<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 2000
REGISTRATION NO. 333-91839
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
LENDINGTREE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7370 25-1795344
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
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6701 CARMEL ROAD, SUITE 205
CHARLOTTE, NORTH CAROLINA 28226
(704) 541-5351
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------
MR. DOUGLAS R. LEBDA
CHIEF EXECUTIVE OFFICER
LENDINGTREE, INC.
6701 CARMEL ROAD, SUITE 205
CHARLOTTE, NORTH CAROLINA 28226
(704) 541-5351
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------
Copies to:
<TABLE>
<S> <C>
DAVID J. GOLDSCHMIDT, ESQ. MICHAEL J. SCHIAVONE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP ALAN L. JAKIMO, ESQ.
FOUR TIMES SQUARE BROWN & WOOD LLP
NEW YORK, NEW YORK 10036 ONE WORLD TRADE CENTER
(212) 735-3000 NEW YORK, NY 10048
(212) 839-5300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. []
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. []---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. []
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
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<CAPTION>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) FEE(1)(3)
Common Stock, par value $0.01 per share
(including the associated Rights to
purchase Series A Junior Participating
Preferred Stock)(2)..................... 4,197,500 $12 $50,370,000 $13,298
</TABLE>
- --------------------------------------------------------------------------------
(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the registration
fee.
(2) The Rights to purchase shares of our Series A Junior Participating Preferred
Stock initially are attached to and trade with the shares of our common
stock being registered hereby. Value attributed to such Rights, if any, is
reflected in the market price of our common stock.
(3) $8,340 of the registration fee was paid previously in connection with the
initial filing of the Registration Statement on December 1, 1999.
----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 11, 2000
PROSPECTUS
3,650,000 SHARES
LENDINGTREE, INC.
COMMON STOCK
----------------------
This is LendingTree, Inc.'s initial public offering. LendingTree, Inc. is
selling all of the shares.
We expect the public offering price to be between $10.00 and $12.00 per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the shares will be quoted on the Nasdaq National Market
under the symbol " ."
INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
----------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price...................................... $ $
Underwriting discount...................................... $ $
Proceeds, before expenses, to LendingTree, Inc. ........... $ $
</TABLE>
----------------------
The underwriters may also purchase up to an additional 547,500 shares from
LendingTree, Inc. at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares will be ready for delivery on or about , 2000.
----------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES
----------------------
The date of this prospectus is , 2000.
<PAGE> 3
APPENDIX -- DESCRIPTION OF GRAPHICS
PROSPECTUS COVER
INSIDE FRONT COVER
The LendingTree logo is positioned in the center of the page with the caption
"Internet Loan Marketplace" placed below it. The LendingTree logo is
encapsulated by a cylinder with the caption "[i]close Marketplace Technology"
placed above and below the cylinder. On either side and above the cylinder are
two captions, "Consumer Demand" and "Lender Supply." Below these headings are
five elongated cubes containing the names of the principal types of loans
offered on the network and the methods by which consumers can access the
network.
The cubes below "Consumer Demand" read:
+ LendingTree.com(SM)
+ Co-Branded Loan Centers
+ Lender Websites
+ Affiliate Network
+ Other Links
The cubes below "Lender Supply" read:
+ Mortgages
+ Home Equity Loans
+ Automobile Loans
+ Credit Cards
+ Personal Loans
Attached to the end of each cube is an arrow which points in the direction of
the cylinder. Below the cylinder there are three boxes placed in a triangular
formation. Each box contains a brief description of one of the following;
"[i]close(SM) Technology," "Lender Supply," or "Consumer Demand."
The text of the [i]close(SM) Technology box: LendingTree's proprietary
[i]close(SM) technology powers the marketplace.
The text of the Lender Supply box: LendingTree's network of more than 90 lenders
provides product coverage and fosters competition.
The text of the Consumer Demand box: LendingTree collects consumer demand across
the Internet from multiple points of distribution.
INSIDE GATEFOLD (two pages)
The gatefold has the five steps a consumer will go through to use LendingTree's
services.
+ Step one illustrates consumer access.
+ Step two illustrates a loan request being completed on a credit request
form.
+ Step three demonstrates how the filtering process matches consumer's credit
requests with the lender's criteria.
+ Step four illustrates the lender evaluation process.
+ Step five illustrates the communication of the lender's offer and the
consumer's acceptance.
Steps one, two, four and five provide a graphical picture of an illustrative
webpage. Step three provides a graphical illustration of the filtering process.
The text associated with step one states: Consumers access the LendingTree
marketplace through LendingTree.com or other points of distribution and select
one of five loan categories.
The text associated with step two states: Consumers complete a single loan
request form.
The text associated with step three states: Through our proprietary filtering
process the consumer's credit request is matched to the preset underwriting
criteria of our lenders and transmitted to up to four lenders.
The text associated with step four states: Lenders evaluate and respond to
loan requests within one business day via a secure website.
The text associated with step five states: The LendingTree system automatically
notifies the consumer to return to the LendingTree website to view and compare
the terms of each offer and choose the loan that is best for them.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Summary..................................................... 4
Risk Factors................................................ 8
Forward-Looking Statements.................................. 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial and Operating Data....................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 29
Management.................................................. 42
Certain Relationships and Related Transactions.............. 57
Principal Stockholders...................................... 59
Description of Capital Stock................................ 61
Shares Eligible for Future Sale............................. 65
Important United States Federal Tax Considerations for
Non-U.S. Holders of Our Common Stock...................... 67
Underwriting................................................ 69
Legal Matters............................................... 72
Experts..................................................... 73
Where You Can Find More Information......................... 73
Index to Financial Statements............................... F-1
</TABLE>
----------------------
This prospectus contains estimates of market growth and other information
related to the Internet. These estimates have been included in studies published
by Forrester Research and International Data Corporation, which are market
research firms, and by the United States Federal Reserve and the U.S. Census
Bureau. These estimates assume that certain events, trends and activities will
occur. None of these entities guarantees the accuracy or completeness of its
information and estimates. We have not independently verified the information
and assumptions on which these market growth estimates are based. If any of
these entities is wrong about any of its assumptions, then its market estimates
may also be wrong.
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations, and prospects may have changed since that date.
----------------------
LendingTree(R) is a registered service mark of LendingTree, Inc.
[i]close(SM) is a service mark of LendingTree, Inc. Other service marks or
trademarks appearing in this prospectus are the property of their respective
holders.
<PAGE> 5
SUMMARY
This summary is not complete and does not contain all of the information
that you should consider before investing in our common stock. You should read
the entire prospectus carefully, including the more detailed information
regarding LendingTree, the risks of purchasing our common stock discussed under
"Risk Factors," and our financial statements and the accompanying notes.
We are an Internet-based loan marketplace for consumers and lenders. Using
a simple and powerful consumer proposition, "Lenders compete for your business,"
we collect consumer credit requests and compare these requests and related
credit information to the underwriting criteria of more than 90 participating
lenders in our network. Consumers can receive multiple offers in response to a
single credit request and then compare, review, and accept the 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. Our marketplace encompasses most consumer credit
categories, including mortgages, home equity loans, automobile loans, credit
cards, and personal loans. We power our website with our proprietary loan
marketplace technology platform, which we call [i]close(SM).
We are a marketplace that facilitates the lending process. Because we are
not a lender, we have reduced exposure to interest rate and market risks
generally associated with traditional lending activities. Our revenue model
depends on revenue generated from lenders participating in our network who pay
us fees based upon their receipt of credit requests, which we refer to as
transmission fees, and fees based upon loan closings, which we refer to as
closed-loan fees. We also license our [i]close technology to other companies who
create single and multi-lender online marketplaces. Credit requests not meeting
lenders' criteria on those marketplaces are routed to our lender network,
increasing our overall volume.
Our marketplace provides important benefits to consumers, including:
- Price. We foster a competitive bidding environment, encouraging lenders
to price loan offers aggressively as they compete for consumers'
business.
- Consumer Advocacy. Consumers view us as their advocate. Through the
range of online information and tools presented on our website, combined
with our support and service, we aim to reduce the confusion often
experienced by consumers during the borrowing process and the time that
it takes to obtain loans.
- Choice. We provide qualified consumers with up to four loan offers from
our network lenders.
- Convenience. We save consumers valuable time by enabling them to go
online, complete one credit request form, which we refer to as a
Qualification Form, and receive up to four loan offers.
- Content. We provide consumers with educational materials about the
borrowing process, answers to frequently asked questions, informative
articles, and interactive loan calculators.
- No Fees. Our service is free to consumers.
Our marketplace provides important benefits to lenders, including:
- New Business. Leveraging the reach of the Internet, we provide lenders
with access to a significantly larger audience of qualified consumers.
- Lower Acquisition Costs. Our fees are designed to be less than the cost
of acquiring customers through traditional and other online channels. Our
[i]close technology enables lenders to process credit requests more
efficiently and at significantly reduced costs.
- Market Information. We collect and distribute to our lenders valuable
information about the online lending marketplace. This information
enables our lenders to refine and improve their Internet lending
strategies and quickly respond to changing market conditions.
4
<PAGE> 6
Our goal is to be the predominant loan marketplace on the Internet. The key
elements of our strategy are to:
- strengthen our position as an online marketplace offering multiple loan
products from a wide variety of lenders;
- increase brand awareness and transaction volume;
- attract lenders offering an array of products across a wide range of
consumer credit profiles and geographic locations;
- expand transaction volume through online relationships;
- establish [i]close as the dominant loan marketplace technology; and
- assist our network lenders to increase their loan closing rates.
LendingTree commenced nationwide operations on July 1, 1998. Since that
time the LendingTree network has expanded to include more than 90 lenders. Among
the lenders generating the highest revenue on our website are some of the
largest lenders in the United States, such as Chase, Citibank, PNC Bank FSB, and
Bank One, as well as online lending companies including iOwn.com, mortgage.com,
and apponline.com.
For the quarter ended September 30, 1999, we transmitted 61,500
Qualification Forms, representing $4.8 billion in loan demand, and our lenders
closed loans totaling $266 million. These numbers reflect significant growth
when compared to the quarter ended September 30, 1998, with 4,900 Qualification
Forms transmitted, representing $424 million in loan demand, which resulted in
$10 million in closed loans.
We intend to expend significant funds on building the LendingTree brand
identity through increased advertising and related promotional activity, hiring
additional personnel, and further developing our website, [i]close technology,
and network infrastructure.
You should read the section of this prospectus entitled "Risk Factors."
That section indicates among other things that:
- we have a history of significant losses;
- from our inception through September 30, 1999 our accumulated losses were
$23.4 million;
- we anticipate incurring significant losses in the foreseeable future; and
- we operate in a highly competitive online market with low barriers to
entry.
5
<PAGE> 7
THE OFFERING
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<S> <C>
Common stock offered by us................... 3,650,000 shares
Common stock to be outstanding
after the offering......................... 17,158,389 shares
Use of proceeds.............................. We estimate that the net proceeds from this
offering will be approximately $35.3 million.
We expect to use these net proceeds
principally for advertising and marketing, as
well as for general corporate purposes.
Risk factors................................. See "Risk Factors" beginning on page 8 for a
discussion of risks that you should consider
carefully before deciding to invest in shares
of our common stock.
Proposed Nasdaq National Market symbol....... " "
</TABLE>
Throughout this prospectus, except where otherwise indicated, the number of
shares of common stock that will be outstanding after this offering is based on
the number of shares outstanding as of January 6, 2000. The number of
outstanding shares excludes:
- 667,385 shares issuable upon the exercise of outstanding warrants;
- 802,196 shares reserved for future grants under our 1999 stock option
plan; and
- 3,711,153 shares issuable at a weighted average exercise price of $5.24
per share upon exercise of stock options outstanding as of January 6,
2000.
All information in this prospectus:
- assumes that a 1.27-for-1 common stock split is effected before
completion of this offering;
- reflects the automatic conversion of all outstanding shares of our
convertible preferred stock into 10,039,145 shares of our common stock
upon the closing of this offering;
- excludes dividends accumulated on our convertible preferred stock which
are convertible into 191,107 shares of common stock as of January 6,
2000, and dividends paid-in-kind issued subsequent to September 30, 1999
which are convertible into 156,455 shares of common stock as of January
6, 2000; and
- except as otherwise indicated, assumes that the underwriters do not
exercise their over-allotment option to purchase additional shares in
this offering.
LendingTree was incorporated in Delaware on June 7, 1996. Our principal
executive offices are located at 6701 Carmel Road, Suite 205, Charlotte, North
Carolina, 28226. Our telephone number is (704) 541-5351, and our website is
located at www.lendingtree.com. Information on our website is not a part of this
prospectus.
6
<PAGE> 8
SUMMARY FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The following table sets forth summary financial and operating data for our
business. You should read this information together with our financial
statements and the accompanying notes included in this prospectus and the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The "pro forma as adjusted" balance sheet data gives
effect to the automatic conversion of all outstanding shares of convertible
preferred stock into common stock and reflects our sale of shares of common
stock offered by this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- ------------------------
1997 1998 1998 1999
------ ---------- --------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE:
LendingTree network........................ $ 2 $ 273 $ 157 $ 3,398
[i]close and other technology.............. -- 136 125 630
------ ---------- --------- -----------
Total revenue...................... 2 409 282 4,028
------ ---------- --------- -----------
COST OF REVENUE:
LendingTree network........................ -- 235 146 1,330
[i]close and other technology.............. -- 149 133 246
------ ---------- --------- -----------
Total cost of revenue.............. -- 384 279 1,576
------ ---------- --------- -----------
Gross profit................................. 2 25 3 2,452
------ ---------- --------- -----------
OPERATING EXPENSES:
Product development........................ 293 1,051 712 808
Marketing and advertising.................. 54 2,494 1,028 12,069
Sales, general and administrative.......... 621 2,955 1,770 5,636
------ ---------- --------- -----------
Total operating expenses........... 968 6,500 3,510 18,513
------ ---------- --------- -----------
LOSS FROM OPERATIONS......................... (966) (6,475) (3,507) (16,061)
Interest income, net....................... 3 41 41 80
------ ---------- --------- -----------
Net loss................................... $ (963) $ (6,434) $ (3,466) $ (15,981)
====== ========== ========= ===========
Basic and diluted net loss per common
share................................... $(1.20) $ (1.88) $ (1.03) $ (4.60)
====== ========== ========= ===========
Weighted average shares used in computing
basic and diluted net loss per common
share................................... 803,370 3,434,736 3,350,765 3,747,888
------- ---------- --------- -----------
------- ---------- --------- -----------
PRO FORMA PER COMMON SHARE DATA:
Pro forma basic and diluted net loss per
common share............................... $ (1.84) $ (2.91)
========== ===========
Pro forma weighted average basic and diluted
shares outstanding......................... 3,501,425 5,930,360
========== ===========
OPERATING DATA:
Qualification Forms transmitted:
Number..................................... -- 18,247 8,720 117,578
Dollar volume (in thousands)............... $ -- $1,596,662 $ 694,802 $11,235,661
Loans closed:
Number..................................... -- 712 361 14,743
Dollar volume (in thousands)............... $ -- $ 25,516 $ 14,375 $ 501,072
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $37,492 $72,831
Working capital............................................. 35,407 70,746
Total assets................................................ 40,287 75,626
Convertible preferred stock................................. 59,317 --
Total stockholders' equity.................................. 36,101 71,440
</TABLE>
7
<PAGE> 9
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
buy our common stock. If any of the following risks actually occur, our
business, financial condition, or results of operations would likely suffer. In
any such case, the market price of our common stock could decline, and you could
lose all or part of the money you paid to buy our common stock.
RISKS RELATED TO OUR FINANCIAL CONDITION
OUR LIMITED OPERATING HISTORY MAKES OUR BUSINESS AND PROSPECTS DIFFICULT TO
EVALUATE.
We have a limited operating history on which to base your evaluation of our
business and prospects. We were formed in 1996 and began serving consumers
across the United States in July 1998. There is no significant historical basis
to assess how we will respond to competitive, economic or technological
challenges. Our 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 us who operate in new and rapidly
developing online marketplaces. Our failure to address these risks and
uncertainties could cause our operating results to suffer and result in the loss
of all or part of your investment.
WE HAVE A HISTORY OF LOSSES AND EXPECT LOSSES IN THE FUTURE.
We have never been profitable. We incurred losses from operations of
approximately $6.5 million in 1998 and $16.1 million for the nine months ended
September 30, 1999. As of September 30, 1999, we had accumulated losses of
approximately $23.4 million. We currently estimate that we will spend
approximately $50 million during 2000 on marketing and advertising, more than
double what we spent in 1999.
We also intend to use the offering proceeds for general corporate purposes,
such as:
- enhancing our technology, including our filtering system, network
infrastructure, and the functionality of our website;
- hiring additional personnel; and
- establishing and developing online relationships.
As a result of these expenditures, we anticipate further losses for the
foreseeable future.
We forecast our future expense levels based on our operating plans and our
estimates of future revenue. We may find it necessary to accelerate expenditures
relating to our sales and marketing efforts or otherwise increase our financial
commitment to creating and maintaining brand awareness among consumers and
lenders. If our revenue grows at a slower rate than we anticipate, or if our
spending levels exceed our expectations or cannot be adjusted to reflect slower
revenue growth, we may not achieve or sustain profitability. If we fail to
become or remain profitable, the value of your investment could be significantly
reduced.
OUR BUSINESS MODEL IS UNPROVEN AND COULD FAIL.
Our revenue model and profit potential are unproven and we cannot assure
you that we will be able to become profitable. Our revenue model depends heavily
on revenue generated from lenders participating in our network who pay us fees
based upon their receipt of credit requests, which we refer to as transmission
fees, and fees based upon loan closings, which we refer to as closed-loan fees.
We also license our [i]close technology to other companies who create single and
multi-lender online marketplaces. To generate revenue we must rapidly achieve
broad market acceptance of our service by both lenders and consumers who have
traditionally used other means to lend and borrow money. In addition, we must
attract a sufficient number of consumers with credit profiles targeted by our
lenders. It is possible that our online loan marketplace model will not gain the
widespread acceptance necessary to support our business, in
8
<PAGE> 10
which case we may find it necessary to alter our business model. We cannot
accurately predict what, if any, changes we would make to our business model in
response to the uncertainties in the online lending market. These changes might
include shifting all or a portion of our fees to customers or reducing fees
currently charged to lenders to expand volume more quickly. If we are not able
to anticipate and adapt to changes in the industry or if our business model is
not successful, we may be unable to expand our business and the value of your
investment could be significantly reduced.
OUR OPERATING RESULTS MAY BE NEGATIVELY IMPACTED BY FLUCTUATIONS IN INTEREST
RATES.
Our business is cyclical. During the nine month period ending September 30,
1999, more than 80% of our revenue was derived from fees paid by lenders
participating in our online marketplace. During periods of rising interest rates
we may experience a decline in consumer traffic to our website and during
periods of robust credit demand, typically associated with falling interest
rates, lenders may have less incentive to use our marketplace. Either of these
events could reduce our revenue and we cannot assess the effects of interest
rates on our business over a broad range of interest rate environments.
YOU SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF OUR
FUTURE RESULTS BECAUSE THEY ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND THESE
RESULTS MAY NEGATIVELY IMPACT THE PRICE OF OUR COMMON STOCK.
Our quarterly operating results may fluctuate significantly in the future
due to a variety of factors that affect our revenue or expenses in any
particular quarter. This could cause the market price of our common stock to
decline. Our 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 our control. These temporary fluctuations could adversely affect our
business. As a result, it is possible that in some future periods our results of
operations may be below the expectations of public market analysts and
investors. In addition, we plan to increase our operating expenses significantly
to expand our sales and marketing, administration, maintenance and technical
support, and product management groups. If revenue falls below our expectations
in any quarter and we are unable to quickly reduce our spending in response, our
operating results would be lower than expected.
In addition, we expect that as our business matures we will experience
seasonal fluctuations in our 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 our
limited operating history, it has not yet been possible for us to assess the
impact of seasonal effects on our business.
OUR FAILURE TO OBTAIN SUFFICIENT FUNDS FROM SUBSEQUENT FINANCINGS MAY
SIGNIFICANTLY IMPEDE OUR GROWTH.
We must achieve and sustain rapid growth for our business model to succeed.
To accomplish this, we will likely need to raise additional funds in the future,
from equity or debt sources. If additional financing is not available when
required or is not available on acceptable terms, we may be unable to
successfully promote our brand name, develop or enhance our service, take
advantage of business opportunities or respond to competitive pressures, any of
which could have a material adverse effect on our business and significantly
reduce the value of your investment.
RISKS RELATED TO OUR MARKETS AND STRATEGY
OUR FUTURE SUCCESS IS DEPENDENT UPON INCREASED ACCEPTANCE OF THE INTERNET BY
CONSUMERS AND LENDERS AS A MEDIUM FOR LENDING.
If consumer and lender acceptance of our online marketplace does not
increase, our business will not succeed and the value of your investment may be
adversely affected. The online lending market is new and rapidly developing. The
adoption of online lending in general, and our marketplace in particular,
requires the acceptance of a new way of conducting business, exchanging
information, and applying for credit by consumers as well as acceptance by
lenders that have historically relied upon traditional lending methods.
9
<PAGE> 11
As a result, we cannot be sure that we will be able to compete effectively with
traditional borrowing and lending methods.
IF POTENTIAL CONSUMERS PERCEIVE THERE ARE SECURITY OR PRIVACY RISKS ASSOCIATED
WITH OUR BUSINESS, DEMAND FOR OUR SERVICE WILL BE REDUCED.
The secure transmission of confidential personal and financial information
over public networks is critical to consumer acceptance of our business. Usage
of our service could decline if any well-publicized compromise of security of
information on our website or the Internet in general were to occur. We and
other Internet-based companies may not be able to respond adequately to privacy
concerns of potential users as advances in computer capabilities and other
technological developments occur.
IF WE ARE UNABLE TO EXPAND OUR BRAND RECOGNITION, CONSUMER AND LENDER DEMAND FOR
OUR SERVICE WILL BE LIMITED.
