<PAGE>
As filed with the Securities and Exchange Commission on March 31, 2000
Registration No. 333-95921
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
EARTHWEB INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3899472
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3 Park Avenue
New York, New York 10016
(212) 725-6550
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Jack D. Hidary
President and Chief Executive Officer
EarthWeb Inc.
3 Park Avenue
New York, New York 10016
(212) 725-6550
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
With Copies to:
John R. Hempill, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104-0050
(212) 468-8000
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
Calculation of Registration Fee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Amount Maximum Aggregate
Title of each Class of to be Offering Price Offering Amount of
Securities to be Registered Registered Per Share(1) Price(1) Registration Fee
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7% Convertible Subordinated Notes
due 2005 $80,000,000 100% $80,000,000 $21,120(3)
- --------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share 2,046,035(2)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(i) of the Securities Act of 1933, as
amended.
(2) Shares of common stock issuable upon conversion of the Convertible
Subordinated Notes registered hereby. This registration statement also
covers such indeterminate number of shares as may be issued in respect of
anti-dilution adjustments. Pursuant to Rule 416 under the Securities Act,
no registration fee is required for these shares.
(3) $19,800 has previously been paid.
The Registrant hereby amends the Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--MARCH 31, 2000
PROSPECTUS
$80,000,000
[LOGO OF EARTHWEB]
7% Convertible Subordinated Notes due 2005
and Shares of Common Stock Issuable Upon Conversion of the Notes
-----------
Holders of our 7% Convertible Subordinated Notes due 2005 may offer for sale
the notes and the shares of our common stock into which the notes are
convertible at various times at market prices prevailing at the time of sale or
at privately negotiated prices. The selling holders may sell the notes or the
common stock to or through underwriters, broker-dealers or agents, who may
receive compensation in the form of discounts, concessions or commissions.
The notes are convertible, at the option of the holder, at any time on or
prior to maturity into shares of our common stock. The 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 notes, subject to adjustment. On
March 29, 2000 the last sale price of the common stock on the NASDAQ National
Market was $25.83 per share.
We will pay interest on the notes on January 25 and July 25 of each year,
beginning July 25, 2000. The notes will mature on January 25, 2005. We may
redeem some or all of the notes at any time before January 25, 2003 at a
redemption price of $1,000 per $1,000 principal amount of notes, plus accrued
and unpaid interest, if any, to the redemption date, if the closing price of
our common stock has exceeded 150% of the conversion price then in effect for
at least 20 trading days within a period of 30 consecutive trading days ending
on the trading day before the date of mailing of the provisional redemption
notice. We will make an additional payment in cash with respect to the notes
called for provisional redemption in an amount equal to $130.43 per $1,000
principal amount of notes, less the amount of any interest actually paid on the
notes before the call for redemption. We may redeem some or all of the notes at
any time after January 25, 2003 at the redemption prices described in this
offering memorandum.
The notes are unsecured and subordinated to our existing and future senior
indebtedness. In addition, the notes effectively rank junior to our
subsidiaries' liabilities.
We do not intend to apply for listing of the notes on any securities exchange
or for quotation through any automated quotation system. The notes are eligible
for trading in the Private Offerings, Resale and Trading through Automated
Linkages ("Portal") market of the National Association of Securities Dealers,
Inc. The notes are [not] expected to remain eligible for trading on the Portal
system and a trading market may not develop for the notes. Our common stock is
traded on the NASDAQ National Market under the symbol "EWBX."
We will not receive any proceeds from the sale of the notes and the common
stock into which the notes are convertible by the selling holders. We will pay
all expenses (other than selling commissions and fees and stock transfer taxes)
of the registration and sale of the notes and the common stock.
Investing in the notes or the common stock into which the notes are
convertible involves risks that are described in the "Risk Factors" section
beginning on page 3 of this prospectus.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
April , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Earthweb................................................................... 1
Risk Factors............................................................... 2
Forward-Looking Statements................................................. 14
Ratio of Earnings to Fixed Charges......................................... 15
Use of Proceeds............................................................ 15
Price Range of Common Stock................................................ 15
Dividend Policy............................................................ 15
Selling Securityholders.................................................... 16
Description of Notes....................................................... 17
United States Federal Income Tax Considerations............................ 33
Plan of Distribution....................................................... 36
Legal Matters.............................................................. 37
Experts.................................................................... 37
Where You Can Find More Information........................................ 38
</TABLE>
----------------
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not, and the selling securityholders have
not, authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not, and the selling securityholders are not, making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information appearing in this
prospectus is accurate only as of the date on the front cover of this
prospectus and the information we previously filed with the Securities and
Exchange Commission and incorporated by reference herein is accurate as of the
date filed. Our business, financial condition, results of operations and
prospects may have changed since that date.
----------------
EarthWeb SM is our registered service mark. All other service marks,
trademarks or trade names we refer to in this offering memorandum are the
property of their respective owners.
----------------
Unless otherwise indicated, all references to "EarthWeb," "we," "our" and
"us" for the period prior to October 25, 1996 are to EarthWeb Inc.'s
predecessors and, for later periods, refer to EarthWeb Inc. and, subsequent to
their acquisition or formation, its subsidiaries, including EW Career
Solutions, Inc. (f/k/a D&L Online, Inc., which owns the dice.com job board) and
EW Subscription Services Inc. (f/k/a MicroHouse International, Inc.).
ii
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EARTHWEB
EarthWeb is the leading business portal for the global Information Technology
("IT") industry. We provide a comprehensive set of business-to-business and
business-to-professional services. We offer 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. Our network serves various constituents of the IT
industry across vertical segments, including:
<TABLE>
<S> <C> <C>
. IT managers . Recruiters/HR managers . Hardware manufacturers
. Programmers and engineers . Corporate IT purchasers . Value-added resellers
. Network managers . Software publishers . IT services firms
</TABLE>
As a global intermediary for the IT industry, we are positioned as the
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. We believe that we offer the
most in-depth content and comprehensive range of business services for the IT
industry. We believe our network has captured a critical mass of IT decision
makers and professionals with attractive demographics who collectively command
significant spending power.
Our principal executive office is located at 3 Park Avenue, New York, New
York 10016, and our telephone number is (212) 725-6550. Our corporate Web site
addresses include http://www.earthweb.com and http://www.ewbx.com. Information
contained on our Web sites is not part of this prospectus.
1
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RISK FACTORS
An investment in the securities offered by this prospectus involves a high
degree of risk. You should consider carefully the following risk factors in
addition to the remainder of this prospectus before making an investment
decision.
RISKS PARTICULAR TO EARTHWEB
You cannot predict our future success based on our limited operating history
Although we commenced operations in October 1994, we did not begin our
business of providing online services to IT professionals until October 1995,
and only recently broadened our online services to address the needs of other
constituents of the IT industry. We did not begin generating advertising
revenues until June 1996. The limited amount of information about us makes it
difficult for you to predict whether we will be successful.
We compete in the relatively new markets for Internet services and products.
Thus, you should also evaluate our chances of financial and operational success
in light of the risks, uncertainties, expenses, delays and difficulties
associated with operating a business in a relatively new and unproven market,
many of which may be beyond our control. Some of the risks that we face are
described in the following paragraphs. Our failure to address these risks could
have a material adverse effect on our business, results of operations and
financial condition.
We have a history of losses and may need additional funds
We had an accumulated deficit of $52.0 million at December 31, 1999. We have
also experienced operating losses as well as net losses for all of the fiscal
years during which we have operated. We expect that we will continue to operate
at a loss for the foreseeable future. Although our revenues have increased in
recent quarters, we cannot assure you that such growth will be maintained or
increased in the future. You should not rely on our recent revenue growth as
indicative of our future results of operations. We cannot predict with accuracy
our future results of operations and believe that any period-to-period
comparisons of our results of operations are not meaningful.
We expect to increase our operating expenses significantly, expand our sales
and marketing operations and continue to develop and extend our online
services. In the future, we may not generate sufficient revenues to pay for all
of these operating or other expenses. If we fail to generate sufficient cash to
pay these expenses, we will need to identify other sources of financing. We may
not be able to borrow money or issue more shares of common stock or other
securities to meet our cash needs, and even if we can complete such
transactions, the terms may seem unfavorable to us.
We compete in a highly competitive developing market without certainty of
future growth
The market for our online services has only recently begun to develop, is
rapidly evolving and is characterized by an increasing number of market
entrants. As is typical of a new and rapidly evolving industry, demand and
market acceptance for recently introduced services is uncertain and we cannot
accurately predict the future growth, if any, and size of this market. The
market for our online services may not continue to develop or become
sustainable. If use of our online services fails to grow, our ability to
establish other online services would be materially adversely affected. In
addition, we may not be successful in our business strategy of extending our
online services model to additional segments of the IT industry.
2
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We compete with other companies that direct portions of their Web sites
towards certain segments or sub-segments of the IT industry. Some of our
competitors include:
.Ziff-Davis (DevHead) .IDG (Javaworld)
.CNET (builder.com and activex.com) .Hotjobs.com
.United News (cmpnet) .Headhunter.net
.Internet.com (webdeveloper.com) .Monster.com
.Lycos (Wired Digital's Webmonkey)
In addition, we compete for advertising revenues with general interest portal
and destination sites, as well as traditional media. Our competitors for sales
of products are book, software and online retailers that sell products similar
to ours. Many of our competitors have longer operating histories, larger client
bases, longer relationships with clients, greater brand or name recognition and
significantly greater financial, technical, marketing and public relations
resources than we do. As a result, they may be in a position to respond more
quickly to new or emerging technologies and changes in customer requirements
and to develop and promote their products and services more effectively. We may
not be able to compete successfully against present or future competitors.
There are relatively low barriers to entry in the online services market. We
do not own any patented technology that precludes or inhibits competitors from
entering the IT online market. Existing or future competitors may develop or
offer services that are comparable or superior to ours at a lower price, which
could have a material adverse effect on our business, results of operations and
financial condition.
Our future revenues are dependent on the adoption and effectiveness of the
Internet as an advertising medium
Our future success is highly dependent on an increase in the use of the
Internet as an advertising medium. The Internet advertising market is new and
rapidly evolving, and it cannot yet be compared with traditional advertising
media to gauge its effectiveness. As a result, demand and market acceptance for
Internet advertising solutions is uncertain. Most of our current or potential
advertising customers have little or no experience using the Internet for
advertising purposes and they have allocated only a limited portion of their
advertising budgets to Internet advertising. The adoption of Internet
advertising, particularly by those entities that have historically relied upon
traditional media for advertising, requires the acceptance of a new way of
conducting business, exchanging information and advertising products and
services. Such customers may find Internet advertising to be less effective for
promoting their products and services relative to traditional advertising
media. If the market for Internet advertising fails to develop or develops more
slowly than we expect, then our business, results of operations and financial
condition could be materially adversely affected.
There are currently no standards for the measurement of the effectiveness of
Internet advertising and standard measurements may need to be developed to
support and promote Internet advertising as a significant advertising medium.
Our advertising customers may challenge or refuse to accept our or third-party
measurements of advertisement delivery, and our customers may not accept any
errors in such measurements. In addition, the accuracy of database information
used to target advertisements is essential to the effectiveness of Internet
advertising that may be developed in the future. The information in our
database, like any database, may contain inaccuracies that our customers may
not accept.
If advertisers determine that banner advertising is an ineffective or
unattractive advertising medium, we may not be able to maintain our revenues
with other forms of advertising that we offer. Also, "filter" software programs
limit or prevent advertising from being delivered to a user's computer. The
commercial viability of internet advertising, and our business, results of
operations and financial condition, would be materially adversely affected by
Web users' widespread adoption of such software.
3
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We rely heavily on advertising revenues
To date, substantially all of our revenues are derived from paid job
listings, banner sponsorship and advertisement. We rely primarily on our in-
house advertising sales force for domestic advertising sales. Our success
depends, in part, on hiring, retaining, managing, training and motivating our
sales force. If a significant portion of our advertising sales force leaves, we
may not be able to compete for or retain advertisers and we may not be able to
sustain or increase our current advertising sales level. The reduction in the
amount of revenue from advertising sales could have a material adverse effect
on our business, results of operations and financial condition.
In addition, the competition in the sale of advertising on the Internet,
including competition from Internet portals and other high-traffic sites is
intense. This competition has resulted in a wide range of rates quoted by
different vendors for a variety of advertising services. As a result, we cannot
accurately predict the future levels of Internet advertising revenues that we
will realize. The prices for Internet advertising may also be affected by
competition among current and future suppliers of Internet navigational
services or Web sites and advertising networks. This, together with competition
with other traditional media for advertising placements, could result in
significant price competition, reduced pricing for Internet advertising and
reductions in our advertising revenues.
We engage in barter transactions, which do not generate cash revenue
We engage in barter transactions, which reduce cash expenditures in marketing
and other areas, and leverage our advertising inventory. For the year ended
December 31, 1999, revenues from barter transactions represented 10% of
revenues. During 1998, revenues from barter transactions represented
approximately 25% of revenues and less than 10% of revenues on a pro forma
basis after giving effect to the acquisition of D&L Online, Inc. Barter
revenues may continue to represent a portion of our total revenues in future
periods.
We must continue to maintain and develop our reputation and brand recognition
We believe that establishing and maintaining the identity of our several
brands is critical in attracting and expanding our audience, and that the
importance of brand recognition will increase due to the growing number of
Internet online services. Promotion and enhancement of our brands will depend
largely on our success in continuing to provide high quality online services.
If users do not perceive our existing online services to be of high quality, or
if we introduce new online services or enter into new business ventures that
are not favorably received by users, the uniqueness of our brands could be
diminished and the attractiveness of our audiences to advertisers could be
reduced. We may also find it necessary to increase substantially our financial
commitment to creating and maintaining a distinct brand loyalty among users. If
we (1) cannot provide high quality online services, (2) fail to promote and
maintain our brands, or (3) incur excessive expenses in an attempt to improve
our online services or promote and maintain our brands, our business, results
of operations and financial condition could be materially adversely affected.
We must retain key executives and personnel
Our performance is substantially dependent on the performance of our senior
management and key technical personnel. In particular, our success depends
substantially on the continued efforts of our senior management. We have
employment agreements, which include non-compete provisions, with members of
senior management. However, these key personnel and others may leave us or
compete with us, which could have a material adverse effect on our business,
results of operations and financial condition. In addition, we have not
purchased key person life insurance on all members of our senior management.
Our future success also depends upon our continuing ability to identify,
attract, hire and retain highly qualified personnel. There is currently a
shortage of qualified personnel in the online services market, and this
shortage is likely to continue. We compete intensely for qualified personnel
with other companies. If we cannot attract, motivate and retain qualified
professionals, our business and results of operations could be materially
adversely affected.
