<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 000 - 25949
CAREERBUILDER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 54-1779164
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10780 PARKRIDGE BOULEVARD 20191
SUITE 200 (ZIP CODE)
RESTON, VIRGINIA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 703-259-5500
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ ]
The aggregate market value of the common equity held by non-affiliates of
the registrant (11,963,774 shares), computed using the closing sales price of
Common Stock on March 15, 2000, as reported on the Nasdaq National Market, was
approximately $68,791,000.
As of March 15, 2000 there were 23,753,160 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered with the Notice
of Annual Meeting of the Stockholders to be held on May 11, 2000 are
incorporated by reference into Part III of this Form 10-K.
1
<PAGE> 2
CAREERBUILDER, INC.
FORM 10-K
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I............................................................................................3
ITEM 1. BUSINESS.............................................................................3
ITEM 2. PROPERTIES...........................................................................8
ITEM 3. LEGAL PROCEEDINGS....................................................................8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................8
PART II...........................................................................................9
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................9
ITEM 6. SELECTED FINANCIAL DATA.............................................................10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS..........................................................................11
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........................26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................................26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL...........
DISCLOSURE..........................................................................26
PART III.........................................................................................27
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................27
ITEM 11. EXECUTIVE COMPENSATION.............................................................27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....................27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................27
PART IV..........................................................................................27
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...................27
SIGNATURES...................................................................................30
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other sections herein,
including statements regarding the development of the Company's business, the
markets for the Company's services, the Company's anticipated capital
expenditures, and other similar statements, are forward-looking statements (as
such term is defined in the Private Securities Litigation Reform Act of 1995)
which can be identified as any statement that does not relate strictly to
historical or current facts. Forward-looking statements use such words as
"plans", "expects", "will", "will likely result", "are expected to", "will
continue", "is anticipated", "estimate", "project", "believes", "anticipates",
"intends", "may", "should", "continue", "seek", "could" and other similar
expressions. Although the Company believes that its expectations are based on
reasonable assumptions, it can give no assurance that its expectations will be
achieved. The important factors that could cause actual results to differ
materially from those in the forward-looking statements herein (the "Cautionary
Statements") include, without limitation, those factors set forth below under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Factors That May Affect Future Results," as well as the
other risks referenced from time to time in the Company's filings with the
Securities and Exchange Commission, including the Company's Quarterly Reports on
Form 10-Q that the Company files in 2000. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.
The Company does not undertake any obligation to release publicly any revisions
to such forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
CareerBuilder provides comprehensive online recruitment offerings for
employers and job seekers. 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 network of integrated Internet
sites, including CareerBuilder.com and career sites for 25 premier
interactive media companies such as Microsoft MSN, Bloomberg.com,
CitySearch, USA Today and NBC Interactive.
- providing job seekers with the tools to find, explore, evaluate and
compare job opportunities. These tools include CareerBuilder's unique Mega
Job-Search(SM) features that enable job seekers to search over 50 career
sites across the Internet, and "mycareerbuilder"(SM), which enables job
seekers to personalize and manage their career search efforts and post a
resume in the CareerBuilder resume database for employers to search.
At December 31, 1999, nearly 1,300 employers subscribed for CareerBuilder's
offerings. Media Metrix reported that over 1.5 million unique monthly job
seekers visited the CareerBuilder Network in December 1999. As ranked by Media
Metrix, the CareerBuilder Network was the third largest destination for job
seekers across the Internet in December 1999.
THE CAREERBUILDER SOLUTION
CareerBuilder provides comprehensive, online recruitment offerings for
employers and job seekers. CareerBuilder's offerings:
ENABLE EMPLOYERS TO REACH AND TARGET JOB SEEKERS ACROSS A WIDE VARIETY OF
PREMIER INTERNET SITES. Employers can post their jobs through the CareerBuilder
Network, including the Company's flagship site CareerBuilder.com and career
sites for 25 premier interactive media companies such as Microsoft's MSN.com,
Bloomberg.com, TicketMaster, CitySearch, USA Today and NBC Interactive. 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, Microsoft MSN's Career Center and USA Today's
Career Center. A company with more specific industry openings may choose to
advertise their jobs on key vertical industry sites such as Bloomberg and
ITcareers.com. Specific geographic openings could be advertised on career sites
such as TicketMaster City Search, the Dallas Morning News, and NBC Interactive.
Diversity candidates are targeted through sites such as Black Enterprise Online,
HISPANIC Online and WomenCONNECT.com. Employers can also utilize CareerBuilder
banner advertising offerings to target key job seeker profiles on
CareerBuilder.com, across the CareerBuilder Network and on selected other
Internet web sites.
PROVIDE EMPLOYERS WITH THE ABILITY TO EASILY ACCESS AND MANAGE ONLINE
RECRUITING. CareerBuilder 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. CareerBuilder
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 quantity and quality of the resumes received.
CareerBuilder also provides internal workflow and resume management
capabilities.
PROVIDE JOB SEEKERS WITH THE ABILITY TO EASILY RESEARCH, FIND, COMPARE AND
APPLY FOR JOBS. Using Mega Job-Search(SM), job seekers can search for over 50
career sites across the Internet, including CareerBuilder.com, each of the other
career sites in the CareerBuilder Network, as well as many other major internet
job posting sites. Job seekers can search possible job opportunities 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(SM) 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. In addition, job seekers can manage their online job
search efforts through "my careerbuilder", enabling them to post and edit
resumes, manage up to 5 Personal Search Agents, and automatically keep abreast
of key information and news concerning potential employers and other employment
information.
3
<PAGE> 4
PRODUCTS AND SERVICES
THE CAREERBUILDER NETWORK. The CareerBuilder Network consists of
CareerBuilder.com, the Company's flagship career site, and career sites located
on the Internet sites of 25 premier interactive media companies, including
Microsoft MSN, Bloomberg.com, CitySearch, 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. Employers can
directly access the CareerBuilder Network, through their browser, to post job
advertisements and manage their online recruiting efforts.
JOB POSTINGS. Employer customers generally access the CareerBuilder
offerings through multi-month subscriptions. Each subscription enables a
customer to post a set number of job postings across the CareerBuilder Network.
The customer can determine, for each job posted, which sites on the
CareerBuilder Network best target the job seekers for that job. Customers
typically subscribe for three-, six- or twelve-month subscriptions. Customers
may also subscribe on an individual posting basis. For the year ended December
31, 1999, approximately 94% of CareerBuilder's revenue was derived from
multiple-month subscriptions and approximately 6% of CareerBuilder's revenue
was derived from individual postings.
ADVERTISING. CareerBuilder also offers employer customers the ability to
advertise their recruitment efforts through banner advertising programs. These
programs include:
- Regional, national and "Hot Company" advertising on CareerBuilder.com
- Bullseye(TM) and Pinpoint(TM) banner advertisements, enabling customers
to more ably target key job seeker profiles on CareerBuilder.com,
across the CareerBuilder Network and on selected other Internet web
sites.
CAREERBUILDER NETWORK AFFILIATE PARTNERS. 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
capability 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:
blackenterprise.com MarketingClick
Bloomberg.com MediaCentral
Business Week ONLINE Microsoft Network (MSN)
CareerBuilder.com NBC Interactive
Career Engine PDR.net Career Pulse
citysearch.com Questlink EE Design Center
ComputerJobs.com r-dental.com
The Dallas Morning News TelecomWeb Career Center
EDN Access Test & Measurement World Online
e-inSite.com USATODAY.com
HISPANIC Online WETA Online
Internet.com WomenCONNECT.com
ITcareers.com
4
<PAGE> 5
CareerBuilder also has a contractual arrangement with Yahoo! which provides
for companies' job advertisements placed on CareerBuilder.com to automatically
appear on Yahoo! This provides more exposure for these job advertisements. No
fees are paid by, or charged by, CareerBuilder or Yahoo! for this arrangement
and CareerBuilder does not currently view the arrangement as material. The
agreement between CareerBuilder and Yahoo! has a one year term. For an
additional fee paid by customers, job advertisements can also appear on
CareerMosaic.
JOB SEEKER PRODUCTS AND SERVICES
MEGA JOB-SEARCH(SM). CareerBuilder's Mega Job-Search enables job seekers
to search, based on their specific defined job characteristics, over 50 career
sites across the Internet, not only CareerBuilder.com and the CareerBuilder
Network, but other major job posting sites.
MY CAREERBUILDER. Introduced in February 2000, "my careerbuilder"(SM)
provides job seekers with a customized place to search for and manage
activities in support of finding jobs. Features include up to 5 Job Search
Profiles, with optional e-mail alerts, ability to file favorite postings to act
on later, and daily news feeds with career news related to their selected
industry.
CAREERBUILDER'S TOTAL CUSTOMER CARE ORGANIZATION. 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 product and service
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, the Personal Search Agent and Mega Job-Search, 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 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. Further, the
Personal Search Agent (SM) automatically locates preferred jobs, notifies the
candidate of matches via confidential e-mail, and offers the job seeker the
ability to follow up by providing a direct link to the employer's posting.
CareerBuilder's distributed system architecture maximizes the interconnectivity
of the Web, providing powerful and effective recruiting solutions.
On November 9, 1999, CareerBuilder was awarded a patent for the Company's
unique interactive recruiting business methods. CareerBuilder's patented system
permits employers to easily post job openings and efficiently receive and
organize resumes from qualified candidates.
CUSTOMERS
At December 31, 1999, CareerBuilder's customer base included approximately
1,300 subscriber customers in industries such as technology, financial services,
health care, professional services, retail and telecommunications/
communications. The following table lists the Company's top 10 subscriber
customers for the year ended December 31, 1999. Each of the companies represents
less than 1% of the total operating revenue for the fiscal year.
5
<PAGE> 6
Top 10 Customers as a % of Revenue (listed alphabetically)
Bell Atlantic Network Integration
Bristol-Myers Squibb Company
Cable & Wireless Communications plc
Deloitte & Touche LLP
Edward Jones Inc.
Microsoft Corporation
PricewaterhouseCoopers LLP
Putnam Mutual Funds Corp.
Stop & Shop Supermarket Co.
Tricon Global Restaurants, Inc.
SALES, MARKETING AND BUSINESS DEVELOPMENT
SALES. CareerBuilder sells its offerings in the United States through a
sales and marketing organization which consisted of 115 employees at December
31, 1999. 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, (see ADP Relationship
below).
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, targeted television advertising, local radio advertising, targeted
and national online advertising, online recruiting seminars, print advertising,
trade shows and customer communication programs.
BUSINESS DEVELOPMENT. CareerBuilder 's business development group
identifies, evaluates and recruits 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, Inc. ("ADP") entered into a joint
marketing and sales representative agreement. ADP is a provider of payroll
processing and other human resource services. CareerBuilder and ADP amended this
agreement in March 1999. The amended agreement provides for ADP to market
CareerBuilder's services to ADP's customers using ADP's approximately
500-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 38% of CareerBuilder's total revenue for the year ended December
31, 1999, up from 11% for the year ended December 31, 1998. Based on
CareerBuilder's current revenues, the agreement provides for sales commissions
to ADP ranging from 33 1/3% to 50% of revenue generated by a customer for which
ADP acted as a sales agent. 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 CareerBuilder's offerings in the United States or Canada. However,
under the terms of this agreement, if ADP determines that the CareerBuilder's
offerings have material inadequacies that reduce their ability to perform
competitively in relation to other online recruiting products, CareerBuilder
must correct the deficiencies specified by ADP or
6
<PAGE> 7
ADP is free 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 Series D
preferred stock to ADP, the Company 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 380,000
shares of common stock each will vest based on ADP achieving specified
revenue-based milestones. The revenue-based milestones are measured for a
specific time period, by subtracting from total revenue received from customers
for which ADP has acted as sales agent, sales commissions paid to ADP. In order
for the minimum number of shares under the March 2001 installment of the
warrant to vest, the milestone of revenue minus sales commissions for the
period from April 1, 2000 through March 31,2001 must exceed $10.2 million, with
$20.4 million required for the maximum number of shares issuable under the
installment to vest. In order for the minimum number of shares under the March
2002 installment to vest, the milestone of revenue minus sales commissions for
the period from April 1, 2001 through March 31,2002 must exceed $23.0 million,
with $30.0 million required for the maximum number of shares issuable under the
installment to vest. The exercise price for the second and third installments
is $5.00 per share. The ADP warrant contains antidilution provisions that
increase the number of shares for which the warrant is exercisable if the
Company issues additional equity securities primarily for financing purposes.
Each remaining installment of the warrant may be issuable upon exercise for a
maximum of 516,824 shares based on current antidilution calculations. The
number of shares of Common Stock issuable upon exercise of the warrant may
increase up to a maximum of 568,506 shares for each of the second and third
installments as a result of these antidilution provisions. 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. As the ADP warrant vests, CareerBuilder may be required to record
significant expenses. See Note 8 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
Hotjobs.com, 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 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.
Many of CareerBuilder's 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 CareerBuilder does. In addition, current and potential competitors may make
strategic acquisitions or establish cooperative relationships to expand their
offerings and to offer more comprehensive solutions.
CareerBuilder believes that there will be rapid business consolidation in
the online recruitment industry. Accordingly, competitors may rapidly acquire
significant market share. In addition, new technologies will likely increase the
competitive pressures that CareerBuilder faces. The development of competing
technologies by market participants or the emergence of new industry standards
may adversely affect CareerBuilder's competitive position. As a result of these
and other factors, if CareerBuilder is not able to compete effectively with
current or future competitors, its business, results of operations and financial
condition could be materially and adversely affected.
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, including those identified in "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Certain Factors That May
Affect Future Results."
7
<PAGE> 8
PROPRIETARY RIGHTS
CareerBuilder relies upon a combination of copyright, patent, trade secret
and trademark laws, and non-disclosure and other contractual arrangements to
protect its proprietary rights. CareerBuilder holds a patent for its interactive
recruiting business methods. 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
At December 31, 1999, CareerBuilder had a total of 179 employees. Of these
employees, 115 were involved in sales, marketing and business development, 38
were involved in technical support and engineering and 26 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.
ITEM 2. PROPERTIES
CareerBuilder currently leases approximately 52,000 square feet of space at
its headquarters in Reston, Virginia. This lease expires in February 2008.
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 its communications
hardware and other 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.
ITEM 3. LEGAL PROCEEDINGS
CareerBuilder is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1999.
8
<PAGE> 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
Since May 12, 1999, the Company's Common Stock has been traded on the
Nasdaq National Market under the symbol "CBDR". The following table sets forth,
for the periods indicated, the high and low sales prices of the Common Stock
since commencement of trading, as reported on the Nasdaq National Market.
HIGH PRICE LOW PRICE
---------- ---------
PERIOD ENDED DECEMBER 31, 1999
Second Quarter $16.00 $10.38
Third Quarter 16.50 6.25
Fourth Quarter 9.25 5.63
HOLDERS OF RECORD
As of March 20, 2000, there were approximately 4,111 holders of record of
Common Stock.
DIVIDEND POLICY
The Company has never paid dividends on the Common Stock and does not
expect to declare any dividends on the Common Stock in the foreseeable future.
The Company currently intends to retain earnings, if any, to fund the
development and growth of its business. The terms of the Company's revolving
credit agreement restrict its ability to declare and pay dividends.
RECENT SALES OF UNREGISTERED SECURITIES
In January 1999, the Company sold 2,018,350 shares of Class F Convertible
Preferred Stock to new & existing investors for approximately $10,986,000. All
of the shares of Class F Convertible Preferred Stock automatically converted
into Common Stock at the closing of the Company's initial public offering.
In March 1999, in connection with an agreement with NBC, the Company 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 an
exercise price of $14.00 per share.
On May 4, 1999, the Company issued 1,372,817 shares of Common Stock to
Microsoft Corporation for an aggregate purchase price of approximately $17.8
million. In addition, for no additional cash consideration, the Company issued a
warrant to Microsoft representing the right to purchase 873,534 shares of Common
Stock at an exercise price of $13 per share.
Between April 1, 1999 and May 11, 1999, the Company issued 23,990 shares
of Common Stock pursuant to option exercises for aggregate proceeds of
approximately $5,000.
The securities issued in the foregoing transactions were (i) offered and
sold in reliance upon exemptions from Securities Act registration set forth in
Section 3(b) and 4(2) of the Securities Act, or any regulations promulgated
thereunder, or (ii) with respect to sales by an issuer upon the exercise of
options, sold in reliance upon an exemption from registration under Rule 701
of the Securities Act. No underwriters were involved in the foregoing sales of
securities.
USE OF PROCEEDS
On May 17, 1999, the Company closed an initial public offering of
Common Stock (the "Offering"). The Registration Statement on Form S-1 (No.
333-73469) was declared effective by the Securities and Exchange Commission on
May 11, 1999 and the Company commenced the Offering on that date.
After deducting the underwriting discounts and commissions and the
Offering expenses, the net proceeds to the Company from the Offering were
approximately $61.4 million.
As of December 31, 1999, approximately (i) $1,400,000 of the net proceeds
of the Offering had been used to pay expenses incurred in connection with the
Offering, (ii) $2,300,000 of the net proceeds had been used to pay all of the
principal and accrued interest on a note payable to PNC Bank in connection with
a bridge loan and (iii) $2,000,000 of the net proceeds had been used to
purchase property and equipment. The remainder of the net proceeds of the
Offering have been invested in short-term, interest-bearing, investment grade
securities. The entire amount of the net proceeds has been allocated for
working capital and general corporate purposes. None of the proceed amounts
were paid directly or indirectly to any director, officer, or general partner
of the Company or its associates, persons owning 10 percent or more of any
class of equity Securities of the Company, or affiliate of the Company.
9
<PAGE> 10
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below are derived from, and are
qualified by reference to the audited Financial Statements of the Company and
the related notes thereto, and should be read in conjunction therewith and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(NOVEMBER 1995) YEAR ENDED DECEMBER 31,
THROUGH -----------------------
DECEMBER 31, 1995 1996 1997 1998 1999
----------------- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Service fees .................. $ -- $ 94 $ 1,263 $ 6,648 $ 14,822
Software license fees ......... -- 44 662 358 86
-------- -------- -------- -------- --------
Total revenue ............... -- 138 1,925 7,006 14,908
Cost of revenue:
Service fees .................. -- 30 197 1,629 6,664
Software license fees ......... -- 6 120 62 23
-------- -------- -------- -------- --------
Total cost of revenue ....... -- 36 317 1,691 6,687
-------- -------- -------- -------- --------
Gross profit .................... -- 102 1,608 5,315 8,221
-------- -------- -------- -------- --------
Operating expenses:
Product development ........... -- 521 1,310 2,293 2,307
General and administrative .... 52 663 1,267 2,305 3,806
Sales and marketing (excluding
equity-based expense)........ -- 1,330 6,452 12,735 25,458
Equity-based expense .......... -- -- -- -- 2,710
-------- -------- -------- -------- --------
Total operating expenses .... 52 2,514 9,029 17,333 34,281
-------- -------- -------- -------- --------
Income (loss) from operations ... (52) (2,412) (7,421) (12,018) (26,060)
Net interest income (expense) ... -- (4) 107 31 2,072
-------- -------- -------- -------- --------
Net income (loss) ............... (52) (2,416) (7,314) (11,987) (23,988)
-------- -------- -------- -------- --------
Preferred stock dividend
requirements .................. -- (71) (549) (1,128) (737)
-------- -------- -------- -------- --------
Net income (loss) available to
common stockholders ........... $ (52) $ (2,487) $ (7,863) $(13,115) $(24,725)
======== ======== ======== ======== ========
Basic and diluted net income
(loss) available per share .... $ (0.01) $ (0.48) $ (1.80) $ (2.92) $ (1.48)
Shares used to compute basic and
diluted net income (loss)
available per share ........... 5,468 5,133 4,366 4,494 16,712
Unaudited pro forma basic and
diluted net income (loss) per
share ......................... $ (0.87) $ (1.14)
Shares used to compute unaudited
pro forma basic and diluted net
income (loss) per share ....... 13,850 20,991
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1996 1997 1998 1999
----------- ---------- ---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD)
Cash and cash equivalents ............ $ 454 $ 82 $ 1,909 $ 2,709 $ 63,589
Working capital (deficit) ............ 454 (520) (131) (3,899) 60,277
Total assets ......................... 475 371 3,589 6,042 72,528
Convertible redeemable preferred stock -- 2,135 10,700 18,931 ---
Stockholders' equity (deficit) ....... 475 (2,440) (9,752) (21,520) 65,099
</TABLE>
10
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AND
RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH "SELECTED FINANCIAL
DATA" AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS ANNUAL REPORT. THIS DISCUSSION AND ANALYSIS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS.
THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE
SET FORTH UNDER "CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS" AND ELSEWHERE
IN THIS ANNUAL REPORT.
OVERVIEW
CareerBuilder, Inc. ("CareerBuilder" or "the Company") provides
comprehensive online recruitment offerings for employers, major media companies
and job seekers. CareerBuilder was founded in November 1995 and has grown from 7
employees at June 30, 1996 to 179 employees at December 31, 1999. During the
period from inception in 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 May
1998, CareerBuilder launched the CareerBuilder Network by hosting the career
sites located on the Internet sites of interactive media companies.
The Company completed its initial public offering of 5,075,000 shares
of Common Stock, including 675,000 shares from the exercise of the
underwriters' over-allotment option, at a price of $13.00 per share on May 17,
1999, and received net proceeds (after expenses of the offering) of
approximately $60 million. In addition, on May 4, 1999 CareerBuilder entered
into a service and distribution agreement with Microsoft. As part of this
transaction, CareerBuilder agreed to provide career sites for the Microsoft
Network. These career sites have become members of the CareerBuilder Network.
Microsoft purchased 1,372,817 shares of CareerBuilder's Common Stock for an
aggregate purchase price of approximately $17.8 million, or $13.00 per share.
In addition, for no additional cash consideration, CareerBuilder issued a
warrant to Microsoft representing the right to purchase 873,534 shares of
Common Stock with an exercise price of $13.00 per share. The warrant is
immediately exercisable in full. CareerBuilder recognized approximately $2.0
million of expense related to the Microsoft warrant in 1999 and expects to
recognize approximately $3.8 million of expense related to the warrant ratably
in 2000 and 2001, reflecting the term of the strategic agreement. The net
proceeds of approximately $77.8 million from both the initial public offering
and the Microsoft investment were added to the working capital of the Company.
The Company has invested such funds in short-term, interest bearing investment
grade obligations.
CareerBuilder's revenue is derived principally from service fees and,
to a much lesser extent, license fees for TeamBuilder Software. In 1999, service
fees accounted for more than 99% of total revenue. Service fees include
subscription fees, advertising fees, recruiting services fees and individual
posting fees.
Subscription Fees. Customers typically subscribe for three-, six- or
twelve- month subscriptions for multiple job postings. Customers may also
subscribe on an individual posting basis for a one month period. The
subscription fees are recognized ratably over the subscription period. For the
year ended December 31, 1999, approximately 94% of CareerBuilder revenue was
derived from multiple-month subscriptions and approximately 6% of CareerBuilder
revenue was derived from individual postings.
Advertising Fees. CareerBuilder derives revenue from delivering banner
and other employment advertising on CareerBuilder.com, as well as selected
other sites in the CareerBuilder Network. Revenue from advertising is
recognized when the advertising impressions are delivered.
Recruiting Services Fees. CareerBuilder provides recruiting services,
such as initial set up help and job posting assistance, to their customers.
Customers have the option of electing to receive recruiting service set-up
assistance for a modest fee. If additional recruiting services are elected,
such fees are generally recognized at the time the service is performed.
Customers can post job advertisements on CareerBuilder.com as well as
the career sites of the members of the CareerBuilder Network. 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 fees, including
advertising and marketing fees, to three current CareerBuilder Network members.
CareerBuilder is party to a joint marketing and sales representative
agreement with Automatic Data Processing, Inc. ("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 and
ranges from 33% to 50%. 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 on
CareerBuilder's behalf. Revenue from orders procured by ADP accounted for
approximately 38% of CareerBuilder's total revenue for 1999.
11
<PAGE> 12
CareerBuilder's cost of revenue as a percentage of total revenue has
increased in 1999 relative to 1998. This increase primarily resulted from two
factors:
- an increase in sales commissions paid to ADP due to increased ADP
revenue; and
- an increase in fees paid to members of the CareerBuilder Network due to
network revenue growth.
In connection with the execution of the joint marketing and sales
representative agreement and its amendment and the sale of shares of Series D
preferred 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. In addition, if and when ADP achieves specified
revenue milestones, CareerBuilder could incur additional equity-based expenses
that could be substantial. For more information regarding the ADP warrant and
these potential expenses, see "Certain Factors That May Affect Future Results -
We could be required to record significant expenses if ADP achieves revenue
goals." In addition to the ADP and Microsoft warrants, CareerBuilder also issued
two warrants representing the right to purchase up to an aggregate of 147,321
shares of Common Stock in connection with an agreement with NBC Multimedia,
Inc., an affiliate member of the CareerBuilder Network. CareerBuilder recognized
approximately $2.7 million of expense related to the ADP, NBC, and Microsoft
warrants in 1999 and expects to recognize approximately $5.5 million of expense
related to these warrants between 2000 and 2002, ratably, based on the duration
of these agreements.
Under its service and distribution agreement with Microsoft,
CareerBuilder may be required to pay Microsoft up to $3.0 million in 2000 and up
to $1.8 million in 2001 if Microsoft achieves agreed upon web site traffic
goals. The Microsoft career site was launched in late September 1999 and as of
December 31, 1999, approximately $293,000 in fees due Microsoft had been
incurred and $78,000 had been paid.
CareerBuilder has incurred substantial net losses in every fiscal
period since its inception in November 1995, and as of December 31, 1999 had an
accumulated deficit of $45.8 million. Such net losses and the accumulated
deficit resulted from CareerBuilder's significant costs incurred in developing
and marketing its online recruitment offerings, including establishing the
CareerBuilder Network.
12
<PAGE> 13
1999 COMPARED TO 1998
REVENUE
CareerBuilder total revenue increased 113%, from $7.0 million for 1998
to $14.9 million for 1999. The increase in total revenue was 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, as well as an increase in the average revenue per
customer. Revenue for which ADP acted as sales agent comprised 11% of total
revenue for 1998 and 38% for 1999.
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 associated with customer support and the delivery of professional
services. Cost of revenue increased 295% from $1.7 million for 1998 to $6.7
million for 1999 and as a percentage of total revenue increased from 24% for
1998 to 45% for 1999. These increases were primarily due to commissions paid to
ADP, fees paid to the members of the CareerBuilder Network, and expenses
associated with customer support and network operations, which included costs
associated with the expansion of customer service and recruiting services
provided by CareerBuilder for its customers, and expenses including
depreciation, associated with hosting the career sites on the CareerBuilder
Network. Prior to June 30, 1998, CareerBuilder did not pay any significant
sales commission fees to ADP or service fees to the CareerBuilder Network
affiliates. CareerBuilder anticipates that cost of revenue will continue to
increase in absolute dollars as revenues increase. Growth in cost of revenue as
a percentage of total revenue will be dependent on the growth of revenue from
ADP relative to total revenue and the growth in jobs posted on affiliate sites
in the CareerBuilder Network relative to those posted on CareerBuilder.com.
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 members of the CareerBuilder Network and depreciation expense on sales and
marketing related assets. Sales and marketing expenses increased 100% from $12.7
million for 1998 to $25.5 million for 1999. The increase in sales and marketing
expenses for 1999 was primarily due to an increase in costs related to the
development of CareerBuilder's marketing and branding campaigns, hiring
additional sales and marketing personnel, the establishment and growth of a
channel sales force that supports ADP's sales effort, and, to a lesser extent,
sales commissions associated with the increase in revenue. CareerBuilder also
incurred expenses for advertising fees to CareerBuilder Network affiliates in
1999 amounting to approximately $3.0 million compared to $872,000 in 1998.
CareerBuilder expects sales and marketing expenses to increase in 2000 in
absolute dollars but decrease as a percentage of total 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 CareerBuilder Network offerings, and expenses associated
with operating the CareerBuilder Network. Product development expenses were
unchanged from $2.3 million for 1998 and 1999. 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 2000 to increase in absolute
dollars but to decrease as a percentage of total 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 for property and
equipment not associated with hosting career sites and general office expenses.
General and administrative expenses increased 65% from $2.3 million for the 1998
to $3.8 million for 1999. The increase in general and administrative expenses
was due primarily to the costs associated with developing the infrastructure
necessary for supporting a public company such as directors and officers
insurance, increased legal fees and an increase in administrative and executive
personnel. CareerBuilder expects general and administrative expenses to increase
in absolute dollars but decrease as a percentage of total revenue in 2000 as
CareerBuilder hires additional personnel and incurs additional costs related to
the growth of its business and with being a public company.
13
<PAGE> 14
EQUITY-BASED EXPENSE
Equity-based expense of $2.7 million for 1999 consists of expenses
related to the issuance of warrants to Microsoft in May 1999 and ADP and NBC in
March 1999. There was no equity based expense for 1998.
NET INTEREST INCOME (EXPENSE)
Net interest income (expense) was approximately $31,000 for 1998 and
$2.1 million for 1999. Interest income was attributable to cash, cash
equivalents and short-term investments primarily attributable to the net
proceeds received by CareerBuilder from its initial public offering of Common
Stock and from the Microsoft investment in May 1999, net of interest expenses
primarily from CareerBuilder's lines of credit that were paid off in May and
June of 1999.
TAXES
CareerBuilder has incurred significant operating losses for all periods
from its inception in November 1995 through December 31, 1999. 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. Accordingly,
no income tax benefits have been recognized in any periods. Due to the Company's
recent initial public offering, a change in control under section 382 of the
Internal Revenue Code of 1986, as amended, has occurred. The change in control
has occurred, it will limit the amount of net operating loss that the Company
will be able to carry forward and potentially utilize.
1998 COMPARED TO 1997
REVENUE
CareerBuilder's total revenue increased 264% from $1.9 million in 1997
to $7.0 million in 1998. The increase in total revenue was 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. This increase was also attributable, in part, to the
fact that, during 1998, ADP began marketing CareerBuilder services to ADP's
customers. Revenue derived from ADP's efforts comprised 11% of total revenue in
1998.
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 associated with customer support and the delivery of professional
services. Cost of revenue in absolute dollars increased 433% from $317,000 in
1997 to $1.7 million in 1998 and as a percentage of total 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.
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 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 CareerBuilder Network affiliates
in 1998 amounting to approximately $872,000. No advertising fees were paid to
members of the CareerBuilder Network in 1997.
Product Development. Product development expenses include expenses for
research, design and development of CareerBuilder's proprietary technology
incorporated in the CareerBuilder Network, and expenses associated with the
operation of the CareerBuilder Network. 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 the CareerBuilder Network.
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
14
<PAGE> 15
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.
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 private placement issuance of equity securities, net of
interest expenses primarily from CareerBuilder's revolving credit line.
TAXES
CareerBuilder has incurred significant operating losses for all periods
from its inception in 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.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, CareerBuilder has financed its activities primarily
through proceeds from private placements of equity securities, and its initial
public offering, totaling approximately $107.7 million through December 31,
1999.
Net cash used in operating activities was $5.8 million in 1997, $9.2
million in 1998 and $19.9 million in 1999. Net cash used in operating activities
resulted principally from net operating losses and increases in accounts
receivable, partially offset by increases in accounts payable and accrued
expenses.
Net cash used in investing activities was $1.2 million in 1997, $1.1
million in 1998, and $4.7 million in 1999. Net cash used in investing activities
was primarily related to purchases of computer and network equipment, as well as
an increase in long term deposits of $1.6 million for a new building lease that
commenced on February 1, 2000. In March 2000, the Company was refunded the $1.6
million deposit plus interest and on February 8, 2000 the Company obtained a
$1.6 million letter of credit in favor of the lessor of the new building.
Cash provided by financing activities was $8.8 million in 1997, $11.1
million in 1998 and $85.5 million for 1999. Net cash provided by financing
activities was primarily due to proceeds from its initial public offering and
private placements of equity securities. In addition, prior to June 1999,
CareerBuilder has utilized revolving credit lines secured by accounts receivable
and computer equipment to fund its operations, which the Company paid off with a
portion of the proceeds from its initial public offering and sale of Common
Stock to Microsoft.
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 were secured by substantially all of the Company's assets, and bore
interest at a variable rate. Each of the credit facility and the bridge loan is
evidenced by a promissory note for the amount borrowed. The Company repaid both
the bridge loan and the revolving credit facility in June, 1999. The revolving
credit facility, including the remaining line of credit for $2,000,000 expired
on December 28, 1999; however, the revolving credit facility was renewed on
February 3, 2000 for 2 years.
As of December 31, 1999, CareerBuilder had $63.6 million of cash and cash
equivalents.
CareerBuilder anticipates it will spend up to $4.5 million for capital
equipment during 2000. CareerBuilder has also entered into agreements that
provide for CareerBuilder to pay advertising and marketing fees to three of its
current CareerBuilder Network affiliates of up to approximately $1.5 million in
2000. In addition, under its service and distribution agreement with Microsoft,
CareerBuilder may be required to pay to Microsoft up to $3.0 million in 2000 and
up to $1.8 million in 2001 if Microsoft achieves agreed upon web site traffic
goals. The Microsoft career site was launched in late September 1999;
CareerBuilder made payments to Microsoft of $78,000 in 1999.
