Account has not been outstanding for more than ninety
(90) days past the invoice date and is not subject to
"dating" terms;
(m) The Account shall be ineligible if 50% or more of the
accounts of the related Account Debtor and its Affiliates
are more than ninety (90) days past due from the date of
original invoice therefor;
(n) The Account shall be ineligible to the extent that the
aggregate amount of all the Accounts of the Account Debtor
and its Affiliates exceed 20% of all of the Borrower's
Accounts;
(o) The Borrower has not received any note, trade acceptance,
draft, chattel paper or other instrument with respect to,
or in payment of, the Account, unless, if any such
instrument has been received, the Borrower immediately
notifies the Bank and, at the Bank's request, endorses or
assigns and delivers such instrument to the Bank;
- 4 -
<PAGE> 25
(p) The Borrower has not received any actual notice of (i) the
death of the Account Debtor or a partner thereof; (ii) the
filing by or against the Account Debtor of any proceeding
in bankruptcy, receivership, insolvency, reorganization,
liquidation, conservatorship or any similar proceeding, or
(iii) any assignment by the Account Debtor for the benefit
of creditors. Upon receipt by the Borrower of any such
notice, it will give the Bank prompt written notice
thereof;
(q) The Account Debtor is not an Affiliate of the Borrower;
(r) The Account shall be ineligible if the related Account
Debtor is domiciled in any country other than the United
States of America unless such Account is supported by a
documentary letter of credit, duly assigned to and in the
possession of the Bank, from a financial institution
acceptable to the Bank and the terms and conditions of
which are acceptable to the Bank;
(s) The Account shall be ineligible if the Account Debtor is
an Official Body, unless the Borrower shall have taken all
actions deemed necessary by the Bank in order to perfect
the Bank's security interest therein, including but not
limited to any notices or filings required under the
Assignment of Claims Act of 1940, as amended, or other
applicable Laws; and
(t) The Bank has not reasonably deemed such Account ineligible
because of uncertainty about the creditworthiness of the
Account Debtor (including, without limitation,
unsatisfactory past experiences of the Borrower or the
Bank with the Account Debtor or unsatisfactory reputation
of the Account Debtor) or because the Bank otherwise makes
a reasonable determination that the collateral value of
the Account to the Bank is impaired or that the Bank's
ability to realize such value is insecure.
Standards of acceptability shall be fixed and may be revised from time to time
solely by the Bank in its exclusive judgment. In the case of any dispute about
whether an Account is or has ceased to be a Qualified Account, the decision of
the Bank shall be final.
4. GOVERNING LAW. THIS RIDER WILL BE INTERPRETED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF
THE COMMONWEALTH OF PENNSYLVANIA, EXCLUDING ITS CONFLICTS OF LAW RULES.
5. COUNTERPARTS. This Rider may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument.
- 5 -
<PAGE> 26
WITNESS the due execution hereof as a document under seal, as of
the date first written above.
<TABLE>
<CAPTION>
<S> <C>
ATTEST: CAREERBUILDER, INC.
By: /s/ RICHARD WATHEN By: /s/ JAMES A. THOLEN (SEAL)
------------------------------- ----------------------------------
Print Name: Richard Wathen Print Name: James A. Tholen
----------------------- -------------------------
Title: Controller Title: CFO
----------------------------- ------------------------------
PNC BANK, N.A.
By: /s/ KATHARINE KAPPLER (SEAL)
----------------------------------
Print Name: Katharine Kappler
-------------------------
Title: Vice President
------------------------------
</TABLE>
- 6 -
<PAGE> 1
EXHIBIT 10.15
REVOLVING CREDIT NOTE
$2,000,000 DECEMBER 29, 1998
FOR VALUE RECEIVED, CAREERBUILDER, INC., a Delaware corporation (the
"BORROWER"), promises to pay to the order of PNC BANK, N.A. (the "Bank"), in
lawful money of the United States of America in immediately available funds, the
principal sum of the lesser of TWO MILLION DOLLARS ($2,000,000) (the "FACILITY")
or the aggregate unpaid principal amount outstanding as of the Maturity Date,
together with interest accruing on the outstanding principal balance from the
date hereof, as provided below:
1. LOAN AGREEMENT. This Note is issued in connection with the Loan
Agreement of even date herewith by and between the Borrower and the Bank, the
terms of which are incorporated herein by reference (the "LOAN AGREEMENT"), and
is secured by the property described in the Security Agreement by and between
the Borrower and the Bank and other loan documents entered into in connection
with the Loan Agreement (the "LOAN DOCUMENTS") and by such other collateral as
previously may have been or may in the future be granted to the Bank to secure
this Note. Capitalized terms used herein shall have the meanings provided in the
Loan Agreement unless a different meaning is provided herein.
2. RATE OF INTEREST. Amounts outstanding under this Note will bear
interest at a rate per annum determined in accordance with the Loan Agreement.
Interest will be calculated on the basis of a year of 360 days for the actual
number of days in each interest period.
3. ADVANCES. The Borrower may borrow, repay and reborrow hereunder
until the Maturity Date, subject to the terms and conditions of this Note and
the Loan Documents (as defined herein). The "MATURITY DATE" shall mean December
__, 1999, or such later date as may be designated by the Bank by written notice
from the Bank to the Borrower. The Borrower acknowledges and agrees that in no
event will the Bank be under any obligation to extend or renew the Facility or
this Note beyond the initial Maturity Date. In no event shall the aggregate
unpaid principal amount of advances under this Note exceed the face amount of
this Note.
4. PAYMENT TERMS. Accrued interest will be due and payable on the
15th day of each month, beginning with the payment due, if any, on January 15,
1999. The outstanding principal balance and any accrued but unpaid interest
shall be due and payable on the Maturity Date. If any payment under this Note
shall become due on a Saturday, Sunday or public holiday under the laws of the
Commonwealth of Pennsylvania, such payment shall be made on the next succeeding
business day and such extension of time shall be included in computing interest
in connection with such payment. The Borrower hereby authorizes the Bank to
charge the Borrower's deposit account at the Bank for any payment when due
hereunder. Payments received will be applied to charges, fees and expenses
(including attorney's fees), accrued interest and principal in any order the
Bank may choose, in its sole discretion.
5. LATE PAYMENTS; DEFAULT RATE. If the Borrower fails to make any
payment of principal when due or any payment of interest or other amount coming
due pursuant to the
<PAGE> 2
provisions of this Note within five (5) business days of the date due and
payable, the Borrower also shall pay to the Bank a late charge equal to the
lesser of five percent (5%) of the amount of such payment or $500. Such five
(5) day period shall not be construed in any way to extend the due date of any
such payment. The late charge is imposed for the purpose of defraying the
Bank's expenses incident to the handling of delinquent payments and is in
addition to, and not in lieu of, the exercise by the Bank of any rights and
remedies hereunder, under the other Loan Documents or under applicable law, and
any fees and expenses of any agents or attorneys which the Bank may employ.
Upon maturity, whether by acceleration, demand or otherwise, and at the option
of the Bank upon the occurrence of any Event of Default and during the
continuance thereof, this Note shall bear interest at a rate per annum (based
on a year of 360 days and actual days elapsed) which shall be two percentage
points (2%) in excess of the interest rate in effect from time to time under
this Note, but not more than the maximum rate allowed by law (the "DEFAULT
RATE"). The Default Rate shall continue to apply whether or not judgment shall
be entered on this Note.
6. PREPAYMENT. The indebtedness evidenced by this Note may be
prepaid in whole or in part at any time without penalty or charge.
7. MISCELLANEOUS. No delay or omission on the part of the Bank to
exercise any right or power arising hereunder shall impair any such right or
power or be considered to be a waiver of any such right or power, nor shall the
Bank's action or inaction impair any such right or power. The Borrower agrees to
pay on demand, to the extent permitted by law, all costs and expenses incurred
by the Bank in the enforcement of its rights in this Note and in any security
therefor, including without limitation reasonable fees and expenses of the
Bank's counsel. If any provision of this Note is found to be invalid by a court,
all the other provisions of this Note will remain in full force and effect. The
Borrower and all other makers and indorsers of this Note hereby forever waive
presentment, protest, notice of dishonor and notice of non-payment. The Borrower
also waives all defenses based on suretyship or impairment of collateral, except
for such impairment which results from the gross negligence or willful
misconduct of the Bank. This Note shall bind the Borrower and its successors and
assigns, and the benefits hereof shall inure to the benefit of the Bank and its
successors and assigns.
THIS NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
BANK AND THE BORROWER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA. The Borrower hereby irrevocably consents to the
exclusive jurisdiction of any state or federal court sitting in Allegheny
County, Pennsylvania, and consents that all service of process be sent by
nationally recognized overnight courier service directed to the Borrower at the
Borrower's address set forth in the Loan Agreement and service so made will be
deemed to be completed when received by the Borrower; provided that nothing
contained in this Note will prevent the Bank from bringing any action,
enforcing any award or judgment or exercising any rights against the Borrower
individually, against any security or against any property of the Borrower
within any other county, state or other foreign or domestic jurisdiction. The
Borrower acknowledges and agrees that the venue provided above is the most
convenient forum for both the Bank and the Borrower. The Borrower waives any
objection to
-2-
<PAGE> 3
venue and any objection based on a more convenient forum in any action
instituted under this Note.
8. WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY AND ALL
RIGHTS THE BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION
WITH THIS NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE
BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
The Borrower acknowledges that it has read and understood all of the
provisions of this Note, including waiver of jury trial, and has been advised by
counsel as necessary or appropriate.
WITNESS the due execution of this Revolving Credit Note as a
document under seal, as of the date first written above, with the intent to be
legally bound hereby.
CAREERBUILDER, INC.
By: /s/ JAMES A. THOLEN
----------------------------
Name: James A. Tholen
----------------------------
Title: CFO
----------------------------
-3-
<PAGE> 1
EXHIBIT 10.16
BRIDGE LOAN NOTE
$4,000,000 DECEMBER 29, 1998
FOR VALUE RECEIVED, CAREERBUILDER, INC., a Delaware
corporation (the "BORROWER"), promises to pay to the order of PNC BANK, N.A.
(the "BANK"), in lawful money of the United States of America in immediately
available funds, the principal sum of the lesser of FOUR MILLION DOLLARS
($4,000,000) (the "FACILITY") or the aggregate unpaid principal amount
outstanding as of the Maturity Date, together with interest accruing on the
outstanding principal balance from the date hereof, as provided below:
1. LOAN AGREEMENT. This Note is issued in connection with the
Loan Agreement of even date herewith by and between the Borrower and the Bank,
the terms of which are incorporated herein by reference (the "LOAN AGREEMENT"),
and is secured by the property described in the Security Agreement by and
between the Borrower and the Bank and other loan documents entered into in
connection with the Loan Agreement (the "LOAN DOCUMENTS") and by such other
collateral as previously may have been or may in the future be granted to the
Bank to secure this Note. Capitalized terms used herein shall have the meanings
provided in the Loan Agreement unless a different meaning is provided herein.
2. RATE OF INTEREST. Amounts outstanding under this Note will
bear interest at a rate per annum determined in accordance with the Loan
Agreement. Interest will be calculated on the basis of a year of 360 days for
the actual number of days in each interest period.
3. ADVANCES. The Borrower may draw up to $2,000,000 on the
date of the Closing and up to $1,000,000 on the last business day of each month
thereafter up to a maximum of $4,000,000; provided, however, that if the Closing
occurs on a date after the fifteenth day of a month, the first month-end draw
after Closing cannot be made until the last business day of the following month.
In no event shall the aggregate unpaid principal amount of advances under this
Note exceed the face amount of this Note.
4. PAYMENT TERMS. Accrued interest will be due and payable on
the 15th day of each month, beginning with the payment due, if any, on January
15, 1999. Mandatory Prepayments shall be made in accordance with the terms of
the Loan Agreement. The outstanding principal balance and any accrued but unpaid
interest shall be due and payable on the Maturity Date. The "MATURITY DATE"
shall mean the earlier to occur of: (i) June 30, 1999; or (ii) the date when
Mandatory Prepayments required by the Loan Agreement equal the then outstanding
principal amount of the Facility. The Borrower acknowledges and agrees that in
no event will the Bank be under any obligation to extend or renew the Facility
or this Note beyond the Maturity Date. If any payment under this Note shall
become due on a Saturday, Sunday or public holiday under the laws of the
Commonwealth of Pennsylvania, such payment shall be made on the next succeeding
business day and such extension of time shall be included in computing interest
in connection with such payment. The Borrower hereby authorizes the Bank to
charge the Borrower's deposit account at the Bank for any payment when due
hereunder. Payments
<PAGE> 2
received will be applied to charges, fees and expenses (including attorney's
fees), accrued interest and principal in any order the Bank may choose, in its
sole discretion.
5. LATE PAYMENTS; DEFAULT RATE. If the Borrower fails to make
any payment of principal when due or any payment of interest or other amount
coming due pursuant to the provisions of this Note within five (5) business days
of the date due and payable, the Borrower also shall pay to the Bank a late
charge equal to the lesser of five percent (5%) of the amount of such payment or
$500. Such five (5) day period shall not be construed in any way to extend the
due date of any such payment. The late charge is imposed for the purpose of
defraying the Bank's expenses incident to the handling of delinquent payments
and is in addition to, and not in lieu of, the exercise by the Bank of any
rights and remedies hereunder, under the other Loan Documents or under
applicable law, and any fees and expenses of any agents or attorneys which the
Bank may employ. Upon maturity, whether by acceleration, demand or otherwise,
and at the option of the Bank upon the occurrence of any Event of Default and
during the continuance thereof, this Note shall bear interest at a rate per
annum (based on a year of 360 days and actual days elapsed) which shall be two
percentage points (2%) in excess of the interest rate in effect from time to
time under this Note, but not more than the maximum rate allowed by law (the
"DEFAULT Rate"). The Default Rate shall continue to apply whether or not
judgment shall be entered on this Note.
6. PREPAYMENT. The indebtedness evidenced by this Note may be
prepaid in whole or in part at any time without penalty or charge.
7. MISCELLANEOUS. No delay or omission on the part of the Bank
to exercise any right or power arising hereunder shall impair any such right or
power or be considered to be a waiver of any such right or power, nor shall the
Bank's action or inaction impair any such right or power. The Borrower agrees to
pay on demand, to the extent permitted by law, all costs and expenses incurred
by the Bank in the enforcement of its rights in this Note and in any security
therefor, including without limitation reasonable fees and expenses of the
Bank's counsel. If any provision of this Note is found to be invalid by a court,
all the other provisions of this Note will remain in full force and effect. The
Borrower and all other makers and indorsers of this Note hereby forever waive
presentment, protest, notice of dishonor and notice of non-payment. The Borrower
also waives all defenses based on suretyship or impairment of collateral, except
for such impairment which results from the gross negligence or willful
misconduct of the Bank. This Note shall bind the Borrower and its successors and
assigns, and the benefits hereof shall inure to the benefit of the Bank and its
successors and assigns.
THIS NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE BANK AND THE BORROWER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA. The Borrower hereby irrevocably consents to the
exclusive jurisdiction of any state or federal court sitting in Allegheny
County, Pennsylvania, and consents that all service of process be sent by
nationally recognized overnight courier service directed to the Borrower at the
Borrower's address set forth in the Loan Agreement and service so made will be
deemed to be completed when received by the Borrower; provided that nothing
- 2 -
<PAGE> 3
contained in this Note will prevent the Bank from bringing any action, enforcing
any award or judgment or exercising any rights against the Borrower
individually, against any security or against any property of the Borrower
within any other county, state or other foreign or domestic jurisdiction. The
Borrower acknowledges and agrees that the venue provided above is the most
convenient forum for both the Bank and the Borrower. The Borrower waives any
objection to venue and any objection based on a more convenient forum in any
action instituted under this Note.
8. WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY
AND ALL RIGHTS THE BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED
IN CONNECTION WITH THIS NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
DOCUMENTS. THE BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND
VOLUNTARY.
The Borrower acknowledges that it has read and understood all
of the provisions of this Note, including waiver of jury trial, and has been
advised by counsel as necessary or appropriate.
WITNESS the due execution of this Bridge Loan Note as a
document under seal, as of the date first written above, with the intent to be
legally bound hereby.
CAREERBUILDER, INC.
By: /s/ JAMES A. THOLEN
------------------------------------
Name: James A. Tholen
----------------------------------
Title: CFO
--------------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.17
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT") is made as of December 29,
1998 by and between CAREERBUILDER, INC., a Delaware corporation (the "GRANTOR"),
with an address at 11495 Sunset Hills Road, Reston, Virginia 20190, and PNC
BANK, N.A. (the "BANK"). All terms capitalized but not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement (as defined
below).
Under the terms hereof, the Bank desires to obtain and the Grantor
desires to grant the Bank security for all of the Obligations (as hereinafter
defined).
NOW, THEREFORE, the Grantor and the Bank, intending to be legally
bound, hereby agree as follows:
1. DEFINITIONS.
(a) "COLLATERAL" shall include all personal property of the
Grantor, including without limitation the following, all whether now owned or
hereafter acquired or arising: (i) accounts, accounts receivable, contract
rights, chattel paper, notes receivable, instruments and documents (including
warehouse receipts), and Grantor's accounts with the Bank; (ii) goods of every
nature, including without limitation, inventory, stock-in-trade, raw materials,
work in process, items held for sale or lease or furnished or to be furnished
under contracts of sale or lease, goods that are returned, reclaimed or
repossessed, together with materials used or consumed in the Grantor's business;
(iii) equipment, including, without limitation, machinery, vehicles, furniture
and fixtures; (iv) general intangibles of every kind and description, including,
but not limited to, all existing and future customer lists, choses in action,
claims (including without limitation claims for indemnification or breach of
warranty), books, records, patents and patent applications, trademarks,
trademark applications, copyrights, copyright applications, goodwill,
blueprints, drawings, designs and plans, trade secrets, contracts, licenses,
license agreements, formulae, tax and any other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer information, software, source codes, object codes, records and data;
(v) all property of the Grantor now or hereafter in the Bank's possession or in
transit to or from, under the custody or control of or on deposit with, the Bank
or any affiliate thereof, including deposit and other accounts; (vi) all cash
and cash equivalents; and (vii) all cash and non-cash proceeds (including
without limitation, insurance proceeds) of all of the foregoing property, all
products thereof and all additions and accessions thereto, substitutions
therefor and replacements thereof. The Collateral shall also include any and all
tangible or intangible property described as being part of the Collateral
pursuant to one or more Riders to Security Agreement which may now or hereafter
be attached hereto or delivered in connection herewith.
(b) "LOAN AGREEMENT" means the Loan Agreement of even date
herewith by and between the Grantor and the Bank.
<PAGE> 2
(c) "LOAN DOCUMENTS" means this Agreement, the Loan Agreement,
any and all notes evidencing the Obligations and all related documents,
instruments and agreements.
(d) "OBLIGATIONS" shall include, without limitation, all
loans, advances, debts, liabilities, obligations, covenants and duties owed to
the Bank from the Grantor under the Loan Documents and any amendments,
extensions, renewals or increases and all reasonable and necessary costs and
expenses of the Bank incurred in the documentation, negotiation, modification,
enforcement, collection or otherwise in connection with any of the foregoing,
including but not limited to reasonable attorneys' fees and expenses.
2. GRANT OF SECURITY INTEREST. To secure the Obligations, the Grantor,
as debtor, hereby assigns and grants to the Bank, as secured party, a continuing
lien on and security interest in the Collateral.
3. CHANGE IN NAME OR LOCATIONS. The Grantor hereby agrees that if the
location of the Collateral changes from the locations listed on Exhibit A hereto
and made part hereof, or if the Grantor changes its name or form of
organization, or establishes a name in which it may do business that is not
listed as a tradename on Exhibit A hereto, the Grantor will as promptly as
practicable notify the Bank in writing of the additions or changes. The
Grantor's chief executive office is also shown on Exhibit A hereto.
4. REPRESENTATIONS AND WARRANTIES. Except as disclosed in or pursuant
to the Loan Agreement, the Grantor represents, warrants and covenants to the
Bank that: (a) the Grantor has not made any prior pledge, encumbrance,
assignment or other disposition of any of the Collateral and the same are free
from all encumbrances and rights of setoff of any kind; (b) the Grantor will
defend the Collateral against all claims and demands of all persons at any time
claiming the same or any interest therein; (c) each account and general
intangible, if included in the definition of Collateral, is genuine and
enforceable in accordance with its terms; and (d) at the time any account or
general intangible becomes subject to this Agreement, such account or general
intangible will be a good and valid account representing a bona fide sale of
goods or services by the Grantor and the services will have been performed for
the respective account debtors.
5. GRANTOR'S COVENANTS. The Grantor covenants that it shall:
(a) from time to time and at all reasonable times allow the
Bank, with reasonable prior notice, by or through any of its officers, agents,
attorneys, or accountants, to examine or inspect the Collateral and notify
account debtors of the Bank's security interest in accounts. The Grantor shall
do, obtain, make, execute and deliver all such additional and further acts,
things, deeds, assurances and instruments as the Bank may reasonably require to
vest in and assure to the Bank its rights hereunder and in or to the Collateral,
and the proceeds thereof, including, but not limited to, waivers from landlords,
warehousemen and mortgagees;
-2-
<PAGE> 3
(b) keep the Collateral in good order and repair at all times;
(c) only use or permit the Collateral to be used in accordance
with all applicable federal, state, county and municipal laws and regulations;
and
(d) have and maintain insurance at all times with respect to
all Collateral against risks of fire (including so-called extended coverage),
theft, sprinkler leakage, and other risks (including risk of flood if any
Collateral is maintained at a location in a flood hazard zone) as is customary
with companies in the same or similar businesses. The policies of all such
casualty insurance shall contain standard Lender's Loss Payable Clauses issued
in favor of the Bank under which all losses thereunder shall be paid to the Bank
as the Bank's interest may appear. Such policies shall expressly provide that
the requisite insurance cannot be materially altered or canceled without at
least thirty (30) days prior written notice to the Bank and shall insure the
Bank notwithstanding the act or neglect of the Grantor. Upon demand of the Bank,
the Grantor shall furnish the Bank with duplicate original policies of insurance
or such other evidence of insurance as the Bank may require. In the event of
failure to obtain insurance as herein provided, the Bank may, at its option,
obtain such insurance and the Grantor shall pay to the Bank, on demand, the cost
thereof. Proceeds of insurance may be applied by the Bank to reduce the
Obligations or to repair or replace Collateral, all in the Bank's sole
discretion.
6. NEGATIVE PLEDGE; NO TRANSFER. The Grantor will not sell or offer to
sell or otherwise transfer or grant or suffer the imposition of a lien or
security interest upon the Collateral (except for sales of inventory and
collections of accounts in the Grantor's ordinary course of business) or use any
portion thereof in any manner inconsistent with this Agreement or with the terms
and conditions of any policy of insurance thereon.
7. COVENANTS FOR ACCOUNTS. If accounts are included in the definition
of Collateral:
(a) The Grantor will, on reasonable demand of the Bank, make
available to the Bank completion certificates or other proof of the satisfactory
performance of services that gave rise to an account, a copy of the invoice for
each account and copies of any written contract or order from which an account
arose.
(b) Upon the occurrence, and during the continuance of an
Event of Default (as defined in Section 9 hereof) for a period of at least sixty
(60) days, the Bank may notify any persons who are indebted to the Grantor on
any Collateral consisting of accounts or general intangibles of the assignment
thereof to the Bank and may direct such account debtors to make payment directly
to the Bank of the amounts due. Upon the occurrence, and during the continuance
of an Event of Default, at the request of the Bank, the Grantor will direct any
persons who are indebted to the Grantor on any Collateral consisting of accounts
or general intangibles to make payment directly to the Bank. The Bank is
authorized to give receipts to such account
-3-
<PAGE> 4
debtors for any such payments and the account debtors will be protected in
making such payments to the Bank. If an Event of Default has occurred and
remains uncured for more than sixty (60) days thereafter, upon the written
request of the Bank, the Grantor will establish with the Bank and maintain a
lockbox account ("LOCKBOX") with the Bank and a depository account(s) ("CASH
COLLATERAL ACCOUNT") with the Bank subject to the provisions of this
subparagraph and such other agreements related thereto as the Bank may require,
whereupon all collections of accounts shall be paid directly from account
debtors into the Lockbox from which funds shall be transferred to the Cash
Collateral Account, and from which funds shall be applied by the Bank, daily, to
reduce the outstanding Obligations.
8. FURTHER ASSURANCES. At the request of the Bank, the Grantor will
join with the Bank in executing one or more financing, continuation or amendment
statements pursuant to the Uniform Commercial Code in form satisfactory to the
Bank and will pay the cost of preparing and filing the same in all jurisdictions
in which such filing is deemed by the Bank to be necessary or desirable. A
carbon, photographic or other copy of this Agreement or of a UCC-1 financing
statement may be filed as and in lieu of a UCC-1 financing statement.
9. EVENTS OF DEFAULT. The Grantor shall, at the option of the Bank, be
in default under this Agreement upon the happening of any of the following
events or conditions (each, an "EVENT OF DEFAULT"): (a) any Event of Default (as
defined in any of the Loan Documents) which has not been cured within any time
period applicable thereto; (b) demand by the Bank under any of the Obligations
that have a demand feature; (c) the failure by the Grantor to perform any of its
obligations under this Agreement which failure has not been cured within ten
days' after written notice to the Grantor; (d) material falsity, material
inaccuracy or material breach by the Grantor of any written warranty,
representation or statement made or furnished to the Bank by or on behalf of the
Grantor, which has a material adverse affect on the business of the Grantor; (e)
an uninsured material loss, theft, damage, or destruction to any of the
Collateral, or the entry of any judgment against the Grantor or any lien against
or the making of any levy, seizure or attachment of or on the Collateral, which
has a material adverse affect on the business of the Grantor; (f) except as
disclosed in the Addendum to the Loan Agreement, the failure of the Bank to have
a perfected first priority security interest in the Collateral, unless such
failure results from the negligence of the Bank; or (g) any indication or
evidence received by the Bank that the Grantor may have directly or indirectly
been engaged in any type of activity which, in the Bank's reasonable and good
faith discretion, might result in the forfeiture of any property of the Grantor
to any governmental entity, federal, state or local and which will have a
material adverse affect on the business of the Grantor.
10. REMEDIES. Upon the occurrence of any such Event of Default and at
any time thereafter, the Bank may declare all Obligations secured hereby
immediately due and payable upon written notice to Grantor and shall have, in
addition to any remedies provided herein or by any applicable law or in equity,
all the remedies of a secured party under the Uniform Commercial Code.
-4-
<PAGE> 5
11. POWER OF ATTORNEY. The Grantor does hereby make, constitute and
appoint any officer or agent of the Bank as the Grantor's true and lawful
attorney-in-fact, with power to endorse the name of the Grantor or any of the
Grantor's officers or agents upon any notes, checks, drafts, money orders, or
other instruments of payment or Collateral that may come into the possession of
the Bank in full or part payment of any amounts owing to the Bank; granting to
the Grantor's said attorney full power to do any and all things necessary to be
done in and about the premises as fully and with the same effect as the Grantor
might or could do, including the right to sign, for the Grantor, UCC-1 financing
statements and to sue for, compromise, settle and release all claims and
disputes with respect to, the Collateral. The Grantor hereby ratifies all that
said attorney shall lawfully do or cause to be done by virtue hereof. This power
of attorney is coupled with an interest, and is irrevocable for the life of this
Security Agreement and the Loan Documents, and until all the Obligations are
satisfied in full.
12. PAYMENT OF EXPENSES. In the event that the Grantor fails to do so
on a timely basis, the Bank may, at its option, discharge taxes, liens, security
interests or such other encumbrances as may attach to the Collateral, may pay
for required insurance on the Collateral and may pay for the maintenance,
appraisal or reappraisal, and preservation of the Collateral, as reasonably
determined by the Bank to be necessary. The Grantor will reimburse the Bank on
demand for any payment so made or any expense incurred by the Bank pursuant to
the foregoing authorization, and the Collateral also will secure any advances or
payments so made or expenses so incurred by the Bank.
13. NOTICES. All notices, demands, requests, consents, approvals and
other communications required or permitted hereunder must be in writing and will
be effective upon receipt if delivered personally to such party, or if sent by
facsimile transmission with confirmation of delivery, or by nationally
recognized overnight courier service, to the address set forth above or to such
other address as any party may give to the other in writing for such purpose.