4
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Our continued future growth may strain our resources
A key part of our strategy is to grow, which may strain our managerial,
operational and financial resources. To manage recent acquisitions and future
growth, our management must continue to improve our operational and financial
systems and expand, train, retain and manage our employee base. Our management
may not be successful in managing our growth effectively. If our systems,
procedures and controls are inadequate to support our operations, our expansion
would be halted and we could lose our opportunity to gain significant market
share. Any inability to manage growth effectively could have a material adverse
effect on our business, results of operations and financial condition.
We may be unable to consummate potential acquisitions or integrate the
operations of companies we acquire
Our strategy includes the acquisition of assets of online service providers
that enhance our current services. As part of this strategy, during 1999 we
acquired many businesses and web sites including D&L Online, Inc., Micro House
International, Inc., GoCertify and The Perl Journal. Our continued growth will
depend in part on our ability to continue to identify suitable acquisition
candidates and to acquire them on appropriate terms. In addition, the
anticipated results of any acquisitions may not be realized. Some of the risks
that we may encounter in acquiring other companies include the following:
. expenses, delays and difficulties of integrating the acquired company
into our existing organization;
. potential disruption of our ongoing business;
. diversion of management's attention;
. the amortization of the acquired company's intangible assets;
. impact on our financial condition due to the timing of the acquisition;
. failure to retain key personnel;
. difficulties of integrating the personnel and cultures of the acquired
company into our organization; and
. potential legal liabilities.
If any of these risks materialize, they could have a material adverse effect
on our business, results of operations and financial condition.
We rely on a number of content providers
Our success depends upon our ability to provide a wide range of in-depth
content. The markets for our online services are characterized by rapidly
changing technology, emerging industry standards and the rapidly changing needs
of our audience. We rely on a number of publishers of technical materials, our
vendors and the users of our online services for the continuing provision of
up-to-date content. No single content provider is material to our operations.
However, publishers of technical materials with which we currently have a
relationship, our current vendors or the current users of our online services
may not continue to provide us with a similar flow of content or may not
continue to do so on the same terms and conditions. If the flow of content for
our online services decreases either in terms of quality or quantity, or ceases
completely, our business, results of operations and financial condition could
be materially adversely affected.
We rely on a number of strategic alliances
We rely on strategic alliances with Sun Microsystems, CMP Media, Ziff-Davis,
Macmillan, Fair Market, beyond.com and fatbrain.com, among others, to attract
users and paid advertising to our online services. These relationships may not
continue or we may not be able to develop any additional third party alliances
on
5
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acceptable commercial terms. No one of these strategic alliances is
individually material to our operations. However, our inability to maintain
current strategic relationships generally or develop new strategic
relationships could have a material adverse effect on our business, results of
operations and financial condition.
Our quarterly results may fluctuate significantly
Because of our limited operating history, we plan our expenses based in part
upon our expectations concerning future revenue. Our expenses, to a large
extent, are fixed. Our quarterly revenues and operating results depend
substantially upon the advertising revenues we receive within that quarter,
which are difficult to forecast accurately. The cancellation or deferral of a
small number of advertising contracts could have a material adverse effect on
our business, results of operations and financial condition. We may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue
shortfall, and any significant shortfall could have a material adverse effect
on our business, results of operations and financial condition.
Our quarterly results have historically been affected by variations in the
following:
. the level of usage of the Internet;
. demand for Internet advertising;
. the addition or loss of advertisers;
. the level of user traffic on our online services;
. economic conditions specific to the Internet industry; and
. online media and economic conditions generally.
We also believe that our revenues are subject to seasonal fluctuations
because advertisers generally place fewer advertisements during the first and
third calendar quarters of each year. As a strategic response to this, we have
and may continue to make pricing, service or marketing decisions. We also may
consummate business combinations to reduce our exposure to seasonality. Any
failure of one or more of these strategies could have a material adverse effect
on our business, results of operations and financial condition.
We may have difficulty in expanding and managing our international operations
A key part of our strategy is to develop our online services in international
markets. To date, we have had limited experience in developing localized
versions of our online services and in marketing and operating our online
services internationally. We intend to enter into relationships with foreign
business partners. If the international revenues are not adequate to offset our
investments in international activities, our business, results of operations
and financial condition could be materially and adversely affected.
We may experience difficulty in managing international operations because of
distance, as well as language and cultural differences. We and any of our
future foreign business associates may not be able to successfully market and
operate our online services in foreign markets. Furthermore, in light of
substantial anticipated competition, we believe that it will be necessary to
implement our business strategy quickly in international markets to obtain a
significant share of the market. We cannot give you any assurance that we will
be able to do so. Other risks that could affect our potential international
operations include:
. fluctuations in currency exchange rates;
. difficulties arising from staffing and managing foreign operations;
. unexpected changes in the legal and regulatory requirements of different
countries;
. potential political and economic instability; and
. overlapping or differing tax laws.
If any of these risks materialize, our domestic and international businesses,
results of operations and financial condition could be materially adversely
affected.
6
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RISKS TYPICAL OF THE INTERNET INDUSTRY
Our success is tied to the continued growth in the use of the Internet and the
adequacy of the Internet infrastructure
Our future success is substantially dependent upon continued growth in the
use of the Internet. The number of users and advertisers on the Internet may
not increase and commerce over the Internet may not become more accepted and
widespread for a number of reasons, including:
. actual or perceived lack of security of information, including credit
card numbers;
. lack of access and ease of use;
. congestion of traffic on the Internet;
. inconsistent quality of service and lack of availability of cost-
effective, high speed service;
. possible disruptions due to computer viruses, possible Year 2000
difficulties or other damage to the Internet servers or to users'
computers;
. excessive governmental regulation;
. uncertainty regarding intellectual property ownership; and
. lack of high-speed modems and other communications equipment.
Published reports have also indicated that growth in the use of the Internet
has resulted in users experiencing delays, transmission errors and other
difficulties. As currently configured, the Internet may not support an increase
in the number or requirements of our users. In addition, there have been
outages and delays on the Internet as a result of damage to the current
infrastructure. The amount of traffic on our online services could be
materially affected if there are outages or delays in the future. The use of
the Internet may also decline if there are delays in the development or
adoption of modifications by third parties that are required to support
increased levels of activity on the Internet. If none of the foregoing changes
occur, or if the Internet does not become a viable commercial medium, our
business, results of operations and financial condition could be materially
adversely affected. In addition, even if those changes occur, we may be
required to spend significant amounts to adapt our online services to any new
or emerging technologies relating to the Internet.
Capacity constraints or systems failures could materially and adversely affect
our business
The performance of our online services is critical to:
. our reputation;
. our ability to attract advertisers to our services; and
. achieving market acceptance of our online services.
Any system failure, including network, software or hardware failure that
causes interruption or an increase in response time of our online services
could result in decreased usage of our services. If these failures are
sustained or repeated, they could reduce the attractiveness of our online
services to our users, vendors and advertisers. An increase in the volume of
queries conducted through our online services could strain the capacity of the
software or hardware we employ, which could lead to slower response time or
system failures that could adversely affect our advertising revenues. We also
face technical challenges associated with higher levels of personalization and
localization of content delivered to users of our online services. The process
of managing advertising within our large, high traffic Internet online service
is an increasingly important and complex task. We rely on both internal and
licensed third party advertising, inventory management and analysis systems. We
could incur so-called "make good" obligations to our advertising customers if
an extended failure
7
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of our advertising system results in incorrect advertising insertions. By
displacing advertising inventory, these obligations could defer advertising
revenues and thereby have a material adverse effect on our business, results of
operations and financial condition.
Our operations are dependent in part upon our ability to protect our
operating systems against:
.physical damage from acts of God;
.power loss;
.telecommunications failures;
.physical and electronic break-ins;
.hacker attacks;
.computer viruses; and
.similar events.
The occurrence of any of these events could result in interruptions, delays
or cessations in service to users of our online services, which could have a
material adverse effect on our business, results of operations and financial
condition. Overall Internet usage could decline if any well-publicized
compromise of security occurs. Hacking involves efforts to gain unauthorized
access to information of systems or to cause intentional malfunctions or loss
or corruption of data software, hardware or other computer equipment. Hackers,
if successful, could misappropriate proprietary information or cause
disruptions in our services. In February 2000, several popular Internet portals
in the United States were disrupted by hackers. We cannot assure you that we
will be able to avoid hackers or some other similar form of system disruption
or denial of service attack. Security breaches could have a material adverse
effect on EarthWeb and its business. In addition, transmission of computer
viruses to our internet sites, whether intentional or inadvertent, could expose
us to a material risk of loss or litigation and possible liability.
We may face liability for the services that we provide
Because content made available by third parties may be downloaded by the
online services operated or facilitated by us and may be subsequently
distributed to others, there is a potential that claims will be asserted
against us for defamation, negligence or personal injury, or based on other
theories due to the nature of the content. These claims have been brought, and
sometimes successfully asserted, against other online service providers. In
addition, we could be exposed to liability with respect to the selection of
listings that may be accessible through our online services or through content
and materials that may be posted by users in our classifieds, bulletin board or
chat room services. By providing hypertext links to Internet sites operated by
other providers, third parties may attempt to assert claims or liability for
wrongful actions by these other providers through these Internet sites. It is
also possible that users could claim that we were responsible for losses
incurred in reliance on information provided on our online services. Although
we carry general liability insurance, our insurance may not cover potential
claims of this type or may not be adequate to provide full indemnification. Any
imposition of liability or legal defense expenses that are not covered by
insurance or are in excess of insurance coverage could have a material adverse
effect on our business, results of operations and financial condition.
Consumers may sue us if any of the products that we sell online are defective,
fail to perform properly or injure the user. To date, we have had very limited
experience in the sale of products online and the development of relationships
with manufacturers or suppliers of such products. Liability claims could
require us to spend significant time and money in litigation or to pay
significant damages. As a result, any such claims, whether or not successful,
could seriously damage our reputation and our business.
8
<PAGE>
Misappropriation of our intellectual property could harm our reputation, affect
our competitive position and cost us money
We believe that our service marks and other proprietary rights are important
to our success and competitive position. We have registered some of our service
marks in the United States and abroad. We also limit access to and distribution
of our proprietary information, as well as proprietary information licensed
from third parties. Our management cannot ensure that these strategies will be
adequate to deter misappropriation of our proprietary information and material.
Despite our efforts to protect our intellectual property, we face the
following risks:
.non-recognition or inadequate protection of our proprietary rights in
various foreign countries;
.undetected misappropriation of our proprietary information or materials;
.development of similar technologies by competitors;
.unenforceability of the non-competition agreements entered into by our
employees; and
.infringement claims, even if not meritorious.
If any of these risks materialize, we could be required to pay significant
amounts to defend our rights and our managerial resources could be diverted.
Legal standards relating to the validity, enforceability and scope of
protection of various intellectual property rights in Internet-related
industries are uncertain and still evolving, and no assurance can be given as
to the future viability or value of any intellectual property rights of ours or
other companies within the IT industry. We generally enter into confidentiality
agreements with our employees, consultants, vendors and customers, license
agreements with third parties and generally seek to control access to and
distribution of our technology, documentation and other proprietary
information. We pursue the registration of our service marks in the United
States and internationally. We have obtained United States service mark
registrations for EarthWeb and its related logo and for developer.com (on the
Supplemental Register), have been assigned Plugin Datamation, Datamation and
Dice and have applied for the registration of additional service marks,
including EarthWeb's ITKnowledge and the developer.com logo. Although we
generally pursue the registration of our service marks and other intellectual
property, we have copyrights, trademarks and/or service marks that have not
been registered in the United States and/or other jurisdictions. Moreover,
effective trademark, copyright and trade secret protection may not be available
in every country in which our online services are distributed or made available
through the Internet. The steps we have taken to protect our proprietary rights
may not be adequate, and third parties could infringe or misappropriate our
copyrights, service marks, trade dress and similar proprietary rights.
We have licensed in the past, and expect to license in the future, various
elements of our distinctive trademarks, service marks, trade dress, trade
secrets and similar proprietary rights to third parties. While we attempt to
ensure that the quality of our several brands is maintained by these licensees,
no assurance can be given that these licensees will not take actions that could
materially and adversely affect the value of proprietary rights or the
reputation of our online services, either of which could have a material
adverse effect on business, results of operations and financial condition.
Also, we are aware that third parties have from time to time copied significant
portions of developer.com directory listings for use in competitive Internet
navigational tools and services, and we cannot guarantee that the distinctive
elements of developer.com can be protected under copyright law.
We may be liable if third parties misappropriate our users' personal
information
If third parties were able to penetrate our network security or otherwise
misappropriate our users' personal information or credit card information, we
could be subject to liability. This liability could include claims for
9
<PAGE>
unauthorized purchases with credit card information, impersonation or other
similar fraud claims. It could also include claims for other misuses of
personal information, including unauthorized marketing purposes. These claims
could result in litigation.
We may be liable with respect to the collection and use of users' personal
information and our current practices may not be in compliance with proposed
new laws and regulations
Recently, class action lawsuits have been filed and the Federal Trade
Commission and state agencies have commenced investigations with respect to the
collection, use and sale by various internet companies of users' personal
information. While we do not sell personally identifiable user information to
third parties and believe we are otherwise in compliance with current law, we
cannot ensure that we will not be subject to any such lawsuits or
investigations. Moreover, our current practices regarding the collection and
use of user information may not be in compliance with currently pending
legislative and regulatory proposals by the U.S. federal government and various
state governments intended to limit the collection and use of user information.
As a result, we may be forced to change our current practices relating to the
collection and use of user information. In addition, the European Union adopted
a directive in October 1998 that may limit our collection and use of
information regarding our users in Europe. We may incur additional expenses if
we are sued, our privacy practices are investigated or need to change our
practices to comply with new regulations or laws regarding the use of personal
information.
Our business is subject to U.S. and foreign government regulation of the
Internet and taxation
Congress and various state and local governments, as well as the European
Union, have recently passed legislation that regulates various aspects of the
Internet, including online content, copyright infringement, user privacy,
taxation, access charges, liability for third-party activities and
jurisdiction. In addition, federal, state, local and foreign governmental
organizations are also considering legislative and regulatory proposals that
would regulate the Internet. Areas of potential regulation include libel,
pricing, quality of products and services and intellectual property ownership.
A number of proposals have been made at the state and local level that would
impose taxes on the sale of goods and services through the Internet. Such
proposals, if adopted, could substantially impair the growth of e-commerce and
could adversely affect our future results of operations and financial
condition.
