<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-25107
----------------
EARTHWEB INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3899472
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Park Avenue, 10016
New York, New York (including Zip Code)
(Address of principal executive offices)
(212) 725-6550
(Registrant's telephone number, including area code)
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 [_]
As of May 12, 2000, the registrant had outstanding 10,536,848 shares of common
stock, $.01 par value.
1
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EARTHWEB INC.
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
PART 1. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of March 31,
2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
EARTHWEB INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents........................... $ 64,601 $ 13,054
Marketable securities............................... 6,347 6,242
Accounts receivable, net............................ 5,424 4,776
Prepaid expenses and other current assets........... 2,905 2,482
-------- --------
Total current assets.............................. 79,277 26,554
Fixed assets, net................................... 9,191 7,272
Intangible assets, net.............................. 76,987 53,790
Other assets........................................ 4,708 1,573
-------- --------
Total assets...................................... $170,163 $ 89,189
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable.................................... $ 2,327 $ 4,347
Accrued expenses.................................... 10,392 7,665
Amounts due under acquisition agreements............ 14,869 6,122
Other current liabilities........................... 3,652 2,409
Notes payable-- short-term.......................... 511 486
-------- --------
Total current liabilities......................... 31,751 21,029
Convertible notes payable........................... 80,875 5,743
Notes payable-- long-term........................... 519 782
Other liabilities................................... 1,769 2,725
-------- --------
Total liabilities................................. 114,914 30,279
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, par value $.01; 2,000,000
authorized, none issued............................ -- --
Common stock, par value $.01; 21,750,000 authorized,
10,089,927 and 9,817,772 issued and outstanding.... 101 98
Additional paid in capital.......................... 119,022 111,283
Unearned compensation............................... (178) (386)
Accumulated comprehensive other income.............. 130 110
Treasury stock, at cost 4,713 shares................ (200) (200)
Accumulated deficit................................. (63,626) (51,995)
-------- --------
Total stockholders' equity........................ 55,249 58,910
-------- --------
Total liabilities and stockholders' equity........ $170,163 $ 89,189
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
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EARTHWEB INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except per share data)
<TABLE>
<CAPTION>
Quarter ended
March 31,
-----------------
2000 1999
-------- -------
<S> <C> <C>
Revenues................................................... $ 13,658 $ 3,732
Cost of revenues........................................... 4,444 1,479
-------- -------
Gross profit............................................... 9,214 2,253
-------- -------
Operating expenses:........................................
Product development...................................... 2,002 736
Sales and marketing...................................... 9,846 5,188
General and administrative............................... 2,846 1,597
Depreciation............................................. 788 247
Amortization............................................. 4,966 1,531
-------- -------
Total operating expenses............................... 20,448 9,299
-------- -------
Loss from operations....................................... (11,234) (7,046)
Interest expense........................................... (1,264) (11)
Interest and other income.................................. 867 245
-------- -------
Net loss................................................... $(11,631) $(6,812)
======== =======
Basic and diluted net loss per share....................... $ (1.18) $ (0.82)
======== =======
Weighted average shares of common stock used in computing
basic and diluted net loss per share...................... 9,891 8,290
======== =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
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EARTHWEB INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
-----------------
2000 1999
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................. $(11,631) $(6,812)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation............................................. 788 247
Amortization............................................. 4,966 1,531
Amortization of deferred financing costs................. 108 --
Provision for doubtful accounts.......................... 123 63
Charge related to issuance of stock options.............. 48 20
Interest accrued on convertible notes.................... 1,039 --
Changes in operating assets and liabilities:...............
Accounts receivable...................................... (513) (316)
Prepaid expenses and other current assets................ (551) 263
Other assets............................................. 7 (23)
Accounts payable and accrued expenses.................... (2,661) 1,253
Other currents liabilities............................... 844 441
-------- -------
Net cash used in operating activities:..................... (7,433) (3,333)
-------- -------
Cash flows from investing activities:
Purchase of fixed assets................................. (2,676) (408)
Payments for acquisitions................................ (13,701) (5,907)
-------- -------
Net cash used in investing activities...................... (16,377) (6,315)
-------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock, net.............. 533 145
Proceeds from issuance of convertible notes, net......... 77,600 --
Payments of obligations under acquisition agreements..... (2,437) --
Payments of principal on capital leases and notes
payable................................................. (339) --
-------- -------
Net cash provided by financing activities.................. 75,357 145
-------- -------
Net change in cash and cash equivalents for the period..... 51,547 (9,503)
Cash and cash equivalents, beginning of period............. 13,054 25,292
-------- -------
Cash and cash equivalents, end of period................... $ 64,601 $15,789
======== =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
EARTHWEB INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The Company and Basis of Presentation
EarthWeb Inc. ("Earthweb" or the "Company"), is a leading business portal
for the global IT industry. EarthWeb provides a comprehensive set of business-
to-business and business-to-professional services and offers a central portal
serving each of the major vertical markets in the IT industry, including
enterprise management, networking and telecommunications, software and
internet development, and hardware and systems. EarthWeb is positioned as a
trusted third party platform offering an integrated environment where various
industry constituents can share information, manage their careers, recruit
personnel and buy and sell products and services.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information required by accounting principles
generally accepted in the United States of America for annual financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair presentation have
been included. The results for the interim periods presented are not
necessarily indicative of the results that may be expected for any future
period. The following information should be read in conjunction with the
financial statements and notes thereto included in EarthWeb's annual report on
form 10-K for the year ended December 31, 1999.
Certain amounts from the prior year have been reclassified to conform with
the current period presentation.
2. Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
in the condensed consolidated financial statements and accompanying notes.
Actual results could differ from these estimates. EarthWeb's significant
estimates include the useful lives of fixed assets and intangibles, the
accounts receivable allowance for doubtful accounts and the income tax
valuation allowance.
3. Acquisitions
In February 2000, EarthWeb completed the acquisition of Measure Up, Inc.
("Measure Up"), a company that provides online certification and preparation
and assessment solutions for the IT industry. Total consideration for the
acquisition was $15.0 million, plus contingent payments ("Earnout") based on
operating performance. The initial purchase price consisted of (a) $10.0
million in cash, which was paid at closing, (b) $2.5 million payment on May 8,
2000, which consisted of $190,500 in cash and 150,947 shares of EarthWeb
common stock and (c) $2.5 million payment in the form of cash and EarthWeb
common stock payable in August 2000. The additional Earnout payments are
payable in the form of cash, common stock or both with an aggregate value of
up to $10.0 million, over a period of three years. Under the terms of the
acquisition agreements and a related escrow agreement, 41,387 shares of
EarthWeb common stock (subject to future adjustments) have been placed in
escrow to secure future payments.
In February 2000, EarthWeb acquired Cambridge Information Network ("CIN"), a
leading website for IT executives. The consideration totaled approximately
$8.0 million, $3.0 million of which was paid at closing in cash and $1.0
million of which was paid on March 31, 2000 in the form of 39,678 shares of
EarthWeb common stock. The remaining payments are due in the second and third
quarter of 2000.
6
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EARTHWEB INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(unaudited)
In February 2000 and March 2000, EarthWeb acquired the Web sites CCPrep and
NetCerts, respectively, both of which offer online certification preparation
products and services designed for IT professionals seeking certification for
Cisco products. The aggregate purchase price of both acquisitions was
$3,370,000 of which $1,975,000 was paid at closing, consisting of $650,000 in
cash and 41,247 shares of EarthWeb common stock. The remaining payment is due
in the third quarter of 2000.
These acquisitions have been accounted for using the purchase method of
accounting, and accordingly, the purchase price of each has been allocated to
assets acquired and liabilities assumed based on their respective fair values.
Intangible assets, representing the unallocated excess of purchase price, plus
transaction expenses, over the net assets acquired, of approximately $27.7
million has been preliminarily allocated to goodwill and other intangibles and
is being amortized on a straight-line basis over a period of three to four
years.