14. PRESERVATION OF RIGHTS. No delay or omission on the part of the
Bank to exercise any right or power arising hereunder will impair any such right
or power or be considered a waiver of any such right or power or any
acquiescence therein, nor will the action or inaction of the Bank impair any
right or power arising hereunder. The Bank's rights and remedies hereunder are
cumulative and not exclusive of any other rights or remedies which the Bank may
have under other agreements, at law or in equity.
15. ILLEGALITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
16. CHANGES IN WRITING. No modification, amendment or waiver of any
provision of this Agreement nor consent to any departure by either party
therefrom, will in any event be effective
-5-
<PAGE> 6
unless the same is in writing and signed by both parties to this Agreement, and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No notice to or demand on the Grantor in any
case will entitle the Grantor to any other or further notice or demand in the
same, similar or other circumstance.
17. ENTIRE AGREEMENT. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
18. COUNTERPARTS. This Agreement may be signed in any number of
counterparts and by the parties hereto on separate counterparts, but all such
counterparts shall constitute one and the same instrument.
19. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and
inure to the benefit of the Grantor and the Bank and their respective successors
and assigns; provided, however, that the Grantor may not assign this Agreement
in whole or in part without the prior written consent of the Bank and the Bank
at any time may assign this Agreement in whole or in part upon written notice to
Grantor.
20. INTERPRETATION. In this Agreement, unless the Bank and the Grantor
otherwise agree in writing, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word "or"
shall be deemed to include "and/or", the words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement unless otherwise indicated. Section headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
21. INDEMNITY. The Grantor agrees to indemnify each of the Bank, its
directors, officers and employees and each legal entity, if any, who controls
the Bank (the "INDEMNIFIED PARTIES") and to hold each Indemnified Party harmless
from and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, all reasonable fees of counsel with whom any
Indemnified Party may consult and all expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may be asserted against
any Indemnified Party as a result of the execution of or performance under this
Agreement; provided, however, that the foregoing indemnity agreement shall not
apply to claims, damages, losses, liabilities and expenses solely attributable
to an Indemnified Party's negligence, willful misconduct, bad faith or fraud.
The indemnity agreement contained in this Section shall survive the termination
of this Agreement. The Grantor may participate at its expense in the defense of
any such claim.
-6-
<PAGE> 7
22. GOVERNING LAW AND JURISDICTION. This Agreement has been delivered
to and accepted by the Bank and will be deemed to be made in the Commonwealth of
Pennsylvania. THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH
OF PENNSYLVANIA, EXCEPT THAT THE LAWS OF THE STATE WHERE ANY COLLATERAL IS
LOCATED (IF DIFFERENT FROM THE COMMONWEALTH OF PENNSYLVANIA) SHALL GOVERN THE
CREATION, PERFECTION AND FORECLOSURE OF THE LIENS CREATED HEREUNDER ON SUCH
PROPERTY OR ANY INTEREST THEREIN. The Grantor hereby irrevocably consents to the
exclusive jurisdiction of any state or federal court for Allegheny County or the
Western District of Pennsylvania, as the case may be, and consents that all
service of process be sent by nationally recognized overnight courier service
directed to the Grantor at the Grantor's address set forth herein and service so
made will be deemed to be completed on the business day after deposit with such
courier; provided that nothing contained in this Agreement will prevent the Bank
from bringing any action, enforcing any award or judgment or exercising any
rights against the Grantor individually, against any security or against any
property of the Grantor within any other county, state or other foreign or
domestic jurisdiction. The Bank and the Grantor agree that the venue provided
above is the most convenient forum for both the Bank and the Grantor. The
Grantor waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Agreement.
23. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR AND THE BANK IRREVOCABLY
WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY OF SUCH DOCUMENTS. THE GRANTOR AND THE BANK ACKNOWLEDGE THAT THE FOREGOING
WAIVER IS KNOWING AND VOLUNTARY.
[Signature Page to Follow]
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<PAGE> 8
WITNESS the due execution of this Security Agreement as a
document under seal, as of the date first written above.
CAREERBUILDER, INC.
By: /s/ JAMES A. THOLEN
---------------------------------
(SEAL)
Print Name: James A. Tholen
------------------------
Title: CFO
------------------------------
PNC BANK, N.A.
By: /s/ KATHARINE KAPPLER
---------------------------------
(SEAL)
Print Name: Katharine Kappler
-------------------------
Title: Vice President
------------------------------
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<PAGE> 9
EXHIBIT A
TO SECURITY AGREEMENT
Address of Grantor's chief executive office, including the County:
11495 Sunset Hills Road Fairfax County, Virginia
Reston, Virginia 20190
Address for books and records, if different:
Addresses of other Collateral locations, including Counties and name and address
of landlord or owner if location is not owned by the Grantor:
Name and Address of Landlord:
Other names or tradenames now or formerly used by the Grantor:
Name change from NetStart in 1998
<PAGE> 10
RIDER TO SECURITY AGREEMENT -
PATENTS
THIS RIDER TO SECURITY AGREEMENT ("RIDER") is executed as of
December 29, 1998, by and between CAREERBUILDER, INC., a Delaware corporation
(the "GRANTOR"), and PNC BANK, N.A. (the "BANK"). This Rider is incorporated
into and made part of that certain Security Agreement ("SECURITY AGREEMENT")
between the Grantor and the Bank of even date herewith, and also into certain
other financing documents and security agreements executed by and between the
Grantor and the Bank or by and between the Borrower (as defined in the Security
Agreement) and the Bank (all such documents including this Rider being
collectively referred to as "LOAN DOCUMENTS"). All capitalized terms not
otherwise defined in this Rider shall have the same meanings ascribed to such
terms in the other Loan Documents.
As collateral security for the Obligations (as defined in the
Security Agreement) under the Loan Documents, the Grantor has agreed to grant a
security interest in and to assign to the Bank, for its own benefit and the
ratable benefit of the Banks, the Patent Collateral (as hereinafter defined).
The Bank desires to have its lien and security interest in such Patent
Collateral confirmed by a document identifying such security interest and in
such form as may be recorded in the United States Patent and Trademark Office.
NOW, THEREFORE, with the foregoing background deemed incorporated by
reference and made part hereof, the parties hereto, intending to be legally
bound hereby, covenant and agree as follows:
1. GRANT OF SECURITY INTEREST. In consideration of and pursuant to
the terms of the Security Agreement and for other good, valuable and sufficient
consideration, the receipt of which is hereby acknowledged, and to secure the
Obligations, the Grantor does hereby assign and grant to the Bank a lien and
security interest in (a) all of the Grantor's right, title and interest in and
to (i) the United States Letters Patent and the inventions described and claimed
therein set forth on Schedule A hereto and any future patents (hereinafter
referred to collectively as the "PATENTS"); (ii) the applications for Letters
Patent and the inventions described and claimed therein set forth on Schedule A
hereto and any United States Letters Patent which may be issued upon any of said
applications and any future patent applications (hereinafter referred to
collectively as the "APPLICATIONS"); (iii) any reissue, extension, division or
continuation of the Patents or the Applications (such reissues, extensions,
divisions and continuations being herein referred to collectively as the
"REISSUED PATENTS"); (iv) all future royalties or other fees paid or payment or
payments made or to be made to the Grantor in respect of the Patents; and (v)
proceeds of any and all of the foregoing (the Patents, Applications, Reissued
Patents and Royalties and proceeds being herein referred to collectively as the
"PATENT RIGHTS"); and (b) all rights, interest, claims and demands that the
Grantor has or may have in existing and future profits and damages for past and
future infringements of the Patent Rights (such rights, interests, claims
<PAGE> 11
and demands being herein called the "CLAIMS") (the Patent Rights and Claims
collectively referred to as the "PATENT COLLATERAL").
2. REPRESENTATIONS AND WARRANTIES. The Grantor warrants and
represents to the Bank that: (a) the Grantor is the true and lawful exclusive
owner of the Patent Rights set forth on Schedule A, including all rights and
interest herein granted; (b) to the Borrower's knowledge, the Patent Collateral
is valid and enforceable; (c) the Grantor has full power and authority to
execute and deliver this Rider; (d) the Grantor has no notice of any suits or
actions commenced or threatened against it, or notice of claims asserted or
threatened against it, with reference to the Patent Rights and the interests
granted herein; and (e) the Patent Rights and all interests granted herein are
so granted free from all liens, charges, claims, options, licenses, pledges and
encumbrances of every kind and character.
3. COVENANTS. The Grantor further covenants that: (a) Until all of
the Obligations have been satisfied in full, the Grantor will not, without the
prior written consent of the Bank, enter into any agreement, including without
limitation, license agreements, which are inconsistent with the Grantor's
obligations under this Rider; and (b) if the Grantor acquires rights to any new
Patent Collateral, the provisions of this Rider shall automatically apply
thereto and the Grantor shall give the Bank prompt written notice thereof along
with an amended Schedule A; provided, however, that notwithstanding anything to
the contrary contained in this Agreement, the Grantor shall have the right to
enter into agreements in the ordinary course of business with respect to the
Patent Collateral.
4. MAINTENANCE OF PATENT COLLATERAL. The Grantor further covenants
that: until all of the Obligations have been satisfied in full, it will (i) not
enter into any agreement, including without limitation, license agreements,
which are inconsistent with the Grantor's undertakings and covenants under this
Rider or which restrict or impair the Bank's rights hereunder and (ii) maintain
the Patent Collateral in full force and effect.
5. NEGATIVE PLEDGE. The Grantor agrees not to sell, assign or
further encumber its rights and interest in the Patent Collateral without prior
written consent of the Bank.
6. REMEDIES UPON DEFAULT. (a) Anything herein contained to the
contrary notwithstanding, if and while the Grantor shall be in default hereunder
or an Event of Default exists under the Loan Documents, the Grantor hereby
covenants and agrees that the Bank, as the holder of a security interest under
the Uniform Commercial Code, as now or hereafter in effect in Pennsylvania, may
take such action permitted under the Loan Documents or permitted by law, in its
exclusive discretion, to foreclose upon the Patent Collateral covered hereby.
(b) For such purposes, and in the event of the Grantor's default
hereunder or an Event of Default under the Loan Documents and while such default
or Event of Default exists, the Grantor hereby authorizes and empowers the Bank
to make, constitute and appoint any officer or agent of the Bank as the Bank may
select, in its exclusive discretion, as the Grantor's true and
-2-
<PAGE> 12
lawful attorney-in-fact, with the power to endorse the Grantor's name on all
applications, documents, papers and instruments necessary for the Bank to use
the Patent Collateral or to grant or issue any exclusive or non-exclusive
license under the Patent Collateral to anyone else, or necessary for the Bank to
assign, pledge, convey or otherwise transfer title in or dispose of the Patent
Collateral to anyone else. The Grantor hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue hereof, except for the gross
negligence or willful misconduct of such attorney. This power of attorney shall
be irrevocable for the life of this Rider and the Loan Documents, and until all
the Obligations are satisfied in full.
(c) The Grantor expressly acknowledges that this Rider shall be
recorded with the Patent and Trademark Office. Contemporaneously herewith, the
Grantor shall also execute and deliver to the Bank such documents as the Bank
shall reasonably require to permanently assign all rights in the Patent
Collateral to the Bank, which documents shall be held by the Bank, in escrow,
until the occurrence of an Event of Default hereunder or under the Loan
Documents. After such occurrence, the Bank may, at its sole option, record such
escrowed documents with the Patent and Trademark Office.
7. PROSECUTION OF PATENT APPLICATIONS. (a) The Grantor shall, at its
own expense, diligently file and prosecute all patent applications relating to
the inventions described and claimed in the Patent Collateral in the United
States Patent and Trademark Office, and shall pay or cause to be paid in their
customary fashion all fees and disbursements in connection therewith, and shall
not abandon any such application prior to the exhaustion of all administrative
and judicial remedies or disclaim or dedicate any Patent without the prior
written consent of the Bank. The Grantor shall not abandon any Patent Collateral
without the prior written consent of the Bank.
(b) Any and all fees, costs and expenses, including reasonable
attorneys' fees and expenses incurred by the Bank in connection with the
preparation, modification, enforcement or termination of this Rider and all
other documents relating hereto and the consummation of this transaction, the
filing and recording of any documents (including all taxes in connection
therewith) in public offices, the payment or discharge of any taxes, counsel
fees, maintenance fees, encumbrances or costs otherwise incurred in defending or
prosecuting any actions or proceedings arising out of or related to the Patent
Collateral shall be paid by the Grantor on demand by the Bank.
(c) The Grantor shall have the right to bring suit in the name of
the Grantor to enforce the Patent Collateral, in which case the Bank may, at the
Bank's option, be joined as a nominal party to such suit if the Bank shall be
satisfied that such joinder is necessary and that the Bank is not thereby
incurring any risk of liability by such joinder. The Grantor shall promptly,
upon demand, reimburse and indemnify, defend and hold harmless the Bank for all
damages, costs and expenses, including reasonable attorneys' fees, incurred by
the Bank pursuant to this
-3-
<PAGE> 13
paragraph and all other actions and conduct of the Grantor with respect to the
Patent Rights during the term of this Rider.
8. SUBJECT TO SECURITY AGREEMENT. This Rider shall be subject to the
terms, provisions, and conditions set forth in the Security Agreement and may
not be modified without the written consent of the party against whom
enforcement is being sought.
9. INCONSISTENT WITH SECURITY AGREEMENT. All rights and remedies
herein granted to the Bank shall be in addition to any rights and remedies
granted to the Bank under the Loan Documents. In the event of an inconsistency
between this Rider and the Security Agreement, the language of the Security
Agreement shall control. The terms and conditions of the Security Agreement are
hereby incorporated herein by reference.
10. TERMINATION OF AGREEMENT. Upon payment and performance of all
Obligations under the Loan Documents, the Bank shall immediately execute and
deliver to the Grantor all documents, and take any and all actions, necessary to
terminate the Bank's security interest in the Patent Collateral.
11. FEES AND EXPENSES. Any and all reasonable fees, costs and
expenses, of whatever kind or nature, including the reasonable attorneys' fees
and legal expenses incurred by the Bank in connection with the preparation of
this Rider and all other documents relating hereto and the consummation of this
transaction, the filing or recording of any documents (including all taxes in
connection therewith) in public offices, the payment or discharge of any taxes,
reasonable counsel fees, maintenance fees, encumbrances or costs otherwise
incurred in protecting, maintaining, preserving the Patent Collateral, or in
defending or prosecuting any actions or proceedings arising out of or related to
the Patent Collateral, in each case in accordance with the terms of this Rider,
shall be borne and paid by the Grantor on demand by the Bank and until so paid
shall be added to the principal amount of the Obligations to the Bank and shall
bear interest at the contract rate therefor.
12. ADDITIONAL REMEDIES. Upon the occurrence of an Event of Default
under the Loan Documents, the Bank may, without any obligation to do so,
complete any obligation of the Grantor hereunder, in the Grantor's name or in
the Bank's name, but at the Grantor's expense, and the Grantor hereby agrees to
reimburse the Bank in full for all reasonable expenses, including reasonable
attorney's fees, incurred by the Bank in protecting, defending and maintaining
the Patent Collateral.
13. GOVERNING LAW. THIS RIDER WILL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA, EXCLUDING ITS CONFLICT OF LAW RULES, EXCEPT THAT
THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA SHALL GOVERN TO THE EXTENT
APPLICABLE.
-4-
<PAGE> 14
14. COUNTERPARTS. This Rider may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument.
WITNESS the due execution hereof as a document under seal, as of the
date first written above, with the intent to be legally bound hereby.
CAREERBUILDER, INC.
By: /s/ JAMES A. THOLEN (SEAL)
----------------------------------
Print Name: James A. Tholen
--------------------------
Title: CFO
-------------------------------
PNC BANK, N.A., as Bank
By: /s/ KATHARINE KAPPLER (SEAL)
----------------------------------
Print Name: Katharine Kappler
--------------------------
Title: Vice President
-------------------------------
-5-
<PAGE> 15
SCHEDULE A TO RIDER TO SECURITY AGREEMENT - PATENTS
<TABLE>
<S> <C>
PATENT REGISTRATION NO. PATENT
- ----------------------- ------
Computerized Job Search System
Computerized Job Search Network
</TABLE>
<PAGE> 16
PATENT ASSIGNMENT
WHEREAS, CAREERBUILDER, INC. (the "GRANTOR") is the owner of the entire
right, title and interest in and to the United States patents and patent
applications listed on Schedule A attached hereto and made a part hereof (the
"PATENTS"), the inventions described therein and all rights associated
therewith, which are registered in the United States Patent and Trademark Office
or which are the subject of pending applications in the United States Patent and
Trademark Office;
WHEREAS, PNC BANK, N. A., having a place of business at USX Tower, 600
Grant Street, 29th Floor, MS# P6-PUSX-29-4, Pittsburgh, PA, 15219, identified as
the "BANK" under that certain Rider to Security Agreement - Patents (the
"RIDER") of even date herewith (the "GRANTEE") is desirous of acquiring said
Patent Collateral; and
WHEREAS, the Rider provides that this Assignment shall become effective
upon the occurrence of an Event of Default thereunder or under the "LOAN
DOCUMENTS," as defined in the Rider;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound hereby, the Grantor, its
successors and assigns does hereby transfer, assign and set over unto Grantee,
its successors, transferees and assigns, all of its present and future right,
title and interest in and to the Patents and any and all divisionals,
continuations, continuations-in-part and the patents issuing therefrom, and any
and all renewals, reissues, extensions, and reexamination certificates based
thereon (hereafter, together with the Patents, the "PATENT RIGHTS"), including
Assignor's right to sue for and collect damages and other recoveries for past
infringement of any of the Patent Rights, and all proceeds thereof and all
rights and proceeds associated therewith.
IN WITNESS WHEREOF, the undersigned has caused this Patent Assignment to
be executed by its duly authorized officer on this 29 day of December 1998.
ATTEST: CAREERBUILDER, INC.
/s/ RICHARD WATHEN By: /s/ JAMES A. THOLEN
- ----------------------------- ------------------------------------
(SEAL)
Print Name: Richard Wathen Print Name: James A. Tholen
------------------ ----------------------------
Title: CFO
---------------------------------
<PAGE> 17
SCHEDULE A TO PATENT ASSIGNMENT
<TABLE>
<S> <C>
PATENT REGISTRATION NO. PATENT
- ----------------------- ------
Computerized Job Search System
Computerized Job Search Network
</TABLE>
<PAGE> 18
RIDER TO SECURITY AGREEMENT -
TRADEMARKS
THIS RIDER TO SECURITY AGREEMENT ("RIDER") is executed as of
December 29, 1998 by and between CAREERBUILDER, INC., a Delaware corporation
originally incorporated in Delaware as Netstart, Inc. (the "GRANTOR"), and PNC
BANK, N.A. (the "BANK"). This Rider is incorporated into and made part of that
certain Security Agreement ("SECURITY AGREEMENT") between the Grantor and the
Bank of even date herewith, and also into certain other related financing
documents and security agreements executed by and between the Grantor and the
Bank or by and between the Borrower (as defined in the Security Agreement) and
the Bank (all such documents including this Rider being collectively referred to
as "LOAN DOCUMENTS"). All capitalized terms not otherwise defined in this Rider
shall have the same meanings ascribed to such terms in the other Loan Documents.
The Grantor has adopted, used and is using (or has filed
applications for the registration of) the trademarks, servicemarks and
tradenames listed on Schedule "A" attached hereto and made part hereof (all such
marks or names hereinafter referred to as the "TRADEMARKS")
The Bank desires to acquire a lien and security interest on the
Trademarks and the registration thereof, together with all the goodwill of the
Grantor associated therewith and represented thereby, as security for all of the
Obligations (as defined in the Security Agreement) to the Bank, and the Bank
desires to have its security interest in such Trademarks confirmed by a document
identifying same and in such form that it may be recorded in the United States
Patent and Trademark Office.
NOW, THEREFORE, with the foregoing background deemed incorporated
by reference and made part hereof, the parties hereto, intending to be legally
bound hereby, covenant and agree as follows:
1. GRANT OF SECURITY INTEREST. In consideration of and pursuant
to the terms of the Loan Documents, and for other good, valuable and sufficient
consideration, the receipt of which is hereby acknowledged, and to secure the
Obligations, the Grantor grants a lien and security interest to the Bank in all
its present and future right, title and interest in and to the Trademarks,
together with all the goodwill of the Grantor associated with and represented by
the Trademarks and the registration thereof, and the right (but not the
obligation) to sue for past, present and future infringements, and the proceeds
thereof, including, without limitation, license royalties and proceeds of
infringement suits.
2. REPRESENTATIONS AND WARRANTIES. Subject to the disclosures set
forth pursuant to the Loan Agreement of even date by and between the Grantor and
the Bank, the Grantor represents, warrants and covenants that: (a) it has the
right to use the Trademarks; (b) the
<PAGE> 19
Grantor is the sole and exclusive owner of the entire and unencumbered (except
for encumbrances created pursuant to the Loan Documents and this Rider) right,
title and interest in and to each of the Trademarks, and each of the Trademarks
is free and clear of any liens, charges, and encumbrances, including, without
limitation, pledges, assignments, licenses and covenants by the Grantor not to
sue third persons; (c) the Grantor has the unqualified right to enter into this
Rider and perform its terms; (d) the Grantor has used, and will continue to use
for the duration of this Rider, proper notice, as required by 15 U.S.C. Sections
1051-1127 in connection with its use of the Trademarks; and (e) the Grantor has
used, and will continue to use for the duration of this Rider, consistent
standards of quality in products leased or sold under the Trademarks and hereby
grants to the Bank and its employees and agents the right to visit the Grantor's
locations which lease, sell, or store products under any of the Trademarks and
to inspect the products and quality control records relating thereto at
reasonable times and upon reasonable notice during regular business hours to
ensure the Grantor's compliance with this paragraph 2.
3. COVENANTS. The Grantor further covenants that: (a) Until all
of the Obligations have been satisfied in full, the Grantor will not enter into
any agreement, including without limitation, any license agreement, which is
inconsistent with the Grantor's obligations under this Rider; and (b) If the
Grantor acquires rights to any new Trademarks, the provisions of this Rider
shall automatically apply thereto and the Grantor shall give the Bank prompt
written notice thereof along with an amended Schedule "A"; provided, however,
that notwithstanding anything to the contrary contained in this Agreement, the
Grantor shall have the right to enter into agreements in the ordinary course of
business with respect to the Trademarks.
4. EXCLUSIVE USE OF TRADEMARKS. So long as this Rider is in
effect and so long as the Grantor has not received notice from the Bank that an
Event of Default has occurred under the Loan Documents and that the Bank has
elected to exercise its rights hereunder, the Grantor shall continue to have the
exclusive right to use the Trademarks and the Bank shall have no right to use
the Trademarks or issue any exclusive or non-exclusive license with respect
thereto, or assign, pledge or otherwise transfer title in the Trademarks to
anyone else. In addition, as long as this Rider is in effect, Bank agrees that
it shall not assign or otherwise transfer the Trademarks in a manner that causes
abandonment of the Trademarks.
5. NEGATIVE PLEDGE. The Grantor agrees not to sell, assign or
further encumber its rights and interest in the Trademarks without prior written
consent of the Bank.
6. REMEDIES UPON DEFAULT. (a) If and while the Grantor shall be
in default hereunder or an Event of Default exists under the Loan Documents, the
Grantor hereby covenants and agrees that the Bank, as the holder of a security
interest under the Uniform Commercial Code, as now or hereafter in effect in
Pennsylvania, may take such action permitted under the Loan Documents or
permitted by law, in its exclusive discretion, to foreclose upon the Trademarks
covered hereby.
- 2 -
<PAGE> 20
(b) For such purposes, and in the event of the Grantor's default
hereunder or an Event of Default under the Loan Documents and while such default
or Event of Default exists, the Grantor hereby authorizes and empowers the Bank
to make, constitute and appoint any officer or agent of the Bank as the Bank may
select, in its exclusive discretion, as the Grantor's true and lawful
attorney-in-fact, with the power to endorse the Grantor's name on all
applications, documents, papers and instruments necessary for the Bank to use
the Trademarks or to grant or issue any exclusive or non-exclusive license under
the Trademarks to anyone else, or necessary for the Bank to assign, pledge,
convey or otherwise transfer title in or dispose of the Trademarks to anyone
else. The Grantor hereby ratifies all that such attorney shall lawfully do or
cause to be done by virtue hereof, except for the gross negligence or willful
misconduct of such attorney. This power of attorney shall be irrevocable for the
life of this Rider and the Loan Documents, and until all the Obligations are
satisfied in full.
(c) The Grantor expressly acknowledges that this Rider shall be
recorded with the Patent and Trademark Office. Contemporaneously herewith, the
Grantor shall also execute and deliver to the Bank such documents as the Bank
shall reasonably request to permanently assign all rights in the Trademarks to
the Bank, which documents shall be held by the Bank until the occurrence of an
Event of Default hereunder or under the Loan Documents, subject to applicable
law. After such occurrence, the Bank may, at its sole option, record such
escrowed documents with the Patent and Trademark Office and exercise all other
remedies available to a secured creditor with respect to the Trademarks.
8. SUBJECT TO SECURITY AGREEMENT. This Rider shall be subject to
the terms, provisions, and conditions set forth in the Security Agreement and
may not be modified without the written consent of the party against whom
enforcement is being sought.
9. INCONSISTENT WITH SECURITY AGREEMENT. All rights and remedies
herein granted to the Bank shall be in addition to any rights and remedies
granted to the Bank under the Loan Documents. In the event of an inconsistency
between this Rider and the Security Agreement, the language of the Security
Agreement shall control. The terms and conditions of the Security Agreement are
hereby incorporated herein by reference.
10. TERMINATION OF AGREEMENT. Upon payment and performance of all
Obligations under the Loan Documents, the Bank shall immediately execute and
deliver to the Grantor all documents and take any and all actions necessary to
terminate the Bank's security interest in the Trademarks.
11. FEES AND EXPENSES. Any and all reasonable fees, costs and
expenses, of whatever kind or nature, including the reasonable attorneys' fees
and legal expenses incurred by the Bank in connection with the preparation of
this Rider and all other documents relating hereto and the consummation of this
transaction, the filing or recording of any documents (including all taxes in
connection therewith) in public offices, the payment or discharge of any taxes,
reasonable counsel fees, maintenance fees, encumbrances or costs otherwise
incurred in protecting,
- 3 -
<PAGE> 21
maintaining, preserving the Trademarks, or in defending or prosecuting any
actions or proceedings arising out of or related to the Trademarks, in each case
in accordance with the terms of this Rider, shall be borne and paid by the
Grantor on demand by the Bank and until so paid shall be added to the principal
amount of the Obligations to the Bank and shall bear interest at the contract
rate therefor.
12. PROSECUTION OF TRADEMARK APPLICATIONS. (a) Subject to the
terms of the Security Agreement, the Grantor shall have the duty to prosecute
diligently any trademark application with respect to the Trademarks pending as
of the date of this Rider or thereafter, until the Obligations shall have been
satisfied in full, to preserve and maintain all rights in the Trademarks, and
upon reasonable request of the Bank, the Grantor shall make federal application
on registrable but unregistered trademarks belonging to the Grantor. Any
reasonable expenses incurred in connection with such applications shall be borne
by the Grantor. Unless the Grantor discontinues the sale of the goods offered in
connection with a Trademark, the Grantor shall not abandon any Trademark without
the written consent of the Bank. Notwithstanding the foregoing, the Grantor
shall not be required to take any action with respect to any Trademark that the
Grantor, in its reasonable judgment determines is not in the best interest of
Grantor. Grantor shall notify the Bank of any decision that will result in
abandonment of a Trademark, or a registration of a Trademark or an application
to register a trademark prior to such abandonment.
(b) The Grantor shall have the right to bring suit in its own
name to enforce the Trademarks, in which event the Bank may, if the Grantor
deems it necessary or after an Event of Default under the Loan Documents, be
joined as a nominal party to such suit if the Bank shall have been satisfied
that it is not thereby incurring any risk of liability because of such joinder.
The Grantor shall promptly, upon demand, reimburse and indemnify the Bank for
all damages, reasonable costs and reasonable expenses, including attorneys'
fees, incurred by the Bank in the fulfillment of the provisions of this
paragraph.
