<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________.
LENDINGTREE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-1795344
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11115 RUSHMORE DRIVE
CHARLOTTE, NORTH CAROLINA 28277
(Address of principal executive offices) (Zip code)
(704) 541-5351
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
As of April 30, 2000 there were 18,023,492 shares of Common Stock, $.01
par value, outstanding.
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Page 1 of 20
<PAGE> 2
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
LENDINGTREE, INC.
TABLE OF CONTENTS
PAGE
NUMBER
------
PART I FINANCIAL INFORMATION:
Introduction
Item 1. Financial Statements
Statements of Operations -
Three months ended March 31, 2000
and March 31, 1999 3
Balance Sheets -
March 31, 2000 and December 31, 1999 4
Statements of Cash Flows -
Three months ended March 31, 2000 and
March 31, 1999 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II OTHER INFORMATION:
Item 2. Changes in Securities and Use of Proceeds 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURE 19
----------------------------
PRODUCTS MENTIONED IN THIS REPORT ARE USED FOR IDENTIFICATION PURPOSES ONLY AND
MAY BE TRADE NAMES OR TRADEMARKS OF LENDINGTREE, INC., OR THIRD PARTIES.
----------------------------
2
<PAGE> 3
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LENDINGTREE, INC.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1999 2000
----------- ------------
<S> <C> <C>
Revenue:
LendingTree.com network $ 386,000 $ 3,695,000
Lend-X
Lend-X network 89,000 678,000
Lend-X technology 162,000 110,000
----------- ------------
Total revenue 637,000 4,483,000
----------- ------------
Cost of revenue:
LendingTree.com network 174,000 1,121,000
Lend-X
Lend-X network 43,000 415,000
Lend-X technology 175,000 127,000
----------- ------------
Total cost of revenue 392,000 1,663,000
----------- ------------
Gross profit 245,000 2,820,000
----------- ------------
Operating expenses:
Product development 142,000 515,000
Marketing and advertising 2,883,000 14,886,000
Sales, general and administrative 1,344,000 5,186,000
----------- ------------
Total operating expenses 4,369,000 20,587,000
----------- ------------
Loss from operations (4,124,000) (17,767,000)
Interest income, net 22,000 537,000
----------- ------------
Net loss (4,102,000) (17,230,000)
----------- ------------
Accumulated, undeclared dividends on convertible preferred stock (120,000) --
Dividends on convertible preferred stock -- (2,461,000)
----------- ------------
Net loss attributable to common shareholders $(4,222,000) $(19,691,000)
=========== ============
Net loss per common share - basic and diluted $ (1.12) $ (2.07)
=========== ============
Weighted average shares used in basic and diluted net
loss per common share calculation 3,756,664 9,525,129
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE> 4
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
LENDINGTREE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
As of As of
December 31, March 31,
1999 2000
------------ -------------
<S> <C> <C>
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 2,419,000 $ 1,373,000
Short-term investments 27,053,000 28,683,000
Restricted investments -- 32,948,000
Accounts receivable, net of allowance for
doubtful accounts of $118,000 and $232,000, respectively 2,027,000 3,325,000
Prepaid expenses and other current assets 1,005,000 1,225,000
------------ -------------
Total current assets 32,504,000 67,554,000
Property, equipment and software, net 1,086,000 1,594,000
Other assets 177,000 552,000
Investments in other businesses -- 2,500,000
------------ -------------
Total assets $ 33,767,000 $ 72,200,000
============ =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 3,579,000 13,192,000
Accrued expenses 2,451,000 2,974,000
------------ -------------
Total current liabilities 6,030,000 16,166,000
Deposits -- 80,000
Commitments and contingencies -- --
Shareholders' equity:
Series A Convertible Preferred stock, $.01 par value, 8%
cumulative, 3,049,031 shares authorized, 1,754,484 and 0 shares
issued and outstanding at December 31, 1999 and March 31,
2000, respectively 9,884,000 --
Series B Convertible Preferred stock, $.01 par value, 911,450
shares authorized, none issued -- --
Series C Convertible Preferred stock, $.01 par value, 268,074
shares authorized, none issued -- --
Series D Convertible Preferred stock, $.01 par value, 8%
cumulative, 6,238,639 shares authorized, 6,238,172 and 0 shares
issued and outstanding at December 31, 1999 and March 31,
2000, respectively 49,234,000 --
Common stock, $.01 par value, 100,000,000 shares authorized,
4,070,655 and 18,972,210 shares issued at December 31,
1999 and March 31, 2000, respectively 41,000 190,000
Deferred compensation (2,767,000) (4,857,000)
Treasury stock (948,971 shares at cost) (5,978,000) (5,978,000)
Notes receivable from officers for option exercises -- (1,602,000)
Unrealized gain on available-for-sale securities 46,000 --
Additional paid-in-capital 9,423,000 117,577,000
Accumulated deficit (32,146,000) (49,376,000)
------------ -------------
Total shareholders' equity 27,737,000 55,954,000
------------ -------------
Total liabilities and shareholders' equity $ 33,767,000 $ 72,200,000
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 5
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
LENDINGTREE, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1999 2000
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,102,000) $(17,230,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 27,000 113,000
Provision for doubtful accounts -- 138,000
Common stock options issued in lieu of
compensation/services rendered -- 14,000
Amortization of deferred compensation -- 493,000
Changes in assets and liabilities:
Accounts receivable (524,000) (1,436,000)
Prepaid expenses and other current assets (11,000) (220,000)
Other assets (16,000) (375,000)
Accounts payable 615,000 9,613,000
Accrued expenses 40,000 523,000
Deposits -- 80,000
----------- ------------
Net cash used in operating activities (3,971,000) (8,287,000)
----------- ------------
Cash flows from investing activities:
Purchase of short-term investments -- (47,192,000)
Liquidation of short-term investments -- 45,516,000
Purchase of restricted investments -- (35,517,000)
Liquidation of restricted investments -- 2,569,000
Investment in other businesses -- (2,500,000)
Additions to equipment, furniture and software (95,000) (621,000)
----------- ------------
Net cash used in investing activities (95,000) (37,745,000)
----------- ------------
Cash flows from financing activities:
Exercise of common stock options 120,000 82,000
Proceeds from initial public offering of common stock, net -- 44,904,000
Proceeds from sale of mandatorily redeemable
Series A Convertible Preferred stock and warrants,
net of offering costs 2,966,000 --
----------- ------------
Net cash provided by financing activities 3,086,000 44,986,000
----------- ------------
Net decrease in cash and cash equivalents (980,000) (1,046,000)
Cash and cash equivalents, beginning of period 3,085,000 2,419,000
----------- ------------
Cash and cash equivalents, end of period $ 2,105,000 $ 1,373,000
=========== ============
Supplemental disclosure of cash flow information:
Interest paid $ -- $ --
Income taxes paid $ -- $ --
Notes receivable from officers for option exercises $ -- $ 1,602,000
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE> 6
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - THE COMPANY
LendingTree, Inc. (the "Company") was incorporated in the State of Delaware on
June 7, 1996.
The Company offers both an Internet-based loan marketplace for consumers and
lenders and also licenses its technology or hosts Internet-based systems to
enable other businesses to create their own on-line lending exchanges.
Through its own website, www.lendingtree.com, the Company collects consumer
credit requests and compares these requests and related credit information to
the underwriting criteria of more than 100 participating lenders in its network.
Consumers can receive multiple loan offers in response to a single credit
request and then compare, review and accept the offer that best suits their
needs. Lenders can generate new business that meets their specific underwriting
criteria at a cost that is lower than the cost associated with offline loan
originations. The Company's marketplace encompasses most consumer credit
categories, including mortgages, home equity loans, automobile loans, credit
cards and personal loans and provides access to small business loans.
The Company is not a lender; its Internet-based marketplace facilitates the
lending process. The Company's revenue model depends on revenue generated from
lenders participating in its network who pay fees ("transmission fees") based
upon their receipt of loan requests (known as qualification forms) and fees
based upon loan closings ("closed-loan fees"). The Company's website is powered
by its loan marketplace technology platform, Lend-X(sm).
The Company also licenses or hosts its Lend-X technology for use by other
businesses, enabling them to create their own customized co-branded or
private-label versions of online lending exchanges. Through these Lend-X
partnerships, the Company can earn revenue both from network sources
(transmission fees and closed-loan fees), as well as from technology related to
customization, licensing and hosting the network.
NOTE 2 - BASIS OF PRESENTATION:
Interim Financial Information
The financial statements of the Company include all adjustments of a normal
recurring nature which, in the opinion of management, are necessary for a fair
presentation of financial position as of March 31, 2000 and results of
operations and cash flows for the interim periods presented. The results of
operations for the three months ended March 31, 2000 are not necessarily
indicative of the results to be expected for the entire year.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, certain information and footnotes required by generally accepted
accounting principles are not included herein. These interim financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended December 31, 1999 as reported by the Company in its
final Prospectus dated February 15, 2000 filed with the Securities and Exchange
Commission in conjunction with the Company's initial public offering of its
common stock.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant estimates include percentage complete under long-term contracts and
the valuation of the Company's common stock, options and warrants. Actual
results could differ from those estimates.
Reclassifications
Certain comparative period amounts have been reclassified to conform to current
period presentation.
6
<PAGE> 7
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Restricted Investments
As of March 31, 2000, the Company had $32.9 million of investments held in an
escrow account. This account was established by the Company and its advertising
agency to maintain funds set aside by the Company for non-cancelable and
approved expenditures and services of the advertising agency. Disbursements from
the escrow account can only be made, with signatures from both the Company and
the advertising agency. The fund is used only for advertising costs the Company
has approved in advance. Disbursements from the escrow account are made no
sooner than one month following the invoice date for the expenditures. All
amounts held in the escrow account are invested in money market instruments. The
Company receives all income earned on funds held in this investment account.
New Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements," ("SAB 101"),
which provides guidance on the recognition, presentation, and disclosures of
revenue in financial statements filed with the SEC. SAB 101, as amended by SAB
101A, outlines the basic criteria that must be met to recognize revenue and
provides guidance for disclosures related to revenue recognition policies. SAB
101 is not expected to have a significant impact on the Company's revenue
recognition policies.
The Financial Accounting Standards Board's Emerging Issues Task Force ("EITF")
has issued several consensuses that are or may sometime be relevant to the
Company's business.
EITF Issue 00-2 "Accounting for Web Site Development Costs" - addresses how an
entity should account for certain costs incurred to develop a web-site. This
EITF is effective for fiscal quarters beginning after June 30, 2000 at which
time the Company will adopt its provisions . The Company anticipates that it
will incur certain costs related to the development of its web-site that will
fall under the provisions of EITF Issue 00-2, however it cannot reasonably
estimate currently those costs that will be capitalized or expensed under this
guidance.
EITF Issue 00-3 "Application of AICPA Statement of Position 97-2, Software
Revenue Recognition, to Arrangements that Include the Right to Use Software
Stored On Another Entity's Hardware" - addresses two issues; whether SOP 97-2
applies to arrangements that require the vendor to host the software and whether
SOP 97-2 applies to arrangements in which the customer has an option to take
delivery of the software. This EITF is currently effective. The Company has
adopted EITF Issue 00-3 and had no material impact on its financial position or
results of operations.
Revenue Recognition
The Company's lendingtree.com network revenue represents transmission fees and
closed-loan fees paid by lenders for credit requests that are received through
the Company's website, www.lendingtree.com. This revenue also includes fees to
set up lenders on the network. Transmission fees are recognized at the time
qualification forms are transmitted, while closed loan fees are recognized at
the time the lender reports the activity to the Company, which may be up to four
months after the qualification form is transmitted. Revenue from lender set-up
fees is recognized upon completion of the lender's integration with the
lendingtree.com network.
Lend-X network revenue is derived from qualification forms that are received
through private-label or co-branded websites of other businesses ("Lend-X
partners") that are enabled by the Company's Lend-X technology. If these
qualification forms are successfully transmitted to or fulfilled by one of the
Company's network lenders, the Company earns transmission fees and/or
closed-loan fees, if applicable, from that lender, which are recognized as
described above.
Lend-X technology revenue is related primarily to licensing and modifying the
Company's proprietary software for use by lenders and other third parties.
Revenue under such contracts is recognized as work is performed under the
percentage of completion method with progress generally measured using costs
incurred to date compared to total estimated costs to be incurred. Maintenance
and support revenue is recognized ratably over the period the services are
provided. Losses, if any, are recognized when the liability is identified.
7
<PAGE> 8
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
Included in accounts receivable, net, as of December 31, 1999 and March 31, 2000
is $10,000 and $4,400, respectively, of unbilled receivables related to
percentage of completion contracts.
Cost of Revenue
The Company's lendingtree.com and Lend-X network cost of revenue includes salary
and benefit costs of the borrower relations and implementation groups, credit
agency scoring expenses, consumer promotion costs, and the costs of website
hosting hardware. Lend-X network cost of revenue includes additional expenses
related to the amounts the Company pays its Lend-X partners.
Cost of revenue related to Lend-X technology includes direct costs of modifying
the Company's proprietary software for licensing to lenders, as well as the cost
of servers related to hosting the systems for these licensees.
Stock Split
In January 2000, the Board of Directors approved a 1.27-for-1 common stock split
that was effective February 22, 2000 upon the closing of the Company's initial
public offering. The financial statements for all periods presented have been
restated to reflect the effect of this stock split. In addition, the Board
approved an amendment to the Company's certificate of incorporation, effective
in conjunction with the Company's Form S-1 Registration Statement, increasing
the authorized capital stock to 100,000,000 shares of common stock and
10,000,000 shares of preferred stock, each with a par value of $0.01 per share.
Product Development Costs
Product development costs primarily include expenses incurred by the Company to
develop our proprietary software and to enhance and upgrade the Company's
website. The Company accounts for the software development costs component of
product development costs associated with software to be sold or marketed in
accordance with Statement of Financial Accounting Standards No. 86 "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
which requires software development costs to be capitalized beginning when a
product's technological feasibility is established and ending when a product is
available for general release.
The Company accounts for the software development component of product
development costs associated with internal use software in accordance with
Statement of Position No. 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"), which provides guidance
regarding when software developed or obtained for internal use should be
capitalized. SOP 98-1 requires that certain costs incurred during the
application development stage be capitalized, while costs incurred during the
preliminary project stage and post-implementation/operation stage should be
expensed as incurred. Capitalized product development costs are amortized over
the estimated life of the related application.
For the three months ended March 31, 2000, the Company capitalized approximately
$.1 million of internal compensation costs related to software development and
approximately $.2 million of purchased software and consulting costs related to
other internal use software systems under development. No product development
costs were capitalized in the period ending March 31, 1999.
Advertising Expenses
Advertising expenses consist primarily of television, radio and outdoor
advertising campaign costs as well as trade shows and other indirect costs. The
Company expenses advertising costs as incurred or the first time the advertising
takes place. For the three months ending March 31, 1999 and 2000, advertising
expenses were $5.5 million and $13.3 million, respectively.
NOTE 4 - SIGNIFICANT TRANSACTIONS
Initial Public Offering and Conversion of Preferred Stock to Common
Stock
On February 15, 2000, the Company completed the sale of 4,197,500 shares of its
common stock at an initial public offering ("IPO") price of $12.00 per share,
raising approximately $44.9 million, net of offering expenses, underwriting
discounts and commissions. Simultaneously with the closing of the initial public
offering, all previously outstanding shares of convertible preferred stock and
accumulated, unpaid in-kind dividends thereon were automatically converted into
an aggregate of 10.5 million shares of common stock. As of March 31, 2000 there
were approximately 18.0 million shares of common stock outstanding.
8
<PAGE> 9
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
Warrant Agreements
In January 2000, Prudential Securities Incorporated, an underwriter for the
Company's initial public offering and a holder of a warrant to purchase the
Company's common stock agreed to exchange its existing warrant to purchase
127,000 shares of the Company's common stock at an exercise price of $7.52 per
share for a new warrant to purchase 127,000 shares of common stock at an
exercise price equal to the initial public offering price of common stock. The
new warrant is exercisable for a five year period from the date of the first
warrant or through September 21, 2004. Upon the exchange of these warrants, the
Company recorded an offset to the IPO proceeds of approximately $.1 million
based upon the fair value of the new warrant issued in excess of the existing
warrant based upon an option valuation model.
Also during January 2000, the Company entered into an agreement for an initial
one-year period with a third party to co-brand a web site. In February 2000, the
Company granted two warrants to this third party in connection with this
agreement. Each warrant is for the purchase of 95,250 shares of the Company's
common stock at $7.87 per share. The first warrant, granted February 2, 2000,
with an underlying fair value of $11.00, was immediately vested and exercisable
at the date of grant. The second warrant was granted February 15, 2000 with an
underlying fair value of $12.00 and was also immediately vested and exercisable.
An expense of approximately $1.3 million, calculated using an option-pricing
model, will be recognized ratably for services provided by the third party over
the initial one-year period of the agreement. For the three months ended March
31, 2000, the Company recognized a charge for these warrants of approximately
$0.2 million.
In connection with this agreement, the Company has also committed to
approximately $4.4 million of advertising and promotional costs during the
initial one-year period of the agreement. Similar commitments are also
structured for the second year if the agreement is not terminated.
Option Grants
In January 2000, the Company granted stock options to purchase 769,225 shares of
common stock to employees at an exercise price of $9.28 per share. Based on the
difference between the strike price of these options and the fair market value
at the date of grant ($11.00), the Company recorded a deferred compensation
charge of approximately $1.3 million and is amortizing it to expense over the
options' four year vesting period. For the three months ended March 31, 2000,
the Company recorded compensation expense of $0.2 million related to these
options.
Officer Loans
In February 2000, the Company entered into promissory notes and pledge
agreements with certain executive officers of the Company to provide a total of
approximately $1.9 million to these officers for the purpose of exercising
non-qualified stock options and for paying the related withholding taxes on such
exercises. The loans are to be repaid to the Company, plus interest at the
federal rate (as defined) in equal annual installments beginning on January 31,
2002, and through January 31, 2005. The officers have pledged to the Company a
security interest in the stock issued as a result of these options being
exercised. The pledged stock may not be sold by the officers without prior
written consent by the Company.
Investment
In February 2000, the Company made a $2.5 million equity investment in a
wholesale lending service LoanTrader.com. The Company's minority investment
represents approximately 8.5% of the outstanding equity of LoanTrader.com.
Accordingly, the Company is accounting for this investment using the cost method
of accounting.
NOTE 5 - NET LOSS PER COMMON SHARE
Basic and diluted net loss per common share is calculated by dividing net loss
available to common shareholders by the weighted average number of common shares
outstanding. Other common stock equivalents, including stock options and
warrants, are excluded from the calculation, as their effect would be
anti-dilutive. At March 31, 2000, options and warrants to purchase 4.6 million
shares of common stock were outstanding.
9
<PAGE> 10
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
This Quarterly Report on Form 10-Q may contain certain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended,
that represent the Company's expectations or beliefs concerning future events or
projected financial results. Such forward-looking statements are about matters
that are inherently subject to risks and uncertainties. Factors that could
influence the matters discussed in certain forward-looking statements include
the timing and amount of revenue that may be recognized by the Company,
continuation of current expense trends, absence of unforeseen changes in the
Company's markets, continued acceptance of the Company's services and products
and general changes in the economy, as well as matters discussed in "Risks and
Uncertainties" in the Company's final Prospectus with an effective date of
February 15, 2000. There can be no assurance that such future events or
projected results will be achieved and actual results could differ materially.
The Company offers both an Internet-based loan marketplace for consumers and
lenders and also licenses its technology or hosts Internet-based systems to
enable other businesses to create their own on-line lending exchanges.
Through its own website, www.lendingtree.com, the Company collects consumer
credit requests and compares these requests and related credit information to
the underwriting criteria of more than 100 participating lenders in its network.
Consumers can receive multiple offers in response to a single credit request and
then compare, review and accept the on-line loan offer that best suits their
needs. Lenders can generate new business that meets their specific underwriting
criteria at a cost that is lower than the cost associated with offline loan
originations. The Company's marketplace encompasses most consumer credit
categories, including mortgages, home equity loans, automobile loans, credit
cards and personal loans and provides access to small business loans.
The Company is not a lender; its Internet-based marketplace facilitates the
lending process without the assumption of consumer credit risks. The Company's
revenue model depends on revenue generated from lenders participating in its
network who pay fees based upon their receipt of qualification forms
("transmission fees"), and fees based upon loan closings ("closed-loan fees").
All of the Company's network revenue is derived from lenders; the service is
free to consumers. The Company's website is powered by its loan marketplace
technology platform, Lend-X(sm).
The Company also licenses or hosts its Lend-X technology for use by other
businesses, enabling them to create their own customized co-branded or
private-label versions of online lending exchanges. Through these Lend-X
partnerships, the Company can earn revenue both from network sources
(transmission fees and closed-loan fees), as well as from technology related to
customization, licensing and hosting the network.
No single lender, in any period presented, represented more than 10% of the
Company's total revenue.
The Company's lendingtree.com and Lend-X network cost of revenue includes salary
and benefit costs of the borrower relations and implementation groups, credit
agency scoring expenses, consumer promotion costs and the costs of website
hosting hardware. Lend-X network cost of revenue includes additional expenses
related to the amounts the Company pays its Lend-X partners for the goods,
facilities and services they provide.
The Company's Lend-X technology cost of revenue includes direct costs of
modifying the Company's proprietary software for license to Lend-X users, as
well as the related costs of hardware used to host the systems for these
customers. All of these expenses are recognized in the period that they are
incurred.
10
<PAGE> 11
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO
THREE MONTHS ENDED MARCH 31, 1999
REVENUE
Total revenue was approximately $4.5 million in the three months ended March 31,
2000, an increase of $3.9 million from $0.6 million in the same period in 1999.
The Company's lendingtree.com network revenue was approximately $3.7 million, or
82% of total revenue for the three months ended March 31, 2000, compared with
61% for the same period in 1999. Network revenue in the three months ended March
31, 2000 increased by $3.3 million from $0.4 million in the same period of 1999.
This growth reflects a substantial increase in volume of qualification forms the
Company transmitted to its lenders and a significant increase in the amount of
revenue earned from closed-loan fees. The Company attributes the increase in
transmission volume (from approximately 22,000 qualification forms in the three
months ended March 31, 1999 to approximately 134,000 in the same period of 2000)
primarily to its extensive advertising and branding campaign running during the
three months ended March 31, 2000 resulting in a significant increase in website
traffic. The increase in closed-loan fees reflects not only the increased
transmission volume, but also a higher percentage of transmissions resulting in
a closed loan. The Company attributes the higher percentage of transmissions
resulting in a closed loan to an improvement in overall credit quality of the
traffic on the Company's website and an increase in the number and variety of
lenders on the Company's network.
Lend-X network revenue totaled $0.7 million or 15% of the Company's revenue for
the three months ended March 31, 2000. This is an increase of $0.6 million over
the same period in 1999. When a Lend-X partner receives a credit request that it
cannot fulfil on its own online exchange, the request is routed to the Company's
network and if the request is successfully transmitted to or fulfilled by one of
the Company's network lenders, the Company earns transmission fees and
closed-loan fees from that lender. The growth in Lend-X network revenue in the
first three months of 2000 is the result of an increase in the number of Lend-X
partners in the first quarter of 2000 as well as significant increases in
credit-request related volume processed through the partner's websites or
exchanges.
Lend-X technology revenue totaled $0.1 million, or approximately 3% of total
revenue for the three months ended March 31, 2000, compared with $0.2 million
for the same period of 1999.
GROSS PROFIT
Gross profit of $2.8 million (63% of total revenue) for the three months ended
March 31, 2000 was $2.6 million higher than the same period of 1999. As noted
above, revenue increased $3.9 million from the first quarter 1999 to the first
quarter 2000, but total cost of revenue increased only $1.3 million for the same
period. Portions of the Company's costs of revenue are volume-based. Costs such
as credit scoring fees, revenue sharing, and network hosting expenses tend to
increase as volume and revenue increase. In the first three months of 2000,
these costs were $0.8 million higher than the same period in 1999. In addition,
the first three months of 2000 included $0.4 million for consumer promotions
costs associated with borrowers that asked for and qualified for a credit card
and also closed a loan through the Company's network. This promotional program
was not in place in the first three months of 1999, however the Company
anticipates that the volume associated with the program will continue to
increase in the near term and therefore expects the associated costs to also
increase. Lend-X technology cost of revenue decreased slightly in the three
months ended March 31, 2000 when compared to the same period in 1999. The Lend-X
technology cost of revenue for the three months ended March 31, 2000 includes
expenses incurred to increase capacity in anticipation of business growth that
the Company believes will begin during the second quarter of 2000.
OPERATING EXPENSES
Product development expense was approximately $.5 million for the three months
ended March 31, 2000 and $.1 for the three months ended March 31, 1999. Product
development costs principally represent costs incurred related to the ongoing
efforts to enhance and maintain the functionality of the Company's Lend-X
technology.
Marketing and advertising expenses increased $12.0 million to approximately
$14.9 million for the three months ended March 31, 2000 compared to $2.9 million
for the same period in 1999. This increase is primarily due to substantially
higher advertising expenses in 2000 incurred in an effort to build brand
awareness and attract customers to the Company's Internet-
11
<PAGE> 12
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
based loan marketplace. During the first quarter of 2000, the Company began
television advertising in several regional markets in addition to expanding its
radio and outdoor advertising campaigns. The Company currently anticipates that
marketing and advertising will continue to be its most significant expense, as
it will continue to run these promotional campaigns and expand its advertising
nationally.
Sales, general and administrative expenses increased to $5.2 million for the
three months ended March 31, 2000 from $1.3 million for the same period in 1999
primarily due to higher employee-related costs such as compensation, recruiting
and relocation expenses, as well as higher rent for a larger facility, and
increased professional fees. The Company expects that future increases in sales,
general and administrative expenses will also be necessary as the Company's
business continues to grow.
Amortization of deferred non-cash compensation charges resulted in $0.5 million
of expense in the three months ended March 31, 2000. As of March 31, 2000, the
Company's balance sheet reflected deferred non-cash compensation charges of $4.9
million related to certain stock option and warrant grants that were considered
compensatory. The deferred charge related to stock options ($3.8 million) is
being amortized over the four-year vesting period associated with the related
options. The deferred charge related to warrants ($1.1 million) is being
amortized through February 2001, corresponding to the initial term of the
underlying service agreement.
INTEREST INCOME
Interest income consists primarily of interest earned on cash and cash
equivalents and short-term investments. Interest income increased to $0.5
million in the three months ended March 31, 2000 from less than $0.1 million in
the same period in 1999. This increase was primarily due to higher average cash
balances in 2000 as a result of the net proceeds from the Company's initial
public offering in February 2000 and the net proceeds from a private offering of
preferred stock in September 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily through
private placements of securities, raising over $64 million, net after offering
costs. Additionally, on February 15, 2000, the Company completed the sale of
4,197,500 shares of its common stock at an initial public offering price of
$12.00 per share, raising approximately $44.9 million net of offering costs,
underwriting discounts and commissions.
Net cash used in operating activities was $8.3 million and $4.0 million in the
three months ended March 31, 2000 and 1999, respectively.
In the three months ended March 31, 2000 the cash used in investing activities
included $35.5 million that was deposited into an escrow investment account.
This account was established by the Company and its advertising agency to
maintain funds set aside by the Company for non-cancelable and approved
expenditures and services of the advertising agency. Disbursements from the
escrow account can only be made for advertising expenditures the Company has
approved in advance.
As of March 31, 2000, the Company had approximately $63.0 million in cash, cash
equivalents, restricted investments and short-term investments. The Company
believes that these sources, along with cash from operations, will be sufficient
to meet its working capital and capital expenditure requirements for the next
twelve months. However, working capital and capital expenditures after March 31,
2001 may need to be funded from additional debt or equity financing sources.
Without the proceeds from additional financing sources, management would have to
reduce the extent of the Company's plans for marketing and advertising during
2001. Additional financing may not be available when needed or, if available,
such financing may not be on terms favorable to us. If additional funds are
raised through the issuance of equity securities, the Company's shareholders may
experience significant dilution.
RISKS
Year 2000 Risks
Year 2000 computer problems may arise after the date of this quarterly report.
Our business could be interrupted by any material year 2000-related failure of
our internal systems, the systems that carry Internet traffic to our online loan
marketplace, the systems of our lenders or online partners, or the systems used
by consumers to access our marketplace.
The Company has not experienced and believes that it will not in the future,
experience any material year 2000 problems.
12
<PAGE> 13
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
The Company's Limited Operating History Makes the Company's Business
and Prospects Difficult to Evaluate.
The Company has a limited operating history. The Company was formed in 1996 and
began serving consumers across the United States in July 1998. There is no
significant historical basis to assess how the Company will respond to
competitive, economic or technological challenges. The Company's business and
prospects must be considered in light of the risks and uncertainties frequently
encountered by companies in the early stages of development, particularly
companies like LendingTree, Inc. who operate in new and rapidly developing
online marketplaces. The Company's failure to address these risks and
uncertainties could materially impact the Company's results of operations and
financial condition.
The Company Has A History of Losses and Expect Losses In The Future.
The Company has never been profitable. The Company incurred losses from
operations of approximately $17.8 million in the three months ended March 31,
2000 and $4.1 million in the same period of 1999. As of March 31, 2000, the
Company had an accumulated net deficit of approximately $49.4 million. The
Company currently estimates that it will spend approximately $50.0 million
during 2000 on marketing and advertising, more than double what it spent in
1999.
The Company anticipates that its future expense levels will continue to exceed
future revenue based on the Company's operating plans for at least the next
twelve months. The Company may find it necessary to accelerate expenditures
relating to the Company's sales and marketing efforts or otherwise increase the
Company's financial commitment to creating and maintaining brand awareness among
consumers and lenders. If the Company's revenue grows at a slower rate than the
Company anticipates, or if the Company's spending levels exceed the Company's
expectations or cannot be adjusted to reflect slower revenue growth, the Company
may not achieve or sustain profitability.
The Company's Operating Results May Be Negatively Impacted By
Fluctuations in Interest Rates.
During the quarter ended March 31, 2000, revenue earned from mortgages,
traditionally a market segment that is greatly impacted by changes in interest
rates, represented approximately 44% of the Company's total revenue. While
interest rates during this period were rising, the Company's business continued
to show increases in website traffic, transmitted qualification forms for
mortgages and revenue from closed-loan fees for mortgages over the first quarter
of 1999. However, during future periods of rising interest rates the Company may
experience a decline in consumer traffic to the Company's website and during
periods of robust credit demand, typically associated with falling interest
rates, lenders may have less incentive to use the Company's marketplace. Either
of these events could reduce the Company's revenue and the Company cannot assess
the effects of interest rates on the Company's business over a broad range of
interest rate environments.
The Company's Quarterly Operating Results Are Not an Indication of the
Company's Future Results.