CareerBuilder believes 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. Although CareerBuilder
currently believes that it has sufficient capital resources to meet its
anticipated working capital and capital expenditure requirements beyond the next
12 months, unanticipated events and opportunities may make it necessary for
CareerBuilder to return to the public markets, increase its current credit
facilities or establish new credit facilities or raise capital in private
transactions in order to meet its capital requirements.
15
<PAGE> 16
================================================================================
YEAR 2000 DISCLOSURE
The Company's business operations were not adversely affected by any year
2000 problems. All CareerBuilder products and services as well as critical
internal business systems were tested to ensure they were year 2000 compliant.
CareerBuilder does not presently anticipate any significant future costs related
to the year 2000 problem. The Company has developed and implemented contingency
backup plans for its internal and external systems, that the Company believes
should be adequate. However, CareerBuilder believes that it is not possible to
determine with complete certainty that all year 2000 problems affecting the
Company have been identified or corrected. No assurances can be made that the
Company's backup plans would be adequate should an unexpected year 2000 problem
occur.
16
<PAGE> 17
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
WE ARE A YOUNG COMPANY SO WE HAVE ONLY 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 uncertainties
encountered by companies in the early stages of development in new and rapidly
evolving markets, specifically the online recruitment market. Some of the
uncertainties we face 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. For the year ended December 31, 1999, our net loss was $24.0
million. As of December 31, 1999, our accumulated deficit was approximately
$45.8 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 represented approximately 38% of our total revenue
for the year ended December 31, 1999; we have no control over
ADP's selling efforts and these 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; to the extent
a greater proportion of our revenue is attributable to customers
who choose to pay on a per-job posting basis, our operating
results may fluctuate to a greater extent from period to period;
revenue attributable to customers who chose to pay on a per-job
posting basis accounted for approximately 6% of our total revenue
for the year ended December 31, 1999;
- our cost of revenue, and therefore our operating results, are
affected by the allocation of our customers' job advertisements
among the CareerBuilder.com site and the other sites on the
CareerBuilder Network; and
- our cost of revenue is affected by the relative mix of sales between
our sales force and sales made through ADP; for the twelve months
ended December 31, 1999, we paid sales commissions to ADP of
approximately $2.0 million. This represented 33% of revenue for the
year ended December 31, 1999 received from customers for which ADP
acted as sales agent.
17
<PAGE> 18
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 MAY FLUCTUATE SEASONALLY, WHICH MAY AFFECT OUR FINANCIAL RESULTS
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, we may
find that similar seasonal and cyclical patterns characterize online recruiting
or we may discover other seasonal patterns. 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, WHICH MAY AFFECT OUR
FINANCIAL RESULTS
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 38% of our
total revenue for the year ended December 31, 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. Under our agreement, ADP is not
required to achieve specific revenue targets. ADP must meet revenue-based
milestones for installments under a warrant we issued to ADP to purchase shares
of our common stock to vest. 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, if ADP determines that the CareerBuilder Network has material
inadequacies that reduce their ability to perform competitively in relation to
other online recruiting products, we must correct the deficiencies specified by
ADP. If we fail to correct those deficiencies, ADP is free 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 its share of recurring sales commission 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.
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 100 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.
18
<PAGE> 19
WE COULD BE REQUIRED TO RECORD SIGNIFICANT EXPENSES IF ADP ACHIEVES REVENUE
GOALS
If ADP achieves specified revenue-based milestones, a warrant to purchase
shares of common stock will become exercisable to purchase up to 380,000 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 revenue-based milestones are measured for
a specific time period by subtracting from total revenue received from customers
for which ADP has acted as sales agent, sales commissions paid to ADP. In order
for the minimum number of shares under the March 2001 installment of the warrant
to vest, revenue minus sales commission for the period from April 1, 2000
through March 31, 2001 must exceed $10.2 million, with $20.4 million required
for the maximum number of shares issuable under the installment to vest. In
order for the minimum number of shares under the March 2002 installment to vest,
revenue minus sales commission for the period from April 1, 2001 through March
31, 2002 must exceed $23.0 million, with $30.0 million required for the maximum
number of shares issuable under the installment to vest. These milestones are
not projections but are solely milestones ADP must achieve for their warrants to
vest. The ADP warrant contains provisions that increase the number of shares for
which the warrant is exercisable if we issue additional shares, particularly for
financing purposes. The maximum number of shares that are issuable upon exercise
of each remaining installment of the warrant is currently 516,824 shares based
on current antidilution calculations. These 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 568,506 shares.
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 re-measured 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, 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.
19
<PAGE> 20
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. From
November 1995 to December 31, 1999, we have recorded approximately $46.0 million
in sales and marketing expenses. We may find it necessary to accelerate
expenditures on our sales and marketing efforts 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 the websites of the premier interactive media companies who
have executed agreements with us for the development of career sites to be a
part of the CareerBuilder Network appeal to a variety of distinct Internet user
communities in strategic broad-based, vertical, geographic and diversity
categories. Our agreements with these CareerBuilder Network affiliate members
generally have one-year terms, subject to extension. Although we do not know of
any of our affiliate member's intent not to renew their current agreements,
affiliate members have declined to renew in the past and we cannot be sure that
in the future all affiliate agreements will be renewed. 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
audiences. 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 MAY NOT SUCCEED
Our strategy includes expansion into international markets through a
combination of partnerships, acquisitions and internal business expansion. Our
future international operations might not succeed for a number or reasons,
including:
- difficulties in staffing and managing foreign operations;
- competition from local and foreign-based recruitment services;
- 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;
- issues relating to uncertainties of laws and enforcement relating to the
protection of intellectual property; and
- general political and economic trends.
Accordingly, we may not be able to successfully execute our business plan
in foreign markets. If revenue from international ventures is not adequate to
cover our investment in those ventures, our business, results of operations and
financial condition could be materially and adversely affected.
WE MAY HAVE DIFFICULTY IN IDENTIFYING AND COMPETING FOR ACQUISITION
OPPORTUNITIES
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.
20
<PAGE> 21
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.
PURSUING AND COMPLETING POTENTIAL ACQUISITIONS COULD DIVERT MANAGEMENT ATTENTION
AND FINANCIAL RESOURCES AND MAY NOT PRODUCE THE DESIRED BUSINESS RESULTS
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 and financial resources to integrate the acquired
business with our existing business. To pay for an acquisition, we might use
capital stock, or cash, 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.
Despite the investment of these management and financial resources, 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
for a variety of reasons, 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.
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.
WE ARE EXPERIENCING RAPID GROWTH, WHICH MAY STRAIN OUR RESOURCES
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.
IF WE LOSE THE SERVICES OF A NUMBER OF KEY EXECUTIVES, OUR BUSINESS COULD SUFFER
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 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 MAY NOT BE ABLE TO HIRE AND RETAIN HIGHLY SKILLED EMPLOYEES, WHICH COULD
AFFECT OUR ABILITY TO COMPETE EFFECTIVELY
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. We may experience
difficulty providing the proper level of service to our customers or incur
increased costs due to rising salary and benefit levels. 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.
21
<PAGE> 22
WE MAY LOSE BUSINESS IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGIES
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
We compete with companies, including recruiting search firms,
that offer a single database "job board" solution, such as Monster.com and
Hotjobs.com, 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 solutions 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.
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, competitors may rapidly acquire
significant market share. In addition, new technologies will 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.
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. Our communications hardware and 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
22
<PAGE> 23
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. 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 DEVELOPMENT AND MAINTENANCE OF 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 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.
BREACHES OF INTERNET SECURITY COULD ADVERSELY AFFECT OUR BUSINESS
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 U.S.
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 electronic
commerce transactions, 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 user information. Courts in the U.S. and abroad 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.
23
<PAGE> 24
Existing or future laws or regulations affecting the Internet and legal
uncertainties relating to 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 or 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
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 that associated with the CareerBuilder
Network, Mega Job-Search and our Personal Search Agent. 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.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL AS NEEDED IN THE FUTURE, OUR
BUSINESS MAY BE ADVERSELY AFFECTED
As of December 31, 1999, the Company had cash and cash equivalents of $63.6
million. We anticipate that our available cash resources 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 four 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. In addition, we may
not be able to obtain additional financing
24
<PAGE> 25
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.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY, AND THIS COULD
DEPRESS OUR STOCK PRICE
Delaware corporate law and our certificate of incorporation and by-laws
contain 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 investors might be willing to
pay in the future for shares of our common stock. These provisions include:
- authorize the issuance of "blank check" preferred stock, which is
preferred stock that 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.
25
<PAGE> 26
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no long term debt as of December 31, 1999. The Company
invests in money market funds and, under its current policies, the Company does
not use interest rate derivative instruments to manage its exposure to interest
rate changes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements together with the related notes and the
report of KPMG LLP, independent auditors, are set forth in the Index to the
Financial Statements at Item 14 and incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
26
<PAGE> 27
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections of the Company's Proxy Statement for the annual meeting of
stockholders to be held on May 11, 2000 entitled "Election of Directors",
"Nominees for Class I Director", "Incumbent Class II Director", "Incumbent Class
III Directors" and "Section 16 Beneficial Ownership Reporting Compliance" are
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The sections of the Company's Proxy Statement for the annual meeting of
stockholders to be held on May 11, 2000 entitled "Executive Compensation",
"Stock Option Grants" and "Option Exercises and Year-end Option Values" are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section of the Company's Proxy Statement for the annual meeting of
stockholders to be held on May 11, 2000 entitled "Beneficial Ownership of Common
Stock" is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section of the Company's 2000 Proxy Statement entitled "Certain
Relationships and Transactions" is incorporated herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) THE FOLLOWING FINANCIAL STATEMENTS OF AND REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS ARE INCLUDED IN ITEM 8 OF THIS FORM 10-K AND ARE ATTACHED
HERETO AS PAGES F-1 THROUGH F-15.
- Report of KPMG LLP, Independent Auditors.
- Balance Sheets as of December 31, 1998 and 1999.
- Statements of Operations for the years ended December 31, 1997,
1998 and 1999.
- Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1997, 1998 and 1999.
- Statements of Cash Flows for the years ended December 31, 1997,
1998 and 1999.
- Notes to Financial Statements.
(a)(2) THE FOLLOWING FINANCIAL STATEMENT SCHEDULE IS FILED AS PART OF THIS
REPORT AND IS ATTACHED HERETO AS PAGES S-1 AND S-2
- Report of Independent Public Accountants on the Financial
Statement Schedule.
- Schedule II - Valuation and Qualifying Acounts.
All other schedules for which provision is made in the applicable
accounting regulations of the Commission either have been included in the
financial statements of CareerBuilder, Inc. or the notes thereto, are not
required under the related instructions or are inapplicable, and
therefore have been omitted.
27
<PAGE> 28
(a)(3) THE FOLLOWING EXHIBITS ARE EITHER PROVIDED WITH THIS FORM 10-K OR ARE
INCORPORATED HEREIN BY REFERENCE:
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ------------------------------------------------------------------------
<S> <C>
3.1* Amended and Restated Certificate of Incorporation of the Registrant.
3.2* Amended and Restated Bylaws of the Registrant.
4.1* Specimen certificate for shares of Common Stock, $.001 par value per
share, of the Registrant.
10.1* Stock Option Plan.
10.2* 1999 Stock Incentive Plan.
10.3* 1999 Non-Employee Director Stock Option Plan.
10.4* 1999 Employee Stock Purchase Plan.
10.5* Third Amended and Restated Registration Rights Agreement, dated January
26, 1999, by and among the Registrant and certain stockholders.
10.6* Amendment Agreement, dated March 5, 1999, between the Registrant
and ADP, Inc.
10.7* ADP Joint Marketing/Sales Representative Agreement, dated January 23,
1998, between the Registrant and ADP, Inc.
10.8 Amended and Restated Common Stock Purchase Warrant, dated March 5,
1999, issued to ADP, Inc., as amended on March 15, 2000.
10.9 Loan Agreement, dated February 3, 2000, between the Registrant
and PNC Bank, N.A.
10.13* Warrant Agreement, dated December 29, 1998, between the Registrant
and PNC Bank, N.A.
10.14* Common Stock Purchase Warrant, dated May 4, 1999, issued to Microsoft
Corporation.
10.15* Amendment Agreement, dated May 4, 1999, by and among the Registrant,
Microsoft Corporation and certain stockholders.
10.16 Lease, dated February 1, 2000, for Reston, VA.
23.1 Consent of KPMG LLP.
27 Financial Data Schedule.
</TABLE>
- ----------
* Incorporated by reference to the Registrant's Registration Statement on Form
S-1, as amended (File No. 333 - 73469)
28
<PAGE> 29
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed in the quarter ended December 31, 1999.
(c) FINANCIAL STATEMENT SCHEDULE.
The following financial statement schedule is filed herewith:
Schedule II - Valuation and Qualifying Accounts.
Schedules not listed above have been omitted because they are inapplicable
or the information required to be set forth therein is provided in the
Consolidated Financial Statements of CareerBuilder, Inc. or notes thereto.
29
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CareerBuilder, Inc.:
Under date of February 4, 2000, we reported on the balance sheets of
CareerBuilder, Inc. as of December 31, 1998 and 1999, 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, 1999, which are
included in this Annual Report on Form 10-K. In connection with our audits of
the aforementioned financial statements, we also audited the related financial
statement schedule. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/ KPMG LLP
McLean, Virginia
February 4, 2000
S-1
<PAGE> 31
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
BALANCE AT BALANCE AT
DESCRIPTION BEGINNING CHARGED TO CHARGED TO DEDUCTIONS END OF
----------- OF PERIOD COSTS AND EXPENSES REVENUE WRITE-OFFS PERIOD
(IN THOUSANDS) --------- ------------------ -------------- ----------- --------
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts
and Sales Returns
- ----------------------------------------------------------------------------------------------------------------
Year ended December 31, 1997 $ 18 $ 88 $ 137 $ (205) $ 38
- ----------------------------------------------------------------------------------------------------------------
Year ended December 31, 1998 38 591 62 (556) 135
- ----------------------------------------------------------------------------------------------------------------
Year ended December 31, 1999 135 321 1,233 (1,267) 422
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
S-2
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-K to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
Date: March 27, 2000 CAREERBUILDER, INC.
By: /s/ ROBERT J. MCGOVERN
--------------------------
Robert J. McGovern
Chairman, President and Chief Executive Officer
By: /s/ JAMES A. THOLEN
---------------------------
James A. Tholen
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
Pursuant to the requirements of the Securities Act of 1934, this Form 10-K
has been signed by the following persons in the capacities indicated on March
27, 2000.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
By: /s/ ROBERT J. MCGOVERN Chairman, President and Chief Executive Officer
---------------------------
Robert J. McGovern
By: /s/ JAMES A. THOLEN Senior Vice President, Chief Financial Officer, and Director
---------------------------
James A. Tholen
By: /s/ PETER BARRIS Director
---------------------
Peter Barris
By: /s/ GARY C. BUTLER Director
-----------------------
Gary C. Butler
By: /s/ D. JARRET COLLINS Director
--------------------------
D. Jarret Collins
By: /s/ DAVID C. WETMORE Director
-------------------------
David C. Wetmore
</TABLE>
30
<PAGE> 33
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT.............................................................................. F-2
BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1999........................................................... F-3
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999............................. F-4
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999......... F-5
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 ...................... F-6
NOTES TO FINANCIAL STATEMENTS............................................................................. F-7
</TABLE>
F-1
<PAGE> 34
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, 1998 and 1999, 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, 1999. 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, 1998 and 1999, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1999 in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
McLean, Virginia
February 4, 2000
F-2
<PAGE> 35
CAREERBUILDER, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1999
------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................ $ 2,709 $ 63,589
Accounts receivable, net of allowance of $135 and $422,
respectively ................................................................. 1,581 3,029
Prepaid Expenses ................................................................ - 1,040
Other ............................................................................ 442 48
--------- ---------
Total current assets ........................................................ 4,732 67,706
Property and equipment, net of accumulated depreciation
and amortization of $1,254 and $2,449, respectively ................................ 1,213 2,028
Deposits .............................................................................. - 2,028
Other ................................................................................. 97 766
--------- ---------
Total assets ................................................................ $ 6,042 $ 72,528
========= =========
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ................................................................. $ 1,514 $ 2,022
Accrued payroll and related expenses ............................................ 711 1,649
Accrued expenses ................................................................. 763 3,340
Lines of credit .................................................................. 3,450 -
Deferred revenue ................................................................. 2,193 418
--------- ---------
Total current liabilities ................................................... 8,631 7,429
--------- ---------
Total liabilities ..................................................... 8,631 7,429
--------- ---------
Convertible redeemable preferred stock ................................................ 18,931 -
--------- ---------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $.001 par value,
60,000 shares authorized at December 31, 1999; 4,855
and 23,691 shares issued and outstanding at
December 31, 1998 and 1999,
respectively ................................................................ 5 24
Additional paid-in capital ....................................................... 244 110,832
Accumulated deficit .............................................................. (21,769) (45,757)
--------- ---------
Total stockholders' equity (deficit) ........................................ (21,520) 65,099
--------- ---------
Total liabilities, convertible redeemable preferred stock, and stockholders'
equity (deficit) ....................................................... $ 6,042 $ 72,528
========= =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 36
CAREERBUILDER, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenue:
Service fees $ 1,263 $ 6,648 $ 14,822
Software license fees 662 358 86
-------- -------- --------
Total revenue 1,925 7,006 14,908
======== ======== ========
Cost of revenue:
Service fees 197 1,629 6,664
Software license fees 120 62 23
-------- -------- --------
Total cost of revenue 317 1,691 6,687
======== ======== ========
Gross profit 1,608 5,315 8,221
-------- -------- --------
Operating expenses:
Product development 1,310 2,293 2,307
General and administrative 1,267 2,305 3,806
Sales and marketing (excluding equity-based
expense below) 6,452 12,735 25,458
Equity-based expense - - 2,710
-------- -------- --------
Total operating expenses 9,029 17,333 34,281
-------- -------- --------
Loss from operations (7,421) (12,018) (26,060)
-------- -------- --------
Net interest income 107 31 2,072
-------- -------- --------
Loss before income taxes (7,314) (11,987) (23,988)
Income taxes - - -
-------- -------- --------
Net loss (7,314) (11,987) (23,988)
-------- -------- --------
Preferred stock dividend requirements (549) (1,128) (737)
-------- -------- --------
Net loss available to common stockholders $ (7,863) $(13,115) $(24,725)
======== ======== ========
Basic and diluted net loss per share $ (1.80) $ (2.92) $ (1.48)
Weighted average shares outstanding 4,366 4,494 16,712
Unaudited pro forma basic and diluted net loss per share $ (0.87) $ (1.14)
Weighted average shares used to compute unaudited
pro forma net loss per share 13,850 20,991
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 37
CAREERBUILDER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
------ ------ ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
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)
Microsoft investment .... 1,373 1 17,845 17,846
Conversion of
convertible
redeemable
preferred stock ... 11,856 12 29,905 29,917
Initial public offering,
net of expenses ... 5,075 5 59,936 59,941
Exercise of stock
options ......... 532 1 192 -- 193
Equity-based
expense ............ -- -- 2,710 -- 2,710
Net income
(loss) .......... -- -- -- (23,988) (23,988)
-------- -------- -------- -------- --------
Balances at December
31, 1999 ................ 23,691 $ 24 $110,832 $(45,757) $ 65,099
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 38
CAREERBUILDER, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows used by operating activities:
Net loss $ (7,314) $(11,987) $(23,988)
Adjustments to reconcile net loss to net cash used by operating
activities:
Noncash items included in net income (loss):
Depreciation and amortization 334 871 1,195
Allowance for doubtful accounts and sales returns 225 653 287
Equity-based expense - - 2,710
Increase in assets:
Accounts receivable (739) (1,649) (1,735)
Other operating assets (12) (317) (646)
Increase (decrease) in liabilities:
Accounts payable 871 475 508
Accrued expenses 421 943 3,515
Deferred revenue 395 1,798 (1,775)
-------- -------- --------
Net cash used by operating activities (5,819) (9,213) (19,929)
-------- -------- --------
Cash flows used by investing activities:
Purchases of property and equipment (1,128) (1,084) (2,010)
Increase in other assets (69) (18) (2,697)
-------- -------- --------
Net cash used by investing activities (1,197) (1,102) (4,707)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of Class F convertible redeemable preferred stock 8,565 8,310 10,986
Proceeds from initial public offering, net of expenses - - 59,941
Proceeds from investment from Microsoft - - 17,846
Proceeds from exercise of stock options 2 31 193
Advances on line of credit 276 2,774 390
Payoff of line of credit - - (3,840)
-------- -------- --------
Net cash provided by financing activities 8,843 11,115 85,516
-------- -------- --------
Net change in cash and cash equivalents 1,827 800 60,880
Cash and cash equivalents, beginning of period 82 1,909 2,709
-------- -------- --------
Cash and cash equivalents, end of period $ 1,909 $ 2,709 $ 63,589
======== ======== ========
Supplemental cash flow information: Interest and income taxes paid:
Interest paid $ 37 $ 98 $ 355
Taxes paid - - -
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 39
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. 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 CareerBuilder Network consists 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 but believes that existing cash and cash
equivalents will be sufficient to fund operations for at least the next 12
months.
NOTE 2 -- BASIS OF PRESENTATION
The financial statements include the accounts of CareerBuilder, Inc.
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
NOTE 3 -- 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.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements", ("SAB No. 101"). SAB No. 101 summarizes certain of the SEC staff's
views in applying generally accepted accounting principles to the recognition of
revenue in financial statements. The Company believes SAB No. 101 has had no
impact on the Company's reported earnings or financial position.
(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 other affiliates. Amounts incurred for affiliates and ADP
commissions were approximately $644,000 and $4.7 million for the years ended
December 31, 1998 and 1999, respectively. No such amounts were incurred in 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
F-7
<PAGE> 40
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. As of December 31,
1999, cash equivalents consist of investments in a money market fund. The
carrying amounts reported in the balance sheets for cash and cash equivalents
approximate their fair value. Interest income on such investments was
approximately $144,000, $129,000 and $2,427,000 for the years ended December 31,
1997, 1998 and 1999, respectively.
(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, line
of credit and convertible redeemable preferred stock, approximate their fair
values as of December 31, 1998 and 1999.
(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.
The Company had a receivable from ADP, Inc. at December 31, 1999 representing
$1.2 million or 34% of trade receivables.
(See Note 7 - Related Party Transactions).
(f) EQUITY-BASED EXPENSE
Equity-based expense represents the amortization of the fair market value
of warrants issued under marketing and sales representative agreements. The
warrants are amortized on straight-line basis over the life of the respective
agreements.
(g) 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.
(h) 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 significant software
development costs.
(i) STOCK-BASED COMPENSATION
The Company accounts for employee 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 for employee stock options is based upon the difference, if
any, on the date of grant, between the fair value of the Company's Common stock
and the exercise price.
(j) 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.
F-8
<PAGE> 41
(k) NET INCOME (LOSS) PER SHARE
The Company computes net income (loss) 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)
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) 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 during the period.
The Company has presented historical basic and diluted net income (loss) 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) per share is the
same. Pro forma basic and diluted net income (loss) per share has been
calculated assuming the conversion into common stock of all shares of preferred
stock outstanding at December 31, 1997 or the date of issuance, if later.
(l) 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.
(m) ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising costs
amounted to approximately $1,900,000, $3,560,000 and $9,349,000 for the years
ended December 31, 1997, 1998 and 1999, respectively.
(n) COMPREHENSIVE INCOME (LOSS)
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 (loss) and its components in financial
statements. Comprehensive income (loss), 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 (loss).
NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
DEPRECIABLE
1998 1999 LIVES
---------- --------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Computer equipment....................................... $ 1,774 $3,518 2 years
Furniture and equipment.................................. 533 761 3-5 years
Shorter of
Leasehold improvements................................... 160 198 useful life or
--------- ------ term of lease
2,467 4,477
Less: accumulated depreciation and amortization.......... 1,254 2,449
--------- ------
$ 1,213 $2,028
========= ======
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1997, 1998 and 1999 was $334,000, $871,000, and $1,195,000, respectively.
NOTE 5 -- LINES OF CREDIT
As of December 31, 1999, all long term debt and lines of credit have been
paid in full. As of December 31, 1998, $3,450,000 was outstanding under the line
of credit agreements. The Company retained a line of credit for up to
$2,000,000, with the amount actually available for borrowing adjusted based upon
the Company's accounts receivable and property and equipment balances, that
expired on December 28, 1999. The Company renegotiated the terms of the line of
credit as of February 3, 2000 for a term of two years. The line of credit bears
interest at the bank's prime rate plus 1/2 %.
F-9
<PAGE> 42
NOTE 6 -- STOCKHOLDERS' EQUITY (DEFICIT)
The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue 60,000,000 shares of common 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>
On January 26, 1999, the Company issued 2,018,350 shares of Class F
Convertible Redeemable Preferred Stock to new and existing investors for
approximately $10,986,000. The Class F preferred stock automatically converted
into common stock upon the initial public offering.
In May 1999, the Company issued 5,075,000 shares of the Company's Common
Stock to the public at $13 per share, generating net proceeds to the Company of
approximately $59.9 million. Concurrent with this transaction, all outstanding
shares of Convertible Redeemable Preferred Stock were converted into 11,856,295
shares of Common Stock.
NOTE 7-- RELATED PARTY TRANSACTIONS
In January 1998, the Company entered into a sales agent agreement with ADP;
this agreement was amended in January 1999. ADP is related to the Company
through common stock ownership. 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.
Under the agreement, ADP sells the Company's classified employment
advertising services on a commission basis. Such commissions range from 33% to
50% of total revenues generated by ADP. 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 was
deferred and reduced by amounts earned of $405,000 as of December 31, 1998; as
of June 1999 the prepayment was reduced to zero. In 1998 and 1999, commission
expense under the ADP agreement was approximately $328,000 and $2.0 million,
respectively. As of December 31, 1999, approximately $1.2 million was due from
ADP under this agreement and is included in accounts receivable.
In May 1999, the Company entered into a strategic arrangement with
Microsoft Corporation. As part of its strategic arrangement, Microsoft invested
$17,846,621, or $13.00 per share, for 1,372,817 shares of the Company's Common
Stock. The Company also issued a warrant to Microsoft to purchase 873,534 shares
of Common Stock at an exercise price of $13.00 per share. The Company recognized
approximately $2.0 million of expense related to the warrant in 1999 and expects
to recognize approximately $3.8 million of expense related to these warrants
between 2000 and 2001, ratably, based on the duration of the agreement.
Under its service and distribution agreement with Microsoft, CareerBuilder
may be required to pay Microsoft up to $3.0 million in 2000 and up to $1.8
million in 2001 if Microsoft achieves agreed upon web site traffic goals. The
Microsoft career site was launched in late September 1999 and as of December 31,
1999 $293,000 in fees due Microsoft had been incurred and $78,000 had been paid.
NOTE 8 -- STOCK COMPENSATION
(a) EMPLOYEE STOCK PURCHASE PLAN
CareerBuilder implemented an employee stock purchase plan ("ESPP")
effective May 7, 1999. The plan allows employees to voluntarily purchase shares
of common stock from the Company in a series of one or more offerings during the
year through payroll deductions. Employees may purchase the stock at a 15%
discount from the lower of the closing price of Common Stock on the offering
commencement date or the last business day on which the offering terminated.
Each offering commencement date will begin
F-10
<PAGE> 43
a six month period except for the initial public offering period which was from
May 7, 1999 to December 31, 1999. The total number of shares under the ESPP plan
is limited to 3,300,000 shares of Common Stock less the sum of the number of
shares awarded or issued under the Company's 1999 Stock Incentive Plan and the
Company's 1999 Director Stock Option Plan. The plan is administered by the Board
of Directors. As of December 31, 1999, payroll deductions for the employee stock
purchase plan totaled $242,000.
On January 3, 2000, the Company sold 35,997 shares of Common Stock to the
ESPP for a total of $197,000. The fair value of the employees' purchase rights
of ESPP shares is estimated using the Black-Scholes option pricing model with
the following weighted-average assumptions used for purchases in the year ended
December 31, 1999: dividend yield of 0 percent, volatility of 100%, risk free
interest rate of 6.45% and expected life of six months. The weighted-average
fair value of the purchase rights granted in 1999 was $5.47 per share. The pro
forma expense for the year ended December 31, 1999 is included below.
(B) STOCK OPTIONS
In March 1999, the Company adopted the 1999 Stock Incentive Plan, the 1999
Non-Employee Director Stock Option Plan and the 1999 Employee Stock Purchase
Plan. Additionally, the Company increased the number of shares available for
issuance under its stock option plans to 3,300,000.
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. Prior to the Company's initial public
offering, options were granted at an exercise price equal to the estimated fair
value on the grant date, as determined by the Board of Directors. Subsequent to
the initial public offering, options were granted at the quoted market price on
the date of grant. The options generally vest over three or four years, with
one-third or one-fourth of the shares vesting on each of the first through third
and fourth anniversaries of the date of grant.
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 and ESPP 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,
---------------------------------------------------
1997 1998 1999
----------------- -------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss) available to common
stockholders:
As reported........................................ $ (7,863) $ (13,115) $ (24,725)
Pro forma.......................................... (7,869) (13,140) (25,306)
Basic and diluted net income (loss)
per share:
As reported........................................ $ (1.80) $ (2.92) $ (1.48)
Pro forma.......................................... (1.80) (2.92) (1.51)
</TABLE>
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,
--------------------------------------
1997 1998 1999
------------ ------------ --------
<S> <C> <C> <C>
Risk-free interest rates...... 6.0% 5.5% 6.5%
Expected lives (in years)..... 5.0 4.0 4.0
Dividend yield................ -- -- --
Expected volatility........... -- -- 100%
</TABLE>
The weighted-average fair value of stock options granted during 1997, 1998,
and 1999 was $0.07, $0.22, and $5.96 respectively.
F-11
<PAGE> 44
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, 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
Granted 890 8.26
Exercised 532 .36
Cancelled 361 1.55
--------------- -------------
Balance, December 31, 1999......... 1,481 $ 5.13
</TABLE>
F-12
<PAGE> 45
The following table summarizes information concerning currently outstanding
and exercisable options at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------- -----------------------------------
NUMBER WEIGHTED-AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 12/31/99 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/99 EXERCISE PRICE
-------------------- -------------- ------------------------- ------------------- ------------------- ---------------
(IN THOUSANDS, EXCEPT YEARS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
$0.04 -- $0.40...... 336 7.4 years $ 0.28 105 $ 0.31
$1.25 -- $3.50...... 304 8.7 years 1.49 20 2.10
$5.63 -- $8.06...... 581 9.7 years 7.01 4 6.00
$8.75 -- $13.00..... 132 9.4 years 9.40 -- --
$13.13 -- $16.50.... 128 9.5 years 13.58 17 13.31
----------- --------- ------- ---- -------
1,481 8.9 years $ 5.13 146 $ 2.21
</TABLE>
(c) WARRANTS
In connection with the ADP agreement (see 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 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.
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 warrants to purchase 380,000 shares of common stock, at an
exercise price of $12.00 per share, were vested at that time. The estimated
value of the warrant at the vesting date of $1,699,000 is being recognized as
equity-based expense ratably over the extended term of the agreement, which is
thirty-seven months. Warrants for the second and third installments of up to
380,000 shares of common stock each will vest on March 31, 2001 and March 31,
2002, respectively, based on ADP achieving specified revenue-based milestones.
The revenue-based milestones are measured for a specific time period, by
subtracting from total revenue received from customers for which ADP has acted
as a sales agent, sales commissions paid to ADP. In order for the minimum number
of shares under the March 2001 installment of the warrant to vest, revenue minus
sales commissions for the period from April 1, 2000 through March 31, 2001 must
exceed $10.2 million, with $20.4 million required for the maximum number of
shares issuable under the installment to vest. In order for the minimum number
of shares under the March 2002 installment to vest, the milestone of revenue
minus sales commission for the period from April 1, 2001 through March 31, 2002
must exceed $23.0 million, with $30.0 million required for the maximum number of
shares issuable under the installment to vest. The exercise price for the second
and third installments is $5.00 per share. In the event that ADP does not meet
the specified sales levels, the associated warrants expire. If the Company
issues additional equity securities primarily for financing purposes, excluding
the shares of common stock sold in an underwritten public offering or through
the Company's stock option plan, the number of shares of common stock issuable
upon exercise of the warrant will increase for each of the second and third
installments.
If and when it becomes probable that the net revenue the Company will
receive from ADP will reach the necessary level for either of the remaining
installments of the warrant to vest, the Company would begin to record an
expense reflecting the fair value of the warrants, which will be determined in
part based on the then current 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.
As of December 31, 1999, the Company believes it is not yet probable that
ADP will achieve the necessary sales level to earn the warrants to purchase the
additional 914,052 shares of common stock.
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 anniversaries of the agreement and expire five years
from the date of grant. The estimated value of the warrants at the grant date of
$706,000 is being recognized as equity-based expense ratably over the term of
the agreement, which is two years. In addition, the Company is required to make
certain mandatory
F-13
<PAGE> 46
minimum payments totaling $750,000 to NBC Interactive in 1999 and 2000. For the
year ended December 31, 1999, $312,500 has been recognized as sales and
marketing expense related to mandatory minimum payments.