In March 2000 the Company issued 126,475 shares of common stock in exchange
for the convertible note issued in connection with the acquisition of
Microhouse International, Inc. In April 2000 the Company issued 76,270 shares
of common stock and paid $2.0 million in cash pursuant to the Earnout
provision of the acquisition agreement with D&L Online, Inc.
The following unaudited pro forma summary presents consolidated results of
operations for the Company as if the acquisitions of Measure Up, Cambridge
Information Network, MicroHouse International, Inc. (now known as EarthWeb
Knowledge Products, Inc.) and D&L Online, Inc. (now known as EarthWeb Career
Solutions, Inc.), CCPrep, codeguru and SysOpt.com had been consummated on the
beginning of each period presented. The unaudited pro forma information does
not necessarily reflect the results that would have been achieved had the
acquisitions occurred on such dates, nor is it necessarily indicative of
future consolidated results of the Company.
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------
2000 1999
--------- ---------
in thousands,
except per share
data
<S> <C> <C>
Revenues................................................ $ 13,965 $ 6,128
Net loss................................................ (13,458) (11,278)
Basic and diluted loss per share........................ (1.34) (1.27)
========= =========
Weighted average of common stock outstanding............ 10,127 8,857
========= =========
</TABLE>
Pro forma adjustments include: (i) amortization of goodwill and other
intangible assets recorded as a result of the acquisitions, and (ii)
adjustment of the weighted average shares of common stock outstanding used in
the calculation of earning per share to reflect shares issued in connection
with the acquisitions. The results of operations for each have been included
with those of EarthWeb for periods subsequent to the date of each acquisition.
The weighted average of common stock outstanding does not include shares that
may be issued to fulfill obligations on amounts due under acquisition
agreements of approximately $12.0 million.
4. Long-Term Debt--Convertible Subordinated Notes
In the quarter ended March 31, 2000, EarthWeb completed a private offering
pursuant to Rule 144A of $80.0 million face value, 7% convertible subordinated
notes due January 25, 2005 (the "Convertible Notes"). Proceeds to EarthWeb,
net of issuance costs, were approximately $77.6 million. The Convertible Notes
are convertible, at the option of the holder, at any time on or prior to
maturity into shares of EarthWeb common stock. The Convertible Notes are
convertible at a conversion price of $39.10 per share, which is equal to a
conversion rate of 25.5754 shares per $1,000 principal amount of Convertible
Notes, subject to adjustment. Interest on the Convertible Notes is payable
semiannually on January 25 and July 25 of each year, beginning July 25, 2000.
EarthWeb may redeem some or all of the Convertible Notes at any time before
January 25, 2003 at the redemption prices set forth in the Convertible Notes,
if the closing price to EarthWeb common stock exceeds 150% of the conversion
price for at least 20 trading days within a period of 30 consecutive trading
days
7
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ending on the trading day before the date of mailing of the provisional
redemption notice. EarthWeb is required to make an additional payment in cash
with respect to the Convertible Notes called for provisional redemption in an
amount set forth in the Convertible Notes.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion of the financial condition and results of operations
of EarthWeb should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and the Notes thereto included in the Company's Annual
Report on form 10-K for the year ended December 31, 1999, and the financial
statements and pro forma financial information and notes thereto contained in
the Company's current report on Form 8-K dated February 8, 2000, reflecting the
acquisition of Measure Up. This quarterly report on Form 10-Q contains forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements involve risks and uncertainties and
actual results could differ materially from those discussed in the forward-
looking statements. All forward-looking statements and risk factors included in
this document are made as of the date hereof, based on information available to
EarthWeb as of the date thereof, and EarthWeb assumes no obligation to update
any forward-looking statement or risk factors.
Results of Operations
Revenues. Revenues for the three months ended March 31, 2000 increased 266%
to $13.7 million from $3.7 million for the three months ended March 31, 1999.
The increase in revenues was primarily due to growth in paid job listings and
advertising revenues due to increases in customers and the average spending per
customer and various acquisitions made in the past year. Specifically the
increase in revenues attributable to a full quarter of operations in 2000
versus a partial period of operations in the 1999 quarter for D&L Online, Inc.
(acquired February 1999) and Microhouse International, Inc. (acquired March
1999) was approximately $2.1 million. Revenues from paid job listings accounted
for 55%, banner and sponsorship advertising for 27%, and premium products for
18% of total revenues in the first quarter of 2000, compared to 54%, 38% and
8%, respectively, of total revenues in the first quarter 1999. For the three
months ended March 31, 2000 and 1999 no single advertiser accounted for more
than 10% of revenue, respectively. Barter advertising revenue accounted for 8%
and 13% of revenues for the quarters ended March 31, 2000 and 1999,
respectively. For both periods, barter advertising revenues primarily related
to the exchange of advertisements and promotional activities with other
companies.
Cost of Revenues. EarthWeb's cost of revenues consists primarily of employee
salaries and related expenses, consulting fees, royalties, Internet access,
hosting fees and computer systems related expenses required to support and
deliver EarthWeb's online services. Cost of revenues for the three months ended
March 31, 2000 increased 200% to $4.4 million from $1.5 million for the three
months ended March 31, 1999. The increase in cost of revenues was primarily
attributable to an increase in employee salaries and related expenses,
consulting fees and freelance writing costs due to the expansion of EarthWeb's
online service offerings, of which approximately $590,000 related to the
expenses of acquired businesses. Management expects costs of revenues to
increase in absolute dollars in future periods as EarthWeb's business continues
to grow.
Product Development Expenses. EarthWeb's product development expenses consist
primarily of employee salaries and related expenses, content conversion costs,
consulting fees and computer systems related expenses required to support the
development of new or enhanced service offerings. Product development expenses
for the three months ended March 31, 2000 increased 172% to $2.0 million from
$736,000 for the three months ended March 31, 1999. The increase in product
development expenses was primarily attributable to the expansion of EarthWeb's
online services and product offerings. Management expects product development
expenses to increase as EarthWeb's business continues to grow.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily
of advertising, employee salaries, commissions and related expenses of
EarthWeb's sales force and marketing personnel and promotional materials. Sales
and marketing expenses for the three months ended March 31, 2000 increased 90%
to $9.8
8
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million from $5.2 million for the three months ended March 31, 1999. The
increase was primarily attributable to an increase in sales related expenses
of approximately $1.8 million and marketing related expenses of $2.8 million
of which approximately $1.0 million related to the expenses of acquired
businesses. Additionally, salaries, commissions and related costs increased
approximately $1.5 million due to the expansion of the sales force. Barter
transactions accounted for approximately 12% and 9% of sales and marketing
expenses for the quarters ended March 31, 2000 and 1999, respectively.
Management expects sales and marketing expenses to increase due to the
continuing growth of its sales force and its planned increase in advertising
and promotional activities.
General and Administrative Expenses. General and administrative expenses
consist primarily of employee salaries and related expenses for executive,
administrative, and accounting personnel, facility costs, recruiting fees,
insurance costs and professional fees. General and administrative expenses for
the three months ended March 31, 2000 increased 78% to $2.8 million from $1.6
million for the three months ended March 31, 1999. The increase in general and
administrative expenses was primarily attributable to an increase in employee
salaries and related expenses and professional fees, of which approximately
$480,000 related to the expenses of acquired businesses. Management expects
general and administrative expenses to increase in future periods due to the
growth of EarthWeb's business.
Depreciation. Depreciation consists primarily of depreciation of property
and equipment. Depreciation for the three months ended March 31, 2000
increased 219% to $788,000 from $247,000 for the three months ended March 31,
1999. The increase was primarily a result of additional property and
equipment. Management expects depreciation to increase due to the growth of
EarthWeb's business.