The Company's quarterly operating results may fluctuate significantly in the
future due to a variety of factors that affect the Company's revenue or expenses
in any particular quarter. The Company's quarterly results will fluctuate in
part based on the demand for and supply of consumer loans which are a function
of seasonal and other fluctuations in interest rates and related economic
factors, all of which are outside of the Company's control. These temporary
fluctuations could adversely affect the Company's business. In addition, the
Company plans to continue to increase its operating expenses significantly to
expand the Company's sales and marketing, administration, maintenance and
technical support and product management groups. If revenue falls below the
Company's expectations in any quarter and the Company is unable to quickly
reduce the Company's spending in response, the Company's operating results would
be lower than expected.
In addition, the Company expects that as its business matures it will experience
seasonal fluctuations in its operating results due to fluctuations in consumer
credit markets during the year. For example, home buying behavior is seasonal.
Typically the second and third quarters of a year have a greater number of
mortgage closings as compared to the first and fourth quarters. Because of the
Company's limited operating history, it has not been possible for the Company to
assess the impact of seasonal effects on its business.
The Company's Failure to Obtain Sufficient Funds from Subsequent
Financings May Significantly Impede the Company's Growth.
The Company must achieve and sustain rapid growth for the Company's business
model to succeed. To accomplish this, the Company will need to raise additional
funds in the future, from equity or debt sources. The Company's future cash
requirements may be substantial. If additional financing is not available when
required or is not available on acceptable terms, the Company may be unable to
successfully promote its brand name, develop or enhance its service, take
advantage of business opportunities or respond to competitive pressures, any of
which could have a material adverse effect on the Company's financial condition
and results of operations.
13
<PAGE> 14
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
If The Company Is Unable To Expand The Company's Brand Recognition,
Consumer And Lender Demand For The Company's Service Will Be Limited.
If the Company fails to promote and maintain its brand successfully or incurs
significant expenses in promoting its brand and fails to generate a
corresponding increase in revenue as a result of its branding efforts, the
Company's business could be materially adversely affected. The Company believes
that continuing to build brand awareness of the LendingTree marketplace is
critical to achieving increased demand for the Company's service. Brand
recognition is a key differentiating factor among providers of online lending
services, and the Company believes it will be increasingly important as
competition intensifies. In order to increase the Company's brand awareness, the
Company must succeed in its marketing efforts, provide high-quality service and
increase the number of consumers using its marketplace. If visitors to the
Company's website do not perceive the Company's existing service to be of high
quality or if the Company alters or modifies its existing service, introduce new
services, or enter into new business ventures that are not favorably received,
the value of the Company's brand could be diluted, which could decrease the
attractiveness of the Company's service to consumers and lenders.
If The Company's Participating Lenders Do Not Provide Competitive
Levels Of Service To Consumers, The Company's Brand Will Be Harmed And
The Company's Ability To Attract Consumers To The Company's Website
Will Be Limited.
The Company's ability to provide a high-quality borrowing experience depends in
part on consumers receiving competitive levels of convenience, customer service,
pricing terms and responsiveness from the Company's participating lenders. If
the Company's participating lenders do not provide consumers with competitive
levels of convenience, customer service, price, and responsiveness the value of
the Company's brand may be harmed and the number of consumers using the
Company's service may decline.
The Company May Experience Reduced Visitor Traffic, Reduced Revenue And
Harm to the Company's Reputation In The Event of Unexpected Network
Interruptions Caused by System Failures.
Any significant failure to maintain the satisfactory performance, reliability,
security and availability of the Company's website, filtering systems or network
infrastructure may cause significant harm to the Company's reputation, its
ability to attract and maintain a high volume of visitors to its website, and to
attract and retain participating consumers and lenders. The Company's revenue
depends in large part on the number of credit requests submitted by consumers.
Any system interruptions that result in the inability of consumers to submit
these credit requests, or more generally the unavailability of the Company's
service offerings, could have an adverse impact on the Company's revenue. In
addition, the Company believes that consumers who have a negative experience
with the Company's website may be reluctant to return or recommend LendingTree
to other potential consumers.
In the past, the Company's website has experienced outages and decreased
performance. In the worst such instance to date, the Company experienced a
service outage for a period of approximately six hours due to a database
software failure. If similar outages occur in the future, they may severely harm
the Company's reputation and the Company's ability to offer the Company's
service. The Company's computer hardware is located in leased facilities in
Beltsville, Maryland. A full backup system is located in Cupertino, California.
If both of these locations experienced a system failure, the performance of the
Company's website would be harmed. These systems are also vulnerable to damage
from fire, floods, power loss, telecommunications failures, break-ins, and
similar events. The Company's insurance policies may not compensate us for any
losses that may occur due to any failures or interruptions in the Company's
systems. Any extended period of disruptions could materially adversely affect
the Company's business, results of operations, and financial condition.
Failure To Comply With Laws Governing The Company's Service Or Material
Changes In The Regulatory Environment Relating To The Internet Could
Have A Material Adverse Effect On Its Business.
The loan products available through The Company's website are subject to
extensive regulation by various federal and state governmental authorities.
Because of uncertainties as to the applicability of these laws and regulations
to the Internet and, more specifically, to the Company's business, and
considering its business has evolved and expanded in a relatively short period
of time, the Company may not always have been, and may not always be, in
compliance with applicable federal and state laws and regulations. Failure to
comply with the laws and regulatory requirements of federal and state regulatory
authorities may result in, among other things, revocation of required licenses
or registrations, loss of approved status, loss of exempt status,
indemnification liability to lenders and others doing business with us,
administrative enforcement actions and fines, class action lawsuits, cease and
desist orders, and civil and criminal liability. The occurrence of one or more
of these events could materially affect the Company's business, results of
operations and financial condition. In January 2000, the Company paid a
settlement relating to allegations that we conducted business in a state without
the appropriate registration.
14
<PAGE> 15
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
Many, but not all, states require licenses to solicit or broker to residents of
those states, loans secured by residential mortgages, and/or other consumer
loans, including credit card, automobile and personal loans. The Company is not
currently licensed and/or able to accept credit requests for all loan products
in every state. The Company is not currently accepting credit requests for loan
products from residents of states in which we are not licensed to provide those
products. In many of the states in which the Company is licensed, it is subject
to examination by regulators.
As a computer loan origination system conducting business through the Internet,
the Company faces an additional level of regulatory risk given that most of the
laws governing lending transactions have not been substantially revised or
updated to fully accommodate electronic commerce. Until these laws, rules, and
regulations are revised to clarify their applicability to transactions conducted
through electronic commerce, any company providing loan-related services through
the Internet or other means of electronic commerce will face compliance
uncertainty. Federal law, for example, generally prohibits the payment or
receipt of referral fees in connection with residential mortgage loan
transactions. The applicability of referral fee prohibitions to the compensation
provisions of fee arrangements used by online companies like LendingTree, Inc.
may have the effect of reducing the types and amount of fees that the Company
may charge in connection with real estate-secured products.
Regulations promulgated by some states may impose compliance obligations on any
person who acquires 10% or more of the Company's common stock, including
requiring that person to periodically file financial and other personal and
business information. If any person acquires 10% or more of the Company's common
stock and refuses or fails to comply with these requirements, the Company may
not be able to obtain a license and existing licensing arrangements in
particular states may be jeopardized. The inability to obtain, or the loss of,
required licenses could have a material adverse effect on the Company's
operations or financial condition.
The parties conducting business with the Company, such as lenders and affiliated
websites, similarly may be subject to federal and state regulation. These
parties act as independent contractors and not as our agents in their
solicitations and transactions with consumers. Consequently, the Company cannot
ensure that these entities will comply with applicable laws and regulations at
all times. Failure on the part of a lender or an affiliated website to comply
with these laws or regulations could result in, among other things, claims of
vicarious liability or negatively impact the Company's reputation. The
occurrence of one or more of these events could materially adversely affect the
Company's business, results of operations, and financial condition.
As An Online Loan Marketplace The Company May Be Liable As A Result Of
Information Retrieved From Its Website Or The Websites Of Businesses
With Which The Company Maintains Relationships.
The Company may be subject to legal claims relating to information that is
published or made available on its website and the other websites linked to it.
The Company's service may subject us to potential liabilities or claims
resulting from:
- lost or misdirected messages from our network lenders, consumers or vendors;
- illegal or fraudulent use of e-mail; or
- interruptions or delays in transmission of Qualification Forms or lenders'
offers.
In addition, the Company could incur significant costs in investigating and
defending such claims, even if the Company ultimately is not found liable. If
any of these events occur, the Company's business could be materially adversely
affected.
Failure To Protect The Company's Intellectual Property Rights Could
Harm Its Brand-Building Efforts And Ability To Compete Effectively.
Failure to protect the Company's intellectual property could harm its brand and
our reputation, devalue our content in the eyes of our customers, and adversely
affect its ability to compete effectively. Further, enforcing or defending the
Company's intellectual property rights, including our service marks, patent
application, copyrights and trade secrets, could result in the expenditure of
significant financial and managerial resources. We regard our intellectual
property as critical to the Company's success. To protect the rights to the
Company's intellectual property, it relies on a combination of patent, trademark
and copyright law, trade secret protection, confidentiality agreements, and
other contractual arrangements with its employees, affiliates, clients, and
others. The protective steps the Company has taken may be inadequate to deter
misappropriation of its proprietary information. The Company may be unable to
detect the unauthorized use of, or take appropriate steps to enforce, its
intellectual property rights. The Company has applied for a U.S. patent and
filed a Patent Cooperation Treaty international patent application on its Lend-X
technology and its online loan market process. While the number of software and
business method patents issued by the U.S. Patent and Trademark Office has been
growing substantially in recent years, there is still a significant degree of
uncertainty associated with these patents. It is possible that the Company's
patent applications will be
15
<PAGE> 16
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
denied or granted in a very limited manner such that they offer little or no
basis for us to deter competitors from employing similar technology or processes
or allow the Company to defend against third party claims of patent
infringement.
Regulation Of The Internet Is Unsettled, And Future Regulations Could
Inhibit The Growth Of The Internet, Decrease Visitors To The Company's
Website And Otherwise Materially Adversely Affect The Company's
Business.
Existing laws and regulations specifically regulate communications and commerce
on the Internet. Further laws and regulations that address issues such as user
privacy, pricing, online content regulation, taxation, and the characteristics
and quality of online products and services are under consideration by federal,
state, local, and foreign governments and agencies. Several telecommunications
companies have petitioned the Federal Communications Commission to regulate
Internet service providers and online service providers in a manner similar to
the regulation of long distance telephone carriers and to impose access fees on
such companies. This regulation, if imposed, could increase the cost of
transmitting data over the Internet. Moreover, it may take years to determine
the extent to which existing laws relating to issues such as intellectual
property ownership and infringement and personal privacy are applicable to the
Internet. Many of these laws were adopted prior to the advent of the Internet
and related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies. The Federal Trade
Commission and government agencies in certain states have been investigating
Internet companies regarding their use of personal information. The Company
could incur additional expenses if any new regulations regarding the use of
personal information are introduced or if these agencies choose to investigate
the Company's privacy practices. Any new laws or regulations relating to the
Internet, or new application or interpretation of existing laws, could inhibit
the growth of the Internet as a medium for commerce or credit procurement which
could, in turn, decrease the demand for the Company's service or otherwise
materially adversely affect the Company's business, results of operations, and
financial condition.
The Company' Business Could Suffer If It Loses The Services Of Key
Executives
If the Company loses the services of Douglas Lebda, its founder, Chief Executive
Officer, and a director, or any of its other executive officers or key
employees, the Company's ability to expand its business would be seriously
compromised. Mr. Lebda has been instrumental in determining the Company's
strategic direction and focus and in promoting the concept of an Internet-based
loan marketplace for consumers and lenders. The Company does not maintain key
person insurance on any of its key executives.
The Company May Be Limited Or Restricted In The Way The Company
Establishes And Maintains The Company's Online Relationships By Laws
Generally Applicable To The Company's Business.
The Real Estate Settlement Procedures Act ("RESPA") and related regulations
generally prohibit the payment or receipt of fees or any other item of value for
the referral of a real estate-secured loan to a loan broker or lender. The act
and the related regulations also prohibit fee shares or splits or unearned fees
in connection with the provision of residential real estate settlement services,
including mortgage brokerage or lending services. Notwithstanding these
prohibitions, RESPA permits payments for goods or facilities furnished or for
services actually performed, so long as those payments bear a reasonable
relationship to the market value of the goods, facilities, or services provided.
Failure to comply with RESPA may result in, among other things, administrative
enforcement actions, class action lawsuits, and cease and desist orders and
civil and criminal liability.
The mortgage and home equity products offered through the Company's marketplace
are residential real estate secured loans subject to these provisions of RESPA.
Consequently, the Company's online relationships with lenders and other Internet
companies and websites that offer these products are subject to RESPA's
prohibitions on payment or receipt of fees for referrals and for unearned fees.
The Company believes that it has structured these relationships to comply with
these regulations. The applicability of RESPA's compensation provisions to these
types of Internet-based relationships, however, is unclear and the appropriate
regulatory agency has provided limited guidance to date on the subject.
INCOME TAXES:
The Company has not generated taxable income for federal or state purposes to
date and therefore has not paid any federal or state taxes since inception.
Utilization of the Company's net operating loss carryforwards, which begin to
expire in 2011, may be subject to certain limitation user Section 382 of the
Internal Revenue Code of 1986, as amended. The Company has provided a full
valuation allowance on the deferred tax asset, consisting primarily of net
operating loss carryforwards, because of uncertainty regarding its realization.
16
<PAGE> 17
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
PART II - Other Information
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 22, 2000 , the Company completed its initial public offering in
which it sold 4,197,500 shares of its common stock. The shares of common stock
sold in the offering were registered under the Securities Act of 1933, as
amended, on a Registration Statement on Form S-1 (the "Registration Statement"),
Registration Number 333-91839 that was declared effective by the Securities and
Exchange Commission on February 15, 2000. All 4,197,500 (including the
underwriters over-allotment) shares of the Company's common stock registered
under the Registration Statement were sold at a price of $12.00 per share,
resulting in net proceeds to the Company of $44.9 million after underwriter fees
and other related expenses. The principal underwriters for this offering were
Merrill Lynch & Co., Lehman Brothers and Prudential Volpe Technology.
The net proceeds from the initial public offering will be used for marketing and
advertising campaigns as well as general corporate purposes, including working
capital to fund anticipated operating losses and capital expenditures. The
Company may also use a portion of the net proceeds to acquire or invest in
businesses, technologies or products or services, although no specific
acquisitions are planned and no portion of the net proceeds has been allocated
for any acquisition.
Simultaneously with the consummation of the initial public offering, each
outstanding share of the Company's Series A and Series D Preferred Stock along
with accumulated, unpaid in-kind dividends were automatically converted into
1.27 shares of common stock without payment of additional consideration. The
conversion of Series A and Series D Preferred Stock and accumulated, unpaid
in-kind dividends resulted in an additional 10.5 million shares of outstanding
common stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company currently has no floating rate indebtedness, holds no derivative
instruments, and does not earn foreign-sourced income. All of the Company's
transactions occur in U.S. dollars and the Company does not have any investments
in foreign countries. Accordingly, changes in interest rates and currency
exchange risks related to these types of transactions do not have a direct
effect on the Company's financial position or results of operations.
However, the Company is subject to interest rate risks on its investment
portfolio. As of March 31, 2000, the Company's investment portfolio was
comprised of all short-term money market instruments, as such the interest rate
risk is substantially mitigated. However, the Company anticipates that it will
from time-to-time, as it deems appropriate, modify its investment portfolio to
include other types of instruments. The Company will attempt to mitigate
interest rate risks on such investments by following its policy of investing in
only high-credit quality and marketable securities with maturities of three
months or less and by generally planning our liquidity needs to help ensure our
investments can be held to maturity. The Company cannot currently quantify the
risks associated with hypothetical changes in market rates on its future
investment portfolio.
17
<PAGE> 18
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
NUMBER DESCRIPTION
- ------ -----------
10.1*+ Employment Continuity Agreement dated April 27, 2000 between
LendingTree, Inc. and Stephen James Campbell, Chief Information Officer
10.2*+ Employment Continuity Agreement dated April 27, 2000 between
LendingTree, Inc. and Richard M. Stiegler, Chief Technology Officer
10.3*+ Employment Continuity Agreement dated April 27, 2000 between
LendingTree, Inc. and Virginia P. Rebata, Senior Vice President of
Human Relations
10.4*+ Employment Continuity Agreement dated April 27, 2000 between
LendingTree, Inc. and David N. Anderson, Senior Vice President of
Operations
10.5*+ Employment Continuity Agreement dated April 27, 2000 between
LendingTree, Inc. and Thomas J. Reddin, Senior Vice President, Chief
Marketing Officer
10.6*+ Employment Continuity Agreement dated April 27, 2000 between
LendingTree, Inc. and Keith B. Hall, Senior Vice President, Chief
Financial Officer and Treasurer
10.7*+ Employment Continuity Agreement dated April 27, 2000 between
LendingTree, Inc. and Douglas R. Lebda, Chief Executive Officer and
Director
10.8*+ Form of Promissory Note Issued by Keith B. Hall, for the benefit of
LendingTree, Inc.
10.9*+ Form of Pledge Agreement by Keith B. Hall. for the benefit of
LendingTree, Inc.
10.10*+ Form of Promissory Note Issued by James F. Bennett, Jr., for the
benefit of LendingTree, Inc.
10.11*+ Form of Pledge Agreement by James, F. Bennett, Jr., for the benefit of
LendingTree, Inc.
27.1* Financial Data Schedule.
* Filed herewith.
+ Management contract or compensatory plan or arrangement required to
be filed as an exhibit.
(b) REPORTS ON FORM 8-K:
None
18
<PAGE> 19
LendingTree, Inc.
Form 10-Q for the Three Months Ended March 31, 2000
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LENDINGTREE, INC.
Date: May 12, 2000 By: /s/ Keith B. Hall
------------- ----------------------------------------
Keith B. Hall, Senior Vice President and
Chief Financial Officer
19
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of April 27, 2000 (the "Agreement Date"), is
made by and between LendingTree, Inc. (the "Company"), a Delaware corporation,
and Stephen James Campbell (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued services of the Executive, despite the
possibility or occurrence of a Change in Control of the Company. The Board
believes that this objective may be achieved by giving key management employees
assurances of financial security in case of a pending or threatened Change in
Control, so that they will not be distracted by personal risks and will continue
to devote their full time and best efforts to the performance of their duties.
The Company and the Executive enter into this Agreement to induce the Executive
to remain an employee of the Company and to continue to devote Executive's full
energy to the Company's affairs. This Agreement is not intended to provide the
Executive with any right to continued employment with the Company, except in the
event of a Change of Control of the Company and subject to the provisions of
this Agreement.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 "Agreement Term" means the period commencing on the Agreement Date
and ending on the first anniversary of the Agreement Date. Commencing on the
first anniversary of the Agreement Date and each subsequent anniversary of the
Agreement Date, the Agreement Term shall be automatically extended for an
additional one-year term, unless at least 30 days prior to the last day of any
such extended Agreement Term, the Company shall give notice to the Executive
that the Agreement Term shall not be extended. The Agreement Term shall also
include the Employment Period.
2.2 "Accrued Obligation." See Section 5.4(a).
2.3 "Annual Base Salary." See Section 3.2(a).
2.4 "Annual Bonus." See Section 3.2(b).
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2.5 "Cause." See Section 4.3.
2.6 "Change in Control" means (i) the acquisition by any Person of
shares of the Company's stock representing more than 50.0% of the total voting
power of the Company; (ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; (iii) any merger, share exchange, consolidation or
other reorganization or business combination in which the Company is not the
surviving or continuing corporation or in which the Company's stockholders do
not control greater than 50.0% of the voting power of the surviving or
continuing corporation, or in which the Company's stockholders become entitled
to receive cash, securities of the Company other than voting common stock, or
securities of another issuer; or (v) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's assets to an entity, at
least 50.0% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale. For purposes of
this Section, the term "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include: (i)
the Company or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
affiliates; (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities; or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Disability." See Section 4.1.
2.9 "Disability Effective Date." See Section 4.1
2.10 "Effective Date" means the first date during the Agreement Term on
which a Change in Control occurs. Notwithstanding anything in this Agreement to
the contrary, if a Change in Control occurs and the Executive's employment with
the Company had terminated prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (a)
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was at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control, or (b) otherwise arose in connection with or in
anticipation of a Change in Control, then for all purposes of this Agreement,
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
2.11 "Employment Period" means the period commencing on the Effective
Date and ending on the first anniversary of such date.
2.12 "Incentive Plans." See Section 5.1(c).
2.13 "Performance Period." See Section 3.2(b).
2.14 "Plans." See Section 3.2(c).
2.15 "Prior Year Annual Bonus" means the total amount of the annual
bonus that was paid to the Executive during the twelve-month period immediately
preceding the Effective Date, or which is payable with respect to that period.
2.16 "Termination Date" means the date of termination of the
Executive's employment; provided, however, that if the Executive's employment is
terminated by reason of Disability, then the Termination Date shall be the
Disability Effective Date (as defined in Section 4.1).
2.17 "Welfare Plans." See Section 3.2(d).
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
(a) The Company hereby agrees to continue the Executive in its
employ during the Employment Period and, subject to Article IV of this
Agreement, the Executive agrees to remain in the employ of the Company subject
to the terms and conditions hereof.
(b) During the Employment Period, the Executive (i) will
devote his knowledge, skill and best efforts on a full-time basis to performing
his duties and obligations to the Company (with the exception of absences on
account of illness or vacation in accordance with the Company's policies and
civic and charitable commitments not involving a conflict with the Company's
business), (ii) will comply with the directions and orders of the Board of
Directors, the Chief Executive Officer or other superior officer of the Company
with respect to the performance of his duties, and (iii) will comply with the
provisions of Article XI.
3.2 Compensation.
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(a) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a monthly rate at least equal to twelve times the highest monthly base salary
paid or payable (including any base salary which has been earned but deferred)
to the Executive by the Company in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date, and shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary awarded to other
peer Executives of the Company. Annual Base Salary shall not be reduced after
any such increase unless such reduction is part of a policy, program or
arrangement applicable to peer Executives of the Company and of any successor
entity, and the term Annual Base Salary as used in this Agreement shall refer to
Annual Base Salary as so adjusted.
(b) Annual Bonus. In addition to Annual Base Salary, the
Company shall grant or cause to be granted to the Executive a bonus award
opportunity (the "Annual Bonus") for each Performance Period which ends during
the Employment Period. "Performance Period" means each period of time designated
in accordance with any annual incentive award arrangement which is based upon
performance. The Executive's target and maximum Annual Bonus with respect to any
Performance Period shall not be less than the largest target and maximum annual
incentive award payable with respect to the Executive under the Company's annual
incentive program as in effect during the twelve-month period immediately
preceding the Effective Date.
(c) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
("Plans") applicable generally to other peer Executives of the Company, but in
no event shall such Plans provide the Executive with incentives or savings and
retirement benefits which, in each case, are less favorable, in the aggregate
than the greater of (i) those provided by the Company for the Executive under
such Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company. The Plans shall
include both tax-qualified retirement plans and nonqualified retirement plans.
(d) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs ("Welfare Plans") provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance benefits), but in no event shall such Welfare Plans provide
the Executive with benefits which are less favorable, in the aggregate than the
greater of (i) those provided by the Company for the Executive under such
Welfare Plans as were in effect at any time during the 90-day period immediately
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preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company.
(e) Other Employee Benefits. During the Employment Period, the
Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company, as in effect with respect to the Executive at any time during the
90-day period immediately preceding the Effective Date, or if more favorable, as
in effect generally with respect to other peer Executives of the Company. These
other employee benefits and perquisites include, but are not limited to,
vacation, use of a Company car, parking benefits and financial planning.
(f) Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated in
the incentive or employee benefit plans of, a subsidiary of the Company, the
references to the Company contained in Sections 3.2(a) through 3.2(e) and the
other Sections of this Agreement referring to benefits to which the Executive
may be entitled shall be read to refer to such subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability. During the Employment Term, the Company may terminate
the Executive's employment upon the Executive's Disability. The Executive's
employment shall terminate effective on the 30th day (the "Disability Effective
Date") after the Executive's receipt of written notice of termination from the
Company unless, before the Disability Effective Date, the Executive shall have
resumed the full-time performance of the Executive's duties. "Disability" means
a condition, resulting from bodily injury or disease, that renders, and for a
six consecutive month period has rendered, the Executive unable to perform
substantially the duties pertaining to his employment with the Company. A return
to work of less than 14 consecutive days will not be considered an interruption
in the Executive's six consecutive months of disability. Disability will be
determined by the Company on the basis of medical evidence satisfactory to the
Company.
4.2 Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Term.
4.3 Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" means
(a) fraud or material misappropriation with respect to the business or assets of
the Company, (b) persistent refusal or willful failure of the Executive to
perform substantially his duties and responsibilities to the Company, which
continues after the Executive receives notice of such refusal or failure, (c)
conviction of a felony or crime involving moral turpitude, or
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(d) the use of drugs or alcohol that interferes materially with the Executive's
performance of his duties.
4.4 Constructive Termination. The Executive may terminate the
Executive's employment for Constructive Termination at any time during the
Employment Period. "Constructive Termination" means any material breach of this
Agreement by the Company during the Employment Period, including:
(a) the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Effective Date;
(b) a material adverse alteration in the nature or scope of
the Executive's position, duties, functions, responsibilities or authority as
compared to the nature or scope immediately prior to the Effective Date;
(c) any failure by the Company to provide the Executive with
the compensation and benefits described in Section 3.2, including any reduction
of the Executive's Annual Base Salary in violation of Section 3.2(a);
(d) the failure of any successor to the Company to assume this
Agreement;
(e) a relocation of more than 50 miles of (i) the Executive's
workplace, or (ii) the principal offices of the Company (if such offices are the
Executive's workplace), in each case without the consent of the Executive; or
An act or omission shall not constitute Constructive Termination unless
(1) the Executive gives written notice to the Company indicating that the
Executive intends to terminate employment under this Section 4.4; (2) the
Executive's voluntary termination occurs within 60 days after the Executive
knows or reasonably should know of an event described above, or within 60 days
after the last in a series of such events, and (3) the Company has failed to
remedy the event described above, as the case may be, within 30 days after
receiving the Executive's written notice. If the Company remedies the event
described above, as the case may be, within 30 days after receiving the
Executive's written notice, the Executive may not terminate employment under
this Section 4.4 on account of the event specified in the Executive's notice.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Constructive Termination or by the Company
Other Than for Cause or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability, or if the
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Executive shall terminate employment for Constructive Termination, the Company's
obligations to the Executive shall be as follows:
(a) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to the sum of
the following amounts:
(i) to the extent not previously paid, the Annual
Base Salary and any accrued paid time off through the Termination Date;
(ii) an amount equal to the product of (i) the target
Annual Bonus (as defined in Section 3.2(b)) for the Performance Period
in which the Termination Date occurs multiplied by (ii) a fraction, the
numerator of which is the number of days actually worked during such
Performance Period, and the denominator of which is 365; and
(iii) all amounts previously deferred by the
Executive under any nonqualified deferred compensation plan sponsored
by the Company, together with any accrued earnings thereon, and not yet
paid by the Company.
(b) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to two (2)
times the sum of the Executive's Annual Base Salary and the Prior Year Annual
Bonus, reduced by the total amount of any severance benefit paid or payable
under the terms of an offer of employment from the Company to the Executive or
an employment agreement between the Company and the Executive.
(c) On the Termination Date, the Executive shall become fully
vested in any and all stock option awards granted to the Executive under the
Amended and Restated 1999 Stock Incentive Plan of LendingTree, Inc. and any
similar plan or other arrangement of the Company ("Incentive Plans") which have
not become exercisable as of the Termination Date, and such stock option awards
shall remain exercisable until the applicable option expiration date. All
forfeiture conditions that as of the Termination Date are applicable to any
restricted stock, phantom stock unit, stock bonus, or other stock-based award
granted to the Executive by the Company pursuant to the Incentive Plans shall
lapse immediately.
(d) During the Employment Period (or until such later date as
any Welfare Plan of the Company may specify), the Company shall continue to
provide to the Executive and the Executive's family welfare benefits (including,
without limitation, disability, individual life and group life insurance
benefits, but excluding medical or other health plans) which are at least as
favorable as those provided under the most favorable Welfare Plans of the
Company applicable (i) with respect to the Executive and his family during the
90-day period immediately preceding the Termination Date, or (ii) with respect
to other peer Executives and their families during the Employment Period. In
determining benefits under such Welfare Plans, the Executive's annual
compensation attributable to base salary and incentives for any plan year or
calendar year, as applicable,
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shall be deemed to be not less than the Executive's Annual Base Salary and Prior
Year Annual Bonus. The cost of the welfare benefits provided under this Section
5.1(d) shall not exceed the cost of such benefits to the Executive immediately
before the Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare Plans
sponsored by another employer, then the amount of coverage required to be
provided by the Company hereunder shall be reduced by the amount of coverage
provided by such other employer's Welfare Plans. The Executive's rights under
this Section shall be in addition to and not in lieu of any post-termination
continuation coverage or conversion rights the Executive may have pursuant to
applicable law, including, without limitation, continuation coverage required by
Section 4980B of the Code.
5.2 If by the Company for Cause. If the Company terminates the
Executive's employment for Cause during the Employment Period, this Agreement
shall terminate without further obligation by the Company to the Executive,
other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.3 If by the Executive Other Than for Constructive Termination. If the
Executive terminates employment during the Employment Period other than for
Constructive Termination, Disability or death, this Agreement shall terminate
without further obligation by the Company to the Executive, other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.4 If by the Company for Disability. If the Company terminates the
Executive's employment by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further obligation to
the Executive, other than:
(a) the Company shall pay the Executive in cash all amounts
specified in Sections 5.1(a)(i), (ii), (iii) and 5(b), in each case, to the
extent unpaid as of the Termination Date (such amounts collectively, the
"Accrued Obligations"),
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(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans, and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.5 If upon Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligation to the Executive's legal
representatives under this Agreement, other than:
(a) the obligation immediately to pay the Executive's estate
or beneficiary in cash all Accrued Obligations (as defined in Section 5.4), and
(b) the rights of the Executive's legal representatives to
benefits under the terms of any of the Plans, Welfare Plans, and other employee
benefit programs in which the Executive was participating immediately prior to
the Termination Date, pursuant to Sections 3.2(c) through (e).
ARTICLE VI
EXPENSES AND INTEREST
6.1 Legal Fees and Other Expenses. The Company will pay all reasonable
fees and expenses, if any, (including, without limitation, legal fees and
expenses) that are incurred by the Executive to enforce this Agreement and that
result from a breach of this Agreement by the Company.
6.2 Interest. If the Company does not pay any amount due to the
Executive under this Agreement within three days after such amount became due
and owing, interest shall accrue on such amount from the date it became due and
owing until the date of payment at a annual rate equal to 200 basis points above
the base commercial lending rate published in The Wall Street Journal in effect
from time to time during the period of such nonpayment.