If we fail to promote and maintain our brand successfully or incur
significant expenses in promoting our brand and fail to generate a corresponding
increase in revenue as a result of our branding efforts, our business and the
value of your investment could be materially adversely affected. We believe that
continuing to build brand awareness of the LendingTree marketplace is critical
to achieving increased demand for our service. Brand recognition is a key
differentiating factor among providers of online lending services, and we
believe it will be increasingly important as competition intensifies. In order
to increase our brand awareness, we must succeed in our marketing efforts,
provide high-quality service, and increase the number of consumers using our
marketplace. If visitors to our website do not perceive our existing service to
be of high quality or if we alter or modify our existing service, introduce new
services, or enter into new business ventures that are not favorably received,
the value of our brand could be diluted, which could decrease the attractiveness
of our service to consumers and lenders.
IF OUR PARTICIPATING LENDERS DO NOT PROVIDE COMPETITIVE LEVELS OF SERVICE TO
CONSUMERS, OUR BRAND WILL BE HARMED AND OUR ABILITY TO ATTRACT CONSUMERS TO OUR
WEBSITE WILL BE LIMITED.
Our 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 our participating lenders. If our
participating lenders do not provide consumers with competitive levels of
convenience, customer service, price, and responsiveness, the value of our brand
may be harmed and the number of consumers using our service may decline.
WE MAY HAVE DIFFICULTY INTEGRATING LENDERS INTO OUR ONLINE MARKETPLACE, WHICH
COULD IMPEDE OUR ABILITY TO OFFER A COMPETITIVE SERVICE TO CONSUMERS.
The failure to integrate lenders into our online marketplace could limit
the variety of products that we can offer to our customers. Integration of a
lender into our online marketplace requires a significant commitment of time and
resources on our part and on the part of the lender. This integration process
typically takes up to three months to complete. Potential lenders may not be
willing to invest the time and resources necessary to achieve this integration,
and we may not have sufficient personnel to devote the time necessary to
successfully integrate lenders into our online marketplace.
WE MAY HAVE DIFFICULTY ATTRACTING A COMPREHENSIVE GROUP OF LENDERS WHICH
COMPLEMENT OUR CURRENT CONSUMER CREDIT PRODUCT COVERAGE.
If we are unable to broaden the offering of consumer credit products on our
network for a wide array of credit profiles and locations, we may be unable to
attract additional consumers or may lose our existing consumers to other online
competitors. The success of our online marketplace depends on our ability to
attract and retain a comprehensive group of lenders to service consumer needs
across a wide array of product lines, consumer credit profiles, and geographic
locations. Lenders may limit the types of credit they offer due to licensing and
regulations, the types of products they offer, and consumer credit profiles. To
this end, some of the lenders in our network do not extend credit in some
states, others are unable to offer particular loan products, and still others do
not lend to consumers with particular credit profiles.
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LENDERS IN OUR NETWORK ARE NOT PRECLUDED FROM OFFERING CONSUMER CREDIT PRODUCTS
OUTSIDE OUR MARKETPLACE.
If a significant number of our potential consumers are able to obtain loans
from our participating lenders without utilizing our service, our ability to
generate revenue may be limited. Because we do not have exclusive relationships
with the lenders whose loan products are offered on our online marketplace,
consumers may obtain offers and loans from these lenders without using our
service. Our lenders can offer their products directly to consumers through
brokers, mass marketing campaigns, or through other traditional methods of
credit distribution. These lenders can also offer their products over the
Internet, either directly to prospective borrowers, through one or more of our
online competitors, or both.
IF WE ARE UNABLE TO DEVELOP AND RETAIN OUR ONLINE RELATIONSHIPS, OUR BUSINESS
WILL BE HARMED.
If we are unable to establish or maintain online relationships that
increase consumer traffic to our website, our business and the value of your
investment could be materially adversely affected. We depend on establishing and
maintaining relationships with a large number of high-traffic websites for a
significant portion of our consumers. For example, in December 1999,
Autobytel.com generated approximately 40% of our automobile loan requests. The
loss of this contractual relationship would materially reduce our revenue in
this product area. There is intense competition for relationships with companies
maintaining these websites, and we may have to pay significant fees to establish
additional relationships or maintain existing relationships in the future. Even
if we enter into these relationships, they may not attract significant numbers
of consumers. Additionally, we may be limited or restricted in the way we
establish and maintain these relationships by regulations generally applicable
to our business. Specifically, federal laws that generally prohibit payment of
fees for the referral of a real estate-secured loan may have the effect of
reducing the types and amount of fees that we may receive for the services
provided in these relationships related to real estate-secured loans. As a
result, we may be unable to enter into relationships with these firms or
websites on commercially reasonable terms or at all.
BECAUSE OUR BUSINESS IS LARGELY DEPENDENT ON THE INTERNET AND TECHNOLOGICAL
INNOVATION, IF WE DO NOT CONTINUALLY ENHANCE AND DEVELOP OUR SERVICE TO KEEP
PACE WITH RAPIDLY CHANGING TECHNOLOGIES WE WILL LOSE OUR COMPETITIVE ADVANTAGE.
As an Internet company, we must continually improve the responsiveness,
functionality, and features of our service, and develop other services that are
attractive to consumers and lenders to remain competitive. We must also
continually meet the evolving technological developments that characterize
Internet commerce. If we are unable to accomplish this, our business and the
value of your investment could be materially adversely affected.
WE MAY NOT BE ABLE TO MANAGE OUR EXPANDING OPERATIONS EFFECTIVELY.
We have recently experienced a period of rapid expansion. In order to
execute our business plan, we must continue to expand significantly. Our
inability to expand our operations in an efficient manner could cause our
expenses to grow disproportionately to our revenue, our revenue to decline or
grow more slowly than expected, or could otherwise have a material adverse
effect on our business and the value of your investment. We had seven employees
in July 1998. As of December 31, 1999, that number had increased to 125. We
expect that the number of our employees will continue to increase for the
foreseeable future. Our anticipated future growth, combined with the
requirements we will face as a public company, will continue to place a
significant strain on our management, systems, and resources. We will need to
continue to expand and maintain close coordination among our technical,
accounting, finance, and sales and marketing departments. We may not succeed in
these efforts.
COMPETITION MAY REDUCE OUR MARKET SHARE AND HARM OUR PERFORMANCE.
Increased competition could result in reduced margins or loss of market
share, either of which could materially adversely affect our business, results
of operations, and financial condition. We operate in a new
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industry that, like the broader electronic commerce market, is rapidly evolving,
highly competitive and has low barriers to entry. We expect this competition
will increase. Our current competitors include:
- online and offline lenders, brokers, and credit card issuers, many of
whom operate websites from which consumers can obtain online interest
rate quotes, such as E-LOAN, giggo.com, and iOwn.com; and
- online and offline referral agents that display rates and products for
multiple lenders and refer consumers to individual lenders, such as
Quicken.com, MSN HomeAdvisor, and getsmart.com.
Our ability to compete depends on many factors, including:
- pricing and breadth of product offering;
- time of market entry;
- brand awareness;
- variety, quantity, and quality of partners and online relationships;
- proprietary and scalable technology infrastructure;
- ease of use and convenience; and
- strength of relationships and depth of technology integration with
customers.
In addition, changes in the methods by which loans are made through traditional
channels of distribution may make electronic commerce a less attractive means
for obtaining loans and could reduce our ability to generate revenue.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases, and significantly greater financial, technical, and marketing
resources than we do. These competitors may engage in more extensive product
development, undertake more far-reaching marketing campaigns, adopt more
aggressive pricing policies than our participating lenders, and make more
attractive offers to existing and potential employees and companies with which
we have relationships.
OUR BUSINESS COULD SUFFER IF WE LOSE THE SERVICES OF KEY EXECUTIVES.
If we lose the services of Douglas Lebda, our founder, Chief Executive
Officer, and a director, or any of our other executive officers or key
employees, our ability to expand our business would be seriously compromised and
the value of your investment may be adversely affected. Mr. Lebda has been
instrumental in determining our strategic direction and focus and in promoting
the concept of an Internet-based loan marketplace for consumers and lenders. We
do not maintain key person insurance on any of our key executives.
RISKS RELATED TO THE INTERNET AND OUR TECHNOLOGY INFRASTRUCTURE
WE MAY EXPERIENCE REDUCED VISITOR TRAFFIC, REDUCED REVENUE, AND HARM TO OUR
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 our website, filtering systems, or
network infrastructure may cause significant harm to our reputation, our ability
to attract and maintain a high volume of visitors to our website, and to attract
and retain participating consumers and lenders. Our 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 our service offerings, could
have an adverse impact on our revenue. In addition, we believe that consumers
who have a negative experience with our website may be reluctant to return or
recommend LendingTree to other potential consumers.
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In the past, our website has experienced outages and decreased performance.
In the worst such instance to date, we experienced a service outage for a period
of approximately six hours due to a database software failure. Although we do
not believe that this interruption resulted in any material harm to our
business, if similar outages occur in the future, they may severely harm our
reputation and our ability to offer our service.
Our 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 our website
would be harmed. These systems are also vulnerable to damage from fire, floods,
power loss, telecommunications failures, break-ins, and similar events. Our
insurance policies may not compensate us for any losses that may occur due to
any failures or interruptions in our systems. Any extended period of disruptions
could materially adversely affect our business, results of operations, and
financial condition.
BREACHES OF OUR NETWORK SECURITY COULD SUBJECT US TO INCREASED OPERATING COSTS
AS WELL AS LITIGATION AND OTHER LIABILITIES.
Any penetration of our network security or other misappropriation of our
users' personal information could cause interruptions in our operations and
subject us to liability. Claims against us could also be based on other misuses
of personal information, such as for unauthorized marketing purposes. These
claims could result in litigation and financial liability. Security breaches
could also damage our reputation. We rely on licensed encryption and
authentication technology to effect secure transmission of confidential
information. It is possible that advances in computer capabilities, new
discoveries, or other developments could result in a compromise or breach of the
technology that we use to protect consumer transaction data. We cannot guarantee
that our security measures will prevent security breaches. We may be required to
expend significant capital and other resources to protect against and remedy any
potential or existing security breaches and their consequences.
RISKS RELATED TO LEGAL UNCERTAINTY
FAILURE TO COMPLY WITH LAWS GOVERNING OUR SERVICE OR MATERIAL CHANGES IN THE
REGULATORY ENVIRONMENT RELATING TO THE INTERNET COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.
The loan products available through our 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 our business, and considering our business
has evolved and expanded in a relatively short period of time, we 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 our business,
results of operations and financial condition.
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.
LendingTree has obtained licenses to broker residential mortgage loans, or is
not required to be licensed, in the District of Columbia and all 50 states, with
the exceptions of New York and Delaware where applications are currently
pending. Similarly, LendingTree has obtained licenses to broker consumer loans,
or is not required to be licensed, in all 50 states, with the exceptions of
California, New Jersey and Ohio, where applications for consumer loan licenses
are pending, and Tennessee, where LendingTree cannot obtain a license to broker
consumer or home equity loans because of residency requirements of that state.
We are 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 we are licensed, we are subject to examination by regulators.
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As a computer loan origination system conducting business through the
Internet, we face 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 us may have the
effect of reducing the types and amount of fees that we 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 our common stock, including requiring
that person to periodically file financial and other personal and business
information. Because we will be a public company following this offering, we
will be unable to control who purchases our common stock in the open market. If
any person acquires 10% or more of our common stock and refuses or fails to
comply with these requirements, we 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 our operations or financial condition.
The parties conducting business with us, 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, we 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 our reputation. The occurrence of one
or more of these events could materially adversely affect our business, results
of operations, and financial condition.
REGULATION OF THE INTERNET IS UNSETTLED, AND FUTURE REGULATIONS COULD INHIBIT
THE GROWTH OF THE INTERNET, DECREASE VISITORS TO OUR WEBSITE, AND OTHERWISE
MATERIALLY ADVERSELY AFFECT OUR 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 services 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. We
could incur additional expenses if any new regulations regarding the use of
personal information are introduced or if these agencies choose to investigate
our 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 our service or otherwise materially adversely
affect our business, results of operations, and financial condition.
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AS AN ONLINE LOAN MARKETPLACE WE MAY BE LIABLE AS A RESULT OF INFORMATION
RETRIEVED FROM OUR WEBSITE OR THE WEBSITES OF COMPANIES WITH WHICH WE MAINTAIN
RELATIONSHIPS.
We may be subject to legal claims relating to information that is published
or made available on our website and the other websites linked to it. Our
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, we could incur significant costs in investigating and
defending such claims, even if we ultimately are not found liable. If any of
these events occur, our business and the value of your investment could be
materially adversely affected.
FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR
BRAND-BUILDING EFFORTS AND ABILITY TO COMPETE EFFECTIVELY.
Failure to protect our intellectual property, such as our registered U.S.
service mark for "LendingTree," our U.S. patent application on our "[i]close"
technology, our copyrights and our trade secrets, could harm our brand and our
reputation, devalue our content in the eyes of our customers, and adversely
affect our ability to compete effectively. Further, enforcing or defending our
intellectual property rights, including our service marks, patent application,
copyrights and trade secrets, could result in the expenditure of significant
financial and managerial resources, which could materially adversely affect our
business, results of operations, and financial condition. We regard our
intellectual property as critical to our success. To protect the rights to our
intellectual property, we rely on a combination of patent, trademark and
copyright law, trade secret protection, confidentiality agreements, and other
contractual arrangements with our employees, affiliates, clients, and others.
The protective steps we have taken may be inadequate to deter misappropriation
of our proprietary information. We may be unable to detect the unauthorized use
of, or take appropriate steps to enforce, our intellectual property rights. We
have applied for a U.S. patent and filed a Patent Cooperation Treaty
international patent application on our [i]close technology and our 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 our patent applications will be 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 us to defend
against third party claims of patent infringement.
RISKS RELATED TO THIS OFFERING, OUR STOCK PRICE, AND CORPORATE CONTROL
WE MAY USE THE PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT AGREE.
Net proceeds to us from this offering are anticipated to be approximately
$35.3 million, after deducting the underwriting discount and estimated offering
expenses. We currently intend to use our net proceeds principally for
advertising and marketing to enhance awareness of our LendingTree brand and
attract consumers to our marketplace. However, as of the date of this
prospectus, we have not allocated any specific amount of our net proceeds for
any particular purpose. Consequently, our management will have broad discretion
with respect to the expenditure of the net proceeds of this offering, including
discretion to use the proceeds in ways with which you may not agree. Investors
will be relying on the judgment of our management and directors regarding the
application of the proceeds of this offering.
OUR COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS AND
INVESTORS IN OUR STOCK MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THE
OFFERING PRICE.
We cannot predict the extent to which investors' interest in us will lead
to the development of a trading market in our common stock or how liquid the
market might become. If you purchase shares of
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our common stock in this offering, you will pay a price that was not established
in a competitive market, but was negotiated between us and the underwriters. The
stock market in general and the market prices of shares in newly public
technology companies, particularly those such as ours that offer Internet-based
services, have been extremely volatile and have experienced fluctuations that
have often been unrelated or disproportionate to the operating performance of
such companies. The market price of our common stock could be highly volatile
and subject to wide fluctuations in response to many factors, some of which are
largely beyond our control. These factors include:
- quarterly variations in our results of operations;
- adverse business developments;
- changes in financial estimates by securities analysts;
- investor perception of us and online lending services in general;
- announcements by our competitors of new products and services; and
- general economic conditions, including interest rate fluctuations.
AN AGGREGATE OF APPROXIMATELY 13.4 MILLION SHARES, OR 77.9% OF OUR OUTSTANDING
STOCK, WILL BECOME ELIGIBLE FOR RESALE IN THE PUBLIC MARKET WITHIN ONE YEAR
AFTER THIS OFFERING, AND FUTURE SALES OF SUCH STOCK MAY CAUSE OUR STOCK PRICE TO
DECLINE.
Sales of substantial amounts of our common stock in the public market after
this offering could reduce the prevailing market prices for our common stock. Of
the 17.2 million shares of common stock to be outstanding upon the closing of
this offering, the 3.65 million shares offered by this prospectus will be freely
tradable without restriction or further registration, other than shares
purchased by our officers, directors, or other "affiliates" within the meaning
of Rule 144 under the Securities Act, which will be restricted from sale until
180 days after the date of this prospectus pursuant to agreements between these
affiliates and the underwriters. The 13.5 million remaining shares of our common
stock will become eligible for resale in the public market subject to the lapse
of applicable holding periods pursuant to Rule 144 as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES/
PERCENT OUTSTANDING
AFTER THE OFFERING DATE WHEN SHARES BECOME AVAILABLE FOR RESALE IN THE PUBLIC MARKET
- ------------------- -----------------------------------------------------------------
<S> <C>
5.2 million/30% 180 days after the date of this prospectus, pursuant to
agreements between the stockholders and the underwriters,
provided that Merrill Lynch can waive this restriction at any
time. Approximately 3.7 million of these shares will also be
subject to sales volume restrictions under Rule 144 under the
Securities Act.
8.2 million/48% Upon expiration of applicable one-year holding periods under Rule
144, which will expire between August 2000 and November 2000,
subject to sales volume restrictions under Rule 144.
</TABLE>
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act approximately 90 days after the date of this offering to
register an aggregate of 4.5 million shares of common stock issued or reserved
for issuance under our various stock option plans. Some holders of our common
stock will also have demand and piggyback registration rights enabling them to
register their shares under the Securities Act for sale.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY, WHICH COULD
DEPRESS OUR STOCK PRICE.
Delaware corporate law and our amended and restated certificate of
incorporation and by-laws which will become effective upon the closing of this
offering, will contain provisions that could have the effect of delaying,
deferring, or preventing a change in control of LendingTree or our management
that stockholders may consider favorable or beneficial. These provisions could
discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. These
provisions
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could also limit the price that investors might be willing to pay in the future
for shares of our common stock. These provisions include:
- authorization to issue "blank check" preferred stock, which is preferred
stock that can be created and issued by the board of directors without
prior stockholder approval, with rights senior to our common
stockholders;
- a staggered board of directors, so that it would take three successive
annual meetings to replace all directors;
- prohibition of stockholder action by written consent; and
- advance notice requirements for the submission by stockholders of
nominations for election to the board of directors and for proposing
matters that can be acted upon by stockholders at a meeting.
In addition, we will enter into a stockholder rights agreement which will
make it more difficult for a third party to acquire us without the support of
our board of directors and principal stockholders.
OUR EXECUTIVE OFFICERS AND DIRECTORS AND ENTITIES AFFILIATED WITH THEM, WHOSE
INTERESTS MAY DIFFER FROM OTHER STOCKHOLDERS, WILL HAVE THE ABILITY TO EXERCISE
SIGNIFICANT CONTROL OVER US.
Our executive officers, directors and entities affiliated with them will,
as a group, beneficially own approximately 78% of our common stock following
this offering. These stockholders will be able to exercise significant influence
over all matters requiring approval by our stockholders, including the election
of directors and the approval of significant corporate transactions, including a
change of control of our company. The interests of these stockholders may differ
from the interests of our other stockholders.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION OF THE VALUE OF YOUR
INVESTMENT.
The initial public offering price per share will be substantially higher
than the net tangible book value per share of the common stock outstanding
immediately prior to this offering. As a result, if you purchase shares in this
offering, you will incur immediate dilution of approximately $6.72 per share
from the price you paid per share. In the past, we issued options and warrants
to acquire common stock at prices significantly below the initial public
offering price. To the extent these outstanding options or warrants are
ultimately exercised, your investment will be further diluted.
FORWARD-LOOKING STATEMENTS
Many statements made in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," and elsewhere are
forward-looking statements that are not based on historical facts. The words
"expects," "anticipates," "estimates," "intends," "believes," and similar
expressions are intended to identify forward-looking statements. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements. The forward-looking
statements made in this prospectus are based on events through the date on which
the statements are made.
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USE OF PROCEEDS
The net proceeds from the sale of the 3,650,000 shares of common stock
offered by this prospectus, assuming an initial public offering price of $11.00
per share, less the underwriting discount and estimated offering expenses, will
be approximately $35.3 million, or $40.9 million if the underwriters'
over-allotment option is exercised in full.
We intend to use approximately $29 million of the proceeds from this
offering for advertising and marketing to increase brand awareness and to
attract consumers to our marketplace. We also intend to use the offering
proceeds for general corporate purposes, such as:
- enhancing our technology, including our filtering system, network
infrastructure, and the functionality of our website;
- hiring additional personnel; and
- establishing and developing online relationships.
We currently estimate that we will spend approximately $50 million during
2000 on marketing and advertising, more than double what we spent in 1999. The
amount we actually spend for this purpose will depend on a number of factors,
including the growth of our consumer base, the types of efforts we make to build
our brand and competitive developments in the home mortgage and consumer credit
markets. Therefore, we cannot specify with certainty the particular uses of the
net proceeds of this offering. Accordingly, management will have significant
flexibility and discretion in applying the net proceeds of this offering.
Pending any use, we will invest the net proceeds of this offering in short-term,
investment grade, interest-bearing securities.
From time to time, in the ordinary course of business, we evaluate possible
acquisitions of, or investments in, businesses, technologies, services, or
products that are complementary to our business. A portion of the net proceeds
may be used to fund acquisitions or investments; however, we have no commitments
or agreements and we are not currently involved in any negotiations with respect
to any such transaction.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock and
do not expect to pay any cash dividends for the foreseeable future. We currently
intend to retain future earnings, if any, to finance the expansion of our
business. Any future payment of dividends will be at the discretion of our board
of directors and will depend upon factors such as future earnings, capital
requirements, our financial condition, and general business conditions.
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CAPITALIZATION
The following table shows our capitalization as of September 30, 1999:
- on an actual basis;
- on a pro forma basis to reflect the conversion of all of our outstanding
shares of convertible preferred stock into shares of common stock upon
the closing of this offering; and
- on a pro forma as adjusted basis to reflect our sale of the 3,650,000
shares of common stock offered by us at an assumed initial public
offering price of $11.00 per share, less the underwriting discount and
estimated offering expenses.
You should read this information in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," our
financial statements, and the accompanying notes and the other financial
information included in this prospectus.