Amortization. Amortization consists primarily of amortization of intangible
assets related to acquisitions. Amortization for the three months ended March
31, 2000 increased 224% to $5.0 million from $1.5 million for the three months
ended March 31, 1999. The increase was a result of acquisitions consummated in
the current quarter and a full quarter of amortization for both EarthWeb
Career Solutions and EarthWeb Knowledge Products, Inc., which were acquired in
the first quarter of 1999. Approximately $3.0 million of amortization for the
current quarter related to these acquisitions. Management expects amortization
to increase in 2000 due to the amortization of intangible assets from the
acquisitions consummated in 1999 and the first quarter of 2000.
Interest Expense. Interest expense consists primarily of interest on the
Convertible Notes issued during the three months ended March 31, 2000.
Interest and Other Income. Interest and other income consists primarily of
interest earned on cash and cash equivalents and marketable securities.
Interest and other income for the three months ended March 31, 2000 increased
8% to $867,000 from $804,000 for the year ended December 31, 1999.
Income Taxes. No provision for federal and state income taxes has been
recorded as EarthWeb has incurred net operating losses through March 31, 2000.
Given EarthWeb's limited operating history, losses incurred to date and the
difficulty in accurately forecasting EarthWeb's future results, management
does not believe that the realization of the related deferred income tax
assets meets the criteria required by generally accepted accounting principles
and, accordingly, a full valuation allowance has been recorded.
Results for the quarter include the operating results of Measure Up, from
February 9, 2000, the date the company was acquired by EarthWeb.
Liquidity and Capital Resources
EarthWeb historically has satisfied its cash requirements primarily through
offerings of convertible preferred stock, common stock, and lease financings,
and more recently, with the issuance of the Convertible Notes.
9
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Net cash used in operating activities was $7.4 million and $3.3 million for
the three months ended March 31, 2000 and March 31, 1999, respectively. Cash
used in operating activities in 2000 was primarily attributable to a net loss
of $11.6 million, partially offset by amortization, depreciation, accrued
interest and a decrease in accounts payable and accrued expenses. Cash used in
operating activities in 1999 was primarily attributable to a net loss of $6.8
million, offset by amortization and depreciation and increases in accounts
payable and accrued expenses.
Net cash used in investing activities for the three months ended March 31,
2000 of $16.4 million was primarily attributable to acquisitions of $13.7
million and $2.7 million in purchases of fixed assets. Net cash used in
investing activities of $6.3 million for 1999 was primarily attributable to
cash of $5.9 million used for acquisitions.
Net cash from financing activities was $75.4 million for the three months
ended March 31, 2000. During the three months ended March 31, 2000, EarthWeb
completed a private offering pursuant to Rule 144A of $80.0 million face
value, Convertible Notes. Proceeds to EarthWeb, net of issuance costs, were
approximately $77.6 million.
EarthWeb will continue to evaluate possible acquisitions of, or investments
in, business products and technologies that are complementary to those of
EarthWeb, which may require the use of cash. Management believes that existing
cash balances, will be sufficient to meet anticipated cash requirements for at
least the next twelve months; however, EarthWeb may sell additional equity or
debt securities or obtain credit facilities. The sale of additional securities
could result in dilution to EarthWeb's stockholders.
Year 2000
The Company did not experience any significant malfunctions or errors in its
information or business systems when the date changed from 1999 to 2000. Based
on its operations since January 1, 2000, the Company does not expect any
significant problems related to the Year 2000 issue, although there can be no
assurance of this. For example, it is possible that Year 2000 or similar
issues, such as leap year related problems, may occur with financial closings.
The Company believes that any such problems will be minor and easily
corrected. In addition, the Company could still be negatively impacted if the
Year 2000 or similar issues adversely affect its customers or suppliers.
Currently, the Company is not aware of any significant Year 2000 or similar
problems that have arisen with its customers or suppliers.
Recent Accounting Pronouncements
In November 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 100, "Restructuring and Impairment
Charges." In December 1999, the SEC issued SAB No. 101, "Revenue Recognition
in Financial Statements." SAB No. 100 expresses the views of the SEC staff
regarding the accounting for and disclosure of certain expenses not commonly
reported in connection with exit activities and business combinations. This
includes the accrual of exit and employee termination costs and the
recognition of impairment charges. SAB No. 101 expresses the views of the SEC
staff in applying generally accepted accounting principles to certain revenue
recognition issues. EarthWeb does not believe that these SABs have a material
impact on its financial position or its results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
10
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
EarthWeb is not a party to any material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
In the quarter ended March 31, 2000, EarthWeb completed a private offering
pursuant to Rule 144A of $80.0 million face value, 7% convertible subordinated
notes due January 25, 2005 (the "Convertible Notes"). The initial purchasers
of the Convertible Notes were Merrill Lynch & Co. and FleetBoston Robertson
Stephens Inc. On January 25, 2000, EarthWeb sold $75 million aggregate
principal amount of the Convertible Notes to the initial purchasers and on
February 24, 2000, EarthWeb sold an additional $5 million aggregate principal
amount of the Convertible Notes pursuant to the initial purchasers' exercise
of their over-allotment option. Proceeds to EarthWeb, net of issuance costs,
were approximately $77.6 million. The Convertible Notes are convertible, at
the option of the holder, at any time on or prior to maturity into shares of
EarthWeb common stock. The Convertible Notes are convertible at a conversion
price of $39.10 per share, which is equal to a conversion rate of 25.5754
shares per $1,000 principal amount of Convertible Notes, subject to
adjustment. Interest on the Convertible Notes is payable semiannually on
January 25 and July 25 of each year, beginning July 25, 2000. EarthWeb may
redeem some or all of the Convertible Notes at any time before January 25,
2003 at the redemption prices set forth in the Convertible Notes, if the
closing price to EarthWeb common stock has exceeded 150% of the conversion
price then in effect for at least 20 trading days with in a period of 30
consecutive trading days ending on the trading day before the date of mailing
of the provisional redemption notice. EarthWeb will make an additional payment
in cash with respect to the Convertible Notes called for provisional
redemption in an amount set forth in the Convertible Notes. EarthWeb intends
to use the net proceeds from the offering of the Convertible Notes for general
corporate purposes, including expansion of sales and marketing capabilities,
continued development of our business-to-business commerce initiatives,
possible strategic acquisitions or investments, international expansion,
technical upgrade of internal systems and working capital requirements.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
11
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Item 5. Other Information
RATIO OF EARNINGS TO FIXED CHARGES
We present below the deficiency of our earnings to fixed charges on a
historical basis for the years ended December 31, 1995 through 1999 and for
the three months ended March 31, 2000. For purposes of computing the ratio of
earnings to fixed charges: (1) earnings consist of pretax income (loss) from
continuing operations, and (2) fixed charges consist of pretax interest
(including capitalized interest) on all indebtedness, amortization of debt
discount and expense, and that portion of rental expense that we believe to be
representative of interest.
<TABLE>
<CAPTION>
Year Ended December 31, (unaudited)
------------------------------------- Three Months Ended
1995 1996 1997 1998 1999 March 31, 2000
---- ------ ------ ------ ------- ------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Loss from continuing
operations............. (640) (2,046) (7,821) (8,970) (34,713) (11,631)
Fixed Charges:
Amortization of debt
discount and premium
on all indebtedness.... 0 0 0 0 0 108
Interest expense........ 0 0 0 0 39 1,156
Rental costs............ 31 86 121 152 453 170
---- ------ ------ ------ ------- -------
Total Fixed Charges..... 31 86 121 152 492 4,734
==== ====== ====== ====== ======= =======
Loss from continuing
operations............. (609) (1,960) (7,700) (8,818) (34,221) (6,897)
==== ====== ====== ====== ======= =======
Ratio of earnings to
fixed charges.......... (A) (B) (C) (D) (E) (F)
==== ====== ====== ====== ======= =======
</TABLE>
- --------
(A) Due to EarthWeb's losses in 1995, the ratio coverage is less than 1:1.
EarthWeb must generate additional earnings of $640 to achieve a coverage
ratio of 1:1.