ARTICLE VII
NO ADVERSE EFFECT ON POOLING OF INTERESTS
Any benefits provided to the Executive under this Agreement may be
reduced or eliminated to the extent necessary, in the reasonable judgment of the
Board, to enable the Company to account for a merger, consolidation or similar
transaction as a pooling of interests; provided that (i) the Board shall have
exercised such judgment and approved the reduction by a vote of at least
two-thirds (2/3) of the directors then in office, (ii) the Board shall have
given the Executive written notice thereof prior to the Effective Date and (iii)
the determination of the Board shall be supported by the Company's independent
auditors.
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ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when due
the payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty to mitigate
the amounts payable by the Company under this Agreement by seeking new
employment following termination. Except as specifically otherwise provided in
this Agreement, all amounts payable pursuant to this Agreement shall be paid
without reduction regardless of any amounts of salary, compensation or other
amounts which may be paid or payable to the Executive as the result of the
Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. To the extent that payments are
made to the Executive pursuant to Section 5.1 of this Agreement, the Executive
hereby waives the right to receive benefits under any plan or agreement
(including an offer of employment or employment contract) of the Company or its
subsidiaries which provides for severance benefits (except as provided in
Section 5.1(b)).
9.2 Other Rights. Except as provided in Section 10.1, this Agreement
shall not prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plans provided by the Company or any of
its subsidiaries and for which the Executive may qualify, nor shall this
Agreement limit or otherwise affect such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under the terms of any plan or program of the Company or any of its subsidiaries
and any other payment or benefit required by law at or after the Termination
Date shall be payable in accordance with such plan, program or applicable law
except as expressly modified by this Agreement.
ARTICLE X
OBLIGATIONS OF THE EXECUTIVE
10.1 Confidentiality.
(a) The Executive recognizes, by the virtue of the Executive's
employment with the Company, that the Executive will have access to certain
information relating to the Company. The Executive agrees that this information
is a
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valuable asset of the Company, and that use or knowledge of this information by
others would harm the Company. Therefore, the Executive covenants and agrees
that the Executive will not at any time during the Agreement Term or for a
period of one (1) year after the Executive's Termination Date, reveal to any
person or entity any of the trade secrets or confidential information concerning
the organization, business or finances of the Company or of any third party
which the Company is under an obligation to keep confidential, except as may be
required in the ordinary course of performing the Executive's duties as an
employee of the Company, and the Executive shall keep secret such trade secrets
and confidential information and shall not use or attempt to use any such
secrets or information in any manner which is designed to injure or cause loss
to the Company. Trade secrets or confidential information shall include, but not
be limited to, the Company's financial statements and projections, expansion
proposals, customer lists and details of its Internet web site or business
relationships with banks, lenders and other parties not otherwise publicly
available.
(b) Further, the Executive agrees that during the Agreement
Term the Executive shall not make, use or permit to be used any notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials of any nature relating to any
matter within the scope of the business of the Company or concerning any of its
dealings or affairs otherwise than for the benefit of the Company. The Executive
further agrees that the Executive shall not, for a period of one (1) year after
the Executive's Termination Date, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that immediately upon the termination of the Executive's employment, the
Executive shall deliver all of the foregoing, and all copies thereof, to the
Company, at its main office, at the Company's expense.
10.2 Non-Hire.
(a) The Executive agrees that for a period of one (1) year
after the Executive's Termination Date, the Executive will not hire or otherwise
employ or retain, or knowingly permit (to the extent reasonably within the
Executive's control) any other entity or business which employs the Executive or
in which the Executive has any ownership interest or is otherwise involved to
hire or otherwise employ or retain, any person who was employed by the Company
as of the Executive's Termination Date.
10.3 Enforcement.
(a) The Executive acknowledges that monetary damages will not
be an adequate remedy for the Company in the event of a breach of this Article
X, and that it would be impossible for the Company to measure damages in the
event of such a breach. Therefore, the Executive agrees that, in addition to
other rights that the Company may have, the Company is entitled to an injunction
preventing the Executive from any breach of this Article X.
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(b) The obligations of the Executive under this Article X
shall survive the termination of the Executive's employment for the periods
specified herein, regardless of the reasons or method of termination. The
existence of any claim or cause of action that the Executive may have against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of these obligations.
(c) The restrictions in this Article X, to the extent
applicable, shall be in addition to any restrictions imposed upon the Executive
by statute or at common law.
(d) The parties hereby acknowledge that the restrictions in
this Article X have been agreed to by the parties hereto and are limited only to
those restrictions reasonably necessary to protect the Company from unfair
competition. The parties hereby agree that if the scope or enforceability of any
provision, paragraph or subparagraph of this Article X is an any way disputed at
any time, and should a court find that such restrictions are overly broad, the
court may modify and enforce the covenant to the extent that it believes to be
reasonable under the circumstances. Each provision, paragraph and subparagraph
of this Article X is separable from every other provision, paragraph and
subparagraph and constitutes a separate and distinct covenant.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignment. The Executive's rights under this Agreement may not
be assigned or transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts payable under
this Agreement after the death of the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
11.2 Successors. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon the successors
and assigns of the Company. Before or upon a Change in Control, the Company
shall obtain the agreement of the surviving or acquiring corporation that it
will succeed to the Company's rights and obligations under this Agreement.
11.3 Rights Under the Agreement. The right to receive benefits under
the Agreement will not give the Executive any proprietary interest in the
Company or any of its assets. Benefits under the Agreement will be payable from
the general assets of the Company, and there will be no required funding of
amounts that may become payable under the Agreement, except to the extend
otherwise provided under the terms of the Plans or Welfare Plans. The Executive
will for purposes of this Agreement be a general creditor of the Company. The
interest of the Executive under the Agreement cannot be assigned, anticipated,
sold, encumbered or pledged and will not be subject to the claims of the
Executive's creditors.
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11.4 Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Executive or his personal representative at his last known
address. All notices to the Company must be directed to the attention of the
Corporate Secretary with a copy to the General Counsel. Such other addresses may
be used as either party may have furnished to the other in writing. Notices of
change of address are effective only upon receipt.
11.5 Miscellaneous. This instrument contains the entire agreement of
the parties. To the extent not governed by federal law, this Agreement will be
construed in accordance with the laws of the State of Delaware, without
reference to its conflict of laws rules. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and the writing is signed by the Executive and the Company.
A waiver of any breach of or compliance with any provision or condition of this
Agreement is not a waiver of similar or dissimilar provisions or conditions. The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
one or more counterparts, all of which will be considered one and the same
agreement.
11.6 Tax Withholding. The Company may withhold from any amounts payable
under this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
LENDINGTREE, INC.
By:
---------------------------------
Title:
------------------------------
------------------------------------
Executive
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EXHIBIT 10.2
EMPLOYMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of April 27, 2000 (the "Agreement Date"), is
made by and between LendingTree, Inc. (the "Company"), a Delaware corporation,
and Richard M. Stiegler (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued services of the Executive, despite the
possibility or occurrence of a Change in Control of the Company. The Board
believes that this objective may be achieved by giving key management employees
assurances of financial security in case of a pending or threatened Change in
Control, so that they will not be distracted by personal risks and will continue
to devote their full time and best efforts to the performance of their duties.
The Company and the Executive enter into this Agreement to induce the Executive
to remain an employee of the Company and to continue to devote Executive's full
energy to the Company's affairs. This Agreement is not intended to provide the
Executive with any right to continued employment with the Company, except in the
event of a Change of Control of the Company and subject to the provisions of
this Agreement.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 "Agreement Term" means the period commencing on the Agreement Date
and ending on the first anniversary of the Agreement Date. Commencing on the
first anniversary of the Agreement Date and each subsequent anniversary of the
Agreement Date, the Agreement Term shall be automatically extended for an
additional one-year term, unless at least 30 days prior to the last day of any
such extended Agreement Term, the Company shall give notice to the Executive
that the Agreement Term shall not be extended. The Agreement Term shall also
include the Employment Period.
2.2 "Accrued Obligation." See Section 5.4(a).
2.3 "Annual Base Salary." See Section 3.2(a).
2.4 "Annual Bonus." See Section 3.2(b).
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2.5 "Cause." See Section 4.3.
2.6 "Change in Control" means (i) the acquisition by any Person of
shares of the Company's stock representing more than 50.0% of the total voting
power of the Company; (ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; (iii) any merger, share exchange, consolidation or
other reorganization or business combination in which the Company is not the
surviving or continuing corporation or in which the Company's stockholders do
not control greater than 50.0% of the voting power of the surviving or
continuing corporation, or in which the Company's stockholders become entitled
to receive cash, securities of the Company other than voting common stock, or
securities of another issuer; or (v) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's assets to an entity, at
least 50.0% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale. For purposes of
this Section, the term "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include: (i)
the Company or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
affiliates; (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities; or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Disability." See Section 4.1.
2.9 "Disability Effective Date." See Section 4.1
2.10 "Effective Date" means the first date during the Agreement Term on
which a Change in Control occurs. Notwithstanding anything in this Agreement to
the contrary, if a Change in Control occurs and the Executive's employment with
the Company had terminated prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (a)
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was at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control, or (b) otherwise arose in connection with or in
anticipation of a Change in Control, then for all purposes of this Agreement,
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
2.11 "Employment Period" means the period commencing on the Effective
Date and ending on the first anniversary of such date.
2.12 "Incentive Plans." See Section 5.1(c).
2.13 "Performance Period." See Section 3.2(b).
2.14 "Plans." See Section 3.2(c).
2.15 "Prior Year Annual Bonus" means the total amount of the annual
bonus that was paid to the Executive during the twelve-month period immediately
preceding the Effective Date, or which is payable with respect to that period.
2.16 "Termination Date" means the date of termination of the
Executive's employment; provided, however, that if the Executive's employment is
terminated by reason of Disability, then the Termination Date shall be the
Disability Effective Date (as defined in Section 4.1).
2.17 "Welfare Plans." See Section 3.2(d).
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
(a) The Company hereby agrees to continue the Executive in its
employ during the Employment Period and, subject to Article IV of this
Agreement, the Executive agrees to remain in the employ of the Company subject
to the terms and conditions hereof.
(b) During the Employment Period, the Executive (i) will
devote his knowledge, skill and best efforts on a full-time basis to performing
his duties and obligations to the Company (with the exception of absences on
account of illness or vacation in accordance with the Company's policies and
civic and charitable commitments not involving a conflict with the Company's
business), (ii) will comply with the directions and orders of the Board of
Directors, the Chief Executive Officer or other superior officer of the Company
with respect to the performance of his duties, and (iii) will comply with the
provisions of Article XI.
3.2 Compensation.
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(a) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a monthly rate at least equal to twelve times the highest monthly base salary
paid or payable (including any base salary which has been earned but deferred)
to the Executive by the Company in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date, and shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary awarded to other
peer Executives of the Company. Annual Base Salary shall not be reduced after
any such increase unless such reduction is part of a policy, program or
arrangement applicable to peer Executives of the Company and of any successor
entity, and the term Annual Base Salary as used in this Agreement shall refer to
Annual Base Salary as so adjusted.
(b) Annual Bonus. In addition to Annual Base Salary, the
Company shall grant or cause to be granted to the Executive a bonus award
opportunity (the "Annual Bonus") for each Performance Period which ends during
the Employment Period. "Performance Period" means each period of time designated
in accordance with any annual incentive award arrangement which is based upon
performance. The Executive's target and maximum Annual Bonus with respect to any
Performance Period shall not be less than the largest target and maximum annual
incentive award payable with respect to the Executive under the Company's annual
incentive program as in effect during the twelve-month period immediately
preceding the Effective Date.
(c) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
("Plans") applicable generally to other peer Executives of the Company, but in
no event shall such Plans provide the Executive with incentives or savings and
retirement benefits which, in each case, are less favorable, in the aggregate
than the greater of (i) those provided by the Company for the Executive under
such Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company. The Plans shall
include both tax-qualified retirement plans and nonqualified retirement plans.
(d) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs ("Welfare Plans") provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance benefits), but in no event shall such Welfare Plans provide
the Executive with benefits which are less favorable, in the aggregate than the
greater of (i) those provided by the Company for the Executive under such
Welfare Plans as were in effect at any time during the 90-day period immediately
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preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company.
(e) Other Employee Benefits. During the Employment Period, the
Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company, as in effect with respect to the Executive at any time during the
90-day period immediately preceding the Effective Date, or if more favorable, as
in effect generally with respect to other peer Executives of the Company. These
other employee benefits and perquisites include, but are not limited to,
vacation, use of a Company car, parking benefits and financial planning.
(f) Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated in
the incentive or employee benefit plans of, a subsidiary of the Company, the
references to the Company contained in Sections 3.2(a) through 3.2(e) and the
other Sections of this Agreement referring to benefits to which the Executive
may be entitled shall be read to refer to such subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability. During the Employment Term, the Company may terminate
the Executive's employment upon the Executive's Disability. The Executive's
employment shall terminate effective on the 30th day (the "Disability Effective
Date") after the Executive's receipt of written notice of termination from the
Company unless, before the Disability Effective Date, the Executive shall have
resumed the full-time performance of the Executive's duties. "Disability" means
a condition, resulting from bodily injury or disease, that renders, and for a
six consecutive month period has rendered, the Executive unable to perform
substantially the duties pertaining to his employment with the Company. A return
to work of less than 14 consecutive days will not be considered an interruption
in the Executive's six consecutive months of disability. Disability will be
determined by the Company on the basis of medical evidence satisfactory to the
Company.
4.2 Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Term.
4.3 Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" means
(a) fraud or material misappropriation with respect to the business or assets of
the Company, (b) persistent refusal or willful failure of the Executive to
perform substantially his duties and responsibilities to the Company, which
continues after the Executive receives notice of such refusal or failure, (c)
conviction of a felony or crime involving moral turpitude, or
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(d) the use of drugs or alcohol that interferes materially with the Executive's
performance of his duties.
4.4 Constructive Termination. The Executive may terminate the
Executive's employment for Constructive Termination at any time during the
Employment Period. "Constructive Termination" means any material breach of this
Agreement by the Company during the Employment Period, including:
(a) the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Effective Date;
(b) a material adverse alteration in the nature or scope of
the Executive's position, duties, functions, responsibilities or authority as
compared to the nature or scope immediately prior to the Effective Date;
(c) any failure by the Company to provide the Executive with
the compensation and benefits described in Section 3.2, including any reduction
of the Executive's Annual Base Salary in violation of Section 3.2(a);
(d) the failure of any successor to the Company to assume this
Agreement;
(e) a relocation of more than 50 miles of (i) the Executive's
workplace, or (ii) the principal offices of the Company (if such offices are the
Executive's workplace), in each case without the consent of the Executive; or
An act or omission shall not constitute Constructive Termination unless
(1) the Executive gives written notice to the Company indicating that the
Executive intends to terminate employment under this Section 4.4; (2) the
Executive's voluntary termination occurs within 60 days after the Executive
knows or reasonably should know of an event described above, or within 60 days
after the last in a series of such events, and (3) the Company has failed to
remedy the event described above, as the case may be, within 30 days after
receiving the Executive's written notice. If the Company remedies the event
described above, as the case may be, within 30 days after receiving the
Executive's written notice, the Executive may not terminate employment under
this Section 4.4 on account of the event specified in the Executive's notice.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Constructive Termination or by the Company
Other Than for Cause or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability, or if the
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Executive shall terminate employment for Constructive Termination, the Company's
obligations to the Executive shall be as follows:
(a) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to the sum of
the following amounts:
(i) to the extent not previously paid, the Annual
Base Salary and any accrued paid time off through the Termination Date;
(ii) an amount equal to the product of (i) the target
Annual Bonus (as defined in Section 3.2(b)) for the Performance Period
in which the Termination Date occurs multiplied by (ii) a fraction, the
numerator of which is the number of days actually worked during such
Performance Period, and the denominator of which is 365; and
(iii) all amounts previously deferred by the
Executive under any nonqualified deferred compensation plan sponsored
by the Company, together with any accrued earnings thereon, and not yet
paid by the Company.
(b) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to two (2)
times the sum of the Executive's Annual Base Salary and the Prior Year Annual
Bonus, reduced by the total amount of any severance benefit paid or payable
under the terms of an offer of employment from the Company to the Executive or
an employment agreement between the Company and the Executive.
(c) On the Termination Date, the Executive shall become fully
vested in any and all stock option awards granted to the Executive under the
Amended and Restated 1999 Stock Incentive Plan of LendingTree, Inc. and any
similar plan or other arrangement of the Company ("Incentive Plans") which have
not become exercisable as of the Termination Date, and such stock option awards
shall remain exercisable until the applicable option expiration date. All
forfeiture conditions that as of the Termination Date are applicable to any
restricted stock, phantom stock unit, stock bonus, or other stock-based award
granted to the Executive by the Company pursuant to the Incentive Plans shall
lapse immediately.
(d) During the Employment Period (or until such later date as
any Welfare Plan of the Company may specify), the Company shall continue to
provide to the Executive and the Executive's family welfare benefits (including,
without limitation, disability, individual life and group life insurance
benefits, but excluding medical or other health plans) which are at least as
favorable as those provided under the most favorable Welfare Plans of the
Company applicable (i) with respect to the Executive and his family during the
90-day period immediately preceding the Termination Date, or (ii) with respect
to other peer Executives and their families during the Employment Period. In
determining benefits under such Welfare Plans, the Executive's annual
compensation attributable to base salary and incentives for any plan year or
calendar year, as applicable,
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shall be deemed to be not less than the Executive's Annual Base Salary and Prior
Year Annual Bonus. The cost of the welfare benefits provided under this Section
5.1(d) shall not exceed the cost of such benefits to the Executive immediately
before the Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare Plans
sponsored by another employer, then the amount of coverage required to be
provided by the Company hereunder shall be reduced by the amount of coverage
provided by such other employer's Welfare Plans. The Executive's rights under
this Section shall be in addition to and not in lieu of any post-termination
continuation coverage or conversion rights the Executive may have pursuant to
applicable law, including, without limitation, continuation coverage required by
Section 4980B of the Code.
5.2 If by the Company for Cause. If the Company terminates the
Executive's employment for Cause during the Employment Period, this Agreement
shall terminate without further obligation by the Company to the Executive,
other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.3 If by the Executive Other Than for Constructive Termination. If the
Executive terminates employment during the Employment Period other than for
Constructive Termination, Disability or death, this Agreement shall terminate
without further obligation by the Company to the Executive, other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.4 If by the Company for Disability. If the Company terminates the
Executive's employment by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further obligation to
the Executive, other than:
(a) the Company shall pay the Executive in cash all amounts
specified in Sections 5.1(a)(i), (ii), (iii) and 5(b), in each case, to the
extent unpaid as of the Termination Date (such amounts collectively, the
"Accrued Obligations"),
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(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans, and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.5 If upon Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligation to the Executive's legal
representatives under this Agreement, other than:
(a) the obligation immediately to pay the Executive's estate
or beneficiary in cash all Accrued Obligations (as defined in Section 5.4), and
(b) the rights of the Executive's legal representatives to
benefits under the terms of any of the Plans, Welfare Plans, and other employee
benefit programs in which the Executive was participating immediately prior to
the Termination Date, pursuant to Sections 3.2(c) through (e).
ARTICLE VI
EXPENSES AND INTEREST
6.1 Legal Fees and Other Expenses. The Company will pay all reasonable
fees and expenses, if any, (including, without limitation, legal fees and
expenses) that are incurred by the Executive to enforce this Agreement and that
result from a breach of this Agreement by the Company.
6.2 Interest. If the Company does not pay any amount due to the
Executive under this Agreement within three days after such amount became due
and owing, interest shall accrue on such amount from the date it became due and
owing until the date of payment at a annual rate equal to 200 basis points above
the base commercial lending rate published in The Wall Street Journal in effect
from time to time during the period of such nonpayment.
ARTICLE VII
NO ADVERSE EFFECT ON POOLING OF INTERESTS
Any benefits provided to the Executive under this Agreement may be
reduced or eliminated to the extent necessary, in the reasonable judgment of the
Board, to enable the Company to account for a merger, consolidation or similar
transaction as a pooling of interests; provided that (i) the Board shall have
exercised such judgment and approved the reduction by a vote of at least
two-thirds (2/3) of the directors then in office, (ii) the Board shall have
given the Executive written notice thereof prior to the Effective Date and (iii)
the determination of the Board shall be supported by the Company's independent
auditors.
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ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when due
the payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty to mitigate
the amounts payable by the Company under this Agreement by seeking new
employment following termination. Except as specifically otherwise provided in
this Agreement, all amounts payable pursuant to this Agreement shall be paid
without reduction regardless of any amounts of salary, compensation or other
amounts which may be paid or payable to the Executive as the result of the
Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. To the extent that payments are
made to the Executive pursuant to Section 5.1 of this Agreement, the Executive
hereby waives the right to receive benefits under any plan or agreement
(including an offer of employment or employment contract) of the Company or its
subsidiaries which provides for severance benefits (except as provided in
Section 5.1(b)).
9.2 Other Rights. Except as provided in Section 10.1, this Agreement
shall not prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plans provided by the Company or any of
its subsidiaries and for which the Executive may qualify, nor shall this
Agreement limit or otherwise affect such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under the terms of any plan or program of the Company or any of its subsidiaries
and any other payment or benefit required by law at or after the Termination
Date shall be payable in accordance with such plan, program or applicable law
except as expressly modified by this Agreement.
ARTICLE X
OBLIGATIONS OF THE EXECUTIVE
10.1 Confidentiality.
(a) The Executive recognizes, by the virtue of the Executive's
employment with the Company, that the Executive will have access to certain
information relating to the Company. The Executive agrees that this information
is a
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valuable asset of the Company, and that use or knowledge of this information by
others would harm the Company. Therefore, the Executive covenants and agrees
that the Executive will not at any time during the Agreement Term or for a
period of one (1) year after the Executive's Termination Date, reveal to any
person or entity any of the trade secrets or confidential information concerning
the organization, business or finances of the Company or of any third party
which the Company is under an obligation to keep confidential, except as may be
required in the ordinary course of performing the Executive's duties as an
employee of the Company, and the Executive shall keep secret such trade secrets
and confidential information and shall not use or attempt to use any such
secrets or information in any manner which is designed to injure or cause loss
to the Company. Trade secrets or confidential information shall include, but not
be limited to, the Company's financial statements and projections, expansion
proposals, customer lists and details of its Internet web site or business
relationships with banks, lenders and other parties not otherwise publicly
available.
(b) Further, the Executive agrees that during the Agreement
Term the Executive shall not make, use or permit to be used any notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials of any nature relating to any
matter within the scope of the business of the Company or concerning any of its
dealings or affairs otherwise than for the benefit of the Company. The Executive
further agrees that the Executive shall not, for a period of one (1) year after
the Executive's Termination Date, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that immediately upon the termination of the Executive's employment, the
Executive shall deliver all of the foregoing, and all copies thereof, to the
Company, at its main office, at the Company's expense.
10.2 Non-Hire.
(a) The Executive agrees that for a period of one (1) year
after the Executive's Termination Date, the Executive will not hire or otherwise
employ or retain, or knowingly permit (to the extent reasonably within the
Executive's control) any other entity or business which employs the Executive or
in which the Executive has any ownership interest or is otherwise involved to
hire or otherwise employ or retain, any person who was employed by the Company
as of the Executive's Termination Date.
10.3 Enforcement.
(a) The Executive acknowledges that monetary damages will not
be an adequate remedy for the Company in the event of a breach of this Article
X, and that it would be impossible for the Company to measure damages in the
event of such a breach. Therefore, the Executive agrees that, in addition to
other rights that the Company may have, the Company is entitled to an injunction
preventing the Executive from any breach of this Article X.
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(b) The obligations of the Executive under this Article X
shall survive the termination of the Executive's employment for the periods
specified herein, regardless of the reasons or method of termination. The
existence of any claim or cause of action that the Executive may have against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of these obligations.
(c) The restrictions in this Article X, to the extent
applicable, shall be in addition to any restrictions imposed upon the Executive
by statute or at common law.
(d) The parties hereby acknowledge that the restrictions in
this Article X have been agreed to by the parties hereto and are limited only to
those restrictions reasonably necessary to protect the Company from unfair
competition. The parties hereby agree that if the scope or enforceability of any
provision, paragraph or subparagraph of this Article X is an any way disputed at
any time, and should a court find that such restrictions are overly broad, the
court may modify and enforce the covenant to the extent that it believes to be
reasonable under the circumstances. Each provision, paragraph and subparagraph
of this Article X is separable from every other provision, paragraph and
subparagraph and constitutes a separate and distinct covenant.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignment. The Executive's rights under this Agreement may not
be assigned or transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts payable under
this Agreement after the death of the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
11.2 Successors. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon the successors
and assigns of the Company. Before or upon a Change in Control, the Company
shall obtain the agreement of the surviving or acquiring corporation that it
will succeed to the Company's rights and obligations under this Agreement.
11.3 Rights Under the Agreement. The right to receive benefits under
the Agreement will not give the Executive any proprietary interest in the
Company or any of its assets. Benefits under the Agreement will be payable from
the general assets of the Company, and there will be no required funding of
amounts that may become payable under the Agreement, except to the extend
otherwise provided under the terms of the Plans or Welfare Plans. The Executive
will for purposes of this Agreement be a general creditor of the Company. The
interest of the Executive under the Agreement cannot be assigned, anticipated,
sold, encumbered or pledged and will not be subject to the claims of the
Executive's creditors.
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11.4 Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Executive or his personal representative at his last known
address. All notices to the Company must be directed to the attention of the
Corporate Secretary with a copy to the General Counsel. Such other addresses may
be used as either party may have furnished to the other in writing. Notices of
change of address are effective only upon receipt.
11.5 Miscellaneous. This instrument contains the entire agreement of
the parties. To the extent not governed by federal law, this Agreement will be
construed in accordance with the laws of the State of Delaware, without
reference to its conflict of laws rules. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and the writing is signed by the Executive and the Company.
A waiver of any breach of or compliance with any provision or condition of this
Agreement is not a waiver of similar or dissimilar provisions or conditions. The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
one or more counterparts, all of which will be considered one and the same
agreement.
11.6 Tax Withholding. The Company may withhold from any amounts payable
under this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
LENDINGTREE, INC.
By:
---------------------------------
Title:
------------------------------
------------------------------------
Executive
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EXHIBIT 10.3
EMPLOYMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of April 27, 2000 (the "Agreement Date"), is
made by and between LendingTree, Inc. (the "Company"), a Delaware corporation,
and Virginia P. Rebata (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued services of the Executive, despite the
possibility or occurrence of a Change in Control of the Company. The Board
believes that this objective may be achieved by giving key management employees
assurances of financial security in case of a pending or threatened Change in
Control, so that they will not be distracted by personal risks and will continue
to devote their full time and best efforts to the performance of their duties.
The Company and the Executive enter into this Agreement to induce the Executive
to remain an employee of the Company and to continue to devote Executive's full
energy to the Company's affairs. This Agreement is not intended to provide the
Executive with any right to continued employment with the Company, except in the
event of a Change of Control of the Company and subject to the provisions of
this Agreement.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 "Agreement Term" means the period commencing on the Agreement Date
and ending on the first anniversary of the Agreement Date. Commencing on the
first anniversary of the Agreement Date and each subsequent anniversary of the
Agreement Date, the Agreement Term shall be automatically extended for an
additional one-year term, unless at least 30 days prior to the last day of any
such extended Agreement Term, the Company shall give notice to the Executive
that the Agreement Term shall not be extended. The Agreement Term shall also
include the Employment Period.
2.2 "Accrued Obligation." See Section 5.4(a).
2.3 "Annual Base Salary." See Section 3.2(a).
2.4 "Annual Bonus." See Section 3.2(b).
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2.5 "Cause." See Section 4.3.
2.6 "Change in Control" means (i) the acquisition by any Person of
shares of the Company's stock representing more than 50.0% of the total voting
power of the Company; (ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; (iii) any merger, share exchange, consolidation or
other reorganization or business combination in which the Company is not the
surviving or continuing corporation or in which the Company's stockholders do
not control greater than 50.0% of the voting power of the surviving or
continuing corporation, or in which the Company's stockholders become entitled
to receive cash, securities of the Company other than voting common stock, or
securities of another issuer; or (v) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's assets to an entity, at
least 50.0% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale. For purposes of
this Section, the term "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include: (i)
the Company or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
affiliates; (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities; or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Disability." See Section 4.1.
2.9 "Disability Effective Date." See Section 4.1
2.10 "Effective Date" means the first date during the Agreement Term on
which a Change in Control occurs. Notwithstanding anything in this Agreement to
the contrary, if a Change in Control occurs and the Executive's employment with
the Company had terminated prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (a)
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was at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control, or (b) otherwise arose in connection with or in
anticipation of a Change in Control, then for all purposes of this Agreement,
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
2.11 "Employment Period" means the period commencing on the Effective
Date and ending on the first anniversary of such date.
2.12 "Incentive Plans." See Section 5.1(c).
2.13 "Performance Period." See Section 3.2(b).
2.14 "Plans." See Section 3.2(c).
2.15 "Prior Year Annual Bonus" means the total amount of the annual
bonus that was paid to the Executive during the twelve-month period immediately
preceding the Effective Date, or which is payable with respect to that period.
2.16 "Termination Date" means the date of termination of the
Executive's employment; provided, however, that if the Executive's employment is
terminated by reason of Disability, then the Termination Date shall be the
Disability Effective Date (as defined in Section 4.1).
2.17 "Welfare Plans." See Section 3.2(d).
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
(a) The Company hereby agrees to continue the Executive in its
employ during the Employment Period and, subject to Article IV of this
Agreement, the Executive agrees to remain in the employ of the Company subject
to the terms and conditions hereof.
(b) During the Employment Period, the Executive (i) will
devote his knowledge, skill and best efforts on a full-time basis to performing
his duties and obligations to the Company (with the exception of absences on
account of illness or vacation in accordance with the Company's policies and
civic and charitable commitments not involving a conflict with the Company's
business), (ii) will comply with the directions and orders of the Board of
Directors, the Chief Executive Officer or other superior officer of the Company
with respect to the performance of his duties, and (iii) will comply with the
provisions of Article XI.
3.2 Compensation.
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(a) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a monthly rate at least equal to twelve times the highest monthly base salary
paid or payable (including any base salary which has been earned but deferred)
to the Executive by the Company in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date, and shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary awarded to other
peer Executives of the Company. Annual Base Salary shall not be reduced after
any such increase unless such reduction is part of a policy, program or
arrangement applicable to peer Executives of the Company and of any successor
entity, and the term Annual Base Salary as used in this Agreement shall refer to
Annual Base Salary as so adjusted.
(b) Annual Bonus. In addition to Annual Base Salary, the
Company shall grant or cause to be granted to the Executive a bonus award
opportunity (the "Annual Bonus") for each Performance Period which ends during
the Employment Period. "Performance Period" means each period of time designated
in accordance with any annual incentive award arrangement which is based upon
performance. The Executive's target and maximum Annual Bonus with respect to any
Performance Period shall not be less than the largest target and maximum annual
incentive award payable with respect to the Executive under the Company's annual
incentive program as in effect during the twelve-month period immediately
preceding the Effective Date.