A law imposing a three-year moratorium on new taxes on Internet-based
transactions was enacted by Congress in October 1998. This moratorium relates
to new taxes on Internet access fees and state taxes on commerce that
discriminate against out-of-state Web sites. Sales or use taxes imposed upon
the sale of products or services over the Internet will not be affected by this
moratorium. We have not yet been able to determine how we will be affected by
this moratorium. To the extent that the moratorium provides a material benefit,
its expiration after three years could have a material adverse effect on our
financial condition and results of operations.
Because these laws are relatively new and still in the process of being
implemented, it is not known how courts will interpret both existing and new
laws. Therefore, our management is uncertain as to how new laws or the
application of existing laws will affect our business. Increased regulation of
the Internet may reduce the use of the Internet, which could decrease the
demand for our services, increase our cost of doing business or otherwise have
a material adverse effect on our business, results of operations and financial
condition.
Accounting standards affecting the Internet industry are in flux
We are aware of various proposals being discussed by the accounting
profession and the Securities and Exchange Commission that would affect how
Internet companies record revenue, account for barter transactions, reflect
guarantees of hits in connection with advertising arrangements or accrue
expenses and, in certain cases, how their customers account for transactions
with Internet companies. While these discussions are still in a preliminary
phase and we believe that none of the proposals we are aware of would
materially
10
<PAGE>
adversely affect our financial position or results of operations in the event
they are adopted, we cannot predict with certainty the timing or effect of the
adoption of any of these proposed changes.
RISKS RELATING TO THE OFFERING
Your right to receive payments on the notes is subordinated to all of our
existing and future senior indebtedness and the notes are effectively
subordinated to indebtedness of our subsidiaries
The notes are unsecured obligations and subordinated in right of payment, as
provided in the indenture under which they are issued, to the prior payment in
full in cash or other payment satisfactory to holders of senior indebtedness of
all of our existing and future senior indebtedness. Senior indebtedness is
defined to include, among other things, all indebtedness for money borrowed and
indebtedness evidenced by securities, debentures, bonds or other similar
instruments. Senior indebtedness does not include indebtedness that is
expressly junior in right of payment to the notes or ranks pari passu in right
of payment to the notes. As of December 31, 1999, we had $15.8 million of
senior indebtedness. The terms of the notes do not limit the amount of
additional indebtedness, including senior indebtedness, which we can create,
incur, assume or guarantee. Upon any distribution of our assets upon any
insolvency, dissolution or reorganization, the payment of the principal of and
interest on the notes will be subordinated to the extent provided in the
indenture to the prior payment in full of all of our senior indebtedness, and
there may not be sufficient assets remaining to pay amounts due on any or all
of the notes then outstanding.
The notes are effectively subordinated to all existing and future liabilities
of our subsidiaries. Any right of ours to receive assets of any subsidiary upon
its liquidation or reorganization, and the consequent right of the holders of
the notes to participate in those assets, will be subject to the claims of that
subsidiary's creditors. If we ourselves are a creditor of that subsidiary, our
claims would still be subordinate to any security interests in the assets of
that subsidiary and any senior indebtedness of that subsidiary. As of December
31, 1999, our subsidiaries had an aggregate of approximately $11.8 million of
liabilities to which the notes would be effectively subordinated.
We may not be able to satisfy a change in control offer
The indenture governing the notes contains provisions that apply to a change
in our control. If someone triggers a change in control as defined in the
indenture, we must offer to purchase those notes with cash, or at our option
with our common stock, subject to the terms and conditions of the indenture. If
we have to make that offer, we cannot be sure that we will have enough funds or
be able to issue enough common stock to pay for all the notes that the holders
could tender.
We have substantially increased our indebtedness
As a result of the sale of the notes, we have incurred $80.0 million of
additional indebtedness, increasing our ratio of long-term debt to equity
(expressed as a percentage) from approximately 12% to approximately 148% as of
December 31, 1999, on a pro forma basis giving effect to the sale of the notes.
Long-term debt excludes approximately $3.5 million of other long-term
liabilities incurred primarily in connection with the acquisition of D&L
Online. Our other indebtedness is principally comprised of notes payable. We
may incur substantial additional indebtedness in the future. The level of our
indebtedness, among other things, could
. make it difficult for us to make payments on the notes;
. make it difficult for us to obtain any necessary future financing for
working capital, capital expenditures, debt service requirements or
other purposes;
. limit our flexibility in planning for, or reacting to changes in, our
business; and
. make us more vulnerable in the event of a downturn in our business.
11
<PAGE>
There can be no assurance that we will be able to meet our debt service
obligations, including our obligations under the notes.
We may not be able to pay our debt and other obligations
Our cash flow generated during the nine months ended December 31, 1999, if
annualized, would have been insufficient to pay the amount of interest payable
annually on the notes, and there can be no assurance that we will be able to
pay interest and other amounts due on the notes as and when they become due and
payable. Additionally, our earnings for the year ended December 31, 1995
through 1998 were insufficient to cover fixed charges during those same years
consisting of pretax interest on indebtedness, amortization of debt exhausted
and expense and rental expense. If our cash flow is inadequate to meet our
obligations, we could face substantial liquidity problems. If we are unable to
generate sufficient cash flow or otherwise obtain funds necessary to make
required payments on the notes or our other obligations, we would be in default
under the terms thereof, which would permit the holders of the notes to
accelerate the maturity of the notes and could also cause defaults under future
indebtedness we may incur. Any such default could have a material adverse
effect on our business, prospects, financial condition and operating results.
In addition, there can be no assurance that we would be able to repay amounts
due in respect of the notes if payment of the notes were to be accelerated
following the occurrence of an event of default as defined in the indenture.
There is no public market for the notes and transfers of the notes will be
restricted
There has been no trading market for the notes. We have applied for the notes
to be approved for trading on the PORTAL market. Although the initial
purchasers of the notes have advised us that they intend to make a market in
the notes, they are not obligated to make a market in the notes. The initial
purchasers could stop making a market at any time without notice. Accordingly,
no market for the notes may develop, and any market that develops may not last.
We do not intend to apply for listing of the notes on any securities exchange
or other stock market.
Any rating of the notes may cause their trading price to fall
We believe that one or more rating agencies may rate the notes. If the rating
agencies rate the notes, they may assign a lower rating than expected by
investors. Rating agencies may also lower ratings on the notes in the future.
If the rating agencies assign a lower than expected rating or reduce their
ratings in the future, the trading price of the notes could decline.
Our stock price, like that of other Internet companies, is volatile
Our common stock began trading on the Nasdaq National Market on November 11,
1998 and its market price has been highly volatile. The price range for our
common stock has ranged from a low of $22.13 to a high of $89 since it began
trading on the Nasdaq National Market. In addition, the overall market for the
equity securities issued by Internet-related companies has been volatile. This
volatility may continue. Factors that may materially adversely affect the
market price of our common stock include:
. variations in our financial results and earnings;
. failure to meet or exceed estimates by securities analysts;
. fluctuations in the stock prices of our competitors;
. any loss of key management;
. adverse regulatory actions or decisions;
. announcements of extraordinary events, including material litigation or
acquisitions or changes in pricing policies by us or our competitors;
12
<PAGE>
. changes in the market for our online services; and
. general economic, political and market conditions.
Four of our directors or their affiliates own a significant percentage of our
shares
As of March 1, 2000, Warburg, Pincus Ventures, L.P., Jack D. Hidary and
Murray Hidary (or their affiliates) owned 34.29% in the aggregate of the
outstanding shares of common stock and individually owned the percentage set
forth opposite their respective names below. Two of our directors are
affiliated with Warburg, Pincus Ventures, L.P. and both Jack Hidary and Murray
Hidary are directors and officers of EarthWeb.
<TABLE>
<S> <C>
Warburg, Pincus Ventures, L.P...................................... 18.00%
Jack D. Hidary..................................................... 8.19%
Murray Hidary...................................................... 8.09%
</TABLE>
If all the notes had been converted into shares of common stock immediately
after the original issuance of the notes, the aggregate percentage of shares of
common stock that Warburg, Pincus Ventures, L.P., Jack D. Hidary and Murray
Hidary (or their affiliates) own would have decreased to 28.5%. If the
stockholders listed above choose to act or vote in concert, they will have the
power to influence the election of our directors, the appointment of new
management and the approval of any other action requiring the approval of our
stockholders, including any amendments to our certificate of incorporation and
mergers or sales of all of its assets. In addition, without the consent of
these stockholders, we could be prevented from entering into potentially
beneficial transactions. Conversely, third parties could be discouraged from
making a tender offer or bid to acquire us at a price per share that is above
the price at which the common stock trades on the Nasdaq National Market.
Substantial sales of our common stock could adversely affect our stock price
In connection with our acquisitions of dice.com, MicroHouse and CodeGuru, we
issued a significant number of shares of common stock. Of these shares 635,215
are being offered and sold from time to time under an effective registration
statement by the holders of those shares. Those shareholders have agreed to
restrict their sales of such shares of common stock to a limited number of
shares per quarter. Certain of those shares are currently held under escrow
arrangements and are not immediately resellable. However, in the event that all
of those shares available for sale in any quarter are all sold on one day, such
sales may have an adverse effect in the market price of our common stock.
Our charter documents could make it more difficult for a third party to acquire
us
Various provisions of our certificate of incorporation and by-laws are
designed to discourage or prevent a third party from acquiring control of us.
Our by-laws include restrictions on who may call a special meeting of
stockholders, and either a majority of the board of directors or the holders of
two-thirds of our outstanding capital stock, which are entitled to vote in the
elections of the board of directors, must approve all amendments to our by-
laws.
Our certificate of incorporation authorizes the board of directors to issue
up to 2,000,000 shares of "blank check" preferred stock. The board of directors
will have the authority without action by our stockholders to fix the rights,
privileges and preferences of, and to issue shares of this preferred stock. In
addition, our certificate of incorporation provides that the board of directors
will be divided into three classes with the directors serving staggered three-
year terms. Only the holders of two-thirds of our outstanding capital stock
that are entitled to vote in the elections of the board of directors can amend
this provision.
13
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus and the documents that are and will be incorporated into this
prospectus contain forward-looking statements that involve risks and
uncertainties. The outcome of the events described in these forward-looking
statements is subject to risks and actual results could differ materially.
These statements relate to our future plans, objectives, expectations and
intentions. These statements may be identified by the use of words like
"believes," "expects," "may," "will," "should," "seeks," "pro forma," or
"anticipates," and similar expressions. Our actual results could differ
materially from those discussed in these statements. Factors that could
contribute to these differences include those discussed under "Risk Factors"
and elsewhere in this prospectus and documents incorporated by reference.
We include information in this prospectus about (1) the worldwide market for
information technology products and services, (2) the size of business-to-
business Internet commerce, (3) the worldwide market for IT education and
training and (4) the worldwide market for IT recruiting. This information is
based on studies prepared by the Internet market research firms International
Data Corporation and Forrester Research. These studies include projections
based on a number of assumptions including:
. no catastrophic failure of the Internet;
. the continuing expansion of the worldwide economy;
. Internet security will be adequately addressed;
. the number of people online and the total number of hours spent online
will increase significantly over the next five years;
. the use of the Internet will increase significantly in major foreign
countries and some of these foreign countries will adopt the U.S. style
of advertising on the Internet;
. media advertising will continue to grow in all categories and online
advertising will comprise an increased percentage of all media
advertising;
. the value of online advertising dollars spent per online user hour will
increase;
. non-technology industry Internet advertising will increase;
. the download speed of content will increase dramatically; and
. a proliferation of Internet access devices other than the PC (for
example, PC/television sets).
If any one or more of these assumptions are incorrect, the projections based
on these assumptions may be materially different from actual results. Internet-
related markets and products may not grow over the next three to four years at
the rates projected by International Data Corporation or Forrester Research, or
at all. If Internet-related markets or products do not grow at the assumed
projected rates, our business, results of operations and financial condition
could be materially and adversely affected.
14
<PAGE>
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. 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,
-------------------------------------
1995 1996 1997 1998 1999
----- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Deficiency of earnings available to
cover fixed charges................... (640) (2,046) (7,821) (8,970) (34,713)
</TABLE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the notes or the
common stock issuable upon conversion thereof by the selling securityholders.
PRICE RANGE OF COMMON STOCK
Our common stock has been quoted on the Nasdaq National Market under the
symbol "EWBX" since November 11, 1998. The following table sets forth, for the
periods indicated, the high and low closing sales prices per share of the
common stock as reported on the Nasdaq National Market:
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Year Ended December 31, 1998
Fourth Quarter (from November 11)................................ $69.25 $33.00
Year Ended December 31, 1999
First Quarter.................................................... $54.81 $35.50
Second Quarter................................................... $77.63 $26.19
Third Quarter.................................................... $49.25 $32.88
Fourth Quarter................................................... $51.88 $30.25
Year Ending December 31, 2000
First Quarter (through March 29)................................. $50.13 $22.13
</TABLE>
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock and do
not expect to do so in the foreseeable future. We currently intend to retain
any earnings to finance the expansion and development of our business. Any
future determination of the payment of dividends will be made at the discretion
of the board of directors based upon various conditions, including our
earnings, financial condition and capital requirements as well as the economic
and other conditions that the board of directors may deem relevant.
15
<PAGE>
SELLING SECURITYHOLDERS
The notes were originally issued by us in a private placement on January 25,
2000. The notes may thereafter have been sold by the initial purchasers in
transactions exempt from the registration requirements of the Securities Act to
persons reasonably believed by the initial purchasers to be "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act).
The selling securityholders may offer and sell the notes or the common stock
into which the notes are convertible from time to time to purchasers directly,
or through underwriters, brokers, dealers or agents, at market prices
prevailing at the time of sale or at negotiated prices. See "Plan of
Distribution."
The following table sets forth information, as of March 29, 2000, with
respect to the selling securityholders and the respective principal amounts of
notes beneficially owned by each selling securityholder that may be offered
pursuant to this prospectus. Because the selling securityholders may offer all
or some portion of their securities, no estimate can currently be given as to
the number of shares that will be held by any selling securityholders upon
termination of such sales. In addition, selling securityholders may have
disposed of, or may dispose of, all or a portion of their securities in
transactions exempt from the requirements of the Securities Act.
<TABLE>
<CAPTION>
Principal Amount of Common Stock Owned
Notes Beneficially Owned Prior to the Common Stock
Name and Offers Hereby Offering (1)(2) Offered Hereby(1)(2)
---- ------------------------ ------------------ -------------------
<S> <C> <C> <C>
JMG Capital Partners,
LP..................... $ 750,000 19,181 19,181
JMG Triton Offshore
Fund, Ltd.............. 750,000 19,181 19,181
Argent Classic
Convertible:
Arbitrage Fund
(Bermuda) L.P......... 5,000,000 127,877 127,877
Fidelity Financial
Trust:
Fidelity Convertible
Securities Fund(3).... 7,500,000 191,815 191,815
Q Opportunity Fund,
LTD. .................. 8,000,000 204,603 204,603
---------- ------- -------
Total............... $
==========
</TABLE>
- ----------------
(1) Assumes a conversion price of $39.10 per share and a cash payment in
lieu of any fractional interest.