13. ADDITIONAL REMEDIES. Upon the occurrence of an Event of
Default under the Loan Documents, the Bank may, without any obligation to do so,
complete any obligation of the Grantor hereunder, in the Grantor's name or in
the Bank's name, but at the Grantor's expense, and the Grantor hereby agrees to
reimburse the Bank in full for all reasonable expenses, including reasonable
attorney's fees, incurred by the Bank in protecting, defending and maintaining
the Trademarks.
14. GOVERNING LAW. THIS RIDER WILL BE INTERPRETED AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF
THE COMMONWEALTH OF PENNSYLVANIA, EXCLUDING ITS CONFLICT OF LAW RULES, EXCEPT
THAT THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA SHALL GOVERN TO THE EXTENT
APPLICABLE.
- 4 -
<PAGE> 22
15. COUNTERPARTS. This Rider may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument.
- 5 -
<PAGE> 23
WITNESS the due execution hereof as a document under seal, as of
the date first written above, with the intent to be legally bound hereby.
CAREERBUILDER, INC.
By: /s/ JAMES A. THOLEN (SEAL)
-----------------------------------------
Print Name: James A. Tholen
---------------------------------
Title: CFO
--------------------------------------
PNC BANK, N.A.
By: /s/ KATHARINE KAPPLER (SEAL)
-----------------------------------------
Print Name: Katharine Kappler
---------------------------------
Title: Vice President
--------------------------------------
- 6 -
<PAGE> 24
SCHEDULE A TO RIDER TO SECURITY AGREEMENT - TRADEMARKS
<TABLE>
<CAPTION>
APPLICATION OR REGISTRATION
TRADEMARK REGISTRATION NO. COUNTRY OR FILING DATE
--------- ---------------- ------- --------------
<S> <C> <C> <C>
NetStart
NetStart and Design
N and Design
TeamBuilder Online
CareerBuilder
TeamBuilder
</TABLE>
<PAGE> 25
TRADEMARK ASSIGNMENT
WHEREAS, CAREERBUILDER, INC. (the "GRANTOR") is the owner of the entire
right, title and interest in and to the United States trademarks, tradenames and
registrations listed on Schedule A attached hereto and made a part hereof, and
all rights associated therewith (collectively, the "TRADEMARKS"), which are
registered in the United States Patent and Trademark Office or which are the
subject of pending applications in the United States Patent and Trademark
Office;
WHEREAS, PNC BANK, NATIONAL ASSOCIATION, having a place of business at
USX Tower, 600 Grant Street, 29th Floor, MS# P6-PUSX-29-4, Pittsburgh, PA,
15219, identified as the "BANK" under that certain Rider to Security Agreement -
Trademarks (the "RIDER") of even date herewith (the "GRANTEE") is desirous of
acquiring said Trademarks;
WHEREAS, the Grantee has a security interest in the assets of the
Grantor adequate to carry on the business of the Grantor; and
WHEREAS, the Rider provides that this Assignment shall become effective
upon the occurrence of an Event of Default as defined in the Security Agreement
of even date herewith by and between the Grantor and the Grantee.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound hereby, the Grantor, its
successors and assigns does hereby collaterally transfer, assign and set over
unto Grantee, its successors, transferees and assigns, all of its present and
future right, title and interest in and to the Trademarks, the goodwill of the
business associated with such Trademarks and all proceeds thereof and all rights
and proceeds associated therewith.
IN WITNESS WHEREOF, the undersigned has caused this Trademark Assignment
to be executed by its duly authorized officer on this 29 day of December 1998.
ATTEST: CAREERBUILDER, INC.
By: /s/ RICHARD WATHEN By: /s/ JAMES A. THOLEN
-------------------------------- ----------------------------
(SEAL)
Print Name: Richard Wathen Print Name: James A. Tholen
------------------------- --------------------
Title: Controller Title: CFO
------------------------------ -------------------------
<PAGE> 26
SCHEDULE A TO RIDER TO SECURITY AGREEMENT - TRADEMARKS
<TABLE>
<CAPTION>
APPLICATION OR REGISTRATION
TRADEMARK REGISTRATION NO. COUNTRY OR FILING DATE
--------- ---------------- ------- --------------
<S> <C> <C>
NetStart
NetStart and Design
N and Design
TeamBuilder Online
CareerBuilder
TeamBuilder
</TABLE>
<PAGE> 1
EXHIBIT 10.18
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is executed this 29th day of
December 1998 by CAREERBUILDER, INC., a Delaware corporation (the "Company"),
in favor of PNC BANK, N.A. (the "Bank"), pursuant to that certain Loan
Agreement of even date herewith between the Company, and the Bank (the "Loan
Agreement"). In consideration of the extension of credit by the Bank to the
Company under the Loan Agreement, the Company has agreed to issue to the Bank,
warrants (each a "Warrant") to purchase shares of the Common Stock of the
Company, par value $__ per share (the "Common Stock") in an amount equal to the
number of shares of Common Stock for which the aggregate consideration is equal
to five per cent (5%) of the maximum principal amount of the Bridge Loan (as
defined in the Loan Agreement) (the "Exercise Quantity"). The shares
purchasable upon exercise of the Warrant, and the purchase price per share,
each as adjusted from time to time pursuant to the provisions of this
Agreement, are referred to herein as the "Warrant Shares" and the "Purchase
Price" respectively.
Capitalized terms used but not defined herein shall the meanings ascribed
to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, the Company and the Bank agree as follows:
1. Grant of Warrant. The Company hereby grants to the Bank a Warrant to
purchase up to that number of shares which constitute the Exercise Quantity of
the Common Stock on the date of such purchase. The Bank and any subsequent
registered holders of the Warrants have the rights and obligations provided for
in this Agreement and in the form of warrant attached hereto.
2. Warrant Certificate.
(a) Form of Warrant Certificate. The Warrant shall be evidenced by a
certificate ("Warrant Certificate"), which Warrant Certificate (and the form of
election to purchase Common Stock and of assignment to be attached thereto)
shall be substantially the same as Exhibit A thereto and may have such marks of
identification or designations and such legends, summaries, or endorsements
printed thereon as the Company may deem appropriate and which are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrant may from time to time be listed. The Warrant Certificate shall entitle
the holder thereof to purchase such
<PAGE> 2
number of shares of Common Stock as shall be set forth therein at the Purchase
Price at such time or times as the holder may elect in its sole discretion, but
the number of such shares of Common Stock and the Purchase Price shall be
subject to adjustment as provided herein. The Warrant shall also provide for a
net issuance option allowing each holder thereof to surrender such Warrant and
receive in exchange therefor shares of Common Stock having a fair market value
equal to the product of (i) the number of shares of Common Stock into which
such Warrant is then exercisable multiplied by (ii) the difference of (A) fair
market value of each share of Common Stock on the date of surrender less (B)
the per share Purchase Price of such Warrant on the date of surrender.
(b) Countersignature and Registration.
(i) The Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, shall have affixed thereto the
Company's seal or a facsimile thereof, and shall be attested by the
Secretary or Assistant Secretary of the Company, either manually or by
facsimile signature.
(ii) The Company will keep or cause to be kept, at its principal
office, books for the registration and transfer of the Warrant Certificate
issued hereunder.
(c) Transfer, Split-Up Combination and Exchange of Warrant
Certificates. Subject to compliance with all applicable laws and the
provisions of this Agreement, at any time prior to the close of business on the
Final Expiration Date (as defined hereinafter), the Warrant Certificate may be
transferred, split up, combined or exchanged for another Warrant Certificate or
Warrant Certificates, entitling the registered holder to purchase a like number
of shares of Common Stock as the Warrant Certificate or Warrant Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Warrant Certificate or
Warrant Certificates shall make such request in writing delivered to the
Company, and shall surrender the Warrant Certificate or Warrant Certificates to
be transferred, split up, combined or exchanged at the principal office of the
Company. Thereupon the Company shall deliver to the person entitled thereto a
Warrant Certificate or Warrant Certificates, as the case may be, as so
requested.
(d) Subsequent Issue of Warrant Certificates. Subsequent to their
original issuance, no Warrant Certificates shall be issued except (a) Warrant
Certificates issued upon any transfer, combination, split up or exchange of
Warrants pursuant to Section 2(c) hereof, (b) Warrant Certificates issued in
replacement of mutilated, destroyed, lost or stolen Warrant Certificates, and
(c) Warrant Certificates issued pursuant to Section 3(d) hereof upon the
partial exercise of any Warrant Certificate to evidence the unexercised
portion of such Warrant Certificate.
<PAGE> 3
3. Exercise of Warrants; Purchase Price; Expiration Date of Warrants.
(a) The registered holder of any Warrant Certificate may exercise the
Warrants evidenced thereby (except as otherwise provided herein) in whole or in
part upon surrender of the Warrant Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Company at its
principal office, together with payment of the Purchase Price or each share of
Common Stock as to which the Warrants are exercised, at or prior to the close
of business on December __, 2008 (the "Final Expiration Date").
(b) The Purchase Price for each share of Common Stock pursuant to the
exercise of a Warrant shall initially be a price equal to the lesser of (i)
$4.93, or (ii) the price paid per share of Common Stock in the sale of shares
to institutional investors in the round of institutional investing occurring
after the date hereof, provided that such institutional investing round occurs
before an underwritten public offering of the Company's Common Stock (the
"Offering"). If the Offering occurs before such institutional investing round,
the Purchase Price shall be $4.93, subject to adjustment as provided in the
following sentence. The Purchase Price shall be subject to adjustment from time
to time as provided in Section 6 hereof and shall be payable in accordance with
paragraph (c) below.
(c) Upon receipt of a Warrant Certificate representing exercisable
Warrants, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of such
Warrant Certificate in accordance with Section 5(c) hereof in cash, or by
certified check or cashier's check payable to the order of the Company, the
Company shall thereupon promptly (i) requisition from any transfer agent of the
Common Stock, or otherwise obtain, certificates for the number of shares of
Common Stock to be purchased and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests, (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 7 hereof, (iii) after receipt
of such certificates, cause the same to be delivered to or upon the order of
the registered holder of such Warrant Certificate, registered in such name or
names as may be designated by such holder, and (iv) when appropriate, after
receipt, deliver such cash to or upon the order of the registered holder of
such Warrant Certificate.
(d) In case the registered holder of any Warrant Certificate shall
exercise less than all the Warrants evidenced thereby, a new Warrant
Certificate evidencing Warrants equivalent to the Warrants remaining
unexercised shall be issued by the Company to the registered holder of such
Warrant Certificate or to its duly authorized assigns, subject to the
provisions of Section 7 hereof.
4. Cancellation and Destruction of Warrant Certificates. All Warrant
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or
<PAGE> 4
exchange shall when surrendered to the Company be canceled by it, and no
Warrant Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement.
5. Reservation and Availability of Common Stock.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Common Stock or
any shares of Common Stock held in its treasury, that number of shares of
Common Stock that will from time to time be sufficient to permit the exercise
in full of all outstanding Warrants.
(b) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all shares of Common Stock delivered upon
the exercise of Warrants shall, at the time of delivery of the certificates for
such shares of Common Stock (subject to payment of the Purchase Price), be duly
authorized, validly issued, fully paid and nonassessable shares.
(c) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Warrant Certificates
or of any shares of Common Stock upon the exercise of Warrants.
6. Adjustments.
(a) General. The Purchase Price shall be subject to adjustment from
time to time pursuant to the terms of this Section 6.
(b) Diluting Issuances.
(i) Special Definitions. For purposes of this Section 6, the
following definitions shall apply:
(A) "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding options described in clause
(III) of subsection 6(b)(i)(D) below.
(B) "Original Issue Date" shall mean the date on which
this Warrant was first issued.
(C) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean
<PAGE> 5
all shares of Common Stock issued (or, pursuant to subsection
6(b)(iii) below, deemed to be issued) by the Company after the
Original Issue Date, other than shares of Common Stock issued
or issuable:
(I) upon conversion of shares of any preferred stock
outstanding on the Original Issue Date;
(II) by reason of a dividend, stock split, split-up or
other distribution on shares of Common Stock that
are excluded from the definition of Additional
Shares of Common Stock by the foregoing clause
(I) or this clause (II); or
(III) to employees or directors of, or consultants to,
the Company pursuant to a plan adopted by the
Board of Directors of the Company.
(ii) No Adjustment of Purchase Price. No adjustments to the Purchase
Price shall be made unless the consideration per share (determined
pursuant to subsection 6(b)(v) hereof for an Additional Share of
Common Stock issued or deemed to be issued by the Company is less
than the Purchase Price in effect on the date of, and immediately
prior to, the issue of such Additional Shares.
(iii) Issue of Securities Deemed Issue of Additional Shares of Common
Stock. If the Company at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of
shares of Common Stock (as set forth in the instrument relating
thereto without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise
of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue or, in case such a
record date shall have been fixed, as of the close of business on
such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 6(b)(v) hereof) of such
Additional Shares of Common Stock would be less than the Purchase
Price in effect on the date of and immediately prior to such
issue, or such record date, as the case may be, and provided
further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
<PAGE> 6
(A) No further adjustment in the Purchase Price shall be made upon the
subsequent issue of Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) If such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, upon the exercise, conversion
or exchange thereof, the Purchase Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon
any such increase becoming effective, be recomputed to reflect such
increase insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(C) Upon the expiration or termination of any unexercised Option, the
Purchase Price shall not be readjusted, but the Additional Shares of
Common Stock deemed issued as the result of the original issue of
such Option shall not be deemed issued for the purposes of any
subsequent adjustment of the Purchase Price;
(D) In the event of any change in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Purchase
Price then in effect shall forthwith be readjusted to such Purchase
Price as would have been obtained had the adjustment which was made
upon the issuance of such Option or Convertible Security not
exercised or converted prior to such change been made upon the basis
of such change; and
(E) No readjustment pursuant to Clause (B) or (D) above shall have the
effect of increasing the Purchase Price to an amount which exceeds
the lower of (i) the Purchase Price on the original adjustment date,
or (ii) the Purchase Price that would have resulted from any
issuances of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(iv) Adjustment of Purchase Price Upon Issuance of Additional Shares of
Common Stock. In the event the Company shall at any time after the Original
Issue Date issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to subsection 6(b)(iii), but
excluding shares issued as a dividend or distribution or upon a stock split or
combination as provided in subsection 6(c), without consideration or for a
consideration per share less than the Purchase Price in effect on the date of
and immediately prior to such issue, then and in such event, such Purchase
Price shall be reduced, concurrently
<PAGE> 7
with such issue, to a price (calculated to the nearest cent) determined by
multiplying such Purchase Price by a fraction, (A) the numerator of which shall
be (1) the number of shares of Common Stock outstanding immediately prior to
such issue plus, (2) the number of shares of Common Stock which the aggregate
consideration received or to be received by the Company for the total number of
Additional Shares of Common Stock so issued would purchase at such Purchase
Price, and (B) the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided, that, (i) for the
purpose of this subsection 6(b)(iv), all shares of Common Stock issuable upon
exercise or conversion of Options or Convertible Securities outstanding
immediately prior to such issue shall be deemed to be outstanding (other than
shares excluded from the definition of "Additional Shares of Common Stock" by
virtue of Clause (III) of subsection 6(b)(i)(D), and (ii) the number of shares
of Common Stock deemed issuable upon conversion of such outstanding Option and
Convertible Securities shall not give effect to any adjustments to the
conversion price or conversion rate of such Options or Convertible Securities
resulting from the issuance of Additional Shares of Common Stock that is the
subject of this calculation.
Notwithstanding the foregoing, the applicable Purchase Price shall not be
so reduce at such time if the amount of such reduction would be an amount less
than $.05, but any such amount shall be carried forward and reduction with
respect thereto made at the time of and together with any subsequent reduction
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $.05 or more.
(v) Determination of Consideration. For purposes of this subsection 6(b),
the consideration received by the Company for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(I) insofar as it consists of cash, be computed at the
aggregate of cash received by the Company, excluding
amounts paid or payable for accrued interest or
accrued dividends;
(II) insofar as it consists of property other than cash,
be computed at the fair market value thereof at the
time of such issue, as determined in good faith by
the Board of Directors; and
(III) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration
so received, computed as provided in clauses (I) and
(II) above, as
<PAGE> 8
determined in good faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to subsection
6(b)(iii), relating to Options and Convertible Securities,
shall be determined by dividing
(x) the total amount, if any, received or receivable by
the Company as consideration for the issue of such
Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such consideration) payable
to the Company upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange
of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon
the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(vi) Multiple Closing Dates. In the event the Company shall issue on
more than on date Additional Shares of Common Stock which are comprised of
shares of the same series or class of Preferred Stock, and such issuance
dates occur within a period of no more than 120 days, then the Purchase
Price shall be adjusted only once on account of such issuances, with such
adjustment to occur upon the final such issuance and to give effect to all
such issuances as if they occurred on the date of the final such issuance.
(c) Recapitalizations. If outstanding shares of the Company's Common Stock
shall be subdivided into a greater number of shares or a dividend in Common
Stock shall be paid in respect of Common Stock, the Purchase Price in effect
immediately prior to such subdivision or at the record date of such dividend
shall simultaneously with the effectiveness of such subdivision or immediately
after the record date of such dividend be proportionately reduced. If
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased.
<PAGE> 9
(d) Mergers, etc. If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in par
value or a subdivision or combination as provided for in subsection 6(c)
above), or any consolidation or merger of the Company with or into another
corporation, or a transfer of all or substantially all of the assets of the
Company, then, as part of any such reorganization, reclassification,
consolidation, merger or sale, as the case may be, lawful provision shall be
made so that the Registered Holder of this Warrant shall have the right
thereafter to receive upon the exercise hereof the kind and amount of shares of
stock or other securities or property which such Registered Holder would have
been entitled to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger or sale, as the case may be, such
Registered Holder had held the number of shares of Common Stock which were then
purchasable upon the exercise of this Warrant. In any such case, appropriate
adjustment (as reasonably determined in good faith by the Board of Directors of
the Company) shall be made in the application of the provisions set forth herein
with respect to the rights and interests thereafter of the Registered Holder of
this Warrant, such that the provisions set forth in this Section 6 (including
provisions with respect to adjustment of the Purchase Price) shall thereafter
be applicable, as nearly as is reasonably practicable, in relation to any
shares of stock or other securities or property thereafter deliverable upon
the exercise of this Warrant.
(e) Adjustment in Number of Warrant Shares. When any adjustment is required
to be made in the Purchase Price, the number of Warrant Shares purchasable upon
the exercise of the Warrant shall be changed to the number determined by
dividing (i) an amount equal to the number of shares issuable upon the exercise
of this Warrant immediately prior to such adjustment, multiplied by the
Purchase Price in effect immediately prior to such adjustment, by (ii) the
Purchase Price in effect immediately after such adjustment.
(f) Certificate of Adjustment. When any adjustment is required to be
made pursuant to this Section 6, the Company shall promptly mail to the
Registered Holder a certificate setting forth the Purchase Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Such certificate shall also set forth the kind and amount of stock
or other securities or property into which this Warrant shall be exercisable
following such adjustment.
7. Fractional Shares.
(a) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Warrants or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company shall pay to the registered holders of Warrant
Certificates at the time such Warrants are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
share of Common Stock.
<PAGE> 10
(b) For purposes of this Section 7, the current market value of a share
of Common Stock shall be the closing price per share of Common Stock on the
date of determination. The closing price for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ") or such other system then in use, or, if on any such date the
Common Stock is not quoted by any such organization, the average of the closing
bid and asked price as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors. If the Common Stock is
not publicly held or so listed or traded, the current market value shall mean
the fair value per share as determined in good faith by the Board of Directors
of the Company, whose determination shall be conclusive.
8. "Piggyback" Registration. If at any time the Company determines to
register under the Securities Act of 1933, as amended (including pursuant to a
demand of any security holder of the Company exercising registration rights),
any of its Common Stock (except securities to be issued solely in connection
with any acquisition of any entity or business, shares issuable solely upon
exercise of stock options, shares issuable solely pursuant to employee benefit
plans or shares to be registered on any registration form that does not permit
secondary sales), it must give to the Bank, written notice of such
determination at least thirty (30) days prior to each such filing. If, within
fifteen (15) days after receipt of such notice, the Bank so requests in writing,
the Company must include in such registration statement (to the extent
permitted by applicable regulation) all or any part of the Bank's shares of
Common Stock (or other securities representing Common Stock purchasable or
purchased from time to time under such the Bank's warrants (together with any
shares of preferred stock containing registration rights "Registrable
Securities") the Bank requests to be registered. Any Registrable Securities
which are included in any underwritten public offering under this Section 8
will be sold upon such terms as the managing underwriters reasonably request.
In the event that any registration pursuant to this Section 8 shall be, in
whole or in part, an underwritten public offering of Common Stock , the number
of shares of Registrable Securities to be included in such an underwriting may
be reduced (pro rata among the requesting holders based upon the number of
shares of Registrable Securities owned by such holders; provided, however, that
such reduction shall be effected in such a way that holders of shares of any
preferred stock of the Company outstanding on the date of this Agreement shall
be permitted to include their shares before the Bank) if and to
<PAGE> 11
the extent that the managing underwriter is of the opinion that such inclusion
would materially and adversely affect the marketing of the securities to be
sold by the Company therein, provided, however, that such number of shares of
Registrable Securities shall not be reduced below one-third of the total number
of shares of Common Stock to be included in such underwriting if any shares are
to be included in such an underwriting for the account of any person other than
the Company or requesting holders of Registrable Securities. If the Bank
disapproves of the terms of such underwriting, the Bank may elect to withdraw
therefrom by written notice to the Company and the underwriter.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration Statement referred to in this Section 8 without thereby incurring
any liability to the holders of Registrable Securities.
9. Agreement of Warrant Holders. Every holder of a Warrant, by
accepting the same, consents and agrees with the Company and with every other
holder of a Warrant that:
(a) the Warrant Certificates are transferable only on the registry
books of the Company if surrendered at its principal offices, duly endorsed
or accompanied by a proper instrument of transfer; and
(b) the Company may deem and treat the person in whose name the
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced thereby (notwithstanding any notations of ownership or
writing on the Warrant Certificates made by anyone other than the Company)
for all purposes whatsoever, and the Company shall not be affected by any
notice to the contrary.
10. Warrant Certificate Holder Not Deemed a Shareholder. No holder, as
such, of any Warrant Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the shares of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Warrants represented thereby, nor shall anything contained
herein or in any Warrant Certificate be construed to confer upon the holder of
any Warrant Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders, or to receive dividends or subscription rights,
or otherwise, until the Warrant or Warrants evidenced by such Warrant
Certificate shall have been exercised in accordance with the provisions hereof.
11. Issuance of New Warrant Certificate. Notwithstanding any of the
provision of this Agreement or of the Warrants to the contrary, the Company
may, at its option, issue new Warrant Certificates evidencing Warrants in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Warrant.
<PAGE> 12
12. Successors and Assigns. The terms of this Agreement shall be binding
upon the Company and the Bank and their respective successors and assigns.
13. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. THIS
AGREEMENT AND ALL RELATED INSTRUMENTS AND AGREEMENTS SHALL BE DEEMED TO BE
CONTRACTS MADE IN THE COMMONWEALTH OF PENNSYLVANIA, AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
(WITHOUT GIVING EFFECT TO CONFLICT OF LAWS) AND THE UNITED STATES OF AMERICA.
WITHOUT EXCLUDING ANY OTHER JURISDICTION, THE BANK AND THE COMPANY AGREE THAT
THE STATE AND FEDERAL COURTS OF PENNSYLVANIA LOCATED IN ALLEGHENY COUNTY,
PENNSYLVANIA SHALL HAVE NON-EXCLUSIVE JURISDICTION OVER PROCEEDINGS IN
CONNECTION HEREWITH. THE COMPANY HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY, OR
OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY RELATED MATTERS,
AND AGREE THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY.
<PAGE> 13
WITNESS the due execution of this Warrant Agreement as of the date first
above written.
ATTEST: CAREERBUILDER, INC.
By: /s/ Richard Wathen By: /s/ James A. Tholen (SEAL)
-------------------------- --------------------------------
Print Name: Richard Wathen Print Name: James A. Tholen
Title: Controller/Treasurer Title: CFO
PNC BANK,
NATIONAL ASSOCIATION
By: /s/ Katharine Kappler (SEAL)
--------------------------------
Print Name: Katharine Kappler
Title: Vice President
<PAGE> 14
Exhibit A
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS. THIS WARRANT AND SUCH SHARES MAY BE OFFERED, SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.
------------------------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF ARE SUBJECT
TO THE TERMS AND PROVISIONS OF THAT WARRANT AGREEMENT DATED AS OF DECEMBER __,
1998 BETWEEN CAREERBUILDER, INC. (THE "COMPANY") AND PNC BANK, NATIONAL
ASSOCIATION (THE "BANK") (AS THE SAME MAY BE SUPPLEMENTED, MODIFIED, AMENDED,
EXTENDED OR RESTATED FROM TIME TO TIME, THE "WARRANT AGREEMENT"). AMONG OTHER
THINGS, THE WARRANT AGREEMENT CONTAINS PROVISIONS FOR PUTS, RESTRICTIONS ON
TRANSFER AND REGISTRATION RIGHTS. A COPY OF THE WARRANT AGREEMENT IS AVAILABLE
AT THE EXECUTIVE OFFICES OF THE COMPANY.
COMMON STOCK PURCHASE AGREEMENT
DECEMBER __, 1998
Capitalized terms used and not otherwise defined in this Warrant shall have the
meanings respectively assigned to them in the Warrant Agreement referred to in
the legend above and in that certain Loan Agreement dated as of December __,
1998 between the Company and the Bank, as the same has been or may be
supplemented, modified, amended, renewed or restated from time to time (the
"LOAN AGREEMENT"). The Company certifies and agrees that the Bank and its
successors and assigns are entitled to purchase from the Company the Exercise
Quantity (as defined in the Warrant Agreement) of the Company's Common Stock
(the "COMMON STOCK"), all upon the terms and provisions and subject to
adjustment as provided in the Warrant Agreement and this Common Stock Purchase
Warrant (the "WARRANT"). The Purchase Price per share of the Common Stock will
be as provided in the Warrant Agreement.
1. Exercise of Warrant.
1.1 This Warrant may be exercised by the Holder of this Warrant at any
time during the term hereof in whole, or in part from time to time
(but not for fractional shares), by presentation and surrender of
this Warrant to the Company, together with the Exercise Form, in the
form attached
<PAGE> 15
hereto as Exhibit A-1 (the "EXERCISE FORM"), duly completed and
executed and payment in the aggregate amount equal to the Purchase
Price multiplied by the number of shares of Common Stock being
purchased. At the option of Holder, payment of the Purchase Price
may be made either by (i) check payable to the order of the Company,
(ii) surrender of certificates then held representing, or deduction
from the number of shares issuable upon exercise of this Warrant,
that number of shares which has an aggregate fair market value on the
date of exercise equal to the aggregate Purchase Price for all shares
to be purchased pursuant to this Warrant or (iii) by any combination
of the foregoing methods. Upon the Company's receipt of this
Warrant, the completed and signed Exercise Form and the requisite
payment, the Company shall issue and deliver (or cause to be
delivered) to the exercising Holder stock certificates aggregating
the number of shares of Common Stock purchased. In the event of a
partial exercise of this Warrant, the Company shall issue and deliver
to the Holder a new Warrant at the same time such stock certificates
are delivered, which new Warrant shall entitle the Holder to purchase
the balance of the Exercise Quantity not purchased in that partial
exercise and shall otherwise be upon the same terms and provisions at
this Warrant.
1.2 In the event the Holder of this Warrant desires that any or all of
the stock certificates to be issued upon the exercise hereof be
registered in a name or names other than that of the Holder of this
Warrant, the Holder must so request in writing at the time of
exercise, and pay to the Company funds sufficient to pay all stock
transfer taxes (if any) payable in connection with the transfer and
delivery of such stock certificates.
1.3 Upon the due exercise by the Holder of this Warrant, whether in whole
or in part, that Holder (or any other person to whom a stock
certificate is to be so issued) shall be deemed for all purposes to
have become the Holder of record of the shares of Common Stock for
which this Warrant has been so exercised, effective immediately prior
to the close of business on the date this Warrant, the completed and
signed Exercise Form and the requisite payment are duly delivered to
the Company, irrespective of the date of actual delivery of
certificates representing such shares of Common Stock so issued.