The table excludes:
- 667,385 shares issuable upon the exercise of outstanding warrants;
- 802,196 shares reserved for future grants under our 1999 stock option
plan as of January 6, 2000;
- 3,711,153 shares issuable at a weighted average exercise price of $5.24
per share upon exercise of stock options outstanding on January 6, 2000;
and
- dividends accumulated on our convertible preferred stock which are
convertible into 191,107 shares of common stock as of January 6, 2000,
and dividends paid-in-kind issued subsequent to September 30, 1999 which
are convertible into 156,455 shares of common stock as of January 6,
2000.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity:
Convertible preferred stock, $.01 par value, 8%
cumulative, 10,467,194 shares authorized:
Series A -- 1,666,667 shares issued and outstanding
actual, none issued and outstanding pro forma and pro
forma as adjusted....................................... $ 9,885 $ -- $ --
Series D -- 6,238,172 shares issued and outstanding
actual, none issued and outstanding pro forma and pro
forma as adjusted....................................... 49,432 -- --
-------- -------- --------
Total convertible preferred stock....................... 59,317 -- --
-------- -------- --------
Common stock, $.01 par value, 38,100,000 shares
authorized, 3,934,736 shares issued and outstanding
actual; 13,973,881 shares issued pro forma; and
17,623,881 shares issued pro forma as adjusted.......... 39 140 176
Additional paid-in capital.............................. 6,367 65,583 100,886
Deferred compensation................................... (262) (262) (262)
Treasury stock, cost (948,971 shares)................... (5,978) (5,978) (5,978)
Accumulated deficit..................................... (23,382) (23,382) (23,382)
-------- -------- --------
Total stockholders' equity...................... 36,101 36,101 71,440
-------- -------- --------
Total capitalization............................ $ 36,101 $ 36,101 $ 71,440
======== ======== ========
</TABLE>
19
<PAGE> 21
DILUTION
Our pro forma net tangible book value as of September 30, 1999 was
approximately $36,101,000, or approximately $2.77 per share of common stock. Pro
forma net tangible book value per share represents the amount of our total
tangible assets reduced by the amount of our total liabilities and divided by
the total number of shares of common stock outstanding, after giving effect to
the conversion of all outstanding shares of convertible preferred stock into
shares of common stock. Assuming the sale by us of the 3,650,000 shares of
common stock in this offering at an assumed initial public offering price of
$11.00 per share and after deducting the underwriting discount and estimated
offering expenses, the pro forma net tangible book value of our common stock as
of September 30, 1999 would have been $71,440,500, or $4.28 per share. This
represents an immediate increase in pro forma net tangible book value of $1.51
per share to existing stockholders and an immediate and substantial dilution in
pro forma net tangible book value of $6.72 per share to new public investors.
The following table illustrates this per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Pro forma net tangible book value per share as of September
30, 1999.................................................... $2.77
Increase attributable to this offering.................... 1.51
-----
Adjusted pro forma net tangible book value per share after
this offering............................................. 4.28
------
Net tangible book value dilution per share to new public
investors................................................. $ 6.72
======
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1999 described above, the differences between existing stockholders and new
public investors in this offering with respect to the number of shares of common
stock purchased from us, the total consideration paid for those shares and the
average price paid per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -----------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 13,024,910 78.1% $ 61,034,000 60.3% $ 4.69
New public investors........... 3,650,000 21.9 40,150,000 39.7 11.00
---------- ----- ------------ -----
Total................ 16,674,910 100.0% $101,184,000 100.0%
========== ===== ============ =====
</TABLE>
The foregoing tables and calculations assume no exercise of outstanding
options or warrants and excludes treasury shares. As of September 30, 1999,
there were 2,379,776 shares of common stock issuable upon exercise of
outstanding options at a weighted average exercise price of $3.65 per share and
2,277,110 shares of common stock reserved for future grants under our stock
option plan. As of September 30, 1999, there were warrants outstanding to
purchase 667,385 shares of common stock with a weighted average exercise price
of $5.66 per share. After September 30, 1999, we issued 1,474,914 options to
purchase our common stock at a weighted average exercise price of $7.46 per
share, 130,837 options were exercised at a weighted average exercise price of
$1.43 per share and 12,700 options were forfeited with a weighted average
exercise price of $4.72 per share. As a result, options to purchase up to an
additional 802,196 shares of common stock may be issued under our stock option
plan. In addition, we may agree to issue additional warrants to acquire common
stock to companies with which we maintain relationships. To the extent that
these options or warrants are exercised, there will be further dilution to new
public investors.
20
<PAGE> 22
SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The following table sets forth selected financial and operating data for
our business. You should read the information together with our financial
statements and the accompanying notes included in this prospectus and the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The statement of operations data for the years ended
December 31, 1997 and 1998 and for the nine month period ended September 30,
1999, and the balance sheet data as of December 31, 1997 and 1998 and September
30, 1999, are derived from, and are qualified by reference to, our financial
statements which have been audited by PricewaterhouseCoopers LLP and are
included elsewhere in this prospectus. The statement of operations data for the
nine month period ended September 30, 1998 is derived from, and is qualified by
reference to, unaudited interim financial statements of LendingTree included
elsewhere in this prospectus. The statement of operations data for the period
from inception through December 31, 1996 and the balance sheet data as of
December 31, 1996 are unaudited. Historical results are not necessarily
indicative of the results to be expected in the future, and results of interim
periods are not necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
PERIOD FROM DECEMBER 31, SEPTEMBER 30,
INCEPTION THROUGH -------------------- -----------------------
DECEMBER 31, 1996 1997 1998 1998 1999
------------------ ------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUE:
LendingTree network.............................. $ -- $ 2 $ 273 $ 157 $ 3,398
[i]close and other technology.................... -- -- 136 125 630
-------- ------- ---------- --------- -----------
Total revenue............................. -- 2 409 282 4,028
-------- ------- ---------- --------- -----------
COST OF REVENUE:
LendingTree network.............................. -- -- 235 146 1,330
[i]close and other technology.................... -- -- 149 133 246
-------- ------- ---------- --------- -----------
Total cost of revenue..................... -- -- 384 279 1,576
-------- ------- ---------- --------- -----------
Gross profit....................................... -- 2 25 3 2,452
-------- ------- ---------- --------- -----------
OPERATING EXPENSES:
Product development.............................. -- 293 1,051 712 808
Marketing and advertising........................ -- 54 2,494 1,028 12,069
Sales, general and administrative................ 4 621 2,955 1,770 5,636
-------- ------- ---------- --------- -----------
Total operating expenses.................. 4 968 6,500 3,510 18,513
-------- ------- ---------- --------- -----------
LOSS FROM OPERATIONS............................... (4) (966) (6,475) (3,507) (16,061)
Interest income, net............................. -- 3 41 41 80
-------- ------- ---------- --------- -----------
Net loss......................................... $ (4) $ (963) $ (6,434) $ (3,466) $ (15,981)
======== ======= ========== ========= ===========
Basic and diluted net loss per common share...... $ (0.02) $ (1.20) $ (1.88) $ (1.03) $ (4.60)
======== ======= ========== ========= ===========
Weighted average shares used in computing basic and
diluted net loss per common share................ 259,080 803,370 3,434,736 3,350,765 3,747,888
======== ======= ========== ========= ===========
PRO FORMA PER COMMON SHARE DATA:
Pro forma basic and diluted net loss per common
share.......................................... $ (1.84) $ (2.91)
========== ===========
Pro forma weighted average basic and diluted
shares outstanding............................. 3,501,425 5,930,360
========== ===========
OPERATING DATA:
Qualification Forms transmitted:
Number........................................... -- -- 18,247 8,720 117,578
Dollar volume (in thousands)..................... -- -- $1,596,662 $694,802 $11,235,661
Loans closed:
Number........................................... -- -- 712 361 14,743
Dollar volume (in thousands)..................... -- -- $ 25,516 $14,375 $ 501,072
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1996 1997 1998 1999
---- ---- ------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $-- $402 $ 3,085 $37,492
Working capital............................................. (1) 333 2,666 35,407
Total assets................................................ -- 424 3,687 40,287
Mandatorily redeemable preferred securities................. -- -- 4,631 --
Convertible preferred stock................................. -- -- -- 59,317
Total stockholders' equity (deficit)........................ (1) 353 (1,695) 36,101
</TABLE>
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and the notes to those statements that appear elsewhere
in this prospectus. The following discussion and analysis contains
forward-looking statements that reflect our plans, estimates, and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and elsewhere
in this prospectus, particularly in "Risk Factors."
OVERVIEW
We are an Internet-based loan marketplace for consumers and lenders. Using
a simple and powerful consumer proposition, "Lenders compete for your business,"
we collect consumer credit requests and compare these requests and related
credit information to the underwriting criteria of more than 90 participating
lenders in our network. Consumers can receive multiple offers in response to a
single credit request and then compare, review, and accept the 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. Our marketplace encompasses most consumer credit
categories, including mortgages, home equity loans, automobile loans, credit
cards, and personal loans. We power our website with our proprietary loan
marketplace technology platform, which we call [i]close(SM).
We are a marketplace that facilitates the lending process. Because we are
not a lender, we have reduced exposure to interest rate and market risks
generally associated with traditional lending activities. Our revenue model
depends on revenue generated from lenders participating in our network who pay
us fees based upon their receipt of credit requests, which we refer to as
transmission fees, and fees based upon loan closings, which we refer to as
closed-loan fees. We also license our [i]close technology to other companies who
create single and multi-lender online marketplaces. Credit requests not meeting
lenders' criteria on those marketplaces are routed to our lender network,
increasing our overall volume.
LendingTree was founded on June 7, 1996. From June 1996 until July 1998, we
conducted research, developed core technology, and conducted initial lender
marketing efforts. Our website, www.lendingtree.com, commenced operations
nationally on July 1, 1998. Since that time, the LendingTree network has
expanded to include over 90 regional and national lenders. For the quarter ended
September 30, 1999, we transmitted 61,500 Qualification Forms representing $4.8
billion in loan demand and our lenders closed loans totaling $266 million. These
numbers reflect significant growth when compared to the quarter ended September
30, 1998, with 4,900 Qualification Forms transmitted, representing $424 million
in loan demand, which resulted in $10 million in closed loans.
We derive our revenue from two primary sources: fees from the LendingTree
network, and fees from licensing our [i]close technology. All of our revenue
from the network is derived from lenders. Our service is free to consumers.
Lenders pay us for the transmitted Qualification Forms they receive and for the
loans they close.
We receive transmission revenue when consumers complete Qualification Forms
that are transmitted to lenders. This transmission revenue is recognized at the
time Qualification Forms are sent to lenders, and fees are payable regardless of
whether Qualification Forms result in closed loans. We recognize closing revenue
when a loan is closed by a lender. Closing revenue generally lags the
transmission of Qualification Forms from several days to up to four months,
depending upon the loan type. For the nine months ended September 30, 1999,
transmission revenue and closing revenue generated approximately 34% and 45%,
respectively, of our total revenue. Other network revenue includes set-up fees
and monthly maintenance fees. These other network revenues generated
approximately 5% and less than 1%, respectively, of our total revenue for the
nine months ended September 30, 1999.
We also generate revenue by licensing [i]close to third parties, to create
single and multi-lender loan marketplaces. [i]close revenue is recognized on the
percentage-of-completion basis. For the nine months
22
<PAGE> 24
ended September 30, 1999, [i]close revenue generated approximately 15% of our
total revenue. In addition, network revenue from [i]close customers represented
20% of total revenue during this period.
Other technology revenue consists of revenue generated from providing third
parties various software integration and hardware hosting services. Revenue
generated from other technology represented less than 1% of total revenue for
the nine months ended September 30, 1999. Other technology revenue is recognized
either on a percentage-of-completion basis or on a fixed monthly rate, depending
on the type of service offered.
Currently, mortgages and home equity loans represent the largest segments
of our network revenue, contributing approximately $2.6 million of our total
revenue generated in the nine months ended September 30, 1999. During the same
period, credit card revenue was $0.4 million. In addition, for the nine months
ended September 30, 1999, auto loan and personal loan revenue was less than $0.1
million each. No single lender currently represents more than 10% of our
revenue. Revenue from credit cards, auto loans and personal loans is expected to
increase as we increase our marketing focus on these products. Revenue from some
of our products may experience seasonal fluctuations. For example, home buying
is typically strongest in the second and third quarters of each year, which may
result in higher mortgage loan closing rates during those periods. However, we
do not have a sufficient operating history to forecast the seasonality of our
revenues with respect to any particular product offering.
Our network cost of revenue includes salary and benefit costs of the
borrower relations and lender implementation groups, credit scoring expenses,
revenue-sharing costs, consumer promotion costs, and the cost of hardware for
the LendingTree network. Our [i]close and other technology cost of revenue
includes direct costs of modifying our proprietary software for license to
[i]close users, as well as the related cost of hardware for these customers.
Product development expenses primarily include costs incurred by us to
develop our proprietary software and filtering technologies and enhance, manage,
monitor, and operate our website. These expenses consist primarily of salaries
and benefits for our technology department, third-party software upgrades and,
from time to time, outside technology consultants and/or contractors. We intend
to continue to expand our online marketplace by adding other product offerings
and new lenders and, consequently, we expect these activities may require
additional personnel. Accordingly, we expect that our product development
expenses will continue to increase for the foreseeable future.
Marketing and advertising expenses consist primarily of costs of
advertising, trade shows, affiliate service fees, and indirect costs. Marketing
and advertising expenses also include costs, including salaries and benefits, of
all personnel involved in the marketing and advertising department as well as
outside advertising agency fees. All advertising costs are expensed as incurred.
Sales, general and administrative expenses consist primarily of salary,
benefits, and related expenses for our management, sales, administrative, legal,
and accounting personnel, expenses relating to our facilities, professional
fees, and other general corporate expenses. We expect that, in support of the
continued growth of our business and our operations as a public company, sales,
general and administrative expenses will continue to increase for the
foreseeable future.
Since our inception on June 7, 1996, we have incurred significant losses
and, as of September 30, 1999, we had an accumulated deficit of $23.4 million.
These losses have resulted from the significant costs incurred for advertising,
employment expenses primarily for the development of our [i]close technology
platform, establishment of lender relationships, and integration of lenders
within our website. We intend to continue to invest heavily in advertising and
marketing. As a result, we believe that we will continue to incur substantial
operating losses for the foreseeable future.
23
<PAGE> 25
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
REVENUE
Total revenue amounted to $4.0 million for the nine month period ended
September 30, 1999, an increase of $3.7 million from $0.3 million for the
corresponding period in 1998.
LendingTree Network. LendingTree network revenue accounted for $3.4
million, or 84% of total revenue for the nine month period ended September 30,
1999, compared with 56% for the corresponding period in 1998. Network revenue
increased by $3.2 million from $0.2 million for the nine month period ended
September 30, 1998 primarily due to higher Qualification Form and closed loan
volume. Transmitted Qualification Form volume increased nearly thirteen times
from approximately 8,700 to over 117,000 during this period while the number of
loans closed increased nearly forty times from about 360 to over 14,700.
[i]close and Other Technology. [i]close and other technology revenue
accounted for $0.6 million, or 15.6% of total revenue for the nine month period
ended September 30, 1999, compared with $0.1 million for the corresponding
period in 1998. The increase in [i]close and other technology revenue resulted
primarily from the issuance of [i]close licenses.
COST OF REVENUE
LendingTree Network. Cost of LendingTree network revenue increased to $1.3
million for the nine month period ended September 30, 1999 from $0.1 million for
the corresponding period in 1998. The increase was primarily attributable to the
introduction of revenue-share agreements with other consumer websites such as
priceline.com, increases in other volume-related expenses such as credit scoring
fees, and an increase in headcount in the borrower relations department. Our
network gross margin increased to 61% from 7% for the nine month periods ended
September 30, 1999 and 1998, respectively.
[i]close and Other Technology. Cost of [i]close and other technology
revenue increased to $0.2 million for the nine month period ended September 30,
1999 from $0.1 million for the corresponding period in 1998. This increase is
primarily due to greater direct hours incurred for [i]close projects.
OPERATING EXPENSES
Product Development. Product development expense increased to $0.8 million
for the nine month period ended September 30, 1999 compared with $0.7 million
for the corresponding period in 1998.
Marketing and Advertising. Marketing and advertising expense increased to
$12.1 million for the nine month period ended September 30, 1999 from $1.0
million for the corresponding period in 1998, an increase of $11.1 million. The
increase is primarily due to higher advertising expenses in order to build brand
awareness and increase volume to our marketplace.
Sales, General and Administrative. Sales, general and administrative
expense increased to $5.6 million for the nine month period ended September 30,
1999, an increase of $3.8 million from the corresponding period in 1998. The
increase is primarily due to higher employee-related costs such as compensation,
recruiting and relocation expenses, rent for a larger facility, and professional
fees.
YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUE
Total revenue amounted to $0.4 million in 1998, an increase of $0.4 million
from 1997, which resulted from the national launch of our website, on July 1,
1998.
LendingTree Network. LendingTree network revenue accounted for $0.3
million in 1998, compared with $2.0 thousand in 1997.
24
<PAGE> 26
[i]close and Other Technology. [i]close and other technology revenue
accounted for $0.1 million in 1998, the first year [i]close was licensed.
COST OF REVENUE
LendingTree Network. Cost of LendingTree network revenue was $0.2 million
in 1998.
[i]close and Other Technology. Cost of [i]close and other technology
revenue was $0.1 million in 1998.
OPERATING EXPENSES
Product Development. Product development expense amounted to $1.1 million
in 1998 compared with $0.3 million in 1997. The increase is primarily due to
employment costs and technology consulting fees.
Marketing and Advertising. Marketing and advertising expense increased to
$2.5 million in 1998 from $0.1 million in 1997. The increase is primarily due to
higher advertising expenses.
Sales, General and Administrative. Sales, general and administrative
expense increased to $3.0 million in 1998, an increase of $2.3 million from
1997. The increase is primarily due to higher employee-related costs such as
compensation, recruiting and relocation expenses, rent, and professional fees.
25
<PAGE> 27
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth a summary of our unaudited quarterly results
of operations for each of the eight quarters in the two-year period ended
September 30, 1999, as well as selected data expressed as a percentage of total
revenue for each quarter. This information has been derived from unaudited
interim financial statements. In management's opinion, this unaudited
information has been prepared on a basis consistent with financial statements
contained elsewhere in this prospectus and includes all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
information for the quarters presented. You should read this information in
conjunction with our financial statements and the accompanying notes included
elsewhere in this prospectus. Historical results for any quarter are not
necessarily indicative of the results to be expected for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30,
1997 1998 1998 1998 1998 1999 1999 1999
-------- -------- -------- --------- -------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
REVENUE:
LendingTree network...... $ 2 $ 15 $ 42 $ 100 $ 116 $ 475 $ 1,049 $ 1,874
[i]close and other
technology............. -- -- -- 125 11 162 24 444
-------- -------- -------- -------- -------- ---------- ---------- ----------
Total revenue...... 2 15 42 225 127 637 1,073 2,318
-------- -------- -------- -------- -------- ---------- ---------- ----------
COST OF REVENUE:
LendingTree network...... -- 39 42 65 89 217 448 665
[i]close and other
technology............. -- -- -- 133 16 175 16 55
-------- -------- -------- -------- -------- ---------- ---------- ----------
Total cost of
revenue.......... -- 39 42 198 105 392 464 720
-------- -------- -------- -------- -------- ---------- ---------- ----------
Gross profit............... 2 (24) -- 27 22 245 609 1,598
OPERATING EXPENSES:
Product development...... 194 223 420 69 339 142 394 272
Marketing and
advertising............ 30 105 274 649 1,466 2,883 2,956 6,230
Sales, general and
administrative......... 461 539 577 654 1,185 1,344 1,763 2,529
-------- -------- -------- -------- -------- ---------- ---------- ----------
Total operating
expenses......... 685 867 1,271 1,372 2,990 4,369 5,113 9,031
-------- -------- -------- -------- -------- ---------- ---------- ----------
LOSS FROM OPERATIONS....... (683) (891) (1,271) (1,345) (2,968) (4,124) (4,504) (7,433)
Interest income, net....... 4 -- 25 16 -- 22 3 55
-------- -------- -------- -------- -------- ---------- ---------- ----------
Net loss................... $ (679) $ (891) $ (1,246) $ (1,329) $ (2,968) $ (4,102) $ (4,501) $ (7,378)
======== ======== ======== ======== ======== ========== ========== ==========
AS A PERCENTAGE OF TOTAL
REVENUE:
Revenue:
LendingTree network...... 100% 100% 100% 44% 91% 75% 98% 81%
[i]close and other
technology............. -- -- -- 56 9 25 2 19
-------- -------- -------- -------- -------- ---------- ---------- ----------
Total revenue...... 100 100 100 100 100 100 100 100
-------- -------- -------- -------- -------- ---------- ---------- ----------
Total cost of revenue...... -- 260 100 88 83 62 43 31
-------- -------- -------- -------- -------- ---------- ---------- ----------
Gross margin............... 100 (160) -- 12 17 38 57 69
Total operating expenses... 34,250 5,780 3,026 610 2,354 686 477 390
-------- -------- -------- -------- -------- ---------- ---------- ----------
Loss from operations....... (34,150)% (5,940)% (3,026)% (598)% (2,337)% (648)% (420)% (321)%
======== ======== ======== ======== ======== ========== ========== ==========
OPERATING DATA:
Qualification Forms
transmitted:
Number................... -- 1,276 2,544 4,900 9,527 22,253 33,762 61,563
Dollar volume
(in thousands)......... -- $ 80,172 $190,747 $423,883 $901,859 $3,144,612 $3,289,217 $4,801,832
Loans closed:
Number................... -- 21 125 215 351 731 4,472 9,540
Dollar volume
(in thousands)......... -- $ 134 $ 4,308 $ 9,933 $ 11,142 $ 47,733 $ 187,163 $ 266,176
</TABLE>
26
<PAGE> 28
Our total revenue has increased steadily over the last eight quarters,
primarily as a result of consistent growth in network revenue. [i]close and
other technology revenue has fluctuated based on the percentage of work
completed on the projects during a quarter. The growth in the cost of revenue
reflects the higher level of revenue.