In May 1999, the Company entered into a strategic arrangement with
Microsoft Corporation. As part of its strategic arrangement, Microsoft invested
$17,846,621, or $13.00 per share, for 1,372,817 shares of the Company's common
stock. The Company also issued a warrant to Microsoft to purchase 873,534 shares
of Common Stock at an exercise price of $13.00 per share. The Company is
recognizing approximately $5.8 million of expense related to the warrant ratably
between 1999 and 2001, reflecting the term of the strategic agreement.
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 (see note 5). The warrants expire in ten years. 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.
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, 1999 are approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------
(IN THOUSANDS)
<S> <C>
2000............................... $1,665
2001............................... 1,781
2002............................... 1,670
2003............................... 1,669
2004............................... 1,719
Thereafter......................... 5,629
----------
$14,133
</TABLE>
Rent expense under noncancelable operating leases was approximately
$279,000, $422,000 and $540,000 for years ended December 31, 1997, 1998 and
1999, respectively.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
(a) RETIREMENT AND HEALTH PLANS
The Company sponsors a defined contribution retirement 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.
NOTE 11 -- INCOME TAXES (KEN I CALLED GRACE LEO AND SHE IS WORKING ON THIS..)
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, 1999, the Company had net operating loss carryforwards available to offset
future taxable income of approximately $40,705,000, which expires through
2019. Further, as a result of certain capital transactions, the utilization of
the net operating loss generated prior to the date of such capital transactions
may be limited. 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.
Temporary differences that give rise to deferred tax assets and liabilities
at December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............ $ 7,877 $ 16,282
Accounts receivable......................... 54 168
Property and equipment...................... 155 285
Accrued expenses............................ 219 219
Deferred revenue............................ 438 163
Equity Based Expenses....................... 0 1,084
Intangibles................................. 0 2
Charitable Contributions.................... 0 2
---------- ----------
Total gross deferred tax assets..... 8,743 18,205
</TABLE>
F-14
<PAGE> 47
<TABLE>
<S> <C> <C>
Less: valuation allowance..................... (8,743) (18,205)
---------- ----------
Net deferred tax assets............. $ -- $ --
========== ==========
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1998 and
1999 was $8,743,000 and $18,205,000 respectively. The net change in the
valuation allowance for the years ended December 31, 1998 and 1999, was an
increase of $4,867,000, and $9,462,000 respectively. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax asset will be
realized. The ultimate realization of the deferred tax asset is dependent upon
the generation of future taxable income during the periods in which temporary
differences become deductible. Management considers scheduled reversals of
deferred tax liabilities, projected future taxable income, and tax planning
strategies that can be implemented by the Company in making this assessment.
Based upon the level of historical taxable income, scheduled reversal of
deferred tax liabilities, and projections of future taxable income over the
periods in which the temporary differences become deductible based on available
tax planning strategies, management presently believes that it is not more
likely than not that the Company will realize all of the benefits of these
deductible differences and , accordingly, has established a valuation allowance
against the deferred tax assets as of December 31, 1998 and 1999.
NOTE 12 -- 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 (loss) per common share. The following is a
reconciliation of the numerators and denominators of the basic and diluted
earnings (loss) per common share computations for net income (loss).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997 1998 1999
---------------- ---------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss)................ $ (7,314) $ (11,987) $ (23,988)
Preferred stock dividend
requirements................... (549) (1,128) (737)
---------- ----------- -----------
Net income (loss)
available to common
stockholders................... $ (7,863) $ (13,115) $ (24,725)
========== =========== ===========
Weighted average shares of
common stock
outstanding.................... 4,366 4,494 16,712
========== =========== ======
Basic and diluted net
income (loss) available
per common share............... $ (1.80) $ (2.92) $ (1.48)
========== =========== ===========
</TABLE>
F-15
<PAGE> 1
EXHIBIT 10.8
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
<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 180,000 - 380,000 $10,200,000 3/1/99 - 3/30/01 3/30/01
Tranche III 50,000 $23,000,000 4/1/01 - 3/30/02 3/30/02
75,000 $24,000,000
100,000 $25,000,000
140,000 $26,000,000
190,000 $27,000,000
230,000 $28,000,000
300,000 $29,000,000
380,000 $30,000,000
</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.
-3-
<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
-4-
<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
-5-
<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
-6-
<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
-7-
<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
-8-
<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.
-9-
<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
- -------------------------
-10-
<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:
----------------------------
----------------------------
-1-
<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:
-------------- ---------------------------------
-1-
<PAGE> 13
Exhibit 10.8
CAREERBUILDER, INC.
11495 SUNSET HILLS ROAD
RESTON, VA 20190
March 15, 2000
ADP, Inc.
One ADP Boulevard
Roseland, NJ 07068
Attention: General Counsel
Dear Sir:
Reference is made to the Amended and Restated Common Stock Purchase Warrant
(Warrant No. ADP1), originally issued on January 23, 1998 and amended and
restated on March 5, 1999 (the "Warrant") by CareerBuilder, Inc, a Delaware
corporation formerly known as NetStart, Inc. (the "Company"), to ADP, Inc., a
Delaware corporation ("ADP"). The Company desires to amend the Warrant as set
forth below and hereby requests your agreement to such amendment.
AMENDMENT OF WARRANT. The Warrant is hereby amended as follows:
1. SECTION 1(a). Section 1(a) of the Warrant is hereby amended by
deleting in its entirety the Tranche II row of the chart appearing therein
which reads as follows:
<TABLE>
<S> <C> <C> <C> <C>
Tranche II 180,000-380,000 $10,200,000 3/1/99-3/30/01 3/30/01
</TABLE>
and replacing it with the following new row:
<TABLE>
<S> <C> <C> <C> <C>
Tranche II 180,000-380,000 $10,200,000-20,400,000 4/01/2000-3/31/2001 3/31/2001
</TABLE>
2. SECTION 1(a). Section 1(a) of the Warrant is further amended by
deleting the dates "4/1/01-3/30/02" and "3/30/02" appearing in the Tranche III
row of the chart appearing therein and replacing them with the dates
"4/1/2001-3/31/2002" and "3/31/2002" respectively.
3. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Warrant, and
all other provisions off the Warrant remain in full force and effect. This
Amendment may be executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which counterparts when
executed and delivered (including by way of facsimile) shall be an original, but
all of which shall together be one and the same instrument. This Amendment and
the rights and obligations of the parties hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware.
<PAGE> 14
ADP, Inc.
One ADP Boulevard
Roseland, NJ 07068
Page 2 of 2
If you are in agreement with the foregoing, please execute a counterpart
of this letter and return the signed counterpart to us as soon as possible.
Very truly yours,
CAREERBUILDER, INC.
By: /s/ James A. Ruben
----------------------------
Name: James A. Ruben
Title: CFO
Accepted and Agreed:
ADP, INC.
By: /s/ James B. Benson
---------------------------
Name: James B. Benson
Title: President
<PAGE> 1
Exhibit 10.9
EXECUTION COPY
AMENDED AND RESTATED
LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT (this "AGREEMENT"), is entered
into as of February 3, 2000 (the "EFFECTIVE DATE"), between CAREERBUILDER, INC.
a Delaware corporation (the "BORROWER"), and PNC BANK, NATIONAL ASSOCIATION (the
"BANK").
WHEREAS, the Borrower and the Bank are parties to a Loan Agreement dated
as of December 29, 1998 (the "ORIGINAL LOAN AGREEMENT") pursuant to which the
Bank made available a revolving credit facility to the Borrower in an aggregate
principal amount not to exceed $2,000,000 and a Bridge Loan to the Borrower in
an aggregate principal amount not to exceed $4,000,000; and
WHEREAS, the Borrower has repaid the Bridge Loan, and the Borrower and the
Bank wish to amend and restate the Original Loan Agreement to eliminate terms
and conditions related to the Bridge Loan and to make certain other changes
described herein;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally
bound hereby, covenant and 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"), with Letter of
Credit sub-facility
The proceeds of the Revolving Credit shall be used for general working capital.
At no time shall the combined amounts of Letter of Credit issued and advances
under the Revolving Credit exceed $2,000,000.
2. TERMS AND CONDITIONS. Subject to the terms and conditions hereof and
relying upon the representations and warranties herein set forth, the Bank
shall 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:
<PAGE> 2
(a) Expiration Date: Two years from the Effective Date (such date being
referred to as the "REVOLVING CREDIT EXPIRATION DATE"), the Borrower may
annually extend the Revolving Credit Expiration Date, in each case for an
additional year, provided that (i) the Borrower remains in compliance with all
terms and conditions of this Agreement, and (ii) the Borrower requests such
renewal no sooner than fourteen (14) months, and no later than twelve (12)
months, prior to the Revolving Credit Expiration Date then in effect.
(b) Availability: The Revolving Credit shall be available and the Borrower may
borrow, repay and reborrow on or after the Effective Date and prior to the
Revolving Credit Expiration Date provided that the Borrower is in compliance
with the terms and conditions of this Agreement and provided that as a result of
such borrowing or reborrowing at all times during this Agreement the outstanding
balance of the Revolving Credit does not exceed the lesser of $2,000,000 or the
Borrowing Base (as defined in Section 2.1(d) hereof).
(c) Interest Rate: Prime Rate (as defined hereinafter) plus 1/2% per annum; the
"PRIME RATE" shall be the rate of interest per annum announced by the Bank at
its principal office from time to time as its Prime Rate, which rate may not be
the lowest interest rate then being charged commercial borrowers by the Bank.
(d) Borrowing Base: The Revolving Credit shall be available in amounts not to
exceed 100% of the Cash Collateral coverage of all loans and letters of credit
outstanding at any time. The "Cash Collateral" shall equal at any time the
aggregate amount of the funds held in a separate account at the Bank, and in a
money market fund managed by the Bank's affiliate [Provident] and (together the
"CASH COLLATERAL ACCOUNTS") pledged to the Bank.
(e) Requests. Except as otherwise provided herein, the Borrower may from time
to time prior to the Revolving Credit Expiration 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 (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.
Provided that sufficient availability exists under the Revolving Credit and the
Borrower has satisfied all conditions to the Bank's obligation to make an
advance as set forth in Section 7 hereof, the Bank shall fund the amount of such
Loan Request within two business days after its receipt of any such request.
(f) Revolving Credit Note. The obligation of the Borrower to repay the
aggregate unpaid principal amount of the Revolving Credit, together with
interest
2
<PAGE> 3
thereon, shall be evidenced by a promissory note of the Borrower (the
"NOTE") payable to the order of the Bank in a face amount equal to the
maximum amount of the Revolving Credit. All Loans evidenced by the Note and
all payments of the principal thereof and interest thereon and the
respective dates thereof shall be recorded in the books and records of the
Bank; provided, however, that the failure of the Bank to make such a
notation or any error in such a notation shall not affect the obligations
of the Borrower under the Note.
2.2. LETTERS OF CREDIT. The Revolving Credit shall be available for Letters of
Credit as well as loans.
(a) Issuance of Letters of Credit. At any time prior to the Revolving
Credit Expiration Date, the Borrower may request the issuance of a letter
of credit (each a "LETTER OF CREDIT") by delivering to the Bank a completed
application and agreement for standby letters of credit in such form as the
Bank may specify from time to time by no later than 10:00 a.m., Eastern
time, at least three (3) Business Days, or such shorter period as may be
agreed to by the Bank, in advance of the proposed date of issuance. Subject
to the terms and conditions hereof, and to the terms of the Bank's form of
Irrevocable Standby Letter of Credit (the "L/C FORM", a copy of which has
been provided to the Borrower), the Bank will issue a Letter of Credit
having a maturity date one year from the date of issuance (renewable
according to the terms set forth in the L/C Form), provided, that in no
event shall the aggregate amount of all Letters of Credit outstanding
exceed, at any time, the difference between the maximum principal
amount of the Revolving Credit and the aggregate amount of all outstanding
advances under the Revolving Credit.
(b) Letter of Credit Fees. The Borrower shall pay to the Bank, with
respect to any Letter of Credit, a flat fee of 1.0% on the daily average
undrawn face amount of such standby Letter of credit for the period from
and including the date of issuance of such Letter of Credit, payable
quarterly in arrears commencing with the first Business Day of each
January, April, July and October following issuance of each Letter of
Credit and on the Revolving Credit Expiration Date. The Borrower shall also
pay to the Bank customary fees and administrative expenses payable with
respect to the Letters of Credit as the Bank may generally charge or incur
from time to time in connection with the issuance, maintenance,
modification (if any), assignment or transfer (if any), negotiation, and
administration of Letters of Credit.
(c) Reimbursement. In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the Bank will
promptly notify the Borrower. Provided that it shall have received such
notice, the Borrower shall reimburse (such obligation to reimburse the Bank
shall sometimes be referred to as a "REIMBURSEMENT OBLIGATION") the Bank
prior to 12:00 noon, Eastern time on each date that an amount is paid by
the Bank under any Letter of Credit (each such date, an "DRAWING DATE") in
an amount equal to the amount so paid by the
3
<PAGE> 4
Bank. Any notice given by the Bank pursuant to this Section 2.1(c) may be
oral if immediately confirmed in writing; provided that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding
effect of such notice.
With respect to any unreimbursed drawing, the Borrower shall be deemed to
have incurred from the Bank a Loan under the Revolving Credit in the amount
of such drawing. Such Loan shall be due and payable on demand (together
with interest) and shall bear interest at the rate per annum applicable to
the Revolving Credit.
(d) Determinations to Honor Drawing Requests. In determining whether to
honor any request for drawing under any Letter of Credit by the beneficiary
thereof, the Bank shall be responsible only to determine that the documents
and certificates required to be delivered under such Letter of Credit have
been delivered and that they comply on their face with the requirements of
such Letter of Credit.
(e) Nature of Reimbursement Obligations. The Obligations of the Borrower
to reimburse the Bank upon a draw under a Letter of Credit, shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Section 2.1 under all circumstances,
including the following circumstances:
(i) any set-off, counterclaim, recoupment, defense or other right
which the Bank may have against the Borrower or any other person or entity
for any reason whatsoever;
(ii) any lack of validity or enforceability of any Letter of Credit;
(iii) the existence of any claim, set-off, defense or other right
which the Bank may have at any time against a beneficiary or any transferee
of any Letter of Credit (or any persons or entities for whom any such
transferee may be acting), the Bank or any other person or entity or,
whether in connection with this Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying transaction
between the Borrower or and the beneficiary for which any Letter of Credit
was procured);
(iv) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect even if the Bank has been notified thereof;
(v) payment by the Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does
not comply with the terms of such Letter of Credit;
4
<PAGE> 5
(vi) any adverse change in the business, operations, properties, assets,
condition (financial or otherwise) or prospects of the Borrower;
(vii) any breach of this Agreement or any other Loan Document by any party
thereto;
(viii) the occurrence or continuance of any bankruptcy or insolvency
proceeding as described in Section 6.5 with respect to the Borrower;
(ix) the fact that an Event of Default shall have occurred and be
continuing; and
(x) the fact that the Revolving Credit Expiration Date shall have passed or
this Agreement shall have been terminated.
(f) Indemnity. In addition to amounts payable as provided in Section 10.9, the
Borrower shall protect, indemnify, pay and save harmless the Bank from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable fees, expenses and disbursements of
counsel and allocated costs of internal counsel) which the Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance of any
Letter of Credit, other than as a result of (A) the gross negligence or willful
misconduct of the Bank as determined by a final judgment of a court of competent
jurisdiction or (B) subject to the following clause (ii), the wrongful dishonor
by the Bank of a proper demand for payment made under any Letter of Credit, or
(ii) the failure of the Bank to honor a drawing under any such Letter of Credit
as a result of any act or omission, whether rightful or wrongful, of any present
or future de jure or de facto government or governmental authority (all such
acts or omissions herein called "GOVERNMENTAL ACTS").
(g) Liability for Acts and Omissions. As between the Borrower and the Bank, the
Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, the Bank shall not be
responsible (except to the extent that such acts and omissions are attributable
to or result from the gross negligence or willful misconduct of the Bank as
determined by a final judgment of a court of competent jurisdiction) for: (i)
the form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for an
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged
(even if the Bank shall have been notified thereof); (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the
5
<PAGE> 6
beneficiary of any such Letter of Credit, or any other party to which
such Letter of Credit may be transferred, to comply fully with any
conditions required in order to draw upon such Letter of Credit or any
other claim of the Borrower against any beneficiary of such Letter of
Credit, or any such transferee, or any dispute between or among the
Borrower and any beneficiary of any Letter of Credit or any such
transferee; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, telecopy or
otherwise; (v) errors in interpretation of technical terms; (vi) any
loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or
of the proceeds thereof; (vii) the misapplication by the beneficiary
of any such Letter of Credit of the proceeds of any drawing under such
Letter of Credit; or (viii) any consequences arising from causes
beyond the control of the Bank or any issuing bank, including any
Governmental Acts, and none of the above shall affect or impair, or
prevent the vesting of, any of the Bank's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by the Bank or
any issuing Bank under or in connection with the Letters of Credit
issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not result in any liability
of the Bank to the Borrower.
3. SECURITY. The security for repayment of the Loan shall be limited to the
pledge by the Borrower to the Bank of funds available at any time in the
Cash Collateral Accounts, which shall secure repayment of the Loan, the
Note 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").
This Agreement, the Note and the Pledge Agreement are collectively referred
to as the "LOAN DOCUMENTS".
4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby makes the following
representations and warranties, which shall be true and correct as of the
date of this Agreement and the date of the making of a Loan:
4.1 EXISTENCE, POWER AND AUTHORITY. The Borrower is duly organized,
validly existing and in good standing under the laws of the State of
Delaware 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
6
<PAGE> 7
to authorize the execution and delivery of the Loan Departments 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. The Borrower has delivered or caused to be
delivered its most recent balance sheet and income statement (the
"HISTORICAL FINANCIAL STATEMENTS"). The Historical Financial Statements
are true, complete and accurate in all material respects and fairly
present the 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 subject in the case of interim statements to normal
year-end adjustments and to any comments and notes acceptable to the
Bank in its reasonable discretion.
4.3 NO MATERIAL ADVERSE CHANGE. Since the date of the Historical Financial
Statements, the Borrower has not suffered any material damage to,
destruction or loss of its assets, and no event or condition has
occurred or exists, which has resulted or, to Borrower's knowledge,
could reasonably be expected to result in a material adverse change in
its business, assets, operations, financial condition or result of
operation.
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 except as
enforceability may be limited by applicable bankruptcy, reorganization,
moratorium and other laws, now or hereafter in effect, affecting the
enforcement of creditor's rights generally and that enforceability may
be limited by general principles of equity.
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 agreement or certificate of limited partnership; (ii) any
material indenture, mortgage, deed of trust, franchise, permit,
contract, agreement, or other 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 of a material nature
applicable to or imposed upon it by any law, the action by any court or
any governmental authority or agency against the Borrower or its
assets; 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,
7
<PAGE> 8
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 date of the Historical Financial
Statements, and (iv) those liens or encumbrances specified in the
Addendum.
4.7. LITIGATION. There are no actions, suits, proceedings or governmental
investigations pending or, to the best of 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, proceedings 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 in 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. No litigation or
proceeding arising under, relating to or in connection with any
Environmental Law is pending or, to 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
Borrower's knowledge, no release, threatened release or disposal of
hazardous waste, solid waste or other wastes is occurring, or has
occurred, on, under or to any real property in which the Borrower holds
any interest or performs any of its operations, in material
8
<PAGE> 9
violation of any Environmental Law. As used in this Section,
"LITIGATION 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, and to the information, knowledge and belief
of the Borrower, Borrower owns or has the right to use all
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 effect on the business, operations,
assets, financial condition or results of operations of Borrower.
4.14 SOLVENCY. As of the date hereof and after giving effect to the
transactions contemplated by the Loan Documents, the Borrower will
have sufficient cash flow to enable it to pay its debts as they
mature.
4.15 DISCLOSURE. None of the Loan Documents contains any untrue statement
of material fact or omits to state a material fact necessary in order
to make the statements contained in this Agreement or the Loan
Documents not misleading. There is no fact known to the Borrower
which materially adversely affects or, might materially adversely
affect, the business, assets, operations, financial condition or
results of operation of the Borrower and which has not otherwise
been fully set forth in this Agreement or in the Loan Documents.
5. AFFIRMATIVE COVENANTS. Borrower 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:
9
<PAGE> 10
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 reasonable notice from the Bank, including permission
to examine, copy (at the Bank's expense) 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 or state. The Bank
shall treat as confidential all non-public information contained in
such books and records; provided, however, that if Bank is required
to disclose confidential information pursuant to a court order,
subpoena or similar process, prior to disclosure Bank shall: (i)
promptly provide Borrower with a copy of the court order or subpoena;
(ii) cooperate with Borrower at Borrower's expense in obtaining a
protective or similar order; and (iii) in any event, disclose only
such confidential information as Bank, with the advice of its
counsel, shall deem necessary to comply with such court order or
subpoena.
5.2 INTERIM FINANCIAL STATEMENTS. Within forty-five (45) days of the end
of each fiscal quarter, provide its Financial Statements (as defined
hereinafter) for such quarter, in reasonable detail, certified by an
authorized officer of the Borrower and prepared in accordance with
GAAP consistently applied from period to period. "FINANCIAL
STATEMENTS" means the Borrower's consolidated and, if required by the
Bank in its sole discretion, consolidating balance sheets, income
statements and statements of cash flows for the year or period
together with year-to-date figures and comparative figures for the
corresponding periods of the prior year. The Borrower shall be deemed
to have satisfied the reporting requirements of this Section 5.2 with
respect to quarterly Financial Statements to the extent that each
such Financial Statement is included among Form 10Q filings made to
the Securities and Exchange Commission via the Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR").
5.3 ANNUAL FINANCIAL STATEMENTS. Furnish the Borrower's Financial
Statements to the Bank within one-hundred-twenty (120) days after the
end of each fiscal year. Such Financial Statements shall 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 shall 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
10
<PAGE> 11
for which the Borrower shall have set aside adequate reserves in
accordance with GAAP or made other adequate provision with respect
thereto acceptable to the Bank in its reasonable discretion.
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
applicable to the Borrower and to the operation of its business
(including any statute, rule or regulation relating to employment
practices and pension benefits or to environmental, occupational and
health standards and controls).
5.8 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, (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.
6. EVENTS OF DEFAULT. The occurrence of any of the following will be deemed to
be an "EVENT OF DEFAULT":
6.1 PAYMENT DEFAULT. The Borrower shall fail to pay any payment of
principal when due or any payment of interest within five (5) calendar
days following the date when due, in respect of the Obligations.
6.2 MATERIAL ADVERSE CHANGE. There shall be a material adverse change in
the business, operations, assets, financial condition or results of
operations of either Borrower.
6.3 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)
days after the occurrence thereof.
6.4 BREACH OF WARRANTY. Any Financial Statement, representation, warranty
or certificate made or furnished by the Borrower to the Bank in
connection with this
11
<PAGE> 12
Agreement shall be false, incorrect or incomplete in any material
respect when made.
6.5. BANKRUPTCY OR INSOLVENCY. A proceeding shall have been instituted in a
court having jurisdiction over either Borrower seeking a decree or
order for relief in respect of such 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
either 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).
6.6. OTHER DEFAULT. The occurrence of an Event of Default as defined in any
of the Loan Documents.
Upon the occurrence of an Event of Default, the Bank will have all rights and
remedies specified in the Note and the Pledge Agreement and all rights and
remedies (which are cumulative and not exclusive) available under applicable
law or in equity.
7. CONDITIONS. The Bank's obligation to make any advance or fund any tranche
under the Loan is subject to the conditions that as of the date of the
advance:
7.1. 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.
7.2. AUTHORIZATION DOCUMENTS. The Bank shall have been furnished certified
copies of resolutions of the shareholders authorizing the execution of
this Agreement, the Note or of the Pledge Agreement; or other proof of
authorization satisfactory to the Bank.
7.3. COLLATERAL/SECURITY. The Bank shall have received first priority
security interests and liens on the Cash Collateral security of the
Borrower and received all such instruments and documents necessary to
perfect such security interests and liens.
7.4. RECEIPT OF LOAN DOCUMENTS. The Bank shall have received 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.
7.5. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Borrower to the Bank shall be true and correct in all respects.
8. EXPENSES. The Borrower agree to pay the Bank, upon the closing of this
Agreement, and otherwise on demand, all reasonable and necessary costs and
expenses incurred by the Bank (including attorney's fees) in connection
with the (i) preparation, negotiation and delivery of this Agreement and
the other Loan Documents, and any modifications thereto, and (ii)
collection of the loan or instituting, maintaining, preserving, enforcing
and
12
<PAGE> 13
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, including reasonable fees and expenses of counsel, expenses for
auditors, appraisers and environmental consultants, lien searches,
recording and filing fees and taxes.
9. INCREASED COSTS. Within twenty (20) days following written demand, together
with the written evidence of the justification therefor, the Borrower agree
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.
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:
13
<PAGE> 14
To the Bank: To the Borrower:
PNC Bank, National Association CareerBuilder, Inc.
11600 Sunrise Valley Drive 11495 Sunset Hills Road
Suite 490 Reston, Virginia 20190
Reston, Virginia 20191 Attention: President
Attention: Katharine S. Kappler Facsimile No.: (703) 709-1004
Facsimile No.: (703) 391-9734
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 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.
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 the
Borrower therefrom, will in any event be effective unless the
same is in writing and signed by the Bank, 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 copies 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 Borrower.
14
<PAGE> 15
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 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; 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.
10.9. INDEMNITY. The Borrower agrees to indemnify each of the Bank, its
directors, officers and employees and each legal entity, if any,
which 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 fees of counsel with whom any Indemnified
Party may consult and all expenses of litigation or preparation
therefor), other than claims arising out of the gross negligence
or willful misconduct of the Bank, which any Indemnified Party
may incur or which may be asserted against any Indemnified Party
in connection with or arising out of the matters referred to in
this Agreement or in the other Loan Documents by any person,
entity or governmental authority (including any person or entity
claiming derivatively on behalf of the Borrower), whether (a)
arising from or incurred in connection with any breach of a
representation, warranty or covenant by the Borrower, or (b)
arising out of or resulting from any suit, action, claim,
proceeding or governmental investigation, pending or threatened,
whether based on statute, regulation or order, or tort, or
contract or otherwise, before any court or governmental
authority, which arises out of or relates to this Agreement, any
other Loan Document, or the use of the proceeds of the Loan. The
indemnity agreement contained in this Section shall survive the
termination of this Agreement, payment of any Loan and assignment
of any rights hereunder. The Borrower may participate at its
expense in the defense of any such action or claim.
10.10. ASSIGNMENTS AND PARTICIPATION. At any time, without any notice to
the Borrower, the Bank may 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 authorize
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
15
<PAGE> 16
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. 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 CONFLICTS OF LAW RULES. The Borrower hereby
irrevocably consents to the non-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 such 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.
10.12. 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.
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.
[Signatures on Following Page]
16
<PAGE> 17
WITNESS the due execution of this Amended and Restated Loan Agreement as a
document under seal, as of the date first written above.
CAREERBUILDER, INC.
ATTEST:
By: /s/ Michelle R. Slagle By: /s/ James A. Ruben (SEAL)
----------------------------------- -----------------------------
Print Name: Michelle R. Slagle Print Name: James A. Ruben
--------------------------- ---------------------
Title: V.P. Finance Title: CFO
-------------------------------- --------------------------
PNC BANK, NATIONAL
ASSOCIATION
By: /s/ Katharine Kappler (SEAL)
------------------------------
Print Name: Katharine Kappler
----------------------
Title: Vice President
---------------------------
17
<PAGE> 18
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of this 3rd day of February 2000, is made
by CAREERBUILDER, INC. (the "PLEDGOR"), with an address at 11495 Sunset Hills
Road, Reston, Virginia 20190, in favor of PNC BANK, NATIONAL ASSOCIATION (the
"SECURED PARTY"), with an address at 11600 Sunrise Valley Drive, Suite 490,
Reston, Virginia 20191.
1. PLEDGE. In order to induce the Secured Party to extend credit to the
Pledgor pursuant to the terms of that certain Amended and Restated Loan
Agreement, dated the date hereof, the Pledgor hereby grants a security interest
in and pledges to the Secured Party, and to all other direct or indirect
subsidiaries of PNC Bank Corp., all of the Pledgor's right, title and interest
in and to the accounts, deposits, deposit accounts, money market accounts and
certificates of deposit, whether negotiable or nonnegotiable, and all security
entitlements of the Pledgor with respect thereto, whether now owned or hereafter
acquired, including those entries on the records of the issuing institution, and
any and all renewals, substitutions, replacements and proceeds and all income,
interest and other distributions thereon maintained in the name of the Pledgor
by the issuing institution (the "COLLATERAL"), as more fully described on
Exhibit A attached hereto and made a part hereof.
The Pledgor agrees that (i) the Secured Party shall have the sole and
exclusive right of withdrawal of the Collateral, (ii) the Pledgor shall have no
right of withdrawal of the Collateral, and (iii) the Secured Party may make
appropriate notations in its books and records (electronic or otherwise) to
effectuate the foregoing.
2. OBLIGATIONS SECURED. The Collateral secures payment of all loans,
advances, debts, liabilities, obligations, covenants and duties owing to the
Secured Party or to any other direct or indirect subsidiary of PNC Bank Corp.
from the Pledgor, of any kind or nature, present or future (including any
interest accruing thereon after maturity, or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to the Pledgor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether or not evidenced
by any note, guaranty or other instrument, whether arising under any agreement,
instrument or document, whether or not for the payment of money, whether arising
by reason of an extension of credit, opening of a letter of credit, loan,
equipment lease or guarantee, under any interest or currency swap, future,
option or other interest rate protection or similar agreement, or in any other
manner, whether arising out of overdrafts on deposit or other accounts or
electronic funds transfers (whether through automated clearing houses or
otherwise) or out of the Secured Party's non-receipt of or inability to collect
funds or otherwise not being made whole in connection with depository transfer
check or other similar arrangements, whether direct or indirect (including those
acquired by assignment or participation), absolute or contingent, joint or
several, due or to become due, now existing or hereafter arising, and any
amendments, extensions, renewals or increases and all costs and expenses of the
Secured Party incurred in the documentation, negotiation, modification,
enforcement, collection or otherwise in
<PAGE> 19
enforcement, collection or otherwise in connection with any of the foregoing,
including reasonable attorneys' fees and expenses (collectively, the
"OBLIGATIONS").
3. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants to
the Secured Party that (a) no prior lien or encumbrance exists on the Collateral
and the Pledgor will not grant or suffer to exist any such lien or encumbrance
in the future, and (b) the Pledgor is the legal owner of the Collateral and has
the right to pledge and grant a security interest in the Collateral without the
consent of any other party other than the issuing institution, which the Pledgor
has caused or will cause to execute the Acknowledgment in substantially the form
attached hereto.
4. DEFAULT.
4.1. If any of the following occur (each an "EVENT OF DEFAULT"): (i)
any Event of Default (as defined in any of the Obligations), (ii) any default
under any of the Obligations that does not have a defined set of "Events of
Default" and the lapse of any notice or cure period provided in such Obligations
with respect to such default, (iii) demand by the Secured Party under any of the
Obligations that have a demand feature, (iv) the failure by the Pledgor to
perform any of its obligations hereunder, (v) the falsity, inaccuracy or
material breach by the Pledgor of any written warranty, representation or
statement made or furnished to the Secured Party by or on behalf of the Pledgor,
(vi) the failure of the Secured Party to have a perfected first priority
security interest in the Collateral, (vii) any restriction is imposed on the
pledge or transfer of any of the Collateral after the date of this Agreement
without the prior written consent of the Secured Party, or (viii) the breach of
the Control Agreement (referred to in Section 6 below), or receipt of notice of
termination of the Control Agreement if no successor custodian acceptable to the
Secured Party has executed a Control Agreement in form and substance acceptable
to the Secured Party on or before 10 days prior to the effective date of the
termination, then the Secured Party is authorized in its discretion to declare
any or all of the Obligations to be immediately due and payable without demand
or notice, which are expressly waived, and may exercise any one or more of the
rights and remedies granted pursuant to this Pledge Agreement or given to a
secured party under the Uniform Commercial Code of the applicable state, as it
may be amended from time to time, or otherwise at law or in equity, including
without limitation the right to sell or otherwise dispose of any or all of the
Collateral at public or private sale, with or without advertisement thereof,
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best.
4.2. The Secured Party is authorized to draw the funds represented by
the Collateral, in whole or in part, and to do all acts necessary to draw such
funds, to apply to all Obligations secured hereby, whether declared immediately
due and payable or otherwise, and the officers of the issuing institution are
authorized and directed to pay the same to the Secured Party on demand.
4.3. The net proceeds arising from the disposition of the Collateral
after deducting expenses incurred by the Secured Party will be applied to the
Obligations in the order determined by the Secured Party. If any excess remains
after the discharge of all of the
-2-
<PAGE> 20
Obligations, the same will be paid to the Pledgor. If after exhausting all of
the Collateral there is a deficiency, the Pledgor will be liable therefor to the
Secured Party.