2. Surrender of Warrant; Expenses.
2.1 Whether in connection with the exercise, exchange, registration of
transfer, replacement or put of this Warrant, surrender of this
Warrant shall be made to the Company during normal business hours on
a Business Day (unless the Company otherwise permits) at the
executive offices of the Company located at 11495 Sunset Hills Road,
Reston, VA 20190, or to such other office or duly authorized
representative of the
<PAGE> 16
Company as from time to time may be designated by the Company by
written notice given to the Holder of this Warrant.
2.2 The Company shall pay all costs and expenses incurred in connection
with the exercise, registering, exchange, transfer, replacement or
put of this Warrant, including the costs of preparation, execution
and delivery of warrants and stock certificates, and shall pay all
taxes (other than any taxes measured by the income of any Person
other than the Company) and other charges imposed by law payable in
connection with the transfer or replacement of this Warrant.
3. Warrant Register, Exchange, Transfer, Loss.
3.1 The Company at all times shall maintain at its chief executive
offices an open register for the Warrant, in which the Company shall
record the name and address of each Holder to whom a Warrant has been
issued or transferred, the number of shares of Common Stock or other
securities purchasable thereunder and the corresponding purchase
prices.
3.2 Subject to all applicable laws and the provisions of this Warrant,
this Warrant may be exchanged for two or more warrants entitling the
Holder hereof to purchase the same aggregate Exercise Quantity at the
same Purchase Price per share and otherwise having the same terms and
provisions as this Warrant. The Holder may request such an exchange
by surrender of this Warrant to the Company, together with a written
exchange request specifying the desired number of warrants and
allocation of the Exercise Quantity purchasable under the existing
Warrant.
3.3 Subject to the provisions of Section 9 of the Warrant Agreement, this
Warrant may be transferred, in whole or in part, by the Holder or any
duly authorized representative of such Holder. A transfer may be
registered with the Company by submission to it of this Warrant,
together with an Assignment Form, in the form of Exhibit A-2 (the
"ASSIGNMENT FORM"), duly completed and executed. Within five (5)
business days after the Company's receipt of this Warrant and the
Assignment Form so completed and executed, the Company will issue and
deliver to the transferee a new Warrant representing the portion of
the Exercise Quantity transferred at the same Purchase Price per
share and otherwise having the same terms and provisions as this
Warrant, which the Company will register in the new Holder's name.
3.4 In the event of the loss, theft or destruction of this Warrant, the
Company shall execute and deliver an identical new Warrant to the
Holder in substitution therefor upon the Company's receipt of (i)
<PAGE> 17
evidence reasonably satisfactory to the Company of such event (with
the affidavit of an institutional Holder being sufficient evidence),
and (ii) if requested by the Company, an indemnity agreement from any
institutional Holder or an indemnity bond from anyone else reasonably
satisfactory in form and amount to the Company.
4. Rights and Obligations of the Company and the Warrant Holder. The Company
and the Holders of this Warrant are entitled to the rights and bound by the
obligations set forth in the Warrant Agreement, all of which rights and
obligations are hereby incorporated by reference herein. This Warrant
shall not entitle its Holder to any rights of a stockholder in the Company
(other than as provided in Section 1.3 of this Warrant).
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized representative and its corporate seal, if any, to be
impressed hereupon and attested to by its Secretary or Assistant Secretary.
CAREERBUILDER, INC.
By: /s/ James A. Tholen
-----------------------------
Its: CFO
Attest:
/s/ Richard Wathen
- ---------------------
Treasurer
<PAGE> 18
Exhibit A-1
COMMON STOCK WARRANT
EXERCISE FORM
- ------------------------
- ------------------------
- ------------------------
Attention: President
The undersigned Holder of the attached Warrant hereby irrevocably elects to
exercise the within Warrant to the extent of ___ shares of Common Stock, $.___
par value per share, of the Company, and
[ ] encloses a check (payable to the order of the Company) in the amount
of $___________ in payment of the purchase price thereof; and/or
[ ] hereby authorizes the deduction of ________ shares in payment of the
Purchase Price.
Instructions For Registering The Securities
On The Stock Transfer Books Of The Company
Name of Transferee:
----------------------------------------
State of Organization (if applicable):
---------------------
Federal Tax Identification or
Social Security Number:
----------------------------------
Address:
---------------------------------------------------
If this exercise of the Warrant is not an exercise in full, then the
undersigned Holder hereby requests that a new Warrant of like tenor
(exercisable for the balance of the shares of Common Stock underlying this
Warrant) be issued and delivered to the undersigned Holder at the address on
the warrant register of the Company.
Dated:
--------- ---------------------------------------------
(Name of Registered Holder - Please Print)
By:
----------------------------------------
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title:
-------------------------------------
<PAGE> 19
Exhibit A-2
COMMON STOCK WARRANT
ASSIGNMENT FORM
For Value Received, the undersigned Holder of the attached Warrant hereby
sells, assigns and transfers to the transferee whose name and address are set
forth below all of the rights of the undersigned under the within Warrant (to
the extent of the portion of the within Warrant being transferred hereby, which
portion is ___________________).
Name of Transferee:
---------------------------------------
State of Organization (if applicable):
--------------------
Federal Tax Identification or
Social Security Number:
---------------------------------
Address:
--------------------------------------------------
If this transfer is not a transfer of the Warrant in full, then the
undersigned hereby requests that, as provided in the within Warrant, a new
warrant of like tenor respecting the balance of the Exercise Quantity not being
transferred pursuant hereto be issued in the name of and delivered to, the
undersigned. The undersigned does hereby irrevocably constitute and appoint
_________________________ attorney to register the foregoing transfer on the
books of the Company maintained for that purpose, with full power of
substitution in the premises.
Dated:
--------- ------------------------------------------
(Name of Registered Holder - Please Print)
By:
--------------------------------------
(Signature of Registered Holder or
of Duly Authorized Signatory)
Title:
-----------------------------------
<PAGE> 1
EXHIBIT 10.7
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is dated this 11th day of September,
1996, by and between SPECTRA-4, L.L.P, a Virginia limited liability partnership
(hereinafter referred to as "Landlord"), and NETSTART, INC., a Delaware
corporation qualified in Virginia (hereinafter referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Landlord has entered into a certain Deed of Lease for the
property known as 11495 Sunset Hills Road, Reston, Virginia; and
WHEREAS, the Tenant desires to sublease the Premises (as defined in
Article II herein) from the Landlord and the Landlord is willing to rent said
space to the Tenant, upon the terms, conditions, covenants and agreements set
forth herein;
The parties hereto, intending to be legally bound, hereinafter covenant
and agree as set forth below:
ARTICLE I
DEFINITIONS
1.1 The terms defined herein shall have the following respective meanings
for all purposes of this Lease:
(a) The "Annual Base Rent" shall mean One Hundred Fourteen Thousand
Two Hundred and Twelve and 50/100 Dollars ($114,212.50), which amount is subject
to adjustment pursuant to Section 4.2 below.
(b) The "Building" shall mean that building, containing the Premises,
located at 11495 Sunset Hills Road, Reston, Virginia 22090, located in Fairfax
County, Virginia and the land owned or leased by the Landlord upon which the
building is located.
(c) The "Expected Occupancy Date" shall be September 15, 1996.
(d) The "Lease Commencement Date" shall mean the later of (i) the
date of this Lease or (ii) the date of tender of possession to Tenant.
(e) The "Period" shall mean a period of sixty (60) consecutive
calendar months.
(f) The "Premises" shall mean that premises known as Suite 210,
located in the second (2nd) floor of the Building, containing approximately Nine
Thousand One Hundred (9,100) rentable square feet.
(g) The "Security Deposit" shall mean Nine Thousand Five Hundred and
Seventeen and 78/100 Dollars ($9,517.78).
(h) The "Tenant Address for Notices" shall mean 516 Herndon Parkway,
Herndon, Virginia, prior to the Lease Commencement Date and 11495 Sunset Hills
Road, Suite 210, Reston, Virginia 22090 after the Lease Commencement Date.
(i) "Permitted Use" shall mean general office use only.
(j) "Proportionate Share" shall mean 22.2% (being 9,100 square feet
divided by 41,000 square feet).
<PAGE> 2
ARTICLE II
PREMISES
2.1 Landlord hereby leases to Tenant and Tenant hereby rents from
Landlord, for the term and upon the terms and conditions, covenants and
agreements herein provided, the Premises (as defined in Section 1.1(f)).
2.2 The lease of the Premises includes the right, together with other
tenants of the Building (as defined in Section 1.1(b)) and members of the public
and subject to the rules and regulations promulgated by Landlord hereunder, to
use the common and public areas of the Building and the non-exclusive right to
use the surface parking spaces appurtenant to the Building, but includes no
other rights not specifically set forth herein. The lease of the Premises does
not include the right to use the roof of the Building. Landlord may, in its sole
discretion, assign specific parking spaces. Tenant's employees shall not use any
of the parking spaces designated for use by visitors only. Tenant is entitled to
twenty-two (22) non-exclusive, unreserved parking spaces after the Lease
Commencement Date and ten (10) exclusive reserved parking spaces, three (3) of
which are located in the front parking lot and are currently designated "GTI"),
and seven (7) of which are located in the rear parking lot.
2.3 Landlord shall have the right, in its sole discretion, at all times,
and from time to time throughout the Term, without incurring any liability to
Tenant and without it constituting an eviction, to:
a. CHANGE OF SIZE OR LAYOUT. Change the area, appearance, size, level,
location, and/or arrangement of the Building or any part thereof, with the
exception of the Premises (including, without limitation, common areas and the
entrances to and exits from the common areas);
b. BUILD NEW BUILDINGS AND STRUCTURES. Construct other structures, or
improvements in the common areas and elsewhere in the Building, and make
alterations and additions thereto, or rearrangements thereof, demolish parts
thereof, build additional stories (and for such purposes to construct and erect
columns and support facilities in any building), and construct additional
buildings or facilities adjoining or proximate to the Building, provided that
such changes shall not have a material adverse impact upon access to, or
tenantability of, the Premises;
c. EXPAND OR ALTER PARKING AREA. Expand, reduce, or alter the parking
areas in any manner whatsoever including, without limitation, the construction
of parking facilities;
d. RELOCATE EXISTING BUILDINGS. Relocate or rearrange the various
structures, parking areas, and other parts of the Building;
e. ADD PIPES AND COLUMNS. Make changes and additions to the pipes,
conduits, and ducts or other structural and nonstructural installations in the
Premises where desirable to serve the common areas and other premises in the
Building or to facilitate the expansion or alteration of the Building
(including, without limitation, the construction and erection of columns and
support facilities);
f. ADD ADDITIONAL LAND. Add additional real property to the Building;
and
g. TEMPORARILY BLOCK COMMON AREAS. Temporarily obstruct or close off the
common areas or any parts thereof for the purpose of maintenance.
Changes pursuant to this Section 2.3 will not increase or decrease the
Proportionate Share. Further, Tenant shall not be responsible for any additional
Basic Operating Charges resulting
2
<PAGE> 3
from the new Building, additions to the Land, or additional floors in the
Building.
ARTICLE III
TERM
3.1 The term of this Lease (hereinafter referred to as the "Lease Term")
shall commence on the Lease Commencement Date, as determined pursuant to Section
3.2 hereof, and shall continue thereafter for the Period (as defined in Section
1.1(e)), unless the Lease Term is renewed or terminated earlier in accordance
with the provisions of this Lease.
3.2 The Lease Commencement Date shall be the earlier of (i) the Lease
Commencement Date, set forth in Section 1.1(d) hereof, or (ii) the date on which
Tenant commences beneficial use of the Premises, whichever event occurs first.
Tenant shall be deemed to have commenced beneficial use of the Premises when
Tenant begins to move furniture, furnishings, inventory, equipment or trade
fixtures into the Premises.
3.3 If the Lease Commencement Date is other than the date set forth in
Section 1.1(d) hereof, promptly after the Lease Commencement Date is
ascertained, Landlord and Tenant shall execute a certificate, which certificate
shall set forth the Lease Commencement Date and the date upon which the initial
term of this Lease will expire.
3.4 If Landlord does not deliver possession of the Premises by the
Expected Occupancy Date, Landlord shall not have any liability whatsoever to
Tenant on account of such failure to deliver possession of the Premises to
Tenant and this Lease shall not be rendered void or voidable as a result of such
delay.
3.5 For purposes of this Lease, the term "Lease Year" shall mean a period
of twelve (12) consecutive months, commencing on the Lease Commencement Date,
and each successive twelve (12) month period thereafter, except that if the
Lease Commencement Date is a day other than the first day of a month, then the
first Lease Year shall commence on the Lease Commencement Date and shall
continue for the balance of the month in which the Lease Commencement Date
occurs and for a period of twelve (12) calendar months thereafter.
ARTICLE IV
BASE RENT
4.1 (a) During the Lease Term, Tenant shall pay to Landlord as annual
base rent for the Premises, without setoff, deduction or demand, the Annual Base
Rent (as defined in Section 1.1(a)), which amount is subject to adjustment from
time to time as provided in Section 4.2 hereof. The Annual Base Rent shall be
divided into twelve (12) equal monthly installments and such monthly
installments shall be due and payable in advance, on the first day of each month
during the Lease Year.
(b) Concurrently with the execution of this Lease, Tenant shall pay
to Landlord an amount equal to One (1) monthly installment of the Annual Base
Rent payable during the first (1st) Lease Year, which amount shall be credited
by Landlord toward the monthly installment of the Annual Base Rent payable for
the first full calendar month falling within the Lease Term. If the Lease
Commencement Date is a day other than the first day of the month, then the
Annual Base Rent from the Lease Commencement Date until the first day of the
following month shall be prorated on a per diem basis at the rate of
one-thirtieth (1/30th) of the monthly installment of the Annual Base Rent
payable during the first Lease Year, and Tenant shall
3
<PAGE> 4
pay such prorated installment of the Annual Base Rent in advance on the Lease
Commencement Date.
4.2 Commencing on September 27, 1997, and on the first day of each and
every Lease Year thereafter during the Lease Term, including any renewal term,
the Annual Base Rent (and the monthly installments thereof) shall be adjusted
(increased only) by adding to the Annual Base Rent a sum equal to the Annual
Base Rent then in effect multiplied by three and one-half percent (3.5%). The
Annual Base Rent as established by such adjustment shall continue in effect as
the Annual Base Rent required to be paid hereunder until again adjusted as
herein provided.
4.3 All sums payable by Tenant under this Lease, whether or not stated to
be the Annual Base Rent or additional rent, shall be paid to Landlord in legal
tender of the United States, without setoff, deduction or demand, at the address
to which notices to the Landlord are to be given or to such other party of or to
such other address as Landlord may designate from time to time by written notice
to Tenant. If Landlord shall at any time accept rent after it shall have become
due and payable, such acceptance shall not excuse a delay upon subsequent
occasions or constitute or be construed as a waiver of any of Landlord's rights
hereunder.
4.4 No payment by Tenant or receipt by Landlord of a lesser amount than
any installment or payment of Annual Base Rent or additional Rent ("Rent") due
shall be deemed to be other than on account of the amount due, and no
endorsement or statement on any check or payment of Rent shall be deemed an
accord and satisfaction. Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
payment of Rent, or pursue any other remedies available to Landlord.
ARTICLE V
REAL ESTATE TAXES AND OPERATING COSTS
5.1 An integral part of Landlord's leasing program for the Building
involves the requirement that tenants bear the administrative, operating and
maintenance costs and expenses incurred each calendar year in the ownership and
the operation of the Building.
5.2 Basic Operating Charges.
(a) As additional rent for the Premises, Tenant shall pay to the
Landlord Tenant's Proportionate Share of the Basic Operating Charges (as
hereinafter defined) incurred by Landlord in the operation of the Building
during each calendar year falling entirely or partly within the Lease Term in
excess of Tenant's proportionate share of the Basic Operating Charges incurred
by Landlord during the Base Year. Tenant's proportionate share shall be that
percentage which is equal to a fraction, the numerator of which is the number of
square feet of the Premises, and the denominator of which is the total number of
square feet of area in the Building leased and occupied. For the purpose of this
Lease, the Base Year is calendar year 19957.
(b) The Basic Operating Charges shall mean the sum of the costs and
expenses described in subsection (1) below, but shall not include the costs and
expenses described in subsection (2) below.
4
<PAGE> 5
(1) Included costs and expenses:
(A) Gas, water, sewer and other utility charges
(including surcharges) of every type and nature, but excluding electricity
charges except as otherwise provided in subsection (1) (I) below.
(B) Premiums and other charges incurred by Landlord with
respect to all insurance relating to the Building and the operation and
maintenance thereof, including, without limitation, all risk of physical damage
or fire and extended coverage insurance, public liability insurance, elevator
insurance, workman's compensation insurance, boiler and machinery insurance,
sprinkler leakage insurance, rent loss insurance, use and occupancy insurance
and health, accident and group life insurance for employees.
(C) Reasonable management fees (consistent with the
market rate for such fees in the Washington D.C. metropolitan area) and
personnel costs of the Building, including, but not limited to salaries, wages,
fringe benefits and other direct and indirect costs of engineers,
superintendents, watchmen, porters and any other Building personnel.
(D) Costs of service and maintenance contracts,
including, but not limited to, chillers, boilers, controls, window, security
services, if any, and management fees.
(E) All other maintenance and repair expenses and
supplies which are deducted by Landlord in computing its Federal income tax
liability.
(F) Any other costs and expenses incurred by Landlord
in maintaining, repairing or operating the Building, including but not limited
to costs of trash collection.
(G) The costs of any additional services not provided to
the Building at the Lease Commencement Date but thereafter provided by Landlord
in the prudent management of the Building.
(H) Real Estate Taxes (as hereinafter defined in
Section 5.2(c)).
(I) Charges for electricity consumed in the operation
of the Building.
(J) Charges for janitorial and cleaning services and
supplies furnished to the public and common areas of the Building, as reasonably
estimated by Landlord.
(K) Reasonable reserves for replacements, repairs
and contingencies.
(L) Assessments imposed by an association now or
hereafter established to maintain common areas within the Building and the land,
including assessments imposed to finance capital improvements in such common
areas.
(M) Any County Business, Professional and Occupational
License tax payable by the Landlord with respect to the Building.
(N) Auditing and accounting fees including accounting
fees incurred in connection with the preparation of any and all statements
required under this Lease.
(O) All miscellaneous taxes (including, without
limitation, all sales and excise taxes on the
5
<PAGE> 6
expenditures enumerated in this Section 5.2) applicable to the Building and any
taxes imposed on personal property in the building owned by Landlord.
(P) The cost of licenses, permits and similar fees
and charges.
(2) Excluded costs and expenses:
(A) Principal or interest payments on any mortgages,
deeds of trust, ground lease or other financing encumbrances.
(B) Leasing commissions payable by Landlord.
(C) Deductions for depreciation for the Building, except
to the extent included in subsection (1) (F) above.
(D) Capital expenditures that are not deducted by
Landlord in computing its Federal income tax liability, except to the extent
included in subsections (1) (F) and (1) (L) above.
(E) The costs of special services or utilities
separately charged to individual tenants of the Building.
(c) As used above, the term "Real Estate Taxes" shall mean (1) all
real estate taxes, including general and special assessments, if any, which are
imposed upon Landlord or assessed against the Building and/or the land (2) any
other present or future taxes or governmental charges that are imposed upon the
Landlord, or assessed against the Building and/or the land which are in the
nature of, or in substitution for, real estate taxes, including, but not limited
to, any tax levied on or measured by the rents payable by tenants of the
Building, and (3) costs (including attorney's fees) incurred in reviewing,
protesting or seeking a reduction of real estate taxes.
5.3 If the average occupancy rate for the entire Building during any
calendar year is less than ninety-seven percent (97%), then Basic Operating
Charges for such calendar year shall be deemed to include all additional costs
and expenses, as reasonably estimated by Landlord, which would have been
incurred during such calendar year if such average occupancy rate had been
ninety-seven percent (97%).
5.4 (a) Tenant shall make estimated monthly payments to Landlord on
account of charges described in Section 5.2, that are expected to be incurred
during each calendar year. The amount of such monthly payments shall be
determined as follows. At the beginning of the Lease Term and at the beginning
of each calendar year thereafter, Landlord shall submit to Tenant a statement
setting forth Landlord's reasonable estimates of the amounts by which the
charges in each such category of expenses that are expected to be incurred
during such calendar year, and the computation of Tenant's proportionate share
of each such anticipated expenses. Tenant shall pay to Landlord on the first day
of each month following receipt of such statements during such calendar year, an
amount equal to Tenant's proportionate share of the anticipated expenses
multiplied by a fraction, the numerator of which is 1, and the denominator of
which is the number of months during such calendar year which fall within the
Lease Term. If, however, Landlord shall submit such statement for a calendar
year subsequent to the commencement thereof, then: (1) until the first day of
the month following the month in which such statement is furnished to Tenant,
Tenant shall pay to Landlord on the first day of each month an amount equal to
the monthly sum which was payable by Tenant to Landlord under this
6
<PAGE> 7
Section for the last month of the preceding calendar year; (2) promptly after
such statement is furnished to Tenant, or together therewith, Landlord shall
give notice to Tenant stating whether the monthly installments previously made
for such calendar year were greater or less than the monthly installments to be
made for such calendar year in accordance with such statement, and (A) if there
shall be a deficiency, Tenant shall pay the amount thereof as additional rent
due hereunder, (B) if there shall have been an overpayment, Landlord shall
credit the amount thereof against any subsequent payment(s) payable by Tenant
under this Section (except upon the expiration of the Lease Term, in which case
the overpayment shall be refunded within thirty (30) days of such
determination), and (C) on the first day of the month following the month in
which such statement is furnished to Tenant, and monthly thereafter through the
remainder of such calendar year, Tenant shall pay to Landlord the appropriate
amount based on such statement. Landlord may at any time or from time to time
furnish to Tenant a revised statement for such calendar year, and in such case,
Tenant's payments of anticipated expenses for such calendar year shall be
adjusted in the same manner as is provided in the immediately preceding
sentence.
(b) Within approximately ninety (90) days after the expiration of
each calendar year, Landlord shall submit to Tenant a statement showing (i)
Tenant's proportionate share of the amounts by which the costs and expenses were
actually incurred in each of the categories described in Section 5.2 during the
preceding calendar year, and (ii) the aggregate amount of the estimated
payments, if any, made by Tenant on account of each such category. If such
statement indicates that the aggregate amount of such estimated payments, if
any, for any such category exceeds Tenant's actual liability with respect to
such category, Tenant shall deduct the net overpayment from its next estimated
payment or payments pursuant to this Article V. If such statement indicates that
Tenant's actual liability with respect to any such category exceeds the
estimated payments, if any, made by Tenant for such category then Tenant shall
pay to Landlord the amount of such excess as additional rent due hereunder.
5.5 In the event the Lease Term commences or expires on a day other than
the first day or the last day of a calendar year, the expenses in the categories
of charges described in Sections 5.2 to be paid by Tenant for such calendar year
shall be apportioned by multiplying the amount of Tenant's proportionate share
thereof for the full calendar year by a fraction, the numerator of which is the
number of days during such calendar year falling within the Lease Term, and the
denominator of which is three hundred sixty-five (365).
5.6 All payments required to be made by Tenant pursuant to this Article V
shall be paid without setoff, deduction or demand.
5.7
(a) Tenant may, upon thirty (30) days advance notice to Landlord,
conduct, at Tenant's sole cost and expense, an audit of Landlord's Operating
Charges charged to Tenant pursuant to this Lease. Tenant may conduct such audit
no more than once per year. Tenant's right to audit Operating Charges for any
calendar year shall expire after the date two (2) years from the last day of
such calendar year.
(b) Tenant shall, upon demand, reimburse Landlord for photocopying
costs and any other cost or expense incurred in connection with such audit.
(c) In the event that Tenant elects to audit Landlord's Operating
Charges in accordance with this Section 5.7, such audit must be conducted by an
independent certified public
7
<PAGE> 8
accounting firm that is not being compensated by Tenant on a contingency fee
basis.
(d) All of the information obtained through the Tenant's audit with
respect to financial matters (including, without limitation, costs, expenses,
income) and any other matters pertaining to the Landlord and/or the Building as
well as any compromise, settlement, or adjustment reached between Landlord and
Tenant relative to the results of the audit shall be held in strict confidence
by the Tenant and its officers, agents, and employees; and Tenant shall cause
its auditor and any of its officers, agents, and employees to be similarly
bound pursuant to Subsection (e) below.
(e) As a condition precedent to Tenant's exercise of its right to
audit, Tenant must deliver to Landlord a signed covenant from the auditor, in
form satisfactory to Landlord, acknowledging that all of the information
obtained in, and the results of such audit as well as any compromise,
settlement, or adjustment reached between Landlord and Tenant shall be held in
strict confidence and shall not be revealed in any manner to any person except
upon the prior written consent of the Landlord, which consent may be withheld in
Landlord's sole discretion, or if required pursuant to any litigation between
Landlord and Tenant materially related to the facts disclosed by such audit, or
if required by law.
(f) Tenant understands and agrees that Subsections (d) and (e) above
are of material importance to the Landlord and that any violation of the terms
of these provisions shall result in immediate and irreparable harm to the
Landlord.
(g) Landlord shall have all rights allowed by law or equity if
Tenant, its officers, agents, or employees and/or the auditor violate the terms
of this Section 5.7, including, without limitation, the right to terminate
Tenant's right to audit in the future pursuant to this Section 5.7.
(h) Tenant shall indemnify, defend upon request, and hold Landlord
harmless from and against all costs, damages, claims, liabilities, expenses,
losses, court costs, and attorney's fees suffered by or claimed against
Landlord, based on whole or in part upon the breach of this Section 5.7 by
Tenant and/or its auditor.
ARTICLE VI
USE OF PREMISES
6.1 Tenant shall use and occupy the Premises solely for the Permitted Use
set forth in Section 1.1(i), and for no other use or purpose without the prior
written consent of Landlord, which consent may be withheld in Landlord's sole
and absolute discretion. Restaurant usage is specifically prohibited. Tenant
shall not use or occupy the Premises for any unlawful purpose or in any manner
that will constitute waste, nuisance or unreasonable annoyance to Landlord or
other tenants of the Building. Tenant shall comply with all present and future
laws, ordinances (including zoning ordinances and land use requirements),
regulations, and orders of the United States of America, the Commonwealth of
Virginia, and any other public or quasi-public authority having jurisdiction
over the Premises concerning the use, occupancy and condition of the Premises
and all machinery, equipment and furnishings therein, including, without
limitation, all obligations imposed by the Americans With Disabilities Act of
1990 with respect to the Premises. It is expressly understood that if any
present or future law, ordinance, regulation or order requires an occupancy or
use permit for the Premises, Tenant shall obtain such permit at Tenant's own
expense and shall promptly deliver a copy thereof to
8
<PAGE> 9
Landlord. Use of the Premises is subject to all covenants, conditions and
restrictions of record.
6.2 Tenant shall pay any business, rent or other taxes that are now or
hereafter levied upon Tenant's use or occupancy of the Premises, the conduct of
Tenant's business at the Premises, or Tenant's equipment or other personal
property. In the event that any such taxes are enacted, changed or altered so
that any of such taxes are levied against Landlord, or the mode of collection of
such taxes is changed so that Landlord is responsible for collection or payment
of such taxes, Tenant shall pay any and all such taxes to Landlord upon written
demand from Landlord.
6.3 Tenant will handle and store its trash and refuse in the most
hygienic manner possible, to Landlord's full satisfaction.
6.4 Tenant shall keep the Premises and all other parts of the Premises of
which it is a part, free from any and all liens arising out of any work
performed, materials furnished or obligations incurred by or for Tenant, and
agrees to bond against or discharge any such lien (including, without
limitation, any construction mechanic's or materialman's lien) within five (5)
business days after notice thereof.