(B) Due to EarthWeb's losses in 1996, the ratio coverage is less than 1:1.
EarthWeb must generate additional earnings of $2,046 to achieve a coverage
ratio of 1:1.
(C) Due to EarthWeb's losses in 1997, the ratio coverage is less than 1:1.
EarthWeb must generate additional earnings of $7,821 to achieve a coverage
ratio of 1:1.
(D) Due to EarthWeb's losses in 1998, the ratio coverage is less than 1:1.
EarthWeb must generate additional earnings of $8,970 to achieve a coverage
ratio of 1:1.
(E) Due to EarthWeb's losses in 1999, the ratio coverage is less than 1:1.
EarthWeb must generate additional earnings of $34,713 to achieve a coverage
ratio of 1:1.
(F) Due to EarthWeb's losses for the three months ended March 31, 2000 the
ratio coverage is less than 1:1. EarthWeb must generate additional earnings
of $11,631 to achieve a coverage ratio of 1:1.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
Amendment to Employment Agreement between Registrant and Irene
10.1 Math.
10.2 Employment Agreement between Registrant and Norman Lorentz.
10.3 Employment Agreement between Registrant and Brian Campbell.
27 Financial Data Schedule.
</TABLE>
b) Reports on Form 8-K.
A report on Form 8-K filed on February 11, 2000, disclosing the purchase by
EarthWeb of Cambridge Information Network.
A report on Form 8-K was filed on February 14, 2000, disclosing the purchase
by EarthWeb of Measure Up, Inc.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of New
York, state of New York, on May 15, 2000.
EARTHWEB INC.
/s/ Jack D. Hidary
By: _________________________________
Jack D. Hidary
President and Chief Executive
Officer
/s/ Irene Math
By: _________________________________
Irene Math
Senior Vice President, Finance
(Principal Financial and
Accounting Officer)
13
<PAGE>
EXHIBIT 10.1: Amendment to Employment Agreement between Registrant and Irene
Math.
Re: Agreement and Amendment (this "Agreement")
Dear Irene:
The purpose of this letter is to effect amendments to, and certain
agreements regarding: (1) your Employment Agreement dated November 4, 1996
between EarthWeb Inc. (the "Company") and you (as amended to date, the
"Employment Agreement"); (2) your Incentive Stock Option Agreement dated
February 18, 1997 (the "February Grant"); (3) your Incentive Stock Option
Agreement dated September 30, 1997 (the "September Grant"); (4) your Incentive
Stock Option Agreement dated January 30, 1998 (the "January Grant"); (5) your
Performance Stock Option Award Agreement dated June 15, 1999 and notice
relating thereto (the "1999 PSO Grant"); and (6) your Nonqualified Stock
Option Award Agreement dated June 15, 1999 and notice relating thereto (the
"1999 NQO Grant" and, together with the 1999 PSO Grant, the January Grant, the
September Grant and the February Grant, the "Award Agreements"); and all terms
used herein as defined which are not otherwise defined herein shall be used as
defined in the respective agreement), as follows:
1. Section I of Schedule A to the Employment Agreement is hereby deleted in
its entirety and replaced with the following: "Employee's title: Senior Vice
President."
2. Section II of Schedule A to the Employment Agreement is hereby amended by
adding the following at the end of said Section II:
"After January 31, 2000, Employee's job responsibilities will become the
following:
. Working with EarthWeb's executives and such other outside individuals as
necessary to manage the Company's relationship with its investors.
. Working with heads of EarthWeb's business units/departments to maximize
profitability and control costs.
. Strategic planning, financial forecasting and strategic initiatives.
. Any extended travel required of the Employee in connection with the
performance of her duties hereunder shall be mutually agreed upon.
; provided, however, that notwithstanding the foregoing, effective as of
January 31, 2000, Employee shall continue to perform her job responsibilities
as they existed prior to January 31, 2000 (the "Existing Responsibilities")
for a period of up to five additional months if no individual is hired within
that period to perform the Existing Responsibilities, and in consideration
thereof, the Company shall: (i) in addition to Employee's annual salary and
bonus, pay Employee an additional $2,500 as of the first day of each month
subsequent to January 31, 2000 (A) that Employee is required to continue
performing her Existing Responsibilities and (B) for the month succeeding the
month in which an individual is hired and commences performing Employee's
existing Responsibilities, and (ii) accelerate the vesting with respect to
1,500 of the shares of Common Stock subject to the 1999 NQO Grant for each
month in which Employee receives a $2,500 payment described in clause (i).
3. Section III of Schedule A to the Employment Agreement is hereby amended
by adding the following at the end of said Section III:
"Notwithstanding anything in this Agreement to the contrary, Employee shall
have the right and option at any time after the earlier to occur of (i) in the
event an employee is hired by the Company to take over Employee's Existing
Responsibilities and commences such Existing Responsibilities before May 1,
2000, on May 1, 2000, and (ii) June 30, 2000, (such May 1, 2000 or June 30,
2000, as applicable, shall hereinafter be referred to as the "Election Date"),
to elect to be employed by EarthWeb on a "part-time" basis (the "Part-Time
Election"). For purposes of the Employment Agreement and all bonuses, stock
option grants and other equity
14
<PAGE>
arrangements, the term "part-time" shall mean working (i) no less than 9 hours
per month, and (ii) no more than four days (i.e., 36 hours) per week. Employee
shall not be required to perform any services other than during reasonable
(i.e., 9 a.m. to 5 p.m.) business hours. In the event Employee makes the Part-
Time Election, her base compensation shall be calculated on a per diem basis
and the basis on which such calculation shall be made shall be her salary in
effect immediately prior to the Part-Time Election."
4. Section VI of Schedule A to the Employment Agreement is hereby amended by
adding the following at the end of said Section VI:
"In the event that Employee shall have her employment terminated after such
time as she has made the Part-Time Election, and such termination is after
January 1, 2001, then Employee shall not be entitled to receive the cash
portion of her severance benefit outlined above."
5. It is hereby acknowledged and confirmed that under each of the Award
Agreements, so long as Employee remains a full or part-time employee of the
Company, all options awarded under each of the Award Agreements will continue
to vest. It is further acknowledged and agreed that, if Employee's employment
terminates for any reason (including, without limitation, voluntary
resignation by Employee or termination by the Company for any reason or no
reason) after the Election Date, (A) 15% of the options awarded under each of
the Award Agreements shall be immediately vested and exercisable and (B) all
options awarded under each of the Award Agreements will continue (as
contemplated under the Employment Agreement) to vest during the period
beginning on the date of such termination and ending on the date six months
thereafter, and the Company hereby acknowledges and agrees that (i) such
options shall be exercisable at the stated exercise price during the term
thereof (notwithstanding any termination of employment), and (ii) to the
extent an option is exercised under the February Grant, September Grant or
January Grant within the first three months of the date of termination, such
options shall be treated as "incentive stock options" under Section 422(b) of
the Internal Revenue Code of 1986, as amended (the "Code"). Without limiting
the applicability of the foregoing sentence, if the Company terminates
Employee's employment with the Company other than for Cause (as defined below)
or Employee quits for "Good Reason" (as defined below) after the Election
Date, but prior to June 30, 2002, (A) all options awarded under each of the
Award Agreements which otherwise would have become vested as of June 30, 2002
if Employee continued employment until such date shall become fully vested and
immediately exercisable and (B) to the extent the immediate exercise by
Employee would result in a "disqualifying disposition" as defined in Section
422 of the Code or would not be treated as incentive stock options due to the
application of Section 422(d), the Company shall pay Employee an additional
amount equal to the sum of all applicable federal, state and local income
taxes in excess of the applicable capital gains rate thereupon so that the
net-tax effect on Employee will the same as though such exercise were a
qualifying disposition of an "incentive stock option" under Section 422(b) of
the Code.