(c) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
("Plans") applicable generally to other peer Executives of the Company, but in
no event shall such Plans provide the Executive with incentives or savings and
retirement benefits which, in each case, are less favorable, in the aggregate
than the greater of (i) those provided by the Company for the Executive under
such Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company. The Plans shall
include both tax-qualified retirement plans and nonqualified retirement plans.
(d) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs ("Welfare Plans") provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance benefits), but in no event shall such Welfare Plans provide
the Executive with benefits which are less favorable, in the aggregate than the
greater of (i) those provided by the Company for the Executive under such
Welfare Plans as were in effect at any time during the 90-day period immediately
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preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company.
(e) Other Employee Benefits. During the Employment Period, the
Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company, as in effect with respect to the Executive at any time during the
90-day period immediately preceding the Effective Date, or if more favorable, as
in effect generally with respect to other peer Executives of the Company. These
other employee benefits and perquisites include, but are not limited to,
vacation, use of a Company car, parking benefits and financial planning.
(f) Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated in
the incentive or employee benefit plans of, a subsidiary of the Company, the
references to the Company contained in Sections 3.2(a) through 3.2(e) and the
other Sections of this Agreement referring to benefits to which the Executive
may be entitled shall be read to refer to such subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability. During the Employment Term, the Company may terminate
the Executive's employment upon the Executive's Disability. The Executive's
employment shall terminate effective on the 30th day (the "Disability Effective
Date") after the Executive's receipt of written notice of termination from the
Company unless, before the Disability Effective Date, the Executive shall have
resumed the full-time performance of the Executive's duties. "Disability" means
a condition, resulting from bodily injury or disease, that renders, and for a
six consecutive month period has rendered, the Executive unable to perform
substantially the duties pertaining to his employment with the Company. A return
to work of less than 14 consecutive days will not be considered an interruption
in the Executive's six consecutive months of disability. Disability will be
determined by the Company on the basis of medical evidence satisfactory to the
Company.
4.2 Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Term.
4.3 Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" means
(a) fraud or material misappropriation with respect to the business or assets of
the Company, (b) persistent refusal or willful failure of the Executive to
perform substantially his duties and responsibilities to the Company, which
continues after the Executive receives notice of such refusal or failure, (c)
conviction of a felony or crime involving moral turpitude, or
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(d) the use of drugs or alcohol that interferes materially with the Executive's
performance of his duties.
4.4 Constructive Termination. The Executive may terminate the
Executive's employment for Constructive Termination at any time during the
Employment Period. "Constructive Termination" means any material breach of this
Agreement by the Company during the Employment Period, including:
(a) the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Effective Date;
(b) a material adverse alteration in the nature or scope of
the Executive's position, duties, functions, responsibilities or authority as
compared to the nature or scope immediately prior to the Effective Date;
(c) any failure by the Company to provide the Executive with
the compensation and benefits described in Section 3.2, including any reduction
of the Executive's Annual Base Salary in violation of Section 3.2(a);
(d) the failure of any successor to the Company to assume this
Agreement;
(e) a relocation of more than 50 miles of (i) the Executive's
workplace, or (ii) the principal offices of the Company (if such offices are the
Executive's workplace), in each case without the consent of the Executive; or
An act or omission shall not constitute Constructive Termination unless
(1) the Executive gives written notice to the Company indicating that the
Executive intends to terminate employment under this Section 4.4; (2) the
Executive's voluntary termination occurs within 60 days after the Executive
knows or reasonably should know of an event described above, or within 60 days
after the last in a series of such events, and (3) the Company has failed to
remedy the event described above, as the case may be, within 30 days after
receiving the Executive's written notice. If the Company remedies the event
described above, as the case may be, within 30 days after receiving the
Executive's written notice, the Executive may not terminate employment under
this Section 4.4 on account of the event specified in the Executive's notice.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Constructive Termination or by the Company
Other Than for Cause or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability, or if the
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Executive shall terminate employment for Constructive Termination, the Company's
obligations to the Executive shall be as follows:
(a) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to the sum of
the following amounts:
(i) to the extent not previously paid, the Annual
Base Salary and any accrued paid time off through the Termination Date;
(ii) an amount equal to the product of (i) the target
Annual Bonus (as defined in Section 3.2(b)) for the Performance Period
in which the Termination Date occurs multiplied by (ii) a fraction, the
numerator of which is the number of days actually worked during such
Performance Period, and the denominator of which is 365; and
(iii) all amounts previously deferred by the
Executive under any nonqualified deferred compensation plan sponsored
by the Company, together with any accrued earnings thereon, and not yet
paid by the Company.
(b) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to two (2)
times the sum of the Executive's Annual Base Salary and the Prior Year Annual
Bonus, reduced by the total amount of any severance benefit paid or payable
under the terms of an offer of employment from the Company to the Executive or
an employment agreement between the Company and the Executive.
(c) On the Termination Date, the Executive shall become fully
vested in any and all stock option awards granted to the Executive under the
Amended and Restated 1999 Stock Incentive Plan of LendingTree, Inc. and any
similar plan or other arrangement of the Company ("Incentive Plans") which have
not become exercisable as of the Termination Date, and such stock option awards
shall remain exercisable until the applicable option expiration date. All
forfeiture conditions that as of the Termination Date are applicable to any
restricted stock, phantom stock unit, stock bonus, or other stock-based award
granted to the Executive by the Company pursuant to the Incentive Plans shall
lapse immediately.
(d) During the Employment Period (or until such later date as
any Welfare Plan of the Company may specify), the Company shall continue to
provide to the Executive and the Executive's family welfare benefits (including,
without limitation, disability, individual life and group life insurance
benefits, but excluding medical or other health plans) which are at least as
favorable as those provided under the most favorable Welfare Plans of the
Company applicable (i) with respect to the Executive and his family during the
90-day period immediately preceding the Termination Date, or (ii) with respect
to other peer Executives and their families during the Employment Period. In
determining benefits under such Welfare Plans, the Executive's annual
compensation attributable to base salary and incentives for any plan year or
calendar year, as applicable,
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shall be deemed to be not less than the Executive's Annual Base Salary and Prior
Year Annual Bonus. The cost of the welfare benefits provided under this Section
5.1(d) shall not exceed the cost of such benefits to the Executive immediately
before the Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare Plans
sponsored by another employer, then the amount of coverage required to be
provided by the Company hereunder shall be reduced by the amount of coverage
provided by such other employer's Welfare Plans. The Executive's rights under
this Section shall be in addition to and not in lieu of any post-termination
continuation coverage or conversion rights the Executive may have pursuant to
applicable law, including, without limitation, continuation coverage required by
Section 4980B of the Code.
5.2 If by the Company for Cause. If the Company terminates the
Executive's employment for Cause during the Employment Period, this Agreement
shall terminate without further obligation by the Company to the Executive,
other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.3 If by the Executive Other Than for Constructive Termination. If the
Executive terminates employment during the Employment Period other than for
Constructive Termination, Disability or death, this Agreement shall terminate
without further obligation by the Company to the Executive, other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.4 If by the Company for Disability. If the Company terminates the
Executive's employment by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further obligation to
the Executive, other than:
(a) the Company shall pay the Executive in cash all amounts
specified in Sections 5.1(a)(i), (ii), (iii) and 5(b), in each case, to the
extent unpaid as of the Termination Date (such amounts collectively, the
"Accrued Obligations"),
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(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans, and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.5 If upon Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligation to the Executive's legal
representatives under this Agreement, other than:
(a) the obligation immediately to pay the Executive's estate
or beneficiary in cash all Accrued Obligations (as defined in Section 5.4), and
(b) the rights of the Executive's legal representatives to
benefits under the terms of any of the Plans, Welfare Plans, and other employee
benefit programs in which the Executive was participating immediately prior to
the Termination Date, pursuant to Sections 3.2(c) through (e).
ARTICLE VI
EXPENSES AND INTEREST
6.1 Legal Fees and Other Expenses. The Company will pay all reasonable
fees and expenses, if any, (including, without limitation, legal fees and
expenses) that are incurred by the Executive to enforce this Agreement and that
result from a breach of this Agreement by the Company.
6.2 Interest. If the Company does not pay any amount due to the
Executive under this Agreement within three days after such amount became due
and owing, interest shall accrue on such amount from the date it became due and
owing until the date of payment at a annual rate equal to 200 basis points above
the base commercial lending rate published in The Wall Street Journal in effect
from time to time during the period of such nonpayment.
ARTICLE VII
NO ADVERSE EFFECT ON POOLING OF INTERESTS
Any benefits provided to the Executive under this Agreement may be
reduced or eliminated to the extent necessary, in the reasonable judgment of the
Board, to enable the Company to account for a merger, consolidation or similar
transaction as a pooling of interests; provided that (i) the Board shall have
exercised such judgment and approved the reduction by a vote of at least
two-thirds (2/3) of the directors then in office, (ii) the Board shall have
given the Executive written notice thereof prior to the Effective Date and (iii)
the determination of the Board shall be supported by the Company's independent
auditors.
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ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when due
the payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty to mitigate
the amounts payable by the Company under this Agreement by seeking new
employment following termination. Except as specifically otherwise provided in
this Agreement, all amounts payable pursuant to this Agreement shall be paid
without reduction regardless of any amounts of salary, compensation or other
amounts which may be paid or payable to the Executive as the result of the
Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. To the extent that payments are
made to the Executive pursuant to Section 5.1 of this Agreement, the Executive
hereby waives the right to receive benefits under any plan or agreement
(including an offer of employment or employment contract) of the Company or its
subsidiaries which provides for severance benefits (except as provided in
Section 5.1(b)).
9.2 Other Rights. Except as provided in Section 10.1, this Agreement
shall not prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plans provided by the Company or any of
its subsidiaries and for which the Executive may qualify, nor shall this
Agreement limit or otherwise affect such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under the terms of any plan or program of the Company or any of its subsidiaries
and any other payment or benefit required by law at or after the Termination
Date shall be payable in accordance with such plan, program or applicable law
except as expressly modified by this Agreement.
ARTICLE X
OBLIGATIONS OF THE EXECUTIVE
10.1 Confidentiality.
(a) The Executive recognizes, by the virtue of the Executive's
employment with the Company, that the Executive will have access to certain
information relating to the Company. The Executive agrees that this information
is a
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valuable asset of the Company, and that use or knowledge of this information by
others would harm the Company. Therefore, the Executive covenants and agrees
that the Executive will not at any time during the Agreement Term or for a
period of one (1) year after the Executive's Termination Date, reveal to any
person or entity any of the trade secrets or confidential information concerning
the organization, business or finances of the Company or of any third party
which the Company is under an obligation to keep confidential, except as may be
required in the ordinary course of performing the Executive's duties as an
employee of the Company, and the Executive shall keep secret such trade secrets
and confidential information and shall not use or attempt to use any such
secrets or information in any manner which is designed to injure or cause loss
to the Company. Trade secrets or confidential information shall include, but not
be limited to, the Company's financial statements and projections, expansion
proposals, customer lists and details of its Internet web site or business
relationships with banks, lenders and other parties not otherwise publicly
available.
(b) Further, the Executive agrees that during the Agreement
Term the Executive shall not make, use or permit to be used any notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials of any nature relating to any
matter within the scope of the business of the Company or concerning any of its
dealings or affairs otherwise than for the benefit of the Company. The Executive
further agrees that the Executive shall not, for a period of one (1) year after
the Executive's Termination Date, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that immediately upon the termination of the Executive's employment, the
Executive shall deliver all of the foregoing, and all copies thereof, to the
Company, at its main office, at the Company's expense.
10.2 Non-Hire.
(a) The Executive agrees that for a period of one (1) year
after the Executive's Termination Date, the Executive will not hire or otherwise
employ or retain, or knowingly permit (to the extent reasonably within the
Executive's control) any other entity or business which employs the Executive or
in which the Executive has any ownership interest or is otherwise involved to
hire or otherwise employ or retain, any person who was employed by the Company
as of the Executive's Termination Date.
10.3 Enforcement.
(a) The Executive acknowledges that monetary damages will not
be an adequate remedy for the Company in the event of a breach of this Article
X, and that it would be impossible for the Company to measure damages in the
event of such a breach. Therefore, the Executive agrees that, in addition to
other rights that the Company may have, the Company is entitled to an injunction
preventing the Executive from any breach of this Article X.
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(b) The obligations of the Executive under this Article X
shall survive the termination of the Executive's employment for the periods
specified herein, regardless of the reasons or method of termination. The
existence of any claim or cause of action that the Executive may have against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of these obligations.
(c) The restrictions in this Article X, to the extent
applicable, shall be in addition to any restrictions imposed upon the Executive
by statute or at common law.
(d) The parties hereby acknowledge that the restrictions in
this Article X have been agreed to by the parties hereto and are limited only to
those restrictions reasonably necessary to protect the Company from unfair
competition. The parties hereby agree that if the scope or enforceability of any
provision, paragraph or subparagraph of this Article X is an any way disputed at
any time, and should a court find that such restrictions are overly broad, the
court may modify and enforce the covenant to the extent that it believes to be
reasonable under the circumstances. Each provision, paragraph and subparagraph
of this Article X is separable from every other provision, paragraph and
subparagraph and constitutes a separate and distinct covenant.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignment. The Executive's rights under this Agreement may not
be assigned or transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts payable under
this Agreement after the death of the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
11.2 Successors. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon the successors
and assigns of the Company. Before or upon a Change in Control, the Company
shall obtain the agreement of the surviving or acquiring corporation that it
will succeed to the Company's rights and obligations under this Agreement.
11.3 Rights Under the Agreement. The right to receive benefits under
the Agreement will not give the Executive any proprietary interest in the
Company or any of its assets. Benefits under the Agreement will be payable from
the general assets of the Company, and there will be no required funding of
amounts that may become payable under the Agreement, except to the extend
otherwise provided under the terms of the Plans or Welfare Plans. The Executive
will for purposes of this Agreement be a general creditor of the Company. The
interest of the Executive under the Agreement cannot be assigned, anticipated,
sold, encumbered or pledged and will not be subject to the claims of the
Executive's creditors.
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11.4 Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Executive or his personal representative at his last known
address. All notices to the Company must be directed to the attention of the
Corporate Secretary with a copy to the General Counsel. Such other addresses may
be used as either party may have furnished to the other in writing. Notices of
change of address are effective only upon receipt.
11.5 Miscellaneous. This instrument contains the entire agreement of
the parties. To the extent not governed by federal law, this Agreement will be
construed in accordance with the laws of the State of Delaware, without
reference to its conflict of laws rules. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and the writing is signed by the Executive and the Company.
A waiver of any breach of or compliance with any provision or condition of this
Agreement is not a waiver of similar or dissimilar provisions or conditions. The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
one or more counterparts, all of which will be considered one and the same
agreement.
11.6 Tax Withholding. The Company may withhold from any amounts payable
under this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
LENDINGTREE, INC.
By:
---------------------------------
Title:
------------------------------
------------------------------------
Executive
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EXHIBIT 10.4
EMPLOYMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of April 27, 2000 (the "Agreement Date"), is
made by and between LendingTree, Inc. (the "Company"), a Delaware corporation,
and David N. Anderson (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued services of the Executive, despite the
possibility or occurrence of a Change in Control of the Company. The Board
believes that this objective may be achieved by giving key management employees
assurances of financial security in case of a pending or threatened Change in
Control, so that they will not be distracted by personal risks and will continue
to devote their full time and best efforts to the performance of their duties.
The Company and the Executive enter into this Agreement to induce the Executive
to remain an employee of the Company and to continue to devote Executive's full
energy to the Company's affairs. This Agreement is not intended to provide the
Executive with any right to continued employment with the Company, except in the
event of a Change of Control of the Company and subject to the provisions of
this Agreement.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 "Agreement Term" means the period commencing on the Agreement Date
and ending on the first anniversary of the Agreement Date. Commencing on the
first anniversary of the Agreement Date and each subsequent anniversary of the
Agreement Date, the Agreement Term shall be automatically extended for an
additional one-year term, unless at least 30 days prior to the last day of any
such extended Agreement Term, the Company shall give notice to the Executive
that the Agreement Term shall not be extended. The Agreement Term shall also
include the Employment Period.
2.2 "Accrued Obligation." See Section 5.4(a).
2.3 "Annual Base Salary." See Section 3.2(a).
2.4 "Annual Bonus." See Section 3.2(b).
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2.5 "Cause." See Section 4.3.
2.6 "Change in Control" means (i) the acquisition by any Person of
shares of the Company's stock representing more than 50.0% of the total voting
power of the Company; (ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; (iii) any merger, share exchange, consolidation or
other reorganization or business combination in which the Company is not the
surviving or continuing corporation or in which the Company's stockholders do
not control greater than 50.0% of the voting power of the surviving or
continuing corporation, or in which the Company's stockholders become entitled
to receive cash, securities of the Company other than voting common stock, or
securities of another issuer; or (v) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's assets to an entity, at
least 50.0% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale. For purposes of
this Section, the term "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include: (i)
the Company or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
affiliates; (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities; or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Disability." See Section 4.1.
2.9 "Disability Effective Date." See Section 4.1
2.10 "Effective Date" means the first date during the Agreement Term on
which a Change in Control occurs. Notwithstanding anything in this Agreement to
the contrary, if a Change in Control occurs and the Executive's employment with
the Company had terminated prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (a)
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was at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control, or (b) otherwise arose in connection with or in
anticipation of a Change in Control, then for all purposes of this Agreement,
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
2.11 "Employment Period" means the period commencing on the Effective
Date and ending on the first anniversary of such date.
2.12 "Incentive Plans." See Section 5.1(c).
2.13 "Performance Period." See Section 3.2(b).
2.14 "Plans." See Section 3.2(c).
2.15 "Prior Year Annual Bonus" means the total amount of the annual
bonus that was paid to the Executive during the twelve-month period immediately
preceding the Effective Date, or which is payable with respect to that period.
2.16 "Termination Date" means the date of termination of the
Executive's employment; provided, however, that if the Executive's employment is
terminated by reason of Disability, then the Termination Date shall be the
Disability Effective Date (as defined in Section 4.1).
2.17 "Welfare Plans." See Section 3.2(d).
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
(a) The Company hereby agrees to continue the Executive in its
employ during the Employment Period and, subject to Article IV of this
Agreement, the Executive agrees to remain in the employ of the Company subject
to the terms and conditions hereof.
(b) During the Employment Period, the Executive (i) will
devote his knowledge, skill and best efforts on a full-time basis to performing
his duties and obligations to the Company (with the exception of absences on
account of illness or vacation in accordance with the Company's policies and
civic and charitable commitments not involving a conflict with the Company's
business), (ii) will comply with the directions and orders of the Board of
Directors, the Chief Executive Officer or other superior officer of the Company
with respect to the performance of his duties, and (iii) will comply with the
provisions of Article XI.
3.2 Compensation.
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(a) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a monthly rate at least equal to twelve times the highest monthly base salary
paid or payable (including any base salary which has been earned but deferred)
to the Executive by the Company in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date, and shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary awarded to other
peer Executives of the Company. Annual Base Salary shall not be reduced after
any such increase unless such reduction is part of a policy, program or
arrangement applicable to peer Executives of the Company and of any successor
entity, and the term Annual Base Salary as used in this Agreement shall refer to
Annual Base Salary as so adjusted.
(b) Annual Bonus. In addition to Annual Base Salary, the
Company shall grant or cause to be granted to the Executive a bonus award
opportunity (the "Annual Bonus") for each Performance Period which ends during
the Employment Period. "Performance Period" means each period of time designated
in accordance with any annual incentive award arrangement which is based upon
performance. The Executive's target and maximum Annual Bonus with respect to any
Performance Period shall not be less than the largest target and maximum annual
incentive award payable with respect to the Executive under the Company's annual
incentive program as in effect during the twelve-month period immediately
preceding the Effective Date.
(c) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
("Plans") applicable generally to other peer Executives of the Company, but in
no event shall such Plans provide the Executive with incentives or savings and
retirement benefits which, in each case, are less favorable, in the aggregate
than the greater of (i) those provided by the Company for the Executive under
such Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company. The Plans shall
include both tax-qualified retirement plans and nonqualified retirement plans.
(d) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs ("Welfare Plans") provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance benefits), but in no event shall such Welfare Plans provide
the Executive with benefits which are less favorable, in the aggregate than the
greater of (i) those provided by the Company for the Executive under such
Welfare Plans as were in effect at any time during the 90-day period immediately
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preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company.
(e) Other Employee Benefits. During the Employment Period, the
Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company, as in effect with respect to the Executive at any time during the
90-day period immediately preceding the Effective Date, or if more favorable, as
in effect generally with respect to other peer Executives of the Company. These
other employee benefits and perquisites include, but are not limited to,
vacation, use of a Company car, parking benefits and financial planning.
(f) Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated in
the incentive or employee benefit plans of, a subsidiary of the Company, the
references to the Company contained in Sections 3.2(a) through 3.2(e) and the
other Sections of this Agreement referring to benefits to which the Executive
may be entitled shall be read to refer to such subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability. During the Employment Term, the Company may terminate
the Executive's employment upon the Executive's Disability. The Executive's
employment shall terminate effective on the 30th day (the "Disability Effective
Date") after the Executive's receipt of written notice of termination from the
Company unless, before the Disability Effective Date, the Executive shall have
resumed the full-time performance of the Executive's duties. "Disability" means
a condition, resulting from bodily injury or disease, that renders, and for a
six consecutive month period has rendered, the Executive unable to perform
substantially the duties pertaining to his employment with the Company. A return
to work of less than 14 consecutive days will not be considered an interruption
in the Executive's six consecutive months of disability. Disability will be
determined by the Company on the basis of medical evidence satisfactory to the
Company.
4.2 Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Term.
4.3 Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" means
(a) fraud or material misappropriation with respect to the business or assets of
the Company, (b) persistent refusal or willful failure of the Executive to
perform substantially his duties and responsibilities to the Company, which
continues after the Executive receives notice of such refusal or failure, (c)
conviction of a felony or crime involving moral turpitude, or
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(d) the use of drugs or alcohol that interferes materially with the Executive's
performance of his duties.
4.4 Constructive Termination. The Executive may terminate the
Executive's employment for Constructive Termination at any time during the
Employment Period. "Constructive Termination" means any material breach of this
Agreement by the Company during the Employment Period, including:
(a) the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Effective Date;
(b) a material adverse alteration in the nature or scope of
the Executive's position, duties, functions, responsibilities or authority as
compared to the nature or scope immediately prior to the Effective Date;
(c) any failure by the Company to provide the Executive with
the compensation and benefits described in Section 3.2, including any reduction
of the Executive's Annual Base Salary in violation of Section 3.2(a);
(d) the failure of any successor to the Company to assume this
Agreement;
(e) a relocation of more than 50 miles of (i) the Executive's
workplace, or (ii) the principal offices of the Company (if such offices are the
Executive's workplace), in each case without the consent of the Executive; or
An act or omission shall not constitute Constructive Termination unless
(1) the Executive gives written notice to the Company indicating that the
Executive intends to terminate employment under this Section 4.4; (2) the
Executive's voluntary termination occurs within 60 days after the Executive
knows or reasonably should know of an event described above, or within 60 days
after the last in a series of such events, and (3) the Company has failed to
remedy the event described above, as the case may be, within 30 days after
receiving the Executive's written notice. If the Company remedies the event
described above, as the case may be, within 30 days after receiving the
Executive's written notice, the Executive may not terminate employment under
this Section 4.4 on account of the event specified in the Executive's notice.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Constructive Termination or by the Company
Other Than for Cause or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability, or if the
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Executive shall terminate employment for Constructive Termination, the Company's
obligations to the Executive shall be as follows:
(a) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to the sum of
the following amounts:
(i) to the extent not previously paid, the Annual
Base Salary and any accrued paid time off through the Termination Date;
(ii) an amount equal to the product of (i) the target
Annual Bonus (as defined in Section 3.2(b)) for the Performance Period
in which the Termination Date occurs multiplied by (ii) a fraction, the
numerator of which is the number of days actually worked during such
Performance Period, and the denominator of which is 365; and
(iii) all amounts previously deferred by the
Executive under any nonqualified deferred compensation plan sponsored
by the Company, together with any accrued earnings thereon, and not yet
paid by the Company.
(b) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to two (2)
times the sum of the Executive's Annual Base Salary and the Prior Year Annual
Bonus, reduced by the total amount of any severance benefit paid or payable
under the terms of an offer of employment from the Company to the Executive or
an employment agreement between the Company and the Executive.
(c) On the Termination Date, the Executive shall become fully
vested in any and all stock option awards granted to the Executive under the
Amended and Restated 1999 Stock Incentive Plan of LendingTree, Inc. and any
similar plan or other arrangement of the Company ("Incentive Plans") which have
not become exercisable as of the Termination Date, and such stock option awards
shall remain exercisable until the applicable option expiration date. All
forfeiture conditions that as of the Termination Date are applicable to any
restricted stock, phantom stock unit, stock bonus, or other stock-based award
granted to the Executive by the Company pursuant to the Incentive Plans shall
lapse immediately.
(d) During the Employment Period (or until such later date as
any Welfare Plan of the Company may specify), the Company shall continue to
provide to the Executive and the Executive's family welfare benefits (including,
without limitation, disability, individual life and group life insurance
benefits, but excluding medical or other health plans) which are at least as
favorable as those provided under the most favorable Welfare Plans of the
Company applicable (i) with respect to the Executive and his family during the
90-day period immediately preceding the Termination Date, or (ii) with respect
to other peer Executives and their families during the Employment Period. In
determining benefits under such Welfare Plans, the Executive's annual
compensation attributable to base salary and incentives for any plan year or
calendar year, as applicable,
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shall be deemed to be not less than the Executive's Annual Base Salary and Prior
Year Annual Bonus. The cost of the welfare benefits provided under this Section
5.1(d) shall not exceed the cost of such benefits to the Executive immediately
before the Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare Plans
sponsored by another employer, then the amount of coverage required to be
provided by the Company hereunder shall be reduced by the amount of coverage
provided by such other employer's Welfare Plans. The Executive's rights under
this Section shall be in addition to and not in lieu of any post-termination
continuation coverage or conversion rights the Executive may have pursuant to
applicable law, including, without limitation, continuation coverage required by
Section 4980B of the Code.
5.2 If by the Company for Cause. If the Company terminates the
Executive's employment for Cause during the Employment Period, this Agreement
shall terminate without further obligation by the Company to the Executive,
other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.3 If by the Executive Other Than for Constructive Termination. If the
Executive terminates employment during the Employment Period other than for
Constructive Termination, Disability or death, this Agreement shall terminate
without further obligation by the Company to the Executive, other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.4 If by the Company for Disability. If the Company terminates the
Executive's employment by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further obligation to
the Executive, other than:
(a) the Company shall pay the Executive in cash all amounts
specified in Sections 5.1(a)(i), (ii), (iii) and 5(b), in each case, to the
extent unpaid as of the Termination Date (such amounts collectively, the
"Accrued Obligations"),
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(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans, and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.5 If upon Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligation to the Executive's legal
representatives under this Agreement, other than:
(a) the obligation immediately to pay the Executive's estate
or beneficiary in cash all Accrued Obligations (as defined in Section 5.4), and
(b) the rights of the Executive's legal representatives to
benefits under the terms of any of the Plans, Welfare Plans, and other employee
benefit programs in which the Executive was participating immediately prior to
the Termination Date, pursuant to Sections 3.2(c) through (e).
ARTICLE VI
EXPENSES AND INTEREST
6.1 Legal Fees and Other Expenses. The Company will pay all reasonable
fees and expenses, if any, (including, without limitation, legal fees and
expenses) that are incurred by the Executive to enforce this Agreement and that
result from a breach of this Agreement by the Company.
6.2 Interest. If the Company does not pay any amount due to the
Executive under this Agreement within three days after such amount became due
and owing, interest shall accrue on such amount from the date it became due and
owing until the date of payment at a annual rate equal to 200 basis points above
the base commercial lending rate published in The Wall Street Journal in effect
from time to time during the period of such nonpayment.
ARTICLE VII
NO ADVERSE EFFECT ON POOLING OF INTERESTS
Any benefits provided to the Executive under this Agreement may be
reduced or eliminated to the extent necessary, in the reasonable judgment of the
Board, to enable the Company to account for a merger, consolidation or similar
transaction as a pooling of interests; provided that (i) the Board shall have
exercised such judgment and approved the reduction by a vote of at least
two-thirds (2/3) of the directors then in office, (ii) the Board shall have
given the Executive written notice thereof prior to the Effective Date and (iii)
the determination of the Board shall be supported by the Company's independent
auditors.
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ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when due
the payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty to mitigate
the amounts payable by the Company under this Agreement by seeking new
employment following termination. Except as specifically otherwise provided in
this Agreement, all amounts payable pursuant to this Agreement shall be paid
without reduction regardless of any amounts of salary, compensation or other
amounts which may be paid or payable to the Executive as the result of the
Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. To the extent that payments are
made to the Executive pursuant to Section 5.1 of this Agreement, the Executive
hereby waives the right to receive benefits under any plan or agreement
(including an offer of employment or employment contract) of the Company or its
subsidiaries which provides for severance benefits (except as provided in
Section 5.1(b)).
9.2 Other Rights. Except as provided in Section 10.1, this Agreement
shall not prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plans provided by the Company or any of
its subsidiaries and for which the Executive may qualify, nor shall this
Agreement limit or otherwise affect such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under the terms of any plan or program of the Company or any of its subsidiaries
and any other payment or benefit required by law at or after the Termination
Date shall be payable in accordance with such plan, program or applicable law
except as expressly modified by this Agreement.
ARTICLE X
OBLIGATIONS OF THE EXECUTIVE
10.1 Confidentiality.
(a) The Executive recognizes, by the virtue of the Executive's
employment with the Company, that the Executive will have access to certain
information relating to the Company. The Executive agrees that this information
is a
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valuable asset of the Company, and that use or knowledge of this information by
others would harm the Company. Therefore, the Executive covenants and agrees
that the Executive will not at any time during the Agreement Term or for a
period of one (1) year after the Executive's Termination Date, reveal to any
person or entity any of the trade secrets or confidential information concerning
the organization, business or finances of the Company or of any third party
which the Company is under an obligation to keep confidential, except as may be
required in the ordinary course of performing the Executive's duties as an
employee of the Company, and the Executive shall keep secret such trade secrets
and confidential information and shall not use or attempt to use any such
secrets or information in any manner which is designed to injure or cause loss
to the Company. Trade secrets or confidential information shall include, but not
be limited to, the Company's financial statements and projections, expansion
proposals, customer lists and details of its Internet web site or business
relationships with banks, lenders and other parties not otherwise publicly
available.
(b) Further, the Executive agrees that during the Agreement
Term the Executive shall not make, use or permit to be used any notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials of any nature relating to any
matter within the scope of the business of the Company or concerning any of its
dealings or affairs otherwise than for the benefit of the Company. The Executive
further agrees that the Executive shall not, for a period of one (1) year after
the Executive's Termination Date, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that immediately upon the termination of the Executive's employment, the
Executive shall deliver all of the foregoing, and all copies thereof, to the
Company, at its main office, at the Company's expense.