6.5 Tenant shall not permit noise or odors in the Premises which are
objected to by Landlord and, upon written notice from Landlord, Tenant shall
immediately cease and desist from causing such noise or odor, and failing of
which Landlord may deem the same a material breach of this Lease. The usual and
customary noise associated with Tenant's permitted use shall not be a violation
of this Section 6.6 provided that (i) such noise is not excessive in Landlord's
reasonable judgment, (ii) there is no interference with other tenants, and (iii)
Tenant shall be responsible for strict compliance with all applicable laws,
ordinances, and regulations. Tenant shall not use or permit the use of any
portion of the Premises as sleeping quarters, lodging rooms, or for any unlawful
purposes. Tenant shall not install any radio or television or other similar
device exterior to the Premises and shall not erect any aerial on the roof or
exterior walls of the Building. Landlord may direct the use of all pest
extermination contractors at the sole cost and expense of Tenant and at such
intervals as Landlord shall determine. Tenant's failure to contract with the
designated pest extermination contractor shall entitle Landlord to employ such
contractor with respect to the Premises and Tenant shall reimburse Landlord for
the cost thereof.
6.6 In the event that Tenant fails, refuses or neglects to commence and
complete repairs promptly and adequately, to remove any lien, to pay any lien,
to pay any cost of expense, to reimburse Landlord, or otherwise to perform any
act or fulfill any obligation required of Tenant pursuant to this Lease,
Landlord may, but shall not be required to, make or complete any such repairs,
remove such lien (without inquiring into the validity thereof), pay such cost or
perform such act or the like without prior notice to, but at the sole cost and
expense of Tenant, and Tenant shall reimburse Landlord for all cost and expenses
of Landlord thereby incurred within five (5) days after receipt by Tenant from
Landlord of a statement setting forth the amount of such costs and expenses. The
failure by Tenant so to make repairs, to remove any lien, to pay any such cost
or expense, or to so reimburse Landlord (in the case of reimbursement, within
such ten-day period) shall constitute a default by Tenant under this Lease and
shall carry with it the same consequences as failure to pay any installment of
rental. Landlord's rights and remedies pursuant to this Section 6.7 shall be in
addition to any and all other rights and remedies provided under this Lease or
at law.
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6.7 Tenant shall not obstruct, encumber or use for any purpose other than
ingress or egress to and from the demised Premises, the sidewalks in front of or
abutting any part of the Premises, or the entrances, vestibules, stairways, or
halls thereof and no business shall be conducted by Tenant anywhere outside
the Premises without the prior written consent of Landlord.
6.8 All merchandising, display and advertising shall be in strict
compliance with the terms and provisions of any use or special use permit
granted by the applicable jurisdiction for the Premises.
6.9 No auction or fire or bankruptcy sale shall be conducted at the
Premises, nor shall any special sale or promotion be carried on therein other
than such as are incidental to the normal routine of Tenant's business with its
regular clientele.
6.10 Tenant agrees that it shall not at any time allow any of its
employees, agents, licensees, contractors, patrons, or other invitees to loiter
in any part of the common area.
ARTICLE VII
ASSIGNMENT AND SUBLETTING
7.1 Tenant understands and agrees that the strict limitation on
assignability of this Lease is a material inducement for Landlord to enter into
this Lease. Tenant shall not assign, transfer, mortgage or otherwise encumber
this Lease or all or any of Tenant's rights hereunder or interest herein, or
sublet, rent or permit anyone to occupy the Premises or any part thereof, or
enter into a management agreement with another person or entity for the
management of Tenant's business, without obtaining the prior written consent of
Landlord, which consent may be withheld or granted in Landlord's sole and
absolute discretion except as provided in Section 7.7 hereof. No assignment or
transfer of this Lease or the right of occupancy hereunder may be effectuated by
operation of law or otherwise without the prior written consent of Landlord. The
consent by Landlord to any assignment, subletting or occupancy shall not be
construed as a waiver or release of Tenant from liability for the performance of
any covenant or obligation to be performed by Tenant under this Lease, nor shall
the collection or acceptance of rent from any assignee, subtenant or occupant
constitute a waiver or release of Tenant from any of its liabilities or
obligations under this Lease. Landlord's consent to any assignment, subletting
or occupancy shall not be construed as relieving Tenant or any assignee,
subtenant or occupant from the obligation of obtaining Landlord's prior written
consent to any subsequent assignment, subletting or occupancy. For any period
during which Tenant is in default hereunder, Tenant hereby assigns to Landlord
the rent due from any assignee, subtenant or occupant of Tenant and hereby
authorizes each such assignee, subtenant or occupant to pay said rent directly
to Landlord.
7.2 If Tenant is a partnership, any dissolution of Tenant or a withdrawal
or change, whether voluntary, involuntary or by operation of law, of partners
owning a controlling interest in Tenant shall be deemed a voluntary assignment
of this Lease and subject to the provisions of this Article VII. If Tenant is a
corporation, any dissolution, merger, consolidation or other reorganization of
Tenant, or the sale or transfer of a controlling interest of the capital stock
of Tenant, shall be deemed a voluntary assignment of this lease and subject to
the provisions of Article VII. Any management agreement, or similar arrangement
of any kind, by which operational control of the business is transferred to any
person other than Tenant, shall be
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deemed a voluntary assignment of this Lease and subject to the provisions of
this Article VII. This Section 7.2 shall not apply to an initial public offering
("IPO") where the securities of Tenant sold to the public are registered with
the Securities and Exchange Commission pursuant to the Securities Act of 1933.
7.3 If, at any time during the Lease Term, Tenant desires to transfer,
assign or sublet all or part of the Premises, in connection with Tenant's
request to Landlord for Landlord's consent thereto, Tenant shall give notice to
Landlord in writing ("Tenant's Request Notice") of the identity of the proposed
assignee or subtenant and its business, the terms of the proposed assignment or
subletting ("Proposed Sublease Commencement Date"), and the area proposed to be
assigned or sublet (the "Proposed Sublet Space"). Tenant shall also transmit
therewith the most recent financial statement or other evidence of financial
responsibility of such assignee or subtenant and a certification executed by
Tenant and such proposed assignee or subtenant stating whether or not any
premium or other consideration is being paid for the proposed assignment or
sublease.
7.4 If any sublease, assignment or other transfer (whether by operation
of law or otherwise) provides that the subtenant, assignee or other transferee
thereunder is to pay any amount in excess of the rental and other charges due
under this Lease, whether such excess be in the form of an increased monthly or
annual rental, a lump sum payment, payment for the sale, transfer or lease of
Tenant's fixtures, leasehold improvements, furniture and other personal
property, or any other form (and if the subleased or assigned space does not
constitute the entire Premises, the existence of such excess shall be determined
on a pro-rata basis), Landlord shall be paid one-half (1/2) of such excess or
other premium applicable to the sublease, assignment or other transfer. Any such
premium shall be paid by Tenant to Landlord as additional rent upon such terms
as shall be specified by Landlord and in no event later than ten (10) days after
any receipt thereof by Tenant. Landlord shall have the right to inspect and
audit Tenant's books and records relating to any sublease, assignment or other
transfer. Any sublease, assignment or other transfer shall, at Landlord's
option, be effected on forms supplied or approved by Landlord.
7.5 As this agreement with the Tenant is a material inducement to
Landlord, in the event of an assignment of this Lease, or a sublet with respect
to the proportionate area of the Premises which is subleased, except for an
assignment or sublet permitted under Sections 7.7 or 7.8 hereof, Landlord may,
as a condition of its approval, increase the Annual Base Rent in such manner as
the Landlord shall determine. Further, all options and concessions, if any, are
personal to Tenant and shall not inure to the benefit of any assignee.
7.6 Tenant agrees to pay to Landlord as additional rent hereunder the
reasonable costs (including reasonable attorney's fees) incurred by Landlord in
connection with any request by Tenant for Landlord to give its consent to any
assignment, transfer, mortgage, encumbrance, or subletting by Tenant.
7.7 If Tenant wishes to assign or sublet, Tenant shall provide Landlord
with (i) copies of all instruments of assignment and transaction documents
between Tenant and the proposed assignee or subtenant, (ii) current financial
statements of the proposed assignee or subtenant prepared by an independent
Certified Public Accountant, (iii) copies of the most recent federal income tax
return of the proposed assignee or subtenant, and (iv) such other information as
Landlord may reasonably request. Landlord's consent shall then not be
unreasonably withheld, provided that all of the following criteria are met:
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(i) No Default (hereinafter defined) exists and no event has occurred
which, with notice and/or the passage of time, would constitute a Default if not
cured within the time, including any applicable grace period, specified herein;
(ii) Landlord receives at least thirty (30) days' prior written
notice of Tenant's intention to assign this Lease or sublet any portion of the
Premises;
(iii) The proposed use of the Premises is permitted under the terms
of this Lease and will not violate any other exclusive use agreement(s)
affecting the Premises or the Building;
(iv) The proposed assignee or subtenant (a) is of a type and quality
consistent with the Building; (b) has the financial capacity and
creditworthiness to undertake and perform the obligations of this Lease or the
sublease as applicable; (c) is not a party by whom any suit or action could be
defended on the grounds of sovereign immunity; (d) will not impose any
additional material burden upon Landlord in the operation of the Building; and
(e) shall not intend to use the Premises for a "Prohibited Activity." A
"Prohibited Activity," for purposes of this provision, shall include uses which
will in Landlord's judgment(a) introduce undue amounts of public traffic in the
Building (in excess of average traffic which Landlord reasonably believes is
generated by other tenants of the Building); (b) place a strain on the existing
plumbing, electrical and mechanical systems; or (c) generate unusually high
densities of employees per square foot of rentable space including, without
limitation, the following: electronic data processing, photographic, multilith
or multigraph reproduction (except in connection with Tenant's own business), an
employment agency, an executive search firm or a school or vocational training
center. In no event shall certain governmental agencies (e.g., Veteran's
Administration, Social Security, etc.) that administer in such offices on a
daily basis the claims of members of the general public and, as a result,
produce a very high volume of pedestrian traffic in office buildings in which
they are located) be permitted as an assignee or subtenant;
(v) The proposed assignee or subtenant (or its principals) (I) has
not defaulted under any other lease, or (II) is not the subject of a judgment or
the subject of any litigation which could, in Landlord's judgment, have a
material adverse impact upon the finances or credit-worthiness of the proposed
assignee or subtenant; and
(vi) The proposed assignee or subtenant is not a tenant of the
Building, or a prospective tenant who, within the six (6) months prior to
Tenant's request, has negotiated with Landlord or its brokers or agents directly
connected with leasing space in the Building about the possibility of leasing
space in the Building.
In the event of a request from Tenant pursuant to this Section 7.7
landlord shall respond within thirty (30) days of receipt of information and/or
documents required to be provided by Tenant.
7.8 Notwithstanding anything contained herein to the contrary, Tenant may
assign this Lease without Landlord's consent to any parent or subsidiary entity,
or to an affiliated entity (meaning an entity of which at least 50% of the
equity is owned by the controlling shareholders or members of Tenant). In such
event, Tenant shall promptly notify Landlord of such assignment, and, with such
notification, provide a copy of the agreement or instruments of assignment. In
addition, Tenant shall remain liable for all obligations of this Lease following
such
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assignment and agrees to execute all documents to document the transaction
accordingly.
ARTICLE VIII
MAINTENANCE AND REPAIRS
8.1 Tenant shall keep and maintain the Premises and all fixtures and
equipment located therein in clean, safe and sanitary condition, shall take good
care thereof and make all required repairs thereto, shall suffer no waste or
injury thereto, and shall, at the expiration or other termination of the Lease
Term, surrender the Premises in the same order and condition in which they were
on the Lease Commencement Date, ordinary wear and tear and unavoidable damage by
the elements excepted. All bulbs, tubes and lighting fixtures for the Premises
shall, at Landlord's option, be provided and installed by Landlord at Tenant's
cost and expense.
8.2 Tenant shall be solely responsible for maintenance and/or repairs to
the sewer and drain lines in or about the Premises, and all sewer and drain
lines feeding into or away from the Premises. Tenant shall be responsible for
any and all damages or claims arising out of or connected with said sewer and
drain lines, unless caused by Landlord.
8.3 Except as otherwise provided in Article XVII hereof, all injury,
breakage and damage to the Premises and to any other part of the building or the
land caused by any act or omission of Tenant, or of any agent, employee,
subtenant, assignee, contractor, client, guest, family member, licensee,
customer or invitee of Tenant, shall be repaired by and at the sole expense of
Tenant, except that Landlord shall have the right, at Landlord's option, to make
such repairs and to charge Tenant for all costs and expenses incurred in
connection therewith as additional rent due hereunder. The liability of Tenant
for such costs and expenses shall be reduced by the amount of any insurance
proceeds received by Landlord on account of such injury, breakage or damage.
ARTICLE IX
ALTERATIONS
9.1 It is understood and agreed that Landlord is under no obligation to
make any structural or other alterations, decorations, additions or improvements
in or to the Premises except as specifically set forth in this Lease. Landlord
shall use its reasonable best efforts to upgrade the public areas of the
Building, provided that the scope and nature of such work shall be at Landlord's
discretion.
9.2 Tenant will not make or permit anyone to make any alterations,
decorations, additions, improvements or other changes (hereinafter referred to
collectively as "Alterations") structural or otherwise, in or to the Premises or
the Building, without the prior written consent of Landlord, which consent, in
the case of cosmetic, non-structural alteration (including moving, adding, or
deleting interior walls) that do not impact the Building's HVAC system, shall
not be unreasonably withheld, but otherwise may be withheld in Landlord's sole
and absolute discretion. When granting its consent, Landlord may impose any
conditions it deems appropriate, including without limitation, the approval of
plans and specifications, approval of the contractor or other persons who will
perform the work, and the obtaining of specified insurance. All alterations
permitted by Landlord pursuant to this Section 9.2 must conform to all laws,
regulations and requirements of federal, state and county governments, and any
other public or quasi-public authority having jurisdiction over the Premises. As
a condition precedent to such written consent of Landlord, Tenant agrees to
obtain and
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deliver to Landlord written, unconditional waivers of mechanics' and
materialmen's liens against the Premises, the Building and the land from all
proposed contractors, subcontractors, laborers and material suppliers for all
work, labor and services to be performed and materials to be furnished in
connection with Alterations. If, notwithstanding the foregoing, any mechanics'
or materialmen's lien is filed against the Premises, any equipment within the
Premises, the building and/or the Land, for work claimed to have been done for,
or materials claimed to have been furnished to, the Premises, such lien shall be
discharged by Tenant within ten (10) days thereafter, at Tenant's sole cost and
expense, by the payment thereof or by the filing of a bond acceptable to
Landlord. If Tenant shall fail to discharge any such mechanics' or materialmen's
lien, Landlord may, at its option, discharge such lien without inquiry into the
validity thereof and treat the cost thereof (including attorneys' fees incurred
in connection therewith) as additional rent due hereunder, it being expressly
agreed that such discharge by Landlord shall not be deemed to waive or release
the default of Tenant in not discharging such lien. It is further understood and
agreed that in the event Landlord shall give its written consent to the making
of any Alterations, such written consent shall not be deemed to be an agreement
or consent by Landlord to subject its interest in the Premises or the Building
to any mechanics' or materialmen's liens which may be filed in connection
therewith.
9.3 Landlord's approval of the plans, specifications and working drawings
for Tenant's alterations shall create no responsibility or liability on the part
of Landlord for their completeness, design sufficiency, or compliance with all
laws, rules and regulations of governmental agencies or authorities.
9.4 Tenant shall indemnify and hold Landlord harmless from and against
any and a11 expenses, liens, claims, liabilities and damages (including, without
limitation, attorneys' fees) based on or arising, directly or indirectly, by
reason of the making of any Alterations. If any Alterations are made without the
prior written consent of Landlord. Landlord shall have the right to remove and
correct such Alterations and restore the Premises and the Building to their
condition immediately prior thereto, and Tenant shall be liable for all expenses
incurred by Landlord in connection therewith. All Alterations to the Premises or
the building made by either party shall immediately become the property of
Landlord and shall remain upon and be surrendered with the Premises as part
thereof at the end of the Lease Term; provided, however, that if Tenant is not
in default under this Lease, then Tenant shall have the right to remove, prior
to the expiration or earlier termination of the Lease Term, all movable
furniture, furnishings and equipment installed in the Premises solely at the
expense of Tenant and except that Tenant shall be required to remove all
Alterations in the Premises or the Building which Landlord designates in writing
for removal. Movable furniture, furnishings and equipment shall be deemed to
exclude any item which would normally be removed from the Premises with the
assistance of tools or machinery other than a dolly. All damage and injury to
the Premises or the Building caused by such removal shall be repaired by
landlord, at Tenant's sole expense. If such property of Tenant is not removed by
Tenant prior to the expiration or earlier termination of this Lease, the same
shall became the property of the Landlord and shall be surrendered with the
Premises as a part thereof; provided, however, that Landlord shall have the
right to remove at Tenant's expense such property and any Alteration which
Landlord designates in writing for removal.
9.5 Tenant shall, at Tenant's sole cost and expense, install and complete
the initial Tenant improvements as set forth on the Addendum attached hereto.
Tenant understands and agrees that the foregoing is a material inducement for
Landlord to enter
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into this Lease, and that the failure of Tenant to undertake such improvements
at the commencement of this Lease, and to proceed diligently and in good faith
to completion, shall be a material breach.
ARTICLE X
SIGNS AND FURNISHINGS
10.1 Tenants exterior signage, and any replacements thereto, shall be in
compliance with all applicable laws, regulations, statutes, and ordinances, and
shall be subject to Landlord's approval as to size, type, location, and content.
10.2 Except as provided in Section 10.1 above, no sign, advertisement or
notice referring to Tenant shall be inscribed, painted, affixed or otherwise
displayed on any part of the exterior of the Building or the interior of the
Premises visible from outside the Premises, and then only in such place, number,
size, color and style as are approved in writing by Landlord. All of Tenant's
signs that are approved by Landlord shall be installed by Landlord at Tenant's
cost and expense. If any sign, advertisement or notice that has not been
approved by Landlord is exhibited or installed by Tenant, Landlord shall have
the right to remove the same at Tenant's expense. Landlord shall have the right
to prohibit any advertisement of or by Tenant which in its opinion tends to
impair the reputation of the Building or its desirability as a high-quality
building and, upon written notice from the Landlord, Tenant shall immediately
refrain from and discontinue any such advertisement. Landlord reserves the right
to affix, install and display signs, advertisements and notices on any part of
the exterior or interior of the Building.
10.3 Landlord shall have the right to prescribe the weight and position of
heavy equipment and fixtures (not including personal computers and ordinary
office furniture), which, if approved by Landlord, shall be installed in such
manner as Landlord directs in order to distribute their weight adequately. Any
and all damage or injury to the Premises or the Building caused by moving the
property of Tenant into or out of the Premises, or due to the same being in or
upon the Premises shall be repaired (by Landlord or a contractor selected by
Landlord) at the sole cost of Tenant. No furniture, equipment or other bulky
matter of any description will be received into the Building or carried in the
elevators except as approved by Landlord, and all such furniture, equipment and
other bulky matter shall be delivered only through the designated delivery
entrance of the Building. All moving of furniture, equipment and other materials
shall be under the direct control and supervision of Landlord, who shall not,
however, be responsible for any damage to or charges for moving the same. Tenant
agrees to remove promptly from the sidewalks adjacent to the Building any of
Tenant's furniture equipment or other material there delivered or deposited.
ARTICLE XI
TENANT'S EQUIPMENT
11.1 Tenant will not install or operate in the Premises any electrically
operated equipment or machinery that operates on greater than 220 volt power
without first obtaining the prior written consent of Landlord who may condition
such consent upon the payment by Tenant of additional rent in compensation for
the excess consumption of electricity or other utilities and for the cost of any
additional wiring or apparatus that may be occasioned by the operation of such
equipment or machinery. Tenant shall not use, store, or install any equipment of
any type or nature that will or may necessitate any changes, replacements or
additions to, or in the use of, the water system, heating system,
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plumbing system, air conditioning system or electrical system of the Premises or
the Building without first obtaining the prior written consent of Landlord,
which consent may be withheld in Landlord' sole and absolute discretion.
Machines and equipment belonging to Tenant which cause noise or vibration that
may be transmitted to the structure of the Building or to any space therein to
such a degree as to be objectionable to Landlord or to any tenant in the
Building shall be installed and maintained by Tenant, at Tenant's expense, on
vibration eliminators or other devices sufficient to reduce such noise and
vibration to a level satisfactory to Landlord.
11.2 At the option of the Landlord, Landlord may install checkmeters to
electrical circuits serving Tenant's equipment to verify that Tenant is not
consuming excessive electricity. If Landlord's survey determines that Tenant's
electricity consumption is excessive, Landlord may install, at Tenant's sole
cost and expense, submeters to ascertain Tenant's actual electricity
consumption, and Tenant will thereafter pay as additional rent for Tenant's
actual consumption of electricity at the then current price per kilowatt hour
charged Landlord by the utility. In such event, Tenant's proportionate share of
Operating Charges shall not include electricity charges for areas of the
Building rented to other tenants.
ARTICLE XII
INSPECTION BY LANDLORD
12.1 Upon reasonable advance notice, which may be verbal, except in the
case of emergency, Tenant shall permit Landlord, its agents, mortgagees, and
representatives, any federal, state, county or municipal officer or
representative and prospective purchasers of interests in the Building or
Landlord, to enter the Premises, without charge therefor and without diminution
of the rent payable by Tenant, to examine, inspect and protect the Premises and
the Building, to make such alterations and/or repairs as in the sole judgment of
Landlord may be deemed necessary, or to exhibit the same to prospective tenants
during the last one hundred eighty (180) days of the Lease Term. In connection
with any such entry, Landlord shall endeavor to minimize the disruption to
Tenant's use of the Premises. During the course of any alteration or repair by
Landlord in the Premises, Landlord may store within the Premises all necessary
materials, tools, supplies and equipment. Nothing in this Section shall be
construed as imposing any obligation on Landlord to make any alterations or
repairs.
ARTICLE XIII
INSURANCE
13.1 Tenant shall not conduct or permit to be conducted any activity, or
place any equipment in or about the Premises or the building, which will in any
way increase the rate of fire insurance or other insurance on the Building. If
any increase in the rate of fire insurance or other insurance is stated by any
insurance company or by the applicable insurance rating organization (or other
organization exercising similar functions in connection with the prevention of
fire or the correction of hazardous conditions) to be due to any activity or
equipment of Tenant in or about the Premises or the Building such statement
shall be conclusive evidence that the increase in such rate is due to such
activity or equipment and, as a result thereof, Tenant shall be liable for the
amount of such increase. Tenant shall reimburse Landlord for such amount and any
such amount shall be considered additional rent due hereunder.
13.2 Throughout the Lease Term, Tenant shall obtain and maintain insurance
from a company or companies licensed to do
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business in the Commonwealth of Virginia and approved by Landlord which policy
or policies shall include: (i) a comprehensive general liability policy,
including insurance against assumed or contractual liability under this lease
with respect to the leased premises and the operations of Tenant and any
subtenants of Tenant in, on or about the leased premises in which the limits
with respect to personal liability and property damage shall be not less than
Two Million Dollars ($2,000,000) per occurrence; (ii) all risk property
insurance, including theft and, if applicable, boiler and machinery coverage,
written at replacement cost value in an adequate amount to avoid coinsurance and
a replacement cost endorsement insuring Tenant's merchandise, trade fixtures,
furnishings, equipment and all items of personal property of Tenant and
including property of Tenant's customers located on or in the leased premises;
(iii) workers' compensation coverage as required by law; (iv) products liability
coverage, and (v) with respect to alterations, improvements and the like
required or permitted to be made by Tenant hereunder, contingent liability and
builder's risk insurance, in amounts satisfactory to Landlord. The minimum
limits of coverage as set forth in this paragraph may from time to time, at
Landlord's option, be increased by not more than ten percent (10%) per annum, on
a cumulative basis, with such increase to occur not more often than once during
each lease year during the term hereof. The deductibles under any of such
insurance policies to be carried by Tenant shall not exceed Five Thousand and
00/100 Dollars ($5,000.00). Said insurance shall name Landlord, Landlord's
sublessor, if any, and the holder of any Mortgage (as hereinafter defined in
Section 21.1) now or hereafter encumbering the Building or the land as
additional insured thereunder, shall contain an endorsement that said insurance
shall remain in full force and effect notwithstanding that the insured may have
waived its right of action against any person prior to the occurrence of a loss.
Such policy shall contain an endorsement prohibiting cancellation or reduction
of coverage (a) as to the interests of Landlord or any Mortgagees by reason of
any act or omission of Tenant, and (b) without first giving Landlord fifteen
(15) days' prior written notice of such proposed action.
13.3 A copy of each paid-up policy, appropriately authenticated by the
insurer, evidencing such insurance and containing the provisions specified
herein [or a certificate of the insurer certifying that such policy has been
issued], shall be delivered to Landlord prior to the Lease Commencement Date
and, upon renewals, not less than thirty (30) days prior to the expiration of
such coverage. Landlord may at any time, and from time to time, inspect and/or
copy any and all insurance policies required to be procured by Tenant by this
Lease.
13.4 Tenants's insurance policy shall include a waiver by the insurer of
all rights of subrogation against the Landlord, its directors, partners,
officers, employees, or representatives, which arises or might arise by reason
of any payment under such policy or by reason of any act or omission of
Landlord, its directors, partners, officers, employees, or representatives.
13.5 Each policy evidencing the insurance to be carried by Tenant under
this Lease shall contain a clause that such policy and the coverage evidenced
thereby shall be primary with respect to any policies carried by Landlord, and
that any coverage carried by Landlord shall be excess insurance, unless it is
proven that Landlord is jointly liable.
13.6 In the event Tenant fails to procure, maintain, and/or pay for the
insurance required by this Lease, at the times and for the durations specified
in this Lease, Landlord shall have the right, but not the obligation, at any
time and from time to time, and without notice, to procure such insurance and/or
pay the premiums for such insurance, in which event Tenant shall repay Landlord,
immediately upon demand by Landlord, as
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additional rent, all sums so paid by Landlord together with interest thereon and
any costs or expenses incurred by Landlord in connection therewith, without
prejudice to any other rights and remedies of the Landlord under this Lease.
13.7 The insurance carrier shall be satisfactory to Landlord and licensed
in the state in which the premises are located. The insurance carrier shall at
all times during the term of this lease have a policyholder's rating of not less
than "A" in the most current edition of Best's Insurance Reports.
13.8 Landlord shall ask its insurance carrier for a waiver of subrogation
in favor of Tenant. If Landlord's insurance carrier will do so, at no cost or de
minimis cost (as reasonably determined by Landlord) to Landlord, then Landlord's
insurance policy shall contain a waiver by the insurer of all rights of
subrogation against Tenant. If, however, Landlord's insurance carrier shall
decline to provide such waiver, then Landlord shall not be required to obtain
such waiver of subrogation.
ARTICLE XIV
SERVICES AND UTILITIES
14.1 So long as Tenant is not in Default, Landlord will furnish or cause
to be furnished on a continuous basis electricity for normal business usage.
Tenant's use of electricity in the Premises may not at any time exceed the
capacity of the electrical conductors and equipment serving the Premises.
Landlord reserves the right to install, at the Tenant's sole cost, check meters,
which will be utilized to determine the amount Tenant will reimburse Landlord
for Tenant's excess usage. Without Landlord's prior written consent, Tenant may
not: (i) connect heating or air-conditioning equipment; special lighting in
excess of building standard specifications or any other item of electrical
equipment that consumes more than permitted by, the building standard
specifications or (ii) make any alteration or addition to the electric system of
the Premises. If Landlord grants such consent, Landlord will provide at the cost
to Landlord plus Landlord's overhead charge of ten percent (10%) of the cost,
which cost Tenant shall pay to Landlord on demand, additional risers or other
required equipment. In addition, Landlord may increase the Base Rent by an
amount reflecting the estimated additional capacity of such risers or other
equipment. Notwithstanding, Landlord may require Tenant to install separate
meters, at Tenant's sole cost, and to pay utilities directly to the utility
company.
14.2 So long as Tenant is not in Default, Landlord will furnish or cause
to be furnished to the Premises Monday through Friday from 8:00 a.m. to 6:00
p.m. and Saturday from 8:00 a.m. to 1:00 p.m. (but, not on Sunday, legal
holidays or days Landlord designates for holiday observance) heat or
air-conditioning (depending upon the season) at reasonable temperatures as
determined by Landlord to provide reasonably comfortable occupancy of the
Premises under Normal Business Conditions (defined below) (excepting any areas
that develop excessive heat from machines, lights, sun, overcrowding or other
sources). "Normal Business Conditions" (herein so called) for maintaining
reasonably comfortable temperatures are:
(a) One person per 250 square feet average occupancy per floor:
(b) Two and One Half (2 1/2) watts per square foot for Tenant lighting
and power use average per floor; and
(c) Light-colored blinds, fully drawn and slats at a 45 degree angle
coincident with peak sun lead or equivalent solar barrier.