For purposes hereof:
"Cause" shall mean conviction for (or pleading nolo contendere to) any
felony or a misdemeanor involving moral turpitude where such felony or
misdemeanor has a demonstrable, material adverse effect on the Company.
"Good Reason" shall mean, unless otherwise consented to in writing by the
Employee: (i) the reduction or change of the Employee's compensation,
title, authority, duties or responsibilities with the Company (other than
as contemplated hereunder); (ii) any other material breach by the Company
of this Agreement, the Employment Agreement (as amended) or the Award
Agreements; or (iii) upon and after the Employee makes a Part-Time
Election, assignment of tasks (including, without limitation, time periods
for completion) not reasonably consistent with Employee's part-time
schedule, as set forth in paragraph 3 above; provided, however, that "Good
Reason" shall not be deemed to exist until the Employee shall have given
the Company written notice of the basis for the Employee's claim that "Good
Reason" exists and the Company shall have failed to cure such basis in all
material respects within 30 days of its receipt of such notice.
15
<PAGE>
6. The 1999 NQO Grant is hereby amended to provide for the accelerated
vesting of 1,500 shares of Common Stock per month as described in the last
paragraph of Section 2 of this Agreement.
7. With respect to the 1999 PSO Grant, the Company hereby acknowledges and
agrees (i) 15,000 shares subject to such option will vest as of November 30,
1999 based upon satisfaction of certain acquisition integration performance
goals for the third quarter of the fiscal year, (ii) 2,500 shares subject to
such option will vest based upon the achievement of additional investment bank
research coverage of the Company, and (iii) 2,500 shares subject to such
option will vest upon completion and announcement of a significant acquisition
or financing transaction.
8. With respect to each Award Agreement, the Company hereby acknowledges and
agrees that upon a "Change in Control," as defined under the amended and
restated 1998 Stock Incentive Plan, the Company shall take all actions
necessary cause all options awarded under each of the Award Agreements to
become fully vested and immediately exercisable.
9. Subject to Section 5 of the Employment Agreement, after the Election
Date, nothing in this Agreement shall prohibit Employee from engaging or
participating in any business, as an employee, consultant, agent, principal,
partner, manager, stockholder, officer, director or in any other individual or
representative capacity.
10. The Company agrees to cause all documents to be executed or amended as
appropriate to carry out the provisions of the amendments and agreements set
forth herein.
11. At all time hereafter, Employee agrees that to maintain the
confidentiality of this Agreement and will not publicize the fact of this
Agreement or any information pertaining to the payments and benefits provided
for herein or any of its contents, except (i) to Employee's family, (ii)
otherwise to Employee's or Company's professional advisors to provide
financial, tax, legal and other similar advice, (iii) as required in
connection with the preparation of Employee's tax returns for local, state and
federal taxing authorities, (iv) to other administrative employees of the
Company as is reasonably necessary to effectuate the terms of this Agreement,
the Employment Agreement or the Award Agreements, or as may otherwise be
reasonably necessary in the ordinary course of business, or (v) as required by
law or legal process. The Company agrees that at all times hereafter, it will
ensure the confidentiality of this Agreement and will not publicize the fact
of this Agreement or any information pertaining to the payments and benefits
provided for herein or any of its contents, except as required by law or legal
process, and the Company agrees not to authorize anyone to, and agrees to
instruct its senior executives that they should not, do anything that would be
intended to or be reasonably likely to result in a breach of such
confidentiality or to result in such publicity.
The parties acknowledge that Company counsel has advised the Company that
this Agreement is required to be filed with the SEC in accordance with all
applicable rules.
Except as amended by the amendments and agreements set forth herein, the
remainder of each of the agreements defined in the first paragraph of this
Agreement shall remain in full force and effect.
Please indicate your acceptance of and agreement to this Agreement by
executing the copy of this letter enclosed herewith and returning it to the
undersigned.
16
<PAGE>
This Agreement is hereby deemed to have been effective as of the 15th day of
June, 1999.
Very truly yours,
EarthWeb Inc.
By:
---------------------------------
Date:
--------------------------------
ACCEPTED AND AGREED TO
AS OF THE DATE FIRST SET
FORTH ABOVE:
- ------------------------------------
Irene Math
Date:
--------------------------------
17
<PAGE>
EXHIBIT 10.2: Employment Agreement between Registrant and Norman Lorentz.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of December 3, 1999, is between EarthWeb Inc., a
Delaware corporation ("Company"), with its principal place of business at 3
Park Avenue, New York, NY, and Norman Lorentz ("Employee").
In consideration of Employee's employment with Company, Employee hereby
agrees to be bound by and comply with the following terms and conditions of
employment:
Section 1. At-Will Employment. Employee acknowledges and agrees that his/her
employment status is that of an employee-at-will and that Employee's
employment may be terminated by Company or Employee at any time with or
without cause.
Section 2. Compensation. In consideration of the services to be rendered
hereunder, Employee shall be paid in accordance with the attached offer
letter.
Section 3. Employee Inventions and Ideas.
(a) Employee will maintain current and adequate written records on the
development of, and disclose to Company, all Inventions (as herein defined).
"Inventions" shall mean all ideas, potential marketing and sales
relationships, inventions, copyrightable expression, research, plans for
products or services, marketing plans, computer software (including, without
limitation, source code), computer programs, original works of authorship,
characters, know-how, trade secrets, information, data, developments,
discoveries, improvements, modifications, technology, algorithms and designs,
whether or not subject to patent or copyright protection, made, conceived,
expressed, developed, or actually or constructively reduced to practice by
Employee solely or jointly with others during the term of Employee's
employment with Company, which refer to, are suggested by, or result from any
work which Employee may do during his employment, or from any information
obtained from Company or any affiliate of Company.
(b) The Inventions shall be the exclusive property of Company, and Employee
acknowledges that all of said Inventions shall be considered as "work made for
hire" belonging to Company. To the extent that any such Inventions, under
applicable law, may not be considered work made for hire by Employee for
Company, Employee hereby agrees to assign and, upon its creation,
automatically and irrevocably assigns to Company, without any further
consideration, all right, title and interest in and to such materials,
including, without limitation, any copyright, other intellectual property
rights, moral rights, all contract and licensing rights, and all claims and
causes of action of any kind with respect to such materials. Company shall
have the exclusive right to use the Inventions, whether original or
derivative, for all purposes without additional compensation to Employee. At
Company's expense, Employee will assist Company in every proper way to perfect
Company's rights in the Inventions and to protect the Inventions throughout
the world, including, without limitation, executing in favor of Company or any
designee(s) of Company patent, copyright, and other applications and
assignments relating to the Inventions. Employee agrees not to challenge the
validity of the ownership by Company or its designee(s) in the Inventions.
(c) Should Company be unable to secure Employee's signature on any document
necessary to apply for, prosecute, obtain, or enforce any patent, copyright,
or other right or protection relating to any Invention, whether due to
Employee's mental or physical incapacity or any other cause, Employee hereby
irrevocably designates and appoints Company and each of its duly authorized
officers and agents as Employee's agent and attorney in fact, to act for and
in Employee's behalf and stead and to execute and file any such document, and
to do all other lawfully permitted acts to further the prosecution, issuance,
and enforcement of patents, copyrights, or other rights or protections with
the same force and effect as if executed and delivered by Employee.
18
<PAGE>
Section 4. Proprietary Information.
(a) Employee will not disclose or use, at any time either during or after
the term of employment, except at the request of Company or an affiliate of
Company, any Confidential Information (as herein defined). "Confidential
Information" shall mean all Company proprietary information, technical data,
trade secrets, and know-how, including, without limitation, research, product
plans, customer lists, customer preferences, marketing plans and strategies,
software, developments, inventions, discoveries, processes, ideas, formulas,
algorithms, technology, designs, drawings, business strategies and financial
data and information, including but not limited to Inventions, whether or not
marked as "Confidential." "Confidential Information" shall also mean any and
all information received by Company from customers, vendors and independent
contractors of Company or other third parties subject to a duty to be kept
confidential.