4.4. If any demand is made at any time upon the Secured Party for the
repayment or recovery of any amount received by it in payment or on account of
any of the Obligations from the disposition of the Collateral and if the Secured
Party repays all or any part of such amount, the Pledgor will be and remain
liable for the amounts so repaid or recovered to the same extent as if never
originally received by the Secured Party.
5. INTEREST AND PREMIUMS. All interest and premiums declared or paid on the
Collateral shall be the property of the Pledgor but shall remain as Collateral,
subject to the restrictions contained in this Agreement, unless released by the
Secured Party, in its discretion, following a request from Pledgor. At any time
after the occurrence of an Event of Default, the Secured Party shall be entitled
to apply all interest and premiums declared or paid on the Collateral in
accordance with the provisions of Section 4 above.
6. SECURITIES ACCOUNT. If the Collateral includes certificate(s) of deposit
maintained in a securities account, then the Pledgor agrees to cause the
securities intermediary on whose books and records the ownership interest of the
Pledgor in the Collateral appears (the "CUSTODIAN") to execute and deliver,
contemporaneously herewith, a notification and control agreement or other
agreement satisfactory to the Secured Party (the "CONTROL AGREEMENT") in order
to perfect and protect the Secured Party's security interest in the Collateral.
7. FURTHER ASSURANCES. At any time and from time to time, upon demand of
the Secured Party, the Pledgor will give, execute, file and record any notice,
financing statement, continuation statement, instrument, document or agreement
that the Secured Party may consider necessary or desirable to create, preserve,
continue, perfect or validate any security interest granted hereunder or to
enable the Secured Party to exercise or enforce its rights hereunder with
respect to such security interest. Without limiting the generality of the
foregoing, the Pledgor hereby irrevocably appoints the Secured Party as the
Pledgor's attorney-in-fact to do all acts and things in the Pledgor's name that
the Secured Party may deem necessary or desirable. This power of attorney is
coupled with an interest with full power of substitution and is irrevocable. The
Secured Party is authorized to file financing statements, continuation
statements and other documents under the Uniform Commercial Code relating to the
Collateral without the Pledgor's signature, naming the Pledgor as debtor and the
Secured Party as secured party.
8. NOTICES. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder must be in writing and will be
effective upon receipt to the Pledgor or the Secured Party. Such notices may be
hand-delivered, sent by facsimile transmission with confirmation of delivery
and a copy sent by first-class mail, or sent by nationally recognized overnight
courier service, to a party's address set forth above or to such other address
as either the Pledgor or the Secured Party may give to the other in writing for
such purpose.
9. PRESERVATION OF RIGHTS. (a) No delay or omission on the Secured Party's
part to exercise any right or power arising hereunder will impair any such
right or power or be
-3-
<PAGE> 21
considered a waiver of any such right or power, nor will the Secured Party's
action or inaction impair any such right or power. The Secured Party's rights
and remedies hereunder are cumulative and not exclusive of any other rights or
remedies which the Secured Party may have under other agreements, at law or in
equity.
(b) The Secured Party may, at any time and from time to time, without
notice to or the consent of the Pledgor unless otherwise expressly required
pursuant to the terms of the Obligations, and without impairing or releasing,
discharging or modifying the Pledgor's liabilities hereunder, (i) change the
manner, place, time or terms of payment or performance of or interest rates on,
or other terms relating to, any of the Obligations; (ii) renew, substitute,
modify, amend or alter, or grant consents or waivers relating to any of the
Obligations, any other pledge or security agreements, or any security for any
Obligations; (iii) apply any and all payments by whomever paid or however
realized including any proceeds of any collateral, to any Obligations of the
Pledgor in such order, manner and amount as the Secured Party may determine in
its sole discretion; (iv) deal with any other person with respect to any
Obligations in such manner as the Secured Party deems appropriate in its sole
discretion; (v) substitute, exchange or release any security or guaranty; or
(vi) take such actions and exercise such remedies hereunder as provided herein.
The Pledgor hereby waives (a) presentment, protest, notice of dishonor and
notice of non-payment, and (b) all defenses based on suretyship or impairment of
collateral.
10. ILLEGALITY. In case any one or more of the provisions contained in
this Pledge 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.
11. CHANGES IN WRITING. No modification, amendment or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
therefrom will be effective unless made in a writing signed by the Secured
Party, 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
Pledgor in any case will entitle the Pledgor to any other or further notice or
demand in the same, similar or other circumstance.
12. ENTIRE AGREEMENT. This Pledge 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 Pledgor and the Secured Party with respect to the subject matter hereof.
13. SUCCESSORS AND ASSIGNS. This Pledge Agreement will be binding upon and
inure to the benefit of the Pledgor and the Secured Party and their respective
heirs, executors, administrators, successors and assigns; provided, however,
that the Pledgor may not assign this Pledge Agreement in whole or in part
without the Secured Party's prior written consent and the Secured Party at any
time may assign this Pledge Agreement in whole or in part.
14. INTERPRETATION. In this Pledge Agreement, unless the Secured Party and
the Pledgor otherwise agree in writing, the singular includes the plural and the
plural the singular; references to statutes are to be construed as including all
statutory provisions consolidating,
-4-
<PAGE> 22
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." Section headings in
this Pledge Agreement are included for convenience of reference only and shall
not constitute a part of this Pledge Agreement for any other purpose. If this
Pledge Agreement is executed by more than one party as Pledgor, the obligations
of such persons or entities will be joint and several.
15. INDEMNITY. The Pledgor agrees to indemnify each of the Secured Party,
its directors, officers and employees and each legal entity, if any, who
controls the Secured Party (the "INDEMNIFIED PARTIES") and to hold each
Indemnified Party harmless from and against any and all claims, damages, losses,
liabilities and expenses (including all 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
Pledge Agreement and under any Control 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 gross
negligence or willful misconduct. The indemnity agreement contained in this
Section shall survive the termination of this Pledge Agreement. The Pledgor may
participate at its expense in the defense of any such claim.
16. GOVERNING LAW AND JURISDICTION. This Pledge Agreement has been
delivered to and accepted by the Secured Party and will be deemed to be made in
the State where the Secured Party's office indicated above is located. THIS
PLEDGE AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PLEDGOR AND THE SECURED PARTY DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA, EXCLUDING ITS CONFLICT OF LAWS RULES. The Pledgor
hereby irrevocably consents to the non-exclusive jurisdiction of any state or
federal court in Allegheny County, Pennsylvania; provided that nothing
contained in this Pledge Agreement will prevent the Secured Party from bringing
any action, enforcing any award or judgement or exercising any rights against
the Pledgor individually, against any security or against any property of the
Pledgor within any other county, state or other foreign or domestic
jurisdiction. The Pledgor acknowledges and agrees that the venue provided above
is the most convenient forum for both the Secured Party and the Pledgor. The
Pledgor waives any objection to venue and any objection based on a more
convenient forum in any action instituted under this Pledge Agreement.
17. WAIVER OF JURY TRIAL. THE PLEDGOR IRREVOCABLY WAIVES ANY AND ALL
RIGHT THE PLEDGOR MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
CLAIM OF ANY NATURE RELATING TO THIS PLEDGE AGREEMENT, ANY DOCUMENTS EXECUTED
IN CONNECTION WITH THIS PLEDGE AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY
OF SUCH DOCUMENTS. THE PLEDGOR ACKNOWLEDGES THAT THE FOREGOING WAIVER IS
KNOWING AND VOLUNTARY.
THE PLEDGOR ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS PLEDGE AGREEMENT, INCLUDING THE WAIVER OF JURY TRIAL, AND HAS BEEN ADVISED
BY COUNSEL AS NECESSARY OR APPROPRIATE.
-5-
<PAGE> 23
WITNESS the due execution hereof as a document under seal, as of the date first
written above.
ATTEST: CAREERBUILDER, INC.
/s/ Michelle Slagle By: /s/ James A. Ruben
- ------------------------------- -------------------------------
Print Name: Michelle Slagle Print Name: James A. Ruben
-------------------- --------------------
Title: V.P. Finance Title: CFO
------------------------- -------------------------
-6-
<PAGE> 24
CONTROL LETTER FOR BLACKROCK FUNDS
BlackRock Institutional Management March 27, 2000
Corporation, as agent for Provident
Institutional Funds - TempFund
400 Bellevue Parkway
MS #W3F4000103
Wilmington, Delaware 19809
Attention: Vincent J. Begatto, Jr.
Re: TempFund Shares-Account in the name of VentureBank@PNC
as Pledgee for CareerBuilder, Inc.
Ladies and Gentlemen:
This letter sets forth the requirements for any redemptions, withdrawals or
investment elections with respect to the above referenced Account. Any such
redemption, withdrawal or investment election shall be made only upon written
request of VentureBank@PNC ("PNC"), without any requirement of consent from the
customer named in the Account titled above. Any such written request shall be
provided to you by facsimile (with hard copy to follow) and signed by any two
(2) of the individuals named below. This letter further directs that all
earnings on the above referenced Account shall be maintained within the Account
unless otherwise directed by any two (2) of the individuals named below.
/s/ KATHARINE KAPPLER Title: Managing Director
-----------------------------
Print Name: Katharine Kappler
/s/ GLEN SINIAWSKI Title: Analyst
-----------------------------
Print Name: Glen Siniawski
These instructions shall remain in effect until modified by written notification
from any two (2) of the individuals named above.
This letter grants PNC control over the above-referenced account for purposes of
the Uniform Commercial Code.
PNC BANK, NATIONAL ASSOCIATION, ACKNOWLEDGED AND ACCEPTED:
A national banking association BlackRock Institutional Management
Corporation, as agent for Provident
Institutional Funds - TempFund
By: /s/ KATHARINE KAPPLER By:/s/ VINCENT J. BEGATTO, JR.
--------------------------- -----------------------------
Print Name: Katharine Kappler Vincent J. Begatto, Jr.
Title: Managing Director Vice President
<PAGE> 25
EXHIBIT A
TO PLEDGE AGREEMENT
Issuer Dollar Amount Account Title/Account No.
------ ------------- -------------------------
Provident $2,000,000
Two Million Dollars
<PAGE> 1
EXHIBIT 10.16
DEED OF LEASE
BETWEEN
PARKRIDGE FIVE ASSOCIATES LIMITED PARTNERSHIP
AS LANDLORD,
AND
CAREERBUILDER, INC.
AS TENANT
-------------------------------------
-------------------------------------
For 53,718 rentable square feet
In Parkridge Five
Dated: September 30, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I FUNDAMENTAL LEASE DEFINITIONS............................ 1
1.1 Landlord................................................. 1
1.2 Landlord's Address....................................... 1
1.3 Landlord's Representative................................ 1
1.4 Manager.................................................. 1
1.5 Tenant................................................... 1
1.6 Tenant's Address......................................... 1
1.7 Tenant's Representative.................................. 1
1.8 Guarantor................................................ 1
1.9 Guarantor's Address...................................... 1
1.10 Building................................................. 1
1.11 Premises................................................. 1
1.12 Term..................................................... 1
1.13 Commencement Date........................................ 1
1.14 Expiration Date.......................................... 1
1.15 Basic Rent............................................... 1
1.16 Lease Year............................................... 1
1.17 Expense Stop............................................. 1
1.18 Tenant's Proportionate Share............................. 2
1.19 Security Deposit......................................... 2
1.20 Landlord's Architect..................................... 2
1.21 Tenant's Finish Work Submission Date..................... 2
1.22 Broker(s)................................................ 2
1.23 Land..................................................... 2
1.24 Common Area.............................................. 2
1.25 Permitted Use............................................ 2
1.26 Agents................................................... 2
1.27 Substantial Completion of the Building................... 2
1.28 Interest Rate............................................ 2
1.29 Mortgage................................................. 2
1.30 Mortgagee................................................ 2
1.31 Exhibits and Addenda..................................... 2
ARTICLE II THE PREMISES............................................. 3
2.1 Description of the Premises.............................. 3
2.2 Landlord's Rights Reserved............................... 3
ARTICLE III TERM..................................................... 3
3.1 Term..................................................... 3
3.2 Possession/Rent Commencement............................. 3
3.3 ......................................................... 4
3.4 ......................................................... 4
3.5 ......................................................... 4
3.6 ......................................................... 4
ARTICLE IV RENT..................................................... 4
4.1 Basic Rent............................................... 4
4.2 Payment of Basic Rent.................................... 4
4.3 Additional Rent.......................................... 4
4.4 Late Payment............................................. 5
4.5 Pre-Commencement Date Occupancy-First Floor Premises..... 5
ARTICLE V SECURITY DEPOSIT......................................... 5
-i-
<PAGE> 3
ARTICLE VI OPERATING EXPENSES............................................. 6
6.1 Tenant's Proportionate Share................................... 6
6.2 Landlord's Operating Expenses Defined.......................... 6
6.3 Landlord's Taxes Defined....................................... 8
6.4 Estimated Payments............................................. 9
6.5 Actual Landlord's Operating Expenses........................... 9
6.6 Allocation of Landlord's Operating Expenses to Tenant.......... 9
6.7 Review Procedure............................................... 9
6.8 Accounting Year................................................ 10
6.9 Credit for Refunds............................................. 10
ARTICLE VII USE............................................................ 10
7.1 General........................................................ 10
7.2 Hazardous Materials............................................ 10
ARTICLE VIII PARKING........................................................ 11
8.1 Parking Spaces................................................. 11
8.2 Changes to Parking Facilities.................................. 11
ARTICLE IX SIGNS.......................................................... 11
ARTICLE X INITIAL CONSTRUCTION; ALTERATIONS; SURRENDER................... 12
10.1 Initial Construction........................................... 12
10.2 Alterations.................................................... 12
10.3 Treatment of Alterations at Expiration Date or Earlier
Termination of Lease......................................... 12
10.4 Landlord Alterations........................................... 12
10.5 Low Voltage Cabling............................................ 12
10.6 Surrender of the Premises...................................... 12
10.7 Dispute Resolution............................................. 12
ARTICLE XI MAINTENANCE AND REPAIR......................................... 14
11.1 Landlord's Obligation.......................................... 14
11.2 Tenant's Obligation............................................ 14
11.3 Landlord's Right to Maintain or Repair......................... 14
ARTICLE XII LANDLORD SERVICES AND UTILITIES................................ 14
12.1 Ordinary Services to the Premises.............................. 14
12.2 After-House Services to the Premises........................... 14
12.3 Interruption of Services....................................... 15
12.4 Meters......................................................... 15
12.5 Utility Charges................................................ 15
ARTICLE XIII RULES AND REGULATIONS.......................................... 15
ARTICLE XIV LIABILITY OF LANDLORD.......................................... 15
14.1 No Liability................................................... 15
14.2 Tenant Indemnity............................................... 15
14.3 Landlord Indemnity............................................. 16
ARTICLE XV INSURANCE...................................................... 16
15.1 Insurance Rating............................................... 16
15.2 Liability Insurance............................................ 16
15.3 Personal Property/Improvements Insurance....................... 16
15.4 Other Insurance................................................ 16
15.5 Requirements of Insurance Coverage............................. 16
15.6 Waiver of Subrogation.......................................... 16
15.7 Security....................................................... 17
15.8 Landlord's Insurance........................................... 17
ARTICLE XVI RIGHT OF ENTRY AND IMPROVEMENT................................. 17
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE XVII TENANT'S EQUIPMENT AND PROPERTY.......................... 17
17.1 Moving Tenant's Property................................. 17
17.2 Installing and Operating Tenant's Equipment.............. 17
ARTICLE XVIII ASSIGNMENT AND SUBLETTING................................ 18
18.1 General.................................................. 18
18.2 Landlord's Rights Upon Proposed Subletting............... 18
18.3 Landlord's Right to Terminate............................ 18
18.4 Conditions to a Sublease or Assignment by Tenant......... 18
18.5 Additional Conditions.................................... 19
ARTICLE XIX DAMAGE; CONDEMNATION..................................... 19
19.1 Damage to the Premises................................... 19
19.2 Condemnation............................................. 19
ARTICLE XX DEFAULT OF TENANT........................................ 20
20.1 Monetary Default......................................... 20
20.2 Non-Monetary Default..................................... 20
20.3 Remedies................................................. 20
20.4 Landlord Default......................................... 22
ARTICLE XXI REPORTS.................................................. 22
21.1 Lease Anniversary Report................................. 22
21.2 Event of Default Report.................................. 22
ARTICLE XXII MORTGAGES................................................ 23
22.1 Subordination............................................ 23
22.2 Mortgagee Protection..................................... 23
22.3 Modification Due to Financing............................ 23
22.4 Condition Precedent...................................... 23
22.5 Assignment for Financing Purposes........................ 23
ARTICLE XXIII HOLDING OVER............................................. 24
ARTICLE XIV QUIET ENJOYMENT.......................................... 24
ARTICLE XXV MISCELLANEOUS............................................ 24
25.1 No Representations by Landlord........................... 24
25.2 No Partnership........................................... 24
25.3 Brokers.................................................. 24
25.4 Estoppel Certificate..................................... 25
25.5 Waiver of Jury Trial..................................... 25
25.6 Notices.................................................. 25
25.7 Invalidity of Particular Provisions...................... 25
25.8 Gender and Number........................................ 25
25.9 Benefit and Burden....................................... 25
25.10 Entire Agreement......................................... 25
25.11 Authority................................................ 25
25.12 Compliance Costs......................................... 26
25.13 Interpretation........................................... 26
25.14 Landlord's Consent....................................... 26
25.15 No Personal Liability; Sale.............................. 26
25.16 Time of the Essence...................................... 26
25.17 Force Majeure............................................ 26
25.18 Headings................................................. 26
25.19 Memorandum of Lease...................................... 26
25.20 Landlord's Relocation Option............................. 26
25.21 Deemed Approval by Tenant................................ 27
25.22 Effectiveness............................................ 27
25.23 Bankruptcy............................................... 27
25.24 Prohibition Against Recording............................ 27
25.25 Easements................................................ 27
25.26 Transportation Management................................ 27
25.27 Security Measures........................................ 27
</TABLE>
-iii-
<PAGE> 5
EXHIBIT A-1 Plat Showing Land and Building
EXHIBIT A-2 Plan Showing the Premises (First (1st) Floor)
EXHIBIT A-2 Plan Showing the Premises (Second (2nd) Floor)
EXHIBIT A-3 Rent Schedule
EXHIBIT B-1 Work Agreement
EXHIBIT B-2 Base Building Specifications and Systems Performance
EXHIBIT B-3 Landlord's Supervisory Role During Initial Construction
EXHIBIT C Rules and Regulations
EXHIBIT D Holidays
EXHIBIT E Cleaning Specifications
EXHIBIT F Low Voltage Cabling
EXHIBIT G SMART Dispute Resolution Procedure
ADDENDUM ONE Option to Expand
ADDENDUM TWO Option to Renew
ADDENDUM THREE Roof Top Space
ADDENDUM FOUR Emergency Generator
-iv-
<PAGE> 6
DEED OF LEASE
THIS DEED OF LEASE (this "Lease") is made as of the 30 day of September,
1999 (the "Date of Lease"), by Parkridge Five Associates Limited Partnership, a
Virginia Limited Partnership ("Landlord"), and CareerBuilder, Inc., a Delaware
corporation ("Tenant").
NOW, THEREFORE, WITNESSETH, that for and in consideration of the mutual
covenants and promises contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant, intending legally to be bound, hereby covenant and agree
as set forth below.
ARTICLE I
FUNDAMENTAL LEASE DEFINITIONS
The following terms, when used herein, shall have the meanings set forth
below.
1.1 Landlord: Parkridge Five Associates Limited Partnership.
1.2 Landlord's Address: c/o Walker and Company, 12007 Sunrise Valley
Drive, Suite 400, Reston, Virginia, 20191.
1.3 Landlord's Representative: Christopher W. Walker.
1.4 Manager: Walker Management, Inc., 12007 Sunrise Valley Drive, Suite
400, Reston, Virginia, 20191.
1.5 Tenant: CareerBuilder, Inc.
1.6 Tenant Address: Current: 11495 Sunset Hills Road, Reston, Va. 20190;
After Lease Commencement: 10780 or 10790 Parkridge Boulevard, Suite 100 or 200,
Reston, Va. 20191.
1.7 Tenant's Representative: Ms. Tanya Sakisat.
1.8 Guarantor: N/A.
1.9 Guarantor's Address: N/A.
1.10 Building: The building containing approximately 203,492 rentable
square feet measured in accordance with BOMA, shown on Exhibit A-1 attached
hereto and made a part hereof, and all alterations, additions, improvements,
restorations or replacements now or hereafter made thereto, located at
10780/10790 Parkridge Boulevard, Reston, Fairfax County, Virginia, 20191, in
the Parkridge Center.
1.11 Premises: Approximately 53,718 rentable square feet measured in
accordance with BOMA, located on the first (1st) (11,384 rsf) and second (2nd)
(42,334 rsf) floors of the Building as outlined in Exhibit A-2 attached hereto
and made a part hereof.
1.12 Term: Eight (8) years, zero (-0-) months, and zero (-0-) days.
1.13 Commencement Date: Earlier of substantial completion or February 1,
2000 for 42,334 rentable square feet on the second (2nd) floor and May 1, 2000
for 11,384 rentable square feet on the first (1st) floor, subject to Section
3.2.C.
1.14 Expiration Date: January 31, 2008, subject to 3.2.C.
1.15 Basic Rent: $28.50 for each rentable square foot of the Premises
during the first Lease Year, full service and increased annually as set forth in
Exhibit A-3. Additional Rent may be adjusted in accordance with Section 1.17,
Article IV and Article VI or as otherwise provided.
1.16 Lease Year: Each successive twelve (12) month period following the
Commencement Date.
1.17 Expense Stop: Tenant's proportionate share of Landlord's Operating
Expenses during the first (1st) lease year as Expense Stop, grossed-up pursuant
to Section 6.2. and adjusted for extraordinary items.
1
<PAGE> 7
1.18 Tenant's Proportionate Share: Rentable floor area of the Premises
divided by rentable floor area of the Building, or twenty-six point four-zero
percent (26.40%).
1.19 Security Deposit: $1,600,000.00 cash or irrevocable, unconditional
letter of credit, due October 1, 1999, pursuant to Article V. The amount of the
Security Deposit will be adjusted, from time to time, in accordance with
Article V.
1.20 Landlord's Architect: N/A.
1.21 Tenant Finish Work Submission Date: N/A.
1.22 Broker(s): Landlord's: None; Tenants: The Staubach Company -
Northeast, Inc.
1.23 Land: The land on which the Building is located as described in
Exhibit A-1.
1.24 Common Area: All areas, improvements, facilities and equipment from
time to time designated by Landlord for the common use or benefit of Tenant,
other tenants of the Building and their Agents, including, without limitation,
roadways, entrances and exits, landscaped areas, open areas, park areas,
exterior lighting, service drives, loading area, pedestrian walkways,
sidewalks, atriums, courtyards, concourses, stairs, ramps, washrooms,
maintenance and utility rooms and closets, exterior utility lines, hallways,
lobbies, elevators and their housing and rooms, common window areas, common
walls, common ceilings, common trash areas and parking facilities.
1.25 Permitted Use: General office, data processing, all uses consistent
with the telecommunications/Internet industry, including but not limited to
call centers, network operations centers, etc., and all other lawful purposes.
1.26 Agents: Officers, partners, directors, employees, contractors, and
agents.
1.27 Substantial Completion of the Building: The completion of all base
building work in accordance with Exhibit B-2, as evidenced by the issuance of a
Non-Residential Use Permit for the Building and the Base Building architect
certifying that the work is substantially complete.
1.28 Interest Rate: Per annum interest rate listed as the base rate on
corporate loans at large U.S. money center commercial banks as published from
time to time under "Money Rates" in the Wall Street Journal plus two percent
(2%), with a minimum rate of 12% per annum (1% per month), but in any event not
greater than the maximum rate permitted by law. In the event the Wall Street
Journal ceases to publish such rates, Landlord shall choose at Landlord's
reasonable discretion a similar publication which publishes such rates.
1.29 Mortgage: Any mortgage, deed of trust, security interest or title
retention interest affecting the Building or the Land.
1.30 Mortgagee: The holder of any note or obligation secured by a
mortgage, deed of trust, security interest or title retention interest
affecting the Building or the Land, including, without limitation, Landlords
under ground leases, sale-leasebacks and lease-leasebacks.
1.31 Exhibits and Addenda: The Exhibits and Addenda listed below in this
section are incorporated in this Lease by reference and are to be construed as
part of this Lease:
Exhibit A-1 - Plat Showing Land and Building
Exhibit A-2 - Plan Showing the Premises
Exhibit A-3 - Rent Schedule
Exhibit B-1 - Work Agreement
Exhibit B-2 - Building and Site Specifications
Exhibit B-3 - Landlord's Supervisory Role During Initial Construction
Exhibit C - Rules and Regulations
Exhibit D - Holidays
Exhibit E - Cleaning Specifications
Exhibit F - Low Voltage Cabling
Exhibit G - SMART Arbitration Rules
Addendum 1 - Option to Expand
Addendum 2 - Option to Renew
Addendum 3 - Roof Top Space
Addendum 4 - Emergency Generator
2
<PAGE> 8
ARTICLE II
THE PREMISES
2.1 Description of the Premises. Landlord hereby leases to Tenant, subject
to and with the benefit of the provisions of the Lease and subject to existing
easements, agreements, rights and encumbrances of record as of the date hereof,
the Premises, together with the right to use, subject to the rules and
regulations of Landlord attached as Exhibit C, the parking areas, Common Area,
Building telephone and electric sleeves between floors (if available),
walkways, and driveways from time to time located on the Land.
2.2 Landlord's Rights Reserved. Landlord reserves unto itself, and its
Agents, the right to use, maintain, repair and replace the Common Area,
including without limitation, the elevators, hallways, staircases, shaftways,
and other common facilities in the Building, and the right to maintain, use,
construct, repair, and replace pipes, ducts, wires, meters and any other
equipment, machinery, apparatus and fixtures therein as well as within or
leading through the Premises, where possible in such a manner as will not cause
interference with Tenant's use of the Premises and rights under this Lease and
subject to Tenant's security requirements and, to the extent practicable, such
items shall be located above the ceilings, behind the walls, or within the
columns of the Premises. Landlord expressly reserves the right temporarily to
close, any portion of the Common Area. In addition to the other rights of
Landlord under this Lease, Landlord reserves the right (i) to change the street
address and/or name of the Building so long as Landlord reimburses Tenant for
the cost of replacing its stationery, (ii) subject to Tenant's rights pursuant
to Article IX and Addendum 3, to maintain exclusive control over the use of the
roof and exterior walls of the Building. 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
Tenant's use or occupancy of the Premises.
ARTICLE III
TERM
3.1 Term. The Term shall commence on the Commencement Date and expire at
midnight on the Expiration Date. If Substantial Completion occurs prior to, or
the Tenant uses or accepts the Premises prior to the date set forth in Article
I as the Commencement Date (e.g., by moving of any furnishings or other
personalty into the Premises), then the Commencement Date shall be such date
upon which the Premises are Substantially Complete or Tenant uses or accepts
the Premises, with the exception of the 11,384 square foot Premises on the
first (1st) floor which shall commence three (3) months after the Premises on
the second (2nd) floor. If requested by Landlord, Tenant shall within fifteen
(15) days after such request sign a declaration in recordable form
acknowledging the Commencement Date and the Expiration Date.
3.2 Possession/Rent Commencement.
A. Second Floor - 42,334 rentable square feet; Upon the earlier of
Substantial Completion of the Premises or February 1, 2000.
B. First Floor - 11,384 rentable square feet; Shall commence May 1,
2000, except for proportional operation expenses upon actual
occupancy prior to May 1, 2000.
C. In the event that possession of the Premises for commencement of
Tenant Improvements is delayed in delivery to Tenant beyond November
1, 1999 due solely to Landlord delays: (1) Tenant shall receive one
(1) day of rental abatement for every one (1) day of delay incurred,
for delays in Substantial Completion of Premises actually caused by
such Landlord delay of Base Building delivery, for the proportion of
the Tenant Premises delayed, (2) the Lease Commencement Date shall
similarly deferred.
3
<PAGE> 9
D. In the event possession of the Second (2nd) floor Premises is delayed
beyond April 1, 2000 solely due to Landlord delay, then Tenant shall
have the unilateral right to terminate its lease without penalty or
financial obligation.
E. If; however, the above referenced delay in possession is caused by
force majeure, the aforementioned date shall slide to June 1, 2000.
3.3 Promptly after the Commencement Date is ascertained, Landlord and
Tenant shall execute a written declaration setting forth the Commencement Date,
the date upon which the initial term of this Lease will expire, and the other
information set forth therein.
3.4 For the purposes of this Lease, the term "Lease Year" shall mean a
period of twelve (12) consecutive calendar months, commencing on the first
(1st) of the month in which the Commencement Date occurs and each successive
twelve (12) month period, except that if the Commencement Date shall occur on a
date other than the first (1st) day of a month, then the first (1st) Lease Year
shall also include the period from the Commencement Date to the first (1st) day
of the following month.
3.5 Substantial Completion of the Building shall have occurred when the
base building work (except for punch list items) has been completed in
substantial conformity with the requirements of Exhibit B-2 as determined by
Tenant's Architect and a Non-Residential Use Permit being issued for the
Building.
3.6 The Premises shall be deemed to be ready for buildout when all of the
following shall have occurred:
(1) the floor area is substantially free from debris and
construction materials, and broom clean;
(2) all perimeter walls and columns are taped and finished, and all
interior core walls are ready for paint on the side facing the
space to be occupied by Tenant;
(3) the HVAC, utility and plumbing systems for the Building are
complete to a point that allows the Leasehold Work to proceed
without impediment;
(4) at least one (1) elevator or material lift is available to the
Tenant's contractor for moving construction materials;
(5) the permanent roof system in the Building shall be water-tight,
and all windows on the relevant floor(s) shall be water-tight;
(6) all rooms located in the building core on the relevant floor(s),
including mechanical rooms, toilet rooms, electrical closets,
janitorial closets, freight elevator anterooms, lobbies and
elevator cars, and stairways, are complete to a point that
allows the Tenant's leasehold improvements to proceed without
impediment; and
(7) all fire life safety equipment is installed, a hydrostatic
pressure test has been completed and all relevant authorities
have approved the Premises for close-in.
Upon Landlord's delivery of the shell Premises to Tenant in ready for
build condition, Landlord shall schedule a mutually agreeable time with Tenant
to walk through the Premises and prepare a mutually acceptable punchlist
setting forth any defects or incomplete work. Landlord will endeavor promptly
to correct and complete those defects and incomplete items described in such
punchlist.
ARTICLE IV
RENT
4.1 Basic Rent. Tenant shall pay to Landlord the Basic Rent as specified
in Section 1.15, increased annually as set forth on Exhibit A-3. The first
month's rent shall be due at Lease execution.
4.2 Payment of Basic Rent. Basic Rent for each Lease Year shall be
payable in equal monthly installments, in advance, without demand, notice,
deduction, offset or counterclaim, on or before the first day of each and every
calendar month during the Term. If the Commencement Date
4
<PAGE> 10
occurs on a date other than on the first day of a calendar month, Basic Rent
prorated from such date until the first day of the following month) shall be
due and payable on the full execution and delivery of this Lease. Tenant shall
pay the Basic Rent and all Additional Rent, by good check or in lawful currency
of the United States of America, to Landlord at Landlord's Address, or to such
other address or in such other manner as Landlord from time to time specified
by written notice to Tenant. Any payment made by Tenant to Landlord on account
of Basic Rent may be credited by Landlord to the payment of any late charges
then due and payable and to any Basic Rent or Additional Rent then past due
before being credited to Basic Rent currently due.
4.3 Additional Rent. All sums payable by Tenant under this Lease, other
than Basic Rent, shall be deemed "Additional Rent," and, unless otherwise set
forth herein, shall be payable in the same manner as set forth above for Basic
Rent and Landlord shall have the same rights and remedies in the collection of
Additional Rent as Landlord has in the collection of Basic Rent. Basic Rent and
Additional Rent are collectively referred to hereinafter as "Rent."
4.4 Late Payment. If Tenant fails to pay any Rent within five (5) days
after such Rent becomes due and payable, Landlord shall provide Tenant with
written notice of non-payment and Tenant shall pay to Landlord a late charge of
five percent (5%) of the amount of such overdue Rent. In addition, any such
late Rent payment shall bear interest from the date such Rent became due and
payable to the date of payment thereof by Tenant at the Interest Rate. Such
late charge and interest shall be due and payable within five (5) days after
written demand from Landlord.
4.5 Pre-Commencement Date Occupancy -- First (1st) Floor Premises. Tenant
may occupy all or a portion of the Premises on the first (1st) floor for the
conduct of its business prior to the Commencement Date, but must pay Tenant's
Proportionate Share of the Landlord's Operating Expenses as defined in Article
1.18 and Article VI hereof for the period of such occupancy.