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If Tenant delivers a written request to Landlord before 12:00 p.m. on the
day prior to the date for which such usage is requested, Landlord will furnish
services at times not specified above in exchange for Tenant's payment therefor
at the hourly rate Landlord establishes from time to time.
14.3 So long as Tenant is not in Default, Landlord will furnish or cause
to be furnished to the Common Areas water from the Fairfax County mains for
drinking, lavatory (including warm water at reasonable temperatures as
determined by Landlord) and toilet purposes. Tenant will not install any
equipment that uses water without Landlord's prior written consent. Tenant will
not waste or permit the waste of water. Landlord reserves the right to install
a water meter for the Premises, and thereafter Tenant shall pay for water based
upon its usage. Tenant shall pay Landlord the cost of the water meter upon
demand.
14.4 So long as Tenant is not in Default, Landlord will furnish or cause
to be furnished to the Premises janitorial services in accordance with the
building standard janitorial specifications established by Landlord from time to
time. Current specifications are attached hereto. Tenant shall pay Landlord for
services above building standard at the charge established by Landlord.
14.5 It is understood and agreed that Landlord and Tenant have entered
into this Lease on the express understanding and agreement that Landlord shall
not have any liability to Tenant whatsoever as a result of utility failure, or
Landlord's failure or inability to furnish any of the services required to be
furnished by Landlord hereunder, whether resulting from breakdown, removal from
service for maintenance or repairs, strikes, scarcity of labor or materials,
acts of God, governmental requirements or from any other cause whatsoever. Any
such failure or inability to furnish the utilities or services required
hereunder shall not be considered an eviction, actual or constructive, of Tenant
from the Premises and shall not entitle Tenant to terminate this Lease or to an
abatement of any rent payable hereunder.
ARTICLE XV
LIABILITY OF LANDLORD
15.1 Landlord and its employees, partners, and agents shall not be liable
to Tenant, Tenant's employees, agents, invitees, licensees, customers, clients,
family members, assignees, subtenants or guests, or to any other person or
entity for, and Tenant shall hold Landlord harmless from and against any damage
(including indirect and consequential damage), injury, loss, obligation,
liability, compensation, or claim, including but not limited to claims for the
interruption of or loss to Tenant's business, based on, arising out of or
resulting from any cause whatsoever (except as otherwise provided in this
Section), including but not limited to the following: repairs to any portion of
the Premises or the Building; interruption in the use of the Premises or any
equipment therein; any accident or damage resulting from the use or operation
(by Landlord, Tenant or any other person or entity) of heating, cooling,
electrical, sewerage, or plumbing equipment or apparatus; the termination of
this Lease by reason of the destruction of the Premises or the Building; any
fire, robbery, theft, vandalism, mysterious disappearance and/or any other
casualty; the actions of any other tenants of the Building or of any other
person or entity; and any leakage in any part or portion of the Premises or the
Building, or from water, rain, ice or snow that may leak into, or flow from, any
part of the Premises or the Building, or from drains, pipes or plumbing fixtures
in the Premises or the Building. Any goods, property or personal effects stored
or placed by Tenant, its employees or agents in or about the Premises or the
Building
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shall be at the sole risk of Tenant, and Landlord shall not in any manner be
held responsible therefor. If any employee of Landlord receives any packages or
articles delivered to the Building for Tenant, such employee shall be acting as
the agent of Tenant for such purposes and not as the agent of Landlord.
Notwithstanding the foregoing provisions of this Section 15.1, Landlord shall
not be released from liability to Tenant for any physical injury to any natural
person caused by the willful misconduct of Landlord or its employees to the
extent such injury is not covered by insurance (a) carried by Tenant or such
person, or (b) required by this Lease to be carried by Tenant.
15.2 Tenant shall indemnify and hold Landlord, its agents, employees, or
partners, harmless from and against all costs, penalties, damages, claims,
causes of action, obligations, liabilities and expenses (including attorney's
fees) suffered by or claimed against Landlord, directly or indirectly, based on,
arising out of or resulting from (i) Tenant's use and occupancy of the Premises
or the business conducted by Tenant therein, (ii) any act or omission by Tenant
or Tenant's employees, agents, assignees, subtenants, contractors, clients,
guests, family members, licensees, customers or invitees (iii) any breach or
default in the performance or observance of Tenant's covenants or obligations
under this Lease, including without limitation any failure to surrender the
Premises upon the expiration or earlier termination of the Lease Term, or (iv)
any entry by Tenant, its employees, agents or contractors upon the land prior to
the Lease Commencement Date. Tenant shall not be required to so indemnify
Landlord from any such damage or claim resulting from the gross negligence or
wilful misconduct of Landlord.
15.3 In the event that at any time any landlord hereunder shall sell or
transfer the Building, said landlord shall not be liable to Tenant for any
obligations or liabilities based on, arising out of or resulting from events or
conditions occurring on or after the date of such sale or transfer.
15.4 In the event that at any time during the Lease Term, Tenant shall
have a claim against Landlord, Tenant shall not have the right to set off or
deduct the amount allegedly owed to Tenant from any rent or other sums payable
to Landlord hereunder, it being understood that Tenant's sole remedy for
recovering upon such claim shall be to institute an independent action against
Landlord, subject to Section 15.5 below.
15.5 Tenant agrees that in the event Tenant or any of Tenant's employees,
agents, subtenants, assignees, contractors, clients, guests, family members,
licensees, customers or invitees is awarded a money judgment against Landlord,
its agents or partners, the sole recourse for satisfaction of such judgment
shall be limited to execution against the estate and interest of Landlord in the
Building (including insurance proceeds therefrom); in no event shall any other
assets of Landlord, or of any partner of Landlord or of any person or entity be
held to have any personal liability for satisfaction of any claims or judgments
against Landlord and/or any partner of Landlord in such partner's capacity as a
partner of Landlord.
ARTICLE XVI
RULES AND REGULATIONS
16.1 Tenant and its agents, employees, invitees, licensees, customers,
clients, family members, guests, assignees and subtenants shall at all times
abide by and observe the rules and regulations as may be promulgated by
Landlord. In addition, Tenant and its agents, employees, invitees, licensees,
customers, clients, family members, guests, assignees and subtenants shall abide
by and observe all other rules or regulations that Landlord may promulgate from
time to time for the operation and
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maintenance of the Building, provided that notice thereof is given to Tenant and
such rules and regulations are not inconsistent with the provisions of this
Lease. Nothing contained in this Lease shall be construed as imposing upon
Landlord any duty or obligation to enforce such rules and regulations, or the
terms, conditions or covenants contained in any other lease, as against any
other tenant, and Landlord shall not be liable to Tenant for the violation of
such rules and regulations by any other tenant or its employees, agents,
assignees, subtenants, invitees, licensees, customers, clients, family members
or guests.
ARTICLE XVII
DAMAGE OR DESTRUCTION
17.1 If the Premises or the Building are totally or partially damaged or
destroyed from any cause, thereby rendering the Premises totally or partially
inaccessible or unusable, Landlord shall (taking into account the time necessary
to effectuate a satisfactory settlement with any insurance company involved)
diligently restore and repair the Premises and the Building to substantially the
same condition they were in prior to such damage; provided, however, that if in
Landlord's judgment the repairs and restoration cannot be completed within
ninety (90) days after the occurrence of such damage (taking into account the
time needed for removal of debris, preparation of plans and issuance of all
required governmental permits), Landlord shall have the right, at its sole
option, to terminate this Lease as of the sixtieth (60th) day after such damage
by giving written notice of termination of Tenant within forty-five (45) days
after the occurrence of such damage. If this Lease is terminated pursuant to the
preceding sentence, all rent payable hereunder shall be apportioned and paid to
the date of termination. If this Lease is not terminated as a result of such
damage, and provided that such damage was not caused by the act or omission of
Tenant, or any of its employees, agents, licensees, invitees, assignees,
subtenants, customers, clients, family members or guests, then until the repair
and restoration of the Premises is substantially complete, Tenant shall be
required to pay the Annual Base Rent and additional rent only for those portions
of the Premises that Tenant is able to use while repairs are being made. Except
as otherwise specified in Section 17.2, Landlord shall bear the costs and
expenses of repairing and restoring the Premises and the Building; provided,
however, that if such damage or destruction was caused by the act or omission of
Tenant, or any of its employees, agents, licensees, invitees, assignees,
subtenants, customers, clients, family members or guests, then Tenant shall pay
to Landlord the amount by which such costs and expenses exceed the insurance
proceeds, if any, actually received by Landlord on account of such damage or
destruction. Notwithstanding anything above to the contrary, Landlord shall have
the right to terminate this Lease in the event (a) Landlord's insurance is
insufficient to pay the full cost of such repair and restoration, (b) any
Mortgagee fails or refuses to make any such insurance proceeds available for
such repair and restoration, or (c) zoning or other applicable laws or
regulations do not permit such repair or restoration. In addition, if more than
30% of the Premises is damaged or destroyed by fire or other casualty, not
resulting from any act or omission of Tenant or Tenant's agents, and Tenant will
be deprived of such use for more than six (6) months, Tenant may terminate this
Lease upon thirty (30) days advance notice.
17.2 Notwithstanding anything above the contrary, if Landlord repairs and
restores the Premises as provided in Section 17.1, Landlord shall not be
required to repair, restore or replace any decorations, alterations or
improvements to the Premises previously made by Tenant or any trade fixtures,
furnishings, equipment or personal property belonging to Tenant.
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It shall be Tenant's sole responsibility to repair and restore all such items.
17.3 Notwithstanding anything to the contrary contained herein, if there
is damage to or destruction of the Building that exceeds twenty-five percent
(25%) of the replacement value of the Building, excluding the land, then,
whether or not the Premises are damaged or destroyed, Landlord shall have the
right to terminate this Lease by written notice to Tenant.
ARTICLE XVIII
CONDEMNATION
18.1 If the whole or a substantial part (as hereinafter defined) of the
Premises, or the use or occupancy of the Premises, shall be taken or condemned
by any governmental or quasi-governmental authority for any public or
quasi-public use or purpose (including a sale thereof under threat of such a
taking), then this Lease shall terminate on the date title thereto vests in such
governmental or quasi-governmental authority, and all rent payable hereunder
shall be apportioned as of such date. If less than a substantial part of the
Premises, or if the use or occupancy of less than a substantial part of the
Premises, is taken or condemned by any governmental or quasi-governmental
authority for any public or quasi-public use or purpose (including a sale
thereof under threat of such a taking), then this Lease shall continue in full
force and effect except that as of the date title vests in the governmental or
quasi-governmental authority Tenant shall not be required to pay the Annual Base
Rent and additional rent with respect to the portion of the Premises taken or
condemned. For purposes of this Section 18.1, a substantial part of the Premises
shall be considered to have been taken if more than one-third (1/3) of the
rentable area of the Premises is rendered unusable as a result of such
condemnation.
18.2 All awards, damages and other compensation paid by the condemning
authority on account of such taking or condemnation (or sale under threat of
such a taking) shall belong to Landlord, and Tenant hereby assigns to landlord
all rights to such awards, damages and compensation. Tenant agrees not to make
any claim against the Landlord or the condemning authority for any portion of
such award or compensation attributable to damages to the Premises, the value of
the unexpired Lease Term, the loss of profits or goodwill, leasehold
improvements or severance damages. Nothing contained herein, however, shall
prevent Tenant from pursuing a separate claim against the condemning authority
for the value of furnishings, equipment and trade fixtures installed in the
Premises at Tenant's expense and for relocation expenses, provided that such
claim shall in no way diminish the award or compensation payable to or
recoverable by Landlord in connection with such taking or condemnation.
18.3 Notwithstanding anything to the contrary contained herein, if
twenty-five percent (25%) or more of the land or of the Building (excluding the
Land) is taken, condemned, or sold under threat of such a taking, Landlord shall
have the right, in Landlord's sole discretion, to terminate this Lease as of the
date title vests in the governmental or quasi-governmental authority.
ARTICLE XIX
DEFAULT
19.1 The occurrence of any of the following shall constitute a default by
Tenant under this Lease:
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(a) If Tenant shall fail to pay any payment of the Annual Base Rent
or additional rent when due, or shall fail to make due any other payment
required by this Lease, and such failure shall continue for a period of five (5)
days;
(b) If Tenant shall violate or fail to perform any other term,
condition, covenant, or agreement to be performed or observed by Tenant under
this Lease, and such failure shall continue for a period of ten (10) days;
provided, however, that if the violation cannot reasonably be cured within ten
(10) days, Tenant will not be in default if Tenant immediately commences to
cure, and thereafter continues diligently and in good faith until such cure is
completed, further provided that the cure period may not exceed sixty (60) days;
(c) If Tenant shall vacate, abandon, or fail to continuously occupy
the Premises;
(d) An Event of Bankruptcy as specified in Article XX with respect
to Tenant any guarantor of Tenant's obligations under this Lease (a "Guarantor")
or any general partner of Tenant (a "General Partner"); or
(e) A dissolution or liquidation of Tenant.
19.2 If there shall be any default by Tenant under this Lease, including
without limitation any default by Tenant prior to the Lease Commencement Date,
Landlord shall have the right, at its sole option, to terminate this Lease. In
addition, with or without terminating this Lease, Landlord may re-enter,
terminate Tenant's right of possession and take possession of the Premises and
the provisions of this Article XIX shall operate as a notice to quit, any other
notice to quit or of Landlord's intention to re-enter the Premises being hereby
expressly waived. If necessary, Landlord may proceed to recover possession of
the Premises under and by virtue of the laws of the Commonwealth of Virginia, or
by such other proceedings, including re-entry and possession, as may be
applicable. If Landlord elects to terminate this Lease and/or elects to
terminate Tenant's right of possession, everything contained in this Lease on
the part of Landlord to be done and performed shall cease without prejudice,
however, to the right of Landlord to recover from Tenant all rent and other sums
accrued up to the time of termination or recovery of possession by Landlord,
whichever is later. If there shall be any default by Tenant under this Lease,
then whether or not this Lease and/or Tenant's right of possession is terminated
by reason of Tenant's default, Landlord may relet the Premises or any part
thereof, alone or together with other premises, for such term(s) (which may be
greater or less than the period which otherwise would have constituted the
balance of the Lease Term) and on such terms and conditions (which may include
concessions or free rent and alterations of the Premises) as Landlord, in its
sole discretion, may determine, but Landlord shall not be liable for, nor shall
Tenant's obligations hereunder be diminished by reason of, any failure by
Landlord to relet the Premises or any failure by Landlord to collect any rent
due upon such relating. If there shall be any default by Tenant under this
Lease, then whether or not this Lease is terminated by reason of Tenant's
default, Tenant nevertheless shall remain liable for any Annual Base Rent,
additional rent or damages which may be due or sustained prior to such default,
all costs, fees and expenses including, but not limited to, attorney's fees,
brokerage fees, expenses incurred in placing the Premises in first-class
rentable condition, and other costs and expenses incurred by Landlord in pursuit
of its remedies hereunder, or in renting the Premises to other from time to time
(all such Annual Base Rent, additional rent, damages, costs, fees and expenses
are hereinafter referred to as "Termination Damages") and additional damages
(hereinafter referred to as "Liquidated Damages"), which, at the election of
Landlord, shall be either:
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(a) an amount equal to the Annual Base Rent and additional rent which
would have become due during the remainder of the Lease Term, less the amount of
the rental, if any, which Landlord shall receive during such period from others
to whom the Premises may be rented (other than any additional rent received by
Landlord as a result of any failure of such other person to perform any of its
obligations to Landlord), in which case such Liquidated Damages shall be
computed and payable in monthly installments, in advance, on the first day of
each calendar month following Tenant's default and continuing until the date on
which the Lease Term would have expired but for Tenant's default. Separate suits
or actions may be brought to collect any such Liquidated Damages for any
month(s), and such separate suits or action shall not in any manner prejudice
the right of Landlord to collect any Liquidated Damages for any subsequent
month(s) by similar proceedings, or Landlord may defer any suits or actions
until after the expiration of the Lease Term; or
(b) an amount equal to the present value (as of the date of Tenant's
default) of all Annual Base Rent and additional rent which would have become due
during the remainder of the Lease Term, which Liquidated Damages shall be
payable to Landlord in one lump sum on demand. For purposes of this Section
19.2(b), "present value" shall be computed by discounting at a discount rate
equal to one percentage point above the discount rate then in effect at the
Federal Reserve Bank nearest to the Building.
The provisions contained in this Section shall be in addition to, and shall not
prevent the enforcement of, any claim Landlord may have against Tenant for
anticipatory breach of this Lease.
19.3. All rights and remedies of Landlord set forth in this Lease are in
addition to all other rights and remedies available to Landlord at law or in
equity. All rights and remedies available to Landlord pursuant to this Lease or
at law or in equity are expressly declared to be cumulative. The exercise by
Landlord of any such right or remedy shall not prevent the concurrent or
subsequent exercise of any other right or remedy. No delay or failure by
Landlord to exercise or enforce any of Landlord's rights or remedies or Tenant's
obligations shall constitute a waiver of any such rights, remedies or
obligations. Landlord shall not be deemed to have waived any default by Tenant
hereunder unless such waiver expressly is set forth in a written instrument
signed by Landlord. If Landlord waives in writing any default by Tenant, such
waiver shall not be construed as a waiver of any covenant, condition or
agreement set forth in this Lease except as to the specific circumstances
described in such written waiver.
19.4 If Landlord shall institute proceedings against Tenant and a
compromise or settlement thereof shall be made, the same shall not constitute a
waiver of the same or of any other covenant, condition or agreement set forth
herein, nor of any of Landlord's rights hereunder. Neither the payment by Tenant
of a lesser amount than the monthly installment of the Annual Base Rent,
additional rent or of any sums due hereunder nor any endorsement or statement on
any check or letter accompanying a check for payment of rent or other sums
payable hereunder shall be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such rent or other sums or to pursue any other remedy available
to Landlord. No re-entry by Landlord, and no acceptance by Landlord of keys from
Tenant, shall be considered in acceptance of a surrender of this Lease.
19.5 If Tenant defaults in the making of any payment or in the doing of
any act herein required to be made or done by Tenant, then Landlord may, but
shall not be required to, make such payment or do such act. The taking of such
action by Landlord shall not be considered as a cure of such default by
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Tenant or prevent Landlord from pursuing any remedy it is otherwise entitled to
in connection with such default. If Landlord elects to make such payment or do
such act, all costs and expenses incurred by Landlord, plus interest thereon at
a rate (the "Default Rate") equal to the greater of eighteen percent (18%) per
annum or the rate per annum which is five (5) whole percentage points higher
than the prime rate announced from time to time by The Riggs National Bank of
Washington, D.C. from the date incurred by Landlord to the date of payment
thereof by Tenant, shall constitute additional rent due hereunder, provided,
however, that nothing contained herein shall be construed as permitting Landlord
to charge or receive interest in excess of the maximum rate then allowed by law.
If The Riggs National Bank of Washington, D.C. ceases to announce a prime rate
or announces more than one prime rate, then for purposes of determining the
Default Rate, Landlord shall have the right to designate a substitute rate which
Landlord deems comparable.
19.6 If Tenant fails to make any payment of the Annual Base Rent,
additional rent or any other sum on or before the date such payment is due and
payable (without regard to any grace period specified in Section 19.1), Tenant
shall pay to landlord a late charge of five percent (5%) of the amount of such
payment. In addition, such payment and such late fee shall bear interest at the
Default Rate from the date such payment or late fee, respectively, became due to
the date of payment thereof by Tenant; provided, however, that nothing contained
herein shall be construed as permitting Landlord to charge or receive interest
in excess of the maximum rate then allowed by law. Such late charge and interest
shall constitute additional rent due hereunder.
ARTICLE XX
BANKRUPTCY
20.1 The following shall be Events of Bankruptcy under this Lease:
(a) Tenant's, a Guarantor's or a General Partner's becoming
insolvent, as that term is defined in Title 11 of the United States Code (the
"Bankruptcy Code"), or under the insolvency laws of any state, district,
commonwealth or territory of the United States (the "Insolvency Laws");
(b) The appointment of a receiver or custodian for any or all of
Tenant's, a Guarantor's or a General Partner's property or assets, or the
institution of a foreclosure action upon any of Tenant's, a Guarantor's or a
General Partner's real or personal property;
(c) The filing of a voluntary petition by Tenant, a Guarantor or a
General Partner under the provisions of the Bankruptcy Code or Insolvency Laws;
(d) The filing of an involuntary petition against Tenant, a Guarantor
or a General Partner as the subject debtor under the Bankruptcy Code or
Insolvency Laws, which either (i) is not dismissed within thirty (30) days of
filing, or (ii) results in the issuance of an order for relief against the
debtor, or
(e) Tenant's, a Guarantor's or a General Partner's making or
consenting to an assignment for the benefit of creditors or a common law
composition of creditors.
20.2 (a) Upon occurrence of an Event of Bankruptcy, Landlord shall have
all rights and remedies available to Landlord pursuant to Article XIX; provided,
however, that while a case in which Tenant is the subject debtor under the
Bankruptcy Code is pending, Landlord shall not exercise its rights and remedies
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pursuant to Article XIX so long as (i) the Bankruptcy Code prohibits the
exercise of such rights and remedies, and (ii) Tenant or its Trustee in
Bankruptcy (hereinafter referred to as "Trustee") is in compliance with the
provisions of Sections 20.2(b) below.
(b) In the event Tenant becomes the subject debtor in a case pending
under the Bankruptcy Code, Landlord's right to terminate this Lease pursuant
to Section 20.2(a) shall be subject, to the extent required by the Bankruptcy
Code, to any rights of Trustee to assume or assign this Lease pursuant to the
Bankruptcy Code. Trustee shall not have the right to assume or assign this Lease
unless Trustee promptly (i) cures all defaults under this Lease, (ii)
compensates Landlord for monetary damages incurred as a result of such defaults,
(iii) provides adequate assurance of future performance on the part of Tenant as
debtor in possession or on the part of the assignee of Tenant, and (iv) complies
with all other requirements of the Bankruptcy Code. Tenant agrees in advance
that this Lease may be terminated by Landlord in accordance with Section 20.2(a)
if the foregoing criteria for assumption or assignment are not met, or if, after
such assumption or assignment, Tenant, Trustee or such assignee defaults under
this Lease.
ARTICLE XXI
SUBORDINATION, ATTORNMENT AND ESTOPPEL CERTIFICATES
21.1 This Lease is subject and subordinate to the lien, provisions,
operation and effect of any and all mortgages, deeds of trust, ground leases or
other security instruments (collectively, "Mortgages") which may now or
hereafter encumber the Building or the Land, to all funds and all indebtedness
intended to be secured by such Mortgages, and to all and any renewals,
extensions, modifications, recastings or refinancings thereof. The holder of any
Mortgage to which this Lease is subordinate shall have the right (subject to any
required consents or approvals of the holders of superior Mortgages) at any time
to declare this Lease to be superior to the lien, provisions, operation and
effect of such Mortgage and Tenant agrees to execute all documents required by
such holder in confirmation thereof. Landlord shall use its reasonable best
efforts to obtain non-disturbance protection from any future holder of any
Mortgage on the Building, provided that (i) there is no representation or
assurance that non-disturbance protection will be obtained, (ii) Landlord shall
not be required to spend any money or incur any obligation or liability in order
to obtain such non-disturbance, and (iii) Landlord shall not be required to
forego any loan or agreement with a lender or prospective lender due to the
failure to provide non-disturbance.
21.2 In confirmation of the foregoing subordination, Tenant shall, at
Landlord's request, promptly execute any requisite or appropriate certificate or
other document. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificate or other document for or on
behalf of Tenant. If the Building or Landlord's interest therein is sold at a
foreclosure sale or by deed in lieu of foreclosure, and this Lease is not
extinguished upon such sale or by the purchaser following such sale, then, at
the request of such purchase, Tenant shall attorn to such purchase and shall
recognize such purchaser as the landlord under this Lease, and Tenant waives the
provision of any statute or rule of law, now or hereafter in effect, which may
give or purport to give Tenant any right to terminate or otherwise adversely
affect this Lease and the obligations of Tenant hereunder in the event any such
foreclosure proceeding is prosecuted or completed or in the event of any such
sale. Tenant agrees that upon such attornment, such purchaser shall not be (a)
bound by any payment of the Annual Base Rent or additional rent for more than
one (1) month in advance, except
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prepayments in the nature of security for the performance by Tenant of its
obligations under this Lease but only to the extent such prepayments have been
delivered to such purchaser, (b) bound by any amendment of this Lease made
without the consent of any lender providing construction or permanent financing
for the Building, (c) liable for damages for any act or omission of any prior
landlord, or (d) subject to any offsets or defenses which Tenant might have
against any prior landlord; provided, however, that after succeeding to
landlord's interest under this Lease, such purchaser shall perform in accordance
with the terms of this Lease all obligations of Landlord arising after the date
such purchaser acquired title to the Land, the Building or Landlord's interest
therein. Within five (5) days after request by such purchaser, Tenant shall
execute and deliver an instrument or instruments confirming its attornment.
21.3 Tenant understands that the Landlord herein is the lessee under an
underlying lease of the Building of which the leased premises and any
improvements thereon demised herein form a part and that this Lease is subject
and subordinate to such underlying lease and any extensions or modifications
thereof. Tenant covenants and agrees that if, by reason of any default upon the
part of the Landlord herein as lessee under such underlying lease, the
underlying lease is terminated by summary proceedings, voluntary agreement or as
otherwise permitted or required by law, the Tenant herein will attorn to and
recognize the lessor under such underlying lease as Tenant's landlord under this
Lease. Tenant further agrees to execute and deliver at any time, upon request of
the lessor under the underlying lease or of any person, firm or corporation
which shall succeed to the interest of such lessor, an instrument to evidence
such attornment. In the event Landlord sells, conveys or otherwise transfers its
interest in the Building or any portion thereof containing the leased premises,
or conveys its interest in Landlord's sublease, or if Landlord's interest is
acquired by Sublessor, this Lease shall remain in full force and effect and
Tenant hereby attorns to, and covenants and agrees to execute an instrument in
writing reasonably satisfactory to the new owner or sublessor whereby Tenant
attorns to such successor in interest and recognizes such successor as the
Landlord under this Lease. Payment by or performance of this Lease by any
person, firm or corporation claiming an interest in this lease or the leased
premises by, through or under Tenant without Landlord's consent in writing shall
not constitute an attornment or create an interest in this Lease or the leased
premises.
21.4 Tenant shall, without charge, at any time and from time to time,
within thirty (30) days after request therefor by Landlord, Mortgagee, or any
purchaser of the Building, execute, acknowledge and deliver to such requesting
party a written estoppel certificate certifying, as of the date of such estoppel
certificate, the following: (i) that this Lease is unmodified and in full force
and effect (or if modified, that the Lease is in full force and effect as
modified and setting forth such modifications; (ii) that the Term has commenced
(and setting forth the Commencement Date and Expiration Date); (iii) that Tenant
is presently occupying the Premises; (iv) the amounts of Base Rent and
Additional Rent currently due and payable by Tenant (or, if not, specifying the
same); (v) that any Alterations required by the Lease to have been made by
Landlord, if any, have been made to the satisfaction of Tenant (or, if not,
specifying the same); (vi) that there are no existing set-offs, charges, liens,
claims or defenses against the enforcement of any right hereunder, including,
without limitation, Basic Rent or Additional Rent (or, if alleged, specifying
the same in detail); (vii) that no Basic Rent (except the first installment
thereof) has been paid more than thirty (30) days in advance of its due date;
(viii) that Tenant has no knowledge of any then uncured default by Landlord of
its obligations under this Lease, (or, if Tenant has such knowledge, specifying
the same in detail); (ix)
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that Tenant is not in default; (x) that the address to which notices to Tenant
should be sent is as set forth in the Lease (or, if not, specifying the correct
address); and (xi) any other reasonable certifications requested by Landlord.