(2) Assumes that any holders of notes or any future transferee from any
such holder does not beneficially own any common stock other than
common stock into which the notes are convertible at the conversion
price of $39.10 per share.
(3) The entity is either an investment company or a portfolio of an
investment company registered under the Investment Act of 1940, as
amended, or a private investment account advised by Fidelity Management
& Research Company. Fidelity Management & Research Company is a
Massachusetts corporation, an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, as amended, and is
a wholly owned subsidiary of FMR Corp., also a Massachusetts
corporation.
Other than as may be stated in any prospectus supplement, none of the selling
securityholders has had any material relationship with us or our affiliates
within the past three years. All of the notes were "restricted securities"
under the Securities Act prior to this registration.
The selling holders have represented or will represent to us that they
purchased the notes for their own account for investment only and not with a
view toward selling or distributing them, except pursuant to sales registered
under the Securities Act or exemptions. We agreed to file the registration
statement of which this prospectus is part to register the resale of the notes
and the shares of common stock issuable upon conversion of the notes. We agreed
to prepare and file all necessary amendments and supplements to the
registration statement to keep it effective until the earlier of the sale of
all the transfer restricted securities pursuant to the shelf registration
statement or two years after the latest date of original issuance.
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<PAGE>
DESCRIPTION OF NOTES
The notes have been issued under the indenture (the "Indenture") between us
and State Street Bank and Trust Company of California, N.A., as trustee (the
"Trustee"). Copies of the Indenture, including the form of notes, and
registration rights agreement have been filed as exhibits to the registration
statement of which this prospectus is a part.
We have summarized portions of the Indenture below. This summary is not
complete. We urge you to read the Indenture because it defines your rights as a
holder of the notes. Terms not defined in this description have the meanings
given them in the Indenture. In this section, "EarthWeb", "we", "our" and "us"
each refers only to EarthWeb Inc. and not to any of its subsidiaries.
General
The notes are unsecured, subordinated obligations of EarthWeb in an aggregate
principal amount of $80,000,000 and will mature on January 25, 2005. The
principal amount of each note is $1,000 and will be payable at the office of
the Paying Agent, which initially will be the Trustee, or an office or agency
maintained by us for that purpose in the Borough of Manhattan, The City of New
York.
The notes bear interest at the rate of 7% per annum on the principal amount
from the date of issuance of the notes, or from the most recent date to which
interest has been paid or provided for until the notes are paid in full,
converted or funds are made available for payment in full of the notes in
accordance with the Indenture. Interest will be payable at the date of maturity
(or earlier purchase, redemption or, in some circumstances, conversion) and
semiannually on January 25 and July 25 of each year (each an "Interest Payment
Date"), commencing on July 25, 2000, to holders of record at the close of
business on the January 10 and July 10 (whether or not a business day)
immediately preceding each Interest Payment Date (each a "Regular Record
Date"). Each payment of interest on the notes will include interest accrued
through the day before the applicable Interest Payment Date or the date of
maturity (or earlier purchase, redemption or, in some circumstances,
conversion), as the case may be. Any payment of principal and cash interest
required to be made on any day that is not a business day will be made on the
next succeeding business day. Interest will be computed on the basis of a 360-
day year composed of twelve 30-day months.
In the event of the maturity, conversion, purchase by us at the option of a
holder or redemption of a note, interest will cease to accrue on that note
under the terms and subject to the conditions of the Indenture. We may not
reissue a note that has matured or been converted, redeemed or otherwise
cancelled, except for registration of transfer, exchange or replacement of that
note.
You may present the notes for conversion at the office of the Conversion
Agent and for exchange or registration of transfer at the office of the
Registrar. Each of these agents will initially be the Trustee.
The Indenture does not contain any financial covenants or restrictions on the
payment of dividends, the incurrence of Senior Indebtedness (defined below) or
the issuance or repurchase of securities by us. The Indenture contains no
covenants or other provisions to protect holders of the notes in the event of a
highly leveraged transaction or a change in control, except to the extent
described below under "--Change in Control Permits Purchase of Notes at the
Option of the Holder."
Subordination
The notes are unsecured obligations and subordinated in right of payment, as
provided in the Indenture, to the prior payment in full in cash or other
payment satisfactory to holders of Senior Indebtedness of all our existing and
future Senior Indebtedness.
At December 31, 1999, we had $15.8 million of Senior Indebtedness
outstanding. The Indenture does not restrict the incurrence by us or our
subsidiaries of indebtedness or other obligations.
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<PAGE>
The term "Senior Indebtedness" means that the principal, premium, if any,
interest (including all interest accrued subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and all other amounts
owed in respect of all our Indebtedness (defined below), whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed, guaranteed
or in effect guaranteed by us, including all deferrals, renewals, extensions,
refinancings, replacements, restatements or refundings of, or amendments,
modifications or supplements to, the foregoing, except for:
.any such Indebtedness that is by its terms subordinated to or ranking
equal with the notes; and
. any Indebtedness between or among us or any of our subsidiaries, a
majority of the voting stock of which we directly or indirectly own, or
any of our affiliates, including all other debt securities and
guarantees in respect of those debt securities issued to any trust, or
trustees of any trust, partnership or other entity affiliated with us
that is, directly or indirectly, a financing vehicle used by us in
connection with the issuance by that financing vehicle of preferred
securities or other securities that rank equal with, or junior to, the
notes.
The term "Indebtedness" means, with respect to any person:
. all indebtedness, obligations and other liabilities, contingent or
otherwise, of that person for borrowed money (including obligations of
that person in respect of overdrafts, foreign exchange contracts,
currency exchange or similar agreements, interest rate protection,
hedging or similar agreements, and any loans or advances from banks,
whether or not evidenced by notes or similar instruments) or evidenced
by bonds, debentures, notes or similar instruments (whether or not the
recourse of the lender is to the whole of the assets of that person or
only to a portion thereof), other than any account payable or other
accrued current liability or obligation, in each case incurred in the
ordinary course of business in connection with the obtaining of
materials or services;
. all reimbursement obligations and other liabilities, contingent or
otherwise, of that person with respect to letters of credit, bank
guarantees, bankers' acceptances, security purchase facilities or
similar credit transactions;
. all obligations and liabilities, contingent or otherwise, in respect of
deferred and unpaid balances on any purchase price of any property;
. all obligations and liabilities, contingent or otherwise, in respect of
leases of that person required, in conformity with generally accepted
accounting principles, to be accounted for as capitalized lease
obligations on the balance sheet of that person and all obligations and
other liabilities, contingent or otherwise, under any lease or related
document, including, without limitation, the balance deferred and unpaid
on any purchase price of any property and a purchase agreement, in
connection with the lease of real property that provides that the person
is contractually obligated to purchase or cause a third party to
purchase the leased property and thereby guarantee a minimum residual
value of the leased property to the lessor and the obligations of that
person under that lease or related document to purchase or to cause a
third party to purchase that leased property;
. all obligations of that person, contingent or otherwise, with respect to
an interest rate or other swap, cap or collar agreement or other similar
instrument or agreement or foreign currency hedge, exchange, purchase or
similar instrument or agreement;
. all direct or indirect guarantees or similar agreements by that person
in respect of, and obligations or liabilities, contingent or otherwise,
of that person to purchase or otherwise acquire or otherwise assure a
creditor against loss in respect of indebtedness, obligations or
liabilities of another person of the kind described in the above
clauses;
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. any indebtedness, or other obligations described in the above clauses
secured by any mortgage, pledge, lien or other encumbrance existing on
property that is owned or held by that person, regardless of whether the
indebtedness or other obligation secured thereby shall have been assumed
by that person; and
. any and all deferrals, renewals, extensions, refinancings, replacements,
restatements and refundings of, or amendments, modifications or
supplements to, or any indebtedness or obligation issued in exchange
for, any indebtedness, obligation or liability of the kind described in
the above clauses.
Any Senior Indebtedness will continue to be Senior Indebtedness and will be
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any of its terms.
By reason of the application of the subordination provisions, in the event of
dissolution, insolvency, bankruptcy or other similar proceedings, upon any
distribution of our assets:
. the holders of the notes are required to pay over their share of that
distribution to the trustee in bankruptcy, receiver or other person
distributing our assets for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all
holders of Senior Indebtedness in full in cash or other payment
satisfactory to the holders of Senior Indebtedness; and
. our unsecured creditors may recover less, ratably, than holders of our
Senior Indebtedness, and may recover more, ratably, than the holders of
notes.
In addition, we may not pay the principal amount, the Change in Control
Purchase Price (defined below), any redemption amounts or interest with respect
to any notes, and we may not acquire any notes for cash or property, except as
provided in the Indenture, if:
. any payment default on any Senior Indebtedness has occurred and is
continuing beyond any applicable grace period or
. any default, other than a payment default, with respect to Senior
Indebtedness occurs and is continuing that permits the acceleration of
the maturity of that Senior Indebtedness and that default is either the
subject of judicial proceedings or we receive a written notice of that
default (a "Senior Indebtedness Default Notice").
Notwithstanding the foregoing, payments with respect to the notes may resume
and we may acquire notes for cash when:
. the default with respect to the Senior Indebtedness is cured or waived
or ceases to exist or
. in the case of a Senior Indebtedness Default Notice, 179 or more days
pass after notice of the default is received by us, provided that the
terms of the Indenture otherwise permit the payment or acquisition of
the notes at that time.
If we receive a Senior Indebtedness Default Notice, then a similar notice
received within nine months after receiving that Senior Indebtedness Default
Notice relating to the same default on the same issue or Senior Indebtedness
will not be effective to prevent the payment or acquisition of the notes as
provided above. In addition, no payment may be made on the notes if any notes
are declared due and payable prior to their Stated Maturity by reason of the
occurrence of an Event of Default until the earlier of:
. 120 days after the date of acceleration of the maturity of that Senior
Indebtedness or
. the payment in full of all Senior Indebtedness
but only if payment on the notes is then otherwise permitted under the terms of
the Indenture.
Upon any payment or distribution of our assets to creditors upon any of our
dissolution, winding up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other similar
proceedings, the holders of Senior Indebtedness will first be entitled to
receive payment in full, in cash or other payment satisfactory to the holders
of Senior Indebtedness, of all amounts due or to become due
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on the Senior Indebtedness, or payment of those amounts must have been provided
for, before the holders of the notes will be entitled to receive any payment or
distribution with respect to any notes.
The notes are effectively subordinated to all existing and future liabilities
of our subsidiaries. Any rights of ours to receive assets of any subsidiary
upon its liquidation or reorganization, and the consequent right of the holders
of the notes to participate in those assets, will be subject to the claims of
that subsidiary's creditors, including trade creditors, except to the extent
that we ourselves are recognized as a creditor of that subsidiary, in which
case our claims would still be subordinate to any securities interests in the
assets of that subsidiary and any indebtedness of that subsidiary senior to
that held by us. As of December 31, 1999, our subsidiaries had an aggregate of
approximately $11.8 million of liabilities to which the notes would be
effectively subordinated.
Conversion Rights
A holder of a note is entitled to convert it into shares of common stock at
any time on or prior to maturity, provided, that if a note is called for
redemption, the holder is entitled to convert it at any time before the close
of business on the last business day prior to the redemption date. A note in
respect of which a holder has delivered a Change in Control Purchase Notice (as
defined below) exercising that holder's option to require us to purchase that
holder's note, may be converted only if the Change in Control Purchase Notice
is withdrawn by a written notice of withdrawal delivered by the holder to the
Paying Agent prior to the close of business on the Change in Control Purchase
Date, in accordance with the terms of the Indenture.
The initial conversion price for the notes is $39.10 per share of common
stock, which is equal to a Conversion Rate of 25.5754 shares per $1,000
principal amount of notes. The Conversion Rate is subject to adjustment upon
the occurrence of some events described below. A holder otherwise entitled to a
fractional share of common stock will receive cash in an amount equal to the
market value of that fractional share based on the closing sale price on the
trading day immediately preceding the Conversion Date. A holder may convert a
portion of that holder's notes so long as that portion is $1,000 principal
amount or an integral multiple of $1,000.
To convert a note, a holder must:
. complete and manually sign the conversion notice on the back of the
note, or complete and manually sign a facsimile of the note, and deliver
the conversion notice to the Conversion agent, initially the Trustee, at
the office maintained by the Conversion Agent for that purpose;
. surrender the note to the Conversion Agent;
. if required, furnish appropriate endorsements and transfer documents;
and
. if required, pay all transfer or similar taxes.
Under the Indenture, the date on which all of these requirements have been
satisfied is the Conversion Date.
Upon conversion of a note, except as provided below, a holder will not
receive any cash payment representing accrued interest on the note. Our
delivery to the holder of the fixed number of shares of common stock into which
the note is convertible, together with any cash payment to be made instead of
any fractional shares, will satisfy our obligation to pay the principal amount
of the note, and the accrued and unpaid interest to the Conversion Date. Thus,
the accrued but unpaid interest to the Conversion Date will be deemed to be
paid in full rather than cancelled, extinguished or forfeited. Notwithstanding
the foregoing, accrued but unpaid cash interest will be payable upon any
conversion of notes at the option of the holder made concurrently with or after
acceleration of the notes following an Event of Default described under "--
Events of Default" below. Notes surrendered for conversion during the period
from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on that Interest Payment Date,
except notes to be redeemed on a date within that period, must be accompanied
by payment of an amount equal to the interest on the surrendered notes that the
registered holder is to receive. Except where notes surrendered for
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conversion must be accompanied by payment as described above, no interest on
converted notes will be payable by us on any Interest Payment Date subsequent
to the date of conversion. The Conversion Rate will not be adjusted at any time
during the term of the notes for accrued interest.
A certificate for the number of full shares of common stock into which any
note is converted, and any cash payment to be made instead of any fractional
shares, will be delivered as soon as practicable, but in any event no later
than the seventh business day following the Conversion Date. For a summary of
the U.S. federal income tax treatment of a holder receiving common stock upon
conversion, see "United States Federal Income Tax Considerations--Conversion of
Notes."