10.2 Non-Hire.
(a) The Executive agrees that for a period of one (1) year
after the Executive's Termination Date, the Executive will not hire or otherwise
employ or retain, or knowingly permit (to the extent reasonably within the
Executive's control) any other entity or business which employs the Executive or
in which the Executive has any ownership interest or is otherwise involved to
hire or otherwise employ or retain, any person who was employed by the Company
as of the Executive's Termination Date.
10.3 Enforcement.
(a) The Executive acknowledges that monetary damages will not
be an adequate remedy for the Company in the event of a breach of this Article
X, and that it would be impossible for the Company to measure damages in the
event of such a breach. Therefore, the Executive agrees that, in addition to
other rights that the Company may have, the Company is entitled to an injunction
preventing the Executive from any breach of this Article X.
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(b) The obligations of the Executive under this Article X
shall survive the termination of the Executive's employment for the periods
specified herein, regardless of the reasons or method of termination. The
existence of any claim or cause of action that the Executive may have against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of these obligations.
(c) The restrictions in this Article X, to the extent
applicable, shall be in addition to any restrictions imposed upon the Executive
by statute or at common law.
(d) The parties hereby acknowledge that the restrictions in
this Article X have been agreed to by the parties hereto and are limited only to
those restrictions reasonably necessary to protect the Company from unfair
competition. The parties hereby agree that if the scope or enforceability of any
provision, paragraph or subparagraph of this Article X is an any way disputed at
any time, and should a court find that such restrictions are overly broad, the
court may modify and enforce the covenant to the extent that it believes to be
reasonable under the circumstances. Each provision, paragraph and subparagraph
of this Article X is separable from every other provision, paragraph and
subparagraph and constitutes a separate and distinct covenant.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignment. The Executive's rights under this Agreement may not
be assigned or transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts payable under
this Agreement after the death of the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
11.2 Successors. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon the successors
and assigns of the Company. Before or upon a Change in Control, the Company
shall obtain the agreement of the surviving or acquiring corporation that it
will succeed to the Company's rights and obligations under this Agreement.
11.3 Rights Under the Agreement. The right to receive benefits under
the Agreement will not give the Executive any proprietary interest in the
Company or any of its assets. Benefits under the Agreement will be payable from
the general assets of the Company, and there will be no required funding of
amounts that may become payable under the Agreement, except to the extend
otherwise provided under the terms of the Plans or Welfare Plans. The Executive
will for purposes of this Agreement be a general creditor of the Company. The
interest of the Executive under the Agreement cannot be assigned, anticipated,
sold, encumbered or pledged and will not be subject to the claims of the
Executive's creditors.
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11.4 Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Executive or his personal representative at his last known
address. All notices to the Company must be directed to the attention of the
Corporate Secretary with a copy to the General Counsel. Such other addresses may
be used as either party may have furnished to the other in writing. Notices of
change of address are effective only upon receipt.
11.5 Miscellaneous. This instrument contains the entire agreement of
the parties. To the extent not governed by federal law, this Agreement will be
construed in accordance with the laws of the State of Delaware, without
reference to its conflict of laws rules. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and the writing is signed by the Executive and the Company.
A waiver of any breach of or compliance with any provision or condition of this
Agreement is not a waiver of similar or dissimilar provisions or conditions. The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
one or more counterparts, all of which will be considered one and the same
agreement.
11.6 Tax Withholding. The Company may withhold from any amounts payable
under this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
LENDINGTREE, INC.
By:
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Title:
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Executive
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EXHIBIT 10.5
EMPLOYMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of April 27, 2000 (the "Agreement Date"), is
made by and between LendingTree, Inc. (the "Company"), a Delaware corporation,
and Thomas J. Reddin (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued services of the Executive, despite the
possibility or occurrence of a Change in Control of the Company. The Board
believes that this objective may be achieved by giving key management employees
assurances of financial security in case of a pending or threatened Change in
Control, so that they will not be distracted by personal risks and will continue
to devote their full time and best efforts to the performance of their duties.
The Company and the Executive enter into this Agreement to induce the Executive
to remain an employee of the Company and to continue to devote Executive's full
energy to the Company's affairs. This Agreement is not intended to provide the
Executive with any right to continued employment with the Company, except in the
event of a Change of Control of the Company and subject to the provisions of
this Agreement.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 "Agreement Term" means the period commencing on the Agreement Date
and ending on the first anniversary of the Agreement Date. Commencing on the
first anniversary of the Agreement Date and each subsequent anniversary of the
Agreement Date, the Agreement Term shall be automatically extended for an
additional one-year term, unless at least 30 days prior to the last day of any
such extended Agreement Term, the Company shall give notice to the Executive
that the Agreement Term shall not be extended. The Agreement Term shall also
include the Employment Period.
2.2 "Accrued Obligation." See Section 5.4(a).
2.3 "Annual Base Salary." See Section 3.2(a).
2.4 "Annual Bonus." See Section 3.2(b).
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2.5 "Cause." See Section 4.3.
2.6 "Change in Control" means (i) the acquisition by any Person of
shares of the Company's stock representing more than 50.0% of the total voting
power of the Company; (ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; (iii) any merger, share exchange, consolidation or
other reorganization or business combination in which the Company is not the
surviving or continuing corporation or in which the Company's stockholders do
not control greater than 50.0% of the voting power of the surviving or
continuing corporation, or in which the Company's stockholders become entitled
to receive cash, securities of the Company other than voting common stock, or
securities of another issuer; or (v) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's assets to an entity, at
least 50.0% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale. For purposes of
this Section, the term "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include: (i)
the Company or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
affiliates; (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities; or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Disability." See Section 4.1.
2.9 "Disability Effective Date." See Section 4.1
2.10 "Effective Date" means the first date during the Agreement Term on
which a Change in Control occurs. Notwithstanding anything in this Agreement to
the contrary, if a Change in Control occurs and the Executive's employment with
the Company had terminated prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (a)
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was at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control, or (b) otherwise arose in connection with or in
anticipation of a Change in Control, then for all purposes of this Agreement,
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
2.11 "Employment Period" means the period commencing on the Effective
Date and ending on the first anniversary of such date.
2.12 "Incentive Plans." See Section 5.1(c).
2.13 "Performance Period." See Section 3.2(b).
2.14 "Plans." See Section 3.2(c).
2.15 "Prior Year Annual Bonus" means the total amount of the annual
bonus that was paid to the Executive during the twelve-month period immediately
preceding the Effective Date, or which is payable with respect to that period.
2.16 "Termination Date" means the date of termination of the
Executive's employment; provided, however, that if the Executive's employment is
terminated by reason of Disability, then the Termination Date shall be the
Disability Effective Date (as defined in Section 4.1).
2.17 "Welfare Plans." See Section 3.2(d).
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
(a) The Company hereby agrees to continue the Executive in its
employ during the Employment Period and, subject to Article IV of this
Agreement, the Executive agrees to remain in the employ of the Company subject
to the terms and conditions hereof.
(b) During the Employment Period, the Executive (i) will
devote his knowledge, skill and best efforts on a full-time basis to performing
his duties and obligations to the Company (with the exception of absences on
account of illness or vacation in accordance with the Company's policies and
civic and charitable commitments not involving a conflict with the Company's
business), (ii) will comply with the directions and orders of the Board of
Directors, the Chief Executive Officer or other superior officer of the Company
with respect to the performance of his duties, and (iii) will comply with the
provisions of Article XI.
3.2 Compensation.
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(a) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a monthly rate at least equal to twelve times the highest monthly base salary
paid or payable (including any base salary which has been earned but deferred)
to the Executive by the Company in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date, and shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary awarded to other
peer Executives of the Company. Annual Base Salary shall not be reduced after
any such increase unless such reduction is part of a policy, program or
arrangement applicable to peer Executives of the Company and of any successor
entity, and the term Annual Base Salary as used in this Agreement shall refer to
Annual Base Salary as so adjusted.
(b) Annual Bonus. In addition to Annual Base Salary, the
Company shall grant or cause to be granted to the Executive a bonus award
opportunity (the "Annual Bonus") for each Performance Period which ends during
the Employment Period. "Performance Period" means each period of time designated
in accordance with any annual incentive award arrangement which is based upon
performance. The Executive's target and maximum Annual Bonus with respect to any
Performance Period shall not be less than the largest target and maximum annual
incentive award payable with respect to the Executive under the Company's annual
incentive program as in effect during the twelve-month period immediately
preceding the Effective Date.
(c) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
("Plans") applicable generally to other peer Executives of the Company, but in
no event shall such Plans provide the Executive with incentives or savings and
retirement benefits which, in each case, are less favorable, in the aggregate
than the greater of (i) those provided by the Company for the Executive under
such Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company. The Plans shall
include both tax-qualified retirement plans and nonqualified retirement plans.
(d) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs ("Welfare Plans") provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance benefits), but in no event shall such Welfare Plans provide
the Executive with benefits which are less favorable, in the aggregate than the
greater of (i) those provided by the Company for the Executive under such
Welfare Plans as were in effect at any time during the 90-day period immediately
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preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company.
(e) Other Employee Benefits. During the Employment Period, the
Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company, as in effect with respect to the Executive at any time during the
90-day period immediately preceding the Effective Date, or if more favorable, as
in effect generally with respect to other peer Executives of the Company. These
other employee benefits and perquisites include, but are not limited to,
vacation, use of a Company car, parking benefits and financial planning.
(f) Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated in
the incentive or employee benefit plans of, a subsidiary of the Company, the
references to the Company contained in Sections 3.2(a) through 3.2(e) and the
other Sections of this Agreement referring to benefits to which the Executive
may be entitled shall be read to refer to such subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability. During the Employment Term, the Company may terminate
the Executive's employment upon the Executive's Disability. The Executive's
employment shall terminate effective on the 30th day (the "Disability Effective
Date") after the Executive's receipt of written notice of termination from the
Company unless, before the Disability Effective Date, the Executive shall have
resumed the full-time performance of the Executive's duties. "Disability" means
a condition, resulting from bodily injury or disease, that renders, and for a
six consecutive month period has rendered, the Executive unable to perform
substantially the duties pertaining to his employment with the Company. A return
to work of less than 14 consecutive days will not be considered an interruption
in the Executive's six consecutive months of disability. Disability will be
determined by the Company on the basis of medical evidence satisfactory to the
Company.
4.2 Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Term.
4.3 Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" means
(a) fraud or material misappropriation with respect to the business or assets of
the Company, (b) persistent refusal or willful failure of the Executive to
perform substantially his duties and responsibilities to the Company, which
continues after the Executive receives notice of such refusal or failure, (c)
conviction of a felony or crime involving moral turpitude, or
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(d) the use of drugs or alcohol that interferes materially with the Executive's
performance of his duties.
4.4 Constructive Termination. The Executive may terminate the
Executive's employment for Constructive Termination at any time during the
Employment Period. "Constructive Termination" means any material breach of this
Agreement by the Company during the Employment Period, including:
(a) the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Effective Date;
(b) a material adverse alteration in the nature or scope of
the Executive's position, duties, functions, responsibilities or authority as
compared to the nature or scope immediately prior to the Effective Date;
(c) any failure by the Company to provide the Executive with
the compensation and benefits described in Section 3.2, including any reduction
of the Executive's Annual Base Salary in violation of Section 3.2(a);
(d) the failure of any successor to the Company to assume this
Agreement;
(e) a relocation of more than 50 miles of (i) the Executive's
workplace, or (ii) the principal offices of the Company (if such offices are the
Executive's workplace), in each case without the consent of the Executive; or
An act or omission shall not constitute Constructive Termination unless
(1) the Executive gives written notice to the Company indicating that the
Executive intends to terminate employment under this Section 4.4; (2) the
Executive's voluntary termination occurs within 60 days after the Executive
knows or reasonably should know of an event described above, or within 60 days
after the last in a series of such events, and (3) the Company has failed to
remedy the event described above, as the case may be, within 30 days after
receiving the Executive's written notice. If the Company remedies the event
described above, as the case may be, within 30 days after receiving the
Executive's written notice, the Executive may not terminate employment under
this Section 4.4 on account of the event specified in the Executive's notice.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Constructive Termination or by the Company
Other Than for Cause or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability, or if the
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Executive shall terminate employment for Constructive Termination, the Company's
obligations to the Executive shall be as follows:
(a) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to the sum of
the following amounts:
(i) to the extent not previously paid, the Annual
Base Salary and any accrued paid time off through the Termination Date;
(ii) an amount equal to the product of (i) the target
Annual Bonus (as defined in Section 3.2(b)) for the Performance Period
in which the Termination Date occurs multiplied by (ii) a fraction, the
numerator of which is the number of days actually worked during such
Performance Period, and the denominator of which is 365; and
(iii) all amounts previously deferred by the
Executive under any nonqualified deferred compensation plan sponsored
by the Company, together with any accrued earnings thereon, and not yet
paid by the Company.
(b) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to two (2)
times the sum of the Executive's Annual Base Salary and the Prior Year Annual
Bonus, reduced by the total amount of any severance benefit paid or payable
under the terms of an offer of employment from the Company to the Executive or
an employment agreement between the Company and the Executive.
(c) On the Termination Date, the Executive shall become fully
vested in any and all stock option awards granted to the Executive under the
Amended and Restated 1999 Stock Incentive Plan of LendingTree, Inc. and any
similar plan or other arrangement of the Company ("Incentive Plans") which have
not become exercisable as of the Termination Date, and such stock option awards
shall remain exercisable until the applicable option expiration date. All
forfeiture conditions that as of the Termination Date are applicable to any
restricted stock, phantom stock unit, stock bonus, or other stock-based award
granted to the Executive by the Company pursuant to the Incentive Plans shall
lapse immediately.
(d) During the Employment Period (or until such later date as
any Welfare Plan of the Company may specify), the Company shall continue to
provide to the Executive and the Executive's family welfare benefits (including,
without limitation, disability, individual life and group life insurance
benefits, but excluding medical or other health plans) which are at least as
favorable as those provided under the most favorable Welfare Plans of the
Company applicable (i) with respect to the Executive and his family during the
90-day period immediately preceding the Termination Date, or (ii) with respect
to other peer Executives and their families during the Employment Period. In
determining benefits under such Welfare Plans, the Executive's annual
compensation attributable to base salary and incentives for any plan year or
calendar year, as applicable,
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shall be deemed to be not less than the Executive's Annual Base Salary and Prior
Year Annual Bonus. The cost of the welfare benefits provided under this Section
5.1(d) shall not exceed the cost of such benefits to the Executive immediately
before the Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare Plans
sponsored by another employer, then the amount of coverage required to be
provided by the Company hereunder shall be reduced by the amount of coverage
provided by such other employer's Welfare Plans. The Executive's rights under
this Section shall be in addition to and not in lieu of any post-termination
continuation coverage or conversion rights the Executive may have pursuant to
applicable law, including, without limitation, continuation coverage required by
Section 4980B of the Code.
5.2 If by the Company for Cause. If the Company terminates the
Executive's employment for Cause during the Employment Period, this Agreement
shall terminate without further obligation by the Company to the Executive,
other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.3 If by the Executive Other Than for Constructive Termination. If the
Executive terminates employment during the Employment Period other than for
Constructive Termination, Disability or death, this Agreement shall terminate
without further obligation by the Company to the Executive, other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.4 If by the Company for Disability. If the Company terminates the
Executive's employment by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further obligation to
the Executive, other than:
(a) the Company shall pay the Executive in cash all amounts
specified in Sections 5.1(a)(i), (ii), (iii) and 5(b), in each case, to the
extent unpaid as of the Termination Date (such amounts collectively, the
"Accrued Obligations"),
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(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans, and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.5 If upon Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligation to the Executive's legal
representatives under this Agreement, other than:
(a) the obligation immediately to pay the Executive's estate
or beneficiary in cash all Accrued Obligations (as defined in Section 5.4), and
(b) the rights of the Executive's legal representatives to
benefits under the terms of any of the Plans, Welfare Plans, and other employee
benefit programs in which the Executive was participating immediately prior to
the Termination Date, pursuant to Sections 3.2(c) through (e).
ARTICLE VI
EXPENSES AND INTEREST
6.1 Legal Fees and Other Expenses. The Company will pay all reasonable
fees and expenses, if any, (including, without limitation, legal fees and
expenses) that are incurred by the Executive to enforce this Agreement and that
result from a breach of this Agreement by the Company.
6.2 Interest. If the Company does not pay any amount due to the
Executive under this Agreement within three days after such amount became due
and owing, interest shall accrue on such amount from the date it became due and
owing until the date of payment at a annual rate equal to 200 basis points above
the base commercial lending rate published in The Wall Street Journal in effect
from time to time during the period of such nonpayment.
ARTICLE VII
NO ADVERSE EFFECT ON POOLING OF INTERESTS
Any benefits provided to the Executive under this Agreement may be
reduced or eliminated to the extent necessary, in the reasonable judgment of the
Board, to enable the Company to account for a merger, consolidation or similar
transaction as a pooling of interests; provided that (i) the Board shall have
exercised such judgment and approved the reduction by a vote of at least
two-thirds (2/3) of the directors then in office, (ii) the Board shall have
given the Executive written notice thereof prior to the Effective Date and (iii)
the determination of the Board shall be supported by the Company's independent
auditors.
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ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when due
the payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty to mitigate
the amounts payable by the Company under this Agreement by seeking new
employment following termination. Except as specifically otherwise provided in
this Agreement, all amounts payable pursuant to this Agreement shall be paid
without reduction regardless of any amounts of salary, compensation or other
amounts which may be paid or payable to the Executive as the result of the
Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. To the extent that payments are
made to the Executive pursuant to Section 5.1 of this Agreement, the Executive
hereby waives the right to receive benefits under any plan or agreement
(including an offer of employment or employment contract) of the Company or its
subsidiaries which provides for severance benefits (except as provided in
Section 5.1(b)).
9.2 Other Rights. Except as provided in Section 10.1, this Agreement
shall not prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plans provided by the Company or any of
its subsidiaries and for which the Executive may qualify, nor shall this
Agreement limit or otherwise affect such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under the terms of any plan or program of the Company or any of its subsidiaries
and any other payment or benefit required by law at or after the Termination
Date shall be payable in accordance with such plan, program or applicable law
except as expressly modified by this Agreement.
ARTICLE X
OBLIGATIONS OF THE EXECUTIVE
10.1 Confidentiality.
(a) The Executive recognizes, by the virtue of the Executive's
employment with the Company, that the Executive will have access to certain
information relating to the Company. The Executive agrees that this information
is a
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valuable asset of the Company, and that use or knowledge of this information by
others would harm the Company. Therefore, the Executive covenants and agrees
that the Executive will not at any time during the Agreement Term or for a
period of one (1) year after the Executive's Termination Date, reveal to any
person or entity any of the trade secrets or confidential information concerning
the organization, business or finances of the Company or of any third party
which the Company is under an obligation to keep confidential, except as may be
required in the ordinary course of performing the Executive's duties as an
employee of the Company, and the Executive shall keep secret such trade secrets
and confidential information and shall not use or attempt to use any such
secrets or information in any manner which is designed to injure or cause loss
to the Company. Trade secrets or confidential information shall include, but not
be limited to, the Company's financial statements and projections, expansion
proposals, customer lists and details of its Internet web site or business
relationships with banks, lenders and other parties not otherwise publicly
available.
(b) Further, the Executive agrees that during the Agreement
Term the Executive shall not make, use or permit to be used any notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials of any nature relating to any
matter within the scope of the business of the Company or concerning any of its
dealings or affairs otherwise than for the benefit of the Company. The Executive
further agrees that the Executive shall not, for a period of one (1) year after
the Executive's Termination Date, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that immediately upon the termination of the Executive's employment, the
Executive shall deliver all of the foregoing, and all copies thereof, to the
Company, at its main office, at the Company's expense.
10.2 Non-Hire.
(a) The Executive agrees that for a period of one (1) year
after the Executive's Termination Date, the Executive will not hire or otherwise
employ or retain, or knowingly permit (to the extent reasonably within the
Executive's control) any other entity or business which employs the Executive or
in which the Executive has any ownership interest or is otherwise involved to
hire or otherwise employ or retain, any person who was employed by the Company
as of the Executive's Termination Date.
10.3 Enforcement.
(a) The Executive acknowledges that monetary damages will not
be an adequate remedy for the Company in the event of a breach of this Article
X, and that it would be impossible for the Company to measure damages in the
event of such a breach. Therefore, the Executive agrees that, in addition to
other rights that the Company may have, the Company is entitled to an injunction
preventing the Executive from any breach of this Article X.
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(b) The obligations of the Executive under this Article X
shall survive the termination of the Executive's employment for the periods
specified herein, regardless of the reasons or method of termination. The
existence of any claim or cause of action that the Executive may have against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of these obligations.
(c) The restrictions in this Article X, to the extent
applicable, shall be in addition to any restrictions imposed upon the Executive
by statute or at common law.
(d) The parties hereby acknowledge that the restrictions in
this Article X have been agreed to by the parties hereto and are limited only to
those restrictions reasonably necessary to protect the Company from unfair
competition. The parties hereby agree that if the scope or enforceability of any
provision, paragraph or subparagraph of this Article X is an any way disputed at
any time, and should a court find that such restrictions are overly broad, the
court may modify and enforce the covenant to the extent that it believes to be
reasonable under the circumstances. Each provision, paragraph and subparagraph
of this Article X is separable from every other provision, paragraph and
subparagraph and constitutes a separate and distinct covenant.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignment. The Executive's rights under this Agreement may not
be assigned or transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts payable under
this Agreement after the death of the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
11.2 Successors. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon the successors
and assigns of the Company. Before or upon a Change in Control, the Company
shall obtain the agreement of the surviving or acquiring corporation that it
will succeed to the Company's rights and obligations under this Agreement.
11.3 Rights Under the Agreement. The right to receive benefits under
the Agreement will not give the Executive any proprietary interest in the
Company or any of its assets. Benefits under the Agreement will be payable from
the general assets of the Company, and there will be no required funding of
amounts that may become payable under the Agreement, except to the extend
otherwise provided under the terms of the Plans or Welfare Plans. The Executive
will for purposes of this Agreement be a general creditor of the Company. The
interest of the Executive under the Agreement cannot be assigned, anticipated,
sold, encumbered or pledged and will not be subject to the claims of the
Executive's creditors.
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11.4 Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Executive or his personal representative at his last known
address. All notices to the Company must be directed to the attention of the
Corporate Secretary with a copy to the General Counsel. Such other addresses may
be used as either party may have furnished to the other in writing. Notices of
change of address are effective only upon receipt.
11.5 Miscellaneous. This instrument contains the entire agreement of
the parties. To the extent not governed by federal law, this Agreement will be
construed in accordance with the laws of the State of Delaware, without
reference to its conflict of laws rules. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and the writing is signed by the Executive and the Company.
A waiver of any breach of or compliance with any provision or condition of this
Agreement is not a waiver of similar or dissimilar provisions or conditions. The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
one or more counterparts, all of which will be considered one and the same
agreement.
11.6 Tax Withholding. The Company may withhold from any amounts payable
under this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
LENDINGTREE, INC.
By:
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Title:
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Executive
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EXHIBIT 10.6
EMPLOYMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of April 27, 2000 (the "Agreement Date"), is
made by and between LendingTree, Inc. (the "Company"), a Delaware corporation,
and Keith B. Hall (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued services of the Executive, despite the
possibility or occurrence of a Change in Control of the Company. The Board
believes that this objective may be achieved by giving key management employees
assurances of financial security in case of a pending or threatened Change in
Control, so that they will not be distracted by personal risks and will continue
to devote their full time and best efforts to the performance of their duties.
The Company and the Executive enter into this Agreement to induce the Executive
to remain an employee of the Company and to continue to devote Executive's full
energy to the Company's affairs. This Agreement is not intended to provide the
Executive with any right to continued employment with the Company, except in the
event of a Change of Control of the Company and subject to the provisions of
this Agreement.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 "Agreement Term" means the period commencing on the Agreement Date
and ending on the first anniversary of the Agreement Date. Commencing on the
first anniversary of the Agreement Date and each subsequent anniversary of the
Agreement Date, the Agreement Term shall be automatically extended for an
additional one-year term, unless at least 30 days prior to the last day of any
such extended Agreement Term, the Company shall give notice to the Executive
that the Agreement Term shall not be extended. The Agreement Term shall also
include the Employment Period.
2.2 "Accrued Obligation." See Section 5.4(a).
2.3 "Annual Base Salary." See Section 3.2(a).
2.4 "Annual Bonus." See Section 3.2(b).
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2.5 "Cause." See Section 4.3.
2.6 "Change in Control" means (i) the acquisition by any Person of
shares of the Company's stock representing more than 50.0% of the total voting
power of the Company; (ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; (iii) any merger, share exchange, consolidation or
other reorganization or business combination in which the Company is not the
surviving or continuing corporation or in which the Company's stockholders do
not control greater than 50.0% of the voting power of the surviving or
continuing corporation, or in which the Company's stockholders become entitled
to receive cash, securities of the Company other than voting common stock, or
securities of another issuer; or (v) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's assets to an entity, at
least 50.0% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale. For purposes of
this Section, the term "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include: (i)
the Company or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
affiliates; (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities; or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Disability." See Section 4.1.
2.9 "Disability Effective Date." See Section 4.1
2.10 "Effective Date" means the first date during the Agreement Term on
which a Change in Control occurs. Notwithstanding anything in this Agreement to
the contrary, if a Change in Control occurs and the Executive's employment with
the Company had terminated prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (a)
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was at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control, or (b) otherwise arose in connection with or in
anticipation of a Change in Control, then for all purposes of this Agreement,
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
2.11 "Employment Period" means the period commencing on the Effective
Date and ending on the first anniversary of such date.
2.12 "Incentive Plans." See Section 5.1(c).
2.13 "Performance Period." See Section 3.2(b).
2.14 "Plans." See Section 3.2(c).
2.15 "Prior Year Annual Bonus" means the total amount of the annual
bonus that was paid to the Executive during the twelve-month period immediately
preceding the Effective Date, or which is payable with respect to that period.
2.16 "Termination Date" means the date of termination of the
Executive's employment; provided, however, that if the Executive's employment is
terminated by reason of Disability, then the Termination Date shall be the
Disability Effective Date (as defined in Section 4.1).
2.17 "Welfare Plans." See Section 3.2(d).
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
(a) The Company hereby agrees to continue the Executive in its
employ during the Employment Period and, subject to Article IV of this
Agreement, the Executive agrees to remain in the employ of the Company subject
to the terms and conditions hereof.
(b) During the Employment Period, the Executive (i) will
devote his knowledge, skill and best efforts on a full-time basis to performing
his duties and obligations to the Company (with the exception of absences on
account of illness or vacation in accordance with the Company's policies and
civic and charitable commitments not involving a conflict with the Company's
business), (ii) will comply with the directions and orders of the Board of
Directors, the Chief Executive Officer or other superior officer of the Company
with respect to the performance of his duties, and (iii) will comply with the
provisions of Article XI.
3.2 Compensation.
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(a) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a monthly rate at least equal to twelve times the highest monthly base salary
paid or payable (including any base salary which has been earned but deferred)
to the Executive by the Company in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date, and shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary awarded to other
peer Executives of the Company. Annual Base Salary shall not be reduced after
any such increase unless such reduction is part of a policy, program or
arrangement applicable to peer Executives of the Company and of any successor
entity, and the term Annual Base Salary as used in this Agreement shall refer to
Annual Base Salary as so adjusted.
(b) Annual Bonus. In addition to Annual Base Salary, the
Company shall grant or cause to be granted to the Executive a bonus award
opportunity (the "Annual Bonus") for each Performance Period which ends during
the Employment Period. "Performance Period" means each period of time designated
in accordance with any annual incentive award arrangement which is based upon
performance. The Executive's target and maximum Annual Bonus with respect to any
Performance Period shall not be less than the largest target and maximum annual
incentive award payable with respect to the Executive under the Company's annual
incentive program as in effect during the twelve-month period immediately
preceding the Effective Date.
(c) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
("Plans") applicable generally to other peer Executives of the Company, but in
no event shall such Plans provide the Executive with incentives or savings and
retirement benefits which, in each case, are less favorable, in the aggregate
than the greater of (i) those provided by the Company for the Executive under
such Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company. The Plans shall
include both tax-qualified retirement plans and nonqualified retirement plans.
(d) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs ("Welfare Plans") provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance benefits), but in no event shall such Welfare Plans provide
the Executive with benefits which are less favorable, in the aggregate than the
greater of (i) those provided by the Company for the Executive under such
Welfare Plans as were in effect at any time during the 90-day period immediately
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preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company.
(e) Other Employee Benefits. During the Employment Period, the
Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company, as in effect with respect to the Executive at any time during the
90-day period immediately preceding the Effective Date, or if more favorable, as
in effect generally with respect to other peer Executives of the Company. These
other employee benefits and perquisites include, but are not limited to,
vacation, use of a Company car, parking benefits and financial planning.
(f) Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated in
the incentive or employee benefit plans of, a subsidiary of the Company, the
references to the Company contained in Sections 3.2(a) through 3.2(e) and the
other Sections of this Agreement referring to benefits to which the Executive
may be entitled shall be read to refer to such subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability. During the Employment Term, the Company may terminate
the Executive's employment upon the Executive's Disability. The Executive's
employment shall terminate effective on the 30th day (the "Disability Effective
Date") after the Executive's receipt of written notice of termination from the
Company unless, before the Disability Effective Date, the Executive shall have
resumed the full-time performance of the Executive's duties. "Disability" means
a condition, resulting from bodily injury or disease, that renders, and for a
six consecutive month period has rendered, the Executive unable to perform
substantially the duties pertaining to his employment with the Company. A return
to work of less than 14 consecutive days will not be considered an interruption
in the Executive's six consecutive months of disability. Disability will be
determined by the Company on the basis of medical evidence satisfactory to the
Company.
4.2 Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Term.
4.3 Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" means
(a) fraud or material misappropriation with respect to the business or assets of
the Company, (b) persistent refusal or willful failure of the Executive to
perform substantially his duties and responsibilities to the Company, which
continues after the Executive receives notice of such refusal or failure, (c)
conviction of a felony or crime involving moral turpitude, or
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(d) the use of drugs or alcohol that interferes materially with the Executive's
performance of his duties.