ARTICLE XXII
HOLDING OVER
22.1 Tenant acknowledges that it is extremely important that Landlord have
substantial advance notice of the date on which Tenant will vacate the Premises,
both because Landlord will require an extensive period to locate a replacement
tenant and because Landlord will plan its entire leasing and renovation program
for the Building in reliance on the expiration dates of this Lease and other
leases. Tenant also acknowledges that if Tenant fails to surrender the premises
at the expiration or earlier termination of the Lease Term, it will be
conclusively presumed that the value to Tenant of remaining in possession of the
Premises, and the loss that will be suffered by Landlord as a result thereof,
far exceed the amount of the Annual Base Rent and additional rent that would
have been payable had the Lease Term continued during such holdover period.
Therefore, if Tenant shall not immediately surrender the Premises on the date of
the expiration or earlier termination of the Lease Term, the rent payable by
Tenant hereunder shall be increased to equal the greater of (a) fair market rent
for the Premises, or (b) one hundred and fifty percent (150%) of the Annual Base
Rent, additional rent, and other sums that would have been payable pursuant to
the terms of this Lease if the Lease Term had continued during such holdover
period. Such rent shall be computed by Landlord on a monthly basis and shall be
payable by Tenant on the first day of such holdover period and the first day of
each calendar month thereafter during such holdover period until the Premises
have been vacated by Tenant. Landlord's acceptance of such rent from Tenant
shall not in any manner impair or adversely affect Landlord's other rights and
remedies hereunder, including, but not limited to, (i) Landlord's right to evict
Tenant from the Premises, and (ii) Landlord's right to recover damages pursuant
to this Lease and such other damages as are available to Landlord at law or in
equity.
ARTICLE XXIII
COVENANTS OF LANDLORD
23.1 Landlord covenants that it has the right to make this Lease for the
term aforesaid, and that if Tenant shall pay all rent when due and punctually
perform all the covenants, terms, conditions and agreements of this Lease to be
performed by Tenant, Tenant shall, during the Lease Term, freely, peaceably and
quietly occupy and enjoy the full possession of the Premises without hindrance
by Landlord or any party claiming through or under Landlord, subject, however,
to the provisions of this Lease, including but not limited to Rules and
Regulations and the provisions of Section 23.2 hereof.
23.2 Landlord hereby reserves to itself and its successors and assigns the
following rights (all of which are hereby consented to by Tenant): (i) to
change the street address and/or name of the Building and/or the arrangement
and/or location of entrances, passageways, doors, doorways, corridors,
elevators, stairs, toilets, or other public parts of the Building; (ii) to
erect, use and maintain pipes and conduits in to and through the Premises; (iii)
to grant to anyone the exclusive right to conduct any particular business or
undertaking in the Building whether or not consistent with Tenant's permitted
use of the Premises; (iv) the exclusive right to use and/or lease the roof
areas, and the sidewalks and other exterior areas; (v) the right to resubdivide
the land or to combine the land with other lands; and (vi) the
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right to relocate any parking areas designated for Tenant's use, if any.
Landlord may exercise any or all of the foregoing rights without being deemed to
be guilty of an eviction, actual or constructive, or a disturbance or
interruption of the business of Tenant or of Tenant's use or occupancy of the
Premises.
23.3 Tenant acknowledges and agrees that all rights of Tenant to use and
occupy the Premises and all rights, terms and conditions of this Lease are in
all respects subject to all applicable zoning and land use restrictions, to all
covenants, conditions, and restrictions of record, and to any master lease or
prior lease pertaining to the Building. In the event that this Lease is
terminated due to the termination of Landlord's lease for the Building, unless
due to any act or omission of Tenant or Tenant's agents, Landlord will indemnify
and hold Tenant harmless from any costs, damages, or losses directly arising
therefrom, such as moving costs (but excluding consequential damages).
Landlord's liability for additional rent, if any, shall not exceed 10% of the
monthly Base Rent and proportionate share of Operating Charges then due under
this Lease, per month, and shall not extend beyond the remainder of the Lease
Term.
ARTICLE XXIV
SECURITY DEPOSIT
24.1 Simultaneously with the execution of this Lease, Tenant shall deposit
with Landlord the Security deposit (as defined in Section 1.1 (g)). The Security
Deposit shall be security for the performance by Tenant of all of Tenant's
obligations, covenants, conditions and agreements under this Lease. Landlord
shall not be required to maintain the Security Deposit in a separate account.
Landlord shall have no fiduciary responsibilities or trust obligations
whatsoever with regard to the Security Deposit and shall not assume the duties
of a trustee for the Security. Except as may be required by law, Tenant shall
not be entitled to interest on the Security Deposit. Within approximately thirty
(30) days after the later of the expiration of the Lease Term or Tenant's
vacating the Premises, Landlord shall return the Security Deposit to Tenant,
less such portion thereof as Landlord shall have appropriated to satisfy any
default by Tenant hereunder. In the event of any default by Tenant hereunder,
Landlord shall have the right, but shall not be obligated, to use, apply or
retain all or any portion of the Security Deposit for (a) the payment of any
Annual Base Rent or additional rent or any other sum as to which Tenant is in
default, (b) the payment of any amount which Landlord may spend or become
obligated to spend to repair physical damage to the Premises or the Building
pursuant to Article VIII hereof, or (c) the payment of any amount Landlord may
spend or become obligated to spend, or for the compensation of Landlord for any
losses incurred, by reason of Tenant's default, including, but not limited to,
any damage or deficiency arising in connection with the reletting of the
Premises. The Security will not be a limitation on Landlord's damages or other
rights and remedies available under the Lease, or at law or equity, nor shall
the Security be a payment of liquidated damages. If any portion of the Security
Deposit is so used or applied, within three (3) business days after written
notice to Tenant of such use or application, Tenant shall deposit with Landlord
cash in an amount sufficient to restore the Security Deposit to its original
amount, and Tenant's failure to do so shall constitute a default under this
Lease.
24.2 If Tenant is in default under this Lease more than two (2) times
within any twelve-month period, irrespective of whether or not such default is
cured, then, without limiting Landlord's other rights and remedies provided for
in this Lease or at law or equity, Tenant shall, upon demand, deposit with
Landlord an
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additional security deposit equal to an amount equal to the greater of:
a. two (2) times the original Security Deposit, or
b. two (2) months' Minimum Rent, which shall be paid by Tenant to
Landlord forthwith on demand.
24.3 If Landlord transfers the Security Deposit to any purchaser or
transferee of Landlord's interest in the Building, Tenant shall look only to
such purchaser or transferee for the return of the Security Deposit, and
Landlord shall be released from all liability to Tenant for the return of the
Security Deposit.
ARTICLE XXV
TENANT'S COVENANTS REGARDING HAZARDOUS MATERIALS
25.1 As used in this Lease, the term "Hazardous Material" means any
flammable items, explosives, radioactive materials, hazardous or toxic
substances, material or waste or related materials, including any substances
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "infectious wastes", "hazardous materials", or "toxic substances" now
or subsequently regulated under any applicable federal, state or local laws or
regulations including, without limitation, oil, petroleum-based products,
paints, solvents, lead, cyanide, DDT, printing inks, acids, pesticides, ammonia
compounds and other chemical products, asbestos, PCBs and similar compounds, and
including any different products and materials which are subsequently found to
have adverse effects on the environment or the health and safety of persons.
25.2 Tenant shall not cause or permit any Hazardous Material to be
generated, produced, brought upon, used, stored, treated or disposed of in or
about the Premises, the Building or the land by Tenant or its agents or
sublessees without the prior written consent of Landlord. Landlord shall be
entitled to take into account such factors or facts as Landlord may in its sole
and exclusive discretion determine to be relevant in determining whether to
grant, condition or withhold consent to Tenant's proposed activity with respect
to Hazardous Material and Tenant shall indemnify, defend and hold Landlord
harmless from any and all actions (including, without limitation, remedial or
enforcement actions of any kind, administrative or judicial proceedings, and
orders or judgments arising out of or resulting therefrom), costs, claims,
damages (including, without limitation, punitive damages), expenses (including,
without limitation, attorneys', consultants' and experts' fees, court costs and
amounts paid in settlement of any claims or actions), fines, forfeitures or
other civil, administrative or criminal penalties, injunctive or other relief
(whether or not based upon personal injury, property damage, contamination of,
or adverse effects upon, the environment, water tables or natural resources),
liabilities or losses (economic or other) arising from a breach of this
prohibition by Tenant, its agents or sublessees. In no event, however, shall
Landlord be required to consent to the installation or use of any storage tanks
in, on or under the Premises, the Building or the land. If Landlord consents to
the generation, production, use, storage, treatment or disposal of Hazardous
Materials in or about the Premises by Tenant, its agents or sublessees, then, in
addition to any other requirements or conditions that Landlord may impose in
connection with such consent, (1) Tenant promptly shall deliver to Landlord
copies of all permits, approvals, filings, and reports reflecting the legal and
proper generation, production, use, storage, treatment or disposal of all
Hazardous Materials generated, used, stored, treated or removed from the
Premises, the Building and the land and, upon Landlord's request, copies of all
hazardous waste manifests relating thereto, and (2) upon expiration or
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earlier termination of this Lease, Tenant shall cause all Hazardous Materials
arising out of or related to the use or occupancy of the Premises by Tenant or
its agents, affiliates, sublessees, or assigns to be removed from the Premises,
the Building and the land and transported for use, storage or disposal in
accordance with all applicable laws, regulations and ordinances and Tenant shall
provide Landlord with evidence reasonably satisfactory to Landlord of the same.
25.3 In the event that Hazardous Materials are discovered upon, in, or
under the Premises, and the applicable governmental agency or entity having
jurisdiction over the Premises requires the removal of such Hazardous Materials,
Tenant shall be responsible for removing those Hazardous Materials, whether or
not related to the use or occupancy of the Premises by Tenant or its agents,
affiliates, customers, employees, business associates or assigns.
Notwithstanding the foregoing, Tenant shall not take any remedial action in or
about the Premises, the Building or the land, nor enter into any settlement
agreement, consent decree or other compromise with respect to any claims
relating to any Hazardous Material in any way connected with the Premises, the
Building or the land without first notifying Landlord of Tenant's intention to
do so and affording Landlord the opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect thereof.
Tenant shall immediately notify Landlord in writing of: (i) any spill, release,
discharge or disposal of any Hazardous Material in, on or under the Premises,
the Building, the land or any portion thereof, (ii) any enforcement, cleanup,
removal or other governmental or regulatory action instituted, contemplated, or
threatened pursuant to any hazardous Materials Laws; (iii) any claim made or
threatened by any person against Tenant, the Premises, the Building or the land
relating to damage, contribution, cost recovery, compensation, loss or injury
resulting from or claimed to result from any Hazardous materials; and (iv) any
reports made to any environmental agency arising out of or in connection with
any hazardous Materials in, on or removed from the Premises, the Building or the
land, including any complaints, notices, warnings, reports or asserted
violations in connection therewith. Tenant also shall supply to Landlord as
promptly as possible, and in any event within five (5) business days after
Tenant first receives or sends the same, copies of all claims, reports,
complaints, notices, warnings or asserted violations relating in any way to the
Premises, the Building, the land or Tenant's use thereof.
25.4 The respective rights and obligations of Landlord and Tenant under
this Article 25 shall survive the expiration or earlier termination of this
Lease.
ARTICLE XXVI
GENERAL PROVISIONS
26.1 Tenant acknowledges that neither Landlord nor any broker, agent or
employee of Landlord has made any representations or promises with respect to
the Premises or the Building except as herein expressly set forth, and no
rights, privileges, easements or licenses are being acquired by Tenant except as
herein expressly set forth. Tenant, by taking possession of the Premises shall
accept the Premises and the Building "AS IS,", and such taking of possession
shall be conclusive evidence that the Premises and the Building are in good and
satisfactory condition at the time of such taking of possession (except for
latent defects and punch-list items reported to Landlord within thirty (30) days
of tender of possession).
26.2 Nothing contained in this Lease shall be construed as creating a
partnership or joint venture of or between Landlord
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and Tenant, or to create any other relationship between the parties hereto other
than that of Landlord and Tenant.
26.3 Landlord and Tenant each represents and warrants to the other that
neither of them has employed or dealt with any broker, agent or finder, in
carrying on the negotiations relating to this Lease, other than The Donohoe
Companies and Jefferson/LBG, LLC ("Broker"). Tenant shall indemnify and hold
Landlord harmless from and against any claim or claims for brokerage or other
commissions asserted by any broker, agent or finder engaged by Tenant or with
whom Tenant has dealt, other than the Broker(s).
26.4 If Tenant fails or refuses to execute and deliver any instrument or
certificate required to be delivered by Tenant hereunder (including, without
limitation, any instrument or certificate required under Article 21 hereof)
within the time periods required herein, then Tenant hereby appoints Landlord as
its attorney-in-fact with full power and authority to execute and deliver such
instrument or certificate for and in the name of Tenant. Any such certificate,
instrument, or statement delivered by Tenant may be relied upon by any owner of
the Building or the Land, any prospective purchaser of the Building or the Land,
any Mortgagee or prospective Mortgagee of the Building or the land or of
Landlord's interest therein, any prospective assignee any of such Mortgagee or
any other person or entity. Tenant acknowledges that time is of the essence to
the delivery of such certificates, instruments, or statements by Tenant, and
that Tenant's failure or refusal to do so may result in substantial damages to
Landlord resulting from, for example, delays suffered by Landlord in obtaining
financing or refinancing secured by the Building. Tenant shall be liable for all
such damages suffered by Landlord.
26.5 Tenant hereby waives trial by jury in any action, proceeding, claim
or counterclaim brought by either party in connection with any matter arising
out of or in any way connected with this Lease, the relationship of Landlord and
Tenant hereunder, Tenant's use or occupancy of the Premises, and/or any claim of
injury or damage. Landlord and Tenant each hereby waives any objection to the
venue of any action filed by either party in any court situated in Fairfax
County, Virginia, and each party further waives any right, claim or power, under
the doctrine of forum non conveniens or otherwise, to transfer any such action
filed by any party in a court situated in Fairfax County to any other court.
26.6 All notices or other communications required hereunder shall be in
writing and shall be deemed duly given if delivered in person (with receipt
therefor), or if sent by certified or registered mail, return receipt requested
postage prepaid, to the following address (i) if to Landlord: Spectra-4, L.L.P.,
11491 Sunset Hills Road, Reston, Virginia 22090, with copy to Rees, Broome &
Diaz, P.C., 8133 Leesburg Pike, Ninth Floor, Vienna, Virginia 22182, Attention:
Joel M. Birken, Esquire; (ii) if to Tenant, at the Tenant Address for notices
(as defined in Section 1.1 (h)). Either party may change its address for the
giving of notices by notice given in accordance with this Section.
Notwithstanding the foregoing, no notice shall be deemed void or insufficient if
(i) the party for whom such notice is intended admits to its receipt or (ii)
receipt of such notice is otherwise proven.
26.7 Each provision of this Lease shall be valid and enforced to the
fullest extent permitted by law. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, such provision shall be deemed to be replaced by the valid and
enforceable provision most substantively similar to such invalid or
unenforceable provision, and the remainder of this Lease, or the application of
such provision to persons or circumstances
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other than those as to which it is invalid or unenforceable, shall not be
affected thereby.
26.8 Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places herein in which the content may require such substitution.
26.9 The provisions of this Lease shall be binding upon, and shall inure
to the benefit of, the parties hereto and each of their representatives,
successors and assigns, subject to the provision hereof restricting assignment
or subletting by Tenant.
26.10 This Lease contains and embodies the entire agreement of the
parties hereto and supersedes all prior agreements, negotiations and discussions
between the parties hereto. Any representation, inducement or agreement that is
not contained in this Lease shall not be of any force or effect. This Lease may
not be modified or changed in whole or in part in any manner other than by an
instrument in writing duly signed by both parties hereto.
26.11 This Lease shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia.
26.12 Article and section headings are used herein for the convenience of
reference and shall not be considered when construing or interpreting this
Lease.
26.13 The submission of an unsigned copy of this document to tenant for
Tenant's consideration does not constitute an offer to lease the Premises or an
option to or for the Premises. This document shall become effective and binding
only upon the execution and delivery of this Lease by both Landlord and Tenant.
26.14 Time is of the essence with respect to each of Tenant's obligations
under this Lease.
26.15 This Lease is being executed in multiple counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.
26.16 This Lease shall not be recorded except that upon the request of
Landlord, Tenant agrees to execute, in recordable form, a short-form memorandum
of this Lease, provided that such memorandum shall not contain any of the
specific rental terms set forth herein. Such memorandum may be recorded at
Landlord's expense in the land records of the Commonwealth of Virginia.
26.17 Landlord reserves the right, without the consent of Tenant, to make
reasonable changes and modifications to the plans and specifications for the
Building, provided that such changes or modifications do not change the
character of the Building.
26.18 In the event of dispute, the rentable area in the Building and in the
Premises shall be determined by Landlord's architect, whose determination shall
be final.
26.19 Except as otherwise provided in this Lease, any additional rent or
other sum owner due Tenant to Landlord, and any cost, expense, damage or
liability incurred by Landlord for which tenant is liable, shall be paid by
Tenant to Landlord not later than the later of (a) ten (10) days after the date
Landlord notified Tenant of the amount of such additional rent, sum, cost,
expense, damage or liability, or (b) the first day of the first calendar month
following the date Landlord so notifies Tenant; provided, however, that if
Landlord so notifies Tenant prior to the commencement or after the expiration or
earlier termination of the Lease Term, such additional rent, sum, expense,
damage or
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liability shall be paid by Tenant to Landlord not later than ten (10) days after
Landlord so notifies Tenant.
26.20 Any liability of Tenant to Landlord existing hereunder at the
expiration or earlier termination of the Lease Term shall survive such
expiration or earlier termination.
26.21 In the event Landlord is in any way delayed, interrupted or prevented
from performing any of its obligations under this Lease, and such delay,
interruption or prevention is due to fire, act of God, governmental act or
failure to act, strike, labor dispute, inability to procure materials, or any
other cause beyond Landlord's reasonable control (whether similar or
dissimilar), then the time for performance of the affected obligation(s) by
Landlord shall be excused for the period of the delay and extended for a period
equivalent to the period of such delay, interruption or prevention.
IN WITNESS WHEREOF, Landlord and Tenant have set their hands and
seals upon this Lease on the day and year first above written.
LANDLORD:
SPECTRA-4, L.L.P.
By: /s/ PHILIP S. HUNTER [SEAL]
----------------------
TENANT:
NETSTART, INC.
By: /s/ ROBERT McGOVERN [SEAL]
---------------------
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TENANT IMPROVEMENT ADDENDUM
Tenant shall take Premises in its as-is condition. Tenant further agrees
to perform Tenant Improvements in the Premises in the amount of $64,000.00
during the period from September 27, 1996 to September 27, 1997. This work shall
include, by way of example only and not limitation, construction, carpeting,
painting, and permanent wiring, and shall exclude by way of example only and not
limitation, telephone systems, move related costs, stationery, etc. and shall be
confirmed by paid invoices from contractors. In the event Tenant fails to
perform Tenant Improvement as outlined herein, the base rent shall then increase
September 1, 1997 to $118,781.00 and this shall be the amount subject to
adjustment pursuant to Section 4.2.
Tenant, at Tenant's sole cost and expense, may install signage on the
exterior of the Building, subject to Landlord, county and governmental approval.
The size of said signage shall be commensurate with a tenant occupying 1/3 of
the Building.
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OPTION TO RENEW
Tenant shall have at the end of the Lease Term, two (2) three (3)-year
renewal options, if during the Lease Term there have been no events of default
by providing the Landlord with six (6) month prior written notice. The "Annual
Base Rent" for these renewal terms shall be mutually agreed upon. In the event
Landlord and Tenant cannot mutually agree upon an "Annual Base Rent" for these
renewal terms, the 3 Broker Method will be utilized.
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OPTION TO EXPAND
Tenant may periodically request from Landlord a listing of available
space within the Building.
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FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("First Amendment") is made and entered
into this 30th day of December, 1996, by and between SPECTRA-4, L.L.P., a
Virginia limited liability partnership ("Landlord") and NETSTART, INC., a
Delaware corporation authorized to conduct business in the Commonwealth of
Virginia ("Tenant").
WHEREAS, Landlord and Tenant are parties to a certain Lease Agreement,
dated as of September 11, 1996 (hereinafter referred to as the "Lease") for the
rental of a certain premises known as Suite 210, at 11495 Sunset Hills Road,
Reston, Virginia, as further defined in the Lease, which definition is
incorporated herein (the "Initial Premises"); and
WHEREAS, Tenant wishes to add additional space to the Premises, and the
Landlord and Tenant wish to memorialize certain agreements between them with
respect to the Lease;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
1. Additional Space: Effective as of February 1, 1997 (the "First
Amendment Commencement Date"), the space identified on Exhibit A attached
hereto, containing approximately 2,913 rentable square feet (the "First
Amendment Space") shall be added to the Premises. Effective as of the First
Amendment Commencement Date, Section 1.1(f) of the Lease is hereby amended to
provide that the term "Premises" means the Initial Premises and the First
Amendment Space.
2. Modification of Base Rent: Effective as of the First Amendment
Commencement Date, Section 1.1(a) of the Lease is amended to read as follows:
(a) The "Annual Base Rent" shall mean One Hundred and Fifty
Four Thousand Nine Hundred and Ninety Four and 50/100 Dollars
($154,994.50), which amount is subject to adjustment pursuant to Section
4.2 below.
3. Modification of Proportionate Share: Effective as of the First
Amendment Commencement Date, Section 1.1(j) of the Lease is amended to read as
follows:
(j) "Proportionate Share" shall mean 29.3% (being 12,013 square
feet divided by 41,000 square feet).
4. Acceptance of First Amendment Space: Landlord shall tender the
First Amendment Space broom-clean, with all trash and debris removed. Other than
the foregoing, Landlord has no
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obligation or undertaking of any kind whatsoever to perform any alterations,
construction, improvements, or decorations of any kind whatsoever in the First
Amendment Space. Tenant acknowledges that Tenant is currently in possession of
the Initial Premises, that neither Landlord nor any broker, agent or employee of
Landlord has made any representations or promises with respect to the Premises
or the Building, and no rights, privileges, easements or licenses are being
acquired by Tenant except as herein expressly set forth. Tenant, by taking
possession of the First Amendment Space shall accept such First Amendment Space
"AS IS,", and such taking of possession shall be conclusive evidence that the
First Amendment Space is in good and satisfactory condition at the time of such
taking of possession.
5. Correction of Typographical Error: In the last sentence of Section
5.2(a) of the Lease, the phrase "calendar year 19957" is corrected to read
"calendar year 1997".
6. No Further Modification of Lease: The modifications to the Lease
set forth herein are the only modifications agreed to by and between Landlord
and Tenant. Except as expressly set forth herein, the Lease is unmodified,
remains in full force and effect, and continues as a binding and enforceable
agreement between the parties hereto.
7. Miscellaneous Provisions:
(a) No Waiver of Breach: The waiver or forbearance by Landlord of a
breach of any provision of the Lease, as amended by this First Amendment, shall
not operate or be construed as a waiver of any subsequent breach.
(b) Incorporation of Recitations: The recitations set forth on the
first page of this First Amendment are incorporated into this First Amendment
and made a part hereof, as if fully set forth herein.
(c) Governing Law: This First Amendment shall be construed and
administered in accordance with the laws of the United States of America and the
Commonwealth of Virginia.
(d) Severability: In the event that any one or more of the provisions
of this First Amendment shall for any reason be held to be invalid, illegal, or
unenforceable, the remaining provisions of this First Amendment shall be
unimpaired, and shall continue in full force and effect.
(e) Singular and plural, genders: The singular shall be substituted
for the plural, and any gender or the neuter for any other gender, as
appropriate.
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(f) Construction: This First Amendment shall be interpreted in
accordance with its plain meaning, and the rule that ambiguities shall be
construed against the drafter of the document shall not apply in connection with
the construction or interpretation hereof.
(g) Counterparts: This First Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(h) No Binding Effect Until Execution and Delivery. The submission of
this First Amendment to Tenant is not an offer. This instrument is not effective
as a Lease, or modification or extension of the Lease, or otherwise unless and
until executed by and distributed to both Landlord and Tenant.
(i) Entire Agreement: This First Amendment contains the entire
understanding of the parties with respect to the extension or modification of
the Lease. The Lease and this First Amendment contains the complete agreement of
the parties. All prior promises, understandings, or agreements relating thereto
are merged herein. The Lease and this First Amendment may not be changed orally,
but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, or discharge is sought.
IN WITNESS WHEREOF, the parties have set their hands and seals on the day
and year first above written.
WITNESS: LANDLORD:
SPECTRA-4, L.L.P.
/s/ VIRGINIA L. BACA By: /s/ PHILIP S. HUNTER (SEAL)
- --------------------- ------------------------
Printed Name: Philip S. Hunter
--------------------
Title: Managing Partner
---------------------------
WITNESS: TENANT:
NETSTART, INC.
By: /s/ ROBERT McGOVERN (SEAL)
- --------------------- ------------------------
Printed Name: Robert McGovern
--------------------
Title: President & CEO
---------------------------
3
<PAGE> 41
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE ("Second Amendment") is made and entered
into this 14th day of March, 1997, by and between SPECTRA-4, L.L.P., a Virginia
limited liability partnership ("Landlord") and NETSTART, INC., a Delaware
corporation authorized to conduct business in the Commonwealth of Virginia
("Tenant").
WHEREAS, Landlord and Tenant are parties to a certain Lease Agreement,
dated as of September 11, 1996, as amended by the First Amendment to Lease,
dated as of December 30, 1996 (hereinafter collectively referred to as the
"Lease") for the rental of a certain premises known as Suite 210, at 11495
Sunset Hills Road, Reston, Virginia, as further defined in the Lease, which
definition is incorporated herein (the "Initial Premises") and the additional
space identified in the First Amendment (the "First Amendment Space"); and
WHEREAS, Tenant wishes to add additional space to the Premises, and the
Landlord and Tenant wish to memorialize certain agreements between them with
respect to the Lease;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
1. Additional Space: Effective as of March 15, 1997 (the "Second
Amendment Commencement Date"), the space identified as Suite 201 on Exhibit A
attached hereto, containing approximately 2,447 rentable square feet (the
"Second Amendment Space") shall be added to the Premises. Effective as of the
Second Amendment Commencement Date, Section 1.1(f) of the Lease is hereby
amended to provide that the term "Premises" means the Initial Premises, the
First Amendment Space, and the Second Amendment Space.
2. Modification of Base Rent: Effective as of the Second Amendment
Commencement Date, Section 1.1(a) of the Lease is amended to read as follows:
(a) The "Annual Base Rent" shall mean One Hundred and Eighty
Nine Thousand Eight Hundred and Sixty Four and 25/100 Dollars
($189,864.25), which amount is subject to adjustment pursuant to Section
4.2 below.
3. First Month Rent: On or before the Second Amendment Commencement
Date, Tenant shall pay Landlord the sum of $1,452.91, being the base rent for
the Second Amendment Space from March 15, 1997 to March 31, 1997. On or before
April 1, 1997, and on or before the first day of each month thereafter, Tenant
shall then pay the monthly installment of Annual Base Rent, as set forth in
Paragraph 2 above.
<PAGE> 42
4. Modification of Proportionate Share: Effective as of the First
Amendment Commencement Date, Section 1.1(j) of the Lease is amended to read as
follows:
(j) "Proportionate Share" shall mean 35.3% (being 14,460 square
feet divided by 41,000 square feet).
5. Acceptance of Second Amendment Space: Landlord shall tender the
Second Amendment Space broom-clean, with all trash and debris removed. Other
than the foregoing, Landlord has no obligation or undertaking of any kind
whatsoever to perform any alterations, construction, improvements, or
decorations of any kind whatsoever in the Second Amendment Space. Tenant
acknowledges that Tenant is currently in possession of the Initial Premises and
the First Amendment Space, that neither Landlord nor any broker, agent or
employee of Landlord has made any representations or promises with respect to
the Premises or the Building, and no rights, privileges, easements or licenses
are being acquired by Tenant except as herein expressly set forth. Tenant, by
taking possession of the Second Amendment Space shall accept such Second
Amendment Space "AS IS,", and such taking of possession shall be conclusive
evidence that the Second Amendment Space is in good and satisfactory condition
at the time of such taking of possession.
6. Security Deposit:
(a) Upon execution of this Second Amendment, Tenant shall deposit with
the Landlord the sum of Two Thousand Nine Hundred and Five and 81/100 Dollars
($2,905.81), as an additional security deposit.