ARTICLE V
SECURITY DEPOSIT
Simultaneous with the execution of this Lease, Tenant shall deposit the
Security Deposit with Landlord, which shall be held by Landlord, with interest,
if posted in cash, as set forth below, as security for the performance of
Tenant's obligations and covenants under this Lease. It is expressly understood
and agreed that such deposit is not an advance rental deposit or a measure of
Landlord's damages in case of an Event of Default. If an Event of Default shall
occur or if Tenant fails to surrender the Premises in the condition required by
this Lease, Landlord shall have the right (but not the obligation), and without
prejudice to any other remedy which Landlord may have on account thereof, to
apply all or any portion of the Security Deposit to cure such default or to
remedy the condition of the Premises. If Landlord so applies the Security
Deposit or any portion thereof before the Expiration Date or earlier
termination of the Lease, Tenant shall deposit with Landlord, upon demand, the
amount necessary to restore the Security Deposit to the then required amount.
If Landlord shall sell or transfer its interest in the Building, Landlord shall
transfer the Security Deposit to such purchaser or transferee, in which event
Tenant shall look solely to the new landlord for the return of the Security
Deposit. Although the Security Deposit shall be deemed the property of
Landlord, any remaining balance of the Security Deposit shall be returned to
Tenant at such time after the Expiration Date or earlier termination of this
Lease that all of Tenant's obligations under this Lease have been fulfilled.
Notwithstanding the foregoing, at Tenant's sole option, Tenant may provide
an irrevocable and unconditional letter of credit equal to $1,600,000 instead
of a cash Security Deposit. If an Event of Default has not occurred or is not
continuing, if Tenant has provided a cash security deposit, Landlord shall,
following the first (1st) anniversary of the Lease Commencement and each Lease
Commencement anniversary thereafter, refund $250,000 per year to Tenant until a
balance of $400,000 remains which shall be held for the remainder of the
initial term or, if Tenant has provided a letter of credit, the amount of such
letter of credit shall be reduced on each anniversary of the Commencement Date
by $250,000 per year, but such letter of credit shall not be reduced below
$400,000. Tenant shall be entitled to the maximum amount of interest earned on
cash deposits such as certificates of deposit and such interest shall be,
provided an Event of Default has not occurred or is not continuing, distributed
to Tenant on an annual basis. If Tenant utilizes a letter of credit for its
Security Deposit, Landlord must receive a replacement letter of credit at least
two (2) weeks prior to the expiration of the current letter of credit,
otherwise Landlord may cash the expiring letter of credit.
Notwithstanding the foregoing, the Letter of Credit may require Landlord
to state in writing that Tenant is in Default of the Lease when requesting that
the Letter of Credit be cashed. Also, in the event the Letter of Credit is
cashed, Landlord shall treat any such cash as a cash Security Deposit under the
terms of the Lease.
5
<PAGE> 11
ARTICLE VI
OPERATING EXPENSES
6.1 Tenant's Proportionate Share. Beginning on the first (1st)
anniversary of the Commencement Date), Tenant covenants and agrees to pay to
Landlord Tenant's Proportionate Share of Landlord's Operating Expenses of the
amount, if any, by which the total of Landlord's Operating Expenses (as defined
in Section 6.2 hereof) for any Lease Year or portion thereof exceeds the amount
of the Expense Stop. In the event that the Commencement Date or the Expiration
Date are other than the first day of a calendar year then Tenant's Proportionate
Share of such excess of Landlord's Operating Expenses shall be adjusted to
reflect the actual period of occupancy during the calendar year.
6.2 Landlord's Operating Expenses Defined. As used herein, the term
"Landlord's Operating Expenses" shall mean all expenses and costs of every kind
and nature which Landlord incurs because of or in connection with the ownership,
maintenance, management and operation of the Land, the Building and the Common
Area including all additional costs and expenses of operation, management and
maintenance of the Land, the Building and the Common Area or, at the very
minimum, which Landlord determines that it would have paid or incurred during
any calendar year, including the first (1st) Least Year, if the Building had
been no less than ninety-five percent (95%) occupied and fully assessed.
Landlord's Operating Expenses shall include, without limitation, all costs,
expenses and disbursements incurred or made in connection with the following:
(i) Wages and salaries of all employees, whether employed by
Landlord or the Building's management company, engaged in the operation and
maintenance or security of the Land, the Building, and the Common Area, and all
costs related to or associated with such employees or the carrying out of their
duties, including uniforms and their cleaning, taxes, auto allowances and
insurance and benefits (including, without limitation, contributions to pension
and/or profit sharing plans and vacation or other paid absences);
(ii) All supplies and materials, including janitorial and lighting
supplies, used directly in the operation and maintenance of the Building, the
Land and the Common Area;
(iii) All utilities, including, without limitation, electricity,
telephone, water, sewer, power, gas, heating, lighting and air conditioning for
the Land, the Building and the Common Area, except to the extent such utilities
are charged directly to or paid directly by a tenant of the Building;
(iv) All arm's-length maintenance, operation and service agreements
for the Building, the Land and the Common Area and any equipment related
thereto, including, without limitation, arm's-length service and/or maintenance
agreements for the security, energy management, HVAC, plumbing and electrical
systems, and for window cleaning, elevator maintenance, janitorial service,
groundskeeping, interior and exterior landscaping and plant maintenance;
(v) All insurance purchased by Landlord or the Building's management
company relating to the Building, the Land and the Common Area and any
equipment or other property contained therein or located thereon including,
without limitation, casualty, liability, rental loss, sprinkler and water
damage insurance;
(vi) All repairs to the Building and the Common Area, which are
deducted by Landlord from ordinary income as an operating expense in the year
they are incurred for purposes of federal income taxation, including interior,
exterior, structural or nonstructural repairs, and regardless of whether
foreseen or unforeseen including expenses to have the Building comply with all
applicable federal and local codes, (but excluding repairs paid for by the
proceeds of insurance or by Tenant or other third parties);
(vii) All maintenance of the Building, the Land and the Common Area,
including, without limitation, painting, ice and snow removal, window washing,
landscaping, groundskeeping, roof repair or replacement, relamping or
replacement of luminaries, HVAC repairs and maintenance to include replacement
of compressors, trash removal and the patching, painting and resurfacing of
roads, driveways and parking lots;
(viii) A management allowance for property management in an amount
not to exceed five percent (5%) of Basic and Additional Rent for space in the
Building payable to Landlord or the company or companies managing the Building,
the Land and the Common Area, if any;
(ix) Accounting and legal fees incurred in connection with the
operation and maintenance of the Building, the Land and the Common Area or
related thereto;
6
<PAGE> 12
(x) Any reasonable additional services not provided to the Building,
the Land or the Common Area at the Commencement Date but thereafter provided by
Landlord as Landlord shall deem necessary or desirable in connection with the
management or operation of the Building, the Land and the Common Area;
(xi) Depreciation (on a straight-line basis over the useful life of the
improvement, with interest at Landlord's cost of funds or, if the improvement
is not financed, at the prime rate plus two (2%) percent reported in The Wall
Street Journal on the date of such expenditure) for capital expenditures made by
Landlord (a) to reduce operating expenses to the extent that such expenditure
actually reduces operating expenses or (b) to comply with applicable laws,
rules, regulations, requirements, statutes, ordinances, codes, by-laws and court
decisions of the jurisdiction in which the Building is located or the federal
government which are not applicable on the Commencement Date.
(xii) All Landlord's Taxes which are defined in Sections 6.3 below;
(xiii) The costs incurred in implementing and operating any transportation
management program, ride sharing program or similar program including, but not
limited to, the cost of any transportation program fees, mass transportation
fees or similar fees charged or assessed by any governmental or quasi-
governmental entity;
(xiv) The cost to operate the on-site recreational/exercise facility on
the Concourse Level. For purpose of this Section 6.2, the operating cost of this
facility shall be a stipulated maximum of $25,000 for the Building in the Base
Year.
Notwithstanding anything to the contrary set forth in the Lease, Operating
Expenses shall not include the following:
(1) any ground or underlying lease rental;
(2) bad debt expenses and interest, principal, points and fees on debts or
amortization on any mortgage or other debt instrument encumbering the
Building or the Land;
(3) costs which may be considered capital improvements, capital changes as
determined under generally accepted accounting principles except for
capital improvements required by any laws not in existence and not in
effect as of the Commencement Date, in which case such costs shall be
capitalized and amortized over their useful life determined in
accordance with generally acceptable accounting principles;
(4) long term rentals for items which if purchased, rather than rented
would constitute a capital cost;
(5) costs incurred by Landlord to the extent that Landlord is reimbursed
by insurance proceeds or is otherwise reimbursed;
(6) depreciation, amortization and interest payments, except on equipment,
materials, tools, supplies and vendor-type equipment purchased by
Landlord to enable Landlord to supply services Landlord might
otherwise contract for with a third party where such depreciation,
amortization and interest payments would otherwise have been included
in the charge for such third party's services, all as determined in
accordance with generally accepted accounting principles, consistently
applied, and when depreciation or amortization is permitted or
required, the item shall be amortized over its reasonably anticipated
useful life;
(7) advertising and promotional expenditures, and costs of acquisition and
maintenance of Building signature and spandrel signs on the Building
identifying other tenants;
(8) marketing costs, including leasing commissions, attorneys' fees (in
connection with the negotiation and preparation of letters, deal
memos, letters of intent, leases, subleases and/or assignments), space
planning costs, and other costs and expenses incurred in connection
with lease, sublease and/or assignment negotiations and transactions
with present or prospective tenants or other occupants of the
Building;
7
<PAGE> 13
(9) costs, including permit, license and inspection costs, incurred with
respect to the installation of tenants' or other occupants'
improvements or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for tenants or other
occupants of the Building;
(10) expenses in connection with services or other benefits which are not
offered to Tenant or for which Tenant is charged for directly;
(11) costs incurred by Landlord due to the violation by Landlord or any
tenant of the terms and conditions of any lease of space in the
Building;
(12) rent for any office space occupied by Building management personnel to
the extent the size or rental rate for of such office space exceed the
size or fair market rental value of office space occupied by
management personnel of comparable buildings in the vicinity of the
Building;
(13) any compensation paid to clerks, attendants or other persons in
commercial concessions operated by Landlord;
(14) services provided, taxes, attributable to, and costs incurred in
connection with the operation of any retail, restaurant and garage
operations for the Building, and any replacement garages or parking
facilities;
(15) costs incurred in connection with upgrading the Building to comply
with laws, rules, regulations and codes in effect prior to the
Commencement Date;
(16) costs arising from the negligence or willful misconduct of Landlord or
other tenants or occupants of the Building or their respective agents,
employees, licensees, vendors, contractors or providers of materials
or services;
(17) costs arising from Landlord's charitable or political contributions;
(18) costs arising from latent defects or repair thereof;
(19) costs associated with Landlord as a corporation or partnership
including accounting and legal matters, costs of defending any
lawsuits with any mortgagee (except as the actions of Tenant may be in
issue), costs of selling, syndicating, financing, mortgaging or
hypothecating any of Landlord's interest in the Building, costs
incurred in connection with any disputes between Landlord and its
employees, between Landlord and Building management, or between
Landlord and other tenants or occupants;
(20) any cost that would cause Landlord's Operating Expenses to include
more than 100% of the amount of the amount Landlord actually incurred
with respect to such expenses.
Landlord shall keep, in the Property Manager's office, complete books and
records regarding Operating Expenses and Taxes. All records shall be retained
for at least three (3) years. Tenant shall have the right to audit such records
at any time upon reasonable written notice to Landlord pursuant to Section 6.7
hereof.
6.3 Landlord's Taxes Defined. "Landlord's Taxes" shall mean all taxes and
assessments, including but not limited to, general or special, ordinary or
extraordinary, foreseen or unforeseen, assessed, levied or imposed by any
governmental authority upon the Building, the Land and the Common Area and upon
the fixtures, machinery, equipment or systems in, upon or used by the Landlord
for the benefit of all Tenants of the Building in connection with any of the
foregoing, and the rental, revenue or receipts derived therefrom, under the
current or any future taxation or assessment system or modification of,
supplement to, or substitute for such system. Landlord's Taxes also shall
include special assessments which are in the nature of or in substitution for
real estate taxes, including, without limitation, road improvement assessments,
special use area assessments, school district assessments, and transportation
taxes, fees or assessments, including, but not limited to, mass transportation
fees, regional transportation district fees, metrorail fees, trip fees and
similar fees and assessments, fees assessed by any air quality management
district or other governmental or quasi-governmental entity regulating
pollution, parking fees or parking taxes paid by Landlord. If at any time the
method of taxation prevailing at the Date of Lease shall be altered so that in
lieu of, as a substitute for or in addition to the whole or any part of the
taxes now levied or assessed, there shall be levied or assessed a tax of
whatever nature, then the same shall be included as Landlord's Taxes hereunder.
Further, for the purposes of this Article, Landlord's Taxes shall include the
reasonable expenses (including, without limitation, attorneys' fees) incurred
by Landlord in challenging or obtaining or attempting to obtain a reduction of
such Landlord's Taxes, regardless of the outcome of such challenge
8
<PAGE> 14
so long as Tenant's Proportionate Share of any refund is paid to Tenant whether
such is received by Landlord during the Term or after the Expiration Date.
Notwithstanding the foregoing, Landlord shall have no obligation to challenge
Landlord's Taxes. However, if Tenant occupies more than 50% of the Building,
Tenant may cause the Landlord to challenge Landlord's Taxes at Tenant's expense.
Notwithstanding anything to the contrary contained in the Lease, the
following shall be excluded from Taxes and shall be paid solely by Landlord:
inheritance, estate, succession, transfer, gift, franchise, or capital stock
tax, or any income taxes arising out of or related to ownership and operation of
income-producing real estate, except for Business, Professional and Occupational
License (BPOL), or any excise taxes imposed upon Landlord based upon gross or
net rentals or other income received by it; any increase in taxes and
assessments resulting from Landlord's sale of, or other transfer of its interest
in, the Building; and assessments, charges, taxes, rents, fees, rates, levies,
excises, license fees, permit fees, inspection fees, or other authorization fees
or charges to the extent allocable to or caused by the development or
installation of on- or off-site improvements or utilities (including without
limitation street and intersection improvements, roads, rights of way, lighting,
and signalization) necessary for the initial development or construction of the
Building, or any past, present or future system development reimbursement
schedule or sinking fund related to any of the foregoing.
6.4 Estimated Payments. Landlord shall submit to Tenant, before the
beginning of each calendar year, a statement of Landlord's estimate of
Landlord's Operating Expenses payable by Tenant during such calendar year. In
addition to the Basic Rent, Tenant shall pay to Landlord on or before the first
day of each month during such calendar year an amount equal to one-twelfth
(1/12) the estimated Landlord's Operating Expenses payable by Tenant for such
calendar year as set forth in Landlord's statement. If Landlord fails to give
Tenant notice of its estimated payments due under this Section for any calendar
year, the Tenant shall continue making monthly estimated payments in accordance
with the estimate for the previous calendar year until a new estimate is
provided. If Landlord determines that, because of unexpected increases in
Landlord's Operating Expenses or other reasons, Landlord's estimate of
Landlord's Operating Expenses was too low, then Landlord shall have the right to
give a new statement of the estimated Landlord's Operating Expenses due from
Tenant for such calendar year or the balance thereof and to bill Tenant for any
deficiency which may have accrued during such calendar year, and Tenant shall
thereafter pay monthly estimated payments based on such new statement. Landlord
shall maintain its books and records in accordance with tax accounting
principles.
6.5 Actual Landlord's Operating Expenses. Within ninety (90) days after
the end of each calendar year, Landlord shall submit a statement to Tenant
showing the actual Landlord's Operating Expenses for such calendar year and
Tenant's Proportionate Share of the amount by which such Landlord's Operating
Expenses exceed the Expense Stop. If for any calendar year, Tenant's estimated
monthly payments exceed Tenant's Proportionate Share of the amount by which the
actual Landlord's Operating Expenses for such calendar year exceed the Expense
Stop, then Landlord shall give Tenant a credit in the amount of the overpayment
toward Tenant's next monthly payments of estimated Landlord's Operating
Expenses. If for any calendar year Tenant's estimated monthly payments are less
than Tenant's Proportionate Share of the amount by which the actual Landlord's
Operating Expenses for such calendar year exceed the Expense Stop, then Tenant
shall pay the total amount of such deficiency to Landlord within thirty (30)
days after receipt of the statement from Landlord. If Tenant fails to pay such
deficiency within thirty (30) days from receipt of the statement from Landlord,
Tenant shall pay Landlord a late charge of five percent (5%) of the amount of
such deficiency and any such deficiency shall bear interest, at the Interest
Rate, from the thirty-first (31st) day to the date of payment thereof by Tenant.
Landlord's and Tenant's obligations with respect to any overpayment or
underpayment of Landlord's Operating Expenses shall survive the expiration or
termination of this Lease. Notwithstanding the foregoing, if the Landlord has
under estimated the Landlord's Operating Expenses by more than five (5%)
percent, the Tenant may pay any deficiency in excess of such five (5%) percent
in monthly installments over the 12 months after Landlord delivers its
statement.
6.6 Allocation of Landlord's Operating Expenses to Tenant. Landlord shall
equitably apportion to the extent possible the costs of utilities or services
which are provided to one tenant or tenants to an appreciably different degree
than to Building tenants at large. In the event that Tenant shall request that
Landlord provide utilities or services in excess of those specified in Article
6.6 or Section 12.1 below, Tenant agrees that Landlord may, by fifteen (15) days
prior written notice to Tenant, charge Tenant for the actual out-of-pocket cost
of such additional utility or service as Additional Rent.
6.7 Review Procedure. Tenant shall have the right to audit or cause an
independent certified public accountant to audit the applicable records of
Landlord to confirm that the charges billed to Tenant under Article VI are
proper and conform to the provisions of such Articles. Such right shall be
exercisable by Tenant within ninety (90) days after Tenant's receipt of
Landlord's annual statement of such charges. Landlord shall cooperate with
Tenant in providing Tenant reasonable access to Landlord's books and record
during normal business hours to enable Tenant to audit Landlord's books and
records as they relate to any costs or expenses passed through to Tenant
9
<PAGE> 15
pursuant to any provisions of this Lease. If the audit discloses any
overpayment on the part of Tenant, then Tenant shall be entitled to a credit on
the next succeeding installment of rent for an amount equal to the overcharge.
If Tenant shall dispute any item or items included by Landlord in determining
Landlord's Operating Expenses or other Additional Rent for any Lease Year, and
if such dispute is not resolved between Landlord and Tenant within ninety (90)
days after such accounting has been rendered, either party may notify the other
of its election to arbitrate said dispute. In such event, such dispute shall
be resolved by an independent certified public accountant acceptable to
Landlord and Tenant, which decision shall be conclusive and binding on both
parties and final judgment thereon may be entered in any court of competent
jurisdiction.
6.8 Accounting Year. Landlord may adopt a different accounting year than
the calendar year, so long as the change does not affect the benefit to Tenant
of the Expense Stop, in which case the times for payment of Additional Rent
shall be adjusted accordingly.
6.9 Credit for Refunds. In the event that, during or after the Term of
this Lease, Landlord shall receive a refund for any tax or other sum included
in the calculation of Landlord's Operating Expenses and paid by Tenant,
Landlord shall repay Tenant's Proportionate Share of such refund (after
deducting therefrom the cost and expense of obtaining such refund, which have
not already been charged as an Operating Expense).
ARTICLE VII
USE
7.1 General. Tenant shall occupy the Premises solely for the Permitted
Use. The Premises shall not be used for any other purpose without the prior
written consent of Landlord. Tenant shall comply, at Tenant's expense, with (i)
all present and future laws, ordinances, regulations and orders of the United
States of America, the Commonwealth of Virginia and any other public or
quasi-public federal, state or local authority having jurisdiction over the
Premises, and (ii) any reasonable requests of Mortgagee or any insurance
company providing coverage, with respect to the Premises. Tenant shall not use
or occupy the Premises in any manner that is unlawful or dangerous or that
shall constitute waste, unreasonable annoyance or a nuisance to Landlord or the
other tenants of the Building.
Notwithstanding the foregoing or any other provision of this Lease,
however, Tenant shall not be responsible for compliance with any such laws,
regulations, or the like requiring (i) structural repairs or modifications or
(ii) repairs or modifications to the utility or building service equipment or
(iii) installation of new building service equipment, such as fire detection or
suppression equipment, unless such repairs, modifications, or installations
shall (a) be due to Tenant's particular manner of use of the Premises (other
than the Permitted Use), or (b) be due to the negligence or willful misconduct
of Tenant or any agent, employee, or contractor of Tenant.
Landlord represents and warrants to Tenant that the Building and the
Premises are in material compliance with all applicable zoning, land use and
environmental laws and agreements and the requirements of all easement and
encumbrance documents and Landlord covenants to keep the same in compliance
throughout the Term.
7.2 Hazardous Materials. Tenant will not store, use or dispose of any
hazardous materials, other than normal cleaning supplies and printer and copier
toner typically used in offices, in, on or about the Premises, the Building or
the Land. Tenant shall not use the Premises for any use which may give rise to
the existence on the Premises, the Building or the Land of toxic materials,
hazardous substances or hazardous waste as those terms are used in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 USC ss 9601 et seq, as amended, Superfund Amendments and Reauthorization Act
of 1986, Resource Conservation and Recover Act of 1976 or in any other Federal,
state or local law (and all regulations promulgated under any of same), as such
laws are amended from time to time. Tenant will be solely responsible for and
will defend, indemnify and hold Landlord and its Agents harmless from and
against all claims, costs and liabilities, including attorney's fees and costs,
arising out of or in connection with Tenant's breach of its obligations under
this Section. Tenant will be solely responsible for and will defend, indemnify
and hold Landlord and its Agents harmless from and against any and all claims,
costs, and liabilities, including attorney's fees and costs, arising out of or
in connection with the removal, clean-up and restoration work and materials
necessary to return the Premises and any other property of whatever nature
located on the Land to their condition existing prior to the appearance of
Tenant's hazardous materials on the Premises. Tenant's obligations under this
Section will survive the expiration or earlier termination of this Lease.
Landlord hereby agrees to defend, indemnify and hold Tenant harmless from
and against any and all loss, cost, damage, claim or expense (including legal
fees) incurred in connection with or arising out of or relating in any way to
the presence of hazardous or toxic materials or oil as of the date hereof in or
on the Property or the Improvements not caused by Tenant or its agents.
10
<PAGE> 16
ARTICLE VIII
PARKING
8.1 Parking Spaces. At no charge to Tenant during the initial Term, Tenant
will have pro-rata use on a first-come, first-served basis of the vehicular and
bicycle parking spaces on the Land, at a parking ratio of 4.0/1000.
Notwithstanding the above, at Landlord's sole cost and expense, Tenant shall
have twelve (12) additional parking spaces as reserved and designated parking
to be located under cover immediately proximate to the Tenant's entrance lobby
as part of its pro-rata share of building parking. Landlord shall not be
responsible for enforcing reserved parking. The number of Tenant's parking
spaces shall increase at a rate of proportionate feet that are added to the
Premises pursuant to Addendum One.
8.2 Changes to Parking Facilities. Landlord shall have the right, from
time to time, without Tenant's consent, to change, alter, add to, temporarily
close or otherwise affect the parking facilities on the Land in such manner as
Landlord, in its sole discretion, deems appropriate including, without
limitation, the right to designate reserved spaces available only for use by
one or more tenants (however, in such event, those parking spaces shall still
be deemed Common Area for the purpose of the definition of Landlord's Operating
Expenses), provided that, except in emergency situations or situations beyond
Landlord's control, Landlord shall provide alternative parking facilities.
Landlord will use its best efforts to ensure any temporary parking is within
reasonable distance to Building or provide transport to distant temporary
parking.
ARTICLE IX
SIGNS
No sign, advertisement or notice shall be inscribed, painted, affixed,
placed or otherwise displayed by Tenant on any part of the Land or the outside
or the inside (including, without limitation, the windows) of the Building or
Premises. In addition to suite signage provided by Landlord, Landlord shall
provide, at Landlord's expense, a listing on the Building directory of Tenant's
business name, the name of Tenant's President, Chief Financial Officer, Vice
President of Sales and the names of up to nine (9) other employees. If any
prohibited sign, advertisement or notice is nevertheless exhibited by Tenant,
Landlord shall have the right with prior, written notice to remove the same,
and Tenant shall pay any and all reasonable, out-of-pocket expenses incurred by
Landlord in such removal, together with interest thereon at the Interest Rate,
upon demand. Landlord shall have the right to prohibit any sign, advertisement,
notice or statement to the public by Tenant which, in Landlord's opinion, tends
to impair the reputation of the Building or its desirability as a first class
office building.
Notwithstanding anything herein to the contrary, subject to applicable
laws, Tenant shall have the right to install an exterior sign with Tenant's name
(signature signage) on the face of the Building facing the Dulles Toll Road, at
a location to be determined by Landlord and Tenant, subject to all applicable
code, ordinance and covenants, which sign may be illuminated during the evening
hours. Tenant shall have the right to install such sign in a size that is no
less than 25% of the total signage area allowable by applicable law, code,
ordinance and covenants, estimated to be 90 square feet. In addition, Tenant
shall have the right to install or to add its name and logo to the 10790
Parkridge Boulevard monument sign, subject to all applicable code, ordinance and
covenants, which name shall be the most prominent name on such monument sign.
All costs and expense relating to exterior Building signs shall be the sole cost
and expense of Tenant, which costs may be included in the costs payable through
the construction allowance. Signature signage is defined as signage on the top
spandrel of the Building. Tenant's sign size shall be proportional with its
actual percentage of occupancy in the Building, subject to all applicable code,
ordinance and covenants. Tenant's exterior signage rights shall be superior to
all other tenant signage rights and such signage rights are not transferable to
unrelated third (3rd) parties.
11
<PAGE> 17
ARTICLE X
INITIAL CONSTRUCTION; ALTERATIONS; SURRENDER
10.1 Initial Construction. Landlord and Tenant agree that the construction
of the Tenant work and other initial construction with respect to the Premises
(the "Tenant Leasehold Improvements") shall be performed by Tenant with Landlord
responsibilities outlined in Exhibit B-3 attached hereto and made a part hereof.
10.2 Alterations. (A) For the purposes of this Section, "Alterations"
shall mean any alterations, additions, decorations, or improvements to the
Premises or the Building. Tenant shall have the right without Landlord's prior
consent to make Alterations to or upon the Premises which i) are non-structural
in nature, ii) do not disrupt any other tenants of the Building, iii) do not
affect any Building systems, and iv) are not visible from outside the Premises;
provided, however, that Tenant must furnish Landlord with notice and detailed
plans and specifications of any such Alterations at least fifteen (15) days
prior to the commencement of such work. Tenant shall not make or permit any
other Alterations without the prior written consent of Landlord, which consent
shall not be unreasonably withheld, conditioned or delayed. If Landlord's
consent is required to an Alteration, Landlord may impose any reasonable
conditions to the performance of the Alterations, including without limitation,
(i) delivery to Landlord of written and unconditional waivers from all
contractors of mechanic's and materialmen's liens as to the Premises, the
Building and the Land for all work, labor and services to be performed and
materials to be furnished, signed by all contractors, subcontractors,
materialmen and laborers participating in the Alterations, (ii) prior approval,
which approval shall not be unreasonably withheld, conditioned or delayed, of
the plans and specifications and Tenant's contractor(s) with respect to the
Alterations, (iii) supervision of the Alterations by Landlord's representative
at Tenant's expense and (iv) delivery to Landlord of payment and performance
bonds naming Landlord and Mortgagee as obligees. All Alterations, whether or not
Landlord's consent is required, shall conform to the requirements of Landlord's
and Tenant's insurers and of the Federal, state and local governments having
jurisdiction over the Premises, shall be performed in accordance with the terms
and provisions of this Lease in a good and workmanlike manner befitting a first
class office building and shall not adversely affect the value, utility or
character of the Premises. Should permits of any kind and nature be required by
Federal, state or local government(s) having jurisdiction over the Premises,
Tenant shall be responsible for securing the permits and the cost of same and
furnishing copies of such permits to Landlord.
(B) If the Alterations are not performed as herein required, Landlord shall
have the right, at Landlord's option, to halt any further Alterations, or to
require Tenant to perform the Alterations as herein required or to require
Tenant to return the Premises to its condition before such Alterations.
(C) Within thirty (30) days of the completion of the Alterations, Tenant
shall furnish Landlord with one set of reproducible sepias showing the actual,
as-built Alterations as they were delivered in the Premises, certified and
inspected by the architects and engineers who prepared the plans and
specifications.
(D) Notwithstanding the foregoing, if any mechanic's or materialmen's lien
is filed against the Premises, the Building or the Land for work claimed to have
been done for, or materials claimed to have been furnished to or for the benefit
of, Tenant, such lien shall be discharged of record by Tenant within ten (10)
days by the payment thereof or the filing of any bond required by law. If Tenant
shall fail to discharge any such lien, Landlord may (but shall not be obligated)
discharge the same, the cost of which shall be paid by Tenant within ten (10)
days of demand by Landlord. If Tenant fails to pay the cost within ten (10) days
of demand by Landlord, Tenant shall pay to Landlord a late charge of five
percent 5% of the amount. In addition, such late payment shall bear interest, at
the Interest Rate, from the fourth (4th) day to the date of payment thereof by
Tenant. Such discharge by Landlord shall not be deemed to waive or release the
default of Tenant in not discharging the same. Neither Landlord's consent to any
Alteration nor anything contained in this Lease shall be deemed to be the
agreement or consent of Landlord to subject Landlord's interest in the Premises,
the Building or the Land to any mechanic's or materialmen's liens which may be
filed in respect of any Alteration.
10.3 Treatment of Alterations at Expiration Date or Earlier Termination of
Lease. Tenant shall have no obligation to remove any Alterations installed
pursuant to the Initial Construction of Tenant Leasehold Improvements, or any
standard office buildout performed after the beginning of the Term of this Lease
so long as Tenant has received Landlord approval for such improvements and/or
buildout. If Tenant requests Landlord's consent to Alterations which are
different than a standard office buildout, at the time Landlord gives its
consent to such Alterations, the Landlord shall notify Tenant of the extent of
any Alterations which Landlord requires the Tenant to remove at the end of the
Term. At the time of such consent, the Tenant may, at its option, choose to
proceed with such Alterations and will remove the same at the end of the Term,
or at Tenant's option will pay Landlord
12
<PAGE> 18
to remove such Alterations.
To the extent elected by Landlord at the time Landlord approves
Alteration, Tenant shall have the obligation, with respect to the Alteration,
to restore the Premises to the condition existing prior to such Alterations, at
Tenant's expense, to include all necessary design and permit costs, using
licensed contractors acceptable to Landlord, unless this obligation was
affirmatively waived by Landlord in writing prior to the time such Alterations
were initially made. Landlord shall have the option, with respect to such
Alterations, to be paid by Tenant the amount of money which would necessary to
have the Premises restored to a condition existing prior to such Alterations
using an outside licensed contractor, to include supervisory, design and permit
costs. In the latter circumstance, if Tenant fails to pay the amount invoiced
within thirty (30) days from receipt of an itemized invoice from Landlord,
Tenant shall pay Landlord a late charge of five (5%) percent of the amount
invoiced for each month the payment is overdue, plus interest at the Interest
Rate from thirty (30) days after invoice submittal until date of payment by
Tenant, in addition to the sums described in the original invoice.
10.4 Landlord Alterations. Landlord shall have no obligation to make any
Alterations in or to the Premises, the Building, the Common Area or the Land
except as specifically provided in Exhibit B-1. Landlord hereby reserves the
right, from time to time, to make Alterations to the Building, change the
Building dimensions, erect additional stories thereon and attach other buildings
and structures thereto, and to erect such scaffolding and other aids to
construction as Landlord deems appropriate so long as the exercise of such right
does not materially or permanently interfere with Tenant's access to or use of
the Premises, and no such Alterations, changes, construction or erection shall
constitute an eviction, constructive or otherwise, or permit Tenant any
abatement of Rent or claim against Landlord.
10.5 Low Voltage Cabling. Low voltage cabling for control, alarms, phone,
data, and computer networking shall be installed in accordance with local codes
and the current version of the National Electrical Code. All cabling shall be
hung off building structural elements accessible from the underside. All local
area network (LAN) cabling shall be installed in accordance with plans
reasonably approved by the Landlord and using "enhanced Category 5" cabling in
substantial conformance with Exhibit F, provided that Exhibit F is consistent
with applicable codes, current industry standards, and common industry
practice, and does not limited qualified manufacturers. All cabling shall
remain in the Premises, at the expiration or earlier termination of this Lease
or removed at Landlord's option at Tenant's sole cost and expense.
10.6 Surrender of the Premises. Tenant shall peaceably surrender the
Premises, including any and all fixtures installed during the Term regardless
of whether Landlord or Tenant installed or paid for them, to Landlord on the
Expiration Date or earlier termination of this Lease, in broom-clean condition
and in as good condition as when Tenant took possession, including, without
limitation, the repair of any damage to the Premises caused by the removal of
any of Tenant's personal property from the Premises, except for reasonable wear
and tear and loss by fire or other casualty. Any of Tenant's personal property
left on or in the Premises, the Building or the Common Area after the
Expiration Date or earlier termination of this Lease shall be deemed to be
abandoned, and, at Landlord's option, shall become property of Landlord under
this Lease.