4.4 Constructive Termination. The Executive may terminate the
Executive's employment for Constructive Termination at any time during the
Employment Period. "Constructive Termination" means any material breach of this
Agreement by the Company during the Employment Period, including:
(a) the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Effective Date;
(b) a material adverse alteration in the nature or scope of
the Executive's position, duties, functions, responsibilities or authority as
compared to the nature or scope immediately prior to the Effective Date;
(c) any failure by the Company to provide the Executive with
the compensation and benefits described in Section 3.2, including any reduction
of the Executive's Annual Base Salary in violation of Section 3.2(a);
(d) the failure of any successor to the Company to assume this
Agreement;
(e) a relocation of more than 50 miles of (i) the Executive's
workplace, or (ii) the principal offices of the Company (if such offices are the
Executive's workplace), in each case without the consent of the Executive; or
An act or omission shall not constitute Constructive Termination unless
(1) the Executive gives written notice to the Company indicating that the
Executive intends to terminate employment under this Section 4.4; (2) the
Executive's voluntary termination occurs within 60 days after the Executive
knows or reasonably should know of an event described above, or within 60 days
after the last in a series of such events, and (3) the Company has failed to
remedy the event described above, as the case may be, within 30 days after
receiving the Executive's written notice. If the Company remedies the event
described above, as the case may be, within 30 days after receiving the
Executive's written notice, the Executive may not terminate employment under
this Section 4.4 on account of the event specified in the Executive's notice.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Constructive Termination or by the Company
Other Than for Cause or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability, or if the
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Executive shall terminate employment for Constructive Termination, the Company's
obligations to the Executive shall be as follows:
(a) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to the sum of
the following amounts:
(i) to the extent not previously paid, the Annual
Base Salary and any accrued paid time off through the Termination Date;
(ii) an amount equal to the product of (i) the target
Annual Bonus (as defined in Section 3.2(b)) for the Performance Period
in which the Termination Date occurs multiplied by (ii) a fraction, the
numerator of which is the number of days actually worked during such
Performance Period, and the denominator of which is 365; and
(iii) all amounts previously deferred by the
Executive under any nonqualified deferred compensation plan sponsored
by the Company, together with any accrued earnings thereon, and not yet
paid by the Company.
(b) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to two (2)
times the sum of the Executive's Annual Base Salary and the Prior Year Annual
Bonus, reduced by the total amount of any severance benefit paid or payable
under the terms of an offer of employment from the Company to the Executive or
an employment agreement between the Company and the Executive.
(c) On the Termination Date, the Executive shall become fully
vested in any and all stock option awards granted to the Executive under the
Amended and Restated 1999 Stock Incentive Plan of LendingTree, Inc. and any
similar plan or other arrangement of the Company ("Incentive Plans") which have
not become exercisable as of the Termination Date, and such stock option awards
shall remain exercisable until the applicable option expiration date. All
forfeiture conditions that as of the Termination Date are applicable to any
restricted stock, phantom stock unit, stock bonus, or other stock-based award
granted to the Executive by the Company pursuant to the Incentive Plans shall
lapse immediately.
(d) During the Employment Period (or until such later date as
any Welfare Plan of the Company may specify), the Company shall continue to
provide to the Executive and the Executive's family welfare benefits (including,
without limitation, disability, individual life and group life insurance
benefits, but excluding medical or other health plans) which are at least as
favorable as those provided under the most favorable Welfare Plans of the
Company applicable (i) with respect to the Executive and his family during the
90-day period immediately preceding the Termination Date, or (ii) with respect
to other peer Executives and their families during the Employment Period. In
determining benefits under such Welfare Plans, the Executive's annual
compensation attributable to base salary and incentives for any plan year or
calendar year, as applicable,
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shall be deemed to be not less than the Executive's Annual Base Salary and Prior
Year Annual Bonus. The cost of the welfare benefits provided under this Section
5.1(d) shall not exceed the cost of such benefits to the Executive immediately
before the Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare Plans
sponsored by another employer, then the amount of coverage required to be
provided by the Company hereunder shall be reduced by the amount of coverage
provided by such other employer's Welfare Plans. The Executive's rights under
this Section shall be in addition to and not in lieu of any post-termination
continuation coverage or conversion rights the Executive may have pursuant to
applicable law, including, without limitation, continuation coverage required by
Section 4980B of the Code.
5.2 If by the Company for Cause. If the Company terminates the
Executive's employment for Cause during the Employment Period, this Agreement
shall terminate without further obligation by the Company to the Executive,
other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.3 If by the Executive Other Than for Constructive Termination. If the
Executive terminates employment during the Employment Period other than for
Constructive Termination, Disability or death, this Agreement shall terminate
without further obligation by the Company to the Executive, other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.4 If by the Company for Disability. If the Company terminates the
Executive's employment by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further obligation to
the Executive, other than:
(a) the Company shall pay the Executive in cash all amounts
specified in Sections 5.1(a)(i), (ii), (iii) and 5(b), in each case, to the
extent unpaid as of the Termination Date (such amounts collectively, the
"Accrued Obligations"),
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(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans, and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.5 If upon Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligation to the Executive's legal
representatives under this Agreement, other than:
(a) the obligation immediately to pay the Executive's estate
or beneficiary in cash all Accrued Obligations (as defined in Section 5.4), and
(b) the rights of the Executive's legal representatives to
benefits under the terms of any of the Plans, Welfare Plans, and other employee
benefit programs in which the Executive was participating immediately prior to
the Termination Date, pursuant to Sections 3.2(c) through (e).
ARTICLE VI
EXPENSES AND INTEREST
6.1 Legal Fees and Other Expenses. The Company will pay all reasonable
fees and expenses, if any, (including, without limitation, legal fees and
expenses) that are incurred by the Executive to enforce this Agreement and that
result from a breach of this Agreement by the Company.
6.2 Interest. If the Company does not pay any amount due to the
Executive under this Agreement within three days after such amount became due
and owing, interest shall accrue on such amount from the date it became due and
owing until the date of payment at a annual rate equal to 200 basis points above
the base commercial lending rate published in The Wall Street Journal in effect
from time to time during the period of such nonpayment.
ARTICLE VII
NO ADVERSE EFFECT ON POOLING OF INTERESTS
Any benefits provided to the Executive under this Agreement may be
reduced or eliminated to the extent necessary, in the reasonable judgment of the
Board, to enable the Company to account for a merger, consolidation or similar
transaction as a pooling of interests; provided that (i) the Board shall have
exercised such judgment and approved the reduction by a vote of at least
two-thirds (2/3) of the directors then in office, (ii) the Board shall have
given the Executive written notice thereof prior to the Effective Date and (iii)
the determination of the Board shall be supported by the Company's independent
auditors.
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ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when due
the payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty to mitigate
the amounts payable by the Company under this Agreement by seeking new
employment following termination. Except as specifically otherwise provided in
this Agreement, all amounts payable pursuant to this Agreement shall be paid
without reduction regardless of any amounts of salary, compensation or other
amounts which may be paid or payable to the Executive as the result of the
Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. To the extent that payments are
made to the Executive pursuant to Section 5.1 of this Agreement, the Executive
hereby waives the right to receive benefits under any plan or agreement
(including an offer of employment or employment contract) of the Company or its
subsidiaries which provides for severance benefits (except as provided in
Section 5.1(b)).
9.2 Other Rights. Except as provided in Section 10.1, this Agreement
shall not prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plans provided by the Company or any of
its subsidiaries and for which the Executive may qualify, nor shall this
Agreement limit or otherwise affect such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under the terms of any plan or program of the Company or any of its subsidiaries
and any other payment or benefit required by law at or after the Termination
Date shall be payable in accordance with such plan, program or applicable law
except as expressly modified by this Agreement.
ARTICLE X
OBLIGATIONS OF THE EXECUTIVE
10.1 Confidentiality.
(a) The Executive recognizes, by the virtue of the Executive's
employment with the Company, that the Executive will have access to certain
information relating to the Company. The Executive agrees that this information
is a
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valuable asset of the Company, and that use or knowledge of this information by
others would harm the Company. Therefore, the Executive covenants and agrees
that the Executive will not at any time during the Agreement Term or for a
period of one (1) year after the Executive's Termination Date, reveal to any
person or entity any of the trade secrets or confidential information concerning
the organization, business or finances of the Company or of any third party
which the Company is under an obligation to keep confidential, except as may be
required in the ordinary course of performing the Executive's duties as an
employee of the Company, and the Executive shall keep secret such trade secrets
and confidential information and shall not use or attempt to use any such
secrets or information in any manner which is designed to injure or cause loss
to the Company. Trade secrets or confidential information shall include, but not
be limited to, the Company's financial statements and projections, expansion
proposals, customer lists and details of its Internet web site or business
relationships with banks, lenders and other parties not otherwise publicly
available.
(b) Further, the Executive agrees that during the Agreement
Term the Executive shall not make, use or permit to be used any notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials of any nature relating to any
matter within the scope of the business of the Company or concerning any of its
dealings or affairs otherwise than for the benefit of the Company. The Executive
further agrees that the Executive shall not, for a period of one (1) year after
the Executive's Termination Date, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that immediately upon the termination of the Executive's employment, the
Executive shall deliver all of the foregoing, and all copies thereof, to the
Company, at its main office, at the Company's expense.
10.2 Non-Hire.
(a) The Executive agrees that for a period of one (1) year
after the Executive's Termination Date, the Executive will not hire or otherwise
employ or retain, or knowingly permit (to the extent reasonably within the
Executive's control) any other entity or business which employs the Executive or
in which the Executive has any ownership interest or is otherwise involved to
hire or otherwise employ or retain, any person who was employed by the Company
as of the Executive's Termination Date.
10.3 Enforcement.
(a) The Executive acknowledges that monetary damages will not
be an adequate remedy for the Company in the event of a breach of this Article
X, and that it would be impossible for the Company to measure damages in the
event of such a breach. Therefore, the Executive agrees that, in addition to
other rights that the Company may have, the Company is entitled to an injunction
preventing the Executive from any breach of this Article X.
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(b) The obligations of the Executive under this Article X
shall survive the termination of the Executive's employment for the periods
specified herein, regardless of the reasons or method of termination. The
existence of any claim or cause of action that the Executive may have against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of these obligations.
(c) The restrictions in this Article X, to the extent
applicable, shall be in addition to any restrictions imposed upon the Executive
by statute or at common law.
(d) The parties hereby acknowledge that the restrictions in
this Article X have been agreed to by the parties hereto and are limited only to
those restrictions reasonably necessary to protect the Company from unfair
competition. The parties hereby agree that if the scope or enforceability of any
provision, paragraph or subparagraph of this Article X is an any way disputed at
any time, and should a court find that such restrictions are overly broad, the
court may modify and enforce the covenant to the extent that it believes to be
reasonable under the circumstances. Each provision, paragraph and subparagraph
of this Article X is separable from every other provision, paragraph and
subparagraph and constitutes a separate and distinct covenant.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignment. The Executive's rights under this Agreement may not
be assigned or transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts payable under
this Agreement after the death of the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
11.2 Successors. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon the successors
and assigns of the Company. Before or upon a Change in Control, the Company
shall obtain the agreement of the surviving or acquiring corporation that it
will succeed to the Company's rights and obligations under this Agreement.
11.3 Rights Under the Agreement. The right to receive benefits under
the Agreement will not give the Executive any proprietary interest in the
Company or any of its assets. Benefits under the Agreement will be payable from
the general assets of the Company, and there will be no required funding of
amounts that may become payable under the Agreement, except to the extend
otherwise provided under the terms of the Plans or Welfare Plans. The Executive
will for purposes of this Agreement be a general creditor of the Company. The
interest of the Executive under the Agreement cannot be assigned, anticipated,
sold, encumbered or pledged and will not be subject to the claims of the
Executive's creditors.
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11.4 Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Executive or his personal representative at his last known
address. All notices to the Company must be directed to the attention of the
Corporate Secretary with a copy to the General Counsel. Such other addresses may
be used as either party may have furnished to the other in writing. Notices of
change of address are effective only upon receipt.
11.5 Miscellaneous. This instrument contains the entire agreement of
the parties. To the extent not governed by federal law, this Agreement will be
construed in accordance with the laws of the State of Delaware, without
reference to its conflict of laws rules. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and the writing is signed by the Executive and the Company.
A waiver of any breach of or compliance with any provision or condition of this
Agreement is not a waiver of similar or dissimilar provisions or conditions. The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
one or more counterparts, all of which will be considered one and the same
agreement.
11.6 Tax Withholding. The Company may withhold from any amounts payable
under this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
LENDINGTREE, INC.
By:
---------------------------------
Title:
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------------------------------------
Executive
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EXHIBIT 10.7
EMPLOYMENT CONTINUITY AGREEMENT
THIS AGREEMENT, dated as of April 27, 2000 (the "Agreement Date"), is
made by and between LendingTree, Inc. (the "Company"), a Delaware corporation,
and Douglas R. Lebda (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued services of the Executive, despite the
possibility or occurrence of a Change in Control of the Company. The Board
believes that this objective may be achieved by giving key management employees
assurances of financial security in case of a pending or threatened Change in
Control, so that they will not be distracted by personal risks and will continue
to devote their full time and best efforts to the performance of their duties.
The Company and the Executive enter into this Agreement to induce the Executive
to remain an employee of the Company and to continue to devote Executive's full
energy to the Company's affairs. This Agreement is not intended to provide the
Executive with any right to continued employment with the Company, except in the
event of a Change of Control of the Company and subject to the provisions of
this Agreement.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 "Agreement Term" means the period commencing on the Agreement Date
and ending on the first anniversary of the Agreement Date. Commencing on the
first anniversary of the Agreement Date and each subsequent anniversary of the
Agreement Date, the Agreement Term shall be automatically extended for an
additional one-year term, unless at least 30 days prior to the last day of any
such extended Agreement Term, the Company shall give notice to the Executive
that the Agreement Term shall not be extended. The Agreement Term shall also
include the Employment Period.
2.2 "Accrued Obligation." See Section 5.4(a).
2.3 "Annual Base Salary." See Section 3.2(a).
2.4 "Annual Bonus." See Section 3.2(b).
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2.5 "Cause." See Section 4.3.
2.6 "Change in Control" means (i) the acquisition by any Person of
shares of the Company's stock representing more than 50.0% of the total voting
power of the Company; (ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving: individuals who,
on the date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended; (iii) any merger, share exchange, consolidation or
other reorganization or business combination in which the Company is not the
surviving or continuing corporation or in which the Company's stockholders do
not control greater than 50.0% of the voting power of the surviving or
continuing corporation, or in which the Company's stockholders become entitled
to receive cash, securities of the Company other than voting common stock, or
securities of another issuer; or (v) the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition by
the Company of all or substantially all of the Company's assets to an entity, at
least 50.0% of the combined voting power of the voting securities of which are
owned by stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale. For purposes of
this Section, the term "Person" shall have the meaning given in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not include: (i)
the Company or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
affiliates; (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities; or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
2.7 "Code" means the Internal Revenue Code of 1986, as amended.
2.8 "Disability." See Section 4.1.
2.9 "Disability Effective Date." See Section 4.1
2.10 "Effective Date" means the first date during the Agreement Term on
which a Change in Control occurs. Notwithstanding anything in this Agreement to
the contrary, if a Change in Control occurs and the Executive's employment with
the Company had terminated prior to the date on which the Change in Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (a)
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was at the request of a third party who has taken steps reasonably calculated to
effect a Change in Control, or (b) otherwise arose in connection with or in
anticipation of a Change in Control, then for all purposes of this Agreement,
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
2.11 "Employment Period" means the period commencing on the Effective
Date and ending on the first anniversary of such date.
2.12 "Incentive Plans." See Section 5.1(c).
2.13 "Performance Period." See Section 3.2(b).
2.14 "Plans." See Section 3.2(c).
2.15 "Prior Year Annual Bonus" means the total amount of the annual
bonus that was paid to the Executive during the twelve-month period immediately
preceding the Effective Date, or which is payable with respect to that period.
2.16 "Termination Date" means the date of termination of the
Executive's employment; provided, however, that if the Executive's employment is
terminated by reason of Disability, then the Termination Date shall be the
Disability Effective Date (as defined in Section 4.1).
2.17 "Welfare Plans." See Section 3.2(d).
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
(a) The Company hereby agrees to continue the Executive in its
employ during the Employment Period and, subject to Article IV of this
Agreement, the Executive agrees to remain in the employ of the Company subject
to the terms and conditions hereof.
(b) During the Employment Period, the Executive (i) will
devote his knowledge, skill and best efforts on a full-time basis to performing
his duties and obligations to the Company (with the exception of absences on
account of illness or vacation in accordance with the Company's policies and
civic and charitable commitments not involving a conflict with the Company's
business), (ii) will comply with the directions and orders of the Board of
Directors with respect to the performance of his duties, and (iii) will comply
with the provisions of Article XI.
3.2 Compensation.
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(a) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"), which shall be paid
at a monthly rate at least equal to twelve times the highest monthly base salary
paid or payable (including any base salary which has been earned but deferred)
to the Executive by the Company in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual Base Salary shall be reviewed no more than 12
months after the last salary increase awarded to the Executive prior to the
Effective Date, and shall be increased at any time and from time to time as
shall be substantially consistent with increases in base salary awarded to other
peer Executives of the Company. Annual Base Salary shall not be reduced after
any such increase unless such reduction is part of a policy, program or
arrangement applicable to peer Executives of the Company and of any successor
entity, and the term Annual Base Salary as used in this Agreement shall refer to
Annual Base Salary as so adjusted.
(b) Annual Bonus. In addition to Annual Base Salary, the
Company shall grant or cause to be granted to the Executive a bonus award
opportunity (the "Annual Bonus") for each Performance Period which ends during
the Employment Period. "Performance Period" means each period of time designated
in accordance with any annual incentive award arrangement which is based upon
performance. The Executive's target and maximum Annual Bonus with respect to any
Performance Period shall not be less than the largest target and maximum annual
incentive award payable with respect to the Executive under the Company's annual
incentive program as in effect during the twelve-month period immediately
preceding the Effective Date.
(c) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
("Plans") applicable generally to other peer Executives of the Company, but in
no event shall such Plans provide the Executive with incentives or savings and
retirement benefits which, in each case, are less favorable, in the aggregate
than the greater of (i) those provided by the Company for the Executive under
such Plans as in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company. The Plans shall
include both tax-qualified retirement plans and nonqualified retirement plans.
(d) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs ("Welfare Plans") provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance benefits), but in no event shall such Welfare Plans provide
the Executive with benefits which are less favorable, in the aggregate than the
greater of (i) those provided by the Company for the Executive under such
Welfare Plans as were in effect at any time during the 90-day period immediately
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preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other peer Executives of the Company.
(e) Other Employee Benefits. During the Employment Period, the
Executive shall be entitled to other employee benefits and perquisites in
accordance with the most favorable plans, practices, programs and policies of
the Company, as in effect with respect to the Executive at any time during the
90-day period immediately preceding the Effective Date, or if more favorable, as
in effect generally with respect to other peer Executives of the Company. These
other employee benefits and perquisites include, but are not limited to,
vacation, use of a Company car, parking benefits and financial planning.
(f) Subsidiaries. To the extent that immediately prior to the
Effective Date, the Executive has been on the payroll of, and participated in
the incentive or employee benefit plans of, a subsidiary of the Company, the
references to the Company contained in Sections 3.2(a) through 3.2(e) and the
other Sections of this Agreement referring to benefits to which the Executive
may be entitled shall be read to refer to such subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability. During the Employment Term, the Company may terminate
the Executive's employment upon the Executive's Disability. The Executive's
employment shall terminate effective on the 30th day (the "Disability Effective
Date") after the Executive's receipt of written notice of termination from the
Company unless, before the Disability Effective Date, the Executive shall have
resumed the full-time performance of the Executive's duties. "Disability" means
a condition, resulting from bodily injury or disease, that renders, and for a
six consecutive month period has rendered, the Executive unable to perform
substantially the duties pertaining to his employment with the Company. A return
to work of less than 14 consecutive days will not be considered an interruption
in the Executive's six consecutive months of disability. Disability will be
determined by the Company on the basis of medical evidence satisfactory to the
Company.
4.2 Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Term.
4.3 Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" means
(a) fraud or material misappropriation with respect to the business or assets of
the Company, (b) persistent refusal or willful failure of the Executive to
perform substantially his duties and responsibilities to the Company, which
continues after the Executive receives notice of such refusal or failure, (c)
conviction of a felony or crime involving moral turpitude, or
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(d) the use of drugs or alcohol that interferes materially with the Executive's
performance of his duties.
4.4 Constructive Termination. The Executive may terminate the
Executive's employment for Constructive Termination at any time during the
Employment Period. "Constructive Termination" means any material breach of this
Agreement by the Company during the Employment Period, including:
(a) the failure to maintain the Executive in the office or
position, or in a substantially equivalent office or position, held by the
Executive immediately prior to the Effective Date;
(b) a material adverse alteration in the nature or scope of
the Executive's position, duties, functions, responsibilities or authority as
compared to the nature or scope immediately prior to the Effective Date;
(c) any failure by the Company to provide the Executive with
the compensation and benefits described in Section 3.2, including any reduction
of the Executive's Annual Base Salary in violation of Section 3.2(a);
(d) the failure of any successor to the Company to assume this
Agreement;
(e) a relocation of more than 50 miles of (i) the Executive's
workplace, or (ii) the principal offices of the Company (if such offices are the
Executive's workplace), in each case without the consent of the Executive; or
An act or omission shall not constitute Constructive Termination unless
(1) the Executive gives written notice to the Company indicating that the
Executive intends to terminate employment under this Section 4.4; (2) the
Executive's voluntary termination occurs within 60 days after the Executive
knows or reasonably should know of an event described above, or within 60 days
after the last in a series of such events, and (3) the Company has failed to
remedy the event described above, as the case may be, within 30 days after
receiving the Executive's written notice. If the Company remedies the event
described above, as the case may be, within 30 days after receiving the
Executive's written notice, the Executive may not terminate employment under
this Section 4.4 on account of the event specified in the Executive's notice.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Constructive Termination or by the Company
Other Than for Cause or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability, or if the
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Executive shall terminate employment for Constructive Termination, the Company's
obligations to the Executive shall be as follows:
(a) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to the sum of
the following amounts:
(i) to the extent not previously paid, the Annual
Base Salary and any accrued paid time off through the Termination Date;
(ii) an amount equal to the product of (i) the target
Annual Bonus (as defined in Section 3.2(b)) for the Performance Period
in which the Termination Date occurs multiplied by (ii) a fraction, the
numerator of which is the number of days actually worked during such
Performance Period, and the denominator of which is 365; and
(iii) all amounts previously deferred by the
Executive under any nonqualified deferred compensation plan sponsored
by the Company, together with any accrued earnings thereon, and not yet
paid by the Company.
(b) The Company shall, within 30 business days of such
termination of employment, pay the Executive a cash payment equal to two (2)
times the sum of the Executive's Annual Base Salary and the Prior Year Annual
Bonus, reduced by the total amount of any severance benefit paid or payable
under the terms of an offer of employment from the Company to the Executive or
an employment agreement between the Company and the Executive.
(c) On the Termination Date, the Executive shall become fully
vested in any and all stock option awards granted to the Executive under the
Amended and Restated 1999 Stock Incentive Plan of LendingTree, Inc. and any
similar plan or other arrangement of the Company ("Incentive Plans") which have
not become exercisable as of the Termination Date, and such stock option awards
shall remain exercisable until the applicable option expiration date. All
forfeiture conditions that as of the Termination Date are applicable to any
restricted stock, phantom stock unit, stock bonus, or other stock-based award
granted to the Executive by the Company pursuant to the Incentive Plans shall
lapse immediately.
(d) During the Employment Period (or until such later date as
any Welfare Plan of the Company may specify), the Company shall continue to
provide to the Executive and the Executive's family welfare benefits (including,
without limitation, disability, individual life and group life insurance
benefits, but excluding medical or other health plans) which are at least as
favorable as those provided under the most favorable Welfare Plans of the
Company applicable (i) with respect to the Executive and his family during the
90-day period immediately preceding the Termination Date, or (ii) with respect
to other peer Executives and their families during the Employment Period. In
determining benefits under such Welfare Plans, the Executive's annual
compensation attributable to base salary and incentives for any plan year or
calendar year, as applicable,
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shall be deemed to be not less than the Executive's Annual Base Salary and Prior
Year Annual Bonus. The cost of the welfare benefits provided under this Section
5.1(d) shall not exceed the cost of such benefits to the Executive immediately
before the Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any Welfare Plans
sponsored by another employer, then the amount of coverage required to be
provided by the Company hereunder shall be reduced by the amount of coverage
provided by such other employer's Welfare Plans. The Executive's rights under
this Section shall be in addition to and not in lieu of any post-termination
continuation coverage or conversion rights the Executive may have pursuant to
applicable law, including, without limitation, continuation coverage required by
Section 4980B of the Code.
5.2 If by the Company for Cause. If the Company terminates the
Executive's employment for Cause during the Employment Period, this Agreement
shall terminate without further obligation by the Company to the Executive,
other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.3 If by the Executive Other Than for Constructive Termination. If the
Executive terminates employment during the Employment Period other than for
Constructive Termination, Disability or death, this Agreement shall terminate
without further obligation by the Company to the Executive, other than:
(a) the obligation immediately to pay the Executive in cash
the Executive's Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously paid, and
(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.4 If by the Company for Disability. If the Company terminates the
Executive's employment by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further obligation to
the Executive, other than:
(a) the Company shall pay the Executive in cash all amounts
specified in Sections 5.1(a)(i), (ii), (iii) and 5(b), in each case, to the
extent unpaid as of the Termination Date (such amounts collectively, the
"Accrued Obligations"),
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(b) the Executive's rights to benefits under the terms of any
of the Plans, Welfare Plans, and other employee benefit programs in which the
Executive was participating immediately prior to the Termination Date, pursuant
to Sections 3.2(c) through (e).
5.5 If upon Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligation to the Executive's legal
representatives under this Agreement, other than:
(a) the obligation immediately to pay the Executive's estate
or beneficiary in cash all Accrued Obligations (as defined in Section 5.4), and
(b) the rights of the Executive's legal representatives to
benefits under the terms of any of the Plans, Welfare Plans, and other employee
benefit programs in which the Executive was participating immediately prior to
the Termination Date, pursuant to Sections 3.2(c) through (e).
ARTICLE VI
EXPENSES AND INTEREST
6.1 Legal Fees and Other Expenses. The Company will pay all reasonable
fees and expenses, if any, (including, without limitation, legal fees and
expenses) that are incurred by the Executive to enforce this Agreement and that
result from a breach of this Agreement by the Company.
6.2 Interest. If the Company does not pay any amount due to the
Executive under this Agreement within three days after such amount became due
and owing, interest shall accrue on such amount from the date it became due and
owing until the date of payment at a annual rate equal to 200 basis points above
the base commercial lending rate published in The Wall Street Journal in effect
from time to time during the period of such nonpayment.
ARTICLE VII
NO ADVERSE EFFECT ON POOLING OF INTERESTS
Any benefits provided to the Executive under this Agreement may be
reduced or eliminated to the extent necessary, in the reasonable judgment of the
Board, to enable the Company to account for a merger, consolidation or similar
transaction as a pooling of interests; provided that (i) the Board shall have
exercised such judgment and approved the reduction by a vote of at least
two-thirds (2/3) of the directors then in office, (ii) the Board shall have
given the Executive written notice thereof prior to the Effective Date and (iii)
the determination of the Board shall be supported by the Company's independent
auditors.
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ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when due
the payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty to mitigate
the amounts payable by the Company under this Agreement by seeking new
employment following termination. Except as specifically otherwise provided in
this Agreement, all amounts payable pursuant to this Agreement shall be paid
without reduction regardless of any amounts of salary, compensation or other
amounts which may be paid or payable to the Executive as the result of the
Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. To the extent that payments are
made to the Executive pursuant to Section 5.1 of this Agreement, the Executive
hereby waives the right to receive benefits under any plan or agreement
(including an offer of employment or employment contract) of the Company or its
subsidiaries which provides for severance benefits (except as provided in
Section 5.1(b)).
9.2 Other Rights. Except as provided in Section 10.1, this Agreement
shall not prevent or limit the Executive's continuing or future participation in
any benefit, bonus, incentive or other plans provided by the Company or any of
its subsidiaries and for which the Executive may qualify, nor shall this
Agreement limit or otherwise affect such rights as the Executive may have under
any other agreements with the Company or any of its subsidiaries. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under the terms of any plan or program of the Company or any of its subsidiaries
and any other payment or benefit required by law at or after the Termination
Date shall be payable in accordance with such plan, program or applicable law
except as expressly modified by this Agreement.
ARTICLE X
OBLIGATIONS OF THE EXECUTIVE
10.1 Confidentiality.
(a) The Executive recognizes, by the virtue of the Executive's
employment with the Company, that the Executive will have access to certain
information relating to the Company. The Executive agrees that this information
is a
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valuable asset of the Company, and that use or knowledge of this information by
others would harm the Company. Therefore, the Executive covenants and agrees
that the Executive will not at any time during the Agreement Term or for a
period of one (1) year after the Executive's Termination Date, reveal to any
person or entity any of the trade secrets or confidential information concerning
the organization, business or finances of the Company or of any third party
which the Company is under an obligation to keep confidential, except as may be
required in the ordinary course of performing the Executive's duties as an
employee of the Company, and the Executive shall keep secret such trade secrets
and confidential information and shall not use or attempt to use any such
secrets or information in any manner which is designed to injure or cause loss
to the Company. Trade secrets or confidential information shall include, but not
be limited to, the Company's financial statements and projections, expansion
proposals, customer lists and details of its Internet web site or business
relationships with banks, lenders and other parties not otherwise publicly
available.
(b) Further, the Executive agrees that during the Agreement
Term the Executive shall not make, use or permit to be used any notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials of any nature relating to any
matter within the scope of the business of the Company or concerning any of its
dealings or affairs otherwise than for the benefit of the Company. The Executive
further agrees that the Executive shall not, for a period of one (1) year after
the Executive's Termination Date, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that immediately upon the termination of the Executive's employment, the
Executive shall deliver all of the foregoing, and all copies thereof, to the
Company, at its main office, at the Company's expense.
10.2 Non-Hire.
(a) The Executive agrees that for a period of one (1) year
after the Executive's Termination Date, the Executive will not hire or otherwise
employ or retain, or knowingly permit (to the extent reasonably within the
Executive's control) any other entity or business which employs the Executive or
in which the Executive has any ownership interest or is otherwise involved to
hire or otherwise employ or retain, any person who was employed by the Company
as of the Executive's Termination Date.
10.3 Enforcement.
(a) The Executive acknowledges that monetary damages will not
be an adequate remedy for the Company in the event of a breach of this Article
X, and that it would be impossible for the Company to measure damages in the
event of such a breach. Therefore, the Executive agrees that, in addition to
other rights that the Company may have, the Company is entitled to an injunction
preventing the Executive from any breach of this Article X.
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(b) The obligations of the Executive under this Article X
shall survive the termination of the Executive's employment for the periods
specified herein, regardless of the reasons or method of termination. The
existence of any claim or cause of action that the Executive may have against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of these obligations.
(c) The restrictions in this Article X, to the extent
applicable, shall be in addition to any restrictions imposed upon the Executive
by statute or at common law.