(b) Upon receipt of the additional deposit, Section 1.1(g) shall be
amended to read as follows:
(g) The "Security Deposit" shall mean Twelve Thousand Four
Hundred and Twenty Three and 59/100 Dollars ($12,423.59)
7. No Further Modification of Lease: The modifications to the Lease
set forth herein are the only modifications agreed to by and between Landlord
and Tenant. Except as expressly set forth herein, the Lease is unmodified,
remains in full force and effect, and continues as a binding and enforceable
agreement between the parties hereto.
8. Miscellaneous Provisions:
(a) No Waiver of Breach: The waiver or forbearance by Landlord of a
breach of any provision of the Lease, as amended by this Second Amendment, shall
not operate or be construed as a waiver of any subsequent breach.
2
<PAGE> 43
(b) Incorporation of Recitations: The recitations set forth on the
first page of this Second Amendment are incorporated into this Second Amendment
and made a part hereof, as if fully set forth herein.
(c) Governing Law: This Second Amendment shall be construed and
administered in accordance with the laws of the United States of America and the
Commonwealth of Virginia.
(d) Severability: In the event that any one or more of the provisions
of this Second Amendment shall for any reason be held to be invalid, illegal, or
unenforceable, the remaining provisions of this Second Amendment shall be
unimpaired, and shall continue in full force and effect.
(e) Singular and plural, genders: The singular shall be substituted
for the plural, and any gender or the neuter for any other gender, as
appropriate.
(f) Construction: This Second Amendment shall be interpreted in
accordance with its plain meaning, and the rule that ambiguities shall be
construed against the drafter of the document shall not apply in connection with
the construction or interpretation hereof.
(g) Counterparts: This Second Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(h) No Binding Effect Until Execution and Delivery. The submission of
this Second Amendment to Tenant is not an offer. This instrument is not
effective as a Lease, or modification or extension of the Lease, or otherwise
unless and until executed by and distributed to both Landlord and Tenant.
(i) Entire Agreement: This Second Amendment contains the entire
understanding of the parties with respect to the extension or modification of
the Lease. The Lease (as modified by the First Amendment and the Second
Amendment) contains the complete agreement of the parties. All prior promises,
understandings, or agreements relating thereto are merged herein. The Lease, as
modified by the First Amendment and the Second Amendment, may not be changed
orally, but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, or discharge is sought.
IN WITNESS WHEREOF, the parties have set their hands and seals on the day
and year first above written.
3
<PAGE> 44
WITNESS: LANDLORD:
SPECTRA-4, L.L.P.
By: (SEAL)
- --------------------- ------------------------
Printed Name:
--------------------
Title:
---------------------------
WITNESS: TENANT:
NETSTART, INC.
/s/ RICHARD WATHEN By: /s/ ROBERT McGOVERN (SEAL)
- --------------------- ------------------------
Printed Name: Robert McGovern
--------------------
Title: President & CEO
---------------------------
4
<PAGE> 45
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE ("Third Amendment") is made and entered
into this 7th day of August, 1997, by and between SPECTRA-4, L.L.P., a
Virginia limited liability partnership ("Landlord") and NETSTART, INC., a
Delaware corporation authorized to conduct business in the Commonwealth of
Virginia ("Tenant").
WHEREAS, Landlord and Tenant are parties to a certain Lease Agreement,
dated as of September 11, 1996, as amended by the First Amendment to Lease,
dated as of December 30, 1996, and the Second Amendment to Lease, dated as of
March 14, 1997, (hereinafter collectively known as the "Lease") for the rental
of certain premises known as Suite 210, at 11495 Sunset Hills Road, Reston,
Virginia, as further defined in the Lease. which definition is incorporated
herein (the "Initial Premises") and the additional space identified in the
First Amendment (the "First Amendment Space") and the additional space
identified in the Second Amendment ("Second Amendment Space"); and
WHEREAS, Tenant wishes to add additional space to the Premises, and the
Landlord and Tenant wish to memorialize certain agreements between them with
respect to the Lease;
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
1. Additional Space: Effective as of August 10, 1997 (the "Third Amendment
Commencement Date"), the space identified as Suite 125 on Exhibit A attached
hereto, containing approximately 2,422 rentable square feet (the "Third
Amendment Space") shall be added to the Premises. Effective as of the Third
Amendment Commencement Date, Section 1.1(f) of the Lease is hereby amended to
provide that the term "Premises" means the Initial Premises, the First
Amendment Space, the Second Amendment Space, and the Third Amendment Space.
2. Modification of Base Rental: Effective as of the Third Amendment
Commencement Date, Section 1.1(a) of the Lease is amended to read as follows:
(a) The "Annual Base Rent" shall mean Two Hundred Eleven Thousand
Six Hundred Sixty-Two and 25/100 Dollars ($211,662.25), which amount is subject
to adjustment pursuant to Section 4.2 below.
<PAGE> 46
3. First Month's Rent: On or before the Third Amendment
Commencement Date, Tenant shall pay Landlord the sum of One Thousand Two
Hundred Eleven and 00/100 Dollars ($1,211.00), being the base rent for the
Third Amendment Space from August 10, 1997 to August 30, 1997. On or
before September 1, 1997, and on or before the first day of each month
thereafter, Tenant shall then pay the monthly installment of Annual Base Rent,
as set forth in Paragraph 2 above.
4. Modification of Proportionate Share: Effective as of the Third
Amendment Commencement Date, Section 1.1(j) of the Lease is amended to read as
follows:
(j) "Proportionate Share" shall mean 41.2% (being 16,882 square
feet divided by 41,000 square feet).
5. Acceptance of Third Amendment Space: Landlord shall tender the
Third Amendment Space broom-clean, with all trash and debris removed. Other
than the foregoing, Landlord has no obligation or undertaking of any kind
whatsoever to perform any alterations, construction, improvements, or
decorations of any kind whatsoever in the Third Amendment Space. Tenant
acknowledges that Tenant is currently in possession of the Initial Premises,
the First Amendment Space and the Second Amendment Space, that neither Landlord
nor any broker, agent, or employee of Landlord has made any representations or
promises with respect to the Premises or the Building, and no rights,
privileges, easements, or licenses are being acquired by Tenant except as
herein expressly set forth. Tenant, by taking possession of the Third Amendment
Space shall accept such Third Amendment Space "AS-IS," and such taking of
possession shall be conclusive evidence that the Third Amendment Space is in
good and satisfactory condition at the time of such taking of possession.
6. Security Deposit:
(a) Upon execution of this Third Amendment, Tenant shall deposit
with the Landlord the sum of One Thousand Eight Hundred Sixteen and 50/00
Dollars ($1,816.50), as an additional security deposit.
(b) Upon receipt of the additional deposit, Section 1.1(g) shall be
amended to read as follows:
(g) The "Security Deposit" shall mean Fourteen Thousand Two Hundred
Forty and 09/100 Dollars ($14,240.09).
2
<PAGE> 47
7. Expiration Date for Third Amendment Space: The Lease with respect to
the Third Amendment Space shall expire on July 31, 1999 (if not terminated
previously), at which time the Lease shall continue with respect to the
remainder of the Premises without regard to this Third Amendment.
8. No Further Modification of Lease: The modifications to the Lease set
forth herein are the only modifications agreed to by and between Landlord and
Tenant. Except as expressly set forth herein, the Lease is unmodified, remains
in full force and effect, and continues as a binding and enforceable agreement
between the parties hereto.
9. Broker: Tenant recognizes The Staubach Company as Broker involved with
and representing Tenant in the First, Second, and Third Amendments to Lease.
Tenant represents that it has not dealt with any other broker with respect to
the First, Second, or Third Amendments.
10. Miscellaneous Provisions:
(a) No Waiver of Breach: The waiver or forbearance by Landlord of a
breach of any provision of the Lease, as amended by this Third Amendment, shall
not operate or be construed as a waiver of any subsequent breach.
(b) Incorporation of Recitations: The recitations set forth on the
first page of this Third Amendment are incorporated into this Third Amendment
and made a part hereof, as if fully set forth herein.
(c) Governing Law: This Third Amendment shall be construed and
administered in accordance with the laws of the United States of America and
the Commonwealth of Virginia.
(d) Severability: In the event that any one or more of the
provisions of this Third Amendment shall for any reason be held to be invalid,
illegal, or unenforceable, the remaining provisions of this Third Amendment
shall be unimpaired, and shall continue in full force and effect.
(e) Singular and Plural, Genders: The singular shall be substituted
for the plural, and any gender or the neuter for any other gender, as
appropriate.
(f) Construction: This Third Amendment shall be interpreted in
accordance with its plain meaning, and the rule that ambiguities shall be
construed against the drafter of the document shall not apply in connection
with the construction or interpretation hereof.
(g) Counterparts: This Third Amendment may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
3
<PAGE> 48
(h) No Binding Effect Until Execution and Delivery: The submission
of this Third Amendment to Tenant is not an offer. This instrument is not
effective as a Lease, or modification or extension of the Lease, or otherwise
unless and until executed by and distributed to both Landlord and Tenant.
(i) Entire Agreement: This Third Amendment contains the entire
understanding of the parties with respect to the extension or modification of
the Lease. The Lease (as modified by the First Amendment, The Second Amendment,
and the Third Amendment) contains the complete agreement of the parties. All
prior promises, understandings, or agreements relating thereto are merged
herein. The Lease, as modified by the First Amendment, the Second Amendment,
and the Third Amendment, may not be changed orally, but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification, or discharge is sought.
IN WITNESS WHEREOF, the parties have set their hands and seals on the
day and year first above written.
WITNESS: LANDLORD:
SPECTRA-4, L.L.P.
BY: /s/ PHILIP S. HUNTER (SEAL)
- --------------------------------- -----------------------------
PRINTED NAME: PHILIP S. HUNTER
-------------------------
TITLE: MANAGING PARTNER
--------------------------------
WITNESS: TENANT:
NETSTART, INC.
/s/ LISA REAGAN BY: /s/ RICHARD WATHEN (SEAL)
- --------------------------------- -----------------------------
PRINTED NAME: RICHARD WATHEN
-------------------------
TITLE: CONTROLLER
--------------------------------
4
<PAGE> 1
SUBLEASE AGREEMENT
THIS AGREEMENT ("Sublease") is made this 14th day of August, 1998, by and
between GANNON TECHNOLOGIES INC., a Missouri Corporation as sublessor
("Sublessor"), and CAREERBUILDER INC., a Delaware Corporation, as sublessee
("Sublessee").
W I T N E S S E T H:
WHEREAS, Sublessor is presently the lessee under that certain lease
agreement dated September 23, 1996 (the "Master Lease"), entered into by and
between Sublessor and SPECTRA-4 L.L.P., as lessor (the "Lessor"), which Master
Lease is attached hereto as Exhibit "A" and is incorporated herein by reference
and made a part hereof; and
WHEREAS, Sublessor and Sublessee desire to enter into agreement for the
sublease of the premises described in the Master Lease and further described
below;
NOW, THEREFORE, Sublessor hereby leases and demises to Sublessee and
Sublessee hereby hires and takes from Sublessor, upon the terms, conditions and
restrictions hereinafter specified and the terms, conditions and restrictions of
the Master Lease, the premises described below:
1. PREMISES. Sublessor hereby subleases to Sublessee on the terms and
conditions set forth in this Sublease the entire premises leased by Sublessor
under the Master Lease described as 10,055 square feet in and upon the first
floor of the building located at 11495 Sunset Hills Rd, Reston VA 20190 as
depicted on Exhibit "B" attached hereto and made a part hereof together with the
fixtures and furniture (if any) described on Exhibit "C" attached hereto (the
"Premises"). The Premises will be subleased in two tranches as depicted on
Exhibit B. Tranche A will be approximately 6,000 square feet; Tranche B will be
the remaining part of the Premises, approximately 4,055 square feet.
2. WARRANTY BY SUBLESSOR. To the best of Sublessor's knowledge and belief,
Sublessor warrants and represents to Sublessee that the Master Lease has not
been amended or modified except as expressly set forth herein, that Sublessor is
not now, and as of the commencement of the Term hereof will not be, in default
or breach of any of the provisions of the Master Lease, and that Sublessor has
no knowledge of any claim by Lessor that Sublessor is in default or breach of
any of the provisions of the Master Lease. To the best of Sublessor's
knowledge and belief, Sublessor warrants that the Premises complies to all
applicable building codes.
<PAGE> 2
3. TERM. The term of this Sublease shall commence on the later of: (a) the
date Lessor consents, in writing, to this Sublease (if such consent is required
under the Master Lease); or (b) upon delivery of Tranche A by Sublessee on
September 11, 1998 (the "Commencement Date") and shall expire on October 31,
1999 (the "Expiration Date") unless earlier terminated pursuant to the
provisions hereof or of the Master Lease (the "Term"). Possession of the
Premises shall be delivered to Sublessee on the Commencement Date. Sublessee
acknowledges that it has inspected the Premises and agrees, except for remedies
required to correct building code violations, to accept the same in AS-IS
condition. If, for any reason, Sublessor does not deliver possession of Tranche
A to Sublessee on the Commencement Date, Sublessor shall be liable for a daily
penalty equal to $278.76 per day, the Expiration Date shall not be extended by
the delay, and the validity of the Sublease shall not be impaired, but rent
shall abate until delivery of possession. Notwithstanding the foregoing, if
Sublessor has not delivered possession of Tranche A to Sublessee within thirty
(30) days after the Commencement Date, then at any time before delivery of
possession, Sublessee may give written notice to Sublessor of Sublessee's
intention to cancel this entire Sublease. If, for any reason, Sublessor does not
deliver possession of Tranche B to Sublessee by December 1, 1998 the Expiration
Date shall not be extended by the delay, and the validity of the Sublease shall
not be impaired, but rent shall abate until delivery of possession.
Notwithstanding the foregoing, if Sublessor has not delivered possession of the
Tranche B to Sublessee by January 1, 1999, then at any time before delivery of
possession, Sublessee may give written notice to Sublessor of Sublessee's
intention to cancel the Tranche B portion of the Sublease. For both Tranche A
and Tranche B said notice shall set forth an effective date for such
cancellation which shall be at least ten (10) business days after delivery of
said notice to Sublessor. If Sublessor delivers possession of the Premises to
Sublessee on or before such effective date, this Sublease shall remain in full
force and effect. If Sublessor fails to deliver possession of Tranche A to
Sublessee on or before such effective date, this Sublease shall be canceled, in
which case all consideration paid by Sublessee to Sublessor on account of this
Sublease shall be returned to Sublessee, this Sublease shall thereafter be of no
further force or effect, and Sublessor shall have no further liability to
Sublessee on account of such delay or cancellation.
If Sublessor permits Sublessee to take possession of the Premises prior to
the commencement of the Term, such early possession shall not advance the
Expiration Date and shall be subject to the provisions of this Sublease,
including without limitation the payment of rent.
<PAGE> 3
4. RENT. Sublessee shall pay to Sublessor as rent, without deduction,
setoff, notice, or demand, at The Gannon Companies 12541 Bennington Place St.
Louis MO 63146 Tel. 314-576-9600 Fax.314-424-0548 or at such other address as
Sublessor shall designate from time to time by notice to Sublessee, the sum of
FIVE THOUSAND TWO-HUNDRED AND SEVENTEEN AND 69/100 ($5,217.69) DOLLARS per month
upon the Commencement Date and until delivery of Tranche B. After delivery of
Tranche B, the rent will be NINE THOUSAND 36/100 DOLLARS ($9,000.36), which
includes the automatic 1998 rent increase in the Master Lease, per month with
the rent payments due on the first day of each calendar month thereafter for the
remainder of the Term. If the Term begins or ends on a day other than the first
or last day of the month, the rent for the partial months shall be prorated on a
per diem basis. Rent payable hereunder will be adjusted for increases in
Sublessee's pro-rata share of taxes, insurance, common area maintenance (CAM)
and all other expenses or charges for which the Tenant is responsible under the
Master Lease. Sublessee shall pay Sublessor a late charge of 5% for any payment
that is not paid by the third day of each month and an interest charge of 8%
(per year) on any overdue balances. In addition, Sublessee shall be responsible
for obtaining and paying for all separately metered utilities for the Premises
and phone/data lines and service. In addition to the rent payments above,
Sublessee shall pay Sublessor the following one time amounts to offset
Sublessor's moving costs: On delivery of Tranche A: TWENTY-THOUSAND AND 00/100
DOLLARS ($20,000) on delivery of Tranche B: TWELVE THOUSAND AND 00/100 DOLLARS
($12,000).
5. SECURITY DEPOSIT. Sublessee shall upon execution hereof pay to
Sublessor as a security deposit the sum of EIGHT THOUSAND FOUR-HUNDRED AND TWO
08/100 DOLLARS ($8,402.08). Such Security Deposit shall be returned to Sublessee
within forty-five days of the expiration or termination of this Sublease unless
Sublessee is in default.
6. USE OF PREMISES. The Premises shall be used and occupied only in
accordance with the Master Lease.
7. SERVICES. It is understood and agreed that Sublessor shall not directly
provide any services to Sublessee, but rather that all services provided by
Lessor to Sublessor will be made available to Sublessee on the same basis as to
Sublessor under the Master Lease.
8. REPAIRS. Sublessee agrees to keep the Premises in good repair and, at
the expiration of the Term to remove all personal property and effects and to
peaceably turn over the Premises to Sublessor in as
<PAGE> 4
good condition as when delivered to Sublessee, ordinary wear and tear excepted.
9. ALTERATIONS. No alteration, addition or improvement to the Premises
shall be made by Sublessee in excess of $30,000 without the prior written
consent of Sublessor and in full compliance with the terms of the Master Lease.
Any alteration, addition or improvement made by Sublessee after such consent
shall have been given, and any fixtures installed as a part thereof, shall, at
Sublessor's option, become the property of Sublessor upon the expiration or
other sooner termination of this Sublease; provided, however, that Sublessee
shall have the right to remove its trade fixtures, equipment and other personal
property, at Sublessee's cost, upon such termination of this Sublease.
10. DAMAGE. If the Premises shall be damaged by fire, other casualty or
act of the public enemy, the continuation or termination of this Sublease and
the terms thereof shall be as specified in the Master Lease. Sublessee shall
give Sublessor immediate written notice of any damages to the Premises.
11. INSURANCE. Sublessee, at its sole expense, shall maintain in force
during the term of this Sublease all coverages required under the Master Lease.
Sublessor shall be named an additional insured under said policies.
12. INCORPORATION OF MASTER LEASE. Sublessee represents and warrants that
it has received a copy of the Master Lease as attached hereto as Exhibit "A" and
any rules and regulations applicable thereto, which are hereby incorporated
herein by reference, that it has reviewed the same and that, except as hereafter
specified, it agrees, for itself and its successors and permitted assigns, to
abide by and faithfully perform all covenants, terms, conditions, liabilities
and obligations of said Master Lease as if Sublessee were the tenant thereunder
except that the obligation to pay rent to Lessor under the Master Lease shall be
considered performed by Sublessee's payment of all rent pursuant to the terms of
this Sublease and except that Sections 2.4(a), 2.4(b), 4.1(b), 26.10 and 19.1f
of the Master Lease shall not apply to this Sublease and are specifically
excluded herefrom in their entirety.
13. DEFAULT. If Sublessee defaults in the payment of any rent or other
sums due and payable to Sublessor under this Lease and such default continues
for a period of twenty (5) days after written notice of such default has been
given by Sublessor to Sublessee, or if Sublessee shall violate or default in the
performance of any covenants, agreements, stipulations or other conditions
contained herein (other than the
<PAGE> 5
payment of rent and other sums) for a period of thirty (30) days after written
notice of such violation or default has been given by Sublessor to Sublessee or,
in the case of a default not curable within thirty (30) days, if Sublessee shall
fail to commence to cure the same within thirty (30) days, and thereafter
proceed diligently to complete the cure thereof, then Sublessor, at its option,
may re-enter and repossess the Premises, with or without process of law, and
declare this Sublease terminated and the Term of this Sublease ended forthwith.
In the event of any such re-entry and repossession, Sublessor shall have the
right to relet all or any portion of the Premises upon such terms and conditions
as may be reasonable. If Sublessor is more than 30 days late on payments to the
Master Lease, Sublessee may make all future rent payments directly to Lessor,
provided that the foregoing shall not prejudice any right of Lessor, including
the right to terminate the Master Lease.
14. LIABILITY OF SUBLESSOR. Sublessor and its employees, partners, and
agents shall not be liable to Sublessee, Sublessee's employees, agents,
invitees, licensees, customers, clients, family members, assignees, subtenants
or guests, or to any other person or entity for any damage (including indirect
and consequential damage), injury, loss, obligation, liability, compensation, or
claim, of any kind or nature, whatsoever, including but not limited to claims
for the interruption of or loss to Sublessee's business, based on, arising out
of or resulting from any cause whatsoever (except as otherwise provided in this
Section 14), including but not limited to the following: repairs to any portion
of the Premises, or the Building; interruption in the use of the Premises or any
equipment therein; any accident or damage resulting from the use or operation
(by Sublessor, Sublessee or any other person or entity) or heating, cooling,
electrical, sewerage, or plumbing equipment or apparatus; the termination of
this Lease by reason of the destruction of the Premises or the Building; any
fire, robbery, theft, vandalism, mysterious disappearance and/or any other
casualty; the actions of any other tenants of the Building or of any other
person or entity; and any leakage in any part or portion of the Premises or the
Building, or from water, rain, ice, or snow that may leak into, flow from, any
part of the Premises or the Building, or from drains, pipes or plumbing fixtures
in the Premises or the Building. Any goods, property or personal effects stored
or placed by Sublessee, its employees or agents in or about the Premises or the
Building shall be at sole risk of Sublessee, and Sublessor shall not in any
manner be held responsible therefor. If any employee of Sublessor receives any
packages or articles delivered to the Building for Sublessee, such employee
shall be acting as the agent for such purposes and not as the agent of
Sublessor. Notwithstanding the foregoing provisions of this Section 14,
Sublessor shall not be released from liability to Sublessee for any physical
injury to any natural person caused by the willful misconduct of Sublessor or
its employees to the extent such injury is not covered by insurance (a) carried
by Sublessee or
<PAGE> 6
such person, or (b) required by this Sublease to be carried by Sublessee.
Notwithstanding the foregoing, this Section 14 does not apply to any such claim
caused by the willful misconduct or gross negligence of Sublessor, provided,
however, that Sublessee shall first look to its own insurance coverage and shall
not recover from Sublessor to the extent that any such claim is covered by, or
reimbursed from, Sublessee's insurance.
Sublessee shall indemnify and hold Sublessor, its agents, employees, or
partners, harmless from and against all costs, penalties, damages, claims,
causes of action, obligations, liabilities and expenses (including attorney's
fees) suffered by or claimed against Sublessor, directly or indirectly, based
on, arising out of or resulting from (i) Sublessee's use and occupancy of the
Premises or the business conducted by Sublessee's therein, (ii) any act or
omission by Sublessee or Sublessee's employess , agents, assigness, subtenants,
contractors, guests, or licensees, (iii) any breach or default in the
performance or observance of Sublessee's covenants or obligations under this
Sublease Term, or (iv) any entry by Sublessee, its employees, agents or
contractors upon the land prior to Sublease Commencement Date. Notwithstanding
the foregoing, Sublessee shall not be obligated to indemnify Sublessor from any
such obligations or liabilities caused by the negligence or willful misconduct
of Sublessor or its agents.
In the event that at any time any landlord hereunder shall sell or transfer the
Building, said landlord shall not be liable to Sublessee for any obligations or
liabilities based on, arising out of or resulting from events or conditions
occurring on or after the date of such sale or transfer.
In the event that at any time during the Sublease Term, Sublessee shall have a
claim against Sublessor, Sublessee shall not have the right to set off or deduct
the amount allegedly owed to Sublessee from any rent or other sums payable to
Sublessor hereunder, it being understood that Sublessee's sole remedy for
recovery upon such claim shall be to institute an independent action against
Sublessor, subject to this Section 14.
Sublessee agrees, on behalf of itself and, to the fullest extent permitted by
law, any of Sublessee's employees, agents, subtenants, assignees, contractors,
clients, guests, licensees, customers or invitees, that in the event that
Sublessee, or any or Sublessee's employees, agents, subtenants, assignees,
contractors, clients, guests, licensees, customers, or invitees is awarded a
money judgement against Sublessor, its agents or partners, the sole recourse for
satisfaction of such judgment shall be limited to execution against the estate
and interest of Sublessor; in no event shall any other assets of Sublessor, or
of any
<PAGE> 7
partner of Sublessor or of any person or entity be held to have any personal
liability for satisfaction of any claims or judgments against Sublessor and/or
any partner of Sublessor in such partner's capacity as a partner of Sublessor.
15. ATTORNEYS' FEES. If Sublessor or Sublessee shall commence an action
against the other arising out of or in connection with this Sublease, the
prevailing party shall be entitled to recover its costs of suit and reasonable
attorney's fees from the nonprevailing party.
16. BROKERS. Sublessee and Sublessor each represent and warrant to the
other that they have dealt with no broker in connection with this Sublease. Each
party shall indemnify and hold the other harmless from and against any and all
losses, claims, liabilities, damages and expenses, including, without
limitation, attorneys' fees and expenses and court costs, arising out of or in
connection with any breach or alleged breach of the above representations or any
claim by any person or entity by, through or under such party for brokerage
commissions or other compensation in connection with the consummation of this
Sublease. Representations and obligations under this section shall survive the
expiration date or earlier termination of this Sublease.
17. NOTICES. All notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be in writing
and deemed sufficiently given if delivered by (i) certified or registered mail,
postage prepaid, return receipt requested, (ii) by nationally recognized
overnight delivery service company (e.g. Federal Express, Airborne Express, and
UPS), or (iii) by telephone facsimile addressed to the other party at the
address shown below or at such place or to such agent as the parties may from
time to time designate in writing.
Sublessor: Terry L. Pabst, Esq.
The Gannon Companies
12541 Bennington Place
St. Louis MO 63146
Tel. 314-576-9600
Fax. 314-424-0548
<PAGE> 8
Sublessee: Richard Wathen, Controller
CareerBuilder Inc.
11495 Sunset Hills Road
Reston VA 20190
Tel. 703-709-1001
Fax: 703-709-1004
Any notice given hereunder shall be deemed delivered when, if sent by
mail, the return receipt is signed or refusal to accept the notice is noted
thereon or, if sent by recognized overnight courier when the notice is actually
delivered or refused as reflected in the courier company's delivery records or
if sent via facsimile upon receipt of confirmation by the sender that the
facsimile has been received (provided a hard copy of the facsimile is delivered
to the recipient via certified mail or overnight delivery within three (3)
business days thereafter).
18. CONSENT BY LESSOR. THIS SUBLEASE SHALL BE OF NO FORCE OR EFFECT UNLESS
AND UNTIL CONSENTED TO IN WRITING BY LESSOR.
19. COMPLIANCE. The parties hereto agree to comply with all applicable
federal, state and local laws, regulations, codes, ordinances and administrative
orders having jurisdiction over the parties, property or the subject matter of
this Sublease, including, but not limited to, the 1964 Civil Rights Act and all
amendments thereto, the Foreign Investment In Real Property Tax Act, the
Comprehensive Environmental Response Compensation Act, and The Americans With
Disabilities Act.
20. CAPITALIZED TERMS. Unless specifically defined herein, all capitalized
words or phrases contained in this Sublease shall be given effect in accordance
with the definition or meaning of such words or phrases as provided by the
Master Lease.
21. COUNTERPARTS. This Sublease may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as of
the day and year first above written.
Sublessor: Gannon Technologies Inc.
Date: 8/14/98 By: /s/ Doris A. Grose
------------ ----------------------------
Print Name Doris A. Grose
---------------------
Title: VP-CFO
-------------------------
Address: 11495 Sunset Hills Rd.
-----------------------
Facsimile: (703) 742-0063
---------------------
Sublessee: CareerBuilder, Inc.
Date: 8/14/98 By: /s/ Richard Wathen
------------ ----------------------------
Print Name Richard Wathen
---------------------
Title: Controller,
CareerBuilder, Inc.
-------------------------
Address: 11495 Sunset Hills Rd.
Reston, VA
-----------------------
Facsimile: 703-709-1004
---------------------
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
None.