The Conversion Rate is subject to adjustment in some events, including:
. the issuance of shares of our common stock as a dividend or a
distribution with respect to common stock;
. some subdivisions and combinations of our common stock;
. the issuance to all holders of common stock of rights or warrants
entitling them, for a period not exceeding 45 days, to subscribe for
shares of our common stock at less than the current market price as
defined in the Indenture;
. the distribution to holders of common stock of evidences of our
indebtedness, securities or capital stock, cash or assets, including
securities, but excluding common stock distributions covered above,
those rights, warrants, dividends and distributions referred to above,
dividends and distributions paid exclusively in cash and distributions
upon mergers or consolidations resulting in a reclassification,
conversion, exchange or cancellation of common stock covered in a
Transaction adjustment described below;
. the payment of dividends and other distributions on common stock paid
exclusively in cash, if the aggregate amount of these dividends and
other distributions, when taken together with:
-- other all-cash distributions made within the preceding 12 months not
triggering a Conversion Rate adjustment, and
-- any cash and the fair market value, as of the expiration of the
tender or exchange offer referred to below, of consideration payable
in respect of any tender or exchange offer by us or one of our
subsidiaries for the common stock concluded within the preceding 12
months not triggering a Conversion Rate adjustment,
exceeds 10% of our aggregate market capitalization on the date of the
payment of those dividends and other distributions. The aggregate
market capitalization is the product of the current market price of our
common stock as of the trading day immediately preceding the date of
declaration of the applicable dividend multiplied by the number of
shares of common stock then outstanding; and
. payment to holders of common stock in respect of a tender or exchange
offer, other than an odd-lot offer, by us or one of our subsidiaries for
common stock as of the trading day next succeeding the last date tenders
or exchanges may be made pursuant to a tender or exchange offer by us or
one of our subsidiaries, which involves an aggregate consideration that,
together with:
-- any cash and the fair market value of other consideration payable in
respect of any tender or exchange offer by us or one of our
subsidiaries for the common stock concluded within the preceding 12
months not triggering a Conversion Rate adjustment, and
-- the aggregate amount of any all-cash distributions to all holders of
our common stock made within the preceding 12 months not triggering
a Conversion Rate adjustment,
exceeds 10% of our aggregate market capitalization.
However, adjustment is not necessary if holders may participate in the
transactions otherwise giving rise to an adjustment on a basis and with notice
that our Board of Directors determines to be fair and appropriate, or
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in some other cases specified in the Indenture. In cases where the fair market
value of the portion of assets, debt securities or rights, warrants or options
to purchase our securities applicable to one share of common stock distributed
to stockholders exceeds the Average Sale Price (as defined in the Indenture)
per share of common stock, or the Average Sale Price per share of common stock
exceeds the fair market value of that portion of assets, debt securities or
rights, warrants or options so distributed by less than $1.00, rather than
being entitled to an adjustment in the Conversion Rate, the holder of a note
upon conversion of the note will be entitled to receive, in addition to the
shares of common stock into which that note is convertible, the kind and
amounts of assets, debt securities or rights, options or warrants comprising
the distribution that the holder of that note would have received if that
holder had converted that note immediately prior to the record date for
determining the stockholders entitled to receive the distribution. The
Indenture permits us to increase the Conversion Rate from time to time.
In the event that we become a party to any transaction, including, and with
some exceptions:
. any recapitalization or reclassification of the common stock;
. any consolidation of us with, or merger of us into, any other Person, or
any merger of another Person into us;
. any sale, transfer or lease of all or substantially all of our assets;
or
. any compulsory share exchange
pursuant to which the common stock is converted into the right to receive other
securities, cash or other property (each of the above being referred to as a
"Transaction"), then the holders of notes then outstanding will have the right
to convert the notes only into the kind and amount of securities, cash or other
property receivable upon the consummation of that Transaction by a holder of
the number of shares of common stock issuable upon conversion of those notes
immediately prior to that Transaction.
In the case of a Transaction, each note will become convertible into the
securities, cash or property receivable by a holder of the number of shares of
the common stock into which the note was convertible immediately prior to that
Transaction. This change could substantially lessen or eliminate the value of
the conversion privilege associated with the notes in the future. For example,
if we were acquired in a cash merger each note would become convertible solely
into cash and would no longer be convertible into securities whose value would
vary depending on our future prospects and other factors.
In the event of a taxable distribution to holders of common stock that
results in an adjustment of the Conversion Rate, or in which holders otherwise
participate, or in the event the Conversion Rate is increased at our
discretion, the holders of the notes may, in some circumstances, be deemed to
have received a distribution subject to United States federal income tax as a
dividend. Moreover, in some other circumstances, the absence of an adjustment
to the Conversion Rate may result in a taxable dividend to holders of common
stock. See "United States Federal Income Tax Considerations--Adjustments to
Conversion Price."
Provisional Redemption
We may redeem the notes, in whole or in part, at any time prior to January
25, 2003, at a redemption price equal to $1,000 per $1,000 principal amount of
notes to be redeemed plus accrued and unpaid interest, if any, to the
provisional redemption date if (i) the closing price of our common stock has
exceeded 150% of the conversion price then in effect (as determined based on
the then effective Conversion Rate) for at least 20 trading days within a
period of 30 consecutive trading days ending on the trading day prior to the
date of mailing of the provisional redemption notice (which date shall be not
less than 10 nor more than 20 trading days prior to the provisional redemption
date) and (ii) the shelf registration statement covering resales of the notes
and the common stock issuable upon conversion of the notes is effective and
available for use and is expected to remain effective for the 30 days following
the provisional redemption date.
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Upon any provisional redemption, we will make an additional payment in cash
with respect to the notes called for redemption to holders on the notice date
in an amount equal to $130.43 per $1,000 principal amount of notes, less the
amount of any interest actually paid on the notes prior to the Notice Date. WE
WILL BE OBLIGATED TO MAKE THIS ADDITIONAL PAYMENT ON ALL NOTES CALLED FOR
PROVISIONAL REDEMPTION, INCLUDING ANY NOTES CONVERTED AFTER THE NOTICE DATE AND
BEFORE THE PROVISIONAL REDEMPTION DATE.
Redemption of Notes At Our Option
There is no sinking fund for the notes. On and after January 25, 2003, we
will be entitled to redeem the notes for cash as a whole at any time, or from
time to time in part, upon not less than 30 days' nor more than 60 days' notice
of redemption given by mail to holders of notes, unless a shorter notice is
satisfactory to the Trustee, at the redemption prices set out below plus
accrued cash interest to the redemption date. Any redemption of the notes must
be in integral multiples of $1,000 principal amount.
The table below shows redemption prices of a note per $1,000 principal amount
if redeemed during the periods described below.
<TABLE>
<CAPTION>
Period Redemption Price
------ ----------------
<S> <C>
January 25, 2003 through January 24, 2004................. 102.8%
Thereafter................................................ 101.4%
</TABLE>
If fewer than all of the notes are to be redeemed, the Trustee will select
the notes to be redeemed in principal amounts at maturity of $1,000 or integral
multiples of $1,000 by lot, pro rata or by another method the Trustee considers
fair and appropriate. If a portion of a holder's notes is selected for partial
redemption and that holder converts a portion of those notes prior to the
redemption, the converted portion will be deemed, solely for purposes of
determining the aggregate principal amount of the notes to be redeemed by us,
to be of the portion selected for redemption.
Change In Control Permits Purchase of Notes at the Option of the Holder
In the event of any Change in Control (as defined below) of EarthWeb, each
holder of notes will have the right, at the holder's option, subject to the
terms and conditions of the Indenture, to require us to purchase all or any
part of the holder's notes provided that the principal amount must be $1,000 or
an integral multiple of $1,000. Each holder of notes will have the right to
require us to make that purchase on the date that is 45 business days after the
occurrence of the Change in Control (the "Change in Control Purchase Date") at
a price equal to 100% of the principal amount of that holder's notes plus
accrued interest to the Change in Control Purchase Date (the "Change in Control
Purchase Price").
We may, at our option, instead of paying the Change in Control Purchase Price
in cash, pay the Change in Control Purchase Price in our common stock valued at
95% of the average of the closing sales prices of our common stock for the five
trading days immediately preceding and including the third day prior to the
Change in Control Date. We cannot pay the Change in Control Purchase Price in
common stock unless we satisfy the conditions described in the Indenture.
Within 15 business days after the Change in Control, we will mail to the
Trustee, each holder, and beneficial owners as required by applicable law, a
notice regarding the Change in Control, which will state, among other things:
. the date of the Change in Control and, briefly, the events causing the
Change in Control;
. the date by which the Change in Control Purchase Notice (as defined
below) must be given;
. the Change in Control Purchase Date;
. the Change in Control Purchase Price;
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. the name and address of the Paying Agent and the Conversion Agent;
. the Conversion Rate and any adjustments to the Conversion Rate;
. the procedures that holders must follow to exercise these rights;
. the procedures for withdrawing a Change in Control Purchase Notice;
. that holders who want to convert notes must satisfy the requirements
provided in the notes; and
. briefly, the conversion rights of holders of notes.
We will cause a copy of the notice regarding the Change in Control to be
published in The Wall Street Journal or another daily newspaper of national
circulation.
To exercise the purchase right, the holder must deliver written notice of
the exercise of the purchase right (a "Change in Control Purchase Notice") to
the Paying Agent or an office or agency maintained by us for that purpose in
the Borough of Manhattan, The City of New York, prior to the close of
business, on the Change in Control Purchase Date. Any Change in Control
Purchase Notice must state:
. the name of the holder;
. the certificate numbers of the notes to be delivered by the holder of
those notes for purchase by us;
. the portion of the principal amount of notes to be purchased, which
portion must be $1,000 or an integral multiple of $1,000; and
. that the notes are to be purchased by us pursuant to the applicable
provisions of the notes.
A holder may withdraw any Change in Control Purchase Notice by a written
notice of withdrawal delivered to the Paying Agent prior to the close of
business on the Change in Control Purchase Date. The notice of withdrawal must
state the principal amount and the certificate numbers of the notes as to
which the withdrawal notice relates and the principal amount, if any, which
remains subject to a Change in Control Purchase Notice.
Payment of the Change in Control Purchase Price for a note for which a
Change in Control Purchase Notice has been delivered and not withdrawn is
conditioned upon delivery of the note, together with necessary endorsements,
to the Paying Agent or an office or agency maintained by us for that purpose
in the Borough of Manhattan, The City of New York, at any time, whether prior
to, on or after the Change in Control Purchase Date, after the delivery of the
Change in Control Purchase Notice. Payment of the Change in Control Purchase
Price for the note will be made promptly following the later of the business
day following the Change in Control Purchase Date and the time of delivery of
the note. If the Paying Agent holds, in accordance with the terms of the
Indenture, money sufficient to pay the Change in Control Purchase Price of
that note on the business day following the Change in Control Purchase Date,
then, immediately after the Change in Control Purchase Date, that note will
cease to be outstanding and interest on that note will cease to accrue and
will be deemed paid, whether or not that note is delivered to the Paying
Agent, and all other rights of the holder will terminate, other than the right
to receive the Change in Control Purchase Price upon delivery of that note.
Under the Indenture, "Change in Control" of EarthWeb is deemed to have
occurred upon the occurrence of any of the following events:
. any "person "or "group " (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")),
acquires the beneficial ownership (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right
to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, through a purchase, merger
or other acquisition transaction, of more than 50% of our total
outstanding voting stock other than an acquisition by us, any of our
subsidiaries or any of our employee benefit plans;
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. we consolidate with, or merge with or into another Person or convey,
transfer, lease or otherwise dispose of all or substantially all of our
assets to any Person, or any Person consolidates with or merges with or
into us, in any such event pursuant to a transaction in which our
outstanding voting stock is converted into or exchanged for cash,
securities or other property, other than where:
-- our voting stock is not converted or exchanged at all, except to the
extent necessary to reflect a change in our jurisdiction of
incorporation, or is converted into or exchanged for voting stock,
other than Redeemable Capital Stock, of the surviving or transferee
corporation and
-- immediately after such transaction, no "person" or "group" (as such
terms are used in Sections 13(d)and 14(d)of the Exchange Act) is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person will be deemed to have
"beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more
than 50% of the total outstanding voting stock of the surviving or
transferee corporation;
. during any consecutive two-year period, individuals who at the beginning
of that two-year period constituted our Board of Directors (together
with any new directors whose election to such Board of Directors, or
whose nomination for election by our stockholders, was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of our Board of Directors then in office; or
. our stockholders pass a special resolution approving a plan of
liquidation or dissolution.
"Redeemable Capital Stock" means any class or series of capital stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
stated maturity of the notes or is redeemable at the option of the holder of
the notes at any time prior to such final stated maturity, or is convertible
into or exchangeable for debt securities at any time prior to such final stated
maturity. Redeemable Capital Stock will not include any common stock the holder
of which has a right to put to us upon some terminations of employment.
The Indenture does not permit our Board of Directors to waive our obligation
to purchase notes at the option of the holder in the event of a Change in
Control of EarthWeb.
We will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be applicable, and
will file Schedule 13E-4 or any other schedule required under the Exchange Act
in connection with any offer by us to purchase notes at the option of the
holders of notes upon a Change in Control. In some circumstances, the Change in
Control purchase feature of the notes may make more difficult or discourage a
takeover of us and, thus, the removal of incumbent management. The Change in
Control purchase feature, however, is not the result of management's knowledge
of any specific effort to accumulate shares of common stock or to obtain
control of us by means of a merger, tender offer, solicitation or otherwise, or
part of a plan by management to adopt a series of anti-takeover provisions.
Instead, the Change in Control purchase feature is the result of negotiations
between us and the initial purchasers.
If a Change in Control were to occur, we cannot assure you that we would have
funds sufficient to pay the Change in Control Purchase Price for all of the
notes that might be delivered by holders seeking to exercise the purchase
right, because we or our subsidiaries might also be required to prepay some
indebtedness or obligations having financial covenants with change of control
provisions in favor of the holders of that indebtedness or those obligations.
In addition, our other indebtedness may have cross-default provisions that
could be triggered by a default under the Change in Control provisions thereby
possibly accelerating the maturity of that other indebtedness. In that case,
the holders of the notes would be subordinated to the prior claims of the
holders of other indebtedness having cross-default provisions. In addition, our
ability to purchase
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the notes with cash may be limited by the terms of our then-existing borrowing
agreements. No notes may be purchased pursuant to the provisions described
above if there has occurred and is continuing an Event of Default described
under "--Events of Default" below (other than a default in the payment of the
Change in Control Purchase Price with respect to those notes).
Consolidation, Merger And Sale Of Assets
We, without the consent of any holders of outstanding notes, are entitled to
consolidate with or merge into or transfer or lease our assets substantially as
an entirety to, any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof (each
a "Person"), and any Person is entitled to consolidate with or merge into, or
transfer or lease its assets substantially as an entirety to us, provided that:
. the Person, if other than us, formed by a consolidation or into which we
are merged or the Person which acquires or leases our assets
substantially as an entirety is a corporation, partnership, limited
liability company or trust organized and existing under the laws of any
United States jurisdiction and expressly assumes our obligations on the
notes and under the Indenture;
. immediately after giving effect to the consolidation, merger, transfer
or lease, no Event of Default (as defined above), and no event which,
after notice or lapse of time or both, would become an Event of Default,
happened and is continuing; and
. an officer's certificate and an opinion of counsel, each stating that
the consolidation, merger, transfer or lease complies with the
provisions of the Indenture, have been delivered by us to the Trustee.