Quarterly increases in operating expenses reflect the continued expansion
of our operations during the two-year period. The increase in marketing and
advertising is primarily due to higher advertising expenses in order to attract
more consumers to our website, and higher employee-related costs such as
compensation, recruiting and relocation expenses, rent for facilities, and
professional fees.
We expect to experience significant fluctuations in future quarterly
operating results due to a variety of factors, many of which are outside of our
control. Our limited operating history and the emerging nature of the markets in
which we compete makes it difficult for us to accurately forecast our operating
results. Our operating results in one or more future quarters may fall below the
expectations of securities analysts and investors, which could cause the price
of our common stock to decline.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through private placements of
securities. Through September 30, 1999, proceeds from the sale of our securities
totaled $64.1 million, net of financing fees. On September 20, 1999, we received
approximately $50.0 million in gross proceeds from the sale of Series D
convertible preferred stock to a group of corporate and institutional investors
including Capital Z Partners, GE Capital, Goldman Sachs, priceline.com and Marsh
& McLennan Risk Capital. The investors who purchased the Series D convertible
preferred stock were allowed to designate three representatives to serve on our
board of directors. At that time, our stockholder's considered it undesirable to
increase the size of our board to accommodate these designees. Five incumbent
board members resigned, three of whom requested that we repurchase some of their
shares since they would no longer be able to oversee their investments.
Approximately $6.0 million of the proceeds from the sale of Series D convertible
preferred stock was used to repurchase shares of outstanding common stock owned
by those resigning directors.
Net cash used in operating activities was $13.6 million for the nine month
period ended September 30, 1999 and $5.7 million and $0.6 million in 1998 and
1997, respectively. In each period the use of cash primarily consisted of our
net operating losses before non-cash items. Non-cash items in each period
included the issuance of common stock, stock options and warrants, and increases
in accounts receivable, partially offset by increases in trade payables and
accrued expenses.
Net cash used in investing activities was $0.5 million for the nine month
period ended September 30, 1999 and $0.2 million and less than $0.1 million in
1998 and 1997, respectively. Net cash used in investing activities in these
periods primarily consisted of capital expenditures for the purchase of computer
equipment and furniture.
Net cash provided by financing activities was $48.6 million for the nine
month period ended September 30, 1999 and $8.6 million and $1.0 million in 1998
and 1997, respectively. Cash provided by financing activities for the nine month
period ended September 30, 1999 consisted primarily of proceeds from the sale of
preferred stock and convertible notes, offset by the repurchase of common stock.
As of September 30, 1999, we had approximately $37.5 million in cash and
cash equivalents. We currently estimate that we will spend approximately $50
million during 2000 on marketing and advertising, more than double what we spent
in 1999. We believe that the net proceeds from this offering together with our
existing cash and cash equivalents will be sufficient to meet our working
capital and capital expenditure requirements for at least the next 12 months.
Without the proceeds of this offering, management would have to reduce the
extent of our plans for marketing and advertising during 2000. After 2000, we
may be required to raise additional funds. Additional financing may not be
available when needed or, if available, such financing may not be on terms
favorable to us. Consequently, management
27
<PAGE> 29
may have to reduce advertising to conserve cash. If additional funds are raised
through the issuance of equity securities, our existing stockholders may
experience significant dilution.
MARKET-RELATED RISKS
We currently have no floating rate indebtedness, hold no derivative
instruments, and do not earn foreign-sourced income. Accordingly, changes in
interest rates or currency exchange rates do not have a direct effect on our
financial position. However, increases in interest rates generally reduce
consumer demand for real estate and other significant purchases and, therefore,
could affect the volume of business transacted in our marketplace.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes a new model
for accounting for derivatives and hedging activities and supercedes several
existing standards. SFAS No. 133, as amended by SFAS No. 137, is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. We do not
expect that the adoption of SFAS No. 133 will have a material impact on the
financial statements.
YEAR 2000 READINESS
Year 2000 computer problems may arise after the date of this prospectus.
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.
During 1998 and 1999 we conducted a review of the year 2000 readiness of
our information technology systems. These systems include software that we have
internally developed and software and hardware that we have obtained from
third-party vendors and licensors. Our review identified a limited number of
remediation steps that we completed prior to January 1, 2000. In 1999, we
performed full end-to-end testing of all key business functions in a simulated
operating environment to assure that our systems previously verified to be year
2000 compliant remained compliant as changes were made to them.
The aggregate costs associated with our year 2000 review and remediation
were approximately $500 in 1998 and $11,500 in 1999. We estimate that any costs
related to year 2000 issues in 2000 will also be immaterial. As of the date of
this prospectus, we have not experienced any year 2000-related systems failures
and, subsequent to January 1, 2000, we have received verbal assurances from all
of our largest lenders and [i]close licensees that they are year 2000 compliant
and that they have not experienced any year 2000-related systems failures in
connection with the January 1, 2000 date change. We intend to continue to
monitor our own systems for ongoing year 2000 compliance and conduct testing to
confirm the compliance of our system, as well as to confer with our lenders and
online partners and vendors about their ongoing year 2000 compliance.
Based on our efforts to date, we believe that we will not experience any
material year 2000 problems. There are, however, possible scenarios under which
year 2000 problems, if they occur, could materially affect us. The most
reasonably likely worst cases among these scenarios, include: the temporary
inability of one or more of our key lenders to receive consumer Qualification
Forms from us or to reply to consumers with loan offers; the temporary inability
of our online partners to direct consumer traffic to our marketplace; and a
failure of, or a degradation in, the Internet infrastructure that reduces
traffic to, or the performance of, our website. We do not intend to develop
contingency plans to address these or other potential worst-case scenarios.
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BUSINESS
OVERVIEW
We are an Internet-based loan marketplace for consumers and lenders. Using
a simple and powerful consumer proposition, "Lenders compete for your business,"
we collect consumer credit requests and compare these requests and related
credit information to the underwriting criteria of more than 90 participating
lenders in our network. Consumers can receive multiple offers in response to a
single credit request and then compare, review, and accept the 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. Our marketplace encompasses most consumer credit
categories, including mortgages, home equity loans, automobile loans, credit
cards, and personal loans. We power our website with our proprietary loan
marketplace technology platform, which we call [i]close.
We are a marketplace that facilitates the lending process. Because we are
not a lender, we have reduced exposure to interest rate and market risks
generally associated with traditional lending activities. Our revenue model
depends on revenue generated from lenders participating in our network who pay
us fees based upon their receipt of credit requests, which we refer to as
transmission fees, and fees based upon loan closings, which we refer to as
closed-loan fees. We also license our [i]close technology to other companies who
create single and multi-lender online marketplaces. Credit requests not meeting
lenders' criteria on those marketplaces are routed to our lender network,
increasing our overall volume.
We commenced nationwide operations on July 1, 1998. Since that time our
network has expanded to include more than 90 regional and national lenders. For
the quarter ended September 30, 1999, we transmitted 61,500 Qualification Forms,
representing $4.8 billion in loan demand, and our lenders closed loans totaling
$266 million. These numbers reflect significant growth when compared to the
quarter ended September 30, 1998, with 4,900 Qualification Forms transmitted,
representing $424 million in loan demand, which resulted in $10 million in
closed loans. We earn revenues primarily through transaction fees paid by
lenders when Qualification Forms are transmitted to lenders and when loans are
closed. We also receive fees from licensing our [i]close software.
Among the lenders generating the highest revenue on our website are some of
the largest lenders in the United States, such as Chase, Citibank, PNC Bank FSB,
and Bank One, as well as online lending companies including iOwn.com,
mortgage.com, and apponline.com. Our [i]close technology powers the loan centers
of several well-known consumer websites including priceline.com, Autobytel.com
and Bloomberg.com; the loan content and tools for a network of over 11,000
websites; and single-lender websites including Fleet Bank and Wachovia Bank.
We believe our unique business model, growing consumer acceptance of our
website, our first mover advantage, the strength of the LendingTree brand, the
breadth of our lender network, our online relationships, and our [i]close
technology platform provide us with significant competitive advantages.
INDUSTRY BACKGROUND
GROWTH OF INTERNET USAGE AND ELECTRONIC COMMERCE
The Internet has emerged as a global medium for communication, information,
and commerce. International Data Corporation estimates that there were 63
million Internet users in the United States at the end of 1998 and anticipates
that this number will grow to approximately 177 million by the end of 2003,
representing a compound annual growth rate of 23%. As a result of the Internet's
increasing acceptance as a commercial medium, businesses have a growing
opportunity to conduct electronic commerce. International Data Corporation
estimates that in the United States, Internet commerce will increase from
approximately $37 billion in 1998 to approximately $708 billion by 2003,
representing a compound annual growth rate of 80%.
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CONSUMER LENDING MARKETS
Consumer lending markets are both large and highly fragmented. The United
States Federal Reserve estimates that as of year-end 1998 total outstanding debt
by households amounted to approximately $5.4 trillion and the U.S. Census Bureau
estimates that there were over 21,000 financial institutions providing consumer
credit in the United States. Forrester Research, a market research organization,
projected approximately $1.9 trillion in loan originations in the United States
during 1999. Forrester also projected that 1.3% of consumer loan originations
would be conducted online in 1999, growing to 9.5% by 2003, and that total
online credit originations will grow from $25.7 billion in 1999 to $167.6
billion in 2003, representing a compound annual growth rate of 60%.
The following table summarizes by consumer product category for the periods
presented, the dollar volume and number of online loan originations, as well as
the dollar volume of online originations as a percentage of total originations
in the United States, as projected by Forrester Research.
<TABLE>
<CAPTION>
PROJECTED
ONLINE
ORIGINATIONS
PROJECTED ONLINE PROJECTED ONLINE AS % OF
ORIGINATIONS ORIGINATIONS TOTAL $
(DOLLARS IN BILLIONS) (IN THOUSANDS) ORIGINATIONS
--------------------- ---------------- ------------
1999 2003 1999 2003 1999 2003
-------- --------- ------ ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
Mortgage...................................... $18.7 $ 91.2 116 599 1.5% 9.6%
Credit Card................................... 5.2 21.5 990 3,674 4.3 16.3
Automobile.................................... 0.8 21.4 36 952 0.2 4.7
Home Equity................................... 1.0 20.2 25 422 0.6 11.4
Student....................................... -- 13.3 12 3,261 0.1 25.3
----- ------ ----- -----
Total......................................... $25.7 $167.6 1,179 8,908
===== ====== ===== =====
</TABLE>
LIMITATIONS OF TRADITIONAL LOAN PROCESS AND OTHER ONLINE LENDING MODELS
For lenders, the traditional lending process is paper-intensive and
time-consuming, usually accompanied by high fixed costs and labor expense. It
generally involves defining loan product guidelines for specific segments of
consumers and establishing a pre-determined price for which the consumer
applies. This inefficient process results in significant marketing and
processing costs. In addition, the traditional lending process increases the
time it takes to implement a given lending strategy, thereby reducing
flexibility and the ability to respond to competition.
For consumers, the traditional loan process is time-consuming, requires
completion of multiple forms and can often be frustrating and confusing.
Consumers typically search through a variety of loan products from many
different lenders, apply to one lender at a time for that lender's offered
price, and then wait for that lender to approve or reject the application.
Online lending sites of our competitors generally mirror the traditional lending
process. Consumers visit a website, view a list of loan products, apply for one
product from one lender, and are either approved or rejected. While the consumer
proposition presented by online lending websites is the same as the traditional
offline process, the business models for online lending websites fall into two
categories:
- Lender/Broker Model. The operators of these websites generate revenue in
the same way as traditional lenders -- from a mark-up over their cost of
capital, whether the source of capital is a lender, secondary market
purchaser, or warehouse line of credit. In exchange for these mark-ups,
the lender/broker undertakes all of the underwriting, processing,
verification, and customer interaction. In addition, to the extent the
lenders/brokers fund originated loans with their own capital, they are
directly exposed to interest rate fluctuations.
- Referral Agent Model. The operators of these websites typically generate
revenue by providing referrals to lenders. Because referral agents
typically do not generate any revenue upon loan closings, there is little
incentive for these companies to ensure that lenders and consumers
consummate the loan transaction.
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We believe that the inefficiencies of the traditional lending process and
the shortcomings of other online business models, combined with the large and
recurring nature of consumer loan demand, offer a substantial opportunity for
our marketplace business model.
THE LENDINGTREE MARKETPLACE SOLUTION
The LendingTree marketplace enables consumers to receive up to four loan
offers in response to a single credit request while providing lenders with the
opportunity to generate new business that meets their specific underwriting
criteria at reduced acquisition costs.
THE LENDINGTREE PROCESS
The LendingTree process consists of the following steps:
- Credit Request. Consumers access our website at www.lendingtree.com and
select a loan product from our current offering of five loan categories,
which include mortgage, home equity, automobile, credit card, and
personal loans. Consumers complete a single Qualification Form for the
selected loan product with information such as income, net worth, loan
term preferences, and other personal data. Consumers also consent to our
use of their credit history.
- Qualification Form Filtering and Transmission. Our proprietary filtering
process matches the consumers' Qualification Forms, credit profile, and
geographic location to the preset underwriting criteria provided by the
lenders in our network. Lenders are able to immediately modify their
underwriting criteria directly through our website. Once Qualification
Forms pass the filters, they are transmitted to up to four lenders.
- Lender Evaluation and Response. Lenders evaluate and respond to the
Qualification Forms that pass through their filters. Currently, lenders
respond to approximately 85% of the Qualification Forms they receive
within one business day. In most cases, lenders approve the Qualification
Form.
- Communication of Offer. Once a lender evaluates a Qualification Form,
renders a decision and responds with an offer, the LendingTree system
automatically notifies the consumer via e-mail. The e-mail contains
instructions to return to our website and provides instructions directing
them to our Check Status page where consumers can view and compare the
terms of each offer online, including: interest rate, closing costs,
monthly payment amount, and lenders' fees.
- Consumer Acceptance. The consumer has the ability to accept, reject, or
request more information about a loan offer. When the consumer selects
one of these options, the LendingTree system automatically notifies the
chosen lender and the remainder of the process is conducted offline. If
the consumer does not like any of the offers he or she can fill out a new
Qualification Form. However, consumers are prohibited from completing a
Qualification Form for the same loan type for 72 hours after they receive
responses from lenders.
- Ongoing Process Support. We provide active telephone follow-up and
support to both lenders and consumers during the loan transaction
process. This follow-up and support is designed to increase overall
satisfaction of the participants in our marketplace.
CONSUMER BENEFITS
Our marketplace provides important benefits to consumers, including:
- Price. Our growing network of more than 90 lenders fosters a competitive
bidding environment, encouraging lenders to price loan offers
aggressively as they compete for consumers' business.
- Consumer Service. Through the range of online information and tools
presented on our website, combined with our support and service, we aim
to reduce the confusion often experienced by consumers during the
borrowing process and the time that it takes to obtain loans.
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- Choice. We provide qualified consumers with up to four loan offers from
a national base of lenders.
- Convenience. In contrast to the traditional process of separately
applying to multiple local lenders for credit, our marketplace saves
consumers valuable time by enabling them to go online, complete one
Qualification Form, and receive multiple loan offers. In addition,
consumers can save a partially or fully completed Qualification Form and
return at a later time to complete the process or apply for another loan.
- Content. We provide consumers with educational materials about the
borrowing process, answers to frequently asked questions, informative
articles, and interactive loan calculators. Consumers can also purchase
related services, including credit reports and insurance.
- No Fees. Our service is free to consumers.
LENDER BENEFITS
Our marketplace provides important benefits to lenders, including:
- New Business. Leveraging the reach of the Internet, we provide lenders
with access to a significantly larger audience of qualified consumers.
- Lower Acquisition Costs. The fees we charge lenders are designed to be
less than the cost of acquiring customers through traditional and other
online channels. Additionally, our [i]close technology and integration
with our lenders' systems enables lenders to process credit requests more
efficiently and at significantly reduced costs.
- Market Information. Our involvement with lenders and consumers across
multiple credit categories provides us with valuable data about the
online lending marketplace. Within the guidelines of our privacy policy,
our account managers combine surveys, consumer feedback, and quarterly
reviews to provide valuable and timely information to lenders. We believe
that this enables our lenders to refine and improve their Internet
lending strategies and quickly respond to changing market conditions in
order to compete more effectively.
THE LENDINGTREE [i]CLOSE SOLUTION
We license our [i]close technology to other companies who create single and
multi-lender loan marketplaces. [i]close consists primarily of four integrated
technologies which we call our technology platform:
- Credit Request Forms. [i]close provides the lender with the
Qualification Form on a website where a consumer can complete the form.
- Proprietary Filtering Process. Once the consumer completes the
Qualification Form, [i]close technology processes the consumer's
information and directs it to a lender whose lending criteria matches the
borrower's loan profile.
- Lender Evaluation and Response. After receiving the consumer's credit
request, [i]close technology enables lenders to evaluate the consumer's
information and respond with loan offers.
- Viewing of Offers. [i]close allows consumers to return to a website and
view one or multiple offers online.
Current [i]close customers include Wachovia Bank, Fleet Bank, and priceline.com.
The benefits to our [i]close customers include:
- Minimal Upfront Cost. We believe that our proprietary technology results
in minimal upfront cost to lenders compared with internally developing a
web-based distribution channel. We believe that as lenders seek to
develop proprietary Internet capabilities, [i]close can meet their needs
in a faster, more cost-effective, and scalable manner.
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- Reduced Technology Obsolescence. We continually update [i]close as new
technologies develop. Lenders who use [i]close can take advantage of
these improvements and maintain the latest technology.
- Multi-lender Capability. We believe that over time, even single-lender
entities such as banks will consider offering other lenders' products on
their websites. Our [i]close solution is well-suited for this purpose.
For example, [i]close is utilized by PNC's Banking Center on the iVillage
community website where, in addition to access to PNC Bank, consumers
have access to our entire network of lenders. This multi-lender approach
not only increases consumer choice, but also provides additional
transaction revenue to the [i]close partner.
LENDINGTREE STRATEGY
Our mission is to be the predominant loan marketplace on the Internet. The
key elements of our strategy are to:
- STRENGTHEN LENDINGTREE'S POSITION AS A MULTI-PRODUCT LOAN
MARKETPLACE. We believe that no other loan marketplace or multi-lender
website offers the breadth of loan categories available on our website.
This multi-category strategy enables us to become consumers' primary
resource for all of their lifetime borrowing needs. We will continually
evaluate adding new loan products to our marketplace such as student
loans and small business loans. By becoming a consumer's primary lending
destination and fostering repeat usage we can increase revenue per
customer and decrease acquisition costs for each new loan.
- EXPAND LENDER COVERAGE AND PRODUCT OFFERINGS. We seek to provide
consumers throughout the United States with a competitive marketplace for
consumer credit products across a wide range of credit risk profiles. The
availability of multiple lenders for each type of loan product generally
provides qualified consumers with a choice of competitive offers. We
intend to expand our lender coverage by actively marketing our
marketplace solution to new lenders. We are also seeking to expand the
product offerings of lenders who are already participants in our network.
- EXPAND TRANSACTION VOLUME THROUGH ONLINE RELATIONSHIPS. We intend to
increase the number of transactions processed in our marketplace by
continuing to enter into agreements with online businesses that have a
high affinity to consumer lending. Currently we have contractual
relationships with well-known consumer Internet brands including
priceline.com, Autobytel.com and Bloomberg.com.
- INCREASE BRAND AWARENESS AND TRANSACTION VOLUME. We intend to
significantly expand our online and offline advertising to create
consumer awareness of LendingTree as the predominant online loan
marketplace and thereby build transaction volume. We are planning a major
advertising campaign in 2000 with the aim of making our marketplace "top
of mind" with consumers.
- ESTABLISH [I]CLOSE AS THE DOMINANT LOAN MARKETPLACE TECHNOLOGY. We
intend to increase our revenue by licensing [i]close to individual
lenders and other companies who create single and multi-lender websites.
We will do this through expansion of our sales force and industry-focused
marketing activities.
- INCREASE LOAN CLOSING RATES. We intend to increase loan closing rates
by:
- adding lenders to our network;
- increasing the level of automation of our lenders to shorten the loan
approval process; and
- continually improving our customer service and encouraging our
lenders to improve their customer service.
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LENDER RELATIONS
OUR LENDERS
During November 1999 we had more than 90 lenders participating in the
LendingTree marketplace across five principal products: mortgages, home equity,
automobile, credit card and personal loans. Below are the top lenders by closed
loan amount in each category for the month of October 1999. Collectively, these
lenders contributed 41.0% of our revenue for that month.
MORTGAGE
- CMP Mortgage
- iOwn.com
- mortgage.com
- MortgageSelect.com
- New Century
HOME EQUITY
- Bank One
- Citibank
- PNC Bank, FSB
- Provident Bank
- Sovereign Bank
AUTOMOBILE
- Auto Refinance Source, Inc.
- Giggo.com
- SmartFinance.com
- Sovereign Bank
- Synergy Federal Savings Bank
CREDIT CARD
- Aspire Card Services
- First USA
- Merrick Bank
PERSONAL LOANS
- Chase
- The Dime Savings Bank
- Sovereign Bank
- Synergy Federal Savings Bank
LENDER SALES AND MARKETING
Our sales force consists of three lender development teams that cover the
following consumer loan categories: mortgage and home equity; automobile; and
credit cards and personal loans. Each team targets and establishes relationships
with lenders to ensure an adequate array of credit products to meet consumer
demand.
Our lender marketing objective is to support our lender sales efforts by
increasing awareness of LendingTree within the lending community through trade
advertising, public relations, and attendance at trade shows and industry
conferences.
LENDER ACCOUNT MANAGEMENT
We strive to provide a high level of support and service to lenders who are
on the LendingTree network and those that license our [i]close technology. We
provide each lender with comprehensive training on our marketplace technology as
well as a dedicated support team after the lender has joined our network. We
regularly review our lenders' online lending processes and make recommendations
to improve their performance.