(d) The parties hereby acknowledge that the restrictions in
this Article X have been agreed to by the parties hereto and are limited only to
those restrictions reasonably necessary to protect the Company from unfair
competition. The parties hereby agree that if the scope or enforceability of any
provision, paragraph or subparagraph of this Article X is an any way disputed at
any time, and should a court find that such restrictions are overly broad, the
court may modify and enforce the covenant to the extent that it believes to be
reasonable under the circumstances. Each provision, paragraph and subparagraph
of this Article X is separable from every other provision, paragraph and
subparagraph and constitutes a separate and distinct covenant.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignment. The Executive's rights under this Agreement may not
be assigned or transferred in whole or in part, except that the personal
representative of the Executive's estate will receive any amounts payable under
this Agreement after the death of the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
11.2 Successors. The rights and obligations of the Company under this
Agreement will inure to the benefit of and will be binding upon the successors
and assigns of the Company. Before or upon a Change in Control, the Company
shall obtain the agreement of the surviving or acquiring corporation that it
will succeed to the Company's rights and obligations under this Agreement.
11.3 Rights Under the Agreement. The right to receive benefits under
the Agreement will not give the Executive any proprietary interest in the
Company or any of its assets. Benefits under the Agreement will be payable from
the general assets of the Company, and there will be no required funding of
amounts that may become payable under the Agreement, except to the extend
otherwise provided under the terms of the Plans or Welfare Plans. The Executive
will for purposes of this Agreement be a general creditor of the Company. The
interest of the Executive under the Agreement cannot be assigned, anticipated,
sold, encumbered or pledged and will not be subject to the claims of the
Executive's creditors.
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11.4 Notice. For purposes of this Agreement, notices and all other
communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Executive or his personal representative at his last known
address. All notices to the Company must be directed to the attention of the
Corporate Secretary with a copy to the General Counsel. Such other addresses may
be used as either party may have furnished to the other in writing. Notices of
change of address are effective only upon receipt.
11.5 Miscellaneous. This instrument contains the entire agreement of
the parties. To the extent not governed by federal law, this Agreement will be
construed in accordance with the laws of the State of Delaware, without
reference to its conflict of laws rules. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and the writing is signed by the Executive and the Company.
A waiver of any breach of or compliance with any provision or condition of this
Agreement is not a waiver of similar or dissimilar provisions or conditions. The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
one or more counterparts, all of which will be considered one and the same
agreement.
11.6 Tax Withholding. The Company may withhold from any amounts payable
under this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
LENDINGTREE, INC.
By:
---------------------------------
Title:
------------------------------
------------------------------------
Executive
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EXHIBIT 10.8
PROMISSORY NOTE
$100,000 February 9, 2000
KEITH B. HALL, a natural person residing in the State of North Carolina
(the "Borrower"), for value received, hereby promises to pay to LENDINGTREE,
INC. (the "Company"), or its assigns, the principal amount of ONE HUNDRED
THOUSAND DOLLARS ($100,000) (the "Loan"), of which THIRTY-THREE THOUSAND THREE
HUNDRED THIRTY THREE DOLLARS AND SIXTY-SEVEN CENTS ($33,333.67) shall be paid on
each of the Maturity Dates, with interest (computed on the basis of the actual
number of days elapsed over a 360 day year) payable, from the date hereof, on
the unpaid balance of the Loan at a rate per annum equal to the Federal Rate, on
January 31 of each year, beginning with January 31, 2001, in which a principal
balance is outstanding, in arrears. Payments of principal and interest hereon
shall be made in lawful money of the United States of America at the address for
such purpose specified in Section 9 or at such other address as you or any
subsequent holder of this Note may designate in writing, without requiring any
presentation or surrender of this Note, except if this Note is paid or prepaid
in full it shall be promptly surrendered to the Borrower and canceled.
Section 1. Prepayment. At any time, or from time to time, the Borrower may, at
Borrower's option, or as required by Section 4(d) hereto, prepay all or any part
of this Note. In the event of any such prepayment, the Borrower shall give
written notice thereof to the holder of this Note not less than 10 days (or
three (3) business days if the prepayment is required by Section 4(d)) prior to
the date fixed for such prepayment. Each such notice shall set forth (a) the
date fixed for prepayment, (b) the aggregate principal amount of and accrued on
this Note to be prepaid on such date.
Section 2. Acceleration. In addition to the rights granted to the holder of this
Note under Section 3 hereof, if the Borrower's employment with the Company is
terminated for any reason, on the date which is 45 days from the date such
termination becomes effective, the holder of this Note shall have the right to
declare the entire principal of, and interest accrued on, this Note then
outstanding to be, and this Note shall thereupon become, forthwith due and
payable, without any presentment, demand, protest, or other notice of any kind,
all of which are hereby expressly waived, and the Borrower shall forthwith pay
to the holder of this Note the entire principal of, and interest accrued
interest on, this Note.
<PAGE> 2
Section 3. Representations and Warranties.
The Borrower represents and warrants that:
(1) When executed and delivered, this Note will constitute the
valid and legally binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms.
(2) The execution, delivery and performance of this Note will
not violate or conflict with or constitute a default under, or result in the
creation of any mortgage, lien, charge or encumbrance upon any of the properties
or assets of the Borrower pursuant to any term of any agreement, instrument,
judgment, decree, order, law, statute, rule or regulation applicable to the
Borrower or any of Borrower's respective properties or assets.
(3) The Borrower is not bound by or subject to any agreement,
instrument, judgment, decree, order, law, statute, rule or regulation under the
terms of or pursuant to which Borrower's obligation to pay interest or principal
of this Note, or to perform Borrower's obligations hereunder, is in any way
restricted.
Section 4. Covenants. The Borrower covenants and agrees that until the principal
amount of this Note, together with interest thereon and all other obligations
incurred hereunder, are paid in full:
(a) Payment of Principal and Interest. The Borrower shall duly
and punctually pay to the Company, when due, all principal of and interest on
this Note on the dates and in the manner provided herein. Principal or interest
shall be considered paid on the date it is due if the Company withholds on that
date money otherwise payable to the Borrower, in the amounts and at the times
required under this Note. The Borrower shall pay interest on overdue principal
from the due date at the Federal Rate plus 2.0% per annum.
(b) No Transfer of Pledged Stock. The Borrower shall not
transfer any of the Pledged Stock except in accordance with the terms and
provisions of the Pledge Agreement.
(c) Use of Proceeds. The Borrower shall use the proceeds from
the Loan solely for the purpose of acquiring the Pledged Stock and not use the
proceeds from the Loan, directly or indirectly, to purchase or carry margin
securities, as those terms are defined in the laws and regulation applicable to
margin loans as promul-
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<PAGE> 3
gated by the Securities and Exchange Commission and the Board of Governors of
the Federal Reserve System.
(d) Mandatory Prepayment. Within three (3) business days after
the receipt by the Borrower of any Net Proceeds, the Borrower shall apply such
Net Proceeds to a prepayment pursuant to Section 1 hereto. For the purposes of
this paragraph, "Net Proceeds" shall mean (x) any proceeds from (i) any
transfer, sale or other disposition of all or a portion of the Other Stock or
(ii) any loan, borrowing or other financing secured or guaranteed by all or a
portion of the Other Stock less (y) all reasonable fees and expenses incurred or
to be incurred and all federal state, local and foreign taxes assessed or to be
assessed in connection with such transfer or loan.
(4) No Transfer of Other Stock. The Borrower shall not
transfer any of the Other Stock without the prior written consent of the
Company. The Borrower shall enter into a Stop Transfer Agreement substantially
in the form attached as Exhibit B hereto.
Section 5. Remedies.
Each of the following shall be Events of Default under this Note:
(5) the Borrower defaults in the due and punctual payment of
all or any part of the principal of this Note when and as the same shall become
due and payable, whether at the stated maturity thereof, by notice of or demand
for prepayment, or otherwise;
(6) the Borrower defaults in the due and punctual payment of
any interest on this Note when and as such interest shall become due and payable
and such default shall have continued for a period of five days;
(e) any representation or warranty made by the Borrower herein
shall prove to be untrue in any material respect as of the date of the issuance
or making thereof;
(7) the Borrower defaults in the performance or observance of
any other of the provisions contained in this Note and such default shall have
continued for a period of 30 days after the earlier of (i) the Borrower's
obtaining actual knowledge of such default or (ii) the Borrower's receipt of
written notice of such default;
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<PAGE> 4
(f) the Borrower shall default in the payment when due
(whether by scheduled maturity, by required prepayment, by acceleration, by
demand, or otherwise) of any indebtedness for borrowed money owing to any other
person, or any interest or premium thereon of any amount owing in respect of
such indebtedness, in excess of $50,000; or the Borrower shall default in the
performance or observance of any obligation or condition with respect to such
indebtedness or any other event shall occur or condition exist, if the effect of
such default, event or condition is to accelerate the maturity of any such
indebtedness or to permit (without regard to any required notice or lapse of
time) the holder or holders thereof, or any trustee or agent for such holders,
to accelerate the maturity of any such indebtedness, or any such indebtedness
shall become or be declared to be due and payable prior to its stated maturity
other than as a result of a regularly scheduled payment date;
(8) there shall remain in force, undischarged, unbonded, or
unstayed, for more than thirty (30) days, any final judgment against the
Borrower that, with other outstanding final judgments, undischarged, against the
Borrower exceeds in the aggregate $10,000;
(9) the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator; (ii) be generally unable to pay the Borrower's debts as such
debts become due; (iii) make a general assignment for the benefit of the
Borrower creditors; (iv) commence a voluntary case under the Bankruptcy Code;
(v) file a petition seeking to take advantage of any other law of any
jurisdiction relating to bankruptcy, insolvency, or composition or readjustment
of debts; (vi) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against the Borrower in an
involuntary case under the Bankruptcy Code; or (vii) take any action for the
purpose of effecting any of the foregoing;
(10) a proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent jurisdiction,
seeking (i) the liquidation of the Borrower's assets, or the composition or
readjustment of the Borrower's debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of any substantial part of the
Borrower's assets, or (iii) similar relief in respect of the Borrower under any
law of any jurisdiction relating to bankruptcy, insolvency, or the composition
or readjustment of debts, and such proceedings or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect for a period of
sixty (60) days; or an order for relief against the Borrower shall be entered in
an
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involuntary case under any bankruptcy, insolvency, composition, readjustment of
debt, liquidation of assets or similar law of any jurisdiction;
(g) the Borrower shall die or become incapacitated or
otherwise unable to fulfill his duties with the Company; or
(h) any provision of the Pledge Agreement shall for any reason
cease to be valid and binding on the Borrower or the Borrower shall so state in
writing; or the Pledge Agreement shall for any reason cease to create a valid
lien on any of the Collateral purported to be covered thereby, or such lien
shall cease to be a perfected and first priority lien with respect to the
Collateral, or the Borrower shall so state in writing;
If an Event of Default specified in clauses (g) and (h) of this Section 3 shall
exist, this Note shall automatically become immediately due and payable together
with interest accrued thereon, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived.
If an Event of Default other than those specified in clauses (g) and (h) shall
exist, the holder of this Note may exercise any right, power or remedy permitted
to such holder by applicable law, and shall have, in particular, without
limiting the generality of the foregoing, the right to declare the entire
principal of, and interest accrued on, this Note then outstanding to be, and
this Note shall thereupon become, forthwith due and payable, without any
presentment, demand, protest, or other notice of any kind, all of which are
hereby expressly waived, and the Borrower shall forthwith pay to the holder of
this Note the entire principal of, and interest accrued on, this Note.
No course of dealing on the part of the holder of this Note nor any delay or
failure on the part of the holder of this Note to exercise any right shall
operate as a waiver of such right or otherwise prejudice such holder's rights,
powers and remedies. If the Borrower fails to comply with any provision of this
Note the Borrower shall pay to the holder, to the extent permitted by applicable
law, such further amounts as shall be sufficient to cover the costs and
expenses, including but not limited to reasonable attorneys' fees, incurred by
such holder in collecting any sums due on this Note or in otherwise assessing,
analyzing or enforcing any rights or remedies that are or may be available to
it.
The Borrower further waives and agrees not to assert any rights or privileges it
may acquire under Section 9-112 of the New York Uniform Commercial Code and the
Borrower shall be liable for the deficiency if the proceeds of any sale or other
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<PAGE> 6
disposition of the Collateral are insufficient to pay all amounts to which the
holder of the Note is entitled, and the fees of any attorneys employed by the
holder of the Note to collect such deficiency.
Section 6. Security. In order to secure the payment and performance in full of
all of its obligations under this Note, the Borrower covenants and agrees to
pledge the Pledged Stock (as defined in the Pledge Agreement) owned by the
Borrower, substantially in accordance with the terms of the Pledge Agreement
attached hereto as Exhibit A.
Section 7. Right of Set-off. The Company is hereby authorized, at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all amounts at any time held and all indebtedness of other amounts at
any time owing by the Borrower to or for the credit or the account of the
Company regardless of the currency in which any such deposit, amount or
indebtedness may be denominated, against any and all of the obligations of the
Borrower now or hereafter existing, irrespective of whether or not the Company
shall have made any demand and although such obligations may be unmatured. The
Company will promptly notify the Borrower after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Company hereunder
are in additional to other rights and remedies (including, without limitation,
other rights of set-off) which the Company may have.
Section 8. Definitions and Principles of Construction.
(a) Defined Terms. As used in this Note, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Bankruptcy Code" shall mean Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statutes.
"Collateral" shall have the meaning assigned to that term in the Pledge
Agreement.
"Credit Documents" shall mean this Note and the Pledge Agreement.
"Federal Rate" shall mean the applicable federal rate, as defined under sections
1274(d) and 7872 of the Internal Revenue Code of 1986, as amended, compounded
annually.
"Maturity Dates" shall mean January 31, 2002, 2003, and 2004, respectively.
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<PAGE> 7
"Material Adverse Effect" shall mean a material adverse effect on (i) the
properties, assets, condition (financial or otherwise) or earnings prospects of
Borrower, (ii) the ability of the Borrower to fully and timely perform the
Secured Obligations, (iii) the legality, validity, binding effect or
enforceability against the Borrower of any Credit Document or (iv) any material
rights, remedies and benefits available to, or conferred upon, the Company, any
holder of the Note or any agent (appointed in accordance with the Pledge
Agreement) under any Credit Document.
"Minimum Collateral Value" shall mean the product of the aggregate outstanding
principal and interest on the Loans multiplied by four (4):
"Other Stock" shall mean all capital stock of the Company, other than the
Pledged Stock, now or hereafter directly held in the name of the Borrower.
"Pledge Agreement" shall mean the Pledge Agreement dated as of even date
herewith between the Borrower and the Company, as the same may be amended,
supplemented or otherwise modified from time to time.
"Pledged Stock" shall have the meaning assigned to that term in the Pledge
Agreement.
"Surplus" shall have the meaning assigned to that term in Section 10.
"Secured Obligations" shall have the meaning assigned to that term in the Pledge
Agreement.
"Transfer Event" shall mean (i) any transfer, sale or other disposition of all
or a portion of the Other Stock or (ii) any loan, borrowing or other financing
secured or guaranteed by all or a portion of the Other Stock.
(b) Principles of Construction. All references to sections and
exhibits are to sections and exhibits in or to this Note unless otherwise
specified. The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Note shall refer to this Note as a whole and not to any
particular provision of this Note.
Section 9. Notices.
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<PAGE> 8
The Borrower's address for all communications related to this Note shall be as
follows:
19309 Peninsula Shores Rd.
Cornelius, North Carolina 28031
The Company's address for all communications and payments related to this Note
shall be as follows:
LendingTree, Inc
6701 Carmel Road, Suite 205
Charlotte, North Carolina 28226
Attention: General Counsel
With a copy to:
LendingTree, Inc
6701 Carmel Road, Suite 205
Charlotte, North Carolina 28226
Attention: Chief Executive Officer
Section 10. Sale of Pledged Stock. In the event that, pursuant to Section 8 of
the Pledge Agreement, the Pledgor sells a portion or all of the Pledged Stock,
the Company will deliver to the buyer the corresponding number of shares of
Pledged Stock against the aggregate amount of proceeds from such sale. In the
event that the aggregate amount of proceeds from such sale exceeds the amount of
principal and accrued interest (including, without limitation, fees, expenses or
otherwise) then outstanding on the Loan (the "Surplus"), the Company shall pay
the Pledgor the Surplus.
Section 11. Successors and Assigns.
This Note shall inure to the benefit of and be binding upon the successors and
assigns of the Company or any holder of this Note. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of this Note,
and shall be enforceable by any such holder, whether or not an express
assignment to such holder of rights hereunder shall have been made by the holder
or any successor or assign. The Borrower may not assign this Note without the
prior written consent of the holder of this Note.
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<PAGE> 9
Section 12. Expenses. The Borrower agrees to pay all reasonable out-of-pocket
expenses incurred by the holder of this Note, including the reasonable fees,
charges and disbursement of counsel for such holder, in connection with any
amendment, waiver, supplement or modification to, or enforcement or protection
of such holder's rights under this Note.
Section 13. No Waiver; Remedies Cumulative. No failure or delay on the part of
the Company in exercising any right, power or privilege hereunder and no course
of dealing between the Borrower and the Company shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or hereunder
or the exercise of any other right, power or privilege hereunder. The rights,
powers and remedies herein expressly provided are cumulative and not exclusive
of any rights, powers or remedies which the Company or the holder of this Note
would otherwise have. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Company to any
other or further action in any circumstances without notice or demand.
Section 14. GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW).
Section 15. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY MATTER ARISING HEREUNDER.
---------------------------
Name: Keith B. Hall
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<PAGE> 10
EXHIBIT A TO PROMISSORY NOTE
PLEDGE AGREEMENT
10
<PAGE> 11
EXHIBIT B TO PROMISSORY NOTE
STOP TRANSFER AGREEMENT
11
<PAGE> 1
EXHIBIT 10.9
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") is made as of this 9th day
of February, 2000, between Keith B. Hall, a natural person residing in the State
of North Carolina (the "Pledgor"), and LendingTree, Inc., a Delaware corporation
(the "Company").
W I T N E S S E T H :
WHEREAS, the Pledgor desires that the Company make a loan of $100,000
(the "Loan") to Pledgor;
WHEREAS, it is a condition precedent to the Company making such loan to
the Pledgor that the Pledgor execute and deliver to the Company a promissory
note (the "Note") in favor of the Company as evidence of Pledgor's obligation to
repay the Loan;
WHEREAS, Pledgor is a party to a lock-up agreement with Merrill Lynch,
Pierce, Fenner & Smith Incorporated, to be effective as of February 15, 2000
(the "Lock-up Agreement"), which, among other things, restricts the
transferability of the shares for 180 days following an initial public offering
of the Company's common stock;
WHEREAS, it is a condition precedent to the Company making such loan to
the Pledgor that the Pledgor execute and deliver to the Company this Agreement;
and
WHEREAS, the Pledgor wishes to grant pledges, assignments and security
interests in favor of the Company as herein provided;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
<PAGE> 2
SECTION 1. Definitions.
Terms not otherwise defined herein have, as used herein, the
respective meanings provided for in the Note. The following additional terms, as
used herein, have the following respective meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"Company Stock" means the common stock of the Company, par value $0.01
per share listed on Schedule I hereto.
"Loan" has the meaning assigned to such term in the recitals hereof.
"Pledged Stock" means the Company Stock and any other capital stock
required to be pledged to the Company pursuant to Section 3(B).
"Secured Obligations" means (i) all principal of and interest
(including, without limitation, fees, expenses or otherwise and any interest
which accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Pledgor) on the
Loan as evidenced by the Note and (ii) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"Surplus" has the meaning assigned to such term in Section 8.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings therein
stated.
SECTION 2. Representations and Warranties.
The Pledgor represents and warrants as follows:
(A) Title to Pledged Securities. The Pledgor owns all of the Pledged
Stock, free and clear of any Liens other than the Security Interests. All of the
Pledged Stock has been duly authorized and validly issued, and is fully paid and
non-assessable, and is subject to no options to purchase or similar rights of
any
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person. The Pledgor is not and will not become a party to or otherwise bound by
any agreement, other than this Agreement and the Lock-up Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Pledged Stock with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the
delivery of the certificates representing the Pledged Stock to the Company in
accordance with Section 4 hereof, the Company will have valid and perfected
security interests in the Collateral subject to no prior lien. No registration,
recordation or filing with any governmental body, agency or official is required
in connection with the execution or delivery of this Agreement or necessary for
the validity or enforceability hereof or for the perfection or enforcement of
the Security Interests. The Pledgor has not performed or will not perform any
acts which might prevent the Company from enforcing any of the terms and
conditions of this Agreement or which would limit the Company in any such
enforcement.
(C) UCC Filing Locations. The primary residence and principal place of
business of Pledgor are located at the following address:
19309 Peninsula Shores Drive
Cornelius, North Carolina 28031
and
6701 Carmel Road, Suite 205
Charlotte, North Carolina 28226
SECTION 3. The Security Interests.
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the obligations of the Pledgor hereunder:
(A) The Pledgor hereby assigns and pledges to the Company and grants to
the Company a security interest in the Pledged Stock, and all of his rights and
privileges with respect to the Pledged Stock (whether such rights are fully
vested or may become fully vested in the future), and all income and profits
thereon, and all dividends and other payments and distributions with respect
thereto, and all proceeds of the foregoing (the "Collateral"). Contemporaneously
with the execution and
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delivery hereof, the Pledgor is delivering certificates representing the Pledgor
Stock in pledge hereunder.
(B) In the event that the Company at any time, in connection with the
Pledged Stock, issues any additional or substitute shares of capital stock of
any class, including, but not limited to, issuing unrestricted shares to replace
restricted shares that have vested, the Pledgor will immediately pledge and
deposit with the Company certificates representing all such shares as additional
security for the Secured Obligations. All such shares constitute Pledged Stock
and are subject to all provisions of this Agreement.
(C) The Security Interests are granted as security only and shall not
subject to, or transfer or in any way affect or modify, any obligation or
liability of the Pledgor with respect to any of the Collateral or any
transaction in connection therewith.
SECTION 4. Delivery of Pledged Stock.
All certificates representing Pledged Stock delivered to the Company by
the Pledgor pursuant hereto shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, with signatures appropriately guaranteed, and accompanied by any
required transfer tax stamps, all in form and substance satisfactory to the
Company.
SECTION 5. Filing; Further Assurances.
(A) The Pledgor agrees that it will, at its expense and in such manner
and form as the Company may require, execute, deliver, file and record any
financing statement, specific assignment or other paper and take any other
action that may be necessary in order to create, preserve, perfect or validate
any Security Interest or to enable the Company to exercise and enforce its
rights hereunder with respect to any of the Collateral. To the extent permitted
by applicable law, the Pledgor hereby authorizes the Company to execute and
file, in the name of the Pledgor or otherwise, Uniform Commercial Code financing
statements (which may be carbon, photographic, photostatic or other
reproductions of this Agreement or of a financing statement relating to this
Agreement) which the Company in its sole discretion may deem necessary to
further perfect the Security Interests.
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(B) The Pledgor agrees that Pledgor will not change (i) Pledgor's name
or (ii) the location of Pledgor's primary residence or principal place of
business unless Pledgor shall have given the Company not less than 30 days'
prior notice thereof.
SECTION 6. Right to Receive Distributions on Collateral.
Prior to the occurrence of any Event of Default, the Pledgor shall be
entitled to receive all cash dividends, if any, on the Pledged Stock. Upon the
occurrence and during the continuance of an Event of Default, the Company shall
be entitled to retain all dividends and other payments and distributions made
upon or with respect to the Collateral and the Pledgor shall take all such
action as the Company may deem necessary or appropriate to give effect to such
right and all such dividends and other payments and distributions which are
received by the Pledgor shall be received in trust for the benefit of the
Company and shall, forthwith upon demand by the Company during the continuance
of an Event of Default, be paid over to the Company as Collateral in the same
form as received (with any necessary endorsement). After all Events of Default
that shall have occurred have been cured, the Company's right to retain
dividends, interest and other payments and distributions under this Section 6
shall cease and the Company shall pay over to the Pledgor any such Collateral
retained by the Company during the continuance of an Event of Default. Any
non-cash dividends and other payments or distributions shall be immediately
pledged to the Company hereunder.
SECTION 7. General Authority.
The Pledgor hereby irrevocably appoints the Company its true and lawful
attorney, with full power of substitution, in the name of the Pledgor, the
Company, or otherwise, for the sole use and benefit of the Company, but at the
expense of the Pledgor, to the extent permitted by law to exercise, at any time
and from time to time while an Event of Default has occurred and is continuing,
all or any of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
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(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and effectually as
if the Company were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference thereto;
provided that the Company shall give the Pledgor not less than ten days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. The Company and the Pledgor agree that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the Uniform
Commercial Code.
SECTION 8. Sale of Pledged Stock.
The Pledgor shall not sell the Pledged Stock without the prior written
consent (which consent shall not be unreasonably withheld) of the Company. In
the event that the Pledgor sells a portion or all of the Pledged Stock, the
Company will deliver to the buyer the corresponding number of shares of Pledged
Stock against the aggregate amount of proceeds from such sale. In the event that
the aggregate amount of proceeds from such sale exceeds the amount of principal
and accrued interest (including, without limitation, fees, expenses or
otherwise) then outstanding on the Loan (the "Surplus"), the Company shall pay
the Pledgor the Surplus. If the aggregate amount of proceeds from such sale are
less than the amount of principal and accrued interest (including, without
limitation, fees, expenses or otherwise) then outstanding on the Loan, the
Pledgor shall remain liable for any deficiency. Notwithstanding anything to the
contrary in this Section 8, any sale of the Pledged Stock by the Pledgor must be
in accordance with the provisions and terms of the Lock-up Agreement.
SECTION 9. Remedies upon Event of Default.
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<PAGE> 7
If any Event of Default shall have occurred and be continuing, the
Company may exercise all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, the Company may, without being required to give
any notice, except as herein provided or as may be required by applicable law,
(i) apply the cash, if any, then held by it as Collateral as specified in
Section 12 and (ii) if there shall be no such cash or if such cash shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral or
any part thereof at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Company may deem satisfactory. The Company may be the
purchaser of any or all of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations, at any
private sale). The Company is authorized, in connection with any such sale, if
it deems it advisable so to do, (i) to restrict the prospective bidders on or
purchasers of any of the Pledged Stock to a limited number of sophisticated
investors who will represent and agree that they are purchasing for their own
account for investment and not with a view to the distribution or sale of any of
such Pledged Stock, (ii) to cause to be placed on certificates for any or all of
the Pledged Stock or on any other securities pledged hereunder a legend to the
effect that such security has not been registered under the Securities Act of
1933 and may not be disposed of in violation of the provision of said Act, and
(iii) to impose such other limitations or conditions in connection with any such
sale as the Company deems necessary or advisable in order to comply with said
Act or any other law. The Pledgor covenants and agrees that it will execute and
deliver such documents and take such other action as the Company deems necessary
or advisable in order that any such sale may be made in compliance with law.
Upon any such sale the Company shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at any
such sale shall hold the Collateral so sold absolutely and free from any claim
or right of whatsoever kind, including any equity or right of redemption of the
Pledgor which may be waived, and the Pledgor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The notice (if
any) of such sale required by Section 8 shall (1) in case of a public sale,
state the time and place fixed for such sale, (2) in case of sale at a broker's
board or on a securities exchange, state the board or exchange at which such
sale is to be made and the day on which the Collateral, or the portion thereof
so being sold, will first be offered for sale at such board or exchange, and (3)
in the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Company may fix in
the notice of such sale. At any such
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<PAGE> 8
sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Company may determine. The Company shall not be obligated to
make any such sale pursuant to any such notice. The Company may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Company until
the selling price is paid by the purchaser thereof, but the Company shall not
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Company, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
SECTION 10. Expenses.
The Pledgor agrees that it will forthwith upon demand pay to the
Company:
(i) the amount of any taxes which the Company may have been
required to pay by reason of the Security Interests or to free any of
the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses,
including the fees and disbursements of counsel and of any other
experts, which the Company may incur in connection with (w) the
administration or enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of any Security Interest, (x)
the collection, sale or other disposition of any of the Collateral, (y)
the exercise by the Company of any of the rights conferred upon it
hereunder or (z) any Event of Default.
SECTION 11. Limitation on Duty of Company in Respect of Collateral.
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<PAGE> 9
Beyond the exercise of reasonable care in the custody thereof, the
Company shall have no duty as to any Collateral in its possession or control or
in the possession or control of any agent or bailee or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto. The Company shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which it accords
its own property, and shall not be liable or responsible for any loss or damage
to any of the Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any agent or bailee selected by the Company in good
faith.
SECTION 12. Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held shall be applied by the Company in the following
order of priorities:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Company, and all expenses, liabilities and advances incurred or
made by the Company in connection therewith, and any other unreimbursed
expenses for which the Company is to be reimbursed pursuant to Section
12 of the Note or Section 10 hereof;
second, to the ratable payment of unpaid principal of the
Secured Obligations;
third, to the ratable payment of accrued but unpaid interest
on the Secured Obligations in accordance with the provisions of the
Note;
fourth, to the ratable payment of all other Secured
Obligations, until all Secured Obligations shall have been paid in
full; and
finally, to payment to the Pledgor or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
SECTION 13. Appointment of Agents.
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<PAGE> 10
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Company may appoint a bank or trust company or one or more
other persons, to act as agent or agents on behalf of the Company with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment (which
may, in the discretion of the Company, include provisions for the protection of
such agent or agents similar to the provisions of Section 13).
SECTION 14. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Pledgor. At any time and from time to time prior to such termination of the
Security Interests, the Company may release any of the Collateral in accordance
with its discretion. Upon any such termination of the Security Interests or
release of Collateral, the Company will, at the expense of the Pledgor, execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be.
SECTION 15. Notices.
All notices, communications and distributions hereunder shall be given
in accordance with Section 9 of the Note.
The Company agrees to use its reasonable efforts to provide written
notice to the Pledgor at least ten (10) business days before any amounts become
due under this Agreement or the Note. No failure by the Company to provide such
notice shall excuse or waive the performance by the Pledgor of the Pledgor's
obligations under this Agreement or the Note.
SECTION 16. Waivers, Non-Exclusive Remedies.
No failure on the part of the Company to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Company of any right under the Note or this Agreement preclude
any other or further exercise thereof or the exercise of any other right. The
rights in this Agreement and the Note are cumulative and are not exclusive of
any other remedies provided by law.
SECTION 17. Successors and Assigns.
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<PAGE> 11
This Agreement is for the benefit of the Company and its successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the indebtedness
so assigned, may be transferred with such indebtedness. This Agreement cannot be
assigned by the Pledgor without the written consent of the Company and its
successors and assigns.
SECTION 18. Changes in Writing.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Pledgor and
the Company.
SECTION 19. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO
THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN NEW
YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 20. WAIVER OF TRIAL BY JURY.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR HEREBY
IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER
ARISING HEREUNDER.
SECTION 21. Severability.
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Company in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
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<PAGE> 12
SECTION 22. Counterparts.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
[Remainder of page intentionally left blank]
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered as of the day and year first above
written.
By _______________________
Name: Keith B. Hall
LENDINGTREE, INC.
By _______________________
Name:
Title:
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<PAGE> 14
SCHEDULE I TO PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement, dated as of
February 9, 2000 made by Keith B. Hall to LendingTree, Inc.