Information Requirement
We have agreed that, during any period in which we are not subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, to
make available to holders of the notes, or beneficial owners of interests
therein, or any prospective purchaser thereof, the information required by Rule
144A(d)(4) to be made available in connection with the sale of such note or
beneficial interest.
Events Of Default
The Indenture provides that, if an Event of Default specified in the
Indenture occurs and is continuing, either the Trustee or the holders of not
less than 25% in aggregate principal amount of the notes then outstanding may
declare the principal amount of, and accrued interest to the date of that
declaration, on all the notes to be immediately due and payable. In the case of
some events of bankruptcy or insolvency, the principal amount of, and accrued
interest on all the notes to the date of the occurrence of that event, will
automatically become and be immediately due and payable. Upon any acceleration
of the payment of principal amount and accrued interest, the subordination
provisions of the Indenture will preclude any payment being made to holders of
notes until the earlier of:
. 120 days or more after the date of that acceleration; and
. the payment in full of all Senior Indebtedness,
but only if such payment is then otherwise permitted under the terms of the
Indenture. See "--Subordination."
Under some circumstances, the holders of a majority in aggregate principal
amount of the notes may rescind any acceleration with respect to the notes and
its consequences.
Interest will continue to accrue and be payable on demand upon a default in:
. the payment of:
- principal and interest when due,
- redemption amounts, or
- Change in Control Purchase Price;
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. the delivery of shares of common stock to be delivered on conversion of
notes; or
. the payment of cash in lieu of fractional shares to be paid on
conversion of notes,
in each case to the extent that the payment of interest that is due is legally
enforceable.
Under the Indenture, Events of Default include:
. default in payment of the principal amount, interest when due (if that
default in payment of interest continues for 30 days), any redemption
amounts or the Change in Control Purchase Price with respect to any
note, when that principal amount, interest, redemption amount or Change
in Control Purchase Price becomes due and payable (whether or not that
payment is prohibited by the provisions of the Indenture);
. failure by us to deliver shares of common stock, together with cash
instead of fractional shares, when those shares of common stock, or cash
instead of fractional shares, are required to be delivered following
conversion of a note, and that default continues for 10 days;
. failure by us to comply with any of our other agreements in the notes or
the Indenture upon the receipt by us of notice of that default from the
Trustee or from holders of not less than 25% in aggregate principal
amount of the notes then outstanding and our failure to cure that
default within 60 days after our receipt of that notice;
. default under any bond, note or other evidence of indebtedness for money
borrowed by us having an aggregate outstanding principal amount in
excess of $10 million, which default shall have resulted in that
indebtedness being accelerated, without that indebtedness being
discharged or that acceleration having been rescinded or annulled within
30 days after our receipt of the notice of default from the Trustee or
receipt by us and the Trustee of the notice of default from the holders
of not less than 25% in aggregate principal amount of the notes then
outstanding, unless that default has been cured or waived; or
. some events of bankruptcy or insolvency.
The Trustee will, within 90 days after the occurrence of any default, mail to
all holders of the notes notice of all defaults of which the Trustee is aware,
unless those defaults have been cured or waived before the giving of that
notice. The Trustee may withhold notice as to any default other than a payment
default, if it determines in good faith that withholding the notice is in the
interests of the holders. The term default for the purpose of this provision
means any event that is, or after notice or lapse of time or both would become,
an Event of Default with respect to the notes.
The holders of a majority in aggregate principal amount of the outstanding
notes may direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee, provided that the direction must not be in conflict with any
law or the Indenture and the direction is subject to some other limitations.
The Trustee may refuse to perform any duty or exercise any right or power or
extend or risk its own funds or otherwise incur any financial liability unless
it receives indemnity satisfactory to it against any loss, liability or
expense. No holder of any note will have any right to pursue any remedy with
respect to the Indenture or the notes, unless:
. that holder has previously given the Trustee written notice of a
continuing Event of Default;
. the holders of at least 25% in aggregate principal amount of the
outstanding notes have made a written request to the Trustee to pursue
the relevant remedy;
. the holder giving that written notice has, or the holders making that
written request have, offered to the Trustee reasonable security or
indemnity against any loss, liability or expense satisfactory to it;
. the Trustee has failed to comply with the request within 60 days after
receipt of that notice, request and offer of security or indemnity; and
. the holders of a majority in aggregate principal amount of the
outstanding notes have not given the Trustee a direction inconsistent
with that request within 60 days after receipt of that request.
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The right of any holder:
. to receive payment of principal, any redemption amounts, the Change in
Control Purchase Price or interest in respect of the notes held by that
holder on or after the respective due dates expressed in the notes;
. to convert those notes; or
. to bring suit for the enforcement of any payment of principal, any
redemption amounts, the Change in Control Purchase Price or interest in
respect of those notes held by that holder on or after the respective
due dates expressed in the notes, or the right to convert;
will not be impaired or adversely affected without that holder's consent.
The holders of a majority in aggregate principal amount of notes at the time
outstanding may waive any existing default and its consequences except:
. any default in any payment on the notes;
. any default with respect to the conversion rights of the notes; or
. any default in respect of the covenants or provisions in the Indenture
that may not be modified without the consent of the holder of each note
as described in "--Modification, Waiver and Meetings" below.
When a default is waived, it is deemed cured and will cease to exist, but
that waiver does not extend to any subsequent or other default or impair any
consequent right.
We will be required to furnish to the Trustee annually a statement as to any
default by us in the performance and observance of our obligations under the
Indenture. In addition, we will be required to file with the Trustee written
notice of the occurrence of any default or Event of Default within five
business days of our becoming aware of the occurrence of any default or Event
of Default.
Modification, Waiver And Meetings
The Indenture or the notes may be modified or amended by us and the Trustee
with the consent of the holders of not less than a majority in aggregate
principal amount of the notes then outstanding. The Indenture or the notes may
not be modified or amended by us without the consent of each holder affected
thereby, to, among other things:
. reduce the principal amount, Change in Control Purchase Price or any
redemption amounts with respect to any note, or extend the stated
maturity of any note or alter the manner of payment or rate of interest
on any note or make any note payable in money or securities other than
that stated in the note;
. make any reduction in the principal amount of notes whose holders must
consent to an amendment or any waiver under the Indenture or modify the
Indenture provisions relating to those amendments or waivers;
. make any change that adversely affects the right of a holder to convert
any note;
. modify the provisions of the Indenture relating to the ranking of the
notes in a manner adverse to the holders of the notes; or
. impair the right to institute suit for the enforcement of any payment
with respect to, or conversion of, the notes.
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Without the consent of any holder of notes, we and the Trustee may amend the
Indenture to:
. cure any ambiguity, defect or inconsistency, provided, however, that the
amendment to cure any ambiguity, defect or inconsistency does not
materially adversely affect the rights of any holder of notes;
. provide for the assumption by a successor of our obligations under the
Indenture;
. provide for uncertificated notes in addition to certificated notes, as
long as those uncertificated notes are in registered form for United
States federal income tax purposes;
. make any change that does not adversely affect the rights of any holder
of notes;
. make any change to comply with any requirement of the Securities and
Exchange Commission in connection with the qualification of the
Indenture under the Trust Indenture Act of 1939, as amended;
. add to our covenants or our obligations under the Indenture for the
protection of holders of the notes; or
. surrender any right, power or option conferred by the Indenture on us.
Form, Denomination, Exchange, Registration, Transfer and Payment
We expect to initially issue the notes in the form of one or more global
notes. The global notes will be deposited with, or on behalf of The Depository
Trust Company ("DTC"), and registered in the name of DTC or its nominee. The
notes will be issued in denominations of $1,000 and $1,000 multiples.
The principal, any premium and any interest on the notes will be payable,
without coupons, and the exchange of and the transfer of the notes will be
registrable, at our office or agency maintained for that purpose in the Borough
of Manhattan, The City of New York and at any other office or agency maintained
for that purpose.
Holders may present the notes for exchange, and for registration of transfer,
with the form of transfer endorsed on those notes, or with a satisfactory
written instrument of transfer, duly executed, at the office of the appropriate
securities registrar or at the office of any transfer agent designated by us
for that purpose, without service charge and upon payment of any faxes and
other governmental charges as described in the Indenture. We will appoint the
Trustee of the notes as securities registrar under the Indenture. We may at any
time rescind designation of any transfer agent or approve a change in the
location through which any transfer agent acts, provided that we maintain a
transfer agent in each place of payment for the notes. We may at any time
designate additional transfer agents for the notes.
All monies paid by us to a paying agent for the payment of principal, any
premium or any interest, on any note which remains unclaimed for two years
after the principal, premium or interest has become due and payable may be
repaid to us, and after the two-year period, the holder of that note may look
only to us for payment.
In the event of any redemption, we will not be required to:
. issue, register the transfer of or exchange notes during a period
beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption of notes to be redeemed and ending at
the close of business on the day of that mailing; or
. register the transfer of or exchange any note called for redemption,
except, in the case of any notes being redeemed in part, any portion not
being redeemed.
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Book-Entry System
Upon the issuance of a global note, DTC will credit, on its book-entry
registration and transfer system, the respective principal amounts of the notes
represented by that global note to the accounts of institutions or persons,
commonly known as participants, that have accounts with DTC or its nominee. The
accounts to be credited will be designated by the underwriters, dealers or
agents. Ownership of beneficial interests in a global note will be limited to
participants or persons that may hold interests through participants. Ownership
of interests in a global note will be shown on, and the transfer of those
ownership interests will be effected only through, records maintained by DTC
(with respect to participants' interests) and the participants (with respect to
the owners of beneficial interests in that global note). The laws of some
jurisdictions may require that some purchasers of securities take physical
delivery of the securities in definitive form. These limits and laws may impair
the ability to transfer beneficial interests in a global note.
So long as DTC, or its nominee, is the registered holder and owner of the
global note, DTC or its nominee, as the case may be, will be considered the
sole owner and holder for all purposes of the notes and for all purposes under
the Indenture. Except as described below, owners of beneficial interests in a
global note will not be entitled to have the notes represented by that global
note registered in their names, will not receive or be entitled to receive
physical delivery of notes in definitive form and will not be considered to be
the owners or holders of any notes under the Indenture or that global note.
Accordingly, each person owning a beneficial interest in a global note must
rely on the procedures of DTC and, if that person is not a participant, on the
procedures of the participant through which that person owns its interest, to
exercise any rights of a holder of notes under the Indenture of that global
note. We understand that under existing industry practice, in the event we
request any action of holders of notes or if an owner of a beneficial interest
in a global note desires to take any action that DTC, as the holder of that
global note is entitled to take, DTC would authorize the participants to take
that action, and that the participants would authorize beneficial owners owning
through them to take those actions or would otherwise act upon the instructions
of beneficial owners owning through them.
Payments of principal of and any premium and any interest on the notes
represented by a global note will be made to DTC or its nominee, as the case
may be, as the registered owner and holder of that global note, against
surrender of the notes at the principal corporate trust office of the Trustee.
Interest payments will be made at the principal corporate trust office of the
Trustee or by a check mailed to the holder at its registered address.
We expect that DTC, upon receipt of any payment of principal, and any premium
and any interest, in respect of a global note, will immediately credit the
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of that global note as
shown on the records of the DTC. We expect that payments by participants to
owners of beneficial interests in a global note held through those participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in 'street name,' and will be the responsibility of those
participants. We, our agent, the Trustee and its agent will not have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in a global note or
for maintaining, supervising or reviewing any records relating to those
beneficial ownership interests or for any other aspect of the relationship
between DTC and its participants or the relationship between those participants
and the owners of beneficial interests in that global note owning through those
participants.
Unless and until it is exchanged in whole or in part for notes in definitive
form, a global note may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC or a successor to DTC selected or
approved by us or to a nominee of that successor to DTC.
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The notes represented by a global note will be exchangeable for notes in
definitive form of like tenor as that global note in denominations of $1,000
and in any greater amount that is an integral multiple of $1,000 if:
. DTC notifies us and the Trustee that it is unwilling or unable to
continue as DTC for that global note or if at any time DTC ceases to be
a clearing agency registered under the Exchange Act and a successor
depositary is not appointed by us within 90 days; or
. there is, or continues to be, an Event of Default or there is an event
which, with the giving of notice or lapse of time, or both, would
constitute an Event of Default with respect to the notes.
Any note that is exchangeable pursuant to the preceding sentence is
exchangeable for notes registered in the names which DTC will instruct the
Trustee. It is expected that DTC's instructions may be based upon directions
received by DTC from its participants with respect to ownership of beneficial
interests in that global note. Subject to the foregoing, a global note is not
exchangeable except for a global note or global notes of the same aggregate
denominations to be registered in the name of DTC or its nominee.
Notices
Except as otherwise provided in the Indenture, notices to holders of notes
will be given by mail to the addresses of holders of the notes as they appear
in the Security Register.
Replacement Of Notes
Any mutilated note will be replaced by us at the expense of the holder upon
surrender of that note to the Trustee. Notes that become destroyed, stolen or
lost will be replaced by us at the expense of the holder upon delivery to the
Trustee of notes or evidence of the destruction, loss or theft of the notes
satisfactory to us and the Trustee. In the case of a destroyed, lost or stolen
note, an indemnity satisfactory to the Trustee and us may be required at the
expense of the holder of that note before a replacement note will be issued.
Governing Law
The Indenture, the notes and the registration rights agreement are governed
by, and construed in accordance with, the laws of the State of New York.
Information Regarding The Trustee
State Street Bank and Trust Company of California, N.A. is the Trustee,
Securities Registrar, Paying Agent and Conversion Agent under the Indenture.
Registration Rights of Holders of the Notes
We and the initial purchasers entered into the registration rights agreement
with respect to the notes and the common stock issuable upon conversion of the
notes.
Under the registration rights agreement, we generally will be required to:
. file, within 60 days after the closing date for this offering, a shelf
registration statement covering the notes and the common stock issuable
upon conversion of the notes;
. use our best efforts to cause the shelf registration to become effective
as promptly as practicable; and
. use our best efforts to keep the shelf registration statement effective
until the earlier of the sale of all the transfer restricted securities
pursuant to the shelf registration statement or two years after the
latest date of original issuance.