We have developed a "best practices" program that helps lenders achieve
high levels of customer service and make competitive loan offers. We believe
that the most successful lenders in our network adhere to the following best
practices including:
- use of dedicated in-house teams to monitor their online loan activities;
- rapid response to consumer credit requests;
- proactive solicitation of customer feedback; and
- personalized service through outbound call centers.
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PRODUCT LINES
Our marketplace offers consumers the opportunity to obtain the following
loan products:
- Home Mortgage. As of November 1, 1999, we had 68 lenders providing home
mortgage loans.
- Home Equity. As of November 1, 1999, we had 37 lenders providing home
equity loans.
- Automobile Loans. As of November 1, 1999, we had 12 lenders providing
automobile loans. Until recently, our marketing efforts have focused
primarily on real estate borrowers and lenders. We have only recently
begun to actively pursue additional automobile lenders. As we increase
our marketing focus on automobile lenders and consumers, we expect this
product category to represent a greater portion of our revenue.
- Credit Cards. As of November 1, 1999, we had three credit card issuers.
We are in the process of adding more credit card issuers that will
complement our strategy of target marketing specific demographic
segments, such as college students and other affinity groups.
- Personal Loans. As of November 1, 1999, we had five lenders providing
personal loans. While personal loans are not currently a significant
revenue source for us, this product may contribute a greater portion of
our revenue as we increase our marketing efforts on lenders and
consumers.
CUSTOMER SERVICE
We employ a staff of customer relations managers whose responsibilities
include:
- responding to consumers' questions about the status of their credit
request, how to use our website, and other frequently-asked questions;
and
- acting as a liaison between consumers and lenders, to ensure consumers
receive prompt service from lenders.
We actively evaluate the effectiveness of our customer service efforts. For
example, for incoming telephone calls, we monitor the average speed of answering
such calls, the average length of the call, and the average amount of time spent
performing work in response to the call. We also respond to e-mail from
consumers and respond generally within 36 hours. Many of the e-mails and
telephone calls from consumers provide feedback on the performance of our
lenders. As part of our best practices program, this information is shared
directly with our lenders, within the guidelines of our privacy policy, to
improve their services and performance on our network.
RELATIONSHIPS
We have established contractual relationships with a number of high-traffic
consumer websites that utilize our online loan marketplace technology. These
relationships include:
- priceline.com. We have formed a relationship with priceline.com to
provide a "name your price" service for mortgage and home equity loans.
Priceline.com has made an equity investment in LendingTree. See "Certain
Relationships and Related Transactions."
- Autobytel.com. We provide the technology platform for the automobile
financing center on the Autobytel.com website.
- Bloomberg.com. Consumers can access our marketplace directly through
Bloomberg's website.
- PNC Banking Center on iVillage.com. We are the exclusive loan
marketplace provider on the PNC Banking Center on iVillage.com.
CONSUMER MARKETING
Our principal marketing objectives are to build positive brand awareness
and increase volume on our marketplace. These efforts include offline
advertising, online advertising, and direct marketing. We also
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collect and analyze consumer data to enhance our consumer marketing programs,
subject to compliance with our privacy policy.
CONSUMER OFFLINE ADVERTISING
- Radio Advertising. Our radio advertising directly increases transaction
volume on our website as well as consumer awareness of the LendingTree
brand. Radio advertising also allows us to test new geographic markets
for their receptiveness to our consumer proposition. We select radio
markets based on a variety of factors, including population density,
housing starts, Internet-enabled users, and mortgage activity. To date,
we have used radio advertising in over 30 U.S. markets.
- Print Advertising. We promote the LendingTree brand through strategic
placements in daily news publications, as well as weekly, bi-weekly, and
monthly periodicals. We have advertised in publications such as The Wall
Street Journal, USA Today, The New York Times, and The Washington Post.
- Outdoor Advertising. We also employ outdoor advertising as part of our
overall advertising strategy. Our strategy includes the use of several
media including billboards, bus and train advertising, and airport
terminals.
CONSUMER ONLINE ADVERTISING
- Online Advertising and Sponsorships. We purchase online advertising and
sponsorships on selected websites with high affinity to consumer credit
such as websites relating to real estate and personal finance. We also
sponsor keywords on major search engines. For example, when a search is
made for the keywords "loan" or "mortgage," a LendingTree banner
advertisement may appear.
- The LendingTree Affiliate Network. A core part of our marketing strategy
is to utilize the thousands of websites that provide content about
products and services that are complementary to those that we offer. Our
objective is to make these websites sources of low-cost Qualification
Forms for LendingTree. The LendingTree affiliate network is our program
to engage these websites as marketing partners. We pay a marketing fee to
these affiliates in exchange for delivering consumer Qualification Forms.
More than 11,000 websites have joined the LendingTree affiliate network.
DIRECT MARKETING
We believe that direct marketing is especially effective to increase loan
closure rates and develop lifetime relationships with consumers. Our direct
marketing is conducted through a variety of channels, within the guidelines of
our privacy policy, including:
- Direct E-mail. We use e-mail to prompt consumers to visit our website,
communicate with consumers throughout the lending process, and promote
loan closing.
- Cross Selling. Through our cross-sell efforts, consumers have the
opportunity to purchase related products and services at various points
in the loan process. Current cross-sell offerings include credit cards,
homeowners' insurance, and life insurance. We intend to increase the
breadth of our cross-sell efforts.
COMPETITION
The market for online loan shopping and related services is new and rapidly
developing. We believe that we have an important first mover advantage, but
current and potential new competitors could establish online loan marketplaces
that are competitive with ours. In addition, we expect competition from:
- online lenders/brokers such as E-LOAN, mortgage.com, QuickenMortgage,
iOwn.com, and NextCard;
- traditional lenders and brokers, such as Washington Mutual and
Countrywide; and
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- existing online referral agents such as GetSmart, Microsoft's
HomeAdvisor, Creditland, and MortgageAuction.com.
Some of these competitors are also participants in our marketplace.
We believe that the primary competitive factors in the online financial
services market are:
- pricing and breadth of product offering;
- time of market entry;
- brand awareness;
- variety, quantity, and quality of partners and online relationships;
- proprietary and scalable technology infrastructure;
- ease of use and convenience; and
- strength of relationships and depth of technology integration with
customers.
Our success depends upon capturing and maintaining a significant share of
consumers who obtain loans through the Internet. In order to do this, we must
continue to build on our first mover advantage, continue to increase brand
awareness among consumers and lenders, expand our network of lenders, establish
additional relationships, and continually upgrade our technology. As described
elsewhere in this prospectus, we are planning to significantly increase our
advertising program during 2000. Many of our current competitors, however, have
longer operating histories, greater name recognition, larger customer bases, and
significantly greater financial, technical, and marketing resources than we do.
In addition, participants in other areas of the financial services industry may
enter the consumer loan marketplace.
TECHNOLOGY
Our marketplace is supported by a proprietary technology platform that was
designed with an emphasis on scalability, performance, reliability, and
security. We use standard Microsoft languages and development tools such as
Visual Basic and Active Server Pages; we also use C++ and Perl. We use
Microsoft's SQL Server as our database engine and our website and database
servers run on the Windows NT operating system. Communications to our website
are protected with Secure Sockets Layer, an industry-standard protocol that
provides data encryption, server authentication, and message integrity. Our
website servers and database servers are protected by firewalls that separate
them from the Internet. For the nine months ended September 30, 1999, and the
years ended December 31, 1998 and 1997, we spent approximately $0.8 million,
$1.1 million and $0.3 million, respectively, on company-sponsored research and
development activities.
As an Internet company, our operations may be subject to system failures or
other service interruptions, which could materially harm our reputation and
impair our ability to offer services. We have established procedures to minimize
the likelihood of service interruptions, including periodic equipment and
software testing, data monitoring, and maintaining error records. We have also
instituted and tested a contingency plan to limit the duration of any database
or other software-related system failure.
Our website is hosted by Digex at its facilities in Beltsville, Maryland
and Cupertino, California. Digex operates with redundant communication lines,
emergency power backup, and 24-hour monitoring and engineering support. Physical
access to all of our servers at Digex is strictly controlled by a state-of-
the-art physical security architecture utilizing multi-redundant mechanics,
utilities, and environmental controls.
PRIVACY POLICY
We believe that issues relating to privacy and use of personal information
relating to Internet users are becoming increasingly important as the Internet
and its commercial use grow. We have adopted a detailed privacy policy that
outlines how we use information concerning our consumers and the extent to
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which lenders and other third parties may have access to this information. This
policy is prominently noted on our website. We may be required to amend our
privacy policy in light of federal and state legislative developments, including
enactment of the Gramm-Leach-Bliley Act. We do not sell or rent any personally
identifiable information about our customers to any third party. We use the
information about our customers for internal purposes only in order to improve
our marketing and promotional efforts, to statistically analyze site usage, and
to improve content, product offering and site layout.
GOVERNMENT REGULATION
Many of the loan products available through our website are subject to
extensive regulation by various federal and state governmental authorities.
These rules impose restrictions on our marketing activities and compensation
arrangements with our participating lenders, many of whose activities are
similarly highly regulated. Federal and state rules regarding lending may, for
example:
- regulate the content of advertisements;
- limit the amount of fees we may receive from lenders and other websites;
- require additional disclosure to consumers;
- mandate protection of consumer privacy;
- regulate sales practices generally, including prohibiting discrimination;
and
- impose various qualification and licensing obligations on us.
Failure to comply with these requirements may result in, among other
things, revocation of required licenses or registrations, loss of approved
status, loss of exempt status, indemnification liability to lenders,
administrative enforcement actions, class action lawsuits, cease and desist
orders, and civil and criminal liability.
We believe we are in substantial compliance with these rules and
regulations, subject to the regulatory uncertainties discussed in the paragraphs
that follow. Our determination is based upon knowledge of our policies,
practices and procedures designed to achieve compliance with applicable laws and
regulations, including the employment of full-time in-house attorneys and
retention of external regulatory counsel, who advise us with respect to the
federal and state consumer protection laws and regulations applicable to our
operations.
As a computer loan origination system conducting business through the
Internet, we face an additional level of regulatory risk given the fact that
most statutes and regulations governing solicitation of lending transactions
have not been substantially revised or updated to fully accommodate electronic
commerce. Most of the federal and state laws, rules, and regulations governing
lending, for example, contemplate or assume paper-based transactions and do not
currently address the delivery of required disclosures and other documents
through electronic means. In addition, many of the federal and state rules
regarding licensing requirements and fees paid in connection with lending did
not originally contemplate that loan products would be made available through
non-lender third parties over the Internet. Until these laws, rules, and
regulations are revised to clarify their applicability to transactions conducted
through e-commerce, any company providing loan-related services through the
Internet or other means of e-commerce will face compliance uncertainty. In
addition, there is no assurance that revisions to the laws, rules, and
regulations will be adopted and, if adopted, will be timely or adequate to
eliminate this uncertainty. Management believes it has taken prudent steps to
mitigate these risks, as discussed in the preceding paragraph.
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.
LendingTree has obtained licenses to broker residential mortgage loans, or is
not required to be licensed, in the District of Columbia and all 50 states, with
the exceptions of New York and Delaware where applications are currently
pending. Similarly, LendingTree has obtained licenses to broker consumer
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<PAGE> 40
loans, or is not required to be licensed, in all 50 states, with the exceptions
of California, New Jersey and Ohio, where applications for consumer loan
licenses are pending, and Tennessee, where LendingTree cannot obtain a license
to broker consumer or home equity loans because of residency requirements of
that state. We are 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 we are licensed, we are subject to examination by
regulators.
In addition, any person who acquires 10% or more of our common stock may be
required to comply with applicable regulations promulgated by certain states
that may include requiring the person to periodically file financial information
and other personal and business information. If any person holding 10% or more
of our common stock refuses or fails to comply with these licensing
requirements, we may be unable to obtain a license or existing licensing
arrangements in particular states could be jeopardized. The inability to obtain,
or loss of, required licenses could have a material adverse effect on our
operations and financial condition.
In addition to licensing requirements, federal and state laws regulate
residential lending activities of brokers and lenders. At the federal level, our
services are regulated by the Truth in Lending Act and Regulation Z, the Equal
Credit Opportunity Act and Regulation B, the Fair Housing Act, the Fair Credit
Reporting Act, federal privacy laws, and the Real Estate Settlement Procedures
Act and Regulation X. These laws generally regulate the manner in which loan
services are made available, including advertising and other consumer
disclosures, payments for services, and the privacy and reporting of consumer
data. State and federal laws also prohibit unfair and deceptive trade practices
and require companies to adopt appropriate policies and practices to protect
consumer privacy.
Under the Truth in Lending Act, creditors are required to provide consumers
with uniform, understandable information concerning some of the terms and
conditions of loan and credit transactions being offered, which may include
disclosures in advertising. This particular federal law is generally applicable
to lenders and applies to us primarily in the context of advertising.
The Equal Credit Opportunity Act prohibits discrimination against
applicants on the basis of race, color, sex, age, religion, national origin, or
marital status, and the Fair Housing Act similarly prohibits discrimination in
residential lending. The regulations under the Equal Credit Opportunity Act also
restrict creditors from requesting various types of information from loan
applicants and require lenders to supply applicants with a notice, referred to
as an "adverse action notice," when the lender denies its applicants credit. Our
lenders are generally obligated to provide the required disclosures.
The Real Estate Settlement Procedures Act requires certain disclosures,
including a good faith estimate of closing costs and fees, as well as mortgage
servicing transfer practices. LendingTree believes that these requirements are
not applicable to its business as presently conducted. RESPA also prohibits the
payment or receipt of kickbacks or referral fees, fee shares or splits, or
unearned fees in connection with the provision of real estate settlement
services. It is a common practice for online financial service companies to
enter into advertising, marketing and distribution arrangements with other
Internet companies and websites whereby the financial service companies pay the
Internet companies fees for advertising, marketing and distribution services and
other goods and facilities based on a number of factors, including the number of
impressions, click-throughs, completed loan applications or closed loans derived
from these arrangements. The applicability of RESPA's referral fee prohibitions
to the compensation provisions of these arrangements is unclear and the
Department of Housing and Urban Development has provided limited guidance to
date on the subject. Although LendingTree believes that it has structured its
relationships with Internet advertisers, marketers and distributors to comply
with RESPA, some level of risk is inherent absent amendments to the law or
regulations, or clarification from regulators. In addition, the applicability of
referral fee prohibitions to the compensation provisions on arrangements used by
online companies like us may have the effect of reducing the types and amount of
fees that we may charge or pay in connection with real-estate secured products.
The Fair Credit Reporting Act is a consumer privacy statute that generally
governs the assemblage, evaluation, maintenance, and dissemination of
information on consumers that has been collected for the
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<PAGE> 41
purpose of evaluating their qualifications for credit. The Fair Credit Reporting
Act also requires that users of consumer credit reports notify consumers when
their loan applications are denied on the basis of those consumer credit
reports. In addition, recent consumer privacy legislation enacted as part of the
Gramm-Leach-Bliley Act will restrict the dissemination of nonpublic consumer
information to nonaffiliated third parties absent consumer consent and will
require regulated institutions to maintain privacy policies when it becomes
effective during 2000.
At the state level, consumer protection laws applicable to LendingTree vary
by state, but typically regulate disclosures in advertising, require disclosures
and notices, prohibit unfair and deceptive trade practices and restrict
dissemination of non-public consumer information. The laws, rules and
regulations applicable to us undergo periodic modification and change.
Periodically, various laws, rules, and regulations are proposed, which, if
adopted, could impact us. These proposed laws, rules, and regulations, or other
applicable laws, rules, or regulations, if adopted, could make compliance more
difficult or expensive, restrict our ability to provide lending services,
further limit or restrict the amount of fees charged by us, or otherwise
adversely affect our business or prospects.
INTELLECTUAL PROPERTY
We regard our intellectual property as critical to our success. We rely on
a combination of patent, trademark and copyright law, and trade secret
protection to protect our proprietary rights. We pursue the protection of our
intellectual property in part through trademark and copyright registration. We
have registered "LendingTree" as a trademark in the United States and have
applied for trademark registration in the United States for "[i]close." We
consider the protection of our trademarks to be important for maintenance of our
brand identity and reputation. We cannot assure you that any of these
registrations or applications will not be successfully challenged by others or
invalidated through administrative process or litigation. Further, if our
trademark applications are not approved or granted due to the prior issuance of
trademarks to third parties or for other reasons, there can be no assurance that
we would be able to enter into arrangements with such third parties on
commercially reasonable terms allowing us to continue to use such trademarks. We
have applied for a U.S. patent and filed a Patent Cooperation Treaty
international patent application on our [i]close technology and our online loan
market process. It is possible that our patent applications will be 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 us
to defend LendingTree against third-party claims of patent infringement.
Further, effective patent, trademark, copyright, and trade secret protection may
not be available in every country in which we may offer our services.
A substantial portion of our intellectual property is licensed to third
parties. We license the right to use [i]close to well-known regional and
national lenders, other online companies that create single and multi-lender
online marketplaces, and consumer websites providing lending services. In
addition, a portion of the intellectual property used in our business is based
on licenses granted to us by third parties. We depend on the third party owners
from whom we license intellectual property and technology to protect those
rights, and therefore, cannot guarantee that the measures taken by these third
parties to protect their proprietary rights will be sufficient. In these
agreements, the licensors have generally agreed to defend, indemnify and hold us
harmless with respect to any claim by a third party that the licensed property
infringes any patent or other proprietary right. We cannot assure you that these
provisions will be adequate to protect us from infringement claims.
In addition, we seek to protect our proprietary rights through the use of
confidentiality agreements and other contractual arrangements with our
employees, affiliates, clients, [i]close licensees, and others. We cannot assure
you that these agreements will provide adequate protection for our proprietary
rights in the event of any unauthorized use or disclosure, that employees of our
affiliates, clients, [i]close licensees, or others will maintain the
confidentiality of such proprietary information, or that such proprietary
information will not otherwise become known, or be independently developed, by
competitors. Occasionally, we have been, and expect to continue to be, subject
to claims in the ordinary course of our business, including claims alleging that
we have violated a patent or infringed a copyright, trademark or
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<PAGE> 42
other proprietary right belonging to a third party. We cannot assure you that
the steps we have taken to protect our proprietary rights will be adequate or
that third parties will not infringe or misappropriate our proprietary rights.
Any infringement claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources on our part, which
could materially adversely affect our business, results of operations, and
financial condition.
EMPLOYEES
As of December 31, 1999, we had 125 full-time employees. Of these, 31 were
in lender and borrower relations, 33 were in sales, marketing, and business
development, 33 were in technology and project management, 19 were in financial
and legal, and the remainder were in human resources and administrative
positions. None of our employees is represented under collective bargaining
agreements. We consider our relations with our employees to be good.
FACILITIES
Our principal executive offices are currently located in approximately
16,000 square feet of office space in Charlotte, North Carolina under a lease
that expires in 2002. We recently entered into a lease for approximately 38,000
square feet of office space in Charlotte for a 10-year term. We have also
entered into a contract to sublease our current office space.
LEGAL PROCEEDINGS
There are currently no material legal proceedings pending or, to our
knowledge, threatened against us.
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<PAGE> 43
MANAGEMENT
The following table sets forth, as of December 31, 1999, the name, age and
position within LendingTree of each of our directors, executive officers and key
employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Douglas Lebda................................... 29 Chief Executive Officer and Director
Keith Hall...................................... 46 Senior Vice President and Chief Financial
Officer
David Anderson.................................. 34 Senior Vice President of Operations
James Bennett, Jr. ............................. 31 Senior Vice President of Strategy and Corporate
Development
Richard Stiegler................................ 43 Chief Technology Officer
Steve Campbell.................................. 35 Chief Information Officer
Robert Flemma, Jr............................... 39 Vice President and General Counsel
Thomas Reddin................................... 39 Chief Marketing Officer
Virginia Rebata................................. 46 Senior Vice President of Human Resources
James Carthaus.................................. 59 Director
Richard Field................................... 59 Director
Robert Kennedy.................................. 64 Director
Daniel Lieber................................... 37 Director
Adam Mizel...................................... 30 Director
W. James Tozer, Jr. ............................ 58 Director
Robert Wilson................................... 65 Chairman Emeritus
</TABLE>
DOUGLAS LEBDA founded LendingTree in June 1996. He has served as Chief
Executive Officer and a Director since September 1998. Prior to that time, Mr.
Lebda served as Chairman of the Board and President. Prior to founding
LendingTree, Mr. Lebda was with Price Waterhouse in various capacities since
1992.
KEITH HALL is Senior Vice President and Chief Financial Officer. From 1997
until 1999, Mr. Hall was the chief financial officer of Broadway & Seymour,
Inc., a software product and services firm. Beginning in 1995, Mr. Hall was the
chief financial officer of Legent Corporation, a software company. Between 1983
and 1995 Mr. Hall worked in various financial positions at United Technologies
Corporation, including chief financial officer at Carrier North America. Mr.
Hall has been with LendingTree since June 1999.
DAVID ANDERSON is Senior Vice President of Operations. From June 1988 until
March 1999, Mr. Anderson worked in various capacities at American Management
Systems Inc., an international business and information technology consulting
company, most recently as a senior principal. Mr. Anderson has been with
LendingTree since March 1999.
JAMES BENNETT, JR. is Senior Vice President of Strategy and Corporate
Development. From November 1996 until May 1998, Mr. Bennett was the vice
president for electronic development in the entertainment, communications, and
media group of Cahners Publishing. In June 1994, Mr. Bennett founded BookWire, a
business-to-business news and information website for the book publishing trade
and acted as publisher until November 1996. Mr. Bennett is a co-founder of
LendingTree and joined LendingTree full-time in May 1998. Mr. Bennett served as
a Director of LendingTree from June 1996 until September 1999.
RICHARD STIEGLER is Chief Technology Officer. From 1993 until 1997, Mr.
Stiegler served as vice president of Advanced Technology at Greenwich Capital
Markets. From 1987 until 1993, Mr. Stiegler was a vice president at Morgan
Stanley. Mr. Stiegler has been with LendingTree since November 1997.
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STEVE CAMPBELL is Chief Information Officer. From 1987 until November 1999,
Mr. Campbell worked in various capacities with American Management Systems Inc.,
an international business and information technology consulting company, most
recently as the director of Software Development for the Consumer Financial
Services Group. Mr. Campbell has been with LendingTree since November 1999.