(b) Employee hereby acknowledges and agrees that all personal property,
including, without limitation, all books, manuals, records, reports,
Convertible Notes, contracts, lists, blueprints, and other documents, or
materials, or copies thereof, Confidential Information as defined in Section
4(a) above, and equipment furnished to or prepared by Employee in the course
of or incident to his employment, including, without limitation, records and
any other materials pertaining to Inventions, belong to Company and shall be
promptly returned to Company upon termination of employment. Following
termination, Employee will not retain any written or other tangible or
electronic material containing any Confidential Information or information
pertaining to any Invention.
Section 5. Limited Agreement Not to Compete.
(a) While employed by Company and for a period of twelve (12) months after
the termination of Employee's employment with Company, Employee shall not,
directly or indirectly, as an employee, employer, consultant, agent,
principal, partner, manager, stockholder, officer, director, or in any other
individual or representative capacity, engage, participate or in any way
render services or assistance to any business that is competitive with the
business of Company. Employee acknowledges that Company's business is
conducted over the World Wide Web and for that reason this restriction cannot
be limited in geographic scope. Notwithstanding the foregoing, Employee may
own less than two percent (2%) of any class of stock or security of any
corporation which competes with Company listed on a national securities
exchange.
(b) While employed by Company and for a period of twelve (12) months after
the termination of Employee's employment with Company, Employee shall not,
directly or indirectly, solicit for employment or employ any person who was
employed by Company at the time of Employee's termination from Company.
Section 6. Company Resources. Employee may not use any Company equipment for
personal purposes without written permission from Company. Employee may not
give access to Company's offices or files to any person not in the employ of
Company without written permission of Company.
Section 7. Post-Termination Period. Because of the difficulty of
establishing when any idea, process or invention is first conceived or
developed by Employee, or whether it results from access to Confidential
Information or Company's equipment, facilities, and data, Employee agrees that
any idea, invention, research, plan for products or services, marketing plan,
computer software (including, without limitation, source code), computer
program, original work of authorship, character, know-how, trade secret,
information, data, developments, discoveries, technology, algorithm, design,
patent or copyright, or any improvement, rights, or claims related to the
foregoing, shall be presumed to be an Invention if it is conceived, developed,
used, sold, exploited or reduced to practice by Employee or with the aid of
Employee within one (1) year after termination of employment. Employee can
rebut the above presumption if he/she proves that the idea, process or
invention (i) was first conceived or developed after termination of
employment, (ii) was conceived or developed entirely on Employee's own time
without using Company's equipment, supplies, facilities, personnel or
Confidential Information, and (iii) did not result from or is not derived
directly or indirectly, from any work performed by Employee for Company or
from work performed by another employee of the Company to which Employee had
access.
19
<PAGE>
Section 8. Injunctive Relief. Employee agrees that the remedy at law for any
breach of the provisions of Section 3, Section 4 or Section 5 of this
Agreement shall be inadequate, the Company will suffer immediate and
irreparable harm, and Company shall be entitled to injunctive relief in
addition to any other remedy at law which Company may have.
Section 9. Severability. In the event any of the provisions of this
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, the other provisions of this Agreement shall remain in
full force and effect.
Section 10. Survival. Sections 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14
shall survive the termination of this Agreement.
Section 11. Representations and Warranties. Employee represents and warrants
that Employee is not under any obligations to any third party which could
interfere with Employee's performance under this Agreement, and that
Employee's performance of his obligations to Company during the term of his
employment with Company will not breach any agreement by which Employee is
bound not to disclose any proprietary information including, without
limitation, that of former employers.
Section 12. Governing Law. The validity, interpretation, enforceability, and
performance of this Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to its conflict
of law rules.
Section 13. Dispute Resolution. Except as otherwise expressly provided for
herein, any dispute relating to or arising out of Employee's employment at
Company, which cannot be resolved by negotiation, shall be settled by a single
arbitrator pursuant to a binding arbitration in accordance with the AAA
Employment Dispute Arbitration Rules and Procedures, as amended by this
Agreement. Employment disputes include, but are not limited to, all claims,
demands or actions under Title VII of the Civil Rights Act of 1964, Civil
Rights Act or 1966, Civil Rights Act of 1991 and all amendments to the
aforementioned, and any other federal, state, or local statute or regulation
or common law regarding employment discrimination or the termination of
employment. The costs of arbitration, including the fees and expenses of the
arbitrator, shall be shared equally by the parties. Each party shall bear the
cost of preparing and presenting its case. The arbitration shall take place in
the County of New York, in the State of New York. The arbitration shall be
conducted in strict confidence. The arbitrator shall not make any award that
provides for punitive or exemplary damages. The arbitrator's decision shall be
based upon the substantive laws of the State of New York. The arbitrator's
decision shall follow the plain meaning of the relevant documents, and shall
be final and binding. The award may be confirmed and enforced in any court of
competent jurisdiction. The parties hereby agree that any federal or state
court sitting in the County of New York in the State of New York is a court of
competent jurisdiction. The parties each expressly waive his/her/its right to
a jury trial. This paragraph does not limit the Company's right to seek
injunctive relief only in any state or federal court sitting in the County of
New York in the State of New York (jurisdictional, venue and inconvenient
forum objections to which are hereby waived by both parties) in the event that
a dispute relates to or arises under Sections 3, 4 or 5 of this Agreement
above and Employee agrees to pay Company reasonable costs and attorney's fees
in seeking to enforce this agreement through such injunctive relief.
Section 14. General. This Agreement supersedes and replaces any existing
agreement between Employee and Company relating generally to the same subject
matter, and may be modified only in a writing signed by the parties hereto.
Failure to enforce any provision of the Agreement shall not constitute a
waiver of any term herein. This Agreement contains the entire agreement
between the parties with respect to the subject matter herein. Employee agrees
that he/she will not assign, transfer, or otherwise dispose of, whether
voluntarily or involuntarily, or by operation of law, any rights or
obligations under this Agreement. Any purported assignment, transfer, or
disposition shall be null and void. Nothing in this Agreement shall prevent
the consolidation of Company with, or its merger into, any other corporation,
or the sale by Company of all or substantially all of its properties or
assets, or the assignment by Company of this Agreement and the performance of
its obligations hereunder. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns,
and shall not benefit any person or entity other than those enumerated.
20
<PAGE>
Section 15. Employee Acknowledgement. Employee acknowledges (i) that he/she
has consulted with or has had the opportunity to consult with independent
counsel of his own choice concerning this Agreement and has been advised to do
so by the Company, and (ii) that he/she has read and understands the
Agreement, is fully aware of its legal effect, and has entered into it freely
based on his own judgment.
AGREED TO BY:
<TABLE>
<S> <C>
_________________________________ _________________________________
EARTHWEB, INC. EMPLOYEE
By: _____________________________ By: _____________________________
Title: __________________________ Title: __________________________
Date: ___________________________ Date: ___________________________
</TABLE>
21
<PAGE>
Addendum to Employment Agreement--Norman Lorentz (Employee)
Severance
If EarthWeb terminates Employee's employment without "cause", EarthWeb will
provide to Employee severance in an amount equal to twelve (12 months) of the
employee's then current base pay, provided employee executes and delivers a
release in a form prepared by the company.
For the purpose of this section, "cause" is defined as: embezzlement;
misappropriation of funds; conviction of a felony or commission of any act
which would rise to the level of a felony; commission of other acts of
dishonesty, fraud or deceit; material breach of any provision of this
Agreement; habitual or willful neglect of duties; breach of fiduciary duty to
the Company involving personal profit; or significant violation of Company
policy or other contractual, statutory or common law duties to the Company.
Change in Control
In the event of a "Change of Control", employee shall be entitled, at his
option, to the severance benefits outlined above if he is terminated without
"cause". A "Change of Control" shall be defined as:
a. Sale of all or substantially all the assets of the company.
b. Complete merger with or acquisition of another company resulting in
which EarthWeb is not the surviving company.