Pledged Shares
<TABLE>
<CAPTION>
Class of Stock Certificate Number of Shares
Pledgor Issuer or Interest No(s). Par Value or Interest
- ------- ------ -------------- ----------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Keith B. Hall LendingTree, Common $0.01 12,260
Inc.
</TABLE>
14
<PAGE> 1
EXHIBIT 10.10
PROMISSORY NOTE
$100,000 February 9, 2000
JAMES F. BENNETT, JR., a natural person residing in the State of North
Carolina (the "Borrower"), for value received, hereby promises to pay to
LENDINGTREE, INC. (the "Company"), or its assigns, the principal amount of ONE
HUNDRED THOUSAND DOLLARS ($100,000) (the "Loan"), of which THIRTY-THREE THOUSAND
THREE HUNDRED THIRTY THREE DOLLARS AND SIXTY-SEVEN CENTS ($33,333.67) shall be
paid on each of the Maturity Dates, with interest (computed on the basis of the
actual number of days elapsed over a 360 day year) payable, from the date
hereof, on the unpaid balance of the Loan at a rate per annum equal to the
Federal Rate, on January 31 of each year, beginning with January 31, 2001, in
which a principal balance is outstanding, in arrears. Payments of principal and
interest hereon shall be made in lawful money of the United States of America at
the address for such purpose specified in Section 9 or at such other address as
you or any subsequent holder of this Note may designate in writing, without
requiring any presentation or surrender of this Note, except if this Note is
paid or prepaid in full it shall be promptly surrendered to the Borrower and
canceled.
Section 1. Prepayment. At any time, or from time to time, the Borrower may, at
Borrower's option, or as required by Section 4(d) hereto, prepay all or any part
of this Note. In the event of any such prepayment, the Borrower shall give
written notice thereof to the holder of this Note not less than 10 days (or
three (3) business days if the prepayment is required by Section 4(d)) prior to
the date fixed for such prepayment. Each such notice shall set forth (a) the
date fixed for prepayment, (b) the aggregate principal amount of and accrued on
this Note to be prepaid on such date.
Section 2. Acceleration. In addition to the rights granted to the holder of this
Note under Section 3 hereof, if the Borrower's employment with the Company is
terminated for any reason, on the date which is 45 days from the date such
termination becomes effective, the holder of this Note shall have the right to
declare the entire principal of, and interest accrued on, this Note then
outstanding to be, and this Note shall thereupon become, forthwith due and
payable, without any presentment, demand, protest, or other notice of any kind,
all of which are hereby expressly waived, and the Borrower shall forthwith pay
to the holder of this Note the entire principal of, and interest accrued
interest on, this Note.
<PAGE> 2
Section 3. Representations and Warranties.
The Borrower represents and warrants that:
(1) When executed and delivered, this Note will constitute the
valid and legally binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms.
(2) The execution, delivery and performance of this Note will
not violate or conflict with or constitute a default under, or result in the
creation of any mortgage, lien, charge or encumbrance upon any of the properties
or assets of the Borrower pursuant to any term of any agreement, instrument,
judgment, decree, order, law, statute, rule or regulation applicable to the
Borrower or any of Borrower's respective properties or assets.
(3) The Borrower is not bound by or subject to any agreement,
instrument, judgment, decree, order, law, statute, rule or regulation under the
terms of or pursuant to which Borrower's obligation to pay interest or principal
of this Note, or to perform Borrower's obligations hereunder, is in any way
restricted.
Section 4. Covenants. The Borrower covenants and agrees that until the principal
amount of this Note, together with interest thereon and all other obligations
incurred hereunder, are paid in full:
(a) Payment of Principal and Interest. The Borrower shall duly
and punctually pay to the Company, when due, all principal of and interest on
this Note on the dates and in the manner provided herein. Principal or interest
shall be considered paid on the date it is due if the Company withholds on that
date money otherwise payable to the Borrower, in the amounts and at the times
required under this Note. The Borrower shall pay interest on overdue principal
from the due date at the Federal Rate plus 2.0% per annum.
(b) No Transfer of Pledged Stock. The Borrower shall not
transfer any of the Pledged Stock except in accordance with the terms and
provisions of the Pledge Agreement.
(c) Use of Proceeds. The Borrower shall use the proceeds from
the Loan solely for the purpose of acquiring the Pledged Stock and not use the
proceeds from the Loan, directly or indirectly, to purchase or carry margin
securities, as those terms are defined in the laws and regulation applicable to
margin loans as promul-
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<PAGE> 3
gated by the Securities and Exchange Commission and the Board of Governors of
the Federal Reserve System.
(d) Mandatory Prepayment. Within three (3) business days after
the receipt by the Borrower of any Net Proceeds, the Borrower shall apply such
Net Proceeds to a prepayment pursuant to Section 1 hereto. For the purposes of
this paragraph, "Net Proceeds" shall mean (x) any proceeds from (i) any
transfer, sale or other disposition of all or a portion of the Other Stock or
(ii) any loan, borrowing or other financing secured or guaranteed by all or a
portion of the Other Stock less (y) all reasonable fees and expenses incurred or
to be incurred and all federal state, local and foreign taxes assessed or to be
assessed in connection with such transfer or loan.
(4) No Transfer of Other Stock. The Borrower shall not
transfer any of the Other Stock without the prior written consent of the
Company. The Borrower shall enter into a Stop Transfer Agreement substantially
in the form attached as Exhibit B hereto.
Section 5. Remedies.
Each of the following shall be Events of Default under this Note:
(5) the Borrower defaults in the due and punctual payment of
all or any part of the principal of this Note when and as the same shall become
due and payable, whether at the stated maturity thereof, by notice of or demand
for prepayment, or otherwise;
(6) the Borrower defaults in the due and punctual payment of
any interest on this Note when and as such interest shall become due and payable
and such default shall have continued for a period of five days;
(e) any representation or warranty made by the Borrower herein
shall prove to be untrue in any material respect as of the date of the issuance
or making thereof;
(7) the Borrower defaults in the performance or observance of
any other of the provisions contained in this Note and such default shall have
continued for a period of 30 days after the earlier of (i) the Borrower's
obtaining actual knowledge of such default or (ii) the Borrower's receipt of
written notice of such default;
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<PAGE> 4
(f) the Borrower shall default in the payment when due
(whether by scheduled maturity, by required prepayment, by acceleration, by
demand, or otherwise) of any indebtedness for borrowed money owing to any other
person, or any interest or premium thereon of any amount owing in respect of
such indebtedness, in excess of $50,000; or the Borrower shall default in the
performance or observance of any obligation or condition with respect to such
indebtedness or any other event shall occur or condition exist, if the effect of
such default, event or condition is to accelerate the maturity of any such
indebtedness or to permit (without regard to any required notice or lapse of
time) the holder or holders thereof, or any trustee or agent for such holders,
to accelerate the maturity of any such indebtedness, or any such indebtedness
shall become or be declared to be due and payable prior to its stated maturity
other than as a result of a regularly scheduled payment date;
(8) there shall remain in force, undischarged, unbonded, or
unstayed, for more than thirty (30) days, any final judgment against the
Borrower that, with other outstanding final judgments, undischarged, against the
Borrower exceeds in the aggregate $10,000;
(9) the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator; (ii) be generally unable to pay the Borrower's debts as such
debts become due; (iii) make a general assignment for the benefit of the
Borrower creditors; (iv) commence a voluntary case under the Bankruptcy Code;
(v) file a petition seeking to take advantage of any other law of any
jurisdiction relating to bankruptcy, insolvency, or composition or readjustment
of debts; (vi) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against the Borrower in an
involuntary case under the Bankruptcy Code; or (vii) take any action for the
purpose of effecting any of the foregoing;
(10) a proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent jurisdiction,
seeking (i) the liquidation of the Borrower's assets, or the composition or
readjustment of the Borrower's debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of any substantial part of the
Borrower's assets, or (iii) similar relief in respect of the Borrower under any
law of any jurisdiction relating to bankruptcy, insolvency, or the composition
or readjustment of debts, and such proceedings or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect for a period of
sixty (60) days; or an order for relief against the Borrower shall be entered in
an
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<PAGE> 5
involuntary case under any bankruptcy, insolvency, composition, readjustment of
debt, liquidation of assets or similar law of any jurisdiction;
(g) the Borrower shall die or become incapacitated or
otherwise unable to fulfill his duties with the Company; or
(h) any provision of the Pledge Agreement shall for any reason
cease to be valid and binding on the Borrower or the Borrower shall so state in
writing; or the Pledge Agreement shall for any reason cease to create a valid
lien on any of the Collateral purported to be covered thereby, or such lien
shall cease to be a perfected and first priority lien with respect to the
Collateral, or the Borrower shall so state in writing;
If an Event of Default specified in clauses (g) and (h) of this Section 3 shall
exist, this Note shall automatically become immediately due and payable together
with interest accrued thereon, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived.
If an Event of Default other than those specified in clauses (g) and (h) shall
exist, the holder of this Note may exercise any right, power or remedy permitted
to such holder by applicable law, and shall have, in particular, without
limiting the generality of the foregoing, the right to declare the entire
principal of, and interest accrued on, this Note then outstanding to be, and
this Note shall thereupon become, forthwith due and payable, without any
presentment, demand, protest, or other notice of any kind, all of which are
hereby expressly waived, and the Borrower shall forthwith pay to the holder of
this Note the entire principal of, and interest accrued on, this Note.
No course of dealing on the part of the holder of this Note nor any delay or
failure on the part of the holder of this Note to exercise any right shall
operate as a waiver of such right or otherwise prejudice such holder's rights,
powers and remedies. If the Borrower fails to comply with any provision of this
Note the Borrower shall pay to the holder, to the extent permitted by applicable
law, such further amounts as shall be sufficient to cover the costs and
expenses, including but not limited to reasonable attorneys' fees, incurred by
such holder in collecting any sums due on this Note or in otherwise assessing,
analyzing or enforcing any rights or remedies that are or may be available to
it.
The Borrower further waives and agrees not to assert any rights or privileges it
may acquire under Section 9-112 of the New York Uniform Commercial Code and the
Borrower shall be liable for the deficiency if the proceeds of any sale or other
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<PAGE> 6
disposition of the Collateral are insufficient to pay all amounts to which the
holder of the Note is entitled, and the fees of any attorneys employed by the
holder of the Note to collect such deficiency.
Section 6. Security. In order to secure the payment and performance in full of
all of its obligations under this Note, the Borrower covenants and agrees to
pledge the Pledged Stock (as defined in the Pledge Agreement) owned by the
Borrower, substantially in accordance with the terms of the Pledge Agreement
attached hereto as Exhibit A.
Section 7. Right of Set-off. The Company is hereby authorized, at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all amounts at any time held and all indebtedness of other amounts at
any time owing by the Borrower to or for the credit or the account of the
Company regardless of the currency in which any such deposit, amount or
indebtedness may be denominated, against any and all of the obligations of the
Borrower now or hereafter existing, irrespective of whether or not the Company
shall have made any demand and although such obligations may be unmatured. The
Company will promptly notify the Borrower after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Company hereunder
are in additional to other rights and remedies (including, without limitation,
other rights of set-off) which the Company may have.
Section 8. Definitions and Principles of Construction.
(a) Defined Terms. As used in this Note, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Bankruptcy Code" shall mean Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statutes.
"Collateral" shall have the meaning assigned to that term in the Pledge
Agreement.
"Credit Documents" shall mean this Note and the Pledge Agreement.
"Federal Rate" shall mean the applicable federal rate, as defined under sections
1274(d) and 7872 of the Internal Revenue Code of 1986, as amended, compounded
annually.
"Maturity Dates" shall mean January 31, 2002, 2003, and 2004, respectively.
6
<PAGE> 7
"Material Adverse Effect" shall mean a material adverse effect on (i) the
properties, assets, condition (financial or otherwise) or earnings prospects of
Borrower, (ii) the ability of the Borrower to fully and timely perform the
Secured Obligations, (iii) the legality, validity, binding effect or
enforceability against the Borrower of any Credit Document or (iv) any material
rights, remedies and benefits available to, or conferred upon, the Company, any
holder of the Note or any agent (appointed in accordance with the Pledge
Agreement) under any Credit Document.
"Minimum Collateral Value" shall mean the product of the aggregate outstanding
principal and interest on the Loans multiplied by four (4):
"Other Stock" shall mean all capital stock of the Company, other than the
Pledged Stock, now or hereafter directly held in the name of the Borrower.
"Pledge Agreement" shall mean the Pledge Agreement dated as of even date
herewith between the Borrower and the Company, as the same may be amended,
supplemented or otherwise modified from time to time.
"Pledged Stock" shall have the meaning assigned to that term in the Pledge
Agreement.
"Surplus" shall have the meaning assigned to that term in Section 10.
"Secured Obligations" shall have the meaning assigned to that term in the Pledge
Agreement.
"Transfer Event" shall mean (i) any transfer, sale or other disposition of all
or a portion of the Other Stock or (ii) any loan, borrowing or other financing
secured or guaranteed by all or a portion of the Other Stock.
(b) Principles of Construction. All references to sections and
exhibits are to sections and exhibits in or to this Note unless otherwise
specified. The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Note shall refer to this Note as a whole and not to any
particular provision of this Note.
Section 9. Notices.
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<PAGE> 8
The Borrower's address for all communications related to this Note shall be as
follows:
1605 Old Wayside Rd.
Charlotte, North Carolina 28277
The Company's address for all communications and payments related to this Note
shall be as follows:
LendingTree, Inc
6701 Carmel Road, Suite 205
Charlotte, North Carolina 28226
Attention: General Counsel
With a copy to:
LendingTree, Inc
6701 Carmel Road, Suite 205
Charlotte, North Carolina 28226
Attention: Chief Financial Officer
Section 10. Sale of Pledged Stock. In the event that, pursuant to Section 8 of
the Pledge Agreement, the Pledgor sells a portion or all of the Pledged Stock,
the Company will deliver to the buyer the corresponding number of shares of
Pledged Stock against the aggregate amount of proceeds from such sale. In the
event that the aggregate amount of proceeds from such sale exceeds the amount of
principal and accrued interest (including, without limitation, fees, expenses or
otherwise) then outstanding on the Loan (the "Surplus"), the Company shall pay
the Pledgor the Surplus.
Section 11. Successors and Assigns.
This Note shall inure to the benefit of and be binding upon the successors and
assigns of the Company or any holder of this Note. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of this Note,
and shall be enforceable by any such holder, whether or not an express
assignment to such holder of rights hereunder shall have been made by the holder
or any successor or assign. The Borrower may not assign this Note without the
prior written consent of the holder of this Note.
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<PAGE> 9
Section 12. Expenses. The Borrower agrees to pay all reasonable out-of-pocket
expenses incurred by the holder of this Note, including the reasonable fees,
charges and disbursement of counsel for such holder, in connection with any
amendment, waiver, supplement or modification to, or enforcement or protection
of such holder's rights under this Note.
Section 13. No Waiver; Remedies Cumulative. No failure or delay on the part of
the Company in exercising any right, power or privilege hereunder and no course
of dealing between the Borrower and the Company shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or hereunder
or the exercise of any other right, power or privilege hereunder. The rights,
powers and remedies herein expressly provided are cumulative and not exclusive
of any rights, powers or remedies which the Company or the holder of this Note
would otherwise have. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Company to any
other or further action in any circumstances without notice or demand.
Section 14. GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW).
Section 15. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE BORROWER HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY MATTER ARISING HEREUNDER.
------------------------
Name: James Bennett, Jr.
9
<PAGE> 10
EXHIBIT A TO PROMISSORY NOTE
PLEDGE AGREEMENT
10
<PAGE> 11
EXHIBIT B TO PROMISSORY NOTE
STOP TRANSFER AGREEMENT
11
<PAGE> 1
EXHIBIT 10.11
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") is made as of this 9th day
of February, 2000, between James F. Bennett, Jr., a natural person residing in
the State of North Carolina (the "Pledgor"), and LendingTree, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H :
WHEREAS, the Pledgor desires that the Company make a loan of $100,000
(the "Loan") to Pledgor;
WHEREAS, it is a condition precedent to the Company making such loan to
the Pledgor that the Pledgor execute and deliver to the Company a promissory
note (the "Note") in favor of the Company as evidence of Pledgor's obligation to
repay the Loan;
WHEREAS, Pledgor is a party to a lock-up agreement with Merrill Lynch,
Pierce, Fenner & Smith Incorporated, to be effective as of February 15, 2000
(the "Lock-up Agreement"), which, among other things, restricts the
transferability of the shares for 180 days following an initial public offering
of the Company's common stock;
WHEREAS, it is a condition precedent to the Company making such loan to
the Pledgor that the Pledgor execute and deliver to the Company this Agreement;
and
WHEREAS, the Pledgor wishes to grant pledges, assignments and security
interests in favor of the Company as herein provided;
NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
<PAGE> 2
SECTION 1. Definitions.
Terms not otherwise defined herein have, as used herein, the
respective meanings provided for in the Note. The following additional terms, as
used herein, have the following respective meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"Company Stock" means the common stock of the Company, par value $0.01
per share listed on Schedule I hereto.
"Loan" has the meaning assigned to such term in the recitals hereof.
"Pledged Stock" means the Company Stock and any other capital stock
required to be pledged to the Company pursuant to Section 3(B).
"Secured Obligations" means (i) all principal of and interest
(including, without limitation, fees, expenses or otherwise and any interest
which accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Pledgor) on the
Loan as evidenced by the Note and (ii) any amendments, restatements, renewals,
extensions or modifications of any of the foregoing.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"Surplus" has the meaning assigned to such term in Section 8.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings therein
stated.
SECTION 2. Representations and Warranties.
The Pledgor represents and warrants as follows:
(A) Title to Pledged Securities. The Pledgor owns all of the Pledged
Stock, free and clear of any Liens other than the Security Interests. All of the
Pledged Stock has been duly authorized and validly issued, and is fully paid and
non-assessable, and is subject to no options to purchase or similar rights of
any
2
<PAGE> 3
person. The Pledgor is not and will not become a party to or otherwise bound by
any agreement, other than this Agreement and the Lock-up Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Pledged Stock with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the
delivery of the certificates representing the Pledged Stock to the Company in
accordance with Section 4 hereof, the Company will have valid and perfected
security interests in the Collateral subject to no prior lien. No registration,
recordation or filing with any governmental body, agency or official is required
in connection with the execution or delivery of this Agreement or necessary for
the validity or enforceability hereof or for the perfection or enforcement of
the Security Interests. The Pledgor has not performed or will not perform any
acts which might prevent the Company from enforcing any of the terms and
conditions of this Agreement or which would limit the Company in any such
enforcement.
(C) UCC Filing Locations. The primary residence and principal place of
business of Pledgor are located at the following address:
10605 Old Wayside Rd.
Charlotte, North Carolina 28277
and
6701 Carmel Road, Suite 205
Charlotte, North Carolina 28226
SECTION 3. The Security Interests.
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the obligations of the Pledgor hereunder:
(A) The Pledgor hereby assigns and pledges to the Company and grants to
the Company a security interest in the Pledged Stock, and all of his rights and
privileges with respect to the Pledged Stock (whether such rights are fully
vested or may become fully vested in the future), and all income and profits
thereon, and all dividends and other payments and distributions with respect
thereto, and all proceeds of the foregoing (the "Collateral"). Contemporaneously
with the execution and
3
<PAGE> 4
delivery hereof, the Pledgor is delivering certificates representing the Pledgor
Stock in pledge hereunder.
(B) In the event that the Company at any time, in connection with the
Pledged Stock, issues any additional or substitute shares of capital stock of
any class, including, but not limited to, issuing unrestricted shares to replace
restricted shares that have vested, the Pledgor will immediately pledge and
deposit with the Company certificates representing all such shares as additional
security for the Secured Obligations. All such shares constitute Pledged Stock
and are subject to all provisions of this Agreement.
(C) The Security Interests are granted as security only and shall not
subject to, or transfer or in any way affect or modify, any obligation or
liability of the Pledgor with respect to any of the Collateral or any
transaction in connection therewith.
SECTION 4. Delivery of Pledged Stock.
All certificates representing Pledged Stock delivered to the Company by
the Pledgor pursuant hereto shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, with signatures appropriately guaranteed, and accompanied by any
required transfer tax stamps, all in form and substance satisfactory to the
Company.
SECTION 5. Filing; Further Assurances.
(A) The Pledgor agrees that it will, at its expense and in such manner
and form as the Company may require, execute, deliver, file and record any
financing statement, specific assignment or other paper and take any other
action that may be necessary in order to create, preserve, perfect or validate
any Security Interest or to enable the Company to exercise and enforce its
rights hereunder with respect to any of the Collateral. To the extent permitted
by applicable law, the Pledgor hereby authorizes the Company to execute and
file, in the name of the Pledgor or otherwise, Uniform Commercial Code financing
statements (which may be carbon, photographic, photostatic or other
reproductions of this Agreement or of a financing statement relating to this
Agreement) which the Company in its sole discretion may deem necessary to
further perfect the Security Interests.
4
<PAGE> 5
(B) The Pledgor agrees that Pledgor will not change (i) Pledgor's name
or (ii) the location of Pledgor's primary residence or principal place of
business unless Pledgor shall have given the Company not less than 30 days'
prior notice thereof.
SECTION 6. Right to Receive Distributions on Collateral.
Prior to the occurrence of any Event of Default, the Pledgor shall be
entitled to receive all cash dividends, if any, on the Pledged Stock. Upon the
occurrence and during the continuance of an Event of Default, the Company shall
be entitled to retain all dividends and other payments and distributions made
upon or with respect to the Collateral and the Pledgor shall take all such
action as the Company may deem necessary or appropriate to give effect to such
right and all such dividends and other payments and distributions which are
received by the Pledgor shall be received in trust for the benefit of the
Company and shall, forthwith upon demand by the Company during the continuance
of an Event of Default, be paid over to the Company as Collateral in the same
form as received (with any necessary endorsement). After all Events of Default
that shall have occurred have been cured, the Company's right to retain
dividends, interest and other payments and distributions under this Section 6
shall cease and the Company shall pay over to the Pledgor any such Collateral
retained by the Company during the continuance of an Event of Default. Any
non-cash dividends and other payments or distributions shall be immediately
pledged to the Company hereunder.
SECTION 7. General Authority.
The Pledgor hereby irrevocably appoints the Company its true and lawful
attorney, with full power of substitution, in the name of the Pledgor, the
Company, or otherwise, for the sole use and benefit of the Company, but at the
expense of the Pledgor, to the extent permitted by law to exercise, at any time
and from time to time while an Event of Default has occurred and is continuing,
all or any of the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
5
<PAGE> 6
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and effectually as
if the Company were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference thereto;
provided that the Company shall give the Pledgor not less than ten days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. The Company and the Pledgor agree that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the Uniform
Commercial Code.
SECTION 8. Sale of Pledged Stock.
The Pledgor shall not sell the Pledged Stock without the prior written
consent (which consent shall not be unreasonably withheld) of the Company. In
the event that the Pledgor sells a portion or all of the Pledged Stock, the
Company will deliver to the buyer the corresponding number of shares of Pledged
Stock against the aggregate amount of proceeds from such sale. In the event that
the aggregate amount of proceeds from such sale exceeds the amount of principal
and accrued interest (including, without limitation, fees, expenses or
otherwise) then outstanding on the Loan (the "Surplus"), the Company shall pay
the Pledgor the Surplus. If the aggregate amount of proceeds from such sale are
less than the amount of principal and accrued interest (including, without
limitation, fees, expenses or otherwise) then outstanding on the Loan, the
Pledgor shall remain liable for any deficiency. Notwithstanding anything to the
contrary in this Section 8, any sale of the Pledged Stock by the Pledgor must be
in accordance with the provisions and terms of the Lock-up Agreement.
SECTION 9. Remedies upon Event of Default.
6
<PAGE> 7
If any Event of Default shall have occurred and be continuing, the
Company may exercise all the rights of a secured party under the Uniform
Commercial Code (whether or not in effect in the jurisdiction where such rights
are exercised) and, in addition, the Company may, without being required to give
any notice, except as herein provided or as may be required by applicable law,
(i) apply the cash, if any, then held by it as Collateral as specified in
Section 12 and (ii) if there shall be no such cash or if such cash shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral or
any part thereof at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Company may deem satisfactory. The Company may be the
purchaser of any or all of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations, at any
private sale). The Company is authorized, in connection with any such sale, if
it deems it advisable so to do, (i) to restrict the prospective bidders on or
purchasers of any of the Pledged Stock to a limited number of sophisticated
investors who will represent and agree that they are purchasing for their own
account for investment and not with a view to the distribution or sale of any of
such Pledged Stock, (ii) to cause to be placed on certificates for any or all of
the Pledged Stock or on any other securities pledged hereunder a legend to the
effect that such security has not been registered under the Securities Act of
1933 and may not be disposed of in violation of the provision of said Act, and
(iii) to impose such other limitations or conditions in connection with any such
sale as the Company deems necessary or advisable in order to comply with said
Act or any other law. The Pledgor covenants and agrees that it will execute and
deliver such documents and take such other action as the Company deems necessary
or advisable in order that any such sale may be made in compliance with law.
Upon any such sale the Company shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at any
such sale shall hold the Collateral so sold absolutely and free from any claim
or right of whatsoever kind, including any equity or right of redemption of the
Pledgor which may be waived, and the Pledgor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The notice (if
any) of such sale required by Section 8 shall (1) in case of a public sale,
state the time and place fixed for such sale, (2) in case of sale at a broker's
board or on a securities exchange, state the board or exchange at which such
sale is to be made and the day on which the Collateral, or the portion thereof
so being sold, will first be offered for sale at such board or exchange, and (3)
in the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Company may fix in
the notice of such sale. At any such
7
<PAGE> 8
sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Company may determine. The Company shall not be obligated to
make any such sale pursuant to any such notice. The Company may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Company until
the selling price is paid by the purchaser thereof, but the Company shall not
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
again be sold upon like notice. The Company, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
SECTION 10. Expenses.
The Pledgor agrees that it will forthwith upon demand pay to the
Company:
(i) the amount of any taxes which the Company may have been
required to pay by reason of the Security Interests or to free any of
the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses,
including the fees and disbursements of counsel and of any other
experts, which the Company may incur in connection with (w) the
administration or enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of any Security Interest, (x)
the collection, sale or other disposition of any of the Collateral, (y)
the exercise by the Company of any of the rights conferred upon it
hereunder or (z) any Event of Default.
SECTION 11. Limitation on Duty of Company in Respect of Collateral.
8
<PAGE> 9
Beyond the exercise of reasonable care in the custody thereof, the
Company shall have no duty as to any Collateral in its possession or control or
in the possession or control of any agent or bailee or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto. The Company shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which it accords
its own property, and shall not be liable or responsible for any loss or damage
to any of the Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any agent or bailee selected by the Company in good
faith.
SECTION 12. Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held shall be applied by the Company in the following
order of priorities:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Company, and all expenses, liabilities and advances incurred or
made by the Company in connection therewith, and any other unreimbursed
expenses for which the Company is to be reimbursed pursuant to Section
12 of the Note or Section 10 hereof;
second, to the ratable payment of unpaid principal of the
Secured Obligations;
third, to the ratable payment of accrued but unpaid interest
on the Secured Obligations in accordance with the provisions of the
Note;
fourth, to the ratable payment of all other Secured
Obligations, until all Secured Obligations shall have been paid in
full; and
finally, to payment to the Pledgor or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
SECTION 13. Appointment of Agents.
9
<PAGE> 10
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Company may appoint a bank or trust company or one or more
other persons, to act as agent or agents on behalf of the Company with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment (which
may, in the discretion of the Company, include provisions for the protection of
such agent or agents similar to the provisions of Section 13).
SECTION 14. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations, the Security
Interests shall terminate and all rights to the Collateral shall revert to the
Pledgor. At any time and from time to time prior to such termination of the
Security Interests, the Company may release any of the Collateral in accordance
with its discretion. Upon any such termination of the Security Interests or
release of Collateral, the Company will, at the expense of the Pledgor, execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be.
SECTION 15. Notices.
All notices, communications and distributions hereunder shall be given
in accordance with Section 9 of the Note.
The Company agrees to use its reasonable efforts to provide written
notice to the Pledgor at least ten (10) business days before any amounts become
due under this Agreement or the Note. No failure by the Company to provide such
notice shall excuse or waive the performance by the Pledgor of the Pledgor's
obligations under this Agreement or the Note.
SECTION 16. Waivers, Non-Exclusive Remedies.
No failure on the part of the Company to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Company of any right under the Note or this Agreement preclude
any other or further exercise thereof or the exercise of any other right. The
rights in this Agreement and the Note are cumulative and are not exclusive of
any other remedies provided by law.
SECTION 17. Successors and Assigns.
10
<PAGE> 11
This Agreement is for the benefit of the Company and its successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the indebtedness
so assigned, may be transferred with such indebtedness. This Agreement cannot be
assigned by the Pledgor without the written consent of the Company and its
successors and assigns.
SECTION 18. Changes in Writing.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Pledgor and
the Company.
SECTION 19. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO
THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY JURISDICTION OTHER THAN NEW
YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 20. WAIVER OF TRIAL BY JURY.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR HEREBY
IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER
ARISING HEREUNDER.
SECTION 21. Severability.
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Company in order to carry out the
intentions of the parties hereto as nearly as may be possible; and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.
11
<PAGE> 12
SECTION 22. Counterparts.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
[Remainder of page intentionally left blank]
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered as of the day and year first above
written.
By ____________________________
Name: James F. Bennett, Jr.
LENDINGTREE, INC.
By ___________________________
Name:
Title:
13
<PAGE> 14
SCHEDULE I TO PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement, dated as of
February 9, 2000 made by James F. Bennett, Jr. to LendingTree, Inc.
Pledged Shares
<TABLE>
<CAPTION>
Class of Stock Certificate Number of Shares
Pledgor Issuer or Interest No(s). Par Value or Interest
- ------- ------ -------------- ----------- --------- ----------------
<S> <C> <C> <C> <C> <C>
James F. LendingTree, Common $0.01 12,260
Bennett, Jr. Inc.
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,373,000
<SECURITIES> 61,631,000
<RECEIVABLES> 3,557,000
<ALLOWANCES> (232,000)
<INVENTORY> 0
<CURRENT-ASSETS> 67,554,000
<PP&E> 1,887,000
<DEPRECIATION> (293,000)
<TOTAL-ASSETS> 72,200,000
<CURRENT-LIABILITIES> 16,166,000
<BONDS> 0
0
0
<COMMON> 190,000
<OTHER-SE> 55,764,000
<TOTAL-LIABILITY-AND-EQUITY> 72,200,000
<SALES> 4,483,000
<TOTAL-REVENUES> 4,483,000
<CGS> 1,663,000
<TOTAL-COSTS> 1,663,000
<OTHER-EXPENSES> 20,587,000
<LOSS-PROVISION> 138,000
<INTEREST-EXPENSE> (537,000)
<INCOME-PRETAX> (19,691,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,691,000)
<EPS-BASIC> (2.07)
<EPS-DILUTED> (2.07)
</TABLE>