ROBERT FLEMMA, JR. is Vice President and General Counsel. From 1998 to
1999, Mr. Flemma was a private investor. From 1986 to 1997, Mr. Flemma was an
attorney at Whyte Hirschboeck Dudek S.C., where he was a partner and the
administrative head of the firm's consumer finance law team. Mr. Flemma joined
LendingTree in October 1999.
THOMAS REDDIN is Chief Marketing Officer. From 1995 to 1999, he was vice
president, consumer marketing for Coca-Cola USA. Mr. Reddin was responsible for
leading the strategy and all marketing activities for Coca-Cola. Prior to
joining the Coca-Cola Company, Mr. Reddin spent 13 years with Kraft General
Foods in various brand management capacities. Mr. Reddin joined LendingTree in
December 1999.
VIRGINIA REBATA is Senior Vice President of Human Resources. Ms. Rebata has
over twenty years of human resources management experience. From 1998 to 1999,
Ms. Rebata was senior vice president of human resources for Planet Hollywood
International, Inc., an international restaurant chain. From 1997 to 1998, she
served as senior vice president of human resources of Fortis, Inc., a financial
services company. Prior to 1997, Ms. Rebata spent 13 years as vice president of
human resources for the Marriott Management Services Division of Marriott
International, an international hotel chain. Ms. Rebata joined LendingTree in
December 1999.
JAMES CARTHAUS has been a Director since December 1998 and is Chairman of
LendingTree's compensation committee. Since 1989, Mr. Carthaus has been the
chairman of a New York investment bank, Scott-Macon, Ltd. He is a former officer
of Citibank, a vice president and senior lending officer of a predecessor of
FleetBoston Financial and an executive vice president and director of Shearson
Lehman Brothers where he headed its financial services division. Mr. Carthaus is
currently a director and chairman of the investment committee of The Franciscan
Sisters of The Poor Foundation, Inc.
RICHARD FIELD has been a Director since August 1997. From 1978 until 1997,
Mr. Field worked at The Bank of New York in various capacities, most recently as
senior executive vice president of retail banking and a member of its policy
committee. Prior to 1978, Mr. Field served in various marketing capacities at
Chase Manhattan Corporation and Citicorp. Mr. Field is also a former member of
the executive committee for MasterCard International's board of directors and
the former chairman of MasterCard's U.S. board of directors.
ROBERT KENNEDY has been a Director since December 1998. Mr. Kennedy has
been the director of special projects at The Union Labor Life Insurance Company
since 1994. Mr. Kennedy is currently a director of SuperShuttle International,
Inc. and is a member of the advisory board of Euclid Funds.
DANIEL LIEBER has been a Director since September 1999. Mr. Lieber is a
partner at Equifin Capital Management, an investment firm, where he has worked
since October 1998. Prior to joining Equifin, Mr. Lieber was a senior vice
president at AT&T Capital. From 1995 to 1997, Mr. Lieber was a senior vice
president with GE Capital Services, RFS Ventures Group. Between 1993 and 1995,
he was employed as a vice president in the Management Consulting Group at
Bankers Trust.
ADAM MIZEL has been a Director since September 1999. Mr. Mizel co-founded
Capital Z Partners, an investment firm, in 1998 where he is currently a partner.
From 1994 to 1998, Mr. Mizel was a Managing Director of Zurich Centre
Investments, Inc.
W. JAMES TOZER, JR. has been a Director since August 1997. Since 1990, Mr.
Tozer has been the managing director of Vectra Management Group, a real estate
firm. He is a former senior vice president of Citibank, senior executive vice
president of Shearson Hayden Stone, senior executive vice president of Marine
Midland Bank, and president of Prudential-Bache Securities. He is chairman of
the executive committee of Draper Bank and Trust and was co-founder of Vectra
Bank of Colorado.
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ROBERT WILSON is Chairman Emeritus. Mr. Wilson joined LendingTree shortly
after its founding. Between April 1997 and September 1999 he served in various
capacities, including chief executive officer, chairman of the board, and chief
financial officer. Following an active role in business development and capital
raising, Mr. Wilson retired from LendingTree in September 1999 and continues to
serve as a consultant. Mr. Wilson was a general partner at Goldman Sachs for 17
years, including three years as a president and managing director of Goldman,
Sachs International. He is currently a director of the Phoenix Home Life Mutual
Insurance Co., WorkPlus.com, inc. and co-founder and chairman of QuoteShip.com,
Inc. Mr. Wilson also serves on the International Advisory Board of BlueStone
Capital Partners, LP.
Several of our directors were elected to the board as designees of specific
stockholders pursuant to a stockholders' agreement that terminates as of the
closing of this offering. Adam Mizel and Dan Lieber were designated by Capital Z
Partners, Robert Kennedy was designated by The Union Labor Life Insurance
Company, and W. James Tozer, Jr. was designated by Richard Field and himself.
CLASSES OF DIRECTORS
We will adopt a provision in our certificate of incorporation which will
divide our board of directors into three classes, denominated as Class I, Class
II and Class III. Members of each class hold office for staggered three-year
terms. At each annual meeting of the stockholders of LendingTree commencing in
2001, the successors to the directors whose term expires at that meeting will be
elected to serve until the third annual meeting after their election or until
their successor has been elected and qualified. Messrs. Field and Tozer will
serve as Class I directors whose terms expire at the 2001 annual meeting of
stockholders. Messrs. Carthaus, Lieber, and Kennedy will serve as Class II
directors whose terms expire at the 2002 annual meeting of stockholders. Messrs.
Lebda and Mizel will serve as Class III directors whose terms expire at the 2003
annual meeting of stockholders. With respect to each class, a director's term
will be subject to the election and qualification of their successors, or their
earlier death, resignation or removal. These provisions, when taken in
conjunction with other provisions of our amended and restated certificate of
incorporation authorizing the board of directors to fill vacant directorships,
may delay a stockholder from removing incumbent directors and simultaneously
gaining control of the board of directors by filling the vacancies with its own
nominees.
BOARD COMMITTEES
The board of directors has a compensation committee that reviews and
recommends to the board the compensation arrangements provided to the management
of LendingTree and administers the stock option plan. The members of the
compensation committee are James Carthaus and Adam Mizel.
The board of directors has an audit committee that reviews LendingTree's
annual audit and meets with LendingTree's independent auditors to review
LendingTree's internal controls and financial management practices. The members
of the audit committee are Richard Field, Daniel Lieber, and Robert Kennedy.
DIRECTOR COMPENSATION
We do not currently pay cash fees to our directors for attending board or
committee meetings, but we reimburse directors for their reasonable expenses
incurred in connection with attending these meetings. Each non-employee director
who holds less than one percent of the common stock as of the closing of this
offering will be granted an option under the Amended and Restated 1999 Stock
Incentive Plan to purchase 15,000 shares of common stock. Following this
offering, a new non-employee director will be granted an option to purchase
15,000 shares of common stock upon his or her first election or appointment to
the board of directors, if he or she holds less than one percent of the common
stock at the time of his or her first election or appointment. In addition,
immediately following each annual stockholders' meeting following this offering,
each non-employee director who holds less than one percent of the common stock
at that time will be granted an option to purchase 5,000 shares of common stock.
These grants are
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<PAGE> 46
described more fully below, at "Executive Compensation -- Amended and Restated
1999 Stock Incentive Plan -- Outside Director Options."
Our directors are eligible to participate in a deferred compensation
program whereby a director may defer the income from the exercise of his or her
stock options. Under that plan, in the event of a change in control, the plan
may not be adversely amended for at least two years, and we will be required to
fund a so-called "rabbi trust" sufficiently to pay the deferred compensation.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth information concerning
compensation earned in 1999 by our Chief Executive Officer and the remaining
four most highly compensated executive officers as of the end of 1999 whose
salary and bonus for that year exceeded $100,000. Also included is information
with respect to two additional individuals who would have been named in the
Summary Compensation Table for 1999 except for the fact that they were not
executive officers as of the end of 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTION/ ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) SARS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($) ($) (#) (#) ($)
- --------------------------- -------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas Lebda(1)............... $154,000 $100,000 $-- -- 190,500
Chief Executive Officer
Keith Hall(2).................. 79,000 62,500 -- -- 114,300
Senior Vice President and
Chief Financial Officer
David Anderson(3).............. 96,000 78,000 -- -- 114,300 20,000
Senior Vice President of
Operations
James Bennett, Jr.............. 117,000 58,000 -- -- 114,300 1,000
Senior Vice President of
Strategy and Corporate
Development
Richard Stiegler(4)............ 120,000 122,000(7) -- -- --
Chief Technology Officer
Mitchell York(5)............... 101,000 25,000 -- -- -- 33,750(8)
Robert Wilson(6)............... 88,000 -- -- -- -- 31,000(9)
</TABLE>
- ---------------
(1) On January 6, 2000, the compensation committee of the board of directors
approved an increase of Mr. Lebda's annual salary from $200,000 to $250,000.
(2) Mr. Hall joined LendingTree in June 1999.
(3) Mr. Anderson joined LendingTree in March 1999.
(4) On January 6, 2000, the compensation committee of the board of directors
approved an increase of Mr. Stiegler's annual salary from $120,000 to
$185,000.
(5) Mr. York terminated his employment with LendingTree effective as of October
1, 1999.
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<PAGE> 47
(6) Mr. Wilson resigned his positions with LendingTree effective as of September
20, 1999. He is currently providing consulting services to LendingTree for
annual compensation of $100,000 and reimbursable expenses.
(7) At our election up to one-half of Mr. Stiegler's bonus may be paid in common
stock equal in value to that portion of the bonus. In 1999, $58,000 of Mr.
Stiegler's bonus was paid in common stock.
(8) Amounts consist of amounts earned in 1999 pursuant to his agreement with us
described under "Employment/Consulting Arrangements -- Agreement with Mr.
York."
(9) Amounts consist of consulting fees and reimbursable expenses earned in 1999
pursuant to his agreement with us described under "Employment/Consulting
Arrangements -- Consulting Agreement with Mr. Wilson."
The following table sets forth information concerning individual grants of
stock options made in 1999 to each of the officers and former officers named in
the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
--------------------------------------------------------- RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTION/SARS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- -------------- ---------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Douglas Lebda........ 190,500(2) 18.5% $6.06 09/02/09 $2,201,125 $4,102,438
Keith Hall........... 76,200(3) 11.1 4.72 06/14/09 968,876 1,701,415
38,100(4) 5.51 09/01/09 461,180 841,443
David Anderson....... 19,050(5) 11.1 4.72 03/15/09 238,192 413,221
95,250(6) 5.51 09/01/09 1,152,950 2,103,607
James Bennett, Jr.... 114,300(7) 11.1 5.51 09/01/09 1,383,540 2,524,328
Richard Stiegler..... --(8) -- -- -- --
Mitchell York........ 101,600(9) 11.1 4.72 (9) 787,344 950,173
12,700(10) 4.72 10/01/03 107,722 139,585
Robert Wilson........ 76,200(11) 7.4 5.20 08/10/07 817,636 1,331,658
</TABLE>
- ---------------
(1) All options, other than the grant to Mr. York relating to 12,700 shares of
common stock, were granted under LendingTree's 1998 Stock Option Plan,
which is described below, under "Stock Plans -- 1998 Stock Option Plan."
All options granted to Messrs. Lebda, Hall, Anderson, and Bennett have a
term of ten years and become vested in equal installments on each of the
first four anniversaries of the date of grant, except for the grant to Mr.
Anderson relating to 19,050 shares, which will become vested on each of the
first three anniversaries of the date of grant.
(2) 32,987 of the shares covered by the option will be eligible for incentive
stock option treatment, and the remainder of the shares will be subject to
the rules for non-qualified stock options. On January 6, 2000, LendingTree
granted an option to Mr. Lebda for 158,750 shares of common stock at an
exercise price of approximately $9.25 per share. This option expires
January 6, 2010. 13,753 of the shares covered by this option will be
eligible for incentive stock option treatment, and the remainder of the
shares will be subject to the rules for non-qualified stock options.
(3) All of the shares covered by the option will be eligible for incentive
stock option treatment.
(4) 7,254 of the shares covered by the option will be eligible for incentive
stock option treatment, and the remainder of the shares will be subject to
the rules for non-qualified stock options. On January 6, 2000, LendingTree
granted an option to Mr. Hall for 38,100 shares of common stock at an
exercise
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<PAGE> 48
price of approximately $9.25 per share. This option expires January 6,
2010. 9,525 of the shares covered by this option will be eligible for
incentive stock option treatment, and the remainder of the shares will be
subject to the rules for non-qualified stock options.
(5) All of the shares covered by the option will be eligible for incentive
stock option treatment.
(6) 56,242 of the shares covered by the option will be eligible for incentive
stock option treatment, and the remainder of the shares will be subject to
the rules for non-qualified stock options. On January 6, 2000, LendingTree
granted an option to Mr. Anderson for 12,700 shares of common stock at an
exercise price of approximately $9.25 per share. This option expires
January 6, 2010. 3,175 of the shares covered by this option will be
eligible for incentive stock option treatment, and the remainder of the
shares will be subject to the rules for non-qualified stock options.
(7) 56,242 of the shares covered by the option will be eligible for incentive
stock option treatment, and the remainder of the shares will be subject to
the rules for non-qualified stock options.
(8) On January 6, 2000, LendingTree granted an option to Mr. Stiegler for
38,100 shares of common stock at an exercise price of approximately $9.25
per share. This option expires January 6, 2010. 35,059 of the shares
covered by this option will be eligible for incentive stock option
treatment, and the remainder of the shares will be subject to the rules for
non-qualified stock options.
(9) This grant was made as consideration for the cancellation of an incentive
stock option relating to 101,600 shares of common stock. The new option's
exercise price per share is the same as the exercise price per share of the
cancelled option. The vesting schedule and term of this option is the same
as the vesting schedule of the cancelled option, as follows:
- as to the 38,100 shares which vested on September 9, 1999, the
expiration date is September 9, 2001;
- as to the 38,100 shares which vest on September 9, 2000, the expiration
date is September 9, 2002; and
- as to the 25,400 shares which vest on September 9, 2001, the expiration
date is September 9, 2003.
Other terms of this option are described under "Employment/Consulting
Arrangements -- Agreement with Mr. York."
(10) This grant was made as consideration for the cancellation of a previously
granted non-qualified stock option relating to 12,700 shares of common
stock and was not granted under the terms of any of LendingTree's option
plans. The new option's exercise price per share is the same as the
exercise price per share of the cancelled option and the option is fully
exercisable as of the date of grant.
(11) This grant was made as consideration for the cancellation of a previously
granted non-qualified stock option relating to 76,200 shares of common
stock. The new option's exercise price per share is the same as the
exercise price per share of the cancelled option and the option is fully
exercisable as of the date of grant.
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The following table sets forth information concerning the exercise of stock
options during 1999 by the officers and former officers named in the Summary
Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES ACQUIRED VALUE FISCAL YEAR-END FISCAL YEAR-END
NAME ON EXERCISE (#) REALIZED ($) EXCERCISABLE/UNEXERCISABLE (#) EXCERCISABLE/UNEXERCISABLE ($)
- ---- --------------- ------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Douglas Lebda........ -- $ -- 123,093/241,300 $1,082,027/$1,235,300
Keith Hall........... -- -- 0/114,300 0/687,300
David Anderson....... -- -- 0/114,300 0/642,300
James Bennett, Jr.... -- -- 19,056/133,350 119,550/746,850
Richard Stiegler..... -- -- 46,567/16,933 417,636/106,264
Michell York......... 25,400 159,400 50,800/63,500 318,800/398,500
Robert Wilson........ -- -- 80,853/0 486,718/0
</TABLE>
STOCK PLANS
1997 STOCK OPTION PLAN
On January 15, 1997, we adopted the 1997 Stock Option Plan of LendingTree,
Inc., as amended through January , 2000. The purpose of the plan is to promote
our long-term growth and profitability by providing key people with incentives
to improve stockholder value and to contribute to our growth and financial
success and enabling us to attract, retain, and reward the best available
persons for positions of substantial responsibility.
GENERAL. A maximum of 1,556,890 shares of common stock is reserved for
issuance under the plan, subject to equitable adjustment upon the occurrence of
any stock dividend or other distribution, stock split, merger, consolidation,
combination, share repurchase or exchange, or other similar corporate
transaction or event. If an option granted under the plan expires or is
terminated for any reason without being exercised, the shares of common stock
underlying the grant will again be available for purposes of the plan. It is
currently anticipated that no further grants will be made under this plan.
ADMINISTRATION. The plan is administered by the compensation committee of
the board of directors. The compensation committee has full authority to
determine the persons to whom options will be granted, the type of options to be
granted, the number of shares to be made subject to options, the exercise price
and other terms and conditions of the options, and to interpret the plan and
prescribe, amend and rescind rules and regulations relating to the plan. Members
of the compensation committee who are either eligible for awards of stock
options or have been given stock options may vote on any matters affecting the
administration of the plan or the grant of options pursuant to the plan, except
that no such member may act upon the granting of an option to himself or
herself.
GRANTS. Options granted under the plan may be either "incentive stock
options," as such term is defined in Section 422 of the Internal Revenue Code,
or non-qualified stock options.
ELIGIBILITY. Options may be granted under the plan to employees,
directors, including directors who are not employees, and consultants, as
selected by the committee.
TERMS AND CONDITIONS OF OPTIONS. The exercise price of a stock option
granted under the plan was determined by the committee at the time the option
was granted, and the exercise price of an incentive stock option is not less
than the fair market value per share of common stock on the date of grant. Stock
options are exercisable at the times and upon the conditions that the committee
has determined, as reflected in the applicable option agreement. The exercise
period may not exceed 10 years from the date of grant.
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Unless earlier terminated pursuant to the provisions of the plan or the
grant agreement, options will terminate in their entirety, whether vested in
whole or in part, three years after the date the grantee is no longer employed
by or providing services to us for any reason other than death, disability or
retirement. If a grantee's employment or service terminates for cause, all
options held by the grantee will terminate upon termination. In the event that
the employment or service of a grantee terminates as a result of death,
disability or retirement, all options that are not exercisable at the time of
termination will terminate and all options that are exercisable at the time of
termination may be exercised for a period of three years immediately following
termination, but in no case after the options expire in accordance with their
terms.
In the event of a proposed change in control, the compensation committee
may:
- accelerate or change the exercise dates of any option;
- make arrangements with grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option;
and
- in any case where equity securities other than our common stock are
proposed to be delivered in exchange for or with respect to our common
stock, make arrangements providing that any option may become one or more
options with respect to such other securities.
In the event a change in control occurs, the vesting of any option that is
time-based only will be accelerated so that the unvested time-based portion of
the option will become 50% vested and exercisable.
In the event we dissolve or liquidate, other than pursuant to a plan of
merger or reorganization, then notwithstanding any restrictions on exercise set
forth in the plan or any option agreement:
- grantees will have the right to exercise their options at any time up to
10 days prior to the effective date of the liquidation or dissolution,
after which time all options will expire; and
- the committee may make arrangements with the grantees for the payment to
them of appropriate consideration for the cancellation and surrender of
any option that is canceled or surrendered at any time up to 10 days
prior to the effective date of the liquidation or dissolution.
1998 STOCK OPTION PLAN
On February 3, 1998, we adopted the 1998 Stock Option Plan of LendingTree,
Inc., effective as of the same date. The purpose of the plan is to promote our
long-term growth and profitability by providing key people with incentives to
improve stockholder value and to contribute to our growth and financial success
and enabling us to attract, retain and reward the best available persons for
positions of substantial responsibility.
GENERAL. A maximum of 1,187,450 shares of common stock is reserved for
issuance under the plan, subject to equitable adjustment upon the occurrence of
any stock dividend or other distribution, stock split, merger, consolidation,
combination, share repurchase or exchange, or other similar corporate
transaction or event. If an option granted under the plan expires or is
terminated for any reason without being exercised, the shares of common stock
underlying such grant will again be available for purposes of the plan. It is
currently anticipated that no further grants will be made under this plan.
ADMINISTRATION. The plan is administered by the compensation committee of
the board of directors. The compensation committee has full authority, subject
to the provisions of the plan, among other things, to determine the persons to
whom options will be granted, the type of options to be granted, the number of
shares to be made subject to options, the exercise price and other terms and
conditions of the options, and to interpret the plan and prescribe, amend and
rescind rules and regulations relating to the plan. Members of the compensation
committee who are either eligible for awards of stock options or have been given
stock options may vote on any matters affecting the administration of the plan
or the grant of options pursuant to the plan, except that no such member may act
upon the granting of an option to himself or herself.
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<PAGE> 51
GRANTS. Options granted under the plan may be either "incentive stock
options," as such term is defined in Section 422 of the Internal Revenue Code,
or non-qualified stock options.
ELIGIBILITY. Options may be granted under the plan to employees,
directors, including directors who are not employees, and consultants, as
selected by the committee.
TERMS AND CONDITIONS OF OPTIONS. The exercise price of a stock option
granted under the plan was determined by the committee at the time the option
was granted, and the exercise price of an incentive stock option was not less
than the fair market value per share of common stock on the date of grant. Stock
options are exercisable at the times and upon the conditions that the committee
has determined, as reflected in the applicable option agreement. The exercise
period may not exceed 10 years from the date of grant.
Unless earlier terminated pursuant to the provisions of the plan or the
grant agreement, options will terminate in their entirety, whether vested in
whole or in part, three years after the date the grantee is no longer employed
by or providing services to us for any reason other than death, disability or
retirement. If a grantee's employment or service terminates for cause, all
options held by the grantee will terminate upon termination. In the event that
the employment or service of a grantee terminates as a result of death,
disability or retirement all options that are not exercisable at the time of
termination will terminate and all options that are exercisable at the time of
termination may be exercised for a period of three years immediately following
termination but in no case after the options expire in accordance with their
terms.
In the event of a proposed change in control, the compensation committee
may:
- accelerate or change the exercise dates of any option;
- make arrangements with grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any option;
and
- in any case where equity securities other than our common stock are
proposed to be delivered in exchange for or with respect to our common
stock, make arrangements providing that any option may become one or more
options with respect to such other securities.