AGREED TO BY:
<TABLE>
<S> <C>
_________________________________ _________________________________
EARTHWEB, INC. EMPLOYEE
By: _____________________________ By: _____________________________
Title: __________________________ Title: __________________________
Date: ___________________________ Date: ___________________________
</TABLE>
22
<PAGE>
Letter of Employment Agreement--Norman Lorentz
November 23, 1999
Dear Norman:
EarthWeb Inc. is pleased to offer you the position of Chief Technology
Officer. This letter and the attached EarthWeb Employment Agreement, together,
shall be considered our offer of employment. Following are the details:
1.) A starting annual salary of US $175,000
2.) Bonus Eligible--up to 25% of annual salary as per our 2000 Corporate
Bonus Plan
3.) Bonus Eligible--up to $40,000 annual MBO bonus based on performance
milestones to be determined.
4.) Upon date of hire you will be eligible to receive a stock option grant to
purchase 75,000 shares of common stock, pursuant to and in accordance
with the terms and conditions of EarthWeb's 1998 Stock Option Plan and
the option granting documents.
5.) Corporate Apartment--EarthWeb will provide up to $2,500 per month plus
utilities towards a corporate apartment in NY.
6.) Weekly commuting expense: EarthWeb will provide you vouchers for weekly
travel between NY and Washington, DC.
As was discussed during the interview process, EarthWeb offers its employees
and their eligible dependents a variety of group insurance benefits. Coverage
under these programs commences on the first day of the month following or
coinciding with the thirtieth day of employment. Information about these
programs and other company benefits and policies are contained in our Employee
Handbook and the Human Resource New Hire Packet. Copies will be provided to
you during an information session with the Human Resources department on or
shortly after your first day of employment.
Please advise me or our Human Resources Department of your decision by
December 4, 1999. Our offer is contingent upon successful completion of our
pre-employment screening process which includes:
. Execution of the enclosed employment agreement.
. Satisfactory references. Submission of 2 business and 1 personal
reference to be forwarded to the company or by telephone (212) 725-
6550.
. Confirmation of eligibility of employment (INS I-9) requiring you to
submit specific forms of identification within the first 3 days of
your employment. Please see attached for a listing of necessary
identification.
. Confirmation of the absence of any contractual impediments to
employment in the offered position.
We look forward to hearing from you in the near future and having you join the
EarthWeb team. In the meantime, if you have any questions about this offer or
the Company, please feel free to contact Jack Hidary directly,
or me at (212) 448-8278.
Sincerely,
X
- ----------------------- -------------------------
Jody Armento Norman Lorentz
HR Director
Earthweb Inc.
23
<PAGE>
EXHIBIT 10.3: Employment Agreement between Registrant and Brian Campbell.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of January 31, 2000, is between EarthWeb Inc., a
Delaware corporation ("Company"), with its principal place of business at 3
Park Avenue, New York, NY, and Brian Campbell ("Employee")
In consideration of Company securing the services of Employee and
Employee's undertaking employment with Company, Company and Employee hereby
agree to be bound by and comply with the following terms and conditions and
agree as follows:
Section 1. At-Will Employment. Employee acknowledges and agrees that
his/her employment status is that of an employee-at-will and that Employee's
employment may be terminated by Company or Employee at any time with or
without cause, subject to the terms and conditions in the Addendum hereto
Section 2. Compensation. In consideration of the services to be rendered
hereunder, Employee shall be paid in accordance with the Addendum hereto.
Section 3. Employee Inventions and Ideas.
(a) Employee will maintain current and adequate written records on
the development of, and disclose to Company, all Inventions (as herein
defined). "Inventions" shall mean all ideas, potential marketing and sales
relationships, inventions, copyrightable expression, research, plans for
products or services, marketing plans, computer software (including, without
limitation, source code), computer programs, original works of authorship,
characters, know-how, trade secrets, information, data, developments,
discoveries, improvements, modifications, technology, algorithms and designs,
whether or not subject to patent or copyright protection, made, conceived,
expressed, developed, or actually or constructively reduced to practice by
Employee solely or jointly with others during the term of Employee's
employment with Company, which refer to, are suggested by, or result from any
work which Employee may do during his employment, or from any information
obtained from Company or any affiliate of Company.
(b) The Inventions shall be the exclusive property of Company, and
Employee acknowledges that all of said Inventions shall be considered as "work
made for hire" belonging to Company. To the extent that any such Inventions,
under applicable law, may not be considered work made for hire by Employee for
Company, Employee hereby agrees to assign and, upon its creation,
automatically and irrevocably assigns to Company, without any further
consideration, all right, title and interest in and to such materials,
including, without limitation, any copyright, other intellectual property
rights, moral rights, all contract and licensing rights, and all claims and
causes of action of any kind with respect to such materials. Company shall
have the exclusive right to use the Inventions, whether original or
derivative, for all purposes without additional compensation to Employee. At
Company's expense, Employee will assist Company in every proper way to perfect
Company's rights in the Inventions and to protect the Inventions throughout
the world, including, without limitation, executing in favor of Company or any
designee(s) of Company patent, copyright, and other applications and
assignments relating to the Inventions. Employee agrees not to challenge the
validity of the ownership by Company or its designee(s) in the Inventions.
(c) Should Company be unable to secure Employee's signature on any
document necessary to apply for, prosecute, obtain, or enforce any patent,
copyright, or other right or protection relating to any Invention, whether due
to Employee's mental or physical incapacity or any other cause, Employee
hereby irrevocably designates and appoints Company and each of its duly
authorized officers and agents as Employee's agent and attorney in fact, to
act for and in Employee's behalf and stead and to execute and file any such
document, and to do all other lawfully permitted acts to further the
prosecution, issuance, and enforcement of patents, copyrights, or other rights
or protections with the same force and effect as if executed and delivered by
Employee.
24
<PAGE>
Section 4. Proprietary Information.
(a) Employee will not disclose or use, at any time either during or
after the term of employment, except at the request of Company or an affiliate
of Company, any Confidential Information (as herein defined). "Confidential
Information" shall mean all Company proprietary information, technical data,
trade secrets, and know-how, including, without limitation, research, product
plans, customer lists, customer preferences, marketing plans and strategies,
software, developments, inventions, discoveries, processes, ideas, formulas,
algorithms, technology, designs, drawings, business strategies and financial
data and information, including but not limited to Inventions, whether or not
marked as "Confidential." "Confidential Information" shall also mean any and
all information received by Company from customers, vendors and independent
contractors of Company or other third parties subject to a duty to be kept
confidential.
(b) Employee hereby acknowledges and agrees that all personal
property, including, without limitation, all books, manuals, records, reports,
Convertible Notes, contracts, lists, blueprints, and other documents, or
materials, or copies thereof, Confidential Information as defined in Section
4(a) above, and equipment furnished to or prepared by Employee in the course
of or incident to his employment, including, without limitation, records and
any other materials pertaining to Inventions, belong to Company and shall be
promptly returned to Company upon termination of employment. Following
termination, Employee will not retain any written or other tangible or
electronic material containing any Confidential Information or information
pertaining to any Invention.
Section 5. Limited Agreement Not to Compete
(a) While employed by Company and for a period of nine (9) months
after the termination of Employee's employment with Company, Employee shall
not, directly or indirectly, as an employee, employer, consultant, agent,
principal, partner, manager, stockholder, officer, director, or in any other
individual or representative capacity, engage or participate in any business
that is competitive with the business of Company. Notwithstanding the
foregoing, Employee may own less than two percent (2%) of any class of stock
or security of any corporation, which competes with Company listed on a
national securities exchange.
(b) While employed by Company and for a period of twelve (12) months
after the termination of Employee's employment with Company, Employee shall
not, directly or indirectly, solicit for employment any person who was
employed by Company at the time of Employee's termination from Company.