10.7 Dispute Resolution. Any dispute over the rights or obligations of
Landlord or Tenant with respect to issues covered by this Article X, either
party will have the right to invoke binding arbitration with respect to such
issues pursuant to the procedure set forth in Exhibit G.
13
<PAGE> 19
ARTICLE XI
MAINTENANCE AND REPAIR
11.1 Landlord's Obligation. Landlord shall keep and maintain in good
repair and working order the exterior and common area side of the demising
walls, foundations, roof and common areas of the Building, the Common Area, and
the equipment (including mechanical, electrical, HVAC and plumbing systems,
pipes and conduits) within and serving the Premises and the Building (excluding
above-standard improvements installed or paid for by Tenant) that are required
for the normal maintenance and operation of the Premises and the Building. The
cost of such maintenance and repairs to the Building, the Common Area and said
equipment shall be included in the Landlord's Operating Expenses and paid by
Tenant to the extent provided in Article VI herein. Tenant agrees to give
Landlord prompt notice of any defective conditions which come to its attention.
11.2 Tenant's Obligation. Tenant shall maintain and repair any
above-standard equipment, fixtures or other improvements to the Premises and all
personal property within the Premises and shall repair, at its expense, any and
all damage caused by Tenant or Tenant's Agents to the Building, the Common Area,
or the Premises, including equipment within and serving the Building, ordinary
wear and tear excepted. Notwithstanding the foregoing, Tenant shall bear the
cost of but shall not perform without Landlord's prior consent any repairs which
Tenant is obligated to perform pursuant to this Section 11.2, Article X or
Exhibit B, which would affect the Building's structure or mechanical or
electrical systems or which would be visible from the exterior of the Building
or any interior Common Area of the Building. In the event Landlord makes such
repair or performs such maintenance, Landlord may add the actual, reasonable,
cost thereof to the first installment of Rent which shall thereafter become due.
11.3 Landlord's Right to Maintain or Repair. If, within five (5) days
following written notice to Tenant, Tenant fails to commence to repair or
replace any damage to the Premises or Building which is Tenant's obligation to
perform, and diligently pursue timely completion of such repair and replacement,
Landlord may, upon written notice, at its option, cause all required
maintenance, repairs or replacements to be made. Tenant shall pay Landlord all
actual, reasonable, costs incurred in connection therewith plus interest thereon
at the Interest Rate from the due date until paid. In addition, where Tenant is
prevented under Section 11.2 from performing certain maintenance or repairs
which are Tenant's obligation and Landlord performs same, Tenant shall promptly
pay to Landlord all actual and reasonable costs incurred in connection therewith
plus interest thereon at the Interest Rate from the due date until paid.
ARTICLE XII
LANDLORD SERVICES AND UTILITIES
12.1 Ordinary Services to the Premises. As long as no Event of Default has
occurred and is continuing, Landlord shall furnish to the Premises throughout
the Term (i) electricity, heating and air conditioning in conformance with the
design performance criteria set forth on Exhibit B-2 appropriate for the
Permitted Use during the normal business hours set forth in Exhibit C, except
for holidays set forth in Exhibit D; (ii) normal and customary janitorial and
char services as outlined in Exhibit E; (iii) regular trash removal from the
Premises; (iv) hot and cold water from points of supply; (v) restrooms as
required by applicable code; and (vi) elevator service; provided that Landlord
shall have the right to remove such elevators from service as may be required
for moving, freight or for servicing or maintaining the elevators or the
Building so long as at least one (1) elevator is available at all times, except
in cases of utility disruption. The cost of all services provided by Landlord
hereunder shall be included within Landlord's Operating Expenses, unless charged
directly (and not as or part of Landlord's Operating Expenses) to Tenant or
another tenant of the Building.
12.2 After-Hours Services to the Premises. If Tenant requires or requests
that the services to be furnished by Landlord (except Building standard
electricity and elevator service) be provided during periods in addition to the
periods set forth in Section 12.1, then Tenant shall request such from Landlord
in writing and, shall pay upon demand Landlord's actual additional expenses
resulting therefrom, which cost is currently $45.00 per hour. Landlord may, from
time to time during the Term, set a per hour charge for after-hours service
which shall include the cost of the utility, service, labor costs,
administrative costs and a cost for depreciation of the equipment used to
provide such after-hours service.
14
<PAGE> 20
12.3 Interruption of Services. Landlord shall not be liable for, nor shall
there be any abatement of Rent or constructive eviction for, the failure to
furnish, or the delay or suspension in furnishing, any of the services either
ordinary or extraordinary required under this Article, whether caused by
breakdown, maintenance, repair, strikes, scarcity of labor or materials, acts of
God or any other cause whatsoever, unless due to the gross negligence or willful
misconduct of Landlord.
Notwithstanding the above, Landlord shall use best efforts to restore
services.
12.4 Meters. Landlord reserves the right to separately meter or monitor the
utility services provided to the Premises and bill the charges directly to
Tenant or to separately meter any other tenant and bill the charges directly to
such tenant and to make appropriate adjustments to the Expense Stop based on the
meter charges to account for the fact that electricity at the capacity outlined
on Exhibit B-2 hereto during the business hours set forth in item #17 on Exhibit
C will be paid directly by Tenant. Tenant also shall have the right to arrange
its own separately metered service, all costs thereof to be paid for by Tenant,
in which case such utilities shall be excluded from Operating Expenses payable
pursuant to Article VI.
12.5 Utility Charges. All telephone, electricity, gas, heat and other
utility service used by Tenant in the Premises shall be paid for by Tenant
except to the extent the cost of same is included within Landlord's Operating
Expenses.
ARTICLE XIII
RULES AND REGULATIONS
Tenant and its Agents shall at all times abide by and observe the rules
and regulations attached as Exhibit C and any amendments or supplements thereto
(the "Rules and Regulations") that may be reasonably promulgated from time to
time by Landlord for the operation and maintenance of the Building and the
Common Area and the Rules and Regulations shall be deemed to be covenants of
the Lease to be performed and/or observed by Tenant. Landlord shall make
reasonable efforts to enforce the Rules and Regulations, against the other
tenants of the Building in a non-discriminatory manner and shall not knowingly
ignore any other tenant's violations of the Rules and Regulations. Landlord
shall not be liable to Tenant for any violation by any party of the Rules and
Regulations or the terms of any other building lease. If there is any
inconsistency between this Lease and the Rules and Regulations, this Lease
shall govern. Landlord reserves the right to amend and modify the Rules and
Regulations as it deems necessary.
ARTICLE XIV
LIABILITY OF LANDLORD
14.1 No Liability. Except in the event of gross negligence or willful
misconduct, Landlord and its Agents shall not be liable to Tenant or its Agents
for, and Tenant, for itself and its Agents, does hereby release Landlord and its
Agents from liability for, any damage, compensation or claim arising from (i)
the necessity of repairing any portion of the Premises or the Building or the
Common Area or any structural defects thereto, (ii) any interruption in the use
of the Premises or the Common Area, (iii) fire or other casualty or bodily,
personal or property injury, damage or loss resulting from the use or operation
(by Landlord, Tenant, or any other person whomsoever) of the Premises or the
Building or the Common Area, (iv) the termination of this Lease, (v) robbery,
assault or theft, or (vi) any leakage in the Premises or the Building from
water, rain, snow or other cause whatsoever. No such occurrence shall give rise
to diminution of Rent or constructive eviction. Any goods, automobiles, property
or personal effects stored or placed by Tenant or its Agents in or about the
Premises, the Building or the Common Area shall be at the sole risk of Tenant,
and Landlord and its Agents shall not in any manner be held responsible
therefor. Except to the extent expressly prohibited by law, Tenant hereby waives
any claim it might have against Landlord or its Agents for any consequential
damages sustained by Tenant arising out of the loss or damage to any person or
property of Tenant.
14.2 Tenant Indemnity. Tenant shall indemnify and hold Landlord and its
Agents harmless from and against any and all damage, claim, liability, cost or
expense (including, without limitation, attorneys' or other professionals'
fees) of every kind and nature (including, without limitation, those arising
from any injury or damage to any person, property or business) incurred by or
claimed against Landlord or its Agents, directly or indirectly, as a result of,
arising from or in connection with Tenant's or its Agents' use and occupancy of
the Premises, the Building or the Common Area.
15
<PAGE> 21
14.3 Landlord Indemnity. To indemnify, defend, protect and save harmless
Tenant, to the extent permitted by law, from and against any and all
liabilities, lawsuits, damages, costs, expenses (including reasonable attorneys'
fees and expenses), causes of action, suits, claims, demands or judgments of
nature arising from injury to or death of any person or damage to or loss of
property on the Premises and caused by the gross negligence of Landlord or its
agents or employees, except to the extent caused by the negligence of Tenant or
its agents, employees, visitors, contractors, licensees or sublessees.
ARTICLE XV
INSURANCE
15.1 Insurance Rating. Tenant shall not conduct or permit any activity,
or place any equipment or material, in or about the Premises, the Building or
the Common Area which will increase the rate of fire or other insurance on the
Building or insurance benefitting any other tenant of the Building; and if any
increase in the rate of insurance is stated by any insurance company or by the
applicable insurance rating bureau to be due to any activity, equipment or
material of Tenant in or about the Premises, the Building or the Common Area,
such statement shall be conclusive evidence that the increase in such rate is
due to the same and, as a result thereof, Tenant shall pay such increase to
Landlord upon demand.
15.2 Liability Insurance. Tenant shall, at its sole cost and expense,
procure and maintain throughout the Term a comprehensive general liability
policy insuring against claims, demands or actions arising out of or in
connection with: (i) the Premises; (ii) the condition of the Premises; (iii)
Tenant's operations in, maintenance and use of the Premises, Building and
Common Area, and (iv) Tenant's liability assumed under this Lease. Such
insurance shall be in amounts not less than those which are standard and
customary with an initial requirement of a combined single limit of not less
than Three Million and No/100 Dollars ($3,000,000.00). Such insurance shall
also include coverage against liability for bodily injuries or property damage
arising out of the use by or on behalf of Tenant by any owned, non-owned, or
hired transportation vehicles for a limit not less than that specified above.
15.3 Personal Property/Improvements Insurance. Tenant shall, at its sole
cost and expense, procure and maintain throughout the Term a property insurance
policy (written on an "All Risk" or "Special Causes of Loss" basis) insuring
all (One hundred (100%) percent) of Tenant's personal property, including but
not limited to equipment, furniture, fixtures, furnishings and leasehold
improvements installed at the Premises by Landlord or Tenant for not less than
the full replacement cost of said property. All proceeds of such insurance
shall be used to repair or replace Tenant's property and improvements to the
Premises.
15.4 Other Insurance. Tenant shall, at all times during the Term hereof,
maintain in effect worker's compensation insurance as required by applicable
law and business interruption insurance satisfactory to Landlord.
15.5 Requirements of Insurance Coverage. All such insurance required to
be carried by Tenant herein shall be with an insurance company licensed to do
business in the Commonwealth of Virginia and approved by Landlord. Such
insurance (i) shall contain an endorsement that such policy shall remain in full
force and effect notwithstanding that the insured has released its right of
action against any party before the occurrence of a loss; (ii) shall name
Landlord, and at Landlord's request, any mortgagee or ground Landlord, as
additional insureds and loss payees as our interest may appear; (iii) shall
provide that the policy shall not be canceled, failed to be renewed or
materially amended without at least forty-five (45) days' prior written notice
(fifteen (15) days if due to non-payment of premium) to Landlord and, at
Landlord's request, any Mortgagee; and (iv) shall provide protection against any
peril included within the classification "All Risk" or "Special Causes of Loss",
including, but not limited to vandalism, malicious mischief, theft, sprinkler
leakage, earthquake, flood and water damage. If this Lease is terminated as the
result of a casualty in accordance with Section XIX, the proceeds of said
insurance attributable to the replacement of all tenant improvements at the
Premises shall be paid to Landlord. On or before the Commencement Date and,
thereafter, not less than thirty (30) days before the expiration date of the
insurance policy, an original of the policy (including any renewal or
replacement policy) or a certified copy thereof, together with evidence
satisfactory to Landlord of the payment of all premiums for such policy, shall
be delivered to Landlord and, at Landlord's request, to any Mortgagee.
15.6 Waiver of Subrogation. If either party hereto is paid any proceeds
under any policy of insurance naming such party as an insured, on account of
any loss or damage, then such party hereby releases the other party hereto and
all other tenants, to and only to the extent of the amount of such proceeds,
from any and all liability for such loss or damage, notwithstanding that such
loss, damage or liability may arise out of the negligent or intentionally
tortuous act or omission of the other party or
16
<PAGE> 22
its Agents; provided, that such release shall be effective only as to a loss or
damage occurring while the appropriate policy of insurance of the releasing
party provides that such release shall not impair the effectiveness of such
policy or the insured's ability to recover thereunder. Each party hereto shall
use reasonable efforts to have a clause to such effect included in any such
policy.
15.7 Security. In the event that Landlord engages the services of a
professional security system for the Building or adopts any policy to promote
security for the Building, it is understood that such engagement or policy
shall in no way increase Landlord's liability for occurrences and/or
consequences which such a system or policy is designed to detect or avert and
that Tenant or its Agents shall look solely to Tenant's insurer as set out
above for claims for damages or injury to any person or property.
15.8 Landlord's Insurance: Landlord shall maintain in full force from the
date upon which Tenant first enters the Premises for any reason, throughout the
Term, a policy of insurance upon the Building insuring against all risks of
physical loss or damage under an All Risk coverage endorsement in an amount at
least equal to the full replacement value of the property insured, with an
Agreed Amount endorsement to satisfy co-insurance requirements, as well as
insurance against breakdown of boilers and other machinery as customarily
insured against. Landlord shall supply to Tenant from time to time upon request
of Tenant certificates of all such insurance issued by or on behalf of the
insurers named therein by a duly authorized agent. All policies of insurance
maintained by Landlord shall contain the same waiver of subrogation provisions
for the benefit of Tenant as Tenant is required to obtain in its insurance
policies for the benefit of Landlord.
ARTICLE XVI
RIGHT OF ENTRY AND IMPROVEMENT
Tenant shall permit Landlord or its Agents, at any reasonable time upon at
least 24 hours prior (except in cases of emergencies) notice, to enter the
Premises, without charge therefor to Landlord and without diminution of Rent,
(i) to examine, inspect and protect the Premises and the Building, (ii) to make
such repairs or perform such maintenance which in the reasonable judgment of
Landlord may be deemed necessary or desirable, (iii) to exhibit the same to
prospective purchasers of the Building or to present or future Mortgagees or
(iv) to exhibit the same to prospective tenants during the last ten (10) months
of the Term and to erect on the Premises a suitable sign indicating the Premises
are available. Should Tenant on its own volition vacate the Premises or any
portion thereof within three (3) months prior to the expiration of the Term and
not sublet such portion, Landlord or Landlord's Agent shall have the right,
without notice, to restore, refit or improve such vacated portion of the
Premises for a successor tenant, without affecting Tenant's obligation to pay
Rent under Article IV.
ARTICLE XVII
TENANT'S EQUIPMENT AND PROPERTY
17.1 Moving Tenant's Property. 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 on the Premises, shall be repaired by
Landlord, at the expense of Tenant. No furniture, equipment, office supplies or
other over-sized, bulky matter of any description shall be received into the
Building or carried in the elevators except as may be approved in writing by
Landlord, and the same shall be delivered only through the designated delivery
entrance and freight elevator in the Building at such times as shall be approved
by Landlord, which approval shall not be unreasonably withheld or delayed. All
moving of furniture, equipment, and other materials shall be under the direct
control and supervision of Landlord; provided, however, in no event shall
Landlord be responsible for any damages to or charges for moving the same.
Tenant shall promptly remove from the Common Area any of Tenant's furniture,
equipment or other property there deposited.
17.2 Installing and Operating Tenant's Equipment. Without first
obtaining the written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed Tenant shall not install or
operate in the Premises (i) any electrically operated equipment or other
machinery, other than standard office equipment that does not require wiring,
cooling or other service in excess of Building standards, (ii) any equipment of
any kind or nature whatsoever which will require any changes, replacements or
additions to, or changes in the use of, any water, heating, plumbing, air
conditioning or electrical system of the Premises or the Building, or (iii) any
equipment which places a load upon the framed floor of the Premises exceeding
the limitations set forth on Exhibit B-2. Landlord's consent to such
installation or operation may be conditioned upon the payment by Tenant of
additional compensation for any excess consumption of utilities and any
additional power, wiring, cooling or other service (as determined in the sole,
reasonable discretion of Landlord) that may result from such equipment.
Machines and equipment
17
<PAGE> 23
which cause noise or vibration that may be transmitted to the structure of the
Building or to any space therein so as to be objectionable to Landlord or any
other Building tenant shall be installed and maintained by Tenant, at its
expense, on vibration eliminators or other devices sufficient to eliminate such
noise and vibration.
ARTICLE XVIII
ASSIGNMENT AND SUBLETTING
18.1 General. Tenant shall not, without Landlord's prior written consent
(i) assign this Lease nor sublet the Premises in whole or in part, and shall
not permit Tenant's interest in the Lease to be vested in any third party by
operation of law or otherwise except as provided below.
18.2 Landlord's Rights Upon Proposed Subletting. Should Tenant desire to
sublet any part of the Premises, Tenant shall not be permitted so to sublet
until Tenant shall have given Landlord at least thirty (30) days prior written
notice of Tenant's intention to offer such space for sublet and specifying the
terms of such sublet. Except for the first (1st) three (3) years of the Lease
for the 11,384 rentable square feet on the first (1st) floor, Landlord shall
have the right for thirty (30) days from receipt of such notice to (i) sublet
or (ii) take an assignment from Tenant, upon the terms and for the period set
forth in the notice. In the event Landlord exercises any right to sublease or
take assignment of space from Tenant, Landlord shall remit each month to Tenant
rent in accordance with the terms set forth in the aforesaid notice for the
period of the sublease or assignment. In such event, Tenant shall not be
responsible for any failure to pay rent by the occupant of the portion of the
Premises sublet or assigned to the Landlord, and Tenant further shall not be
responsible for other Tenant obligations with respect to such portion of the
Premises for the term of such sublet or assignment. Should Landlord not elect
to accept assignment of such space, Tenant may sublet the same only after
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed. Tenant agrees that disapproval
of such sublet by Landlord's lender is deemed a reasonable basis for
withholding consent. During the first (lst) three (3) years of the Lease,
Tenant may sublet any or all first (1st) floor Premises after giving Landlord
notice of its intention to do so, with Landlord's reasonable consent as to use.
18.3 Landlord's Right to Terminate. Except for the first (1st) three (3)
years of the Lease for the 11,384 rentable square feet on the first (1st)
floor, should Tenant desire to sublet more than fifty (50%) percent of the
rentable space in the Premises, in the aggregate, for substantially the
remainder of the Term or if Tenant desires to assign this Lease other than to
an affiliate of Tenant in whole or in part, then Landlord shall have the right,
in addition to the foregoing, to terminate this Lease by giving notice thereof
to Tenant within twenty-five (25) days from the date of Tenant's notice to
Landlord and this Lease shall thereupon terminate on the date specified in
Landlord's notice but not earlier than thirty (30) days nor later than the end
of the next calendar month after the date of Landlord's notice to Tenant
exercising such right of termination. Such termination shall not be deemed a
default by Tenant under this lease and Tenant shall be relieved of all
obligations under this Lease accruing after the date of such termination. In
this event, any Security Deposit then outstanding on such Premises will be
returned to Tenant, pursuant to Article V.
18.4 Conditions to a Sublease or Assignment by Tenant. After receipt of
Landlord's written consent, a duly executed copy of the sublease shall be
delivered to Landlord for Landlord's review and approval, which shall be given
within ten (10) business days of such delivery to Landlord. All subleases shall
provide that the subtenant must comply with all applicable terms and conditions
of this Lease. All assignments shall contain an assumption by the assignee of
all the terms and obligations of this Lease. Should Landlord consent to the
proposed assignment or subletting, Tenant shall pay to Landlord one-half (1/2)
of any amount of cash in excess of that which would be received by Landlord for
the sublet space, of rent or other sums directly or indirectly received by
Tenant from any subtenant or assignee for the use of the sublet space including
any rent or other sums which may exceed the Basic Rent and Additional Rent due
hereunder minus reasonable reserves for refurbishment of the space or other
costs and expenses Tenant incurs (including, but not limited to marketing costs,
broker's and legal fees and other build-out costs) in connection with the
sublet. Tenant agrees that, except as set forth in Section 18.2, notwithstanding
any assignment or sublease, and notwithstanding the acceptance of rent by the
Landlord from an assignee, subtenant, or any other part, the Tenant shall remain
fully liable for the payment of rent due and to become due under this Lease and
for the performance of all the covenants, agreements, terms, provisions, and
conditions of this Lease on the part of Tenant to be performed or observed.
Notwithstanding anything in this Article XVIII to the contrary, Tenant shall
have the right to sublease all or any portion of the total rentable area of the
Premises at any time during the Lease Term with Landlord's prior, written
consent only as to the appropriateness of the subtenant(s) and/or assignee,
which shall not be unreasonably withheld, conditioned or delayed. Tenant shall
have the right, at any time, to assign or sublease to an affiliate, parent or
subsidiary without requiring the consent or approval of Landlord. The term
"Affiliate" shall mean another legal entity with essentially the same ownership
or conducting similar or contributing business services or any entity resulting
from the merger or acquisition of the Tenant.
18
<PAGE> 24
Notwithstanding the above, Tenant shall have the right to fully retain any
sublease profit on the first (1st) floor Premise during the first (1st) three
(3) years of the Lease.
18.5 Additional Conditions. Any transfer of this Lease from Tenant by
merger, reorganization, liquidation, or the sale, conveyance, transfer by
bequest or inheritance, or other transfer of a controlling interest in Tenant
(whether by transfer of stock, partnership interests or otherwise) shall
constitute an assignment for the purposes of this Lease. No assignment or
subletting shall be made to any person or entity for the conduct of a business
which is not in keeping with the requirements of the applicable zoning
regulations and standards and general character of the Building. All Lease
Options and signage rights associated with the Lease do not automatically
convey with the assignment or subletting of this Lease to non-affiliates and
specific approval must be requested and obtained from Landlord. Notwithstanding
the above, should Tenant assign or sublet it's Premises in their entirety to a
non-affiliate, the first (1st) five (5) year renewal term shall be exercisable
by the assignee or subtenant according to the Terms of this Lease. Consent to a
given assignment or sublease shall not relieve Tenant or subtenant from its
obligation to receive Landlord's written consent to any subsequent assignment or
sublease pursuant to the procedure of this section.
ARTICLE XIX
DAMAGE; CONDEMNATION
19.1 Damage to the Premises. If the Premises shall be damaged by fire or
other cause without the fault or negligence of Tenant or its Agents, Landlord
shall diligently and as soon as practicable after such damage occurs (taking
into account the time necessary to effect a satisfactory settlement with any
insurance company involved) repair such damage at the expense of Landlord;
provided, however, that Landlord's obligation to repair such damage shall not
exceed the proceeds of insurance available to Landlord (reduced by any
proceeds retained pursuant to the rights of Mortgagee). Notwithstanding the
foregoing, if the Premises or the Building is damaged by fire or other cause to
such an extent that, in Landlord's sole judgment, the damage cannot be
substantially repaired within one hundred eighty (180) days after the date of
such damage, or if the Premises are damaged during the last two (2) Lease Years
unless Tenant is willing to exercise its Option to Renew the Term, then
Landlord or Tenant within thirty (30) days from the date of such damage may
terminate this Lease by notice to the other. If either Landlord or Tenant
terminates this Lease, the Rent shall be apportioned and paid to the date of
such termination. If neither Landlord nor Tenant so elects to terminate this
Lease but the damage required to be repaired by Landlord is not repaired within
one hundred eighty (180) days from the date of such damage (such one hundred
eighty (180) day period to be extended by the period of any delay outside the
direct control of Landlord plus a reasonable period for a satisfactory
settlement with any insurance company involved), Tenant, within thirty (30)
days from the expiration of such one hundred eighty (180) day period (as the
same may be extended), may terminate this Lease by notice to Landlord. During
the period that Tenant is deprived of the use of the damaged portion of the
Premises, and provided such damage is not the consequence of the fault or
negligence of Tenant or its Agents, Basic Rent and Tenant's Proportionate Share
shall be reduced by the ratio that the rentable square footage of the Premises
damaged bears to the total rentable square footage of the Premises before such
damage. All injury or damage to the Premises or the Building resulting from the
fault or negligence of Tenant or its Agents shall be repaired by Tenant, at
Tenant's expense, and Basic Rent shall not abate, unless a mutual waiver of
subrogation is in force. If Tenant shall fail to do so or if Landlord shall so
elect, Landlord shall have the right to make such repairs, and any expense so
incurred by Landlord, together with interest thereon at the Interest Rate,
shall be paid by Tenant upon demand. Notwithstanding anything herein to the
contrary, Landlord shall not be required to rebuild, replace, or repair any
above-standard work or improvements or any other personal property of Tenant.
19.2 Condemnation. If more than fifty percent (50%) of the Premises or the
Building shall be taken or condemned by any governmental or quasi-governmental
authority for any public or quasi-public use or purpose (including, without
limitation, sale under threat of such a taking), then at Tenant's option the
Term shall cease and terminate as of the date when title vests in such
governmental or quasi-governmental authority, and Basic Rent shall be pro-rated
to the date when title vests in such governmental or quasi-governmental
authority. If fifty percent (50%) or less of the Premises is taken or condemned
by any governmental or quasi-governmental authority for any public or
quasi-public use or purpose (including, without limitation, sale under threat of
such a taking), Basic Rent and Tenant's Proportionate Share shall be reduced by
the ratio that the portion so taken bears to the rentable square footage of the
Premises before such taking, effective as of the date when title vests in such
governmental or quasi-governmental authority, and this Lease shall otherwise
continue in full force and effect. Tenant shall have no claim against Landlord
(or otherwise) as a result of such taking, and Tenant hereby agrees to make no
claim against the condemning authority for any portion of the amount that may be
awarded as compensation or damages as a result of such taking; provided,
however, that Tenant may, to the extent allowed by law, claim an award for
moving expenses and for the taking of any of Tenant's property (other than its
leasehold interest in the Premises) which does not, under the terms of this
Lease, become the property of Landlord at the termination hereof as long as such
claim
19
<PAGE> 25
is separate and distinct from any claim of Landlord and does not diminish
Landlord's award. Tenant hereby assigns to Landlord any right and interest it
may have in any award for its leasehold interest in the Premises.
ARTICLE XX
DEFAULT OF TENANT
20.1 Monetary Default. The following events shall be deemed to be
events of monetary default by Tenant under this Lease, Landlord shall notice
Tenant of such default and Tenant shall have five (5) days to cure such Default.
(A) Tenant shall fail to pay when due, any installment of Basic Rent,
Additional Rent, Operating Expense, Real Estate Tax or any other
payment or reimbursement to Landlord required herein when due and
such failure shall continue for a period of ten (10) days from the
date such payment is past due and unpaid;
(B) Tenant shall become insolvent or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors
or shall transfer all or substantially all of its assets to another
person or entity.
(C) Tenant shall file a petition under any section or chapter of the
United States Bankruptcy Code or under any similar law or statute of
the United States or any state thereof, or an order for relief shall
be entered against Tenant not dismissed within thirty (30) days in
any proceeding filed against Tenant thereunder;
(D) A receiver or trustee shall be appointed for all or substantially
all the assets of Tenant;
(G) If Tenant should fail to renew or let expire the Letter of Credit
Security Deposit per Article V.
20.2 Non-Monetary Default: The following events shall be deemed to be
events of non-monetary default by Tenant under this Lease.
(A) Tenant shall fail to maintain any insurance required hereunder;
(B) Tenant refuses to take possession of the Premises upon a reasonable
period of time after Substantial Completion of the Premises;
(C) Tenant shall fail to comply with any term, provision or covenant of
this Lease (other than the foregoing in this paragraph) and shall
not cure such failure within twenty (20) days after written notice
thereof to Tenant or if such failure cannot be cured within such
twenty (20) business day period, then such time as Tenant may need
so long as Tenant has commenced and is diligently pursuing such
cure.
20.3 Remedies: Upon occurrence of any Event of Default that continues
beyond any applicable cure period, Landlord, without prejudice to
any other rights or remedies Landlord may have under this Lease or
otherwise, shall have the option to pursue any one, all or
combination of the following remedies without a notice or demand
whatsoever.
(A) Terminate this Lease by giving written notice to that effect to the
Tenant, in which event Tenant shall immediately surrender the
Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for
possession or arrearage in rent, re-enter and take possession of the
Premises and expel or remove Tenant and any other person who may be
occupying such Premises or any part thereof, without being liable
for prosecution or any other claim for damages. In the event
Landlord elects to terminate this Lease by reason of an event of
default, then not-withstanding such termination, Tenant shall be
liable for and shall pay to Landlord, the sum of all rental and
other indebtedness accrued to date of such termination, plus at its
option, at any time, the Landlord may choose to accelerate the
entire balance due under the remainder of the Lease and any other
monies due under the Lease required to be paid by Tenant to Landlord
until the Expiration Date of the Lease at the then
20
<PAGE> 26
present value of all rents and other amounts as may be due in the
future, with the Interest Rate as the discount rate for such a present
value calculation, and with a reduction to be given for the total
amount actually recovered from any reletting, net of reasonable
reletting expenses to include brokerage and management fees, which may
be paid to an affiliate of Landlord, redecoration or rebuilding costs
for tenant fit-out, legal costs of reletting, costs of removing or
storing Tenant's or other occupant's property, and other expenses
reasonably incurred in the business of leasing and preparing office
space for occupancy;
(B) Alter all locks and other security devises at the Premises without
terminating this Lease;
(C) Re-enter and take possession of the Premises by legal process or by
expelling or removing Tenant and any other person who may be occupying
such Premises or any part thereof, without being liable for
prosecution or any claim for damages therefore; and relet the Premises
and receive the rent therefore. No legal process, re-entry, re-letting
or taking possession of the Premises by the Landlord shall be
construed as an election on its part to terminate this Lease unless a
written notice of such intention is given to the Tenant. In the event
that Landlord elects to retake or repossess the Premises, the Tenant
shall be liable for and shall pay to Landlord, all rental and other
indebtedness accrued to date of such repossession, plus at its option,
at any time, the Landlord may choose to either: (1) accelerate the
entire balance due under the remainder of the Lease and any other
monies due under the Lease required to be paid by Tenant to Landlord
until the Expiration Date of the Lease, including those referred to in
Section 20.2(A) above; or (2) seek payment from Tenant for the
difference between all sums due to Landlord from Tenant under this
Lease and the amount received by Landlord through re-letting the
Premises; Landlord may choose suit under option (2) and later
accelerate under option (1); and all reasonable expenses incurred by
Landlord in enforcing or defending Landlord's rights or remedies
including reasonable attorney's fees and fifteen percent (15%)
interest per annum on all the sum owing by Tenant to Landlord.
(E) Enter upon the Premises without being liable for prosecution or any
claim for damages therefore, and do what ever Tenant is obligated to
do under the terms of this Lease, and Tenant agrees to reimburse
Landlord on demand for any expenses which Landlord may incur and thus
effecting compliance with Tenant's obligations under this Lease, and
Tenant further agrees that Landlord shall not be liable for any
damages resulting to the Tenant from such action, whether caused by
the negligence of Landlord or otherwise;
(F) In the event of termination or repossession of the Premises for an
event of default, Landlord shall not have any obligation to relet or
attempt to relet the Premises or any portion thereof, or to collect
rental after re-letting, and in the event of reletting, Landlord may
reject the whole or any portion of the Premises for any period to any
tenant and for any use and purpose;
(G) Landlord shall have a lien upon all the personal property of Tenant
located in the Premises, as and for security for the rent and other
obligations of Tenant herein provided. In order to perfect and enforce
said lien, Landlord may at any time after default in the payment of
rent or default of other obligations, seize and take possession of any
and all personal property belonging to Tenant which may be found in
and upon the Premises. If Tenant fails to redeem the personal property
so seized, by payment of whatever sum may be due Landlord under and by
virtue of the provisions of this lease, then and in that event,
Landlord shall have the right, after twenty (20) days written notice
to Tenant of its intention to do so, to sell such personal property so
seized at public or private sale and upon such terms and conditions as
to Landlord may appear advantageous, and after the payment of all
proper charges incident to such sale, apply the proceeds thereof to
the payment of any balance due to Landlord on account of rent or other
obligations of Tenant pursuant to this Lease. In the event there shall
then remain in the hands of Landlord any balance realized from the
sale of said personal property as aforesaid, the same shall be paid
over to Tenant. The exercise of the foregoing remedy by Landlord shall
not relieve or discharge Tenant from any deficiency owed to Landlord
which Landlord has the right to enforce pursuant to any other
provision of this Lease. Notwithstanding the foregoing, Landlord's
lien shall not apply
21
<PAGE> 27
to Tenant's intangible, intellectual property, files and proprietary
information. This in no way effects Landlord's ability to remove or
sell Tenant's tangible personal property.