In the event a change in control occurs, the vesting of any option that is
time-based only will be accelerated so that the unvested time-based portion of
the option will become 50% vested and exercisable.
In the event we dissolve or liquidate, other than pursuant to a plan of
merger or reorganization, then notwithstanding any restrictions on exercise set
forth in the plan or any option agreement:
- grantees will have the right to exercise their options at any time up to
10 days prior to the effective date of such liquidation and dissolution,
after which time all options will expire; and
- the compensation committee may make arrangements with the grantees for
the payment to them of appropriate consideration for the cancellation and
surrender of any option that is canceled or surrendered at any time up to
10 days prior to the effective date of such liquidation and dissolution.
AMENDED AND RESTATED 1999 STOCK INCENTIVE PLAN
On September 21, 1999 we adopted, and on November 16, 1999, our
shareholders approved, the 1999 Stock Option Plan of LendingTree, Inc.,
effective as of the same date. On January , 2000, we adopted, and on January
, 2000, our stockholders approved an amendment and restatement of that plan,
which was renamed the Amended and Restated 1999 Stock Incentive Plan of
LendingTree, Inc., effective as of the same date. The purpose of the plan is to
promote our long-term growth and profitability by providing key people with
incentives to improve stockholder value and to contribute to our growth and
financial success and by enabling us to attract, retain and reward the best
available persons for positions of substantial responsibility.
GENERAL. The compensation committee has reserved for issuance under the
plan a maximum of 2,286,000 shares of common stock, subject to equitable
adjustment upon the occurrence of any stock dividend or other distribution,
stock split, merger, consolidation, combination, share repurchase or
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<PAGE> 52
exchange, or other similar corporate transaction or event. If an award granted
under the plan expires or is terminated for any reason, the shares of common
stock underlying the award will again be available for purposes of the plan.
TYPES OF AWARDS. The following awards may be granted under the plan:
- stock options, including incentive stock options and nonqualified stock
options;
- restricted stock;
- phantom stock;
- stock bonuses; and
- other stock-based awards.
ADMINISTRATION. The plan is administered by the compensation committee of
the board of directors. The committee has full authority, subject to the
provisions of the plan, among other things, to determine the persons to whom
awards will be granted, to determine the type of award to be granted, the number
of shares to be made subject to awards, the exercise price and other terms and
conditions of the awards, and to interpret the plan and prescribe, amend and
rescind rules and regulations relating to the plan. The board of directors or
the committee may delegate to any of our senior management the authority to make
grants of awards to our employees who are not executive officers or directors of
LendingTree.
ELIGIBILITY. Awards may be granted under the plan to employees, directors,
including directors who are not employees, and consultants of LendingTree or any
of our affiliates, as selected by the committee.
TERMS AND CONDITIONS OF OPTIONS. Stock options may be either "incentive
stock options," as that term is defined in Section 422 of the Internal Revenue
Code, or nonqualified stock options. The exercise price of a stock option
granted under the plan is determined by the committee at the time the option is
granted, but the exercise price of an incentive stock option may not be less
than the fair market value per share of common stock on the date of grant. Stock
options are exercisable at the times and upon the conditions that the committee
may determine, as reflected in the applicable option agreement. The exercise
period will be determined by the committee, but in the case of an incentive
stock option, generally the exercise period may not exceed 10 years from the
date of grant.
The option exercise price must be paid in full at the time of exercise, and
may be payable by one or more of the following methods:
- in cash or cash equivalents;
- the surrender of previously acquired shares of common stock that have
been held by the participant for at least six months prior to the date of
surrender;
- if so determined by the committee as of the grant date, authorization for
LendingTree to withhold a number of shares otherwise payable pursuant to
the exercise of an option; or
- through a broker cashless exercise procedure approved by LendingTree.
The committee may, in its sole discretion, authorize LendingTree to make or
guarantee loans to a participant to assist the participant in exercising
options.
The committee may provide at the time of grant of an option that the
participant may elect to exercise all or any part of the option before it
becomes vested and exercisable. If the participant elects to exercise all or
part of a non-vested option, the participant will be issued shares of restricted
stock which will become vested in accordance with the vesting schedule set forth
in the original option agreement.
OUTSIDE DIRECTOR OPTIONS. Non-employee directors who own less than one
percent of the voting power of LendingTree, or outside directors, will be
eligible for automatic grants of non-qualified options under the plan. Each
outside director who holds less than one percent of the common stock as of the
closing of this offering will be granted an option to purchase 15,000 shares of
common stock. Following this offering, each outside director will be granted
upon his or her first election or appointment to the board an option to purchase
15,000 shares of common stock. In addition, immediately following each
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annual stockholders meeting following this offering, each outside director will
be granted an option to purchase 5,000 shares of common stock. Each option
granted under this program to an outside director will have an exercise price
equal to the fair market value of the common stock on the date of grant and will
become exercisable in full on the second anniversary of the date of grant of the
option, provided that the director is still serving as an outside director as of
the date of vesting of the option. Each option granted to an outside director
will expire on the tenth anniversary of the date of grant. The other terms of
the options granted to outside directors will be consistent with the terms of
options granted to employees.
RESTRICTED STOCK. The plan provides for awards of common stock that are
subject to restrictions on transferability and other restrictions imposed by the
committee. Except to the extent restricted under the award agreement relating to
the restricted stock, a participant granted restricted stock will have all of
the rights of a stockholder.
PHANTOM STOCK. The plan provides for awards of phantom stock, which upon
vesting, entitles the participant granted such an award to receive an amount in
cash equal to the fair market value of the number of shares subject to such
award. Vesting of all or a portion of a phantom stock award may be subject to
various conditions established by the committee.
STOCK BONUSES; OTHER AWARDS. The plan provides that awards of shares of
common stock may be made to employees at the discretion of the committee. In
addition, other awards valued in whole or in part by reference to, or otherwise
based on, common stock may be granted either alone or in addition to other
awards under the plan, in the committee's discretion.
CHANGE IN CONTROL. In the event of a change in control, the time-based
portion of an outstanding award that is not vested and exercisable at the time
of the change in control will become 50% vested and exercisable. In addition to
the automatic acceleration, the committee will have the discretion to accelerate
the vesting or exercisability of the remainder of any award granted under the
plan.
TERMINATION OF EMPLOYMENT. Unless otherwise determined by the committee,
the unvested portion of awards granted under the plan will immediately be
cancelled upon termination of a participant's employment or service with
LendingTree. If a participant's employment or service terminates other than
because of death, disability or retirement, all options that are exercisable at
the time of termination may be exercised by the participant for no longer than
90 days after the date of termination. If a participant's employment or service
terminates for cause, all options held by the participant will immediately
terminate. If a participant's employment or service terminates as a result of
death, all options that are exercisable at the time of death may be exercised by
the participant's heirs or distributees for one year, provided that options
granted to non-employee directors may provide for a post-death exercise period
of up to three years. If a participant's employment or service terminates
because of disability or retirement, all options that are exercisable at the
time of termination may be exercised for a period of one year immediately
following termination. In no case may an option be exercised after it expires in
accordance with its terms.
AMENDMENT, TERMINATION OF PLAN. The board of directors may modify or
terminate the plan or any portion of the plan at any time, except that an
amendment that requires stockholder approval in order for the plan to continue
to comply with any law, regulation or stock exchange requirement will not be
effective unless approved by our stockholders. No options may be granted under
the plan after the day immediately preceding the tenth anniversary of its
adoption date.
Since the amount of benefits to be received by any plan participant who is
an employee of Lending Tree or any of its affiliates is determined by the
committee, the amount of future benefits to be allocated to any employee or
group of employees under the plan in any particular year is not determinable.
Mr. Carthaus is currently the only director eligible to be granted options
under the plan's outside director program for automatic grants of options. It is
anticipated that Mr. Carthaus will be granted options to purchase an aggregate
of 38,100 shares of common stock under this program during our next fiscal year
at the offering price.
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EMPLOYEE STOCK PURCHASE PLAN
On January , 2000, we adopted, and on January , 2000, our stockholders
approved, the LendingTree, Inc. Employee Stock Purchase Plan. The employee stock
purchase plan is designed to encourage our employees to purchase shares of our
common stock.
GENERAL. The employee stock purchase plan is intended to comply with the
requirements of Section 423 of the Internal Revenue Code, and to assure the
participants of the tax advantages provided thereby. The employee stock purchase
plan will be administered by a committee established by the board of directors
comprising solely of non-employee directors who are not eligible to participate
in the employee stock purchase plan. The committee may make such rules and
regulations and establish such procedures for the administration of the employee
stock purchase plan as it deems appropriate.
SHARES AVAILABLE. The committee has authorized for issuance under the plan
a total of shares of common stock, plus an additional number of shares
to be added on the first day of our fiscal year beginning in 2001 equal to the
lesser of:
- shares,
- 0.5% of the outstanding shares on such date, or
- a lesser amount determined by the committee.
In each of the above cases, the number of shares subject to adjustment by
the committee in the event of a recapitalization, stock split, stock dividend or
similar corporate transaction.
ELIGIBILITY. Subject to procedural requirements, employees of LendingTree
who have at least six months of service and work more than 20 hours per week
will be eligible to participate in the employee stock purchase plan, except that
employees who own five percent or more of the common stock of LendingTree or any
subsidiary of LendingTree will not be eligible to participate. All of our
full-time employees will be eligible to participate in the first offering period
under the plan.
STOCK PURCHASES. Under the employee stock purchase plan, each eligible
employee will be permitted to purchase shares of the common stock through
regular payroll deductions or cash payments in an amount equal to 1% to 20% of
the employee's compensation for each payroll period. The fair market value of
the shares of common stock which may be purchased by any employee under this or
any other LendingTree plan that is intended to comply with Section 423 of the
Internal Revenue Code during any calendar year may not exceed $25,000.
The employee stock purchase plan provides for a series of consecutive,
overlapping offering periods that generally will be 24 months long. Successive
six-month purchase periods will run during each offering period. Offering
periods generally will commence on January 1 and July 1 of each year during the
term of the plan, and purchase periods will run from January 1 to June 30 and
from July 1 to December 31; provided, that the first offering period will begin
on the first day of regular trading and end on the last trading day on or before
December 31, 2001.
During each offering period, participating employees will be able to
purchase shares of common stock at a purchase price equal to 85% of the fair
market value of the common stock at either the beginning of each offering period
or the end of each purchase period within the offering period, whichever price
is lower.
To the extent permitted by applicable laws, regulations, or stock exchange
rules, if the fair market value of the shares at the end of any purchase period
is lower than the fair market value of the shares on the date the related
offering period began, then all participants in that offering period will be
automatically withdrawn from the offering period immediately after the exercise
of their option on the date the purchase period ends. The participants will
automatically be re-enrolled in the immediately following offering period when
that offering period begins.
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The options granted to a participant under the employee stock purchase plan
are not transferable other than by will or the laws of descent and distribution,
and are exercisable, during the participant's lifetime, only by the participant.
AMENDMENT, TERMINATION OF PLAN. The employee stock purchase plan and all
offering periods under the plan will automatically terminate on the tenth
anniversary of the first offering period under the plan. The board of directors
may from time to time amend or terminate the employee stock purchase plan;
provided, that no such amendment or termination may adversely affect the rights
of any participant without the consent of such participant and, to the extent
required by Section 423 of the Internal Revenue Code or any other law,
regulation or stock exchange rule, no such amendment will be effective without
the approval of stockholders entitled to vote thereon. Additionally, the
committee may make such amendments as it deems necessary to comply with
applicable laws, rules and regulations.
Since the amount of benefits to be received by each participant in the
employee stock purchase plan is determined by his or her elections, the amount
of future benefits to be allocated to any individual or group of individuals
under the plan in any particular year is not determinable.
MANAGEMENT INCENTIVE PLAN
On January , 2000, we adopted, and on January , 2000, our stockholders
approved, the LendingTree, Inc. Management Incentive Plan. The purposes of the
management incentive plan are to reinforce corporate business goals and to
promote the achievement of annual and long-range financial business and other
objectives by providing for the payment of cash bonuses to our officers and
other key employees. The plan will be administered by the compensation committee
of our board of directors. The compensation committee will have the authority to
determine who will participate in the plan and to determine the terms and
conditions of incentive awards granted under the plan. The payment of bonuses
under the management incentive plan will be based on the achievement during a
performance period determined by the compensation committee of certain
performance goals set by the compensation committee, which may include any or
all or none of the following:
- increase in the volume of qualification forms submitted;
- increase in the number of loans closed;
- growth of revenue;
- reductions in expenses; or
- increases in the market price of the common stock or total return to our
stockholders.
Minimum bonuses will be based on achievement of 80% of the performance
goals and maximum bonuses will be based on achievement of 150% of the
performance goals. A bonus will be paid only if the participant is employed by
LendingTree or its affiliates on the day the bonus is to be paid. Under the
plan, no payment may be made to one of our executive officers that exceeds 150%
of the officer's annual base salary. In the event of a change in control, the
performance period in effect at the time of the change in control will be deemed
to have been completed, the maximum targets will be deemed to have been
attained, and a pro rata portion of the award will be paid in cash to the
participant.
EMPLOYMENT/CONSULTING ARRANGEMENTS
EMPLOYMENT AGREEMENT WITH MR. LEBDA. We have an employment agreement with
Douglas Lebda having a term commencing on September 2, 1999 and expiring on
September 2, 2003, unless earlier terminated as provided under the agreement. In
addition to providing for a current annual salary of $250,000 and benefits, Mr.
Lebda's agreement provides for his participation in our bonus programs, with a
maximum bonus opportunity equal to 50% of his salary, and for the grant of an
option to purchase 190,500 shares of common stock; this grant will be referred
to later as the "new option." In the event we terminate Mr. Lebda's employment
either without cause or for bad performance, or if Mr. Lebda terminates his
employment for good reason, Mr. Lebda is entitled to receive continuation of his
base salary until the first anniversary of the effective date of termination,
provided that the severance payments are to be reduced to
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<PAGE> 56
the extent he receives any earned compensation from any subsequent employment
during the one-year severance period. In the event Mr. Lebda's employment is
terminated as a result of any merger, acquisition, share exchange or other
business combination, Mr. Lebda is entitled to receive a lump sum payment in an
amount equal to 12 months of his then current base salary.
With respect to his stock options, if we terminate Mr. Lebda's employment
without cause, or Mr. Lebda terminates his employment for good reason or if his
employment is terminated as a result of a merger, acquisition, share exchange or
other business combination, all of Mr. Lebda's stock options will continue to
vest in accordance with their vesting schedules in effect prior to termination
and he will have a right to exercise the options for a period of 30 days
following the final vesting date. In the event we terminate Mr. Lebda's
employment for bad performance, his stock options, excluding the new option,
will vest in accordance with the schedule set forth in the agreement evidencing
the new option and he will have a right to exercise the options for a period of
30 days following the final vesting date. Mr. Lebda will be subject to a
non-compete and non-solicitation covenant for one year following termination of
his employment and will be required to give us a general release in order to
receive his severance payments.
EMPLOYMENT AGREEMENT WITH MR. REDDIN. We have an employment agreement with
Thomas Reddin, our Chief Marketing Officer, whose employment with us began on
December 10, 1999. Under his agreement, Mr. Reddin is entitled to our annual
salary of $200,000, a signing bonus of $65,000, and employee benefits, including
reasonable relocation expenses. During his first year of employment, we are
obligated to pay to Mr. Reddin a bonus equal to $70,000, payable in four
quarterly payments beginning March 31, 2000. During subsequent years, bonuses
will be incentive-based and will range from zero to 50% of his salary. Mr.
Reddin was granted on December 10, 1999 an option under the 1999 Stock Option
Plan, which is now the Amended and Restated 1999 Stock Incentive Plan, to
purchase 285,750 shares of common stock at an exercise price of approximately
$5.51 per share. The option is intended to be an "incentive stock option" within
the meaning of Section 422 of the Internal Revenue Code and will vest ratably on
each of the first four anniversaries of his date of employment. If Mr. Reddin's
employment is terminated other than for cause, we will be obligated to continue
to pay him his salary and his first year's bonus for one year or until he takes
another full-time job, in which case, if his subsequent employer is paying him
less, we are obligated to pay the difference, if any, between the salary and
bonus paid to Mr. Reddin from the subsequent employer and the salary he would
have received from us. In addition, if his employment is terminated other than
for cause after his first year of employment, Mr. Reddin will be entitled to a
pro rata portion of stock options previously granted to him based on the number
of months worked in the year of termination before his next anniversary. The
stock options that are or become exercisable at termination will remain
exercisable for 90 days following termination. Mr. Reddin is also subject to
covenants with respect to LendingTree's confidential information and trade
secrets during his employment and for 5 years thereafter. If Mr. Reddin
completes one year of employment with us, he will be subject to non-competition
and non-solicitation covenants during his employment and for one year
thereafter.
AGREEMENT WITH MR. YORK. Simultaneously with his resignation from all
positions, directorships and titles relating to LendingTree, we entered into an
agreement with Mitchell York with a one-year term commencing on October 1, 1999.
Under the terms of the agreement, LendingTree agrees to pay Mr. York $11,250 per
month for 12 months. Mr. York has given us a general release in order to receive
these monthly payments, which will be reduced on a dollar-for-dollar basis to
the extent that Mr. York receives compensation from any subsequent employment
before October 1, 2000. In addition, LendingTree agrees to pay Mr. York prorated
bonus amounts. Mr. York has agreed to cooperate with all of our financing
efforts and with any existing or future litigation against us. Further, Mr. York
is subject to a non-compete and non-solicitation covenant until October 1, 2000
and is obligated to refrain from making any disparaging statements with respect
to LendingTree or our officers, directors or employees. In connection with
entering into the agreement, we entered into two new stock option agreements
with Mr. York which cancel two previous stock option agreements, one of which
was a non-qualified stock option relating to 12,700 shares of common stock. The
other agreement was an incentive stock option, within the meaning of Section 422
of the Internal Revenue Code, relating to 101,600 shares of common stock. The
new option
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agreements are substantially similar to the old agreements, except that the
incentive stock option was replaced with a non-qualified stock option.
In the event that, within 3 years after the effective date of Mr. York's
agreement, a court finds that Mr. York has materially violated any of the
provisions of his non-compete, non-solicitation, and non-disparagement covenants
or that he has failed to cooperate with our financing efforts or failed to
assist us with any litigation matter, we will be relieved of all of our
obligations under the agreement and Mr. York will be required to repay all
payments and other benefits paid to him under his agreement. In the event that
the non-compete, non-solicitation and non-disparagement provisions of Mr. York's
agreement are found by a court to be unenforceable with respect to Mr. York, the
new option agreement relating to 101,600 shares of common stock will become null
and void, and any of Mr. York's vested and unvested options will be immediately
cancelled. Mr. York will also be required to return all shares of common stock
which he received pursuant to the exercise of the new option relating to 101,600
shares. We will then be required to return to Mr. York all sums paid to us in
connection with the exercise of the option.
CONSULTING AGREEMENT WITH MR. WILSON. In connection with his resignation
from all directorships and positions with us and in settlement of his then
current employment agreement, we entered into a consulting agreement with Robert
Wilson effective September 21, 1999 and expiring on October 12, 2002. Under the
terms of the agreement, LendingTree has agreed to pay Mr. Wilson a quarterly fee
in the amount of $25,000, prorated for a shorter period, as consideration for
his services as a consultant, which will not exceed the equivalent of 10 days'
full-time employment per year. Mr. Wilson also receives an annual allowance for
reimbursement of medical expenses and a reimbursement for any legal expenses
relating to LendingTree. Concurrently with entering into the agreement, we
purchased 539,750 shares of common stock from Mr. Wilson at approximately $6.30
per share and entered into a new option agreement with Mr. Wilson. The new
option agreement cancels Mr. Wilson's old option and grants Mr. Wilson a
non-qualified stock option to purchase 76,200 shares of common stock. The new
stock option is immediately exercisable in full at the same exercise price per
share, as the exercise price per share of the old stock option. Mr. Wilson has
agreed to cooperate with all of our financing efforts and with any existing or
future litigation against us. Further, Mr. Wilson is subject to a non-compete
and non-solicitation covenant until September 21, 2000 and is obligated to
refrain from filing or participating or assisting in any lawsuit, arbitration or
other legal action asserting any claims on his behalf against us, our directors,
officers or employees other than a claim for breach of his consulting agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the board of directors consists of James
Carthaus and Adam Mizel. No interlocking relationship exists between any member
of our board of directors or our compensation committee and any members of the
board of directors or compensation committee of any other company, and no such
interlocking relationship has existed in the past, except that Mr. Mizel is a
partner at Capital Z Partners and participates in compensation decisions for
Capital Z Partners.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRIVATE EQUITY FINANCINGS
PHOENIX STRATEGIC CAPITAL. In March 1998, we sold 564,444 shares of our
common stock at a price per share of approximately $3.54 to Phoenix Strategic
Capital for $2.0 million. Phoenix also provided us with a $1,000,000 line of
credit, $500,000 of which was utilized in November 1998 and repaid in December
1998. The line of credit provided by Phoenix expired on December 30, 1998. As
part of the line of credit transaction, Phoenix received a warrant to purchase
9,525 shares of our common stock with an exercise price of approximately $4.72
per share. Assuming an initial public offering price of $11.00 per share, the
value of the warrant as determined by the difference between the offering price
and the exercise price is approximately $60,000. In September 1999, we
repurchased 282,222 shares of our common stock at a price per share of
approximately $6.30 from Phoenix Strategic Capital for $1,777,776. Upon the
closing of this offering, Phoenix Strategic Capital will own approximately 1.7%
of our issued and outstanding common stock.