Section 6. Company Resources. Other than for incidental personal use,
Employee may not use any Company equipment for personal purposes without
written permission from Company. Employee may not give access to Company's
offices or files to any person not in the employ of Company without written
permission of Company.
Section 7. Post-Termination Period. Because of the difficulty of
establishing when any idea, process or invention is first conceived or
developed by Employee, or whether it results from access to Confidential
Information or Company's equipment, facilities, and data, Employee agrees that
any idea, invention, research, plan for products or services, marketing plan,
computer software (including, without limitation, source code), computer
program, original work of authorship, character, know-how, trade secret,
information, data, developments, discoveries, technology, algorithm, design,
patent or copyright, or any improvement, rights, or claims related to the
foregoing, shall be presumed to be an Invention if it is conceived, developed,
used, sold, exploited or reduced to practice by Employee or with the aid of
Employee within one (1) year after termination of employment. Employee can
rebut the above presumption if he/she proves that the idea, process or
invention (i) was first conceived or developed after termination of
employment, (ii) was conceived or developed entirely on Employee's own time
without using Company's equipment, supplies, facilities, personnel or
Confidential Information, and (iii) did not result from or is not derived
directly or indirectly, from any work performed by Employee for Company or
from work performed by another employee of the Company to which Employee had
access.
25
<PAGE>
Section 8. Injunctive Relief. Employee agrees that the remedy at law for
any breach of the provisions of Section 3, Section 4 or Section 5 of this
Agreement shall be inadequate, the Company will suffer immediate and
irreparable harm, and Company shall be entitled to injunctive relief in
addition to any other remedy at law which Company may have.
Section 9. Severability. In the event any of the provisions of this
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, the other provisions of this Agreement shall remain in
full force and effect.
Section 10. Survival. Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14,
and the Addendum shall survive the termination of this Agreement.
Section 11. Representations and Warranties. Employee represents and
warrants that Employee is not under any obligations to any third party which
could interfere with Employee's performance under this Agreement, and that
Employee's performance of his obligations to Company during the term of his
employment with Company will not breach any agreement by which Employee is
bound not to disclose any proprietary information including, without
limitation, that of former employers; provided that notwithstanding the
foregoing, in the event employee determines that an action which the Company
requests him to pursue would cause him to so violate any such agreement, so
informs the Company, and the Company instructs him to proceed with such
action, Employees proceeding with such action shall not be deemed to be a
violation of this representation and warranty.
Section 12. Governing Law. The validity, interpretation, enforceability,
and performance of this Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to its
conflict of law rules.
Section 13. Not Used
Section 14. General. This Agreement supersedes and replaces any existing
agreement between Employee and Company relating generally to the same subject
matter, and may be modified only in a writing signed by the parties hereto.
Failure to enforce any provision of the Agreement shall not constitute a
waiver of any term herein. This Agreement contains the entire agreement
between the parties with respect to the subject matter herein. Employee agrees
that he/she will not assign, transfer, or otherwise dispose of, whether
voluntarily or involuntarily, or by operation of law, any rights or
obligations under this Agreement. Any purported assignment, transfer, or
disposition shall be null and void. Nothing in this Agreement shall prevent
the consolidation of Company with, or its merger into, any other corporation,
or the sale by Company of all or substantially all of its properties or
assets, or the assignment by Company of this Agreement and the performance of
its obligations hereunder. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns,
and shall not benefit any person or entity other than those enumerated.
Section 15. Employee Acknowledgement. Employee acknowledges (i) that he/she
has consulted with or has had the opportunity to consult with independent
counsel of his own choice concerning this Agreement and has been advised to do
so by the Company, and (ii) that he/she has read and understands the
Agreement, is fully aware of its legal effect, and has entered into it freely
based on his own judgment.
AGREED TO BY:
EARTHWEB INC. Brian Campbell
Sign: _________________________ ______________________________________________
Sign: _________________________ ______________________________________________
Date: _________________________ ______________________________________________
Date: _________________________ ______________________________________________
26
<PAGE>
Addendum to Employment Agreement--Brian Campbell (employee)
Section 1
Title and Job Description
The Employee shall be employed on a full-time basis, as Vice President and
General Counsel and, in such capacity, shall be the chief legal officer of the
Company and responsible for the operation of the legal department and any
other responsibilities reasonably assigned by the Company from time to time.
In such capacity and in the performance of his or her duties hereunder, the
Employee shall as appropriate under the circumstances, report to the board of
directors, the chief executive officer, the president, the chief financial
officer and/or other select officers, on legal issues affecting the Company
and the operation of the legal department.
The Employee shall be located in EarthWeb's New York offices currently
located in New York City or within 40 miles of New York City.
Severance
If, at any time during the first year of the term of the Employment
Agreement, (i) Company terminates Employee's employment without "cause", or
(ii) a "change of control" occurs and thereafter the Employee is terminated,
or after a change in control, employee voluntarily terminates his employment
with the company for "good reason." Company shall pay Employee a lump sum
equal to fifty percent (50%) of Employee's annual base salary. If any such
event occurs after the first anniversary of the Employment Agreement, Company
shall pay Employee a lump sum equal to seventy-five (75%) of Employee's annual
base salary.
For the purpose of this section, "cause" is defined as: embezzlement;
misappropriation of funds; conviction of a felony or commission of any act
which would rise to the level of a felony; commission of other acts of
dishonesty, fraud or deceit; material breach of any provision of this
Agreement; habitual or willful neglect of duties; breach of fiduciary duty to
the Company involving personal profit; or significant violation of Company
policy or other contractual, statutory or common law duties to the Company.
"Good Reason" shall exist if Company, without Employee's consent,
materially reduces Employee's base salary or total package of annual
compensation and benefits, materially diminishes Employee's position,
authority, duties or responsibilities or requires Employee to report to an
office that is more than 40 miles from the office to which Employee regularly
reports.
Change of Control
For the purpose of this section, a "Change of Control" shall be defined as:
a. sale of all or substantially all the assets of the company.
b. complete merger with or acquisition of another company resulting in
which EarthWeb is not the surviving company.
In the event of a "Change of Control," Employee shall be entitled to
additional vesting of fifteen percent (15%) of previously granted unvested
stock options.
Section 2
Compensation
In consideration of the services to be rendered hereunder: Employee shall
be paid an annual base salary of $175,000 per year plus a bonus (prorated
based on period of service in year of hire) of up to 25% of employees annual
base salary. Bonus compensation will be determined by the Chief Financial
Officer and the Board of Directors.
27
<PAGE>
Employee shall receive 40,000 Stock Options to be granted on the
administration date following date of employment, made pursuant to the terms
and conditions of EarthWeb's 1998 Stock Incentive Plan, and option-granting
documents and subject to approval by the board.
AGREED TO BY:
EARTHWEB INC. Brian Campbell
Sign: _________________________ ______________________________________________
Sign: _________________________ ______________________________________________
Date: _________________________ ______________________________________________
Date: _________________________ ______________________________________________
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Earthweb
10-Q and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-2000
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 DEC-31-1999
<CASH> 64,601 13,054
<SECURITIES> 6,347 6,242
<RECEIVABLES> 5,424 4,776
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 79,277 26,554
<PP&E> 9,191 7,272
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 170,163 89,188
<CURRENT-LIABILITIES> 19,427 21,029
<BONDS> 0 0
0 0
0 0
<COMMON> 101 98
<OTHER-SE> 55,148 58,812
<TOTAL-LIABILITY-AND-EQUITY> 170,163 89,188
<SALES> 0 0
<TOTAL-REVENUES> 13,658 3,732
<CGS> 4,444 1,479
<TOTAL-COSTS> 20,448 9,299
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,263) 0
<INCOME-PRETAX> (11,631) (6,812)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (11,631) (6,812)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,631) (6,812)
<EPS-BASIC> (1.18) (.82)
<EPS-DILUTED> (1.18) (.82)
</TABLE>