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When we use the term "transfer restricted securities" in this section, we
mean the notes and the common stock issued upon conversion of the notes until
the earlier of the following events:
. the date the note or common stock issued upon conversion has been
effectively registered under the Securities Act of 1933 and sold or
transferred pursuant to the shelf registration statement;
. the date on which the note or common stock issued upon conversion is
distributed to the public pursuant to Rule 144 under the Securities Act
of 1933 or is available for sale pursuant to Rule 144(k) under the
Securities Act of 1933; or
. the date the note or common stock issued upon conversion ceases to be
outstanding.
We will be required to pay predetermined liquidated damages if one of the
following "registration defaults" occurs:
. we do not file the shelf registration statement within 60 days after the
closing date for this offering;
. the Securities and Exchange Commission does not declare the shelf
registration statement effective within 120 days after the closing date
of this offering; or
. after it has been declared effective, the shelf registration statement
ceases to be effective or available for more than 90 days in any period
of 365 consecutive days.
If a registration default occurs, liquidated damages initially will accrue
(a) for the notes that are transfer restricted securities, at the rate of $.05
per week per $1,000 principal amount of the notes and (b) for any common stock
issued on conversion of the notes that are transfer restricted securities, at
an equivalent rate based on the conversion price. If the registration default
has not been cured within 90 days, the liquidated damages rate will increase by
$.05 per week per $1,000 principal amount of the notes that are transfer
restricted securities (and an equivalent amount for any common stock issued
upon conversion that are transfer restricted securities) for each subsequent
90-day non-compliance period, up to a maximum rate of $.25 per week per $1,000
principal amount of the notes that are transfer restricted securities.
Liquidated damages generally will be payable at the same time as interest
payments on the notes.
We may suspend the use of the shelf registration statement in certain
circumstances described in the registration rights agreement upon notice to the
holders of the transfer restricted securities, subject to the rights of the
holders of transfer restricted securities to receive liquidated damages in
accordance with the registration rights agreement. We will provide copies of
the prospectus and notify holders of notes and common stock issued upon
conversion when the shelf registration statement is filed and when it becomes
effective.
We will give notice to all holders of the filing and effectiveness of the
shelf registration statement. You will need to complete the notice and
questionnaire attached as Annex A to this offering memorandum prior to any
intended distribution of your transfer restricted securities pursuant to the
shelf registration statement. We refer to this form of notice and questionnaire
as the "questionnaire." You are required to complete and deliver the
questionnaire prior to the effectiveness of the shelf registration statement so
that you can be named as selling stockholders in the prospectus. Upon receipt
of your completed questionnaire after the effectiveness of the shelf
registration statement, we will, as promptly as practicable but in any event
within five business days of receipt, file any amendments or supplements to the
shelf registration statement so that you may use the prospectus, subject to our
right to suspend as set forth above. We will pay liquidated damages to you if
we fail to make this filing in the required time. If this filing requires a
post-effective amendment to the shelf registration statement, we will pay
liquidated damages if this amendment is not declared effective within 45
business days of the filing of the post-effective amendment. Under the
registration rights agreement, you will be required to deliver a prospectus to
purchasers and will be bound by the provisions of the agreement.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes the material United States federal income tax
consequences of purchasing, owning, and disposing of the notes and the common
stock into which you may convert the notes. This summary is not a complete
analysis of all the potential tax consequences that you may need to consider
before investing based on your particular circumstances.
This summary is based on the Internal Revenue Code of 1986, as amended, the
applicable Treasury regulations promulgated or proposed under the Internal
Revenue Code, judicial authority and administrative rulings as of the date
hereof. Any of these may change, possibly on a retroactive basis.
This summary deals only with beneficial owners of notes and common stock who
hold the notes and common stock into which the notes are converted as "capital
assets." It does not address tax consequences under any special tax rules.
Special rules may apply, for example, to banks, tax-exempt organizations,
pension funds, insurance companies, dealers in securities or foreign
currencies, persons participating in a hedging transaction, a "straddle,"
constructive sale transaction or "conversion transaction," or persons that have
a "functional currency" other than the U.S. dollar. In addition, this
discussion does not address the tax consequences to non-U.S. holders. This
summary discusses the tax consequences to holders who purchase the notes at
their "issue price" and subsequent purchasers of the notes. The "issue price"
is the first price at which a substantial portion of the notes is sold to the
public, and this summary assumes that the issue price is the original offering
price to investors. We have not sought any ruling from the Internal Revenue
Service (the "IRS") with respect to the statements and conclusions in this
summary. We cannot guarantee that the IRS will agree with these statements and
conclusions.
Before you invest in the notes, you should consult your own tax adviser to
determine how the United States federal income tax laws apply to your
particular situation and for information about any tax consequences arising
under other tax laws, such as United States federal estate tax laws and the
laws of any state, local or foreign taxing jurisdiction or under any applicable
tax treaty.
This summary applies to you if you are a U.S. holder. For purposes of this
discussion, the term "U.S. holder" means a beneficial owner of a note or common
stock that is for U.S. federal income tax purposes:
. a citizen or resident of the United States;
. a corporation or other entity created or organized in or under the laws
of the United States or any political subdivision thereof; or
. an estate or trust, the income of which is subject to United States
federal income taxation regardless of its source.
If a partnership holds notes, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships holding notes or common stock should
consult their tax advisers.
Although the treatment of the notes and, in particular, the additional
payment that we may be required to make upon a provisional redemption of the
notes is not entirely clear, we intend to take the position that the notes will
be treated as described below.
Payment of Interest
You generally must include interest on notes in your income as ordinary
income at the time you receive or accrue the interest based on your method of
accounting for United States federal income tax purposes. We must pay
liquidated damages to you in specified circumstances. According to Treasury
regulations, the possibility of liquidated damages being paid to you will not
affect the amount of interest income you recognize, in advance of the payment
of any liquidated damages, if there is only a remote chance as of the date the
notes were issued that you will receive liquidated damages. We believe that the
likelihood that we will pay liquidated damages is remote. Therefore, we do not
intend to treat the potential payment of liquidated damages as part of the
yield to
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maturity of any notes. If we pay you liquidated damages, however, you would
treat the payments as interest income when you receive them. Similarly, we
intend to take the position that the likelihood of a redemption or repurchase
of the notes is remote, and likewise do not intend to treat the possibility of
any premium payable on a redemption or repurchase as affecting the yield to
maturity of any notes.
Sale, Exchange or Redemption of Notes
You generally will recognize gain or loss on the sale, exchange (other than a
conversion) or redemption of notes equal to the difference between (1) the
amount of cash proceeds and the fair market value of any property you receive
on the sale, exchange or redemption (except any portion that represents accrued
interest income, which is taxable as ordinary income) and (2) your adjusted tax
basis in the notes. Your adjusted tax basis generally will equal the cost of
the notes to you, increased by any market discount previously includible in
income by you with respect to the notes, and reduced by any amortizable bond
premium used to offset interest income on the notes. Your gain or loss
generally will be capital gain or loss, except as set forth below under "Market
Discount and Bond Premium." Capital gain or loss will be long-term if you have
held the notes for more than one year and will be short-term if you have held
the notes for one year or less. Long-term capital gains for noncorporate
taxpayers, including individuals, are taxed at a maximum stated rate of 20%,
and short-term capital gains at a maximum stated rate of 39.6%. If you
recognize capital loss, your deduction for the loss may be limited. Corporate
taxpayers pay a maximum regular stated tax rate of 35% on all net capital gains
and ordinary income.
Market Discount and Bond Premium
If you purchase a note after the original issue for an amount less than its
principal amount, then the difference will be treated as market discount. Under
the market discount rules, you will be required, subject to a de minimis
exception, to treat any principal payment on a note or any gain on the sale,
exchange, retirement or other disposition of a note, as ordinary income to the
extent of the market discount that has not previously been included in income
and that is treated as having accrued on such note at the time of such payment
or disposition. If a note with accrued market discount is converted into common
stock pursuant to the conversion feature, the amount of such accrued market
discount generally will be taxable as ordinary income upon the disposition of
the common stock. In addition, you may be required to defer, until the maturity
of the note or its earlier disposition in a taxable transaction, the deduction
of all or a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry such note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless you elect
to accrue on a constant interest method. You may elect to include market
discount in income currently as it accrues (on either a ratable or constant
interest method), in which case the rule described above regarding deferral of
interest deductions will not apply. This election to include market discount in
income currently, once made, applies to all market discount obligations
acquired by you on or after the first day of the first taxable year to which
the election applies and may not be revoked without the consent of the IRS.
If you purchase a note for an amount in excess of its stated principal
amount, plus accrued interest, you generally will be considered to have
purchased the note with "amortizable bond premium." You generally may elect to
amortize such premium from the purchase date to the note's maturity date under
a constant yield method. Amortizable bond premium generally is treated as an
offset to interest income on the note and not as a separate deduction.
Amortizable bond premium, however, will not include any premium attributable to
the value of the note's conversion feature. Also, because the notes may be
redeemed by us at a price in excess of their principal amount, you may be
required to amortize any premium based on an earlier call date and the call
price payable at that time. An election to amortize amortizable bond premium on
a constant yield method, once made, generally applies to all debt obligations
held or subsequently acquired by you on or after the first day of the first
taxable year to which the election applies and my not be revoked without the
consent of the IRS.
You should consult your own tax advisors concerning the existence of, and tax
consequences of, market discount and amortizable bond premium.
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Conversion of Notes
You generally will not recognize any income, gain or loss on conversion of
notes into common stock, except for (i) common stock you receive with respect
to interest that has accrued but not included in income, (ii) any cash you
receive instead of a fractional share of common stock, as described below, and
(iii) to the extent described below, cash received as an additional payment if
you convert your notes after receiving notice of a provisional redemption. Upon
your conversion of a note into common stock, interest that has accrued but not
been included in income will be taxable to you as ordinary interest income.
Although the treatment of the additional payment that we will be required to
make to you if you convert your notes after receiving notice of a provisional
redemption is unclear, it is likely that you will be required to recognize
gain, if any, that you realize to the extent not in excess of such cash
payment. Any gain so recognized will generally be capital gain. Your tax basis
in the common stock will be the same as your adjusted tax basis in the notes at
the time of conversion, increased by the amount of gain, if any, recognized as
a result of accrued interest or the receipt of the cash payment described
above, and reduced by any basis attributable to fractional shares. For capital
gains purposes, your holding period for the common stock will generally include
your holding period for the notes you converted except that the holding period
of the common stock allocable to interest that has accrued but not been
included in income may commence with the conversion.
You should treat cash you receive instead of a fractional share of common
stock as a payment in exchange for the fractional share of common stock. This
will result in capital gain or loss (measured by the difference between the
cash you receive for the fractional share and your adjusted tax basis in the
fractional share after taking into account any increase in basis attributable
to gain recognized as a result of the receipt of a cash payment from us in
connection with a provisional redemption of notes).
Dividends on Common Stock
If we make a distribution on common stock, the distribution generally will be
treated as a dividend and taxed as ordinary income to the extent of our current
or accumulated earnings and profits. A distribution in excess of earnings and
profits is treated as a tax-free return of capital to the extent of your tax
basis in the common stock, on a share-by-share basis, and then as gain from the
sale or exchange of such stock.
A dividend to a corporate holder may qualify for a deduction of 70% of the
dividend received, subject to limitations in certain cases, if the holder owns
less than 20% of the voting power and value of our stock (disregarding certain
nonvoting, nonconvertible, nonparticipating preferred stock). A corporate
holder that owns 20% or more of the voting power and value of our stock
(similarly disregarding such preferred stock) generally will qualify for an 80%
dividends received deduction.
Adjustments to Conversion Price
The conversion price of the notes may change under certain circumstances. In
such a case, you may be treated as having received a constructive distribution
whether or not your notes are ever converted. Such a distribution will
generally be deemed to occur if, and to the extent that, the adjustment in the
conversion price increases your proportionate interest in our assets or
earnings and profits. The constructive distribution may be taxed as ordinary
income, subject to a possible dividends received deduction if you are a
corporate holder, to the extent of our current and/or accumulated earnings and
profits. For example, an adjustment to reflect a taxable dividend to holders of
common stock will result in a constructive distribution. Common stockholders
will generally be treated as having received a constructive distribution if
there is not a full adjustment to the conversion price of the notes to reflect
a stock dividend or other event that would (absent such adjustment) increase
the proportionate interest of the common stockholders in our assets or earnings
and profits. In such an event, the constructive distribution will be taxable as
ordinary income, subject to a possible dividends received deduction if you are
a corporate holder, to the extent of our current and/or accumulated earnings
and profits.
35
<PAGE>
Sale of Common Stock
On the sale or exchange of common stock, you generally will recognize capital
gain or loss (except to the extent of any accrued market discount attributable
to such stock, which will be taxable as ordinary income, as described above
under "Market Discount and Bond Premium") equal to the difference between (1)
the amount of cash and the fair market value of any property you receive on the
sale or exchange and (2) your adjusted tax basis in the common stock. This
capital gain or loss will be long-term if you have held the stock for more than
one year and will be short-term if you have held the stock for one year or
less. Long-term capital gains for noncorporate taxpayers, including
individuals, are taxed at a maximum stated rate of 20%, and short-term capital
gains at a maximum stated rate of 39.6%. A holder's basis and holding period in
common stock received upon conversion of notes are determined as discussed
above under "Conversion of Notes." If you recognize capital loss, your
deduction for the loss may be limited. Corporate taxpayers pay a maximum
regular stated tax rate of 35% on all net capital gains and ordinary income.
Information Reporting and Backup Withholding Tax
In general, a broker or we must report to the IRS payments of principal,
premium and interest on notes, payments of dividends on common stock, payments
of the proceeds of the sale or exchange of notes, and payments of the proceeds
of the sale or exchange of common stock. The payer or broker must backup
withhold at the rate of 31% if
. you fail to furnish a taxpayer identification number to the payer or
broker or establish an exemption from backup withholding;
. the IRS notifies the payer or broker that the number you furnished is
incorrect;
. you have underreported interest or dividends; or
. you have failed to certify under penalties of perjury that you are not
subject to backup withholding under the Internal Revenue Code.
Some holders, including all corporations, are exempt from backup withholding.
You may credit any amounts withheld under the backup withholding rules against
your United States federal income tax liability, or receive a refund, if you
furnish the required information to the IRS.
Treasury regulations that apply to payments made after December 31, 2000 will
modify current information reporting and backup withholding procedures and
requirements. These regulations provide certain presumptions regarding the
status of holders when payments to the holders cannot be reliably associated
with appropriate documentation provided to the payer. For payments made after
December 31, 2000, holders must provide certification, if applicable, that
conforms to the requirements of the regulations, subject to certain
transitional rules permitting certification in accordance with current Treasury
regulations until December 31, 2000. Because the application of these
regulations may depend on your particular circumstances, we urge you to consult
your tax adviser regarding the application of these regulations.