(H) Landlord, at its option, may bring a legal proceeding to recover from
Tenant any monies owed under this Lease without seeking possession of
the Premises. Such proceeding shall not be considered a termination of
the Lease and Landlord shall retain the right to seek continuing rents
as well as the right to accelerate all monies as provided in Section
20.3(A) above owed for the full term of the Lease in subsequent legal
proceedings. In the event of a default under 20.2(C) that remains
uncured after fifteen (15) days from Date of Notice, and Landlord does
not elect to accelerate monies due under the Lease, Tenant shall pay
110% of the sum of Basic Rent, Additional Rent, Landlord's Operating
Expenses, real estate tax or any other payment or reimbursement to
Landlord required herein, during the period from expiration of the
fifteen (15) day cure period until the date of actual cure.
(I) Exercise by Landlord of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be a termination of this
Lease or an acceptance of surrender of the Premises by Tenant, being
understood that such termination or surrender can be effected only by
written notice from Landlord specifying such termination.
(J) The Tenant acknowledges that all accounts are due and payable as
required in the Lease, and in the event Tenant fails to pay any
installment of rent hereunder as and when such installment is due,
Tenant shall pay to Landlord a late charge in an amount equal to five
percent (5%) of such installment, and the failure to pay such amount
shall be an event of default hereunder. In addition, a finance charge
at a rate of fifteen percent (15%) per annum shall be charged on all
accounts more than five (5) days past due. Interest will be charged
back to the account due date and apply to all charges due from the
Tenant including but not limited to minimum rent, percent rent, taxes,
insurance and common area maintenance charges. The provision for such
late charges and finance charges shall be in addition to all of
Landlord's other rights and remedies hereunder or at law and shall not
be construed as a penalty, liquidated damages or as limiting
Landlord's remedies in any manner.
20.4 Landlord Default. Landlord shall be deemed to be in default of this
Lease if Landlord fails to make any payments to Tenant required under this Lease
and such failure continues for ten (10) days after written notice from Tenant
to Landlord, or if Landlord shall be in default in the prompt and full
performance of any other of its promises, covenants or agreements contained in
this Lease and such default in performance continues for more than thirty (30)
days after written notice thereof from Tenant to landlord specifying the
particulars of such default or breach of performance; provided, however, that if
the default complained of, other than for the payment of monies, is of such a
nature that the same cannot be rectified or cured within such thirty (30) day
period. If Landlord, within such thirty (30) day period, shall have commenced
such cure and shall continue thereafter with due diligence to cause such cure
to be completed Landlord shall have such time as is necessary to cure such a
Default. Upon any default of this Lease by Landlord, Tenant shall be entitled
to pursue any and all remedies available to Tenant at law or in equity.
ARTICLE XXI
REPORTS
21.1 Lease Anniversary Report. Landlord may access Tenant's most recent
public financial information on the Internet at www.careerbuilder.com.
21.2 Event of Default Report. If Tenant is in default at any time during
the Lease, for any cause listed in Section 20.1 above, in addition to being
liable for a late penalty fee and interest as stated in Section 4.4, Tenant
shall have the obligation of furnishing to Landlord, within fifteen (15) days
of the date Tenant comes into default, the most recently available income
statement and balance sheet, certified by Tenant as to their accuracy.
22
<PAGE> 28
ARTICLE XXII
MORTGAGES
22.1 Subordination. This Lease is subject and subordinate to all ground or
underlying leases and to any first Mortgage(s) which may now or hereafter
affect such leases, the Building, or the Land. 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 XXI or Section 25.4 hereof) within fifteen (15) business
days, then Tenant stipulates that if Tenant is notified in writing and fails to
respond in such fifteen (15) business days time-frame then such request shall
be deemed to be approved and such documents as may have been required shall be
deemed to have been approved. Landlord shall use its best efforts to aid Tenant
in securing a non-disturbance agreement recognizing Tenant's rights under this
Lease from the holder of each mortgage now or hereafter encumbering the
Building and/or the land on such holder's reasonable standard form
non-disturbance agreement within ten (10) days after the execution of this
Lease. In the event of any foreclosure sale under a Mortgage, if the Mortgagee
so elects, after foreclosure, this Lease shall continue in full force and
effect and Tenant shall attorn to and recognize as its landlord the purchaser
of Landlord's interest under this Lease so long as such purchaser executes a
non-disturbance agreement in a form acceptable to Tenant. Tenant shall, upon
the request of a Mortgagee or Purchaser at foreclosure, execute and delivery
any instrument that has for its purpose and effect the subordination of this
Lease to the lien of any Mortgage, or Tenant's attornment to such Purchaser.
22.2 Mortgagee Protection. Tenant agrees to give any Mortgagee by
certified mail, return receipt requested, a copy of any notice of default
served upon Landlord, provided that before such notice Tenant has been notified
in writing of the address of such Mortgagee. Tenant further agrees that if
landlord shall have failed to cure such default within the time provided for in
this Lease, then Mortgagee shall have an additional thirty (30) days within
which to cure such default; provided, however, that if such default cannot be
reasonably cured within that time, then such Mortgagee shall have such
additional time as may be necessary to cure such default but in no case longer
than an additional sixty (60) days unless cure can not be completed by then
(including, without limitation, the commencement of foreclosure proceedings, if
necessary), in which event this Lease shall not be terminated or Basic Rent
abated while such remedies are being so diligently pursued. In the event of the
sale of the Land or the Building, by foreclosure or deed in lieu thereof, the
Mortgagee or purchaser at such sale shall be responsible for the return of the
Security Deposit only to the extent that such Mortgagee or purchaser actually
received the Security Deposit.
22.3 Modification Due to Financing. If, in connection with obtaining
construction or permanent financing for the Premises, the Building or the Land,
any lender (or Mortgagee) shall request reasonable modifications of this Lease
as a condition to such financing, Tenant shall promptly execute a modification
of this Lease, provided such modifications do not increase the financial
obligations of Tenant hereunder or materially alter the Tenant's rights and
obligations hereunder or adversely affect the leasehold interest hereby created
or Tenant's reasonable use and quiet enjoyment of the Premises.
22.4 Condition Precedent. Landlord's obligation to perform its covenants
and agreements hereunder is subject to the condition precedent that this Lease
be approved by Mortgagee or the issuer of any commitment to make a construction
or mortgage loan. Unless Landlord gives Tenant written notice within fifteen
(15) days after the date hereof that the Mortgagee or issuer, or both,
disapproves this Lease, then this condition shall be deemed to have been
satisfied or waived and the provisions of this Section 22.4 shall be of no
further force or effect.
22.5 Assignment for Financing Purposes. If, at any time or times, Landlord
assigns this Lease or the Basic Rent payable hereunder to the Mortgagee, or to
any other party for the purpose of securing financing (the Mortgagee and any
other such party are referred to herein as the "Financing Party"), whether such
assignment is conditional in nature or otherwise, the following provisions
shall apply:
(i) Such assignments to the Financing Party shall not be deemed an
assumption by the Financing Party of any obligations of Landlord hereunder
unless such Financing Party shall, by written notice to Tenant, specifically
otherwise elect;
23
<PAGE> 29
(ii) To the extent the Financing Party has assumed obligations under
(i) above, the Financing Party shall be treated as having assumed such
obligations only upon foreclosure of its Mortgage (or voluntary conveyance by
deed in lieu thereof).
Tenant hereby agrees to enter into such reasonable agreement or instruments
as may, from time to time, be reasonably requested in confirmation of the
foregoing.
ARTICLE XXIII
HOLDING OVER
In the event that Tenant shall not immediately surrender the Premises to
Landlord on the Expiration Date or earlier termination of this Lease, Tenant
shall be deemed to be a tenant-at-will upon all of the terms and provisions of
this Lease at 175% of Tenant's then current Rent, except the monthly Basic Rent
shall be paid in accordance with the following schedule, provided Tenant gives
Landlord nine (9) months prior written notice of Tenant's desire to Holdover and
the duration of the Holdover Term: (i) Months one (1) through three (3): 125% of
Tenant's then current rental; (ii) Months four (4) through six (6): 150% of
Tenant's then current rental; (iii) thereafter at 175% of Tenant's then current
rental of the monthly Basic and Additional Rent in effect during the last month
of the Term. Notwithstanding the foregoing, if Tenant shall hold over after the
Expiration Date or earlier termination of this Lease, and Landlord shall desire
to regain possession of the Premises, then Landlord may forthwith re-enter and
take possession of the Premises without process, or by any legal process in
force in the Commonwealth of Virginia. Tenant shall indemnify Landlord against
all liabilities and damages sustained by Landlord by reason of such retention of
possession. Notwithstanding the above, there will be no consequential damages if
Tenant abides by the mutual agreement on the Holdover Term. Tenant will not be
considered in Holdover if Tenant and Landlord are negotiating to renew the Term
of this Lease and the extension is ultimately executed.
ARTICLE XXIV
QUIET ENJOYMENT
Landlord covenants that if Tenant shall pay Basic Rent and perform all of
the terms and conditions of this Lease to be performed by Tenant, and if Tenant
shall not be in default of any provision in this Lease, then Tenant shall
peaceably and quietly occupy and enjoy possession of the Premises during the
Term without molestation or hindrance by Landlord or any party claiming through
or under Landlord, subject to the provisions of this Lease and of any Mortgage
to which this Lease is subordinate and easements, conditions and restrictions of
record affecting the Land as of the date hereof. Landlord shall use commercially
reasonable efforts to remove any party.
ARTICLE XXV
MISCELLANEOUS
25.1 No Representations by Landlord. Tenant acknowledges that neither
Landlord nor its Agents nor any broker has made any representation or promise
with respect to the Premises, the Building, the Land or the Common Area, except
as herein expressly set forth, and no rights, privileges, easements or licenses
are required by Tenant except as herein expressly set forth. Tenant, by taking
possession of the Premises shall accept the Premises and the Building "AS IS",
subject to Base Building latent defects, except as modified by Exhibit B 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.
25.2 No Partnership. Nothing contained in this Lease shall be deemed or
construed to create a partnership or joint venture of or between Landlord and
Tenant, or to create any other relationship between Landlord and Tenant other
than that of landlord and tenant.
25.3 Brokers. Landlord recognizes Broker(s) as the sole broker(s) procuring
this Lease and shall pay Broker(s) a commission therefor pursuant to a separate
agreement between Broker(s) and Landlord. Landlord and Tenant each represents
and warrants to the other that it has not employed any broker, agent or finder
other than Broker(s) relating to this Lease. Landlord shall indemnify and hold
Tenant harmless, and Tenant shall indemnify and hold Landlord harmless, from and
against any claim for brokerage or other commission arising from or out of any
breach of the indemnitor's representation and warranty.
24
<PAGE> 30
25.4 Estoppel Certificate. Tenant shall, without charge, at any time and
from time to time, within ten (10) business days after request therefor by
Landlord, Mortgagee, any purchaser of the Land or the Building or any other
interested person, execute, acknowledge and deliver to such requesting party a
written and accurate 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 Basic Rent
and Additional Rent currently due and payable by Tenant; (v) that any
Alterations required by the Lease to have been made by Landlord have been made
to the satisfaction of Tenant; (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) 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.
25.5 Waiver of Jury Trial. Tenant hereby waives trial by jury in any
action, proceeding or counterclaim brought by Landlord against Tenant with
respect to any matter whatsoever arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant hereunder or Tenant's use or
occupancy of the Premises. In the event Landlord commences any proceedings for
nonpayment of Rent, Tenant shall not interpose any counterclaims. This shall
not, however, be construed as a waiver of Tenant's right to assert such claims
in any separate action brought by Tenant.
25.6 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed duly given upon the earlier of receipt, if mailed by
certified or registered mail, or three (3) days after certified or registered
mailing, return receipt requested, postage prepaid, addressed and sent, if to
Landlord to Landlord's Address specified in Section 1.2; or if to Tenant to
Tenant's Address specified in Section 1.6. Landlord and Tenant may from time to
time by written notice to the other designate another address for receipt of
future notices.
25.7 Invalidity of Particular Provisions. If any provisions of this Lease
or the application thereof to any person or circumstances shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and be enforced to the full extent permitted by law.
25.8 Gender and Number. All terms and words used in this Lease, regardless
of the number or gender in which they are used, shall be deemed to include any
other number or gender as the context may require.
25.9 Benefit and Burden. Subject to the provisions of Article XVIII and
except as otherwise expressly provided, the provisions of this Lease shall be
binding upon, and shall inure to the benefit of, the parties hereto and each of
their respective representatives, heirs, successors and assigns. Landlord may
freely and fully assign its interest hereunder.
25.10 Entire Agreement. This Lease (which includes the Exhibits attached
hereto) contains and embodies the entire agreement of the parties hereto, and no
representations, inducements or agreements, oral or otherwise, between the
parties not contained in this Lease shall be of any force or effect. This Lease
(other than the Rules and Regulations, which may be changed from time to time as
provided herein) may not be modified, changed or terminated in whole or in part
in any manner other than by an agreement in writing duly signed by Landlord and
Tenant.
25.11 Authority.
(i) If Landlord or Tenant signs as a corporation, the person executing
this Lease on behalf of Tenant hereby represents and warrants that Tenant is a
duly formed and validly existing corporation, in good standing, qualified to do
business in the Commonwealth of Virginia, that the corporation has full power
and authority to enter into this Lease and that he or she is authorized to
execute this Lease on behalf of the corporation. Tenant shall deliver to
Landlord upon demand evidence of such authority satisfactory to Landlord.
25
<PAGE> 31
(ii) If Landlord or Tenant signs as a partnership, the person executing
this Lease on behalf of Tenant hereby represents and warrants that Tenant is a
duly formed and validly existing partnership, in good standing, qualified to do
business in the Commonwealth of Virginia, that the partnership has full power
and authority to enter into this Lease and that he or she is authorized to
execute this Lease on behalf of the partnership. Tenant shall deliver to
Landlord upon demand evidence of such authority satisfactory to Landlord.
25.12
25.13 Interpretation. This Lease is governed by the laws of the
Commonwealth of Virginia.
25.14 Landlord's Consent. Regardless of any reference to the words "sole"
or "absolute" (but except for matters which will have an adverse effect on the
(a) structural integrity of the Building (b) the Building's plumbing, heating,
life safety, ventilating, air conditioning, mechanical or electrical systems, or
(c) the exterior appearance of the Building, whereupon in each such case
Landlord's duty is to act in good faith and in compliance with the Lease), any
time the consent of Landlord or Tenant is required, such consent shall not be
unreasonably withheld, conditioned or delayed. Whenever the Lease grants
Landlord or Tenant the right to take action, exercise discretion, establish
rules and regulations or make allocations or other determinations, Landlord and
Tenant shall act reasonably and in good faith.
25.15 No Personal Liability; Sale. Neither Landlord nor its Agents,
whether disclosed or undisclosed, shall have any personal liability under any
provision of this Lease. If Landlord defaults in the performance of any of its
obligations hereunder or otherwise, Tenant shall look solely to Landlord's
equity, interest and rights in the Building and the Land for satisfaction of
Tenant's remedies on account thereof. In the event that the original Landlord
hereunder, or any successor owner of the Building shall sell or convey the
Building, all liabilities and obligations on the part of the original Landlord,
or such successor owner, under this Lease occurring thereafter shall terminate
as of the day of such sale, and thereupon all such liabilities and obligations
shall be binding on the new owner so long as such new owner agrees not to
disturb Tenant's possession of the Premise. Tenant agrees to attorn to such new
owner. Any successor to Landlord's interest shall not be bound by (i) any
payment of Basic Rent or Additional Rent for more than one (1) month in advance,
except for the payment of the first installment of Basic Rent for the initial
Lease Year or (ii) as to any Mortgagee or any purchaser at foreclosure, any
amendment or modification of this Lease made without the consent of such
Mortgagee.
25.16 Time is of the Essence. Time is of the essence as to Landlord's and
Tenant's obligations contained in this Lease.
25.17 Force Majeure. Landlord or Tenant shall not be required to perform
any of its obligations under this Lease, nor shall Landlord or Tenant be liable
for loss or damage for failure to do so, nor shall the other party thereby be
released from any of its obligations under this Lease, where such failure arises
from or through acts of God, strikes, lockouts, explosions, sabotage, accidents,
riots, civil commotions, acts of war, results of any warfare conditions in this
country, fire or casualty, government action or inaction, legal requirements, or
energy shortage. However, nothing in this Section shall relieve Tenant from
paying Basic or Additional Rent as due under the Lease.
25.18 Headings. Captions and headings are for convenience of reference
only.
25.19 Memorandum of Lease. Tenant shall, at the request of Landlord,
execute and deliver a memorandum of lease in recordable form without including
any of the monetary terms herein. Tenant shall not record such a memorandum or
this Lease without Landlord's consent. The party requesting recordation of a
memorandum of this Lease shall be obligated to pay all costs, fees and taxes, if
any, associated with such recordation.
26
<PAGE> 32
25.21 Deemed Approval by Tenant. 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 XXI or Section 25.4 hereof) within fifteen (15) days, then Tenant
stipulates that if Tenant is notified in writing and fails to respond in such
fifteen (15) days time-frame then such request shall be deemed to be approved
and such documents as may have been required shall be deemed to have been
approved.
25.22 Effectiveness. The furnishing of the form of this Lease shall not
constitute an offer and this Lease shall become effective upon and only upon its
execution by and delivery to each party hereto.
25.23
25.25 Easements. Landlord reserves to itself the right, from time to time,
to grant such easements, rights and dedications that Landlord deems necessary or
desirable, and to cause the recordation of parcel maps and restrictions, so long
as such easements, rights dedications, maps and restrictions do not
unreasonably interfere with the use of the Premises by Tenant. Tenant shall sign
any of the aforementioned documents within fifteen (15) days after Landlord's
request and Tenant's failure to do so shall constitute a material default by
Tenant. The obstruction of Tenant's view (except the viewability of Tenant's
sign from the Dulles Toll Road), air, or light by any structure erected in the
vicinity of the project, whether by Landlord or third parties, shall in no way
affect this Lease or impose any liability upon Landlord.
25.26 Transportation Management. Tenant shall fully comply with future
programs implemented or required by any governmental or quasi-governmental
entity or Landlord to manage parking, transportation, air pollution, or traffic
in and around the project or the metropolitan area in which the project is
located.
25.27 Security Measures. Tenant hereby acknowledges that Landlord shall
have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises or the project, and Landlord shall
have no liability to Tenant due to its failure to provide such services. Tenant
assumes all responsibility for the protection of Tenant, its agents, employees,
contractors and invitees and the property of Tenant and of Tenant's agents,
employees, contractors and invitees from acts of third parties. Nothing herein
contained shall prevent Landlord, at Landlord's sole option, from implementing
security measures for the project or any part thereof, in which event Tenant
shall participate in such security measures and the cost thereof shall be
included within the definition of Landlord's Operating Expenses. Landlord shall
have the right, but not the obligation, to require all persons entering or
leaving the project to identify themselves to a security guard and to reasonably
establish that such person should be permitted access to the project.
27
<PAGE> 33
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under
seal as of the Date of Lease.
ATTEST/WITNESS: LANDLORD: Parkridge Five Associates
Limited Partnership
/s/ Charles Parlson By: /s/ Christopher W. Walker, Pres.
- -------------------------- ----------------------------------
Name: Charles Parlson Name: Sunrise Valley, Inc.
---------------------
Title: Director, Walker Mgmt, Inc. Title: General Partner
---------------------------- Christopher W. Walker, President
Date: 10/01/99
----------------------------------
ATTEST/WITNESS TENANT: CareerBuilder, Inc.
By: /s/ James Tholen [SEAL]
- -------------------------- --------------------------
Name: Name: James Tholen
--------------------- ----------------------------------
Title: Title: Chief Financial Officer
-------------------- ---------------------------------
Date: 9/30/99
----------------------------------
STATE OF VIRGINIA
COUNTY OF FAIRFAX
I, the undersigned, Notary Public in and for the jurisdiction aforesaid do
hereby certify that CHRISTOPHER W. WALKER, President, Sunrise Valley, Inc., the
General Partner of Parkridge Five Associates Limited Partnership, a Virginia
Limited partnership, whose signature is signed to the foregoing Deed of Lease,
personally appeared before me this 1st day of October 1999, and acknowledged
the same before me and in my jurisdiction aforesaid.
[SIG]
-------------------------
NOTARY PUBLIC
My commission expires: 4/30/01
STATE OF VIRGINIA
COUNTY OF FAIRFAX
I, the undersigned, Notary Public, in and for the jurisdiction aforesaid,
do hereby certify that James Tholen, Chief Financial Officer, whose signature
is signed to the foregoing Deed of Lease, personally appeared before me this
30th day of September 1999, and acknowledged the same before me in my
jurisdiction aforesaid.
/s/ Michele Trankovich
---------------------------
NOTARY PUBLIC
My Commission Expires:
MICHELE TRANKOVICH
NOTARY PUBLIC
COMMONWEALTH OF VIRGINIA
MY COMMISSION EXPIRES NOV. 30, 2002
<PAGE> 34
EXHIBIT A-1
PLAT SHOWING LAND AND BUILDING
Parkridge Center
[GRAPHIC]
<PAGE> 35
EXHIBIT A-2
PLAN SHOWING THE PREMISES
Parkridge Five * First Floor
10780-10790 Parkridge Boulevard, Reston, Virginia
[GRAPHIC]
<PAGE> 36
EXHIBIT A-2
PLAN SHOWING THE PREMISES
Parkridge Five * Second Floor
10780-10790 Parkridge Boulevard, Reston, Virginia
[GRAPHIC]
<PAGE> 37
EXHIBIT A-3
RENT SCHEDULE
<TABLE>
<CAPTION>
PER ADDITIONAL
SQUARE TENANT TOTAL
YEAR PER ANNUM PER MONTH FOOT IMPROVEMENTS MONTHLY RENT
- ---- --------- --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
2/1/2000-
4/30/2000 $1,206,519.00 $100,543.25 $28.50 $5,847.10 $106,390.35
5/1/2000-
1/31/2001 $1,530,963.00 $127,580.25 $28.50 $5,847.10 $133,427.35
2/1/2001-
1/31/2002 $1,576,891.89 $131,407.66 $29.36 $5,847.10 $137,254.76
2/1/2002-
1/31/2003 $1,624,198.65 $135,349.89 $30.24 $5,847.10 $141,196.99
2/1/2003-
1/31/2004 $1,672,924.61 $139,410.38 $31.14 $5,847.10 $145,257.48
2/1/2004-
1/31/2005 $1,723,112.35 $143,592.70 $32.08 $ 140.35 $143,733.05
2/1/2005-
1/31/2006 $1,774,805.72 $147,900.48 $33.04 $ 140.35 $148,040.83
2/1/2006-
1/31/2007 $1,828,049.89 $152,337.49 $34.03 $ 140.35 $152,477.84
2/1/2007-
1/31/2008 $1,882,891.39 $156,907.62 $35.05 $ 140.35 $157,047.97
</TABLE>
- -----------------
Note: (1) Rent is escalated by three (3%) percent per annum.
(2) Second Floor -- 42,334 rentable square feet: Upon the earlier of
Substantial Completion of the Premises or February 1, 2000.
(3) First Floor -- 11,384 rentable square feet: Shall commence May 1,
2000, except for proportional operation expenses upon actual occupancy
prior to May 1, 2000.
(4) Schedule subject to Article III.
(5) Additional Tenant Improvements are based upon $5.00 psf times 53,718
rsf or $268,590 amortized over five (5) years (sixty (60) months) at
ten (10%) percent interest yielding $5,706.75 per month, plus first
(1st) floor phase-in allowance calculated as follows: $26.00 psf times
11,384 rsf equals $295,984; 3 months/96 months equals 3.125%
proportional additional Tenant Improvements equals $9,249.50;
amortized over 96 months at ten (10%) percent interest equals an
additional $140.35 per month or $1,684.20 per year.
<PAGE> 38
EXHIBIT B-1
WORK AGREEMENT
Improvements:
1. Landlord to deliver space in "AC Shell" condition as per attached Exhibit
B-2, except Landlord shall deliver the first (1st) floor in a multi-tenant
condition as per attached Exhibit B-2(a) to include, but not limited to all
fixtures, life safety features and common area corridors complete with
building standard finishes installed.
2. Tenant has selected its own architect/space planner.
3. Construction Allowance: $26.00 per rentable square foot of space leased
times 53,718 rsf or $1,396,668.00, payable monthly by Landlord on demand
upon presentation of invoices, General Contractor's and lien releases and
other appropriate documentation from Tenant. Landlord shall hold ten (10%)
percent retainage from each payment until job is complete (to include
punchlist) and an additional retainage withheld, to be determined, payable
after "as-built" drawings and any other construction documents, as may be
determined, are delivered. If the cost of construction exceeds Landlord's
allowance payments towards construction invoices shall be paid
proportionally, by Landlord and Tenant.
4. Landlord shall lend Tenant an additional $5.00 psf towards Tenant
Improvements, which loan shall be repaid over the first (1st) sixty (60)
months of the Lease Term at ten (10%) percent per annum). If Tenant does
not utilize the entire $5.00 psf, then Landlord and Tenant shall execute a
lease amendment prorating the Additional Rent to Tenant Improvements
actually used. In the event of an uncured Monetary Default, Landlord may
demand immediate payment of the unamortized additional Tenant Improvement
loan together with all accrued interest.
5. Utilization: (a) Hard and soft costs, including communication cabling; (b)
any unused balance shall be placed into a reserve fund for Tenant to draw
upon from time to time for all approved, future renovations or
refurbishment.
6. Tenant shall take full responsibility for the proper and timely
construction of Tenant's tenant improvements.
7. Tenant shall retain an authorized construction management representative
and this party shall be compensated separately by Tenant.
8. Tenant agrees, in return for Landlord's full compliance of Exhibit B-3
attached hereto, to a construction management or supervisory fee equal to
five percent (5%) Landlord's Construction Allowance contribution.
9. Detailed base building plans shall be incorporated by reference into the
Lease.
10. Landlord shall, at its sole cost and expense, ensure that fiber optic cable
is available to Tenant at the Building.
<PAGE> 39
EXHIBIT B-2
BASE BUILDING SPECIFICATIONS AND SYSTEMS PERFORMANCE
The Landlord shall construct the base building in substantial conformance with
the base building construction documents dated January 25, 1999 and associated
specifications, and shall furnish such relative documents to the Tenant for the
Tenant's use in designing the leasehold work.
Notwithstanding the above referenced base building documents, the Landlord
shall design and construct the building to "Building Shell Condition" as defined
below, beyond which the Tenant Improvements shall be installed by the Tenant in
accordance with the Lease.
1. Elevators
Six (6) elevators serve the building (West entrance - 2 passenger; center
building - 1 freight; East entrance - 3 passenger). Passenger elevators
include granite floors and wood/glass walls. All elevators access all five
floors of the building. The elevator system is hydraulic.
2. Suite Entry Doors
First and second floor Tenant suite entries shall be full height, eight
(8') foot, cherry, solid-core doors with glass inserts and hollow metal
frames.
3. Tenant Area Finishes:
All interior and exterior columns, the Premises side of all common area
facilities walls (rest rooms, mechanical/electrical closets, stairs, etc.),
and areas above and below exterior windows shall be taped, spackled, and
ready for paint.
4. HVAC
Base building work for each floor shall include all ductwork up to and
including the VAV boxes, all perimeter and interior zone low pressure
ductwork downstream of the VAV boxes, and all temperature sensors. Landlord
shall fully air balance all base building systems and equipment and shall
provide a completed report to the Tenant for Tenant's coordination with
leasehold work.
A DDC Trane Tracer building management system shall be installed.
The HVAC system shall be designed and installed at a minimum to meet the
following performance criteria:
* Summer Design Outdoor Condition: 92 degrees F WB, 76 degrees F DB
(ASHRAE 1% condition)
* Winter Design Outdoor Condition: 5 Degrees F
* Indoor Design Conditions:
* Summer: Maximum 75 degrees F, maximum 50 RH at the above outdoor
condition
* Winter: Minimum 70 degrees at the above outdoor condition. No
humidification required
* Lighting Design Load: 1.5 watts / rsf
* Diversified tenant equipment heat loads: 3.5 watts / rsf
* Outside air: per ASHRAE 62-89; 20 cfm per person; assumed 1 person per
142 useable square feet.
* Population (for heat load): 142 usf/person
<PAGE> 40
5. Fire Protection / Fire Alarm Systems
The building shall be fully sprinkled with assistance of a jockey pump and
be connected to the fire alarm system with an automated dialing capability
to the fire department. The sprinkler system mains and branchlines shall be
hydraulically sized for a density of 1 sprinkler head per 125 square feet.
Sprinkler heads shall be installed in the upright position at maximum loft
spacing in the Tenant areas.
The fire alarm system shall include Transponder Module Plug-in Panels on
each floor for use by Tenant.
6. Electric.
Electrical closets on the typical floor shall contain:
* 277/480 volt, three phase power panel(s), with adequate capacity
3.5 watts / square foot of Tenant lighting load.
* 277/480 to 120/208 dry transformer(s), sized for 7.5 watts per
rentable square foot, serving the Tenant's 120/208 volt convenience
power panel(s).
* 120/208 volt convenience power panel(s) sized for 7.5 watts per
square foot.
Backup generator power shall be supplied to accommodate base building
emergency power needs. An auxiliary concrete pad for a tenant generator or
specialty equipment is available on a first come first-served basis
complete with installed electrical and telephone conduits. Building Access:
(a) At Landlord's cost, the exterior entry doors will be equipped with an
access card system for after-hours access and Landlord shall provide Tenant
such keys or cards, at no cost to Tenant, in amount of four (4) cards/every
1,000 rentable square feet of the Premises; (b) at Tenant's cost, all
Building elevators will receive a fully-equipped key entry floor-by-floor
access system, and Landlord's access control provider will install and
connect the key entry system to fully complete the elevators' access
features, at Tenant's sole cost and expense. All elevators shall be
pre-wired for such access devices by Landlord.
7. Floor Finish.
Concrete floor shall be ready for finish covering, with a moisture content
adequate for proper installation of direct glue down carpet.
8. Window Covering.
All windows have aluminum, horizontal blinds with tilt and up/down
controls.
9. Floor Loads.
The Live Load capacities are as follows:
* Office space 100 pounds psf,
* Rooftop, 30 pounds psf.
10. Tenant Area Ceiling Height.
The Building is designed slab to slab at 14 feet 0 inches and shall
accommodate a finished ceiling height of 9 feet. Tenant finished ceiling
heights can be increased to 9 feet 6 inches with some modifications to the
HVAC and sprinkler systems.
<PAGE> 41
EXHIBIT B-3
LANDLORD'S SUPERVISORY ROLE DURING
INITIAL CONSTRUCTION
The following outlines the Landlord's basic supervisory duties during the
initial construction of Tenant's Tenant Improvements:
1. Provide selected General Contractor with Building Rules and Regulations.
2. Coordinate project "kick-off" meeting (use of loading dock, elevator usage,
trash removal procedure, etc.) to establish site rules during construction.
3. Review and approve Tenant Improvement Allowance invoices and disburse
funds. Maintain and distribute monthly a "ledger" detailing T.I. Allowance
funds disbursed to date, retained and amount remaining.
4. Review and approve base building infrastructure system modifications (HVAC,
electrical, etc.) required by Tenant's work.
5. Review and approve all alterations to base building electrical, mechanical
and life safety systems required by Tenant's design.
6. Review and approve Tenant's selected General Contractor, and acquire all
proper insurance paperwork and licenses.
7. Interface with base building access control provider as required to install
new devices for Tenant.
8. Coordinate the work of the base building contractor and the T.I. contractor
so as to maintain jobsite harmony. Conduct weekly meetings with the base
building and T.I. superintendents to review jobsite coordination issues.
9. Inform Tenant's representative on an ongoing basis as to base building work
or other T.I. work, which may impact Tenant's work.
10. Coordinate and provide subcontractor and supplier contacts as necessary for
those base building systems which the Tenant's contractor must interface
with or alter (ATC, fire alarm, fire protection, roofing, etc.).
11. Provide Tenant's architect with applicable architectural and MPE documents
for the base building. Landlord shall provide all bulletins, as-builts, or
field changes to the base building which may affect Tenant's design or
construction to the Tenant's architect.
12. Support the procurement of permit approvals and inspections from the
Authority having Jurisdiction. Obtain waivers as required to commence work
prior to completion of the base building or receipt of the T.I. permit.
13. Review and approve Tenant's construction documents prior to commencement of
construction.
<PAGE> 42
EXHIBIT C
RULES AND REGULATIONS
1. The entrance, lobbies, passages, corridors, elevators and stairways
shall not be encumbered or obstructed by Tenant, or Tenant's Agents, or be used
by them for any purpose other than for ingress and egress to and from the
Premises. Tenant shall not place or permit its Agents to place any trash or
other objects anywhere within the Building or the land (other than within the
Premises) without first obtaining Landlord's written consent.
2. No curtains, blinds, shades, screens or signs other than those
furnished by Landlord shall be attached to, hung in or used in connection with
any window or door of the Premises without prior written consent of Landlord.
Interior signs in addition to suite entry signs on the suite entry doors shall
be painted or affixed for Tenant by Landlord or by sign painters first approved
by Landlord at the expense of Tenant and shall be of a size, color and style
acceptable to Landlord.
3. If Landlord has installed or hereafter installs any shade, blind or
curtain in the Premises, Tenant shall not remove the same without first
obtaining Landlord's written consent thereto.