PLAN OF DISTRIBUTION
Effective January 25, 2000, we issued $80,000,000 aggregate principal amount
of 7% Convertible Subordinated Notes due 2005 to the initial purchasers. We
agreed to register the notes and the underlying conversion shares under the
Securities Act for resale from time to time to the public. Under the
registration rights agreement between EarthWeb and the initial purchasers, we
must use our best efforts to cause the registration statement, or a
replacement, to be continuously effective under the Securities Act until the
earlier of (1) two years from the original effective date of the registration
statement of which this prospectus forms a part or (2) such time as the selling
securityholders have sold all transfer restricted securities.
The sale of all or a portion of these securities by the selling
securityholders may be effected from time to time at prevailing market prices
at the time of such sales, at prices related to such prevailing prices, at
fixed prices that may be changed or at negotiated prices. The selling
securityholders may effect such transactions by selling directly to purchasers
in negotiated transactions, to dealers acting as principals or through one or
more
36
<PAGE>
brokers, or any combination of these methods of sale. In addition, securities
may be transferred in connection with the settlement of call options, short
sales or similar transactions that may be effected by the selling
securityholders. Dealers or brokers may receive compensation in the form of
discounts, concessions or commissions from the selling securityholders. The
selling stockholders and any brokers or dealers that participate in the
distribution may under certain circumstances be "underwriters" within the
meaning of the Securities Act, and any commissions received by such brokers or
dealers and any profits realized on the resale of shares by them may be
underwriting discounts and commissions under the Securities Act. EarthWeb and
the selling securityholders may agree to indemnify such brokers or dealers
against certain liabilities, including liabilities under the Securities Act.
To the extent required under the Securities Act or the rules of the
Securities and Exchange Commission, a supplemental prospectus will be filed
disclosing as appropriate:
. the name of any such brokers or dealers,
. the number of securities involved,
. the price at which such securities are to be sold,
. the commissions paid or discounts or concessions allowed to such brokers
or dealers, where applicable,
. that such brokers or dealers did not conduct any investigation to verify
the information set out in this prospectus and
. other facts material to the transaction.
We can give no assurance that any of the selling securityholders will sell
any or all of the notes or conversion shares.
The aggregate proceeds to the selling securityholders from the sale of the
notes or common stock into which the notes are convertible offered by them
hereby will be the purchase price of such notes or common stock less discounts
and commissions, if any. Each of the selling securityholders reserves the
right to accept and, together with their agents from time to time, to reject,
in whole or in part, any proposed purchase of notes or common stock to be made
directly or through agents. We will not receive any of the proceeds from this
offering.
Our outstanding common stock is listed for trading on the Nasdaq National
Market. We do not intend to list the notes for trading on any national
securities exchange or on the Nasdaq National Market and can give no assurance
about the development of any trading market for the notes.
LEGAL MATTERS
The validity of the notes and the shares of common stock issuable upon
conversion of the notes offered hereby has been passed upon for EarthWeb by
Morrison & Foerster LLP, New York, New York.
EXPERTS
The audited financial statements incorporated in this registration statement
by reference to the Annual Report on Form 10-K for the year ended December 31,
1999 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent auditors, given on the authority of
said firm as experts in accounting and auditing.
37
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For further
information with respect to EarthWeb and the securities offered hereby,
reference is made to the registration statement, including the exhibits and
schedules thereto. Statements contained in this prospectus as to the contents
of any contract or other document referred to in this prospectus are not
necessarily complete and, where this contract is an exhibit to the registration
statement, each statement is qualified in all respects by the provisions of
this exhibit. Copies of the registration statement, including the exhibits and
schedules thereto, may be examined without charge at the Public Reference
Section of the Securities and Exchange Commission, 450 Fifth Street, N.W. Room
1024, Washington, D.C. 20549, and the Securities and Exchange Commission's
Regional Offices located at 500 West Madison Street, Suite 1400, Chicago, IL
60661, and 7 World Trade Center, 13th Floor, New York, NY 10048 or on the
Internet at http://www.sec.gov. Copies of all or a portion of the registration
statement can be obtained from the Public Reference Section of the Securities
and Exchange Commission upon payment of prescribed fees. Please call the SEC at
800-SEC-0330 for further information about the public reference room.
EarthWeb is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended, under which it files periodic
reports, proxy statements and other information with the Securities and
Exchange Commission. These reports, proxy and information statements and other
information may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
The Securities and Exchange Commission allows us to "incorporate by
reference" into this prospectus the information we file with it. This means
that we can disclose important business, financial and other information in our
Securities and Exchange Commission filings by referring you to the documents
containing this information. All information incorporated by reference is part
of this prospectus, unless and until that information is updated and superseded
by the information contained in this prospectus or any information incorporated
later. Any information that we subsequently file with the Securities and
Exchange Commission that is incorporated by reference will automatically update
and supersede any previous information that is part of this prospectus.
We incorporate by reference our documents listed below and any future filings
we make with the Securities and Exchange Commission under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended, until
the termination of this offering:
. Annual Report on Form 10-K, filed March 29, 2000, for the fiscal year
ended December 31, 1999;
. Current Report on Form 8-K, filed January 13, 2000;
. Current Report on Form 8-K, filed January 14, 2000;
. Current Report on Form 8-K, filed January 25, 2000;
. Current Report on Form 8-K, filed February 11, 2000;
. Current Report on Form 8-K, filed February 14, 2000;
. The description of our common stock contained in our Registration
Statement on Form S-1 filed August 6, 1999, as amended.
38
<PAGE>
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
EarthWeb Inc.
3 Park Avenue
New York, NY 10016
Attention: Investor Relations
(212) 725-6550
39
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses to be paid by the registrant, in
connection with the issuance and distribution of the securities hereunder.
<TABLE>
<CAPTION>
Item Amount
- --------------------------------------------- --------
<S> <C>
SEC registration fee........................ $ 21,120
Nasdaq National Market Listing Fees......... --
*Accounting fees and expenses................ 10,000
*Legal fees and expenses..................... 40,000
*Printing costs.............................. 30,200
*Miscellaneous............................... 3,680
--------
*Total....................................... $105,000
========
</TABLE>
- --------
*Estimated.
Item 15. Indemnification of Directors and Officers.
Section 145 ("Section 145") of the General Corporation Law of the State of
Delaware (the "DGCL") provides that directors and officers of Delaware
corporations may, under certain circumstances, be indemnified against expenses
(including attorneys' fees) and other liabilities actually and reasonably
incurred by them as a result of any suit brought against them in their capacity
as a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they
had no reasonable cause to believe their conduct was unlawful. Section 145 also
provides that directors and officers may also be indemnified against expenses
(including attorneys' fees) incurred by them in connection with a derivative
suit if they acted in good faith and in a manner they reasonably believed to be
in or not opposed to the best interests of the corporation, except that no
indemnification may be made without court approval if such person was adjudged
liable to the corporation.
EarthWeb has implemented such indemnification provisions in its Amended and
Restated Certificate of Incorporation which provides that officers and
directors shall be entitled to be indemnified by EarthWeb to the fullest extent
permitted by law against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement incurred in connection with any action, suit or
proceeding by reason of the fact that he or she is or was an officer or
director of the Company.
The above discussion of EarthWeb's Amended and Restated Certificate of
Incorporation and Sections
102(b)(7) and 145 of the DGCL is not intended to be exhaustive and is qualified
in its entirety by such Amended 102(b)(7) and 145 of the DGCL is not intended
to be exhaustive and is qualified in its entirety by such Amended and Restated
Certificate of Incorporation and statutes.
For information regard EarthWeb's undertaking to submit to adjudication the
issue of indemnification for violation of the securities laws, see Item 17
hereof.
II-1
<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description
------- --------------------------------------------------------------------
<C> <S>
*4.1 Indenture, dated as of January 25, 2000, between the Registrant and
State Street Bank and Trust Company of California, N.A. as Trustee.
*4.2 Registration Rights Agreement, dated as of January 19, 2000, between
the Registrant and the initial purchasers.
5 Opinion of Morrison & Foerster LLP
12 Statement re: Computation of Ratios
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Morrison & Foerster LLP (set forth in Exhibit 5)
*24 Powers of Attorney (set forth in the signature page hereto)
*25.1 Statement of Eligibility of Trustee
</TABLE>
- --------
* Previously filed.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes the following:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, EarthWeb has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
EarthWeb will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on March 31, 2000.
EarthWeb Inc.
/s/ Jack D. Hidary
By: _________________________________
Jack D. Hidary
President and Chief Executive
Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities indicated on March 31, 2000.
<TABLE>
<S> <C>
Name and Signature Title
------------------ -----
Jack D. Hidary* President, Chief Executive
___________________________________________ Officer and Director
Jack D. Hidary
Murray Hidary* Executive Vice President,
___________________________________________ Secretary, Treasurer and
Murray Hidary Director
Peter Derow* Director
___________________________________________
Peter Derow
Henry Kressel* Director
___________________________________________
Henry Kressel
Cary Davis* Director
___________________________________________
Cary Davis
Irene Math* Senior Vice President, Finance
___________________________________________ (Principal Financial and
Irene Math Accounting Officer)
*/s/ Jack D. Hidary
___________________________________________
Jack D. Hidary
Attorney-in-fact
</TABLE>
II-3
<PAGE>
EXHIBIT 5
[Morrison & Foerster LLP Letterhead]
March 31, 2000
EarthWeb Inc.
Three Park Avenue
32nd Floor
New York, NY 10016
Re: Registration of $80,000,000 in Principal Amount of 7% Convertible
Subordinated Notes due 2005 and Certain Shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel to EarthWeb Inc., a Delaware Corporation (the
"Company") in connection with the Registration Statement on Form S-3 (No. 333-
95921), as filed with the Securities and Exchange Commission (the "Registration
Statement"), relating to the registration under the Securities Act of 1933, as
amended, of $80,000,000 principal amount of 7% Convertible Subordinated Notes
due 2005 (the "Notes"), and of such indeterminate number shares of the Company's
common stock, $.01 par value (the "Stock"), as are issuable upon conversion of
the Notes. The Notes are being issued pursuant to the terms and conditions of an
indenture, dated as of January 25, 2000 (the "Indenture"), by and between the
Company and the State Street Bank and Trust Company of California, N.A. (the
"Trustee"). The Indenture has been filed as an exhibit to the Registration
Statement.
We have examined the originally executed Indenture and the Notes. In
addition, we have examined such records, documents, certificates of public
officials and the Company, made inquiries of officials of the Company, and
considered such questions of law as we have deemed necessary for the purpose of
rendering the opinions set forth herein. As counsel to the Company, we have
examined the proceedings taken by the Company in connection with the issuance
and sale by the Company of the Notes and the underlying Stock.
In conducting our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such documents.
We have also assumed that each party to the Indenture and the Notes, other than
the Company, has the power and authority to execute and deliver, and to perform
and observe the provisions of, the Indenture and the Notes, and has duly
authorized,
<PAGE>
executed and delivered the Indenture and the Notes, that the Indenture
constitutes the legal, valid and binding obligations of the Trustee, and that
the Indenture has been duly authenticated by the Trustee and will be duly
qualified under the Trust Indenture Act of 1939, as amended. We have also
assumed compliance with all applicable state securities and "Blue Sky" laws.
The opinions herein after expressed are subject to the following
qualifications and exceptions:
(i) The effect of bankruptcy, insolvency, reorganization,
arrangement, moratorium, or other similar laws relating to or effecting the
rights of creditors generally, including, without limitation, laws relating to
fraudulent transfers or conveyances, preferences and equitable subordination;
(ii) We express no opinion as to the enforceability of the waiver of
stay or extension laws contained in Section 4.14 of the Indenture;
(iii) Limitations imposed by general principles of equity upon the
availability of equitable remedies or the enforcement of provisions of the Notes
and the Indenture; and the effect of judicial decisions that have held that
certain provisions are unenforceable where their enforcement would violate
implied covenants of good faith and fair dealing, or would be commercially
unreasonable, or where their breach is not material;
(iv) We express no opinion as to the effect on the opinions expressed
herein of (a) the compliance or non-compliance of any party to the Indenture or
the Notes (other than the Company) with any laws or regulations applicable to
it, or (b) the legal or regulatory status or the nature of the business of any
such party;
(v) The effect of judicial decisions that may permit the
introduction of extrinsic evidence to supplement the terms of the Indenture or
the Notes or to aid in the interpretation of the Indenture or the Notes;
(vi) We express no opinion as to the enforceability of provisions of
the Indenture and the Notes imposing, or which are construed as effectively
imposing, penalties;
(vii) The enforceability of provisions of the Indenture or the Notes
that purport to establish evidentiary standards or make determinations
conclusive; and
(viii) We express no opinion as to the enforceability of any choice of
law provisions contained in the Indenture or the Notes or the enforceability of
any provisions that purport to establish a particular court as the forum for
adjudication of any controversy relating to the Indenture or the Notes or that
purport to cause any party to waive or alter any right to a trial by jury or
that waive objection to jurisdiction.
Based upon and subject to the foregoing, we are of the following opinions:
<PAGE>
1. The Notes, assuming due authentication of the Notes by the
Trustee, constitute valid and binding obligations of the Company, entitled to
the benefits of the Indenture and enforceable against the Company in accordance
with their terms.
2. The shares of Stock, when issued and delivered against payment
therefor in accordance with the terms of the Indenture and the Notes, will be
legally issued, fully paid and nonassessable.
We express no opinion as to matters governed by laws of any jurisdiction
other than the following as in effect on the date hereof: the laws of the State
of New York, the General Corporation Law of the State of Delaware and the
federal laws of the United States of America.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
/s/ Morrison & Foerster LLP
<PAGE>
EXHIBIT 12
EARTHWEB INC.
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
<TABLE>
<CAPTION>
Year
Ended December 31,
-------------------------------------
1995 1996 1997 1998 1999
---- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net loss................................ (640) (2,046) (7,821) (8,970) (34,713)
Plus fixed charges:
Interest expense....................... 16 3 3 4 542
Assumed interest element included in
rent expense(1)....................... 31 56 130 192 589
---- ------ ------ ------ -------
Adjusted loss........................... (593) (1,987) (7,688) (8,774) (33,582)
Fixed charges........................... (47) (59) (133) (196) (1,131)
---- ------ ------ ------ -------
(640) (2,046) (7,821) (8,970) (34,713)
==== ====== ====== ====== =======
</TABLE>
(1) Total rent expense for the period divided by three This is the portion of
rental expense which the Company believes to be representative of interest.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 1, 2000, relating to the
consolidated financial statements, which appears in EarthWeb Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1999. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
March 24, 2000
1