4. Canvassing, soliciting and peddling in the Building are prohibited
and Tenant shall cooperate to prevent the same.
5. Tenant may request heating and/or air conditioning during periods in
addition to normal working hours by submitting its request in writing to the
Building Manager's office no later than 12:00 p.m. the preceding workday
(Monday through Friday) on forms available from the Building Manager. The
request shall clearly state the start and stop hours of the "off-hour" service.
Tenant shall submit to the Building Manager a list of personnel who are
authorized to make such requests. Charges are to be governed by the provisions
of Tenant's Lease.
6. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish bags or other articles/substances (including, without
limitation, coffee grounds) shall be thrown therein.
7. No cooking shall be done or permitted in the Building by Tenant or
its Agent except that Tenant may install and use microwave ovens, coffee
machines or vending machines in their Premises. Tenant shall not cause or
permit any unusual or objectionable odors to emanate from the Premises.
8. Tenant shall not make or permit any unseemly or disturbing noises or
disturb or interfere with other tenants or occupants of the Building or
neighboring buildings or premises by the use of any musical instrument, radio,
television set, other audio device, unmusical noise, whistling, singing or in
any other way.
9. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows of the Premises, nor shall any changes be made in locks or
the mechanism thereof without prior notice to and the approval of Landlord.
Tenant shall, upon the termination of its Lease, return to Landlord all keys to
the Premises and other areas furnished to, or otherwise procured by Tenant. In
the event of the loss of any such keys, Tenant shall pay Landlord the cost of
replacement keys.
10. Tenant shall not use or occupy or permit any portion of the Premises
to be used or occupied as storage, manufacture or sale of liquor, narcotics, or
drugs. The Premises shall not be used, or permitted to be used, for lodging or
for any immoral or illegal purpose.
11. Landlord reserves the right to control and operate the Common Area in
such manner as it deems best for the benefit of the Building tenants. Landlord
may exclude from all or a part of the Common Area at all hours on Monday
through Friday, except 8:00 a.m. to 6:00 p.m., and at all hours on Saturday,
except 8:00 a.m. to 1:00 p.m., and all day Sunday and federal holidays other
than Columbus Day, all persons who do not present a pass to the Building signed
by Landlord or other suitable identification satisfactory to Landlord. Landlord
will furnish passes to persons for whom Tenant reasonably requests such passes.
Tenant shall be responsible for all persons for whom it requests such passes
and shall be liable to Landlord for all acts of such persons.
<PAGE> 43
12. Tenant shall have the responsibility for the security of the Premises
and, before closing and leaving the Premises at any time, Tenant shall see that
all entrance doors are locked and all lights and office equipment with the
Premises are turned off, and Landlord shall have no responsibility relating
thereto.
13. In connection with the delivery or receipt of merchandise, freight or
other matter, no hand trucks or other means of conveyance shall be permitted,
except those equipped with rubber tires, rubber side guards or such other
safeguards as Landlord may require.
14. No animals of any kind, except seeing-eye dogs and aquarium fish,
shall be brought into or kept about the Land or the Building by Tenant or its
Agents.
15. So that the Building may be kept in a good state of cleanliness,
Tenant shall permit only Landlord's employees and contractors to clean its
Premises unless prior thereto Landlord otherwise consents in writing.
16. Tenant shall keep the windows and doors of the Premises (including,
without limitation, those opening on corridors and all doors between any room
designed to receive heating or air conditioning service and room(s) not
designated to receive such service) closed while the heating or air conditioning
system is operating in order to minimize the energy used by, and to conserve the
effectiveness of, such systems.
17. Normal business hours are 8:00 a.m. to 7:00 p.m. Monday through
Friday, 9:00 a.m. to 1:00 p.m. Saturday. Holidays as outlined in Exhibit D are
excluded.
Notwithstanding the Landlord's right to modify these Rules and Regulations
pursuant to Article XIII of the Lease, Landlord may not change the termination
of Operating Hours (7:00 p.m. weekdays) except where directed by law, ordinance,
or other governmental authority and in cases of emergency.
<PAGE> 44
EXHIBIT D
HOLIDAYS
January 1 - New Year's Day
President's Day
Memorial Day
July 4 - Independence Day
Labor Day
Thanksgiving Day
December 25 - Christmas Day
These are the Building's holidays, but Landlord recognizes the Tenant may
be open every day.
<PAGE> 45
EXHIBIT E
CLEANING SPECIFICATIONS
A. General
1. All cleaning work will be performed between 7 p.m. and 12 midnight,
Monday through Friday, unless otherwise necessary for stripping,
waxing, etc.
2. Abnormal waste removal (e.g., medical or toxic waste, computer
installation paper, bulk packaging, wood or cardboard crates, refuse
from cafeteria operation, etc.) shall be Tenant's responsibility.
B. Daily Operations (5 times per week)
1. Tenant Area
a. Empty and clean all waste receptacles; wash receptacles as
necessary.
b. Vacuum all rugs and carpeted areas.
c. Empty, damp-wipe and dry all ashtrays.
2. Lavatories
a. Sweep and wash floors with disinfectant.
b. Wash both sides of toilet seats with disinfectant.
c. Wash all mirrors, basins, bowls, urinals.
d. Spot clean toilet partitions.
e. Empty and disinfect sanitary napkin disposal receptacle.
f. Refill toilet tissue, towel, soap, and sanitary napkin
dispensers.
3. Public Areas
a. Wipe down entrance doors and clean glass (interior and exterior).
b. Vacuum elevator carpets and stairwells and wipe down doors,
walls, and ceilings.
c. Clean water coolers.
C. Operations as Needed (but not less than every other day)
1. Tenant Areas, Lavatories, Public Areas
a. Clean all resilient floor areas and bring finish to a shine.
D. Weekly Operations
1. Tenant Areas, Lavatories, Public Areas
a. Hand-dust and wipe clean all horizontal surfaces with treated
cloths to include furniture, office equipment, telephones, window
sills, door ledges, chair rails, baseboards, convector tops,
etc., within normal reach.
b. Remove finger marks from private entrance doors, light switches,
and doorways.
c. Clean and wax, if necessary, all stairwells.
<PAGE> 46
E. Monthly Operations (Or more often as needed)
1. Tenant and Public Areas
a. Thoroughly vacuum seat cushions on chairs, sofas, etc.
b. Vacuum and dust grillwork.
2. Lavatories
a. Wash down interior walls and toilet partitions.
F. As required and Weather Permitting, but not less often than Semi-annually.
1. Entire Building
a. Clean inside of all windows.
b. Clean outside of all windows.
3. Shampoo common area carpets.
4. Clean light fixtures.
G. Yearly (Or more often as needed)
1. Tenant and Public Areas
a. Strip and wax all resilient tile floor areas.
H. Cafeteria/Vending Installation
1. Any space to be used primarily for lunchroom or cafeteria operation will
be Tenant's responsibility to keep clean and sanitary. This includes
appliances that are specifically for Tenant's space, i.e., dishwasher,
refrigerator, washer, dryer, microwave.
2. If Tenant should at some later date require vending machines, machine
installation and clean-up are the responsibility of the Tenant.
<PAGE> 47
EXHIBIT F
LOW VOLTAGE CABLING
TABLE OF CONTENTS
Section Subject
1.0 Engineering Drawing and Abstract
2.0 Scope
3.0 Physical
3.1 Conductor
3.2 Conductor Insulation
3.3 Pair Assembly
3.4 Outer Jacket
3.5 Color Codes
3.6 Cable Marking and Indentification
4.0 Mechanical
4.1 Conductor Elongation
4.2 Cable Breaking Strength
4.3 Cable Bend Radius
5.0 Fire Performance
5.1 National Electrical Code
5.2 Potential Heat Requirement for Limited-Combustible Materials
6.0 Transmission
6.1 Capacitance Unbalance: Pair to Ground
6.2 Characteristic Impedance and Structural Return Loss (SRL)
6.3 Attenuation
6.4 Near End Cross Talk (NEXT) Loss
6.5 Attenuation to Cross Talk Ratio (ACR)
6.6 Propagation Delay
6.7 Propagation Delay Skew
7.0 Reference Documentation
8.0 Cable Documentation
8.1 Cable Manufacturers' Part Numbers
SPECIFICATION NO. APPROVED DATE PAGE NO.
1
- ----------------- -------- ----- --------
<PAGE> 48
[ILLUSTRATION OF LAN COMMUNICATION CABLE]
1.0 ENGINEERING DRAWING AND ABSTRACT
SCOPE
This specification defines the requirements for commercially available
high-performance Category 5 plenum-rated LAN communications cable. The cable
design described herein exceeds minimum ANSI/TIA/EIA 568 A Category 5 and
ISO/IEC 11801 Class D standards in critical transmission characteristics and
provides additional specifications for conductor insulation. This specification
provides more ACR margin (headroom) at transmission frequencies up to 155 MHz,
better electrical balance, and temperature/humidity stability for superior
long-term performance. In addition, this specification calls for a
limited-combustible wire insulation that meets the fire safety stipulation of
the NFPA 90A Standard requiring limited-combustible materials in products for
use in building plenums.
ENGINEERING SPECIFICATIONS
Characteristic impedance 100 ohms plus or minus 15% from 1 to 155 MHz
ACR 15 db at 100 MHz, 10 db at 155 MHz
Propagation delay 5.7 ns/m at 100 MHz, max.
Delay skew 18 ns at 100 MHz, max.
CABLE CONSTRUCTION
Conductor 24 AWG solid annealed copper.
Primary Insulation FEP fluoropolymer resin on each pair.
Jacket Thermosplastic. Must meet all requirements for the
expected life of the cable.
REVISIONS ENHANCED PERFORMANCE CATEGORY 5 UTP PLENUM CABLE
DATE REVISION BY WITH LIMITED-COMBUSTIBLE WIRE INSULATION
- --------------------------------------------------------------------------------
APPROVED DRAWING NO.
- ----------------------
- ----------------------
--------------------------------------------------------
DATE PROJECT NO.
- ----------------------
- ---------------------- --------------------------------------------------------
<PAGE> 49
2.0 SCOPE
This specification defines the requirements for commercially available
high-performance Category 5 plenum-rated LAN communications cable. The cable
design described herein exceeds minimum ANSI/TIA/EIA 568 A Category 5 and
ISO/IEC 11801 Class D standards in critical transmission characteristics and
provides additional specifications for conductor insulation. This specification
provides more ACR margin (headroom) at transmission frequencies up to 155 MHz,
better electrical balance and temperature/humidity stability for superior
long-term performance. In addition, this specification calls for a
limited-combustible* wire insulation that meets the fire safety stipulation of
the NFPA 90A Standard requiring limited-combustible materials in products for
use in building plenums.
3.0 PHYSICAL
In addition to the applicable requirements of ANSI/ICEA S-80-661 and UL 444, the
physical design of the cable shall meet sections 3.1 to 3.6 inclusive.
3.1 Conductor
Conductor shall be 24 AWG solid bare copper and shall conform to the
applicable requirements of ANSI/ICEA S-80-661. Minimum dimensions and
maximum strand length shall be in accordance with UL 444. Conductor shall
also conform to solid annealed copper wire in accordance with ASTM B 3. The
section "Dimensions and Permissible Variations" of ASTM B 3 shall be
waived.
3.2 Conductor Insulation
Each copper conductor shall be insulated 100% with fluorinated ethylene
propylene (FEP) polymer.
3.3 Pair Assembly
Cable shall consist of 4 insulated conductor pairs. The pair twist length
shall be selected by the manufacturer to assure compliance with the
transmission requirements of section 6.0;
3.4 Outer Jacket
The core, consisting of 4 insulated conductor pairs, shall be protected
with an overall thermoplastic covering generally referred to as an "outer
jacket." The jacketing material selected by the manufacturer must meet and
maintain the physical, mechanical and electrical requirements of ASTM D
4565 and this specification for the expected life of the cable.
3.5 Color Codes
The color code shall be as shown in Table 3.5.
*This term is used per NFPA 259 utilizing the maximum limits for potential heat
of 3,500 Btu/lb (8.141 ml/kg) per NFPA 90A.
- --------------------------------------------------------------------------------
SPECIFICATION NO. APPROVED DATE PAGE NO.
3
- --------------------------------------------------------------------------------
<PAGE> 50
Table 3.5
Color Codes for Horizontal 100 Q UTP Cable
Conductor Identification Color Code Abbreviation
-------------------------------------------------------------------
Pair 1 White-Blue (NOTE 1) W-BL
BLUE (NOTE-2) BL
Pair 2 White-Orange (NOTE 1) W-O
Orange (NOTE 2) O
Pair 3 White-Green (NOTE 1) W-G
Green (NOTE 2) G
Pair 4 WHITE-BROWN (NOTE 1) W-BR
Brown (NOTE 2) BR
Note 1: The conductor insulation is white, and a colored marking is
added for identification. For cables with tightly twisted pairs (all
less than 38.1 mm [1.5 in.] per twist) the mate conductor may serve as
the marking for the white conductor.
Note 2: A white marking is optional.
3.6 Cable Marking and Identification
The cable jacket shall be legibly marked at least every 24 in. by surface
printing. The following information shall be provided:
-- Manufacturer's Identification
-- Type of Cable Construction
-- UL or ETL Verification
-- CMP Identification Code
-- Cable Footage Marker
4.0 Mechanical
4.1 Conductor Elongation
Minimum elongation of conductors from a finished cable shall be in
accordance with ICEA S-90-661.
4.2 Cable Breaking Strength
Finished cable shall have a minimum breaking strength of 400 N (90 lbf)
measured in accordance with ASTM D 4565.
4.3 Cable Bend Radius
Finished cable shall withstand a bend radius of 25.4 mm (1 in.) at a
temperature of -20 degrees C plus/minus 1 degree C without jacket or
insulation cracking when tested in accordance with ASTM D 4565.
SPECIFICATION NO. APPROVED DATE PAGE NO.
4
<PAGE> 51
5.0 Fire Performance
5.1 National Electrical Code -- NFPA 70A
The finished cable shall be plenum-rated in accordance with the
requirements of National Electrical Code NEC Article 800, UL 444, NFPA 262
(UL 910) and applicable CSA standards.
5.2 Potential Heat Requirement for Limited-Combustible Materials
The insulation material used on the wire pairs in the cable shall conform
with the requirement of the NFPA 90A Standard that limited-combustible
materials* be used in products installed in building plenums. Limited
combustible is measured according to NFPA 259 utilizing the maximum limits
for potential heat of 3,500 Btu/lb (8.141 mJ/kg) per NFPA 90A.
6.0 Transmission
Transmission requirements shall conform to all applicable sections of
ANSI/TIA/EIA 568A Category 5 and ISO/IEC 11801 Class D except where exceeded by
the requirements of sections 6.1 to 6.7, inclusive.
6.1 Capacitance Unbalance: Pair to Ground
The capacitance unbalance to ground at 1 kHz of any pair, measured in
accordance with ASTM D 4566, shall not exceed 200 pF per 100 m (328 ft.) at
or corrected to a temperature of 20 degrees C.
6.2 Characteristic Impedance and Structural Return Loss (SRL)
Finished cable shall have a characteristic impedance of 100 OHMS plus/minus
15% in the frequency range from 1 MHz to 155 MHz when measured in
accordance with ASTM D 4566 Method 3. The SRL shall be greater than or
equal to the values given in Table 6.2 for all frequencies from 1 MHz to
155 MHz for a length of 100 m (328 ft.) or longer.
Table 6.2
Horizontal UTP Cable SRL
(Worst Pair)
Frequency (f), MHz dB
---------------------------
0.772-10 23
10-16 23
16-20 23
20-155 23-10 log(f/20)
6.3 Attenuation
The attenuation of any pair shall meet the requirements of Table 6.3.
* This term is used per NFPA 259 utilizing the maximum limits for potential
heat of 3,500 Btu/lb (8.141 mJ/kg) per NFPA 90A.
SPECIFICATION NO. APPROVED DATE PAGE NO.
5
<PAGE> 52
The maximum attenuation at elevated temperatures of 40 degree C and 60
degrees C shall be verified using a factor of 0.4% increase per degree C.
Attenuation measurements shall be in accordance with ASTM D 4566.
Table 6.3
Horizontal UTP Cable ACR
(Worst Pair, dB)
<TABLE>
<CAPTION>
Freq., MHz Attenuation, Max. NEXT, Min.* ACR*
- ------------------------------------------------------
<S> <C> <C> <C>
0.772 1.8 70 68
1.00 2.0 68 66
4.00 4.1 59 55
8.00 5.8 54 48
10.00 6.5 53 46
16.00 8.2 50 42
20.00 9.3 48 39
25.00 10.4 47 37
31.25 11.7 45 33
62.50 17.0 41 24
100.00 22.0 38 16
155.00 27.0 37 10
</TABLE>
*Rounded to nearest dB.
6.4 Near End Cross Talk (NEXT) Loss
The NEXT loss shall meet the requirements of Table 6.3. NEXT measurement
shall be in accordance with ASTM D 4566.
6.5 Attenuation to Cross Talk Ratio (ACR)
ACR shall meet the requirements of Table 6.3.
6.6 Propagation Delay
The propagation delay of any pair at 100 Mhz shall not exceed 5.7 ns/m.
6.7 Propagation Delay Skew
The maximum phase delay skew between the fastest and slowest pair shall
not exceed 18 ns at 100 m when measured in accordance with ASTM D 4566 at -20
degrees C to 60 degrees C.
SPECIFICATION NO. APPROVED DATE PAGE NO.
6
<PAGE> 53
7.0 Reference Documentation
Copies of referenced standards may be obtained from the following sources:
American National Standards Institute (ANSI)
11 W 42nd St.
13th Floor
New York, NY 10036
Tel. (212) 642-4900
ISO/IEC 11801 Generic Cabling for Customer Premises
American Society for Testing and Materials (ASTM)
100 Barr Harbor Dr.
West Conshohocken, PA 19428-2959
ASTM B 3-90 Soft or Annealed Copper Wire
ASTM 4565 Cold Bend Test
ASTM D 4566-94 Standard Test Methods for Electrical Performance
Properties of Insulations and Jackets for
Telecommunications Wire & Cable
ASTM 4565 Physical and Environmental Properties of
Insulation and Jackets for Telecommunications
Wire and Cable
Insulated Cable Engineers Association
P.O. Box 440
South Yarmouth, MA
ANSI/ICEA S-90-661-1994 Communications Wire and Cable for Wiring Premises
National Fire Protection Association (NFPA)
Batterymarch Park
Quincy, MA 02269
ANSI/NFPA 70-1996 National Electrical Code (NEC)
NFPA 90A Standard for the Installation of Air Conditioning
and Ventilating Systems-1996 Edition
Telecommunications Industries Association (TIA)
2500 Wilson Blvd., Suite 300
Arlington, VA
Tel. (703) 907-7700
Fax (703) 907-7727
ANSI/TIA/EIA 568A Commercial Building Telecommunications Cabling
Standard
Underwriters Laboratories, Inc.
333 Pfingsten Rd.
Northbrook, IL 60062
UL 910 Fire Safety Test
UL 444 Standard for Communications Cable
- ------------------------------------------------------------------------------
SPECIFICATION NO. APPROVED DATE PAGE NO.
7
- ------------------------------------------------------------------------------
<PAGE> 54
8.0 Cable Documentation
8.1 CABLE MANUFACTURERS' PART NUMBERS:
Belden Datatwist(R) 350
P.O. Box 1980 Part #-SQ1701A
Richmond, IN 47875
Tel. (317) 983-5200
Berk-Tek LANmark(R)-350
132 White Oak Rd Part #-230600.
New Holland, PA
Tel. (800)-BERKTEK (237-5835)
Champlain Cable Dataclear(R) EF Gold
12 Hercules Dr.
Colchester, VT 05446
Tel. (800) 451-5162
Essex Group. Inc. 427 Cobra (TM)
Engineered Products Division
1510 Wall St.
Fort Wayne, IN 46801-1510
Tel. (800) 551-8948
Fax (219) 461-5661
General Cable DreamLAN(TM) 5
Data/Electronic Products
4 Tesseneer Dr.
Highland Heights, KY 41076-9753
Tel. (800) 424-5666
Fax (800) 547-8249
Helix/HiTemp Cables, Inc. SuperCat-360
20 Forge Park Part #-804508
Franklin, MA 02038
Tel. (508) 541-7100
Fax (508) 541-8122
Mohawk/CDT MegaLAN(TM) 400
9 Mohawk Dr. Part #-M55988
Leominster, MA 01453
Tel. (800) 422-9961
Fax (508) 537-4358
Prestolite Wire Corp. NETLink 2000(TM)
1 Greenwood Dr. Part #-EFP 424 BWT 02
P.O. Box 259
Sidney, NE 69162
Tel. (308) 354-5310
- ------------------------------------------------------------------------------
SPECIFICATION NO. APPROVED DATE PAGE NO.
8
- ------------------------------------------------------------------------------
<PAGE> 55
SPECIFICATION
HIGH SPEED LAN COMMUNICATIONS
PLENUM CABLE
ENHANCED PERFORMANCE
CATEGORY FIVE WITH LIMITED-
COMBUSTIBLE WIRE INSULATION
HORIZONTAL UNSHIELDED TWISTED
FOUR PAIR (UTP)
-----------------------------
[Wire Cable Graphic]
<PAGE> 56
Exhibit G
SMART Dispute Resolution Procedure
I. Preliminary.
1. Any dispute regarding the terms of a contract, agreement, or
business relationship between the parties herein, or involving employees,
agents, or other representatives of the parties, shall be resolved, at the
election of either party, by the following "SMART" procedure ("Sensible Method
for Addressing and Resolving Troubles").
2. SMART shall be initiated by one party's sending a certified letter
to the other, requesting a resolution of a dispute described in the letter. Such
a request shall be made in a timely manner, normally within 3 months after the
event which initiated the dispute. Any question regarding timeliness, and its
effect on the merits of the claim or costs of and effectiveness of its defense,
shall be decided by the arbitrator(s), and may be a factor in the amount or
appropriateness of any award, their decision to be final. The categories of
discovery and any limitations thereon shall be determined by the
neutral arbiter as soon as practicable.
3. Within 14 days after the receipt of such notice, each party shall
designate a representative to meet informally to attempt to resolve the dispute.
In the event that the parties are unable to resolve the matter
between them within 30 days after the date of the initial letter, either party
may, by a second letter served certified mail on the other party, initiate
proceedings for a final and binding resolution of such dispute, controversy or
claim by arbitration following the procedures herein set forth, along with a
requested award.
II. Arbitration.
4. If the award requested is under $50,000, all evidentiary hearings
and decisionmaking shall be accomplished by a single arbiter.
If the parties cannot agree on the arbiter, within 15 days after the
date of the second letter they shall each appoint a representative, and the two
representatives shall within 10 days jointly nominate the arbiter. Such arbiter
shall have at least 10 years active prior experience in the business field in
which the dispute arises.
The arbiter shall issue a written report explaining the award.
5. If the award requested is greater than $50,000, or involves relief
other than money damages, upon request of either party, the hearings and
decisionmaking shall be accomplished by two designated representatives, one
appointed by either side, each of which shall have at least 10 years active
prior experience in the business field in which the dispute arises. Either
party, if it so chooses, may designate a representative employed by, or
otherwise affiliated with, the party so designating.
Within 10 days of their appointment the designated representatives
shall jointly appoint a neutral arbiter. Such arbiter shall have had
significant prior experience in dispute resolution, as a judge, lawyer,
arbitrator, or mediator, and prior experience in the business field in which
the dispute arises.
If an appointment is required and has not been made within the
designated time period, such a choice will be left up to the American
Arbitration Association.
The neutral arbiter shall participate in the hearings.
<PAGE> 57
The panel shall, by majority vote, issue findings of fact and
conclusions of law in connection with its award.
With either procedure, should the amount of the award exceed $250,000,
or involve non-monetary remedies, either party may appeal the correctness of the
conclusions of law to the applicable state or federal court. Findings of fact
shall be subject to judicial review only if they are arbitrary and capricious,
an abuse of discretion, or totally unsupported by the evidence, or deficient in
other similar standards used for judicial review of administrative decisions in
contested cases. Security for the party receiving an award shall be set by the
court.
III. General Provisions.
6. Evidence. Rules for discovery, interrogatories, depositions, and
other evidentiary issues and a schedule therefore shall be decided by the
arbiter(s), in accordance with the procedures of the American Arbitration
Association or other rules selected by the arbitrators in their sole discretion.
Each party shall submit a discovery plan to the arbiter(s) and have it approved
prior to requesting any discovery beyond the initial 100 pages. Oral depositions
shall be discouraged unless a deponent cannot easily be available for actual
testimony. The time periods applicable to discovery shall be set to permit
compliance with the scheduling provisions of 8) below.
All evidence, whether written or oral, shall be deemed by the parties
to be confidential, and it shall not be disclosed to any other person except to
the extent reasonably necessary to assist counsel in the proceedings or in
preparation for the proceeding.
7. Schedule. The arbitration shall be conducted on an expedited
schedule. Unless other time periods are determined by the Arbiter to be
appropriate, the initial submissions shall be made, and the hearing shall
commence, within 90 days of the initiation of the arbitration. The hearings
shall be completed within 60 days thereafter. The award shall be made within 30
days from the close of the hearing. Any failure to render the award within the
foregoing time period shall not, however, affect the validity of such awards.
8. Validity. Judgment on the award may be entered in any court having
jurisdiction over the necessary party. The award of noncompensatory damages, if
made, shall not exceed 50% of compensatory damages and shall be a nonappealable
fact. The parties hereby waive their right to proceed judicially in any
jurisdiction pending the outcome of the SMART proceedings as outlined above.
9. Costs. Each party shall bear its own costs for representation and
preparation. The costs for any neutral arbiter shall be shared equally by the
parties.
Should a party challenge the existence, validity, terms, or
enforceability of these dispute resolution provisions, and if it does not
prevail in its challenge, it shall pay the costs and fees as determined by the
arbiter(s).
At any time during the proceedings either party shall have the
opportunity to submit an offer for settlement to the opposing party which may
be sealed or presented publicly to the arbiter(s), as the initiating party so
chooses. Subsequent offers may be made if earlier ones be rejected.
Should the final award be more favorable to the party making such
offer of settlement than the pending offer which was not accepted, the party
which did not accept such offer shall pay all costs of arbitration, including
without limitation the cost to the other party of its expert witnesses,
discovery costs, stenographic fees, and attorney's fees. Such reimbursements,
however, shall be limited to the difference between the offer rejected and the
actual award. The arbiters shall have the power to award partial costs in the
event of a multifaceted award.
10. Supplemental Procedure. The arbitration shall be governed by such
of the general and special rules of the American Arbitration Association (AAA)
in force as of the date of the proceedings as are not inconsistent with the
provisions herein. Should any language contained herein require interpretation
beyond the scope of discretion of the arbiter(s), the parties authorize the AAA
to perform this role.
11. Review. Prior to the final issuance of any required written
report prepared as part of an award, a draft of such report shall be circulated
to the parties, giving each the opportunity to comment on the reasoning
employed, and the accuracy of the calculation of the award. The arbiter shall
set time limits to govern the comment procedure, and may or may not respond to
the comments, or revise the award after reading them.
12. Choice of Law. The law applied shall be that of Virginia, United
States of America, but if sufficient authority in a particular area of the law
is lacking, precedent from other leading industrial states, such as New York,
Illinois, or California, may be invoked.
<PAGE> 58
ADDENDUM ONE
OPTION TO EXPAND
Tenant shall have the First Right of Refusal on all contiguous floors at
terms of a bonafide third (3rd) party offer during the initial lease-up of the
Building. Tenant shall have the continuous and recurring Right of First Offer to
lease any and all space in the Building becoming available (expiring leases or
early lease terminations) after initial lease-up at 100% of market, including
lease term, taking into consideration 100% of the concessions available in the
market to include but not limited to rental rates, tenant improvements, rent
abatement and brokerage commissions. Tenant's Expansion Rights shall be void if
Tenant is in material default of the Lease continuing at the time of Tenant's
exercise. Tenant will have ten (10) business days to respond to Landlord's
notice of availability. In the event Tenant fails to respond during such ten
(10) business day period, the Expansion Right shall terminate on the space in
question. The expansion option does not convey with sublet/assignment.
<PAGE> 59
ADDENDUM TWO
OPTION TO RENEW
Tenant shall have two (2) consecutive options to renew this Lease, each for
a period of five (5) years at a rate equal to 95% of the prevailing Market
Rental Rates including 100% prevailing market concession (i.e., rental rates,
tenant improvements, abatement, brokerage commissions, etc.) for buildings in
Reston, Virginia, of similar age, size, quality, and location; however, in each
instance, the first, full twelve (12) calendar months of the renewal term shall
be the new Base Year for operating expense pass throughs provided however, that
the following conditions shall all be met: (i) upon the exercise of the Renewal
Option, no material Event of Default shall have occurred and be continuing; (ii)
that Tenant shall not have any further option to renew or otherwise extend the
Term of this lease beyond the last day of the Second Renewal Term, unless
otherwise agreed; (iii) that Tenant shall exercise its option by giving written
notice to Landlord of such election not later than nine (9) months prior to the
expiration of the applicable renewal term commencement date, in the manner and
at the place provided for giving notice to Landlord; (iv) that renewal of this
Lease shall be upon the terms, covenants, agreements, provisions, conditions,
and limitations set forth in this Lease, which shall be as fully applicable
during such Renewal Term(s) as they are applicable during the original Term,
except to the extent expressly otherwise provided in this Lease; (iv) the
renewal option does not convey with sublet/assignment except if Premises are
sublet/ assigned in their entirety, in which case, one (1) five (5) year renewal
term shall be granted with provisions herein. This Renewal Option shall include
95% of market rent for parking, if applicable.
Tenant may renew the Lease for less than the entire amount of space under
lease at the end of the pertinent initial or extended term. However, if Tenant
renews for less than 50,000 rsf but at least 40,000 rentable square feet, the
Landlord may request, at Tenant's expense, that the exterior building signage be
replaced with spandrel signage. If the Tenant renews for less than 40,000
rentable square feet, Tenant shall not have exterior signage rights and Tenant
must remove its sign and restore the Building to its original condition at
Tenant's cost and upon written notice from Landlord.
<PAGE> 60
ADDENDUM THREE
ROOF TOP SPACE
Tenant shall have unencumbered access and rights to utilize available roof
top space, but no less than 650 square feet of the roof, for its
telecommunications needs for the initial term and all renewal and/or extension
terms, at no cost, subject to existing tenants' rooftop rights, provided
however, that the following conditions shall all be met: No material Event of
Default shall have occurred and be continuing; and, Tenant shall be responsible
for the installation, maintenance and removal (including equipment no longer
being utilized) of any equipment. These rights shall be conditioned upon any
applicable zoning requirements, FCC regulations, interference with other
existing rooftop users at the time of Tenant's election, review by Landlord's
structural engineer, and Landlord's reasonable approval of the location, weight
and installation of any equipment, which approval shall not be unreasonably
withheld, conditioned or delayed.
<PAGE> 61
ADDENDUM FOUR
EMERGENCY GENERATOR
An emergency generator for fire and life safety needs meeting code will be
provided at no cost to Tenant by and installed by Landlord as part of base
building construction.
Tenant shall have the right to install its own additional generator(s), to
use available building riser conduit at no additional rent and to run
additional riser conduit within the Building from the emergency generator(s) to
the Premises at no additional rent, from the roof to the Premises, and between
floors of the Premises, provided however, that the following conditions shall
be met: No Event of Default shall have occurred and be continuing; and, Tenant
shall be responsible for the installation, including permits, maintenance and
removal (including a generator no longer being utilized). The exact location
for the additional generator(s) and conduit shall be mutually agreed to by
Landlord and Tenant. The cost of the additional generator(s) and conduit
installation above the base building condition shall be borne by Tenant.
Landlord shall not charge rent for the generator site.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
CareerBuilder, Inc.:
We consent to incorporation by reference in the registration statement (No.
333-78283) on Form S-8 of CareerBuilder, Inc. of our report dated February 4,
2000, relating to the balance sheets of CareerBuilder, Inc. as of December 31,
1998 and 1999, 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, 1999, and the related schedule, which reports appear in the
December 31, 1999, annual report on Form 10-K of CareerBuilder, Inc.
/s/ KPMG LLP
McLean, Virginia
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 63,589
<SECURITIES> 0
<RECEIVABLES> 3,451
<ALLOWANCES> 422
<INVENTORY> 0
<CURRENT-ASSETS> 67,706
<PP&E> 4,477
<DEPRECIATION> 2,449
<TOTAL-ASSETS> 72,528
<CURRENT-LIABILITIES> 7,429
<BONDS> 0
0
0
<COMMON> 24
<OTHER-SE> 65,075
<TOTAL-LIABILITY-AND-EQUITY> 72,528
<SALES> 0
<TOTAL-REVENUES> 14,908
<CGS> 0
<TOTAL-COSTS> 6,687
<OTHER-EXPENSES> 34,281
<LOSS-PROVISION> 322
<INTEREST-EXPENSE> (2,072)
<INCOME-PRETAX> (23,988)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,988)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,988)
<EPS-BASIC> (1.48)
<EPS-DILUTED> (1.14)
</TABLE>