THE UNION LABOR LIFE INSURANCE COMPANY. In December 1998, we sold
convertible preferred stock and a warrant to purchase 260,000 additional shares
of Series A convertible preferred stock at an exercise price of $6.00 per share
to The Union Labor Life Insurance Company on behalf of its separate account "P"
(ULLICO) for $5.0 million. In March 1999, we sold an additional 500,000 shares
of Series A convertible preferred stock and warrants to purchase 40,000 shares
of Series B convertible preferred stock at an exercise price of $9.00 per share
to ULLICO for $3.0 million. In September 1999, all of the warrants held by
ULLICO were exchanged for a warrant to purchase 381,000 shares of our common
stock. This warrant has an exercise price of $4.72 per share and expires in
September 2005. Assuming an initial public offering price of $11.00, the value
of this warrant as determined by the difference between the offering price and
the exercise price is approximately $2,393,000. Upon the closing of this
offering and assuming the exercise of the warrant to purchase 381,000 shares of
our common stock, ULLICO will own approximately 15.0% of our issued and
outstanding common stock.
CAPITAL Z, GE CAPITAL, GOLDMAN SACHS AND PRICELINE.COM. In September 1999,
we sold 6,024,096 shares of our Series D convertible preferred stock at a price
per share of $8.30 to an affiliate of Capital Z, The Goldman Sachs Group, Inc.,
General Electric Capital Assurance Company, GE Capital Residential Connections
Corporation, priceline.com Incorporated and Marsh & McLennan Risk Capital Corp.
for aggregate consideration in the amount of $50 million. Capital Z, GE Capital,
The Goldman Sachs Group, Inc. and priceline.com, either directly or through an
affiliate, received 3,012,048, 1,204,819, 1,084,337 and 240,964 shares of Series
D convertible preferred stock, respectively. Upon the closing of this offering,
Capital Z, GE Capital, Goldman Sachs and priceline.com will own approximately
22.8%, 9.1%, 8.2% and 1.8%, respectively, of our issued and outstanding common
stock. In addition, we have a commercial relationship with priceline.com which
is summarized below.
INVESTMENTS BY DIRECTORS
In July 1998, we sold 42,333 shares of our common stock at a price of
approximately $4.72 per share to H. Eugene Lockhart for $200,000. Mr. Lockhart
served as a member of our board of directors until September 1999.
In November 1998, we sold 12,700 shares of our common stock at a price of
approximately $4.72 per share to James Carthaus for $60,000. Mr. Carthaus is a
member of our board of directors.
In May 1999, we sold 333,334 shares of Series A convertible preferred stock
at a price of $6.00 per share and warrants to purchase 33,020 shares of our
common stock for $2.0 million to W. James Tozer, Jr. and Richard Field, each of
whom serves as a member of our board of directors. These warrants have an
exercise price of approximately $7.87 per share and expire in May 2004. Assuming
an initial public offering price of $11.00, the value of the warrants as
determined by the difference between the offering price and the exercise price
is approximately $103,000.
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In July 1999, we issued an 8% $500,000 principal amount convertible
promissory note and a warrant to purchase 15,240 shares of our common stock at
an exercise price of approximately $7.87 per share to Garrity Investment LLC,
which is controlled by a family member of Douglas Lebda, our Chief Executive
Officer. This financing was part of our issuance of 8% convertible promissory
notes in an aggregate principal amount of $1,750,000 and warrants to purchase
53,340 shares of our common stock to five investors. In September 1999, all of
the promissory notes along with accrued interest were exchanged for 214,076
shares of our Series D convertible preferred stock, of which Garrity Investments
received 61,165 shares. Assuming an initial offering price of $11.00, the value
of the warrant held by Garrity Investment LLC as determined by the difference
between the offering price and the exercise price is approximately $48,000.
In September 1999, Robert G. Wilson, who served as our Chairman and Chief
Financial Officer until September 1999, received $3,400,000 upon our repurchase
of 539,750 shares of our common stock at a price per share of approximately
$6.30. Donald Colby, who served as a member of our board of directors until
September 1999, received $800,000 upon our repurchase of 127,000 shares of our
common stock at a price per share of approximately $6.30.
RELATIONSHIPS BETWEEN DIRECTORS AND STOCKHOLDERS
Robert Kennedy, a member of our board of directors, is the director of
special projects for The United Labor Life Insurance Company.
Daniel Lieber, who serves as a member of our board of directors, is a
partner of Equifin Capital Management, an entity associated with Capital Z.
Adam Mizel, who serves as a member of our board of directors, is a partner
of Capital Z.
OTHER RELATIONSHIPS
PRICELINE.COM
In August 1998, we entered into an agreement with priceline.com in which
priceline.com initially granted to us the exclusive license to operate an area
of the priceline.com website through which we offered our business services and
the non-exclusive license to utilize priceline.com intellectual property. In
return, we granted priceline.com the non-exclusive license to utilize our
intellectual property. We also agreed to pay priceline.com a marketing fee equal
to a percentage of the monthly net revenue received by us in operating the loan
center on their website. To enhance the variety of products available through
the priceline.com home finance service, we subsequently modified our service to
allow for multiple providers.
PRUDENTIAL SECURITIES INCORPORATED
Prudential Securities Incorporated, an underwriter, acted as placement
agent in connection with a private placement of our Series D convertible
preferred stock in September 1999. Prudential Securities Incorporated received a
warrant to purchase 127,000 shares of common stock at an exercise price of $7.52
per share. In January 2000 Prudential Securities Incorporated agreed to exchange
the warrant for a new warrant to purchase 127,000 shares of common stock at an
exercise price equal to the public offering price of the shares offered by this
prospectus. This warrant is exercisable for a five-year period ending on
September 21, 2004. Other than the shares to be purchased by Prudential
Securities Incorporated as an underwriter in this offering, Prudential
Securities Incorporated has agreed that it will not transfer or dispose of,
directly or indirectly, shares of common stock or any securities convertible
into or exercisable or exchangeable for or repayable with shares of common stock
for one year after the date of this prospectus.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of our common stock as of January 6, 2000. The percentage of beneficial
ownership is provided for the following:
- each stockholder who is known by us to beneficially own 5% or more of any
class of our capital stock;
- each of our present executive officers who are also named in the Summary
Compensation Table and each of our directors; and
- all of our executive officers and our directors as a group.
Percentage ownership is based on 17,158,389 shares outstanding as of
January 6, 2000, net of treasury stock, as adjusted to reflect the conversion of
all outstanding preferred stock into common stock. Shares of common stock
subject to options or warrants currently exercisable or exercisable within 60
days of January 6, 2000, are deemed outstanding for the purpose of computing the
percentage ownership of the person holding such options or warrants but are not
outstanding for computing the percentage ownership of another person. Unless
otherwise indicated below, the persons and entities named in the table have sole
voting and sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
OF COMMON
NUMBER OF SHARES OF STOCK BENEFICIALLY OWNED
COMMON STOCK -------------------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE THE OFFERING AFTER THE OFFERING(1)
- ------------------------ ------------------- ------------------- ---------------------
<S> <C> <C> <C>
Capital Z Partners(2)........................... 3,916,132 29.0% 22.8%
The Union Labor Life Insurance Company(3)....... 2,212,760 15.9% 12.6%
GE Capital(4)................................... 1,566,453 11.6% 9.1%
The Goldman Sachs Group, Inc.(5)................ 1,409,806 10.4% 8.2%
Douglas Lebda(6)................................ 986,967 7.2% 5.7%
Keith Hall...................................... 48,681 * *
David Anderson.................................. 12,700 * *
James Bennett, Jr.(7)........................... 148,590 1.1% *
Richard Stiegler(8)............................. 80,750 * *
James Carthaus(9)............................... 31,750 * *
Richard Field(10)............................... 840,747 6.0% 4.8%
Robert Kennedy(11).............................. 2,212,760 15.9% 12.6%
Daniel Lieber(12)............................... 3,916,132 29.0% 22.8%
Adam Mizel(13).................................. 3,916,132 29.0% 22.8%
W. James Tozer, Jr.(14)......................... 591,632 4.4% 3.4%
All executive officers and directors as a group
(11 persons).................................. 8,870,712 61.1% 48.8%
</TABLE>
- ------------------------
* represents less than 1%
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- ---------------
(1) Assumes the underwriters' over-allotment option is not exercised.
(2) Capital Z Partners is located at 54 Thompson Street, New York, New York.
These shares are held by Specialty Finance Partners, an affiliate of
Capital Z Partners.
(3) The Union Labor Life Insurance Company is located at 111 Massachusetts
Avenue, N.W., 8th Floor, Washington, D.C. Includes a warrant to purchase
381,000 shares of common stock with an exercise price of approximately
$4.72 which is currently exercisable.
(4) GE Capital is located at 6601 Six Forks Road, Raleigh, North Carolina. Upon
the automatic conversion of the preferred stock at the closing of this
transaction, General Electric Capital Assurance Company will be the holder
of 313,290 shares of common stock and GE Capital Residential Connections
Corporation will be the holder of 1,253,162 shares of common stock.
(5) The Goldman Sachs Group, Inc. is located at 85 Broad Street, New York, New
York. Upon the automatic conversion of the preferred stock at the closing
of this transaction, The Goldman Sachs Group, Inc. will be the holder of
1,268,826 shares of common stock and Stone Street Fund 1999, L.P. will be
the holder of 140,980 shares of common stock.
(6) Includes an option to purchase 97,693 shares of common stock with an
exercise price of approximately $1.43 per share, an option to purchase
25,400 shares of common stock with an exercise price of approximately $5.20
per share which are exercisable as of January 6, 2000, or will become
exercisable within 60 days thereafter, and 659,130 shares and options to
purchase 6,350 shares of common stock with an exercise price of
approximately $5.20 per share which are exercisable as of January , 2000
or will become exercisable within 60 days thereafter, held directly by or
jointly with family members.
(7) Includes an option to purchase 12,700 shares of common stock with an
exercise price of approximately $4.72 and an option to purchase 6,350
shares of common stock with an exercise price of approximately $4.72 per
share, which are exercisable as of January 6, 2000, or will become
exercisable within 60 days thereafter.
(8) Includes an option to purchase 38,100 shares of common stock with an
exercise price of approximately $1.43 and an option to purchase 8,467
shares of common stock with an exercise price of approximately $4.72 per
share, which are exercisable as of January 6, 2000, or will become
exercisable within 60 days thereafter.
(9) Includes an option to purchase 19,050 shares of common stock with an
exercise price of approximately $4.72 which is exercisable as of January 6,
2000, or will become exercisable within 60 days thereafter.
(10) Includes a warrant to purchase 16,510 shares of common stock with an
exercise price of approximately $7.87 which is currently exercisable and an
option to purchase 392,511 shares of common stock with an exercise price of
approximately $1.43 which is exercisable as of January 6, 2000, or will
become exercisable within 60 days thereafter.
(11) Includes 2,212,760 shares of common stock beneficially owned by Union Labor
Life Insurance Company as to which Robert Kennedy disclaims beneficial
ownership.
(12) Includes 3,916,132 shares of common stock beneficially owned by Capital Z
Partners. Daniel Lieber is a partner at Equifin Capital Management, an
entity affiliated with Capital Z Partners.
(13) Includes 3,916,132 shares of common stock beneficially owned by Capital Z
Partners of which Adam Mizel is a partner.
(14) Includes a warrant to purchase 16,510 shares of common stock with an
exercise price of approximately $7.87 which is currently exercisable.
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DESCRIPTION OF CAPITAL STOCK
Our amended and restated certificate of incorporation which will become
effective upon the closing of this offering authorizes us to issue up to 100
million shares of common stock, $0.01 par value per share, and 10 million shares
of preferred stock, par value $0.01 per share. All of the outstanding capital
stock is and, upon completion of this offering, will be, fully paid and
non-assessable.
Upon the closing of this offering, we will have 17,158,389 shares of common
stock issued and outstanding, excluding treasury stock. This includes 10,039,145
shares of common stock to be issued upon the automatic conversion of all
outstanding shares of our convertible preferred stock.
COMMON STOCK
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available for this purpose
at the times and in the amounts as the board of directors may occasionally
determine. Each stockholder is entitled to one vote for each share of common
stock held on all matters submitted to a vote of stockholders. Cumulative voting
for the election of directors is not provided for in our amended and restated
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election. The
common stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Upon the occurrence of a liquidation, dissolution or
winding-up of LendingTree, the holders of shares of common stock would be
entitled to share ratably in the distribution of all of LendingTree's assets
remaining available for distribution after satisfaction of all its liabilities
and the payment of the liquidation preference of any outstanding preferred
stock.
PREFERRED STOCK
The board of directors has the authority to provide by resolution for the
issuance of shares of preferred stock, in one or more classes or series, and to
fix the rights, preferences, privileges and restrictions of this preferred
stock, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of preferred stock could
have the effect of decreasing the market price of the common stock and could
adversely affect the voting and other rights of the holders of common stock.
WARRANTS
As of January 6, 2000, we had the following outstanding warrants to
purchase shares of common stock:
(1) a warrant to purchase up to 381,000 shares at an exercise price of
approximately $4.72 per share that is held by The Union Labor Life
Insurance Company;
(2) a warrant to purchase up to a total of 16,510 shares at an
exercise price of approximately $7.87 per share that is held by W. James
Tozer, Jr.;
(3) a warrant to purchase up to a total of 16,510 shares at an
exercise price of approximately $7.87 per share that is held by Richard
Field;
(4) a warrant to purchase up to 15,240 shares at an exercise price of
approximately $7.87 per share that is held by a family member of Douglas R.
Lebda;
(5) seven warrants to purchase an aggregate of 38,100 shares at an
exercise price of approximately $7.87 per share that are held by Hovde
Financial Institution Partners II, L.P., Hovde Investment Corp., L.L.C.,
William N. Schiebler, Barbara A. and Peter A. Georgescu, and John B.
Prince;
(6) a warrant to purchase up to 63,500 shares at an exercise price of
approximately $4.72 per share that is held by Seacris Group, Ltd.;
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(7) a warrant to purchase up to 127,000 shares that is held by
Prudential Securities at an exercise price equal to the public offering
price of the shares offered by this prospectus; and
(8) a warrant to purchase up to 9,525 shares at an exercise price of
approximately $4.72 per share that is held by Phoenix Strategic Capital.
All of the warrants listed above are currently exercisable and contain
standard anti-dilution provisions.
OPTIONS
As of January 6, 2000:
- options to purchase a total of 3,711,153 shares of common stock were
outstanding of which 1,191,232 have vested with exercise prices
ranging from $1.43 to $9.25 per share; and
- up to 802,196 additional shares of common stock may be subject to
options granted in the future.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND LENDINGTREE'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
Some provisions of our amended and restated certificate of incorporation
and amended and restated bylaws, each of which will become effective after this
offering, may be deemed to have an anti-takeover effect and may delay or prevent
a tender offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.
CLASSIFIED BOARD OF DIRECTORS. Our board of directors will be divided into
three classes of directors serving staggered three-year terms. As a result,
approximately one-third of the board of directors will be elected each year.
These provisions, when coupled with the provision of our amended and restated
certificate of incorporation authorizing the board of directors to fill vacant
directorships or increase the size of the board of directors, may deter a
stockholder from removing incumbent directors and simultaneously gaining control
of the board of directors by filling the vacancies created by such removal with
its own nominees.
CUMULATIVE VOTING. Our amended and restated certificate of incorporation
will expressly deny stockholders the right to cumulate votes in the election of
directors.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our amended and
restated certificate of incorporation will eliminate the ability of stockholders
to act by written consent. It further provides that special meetings of our
stockholders may be called only by the chairman of the board of directors, the
president or a majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTORS
NOMINATIONS. Our amended and restated bylaws will provide that stockholders
seeking to bring business before an annual meeting of stockholders, or to
nominate candidates for election as directors at an annual meeting of
stockholders, must provide timely notice in writing. To be timely, a
stockholder's notice must be delivered to or mailed and received at our
principal executive offices not less than 90 days prior to the anniversary date
of the immediately preceding annual meeting of stockholders. However, in the
event that the annual meeting is called for a date that is not within 30 days
before or after such anniversary date, notice by the stockholder in order to be
timely must be received not later than the close of business on the 10th day
following the date on which notice of the date of the annual meeting was mailed
to stockholders or made public, whichever first occurs. In the case of a special
meeting of stockholders called for the purpose of electing directors, notice by
the stockholder in order to be timely must be received not later than the close
of business on the 10th day following the day on which notice of the date of the
special meeting was mailed or public disclosure of the date of the special
meeting was made, whichever first occurs. Our amended and restated bylaws will
also specify requirements as to the form and content of a stockholder's notice.
These
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provisions may preclude stockholders from bringing matters before an annual
meeting of stockholders or from making nominations for directors at an annual
meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of common stock and preferred stock will
be available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of LendingTree by means of a proxy contest, tender
offer, merger or otherwise.
AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
either a corporation's certificate of incorporation or bylaws require a greater
percentage. Our amended and restated certificate of incorporation will impose
supermajority vote requirements in connection with business combination
transactions and the amendment of provisions of our amended and restated
certificate of incorporation and amended and restated bylaws, including those
provisions relating to the classified board of directors, action by written
consent and the ability of stockholders to call special meetings.
RIGHTS AGREEMENT
Under Delaware law, every corporation may create and issue rights entitling
the holders of such rights to purchase from the corporation shares of its
capital stock of any class or classes, subject to any provisions in its
certificate of incorporation. The price and terms of such shares must be stated
in the certificate of incorporation or in a resolution adopted by the board of
directors for the creation or issuance of such rights.
We have entered into a stockholder rights agreement. As with most
stockholder rights agreements, the terms of our rights agreement are complex and
not easily summarized, particularly as they relate to the acquisition of our
common stock and to exercisability. This summary may not contain all of the
information that is important to you. Accordingly, you should carefully read our
rights agreement, which has been filed as an exhibit to the registration
statement of which this prospectus forms a part.
Our rights agreement provides that each share of our common stock
outstanding after this offering will have one right to purchase one-hundredth of
a preferred share attached to it. The purchase price per one one-hundredth of a
preferred share under the stockholder rights agreement is four times the average
closing price of our common stock for the first five days of trading after the
consummation of this offering.
Initially, the rights under our rights agreement are attached to
outstanding certificates representing our common stock and no separate
certificates representing the rights will be distributed. The rights will
separate from our common stock and be represented by separate certificates
approximately 10 days after someone acquires or commences a tender offer for 15%
of our outstanding common stock.
After the rights separate from our common stock, certificates representing
the rights will be mailed to record holders of our common stock. Once
distributed, the rights certificates alone will represent the rights.
All shares of our common stock issued prior to the date the rights separate
from the common stock will be issued with the rights attached. The rights are
not exercisable until the date the rights separate from the common stock. The
rights will expire on the tenth anniversary of the date of the completion of
this offering unless earlier redeemed or exchanged by us.
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If an acquiror obtains or has the rights to obtain 15% or more of our
common stock, then each right will entitle the holder to purchase a number of
shares of our common stock equal to two times the purchase price of each right.
Each right will entitle the holder to purchase a number of shares of common
stock of the acquiror having a then current market value of twice the purchase
price if an acquiror obtains 15% or more of our common stock and any of the
following occurs:
- we merge into another entity;
- an acquiring entity merges into us; or
- we sell more than 50% of our assets or earning power.
Under our rights agreement, any rights that are or were owned by an acquiror of
more than 15% of our outstanding common stock will be null and void.
Our rights agreement contains exchange provisions which provide that after
an acquiror obtains 15% or more, but less than 50% of our outstanding common
stock, our board of directors may, at its option, exchange all or part of the
then outstanding and exercisable rights for shares of our common stock. In such
an event, the exchange ratio is one common share per right, adjusted to reflect
any stock split, stock dividend or similar transaction.
Our board of directors may redeem all of the outstanding rights under our
rights agreement prior to the earlier of (1) the time that an acquiror obtains
15% or more of our outstanding common stock or (2) the final expiration date of
the rights agreement. The redemption price under our rights agreement is $0.01
per right, subject to adjustment. The right to exercise the rights will
terminate upon the action of our board ordering the redemption of the rights and
the only right of the holders of the rights will be to receive the redemption
price.
Holders of rights will have no rights as our stockholders including the
right to vote or receive dividends, simply by virtue of holding the rights.
Our rights agreement provides that the provisions of the rights agreement
may be amended by the board of directors prior to 10 days after someone acquires
or commences a tender offer for 15% of our outstanding common stock without the
approval of the holders of the rights. However, after that date, the rights
agreement may not be amended in any manner which would adversely effect the
interests of the holders of the rights, excluding the interests of any acquiror.
In addition, our rights agreement provides that no amendment may be made to
adjust the time period governing redemption at a time when the rights are not
redeemable.
Our rights agreement contains rights that have anti-takeover effects. The
rights may cause substantial dilution to a person or group that attempts to
acquire us without conditioning the offer on a substantial number of rights
being acquired. Accordingly, the existence of the rights may deter acquirors
from making takeover proposals or tender offers. However, the rights are not
intended to prevent a takeover, but rather are designed to enhance the ability
of our board to negotiate with an acquiror on behalf of all the stockholders. In
addition, the rights should not interfere with a proxy contest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is First Union
National Bank. Its address is 1525 W. WT, Harris Blvd; 3C3, Charlotte, NC
28288-1153.
LISTING
We expect the shares to be approved for quotation on the Nasdaq National
Market, subject to notice of issuance under the symbol " ."
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<PAGE> 66
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of contractual and legal restrictions on resale described below, sales of
substantial amounts of common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price of our
common stock and our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding a total of
17,158,389 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless such shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rule 144 promulgated under the Securities Act, which rules are summarized below.
As a result of the contractual restrictions described below and the
provisions of Rule 144, the restricted securities will be available for sale in
the public market subject to the volume limitations and other conditions of Rule
144. These shares could be available for resale immediately upon the expiration
of the 180-day lock-up period.
LOCK-UP AGREEMENTS
Stockholders holding more than 95% of our outstanding common stock,
including all of our officers and directors, have signed lock-up agreements
under which they agreed not to transfer or dispose of any shares of common stock
or any securities convertible into or exchangeable or exercisable for or
repayable with shares of common stock, for a period of 180 days after the date
of this prospectus. Transfers or dispositions can be made sooner with the prior
written consent of Merrill Lynch.
RULE 144
In general, under Rule 144, beginning 90 days after the date of this
prospectus, a person who has beneficially owned shares of our common stock for
at least one year would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 172,000 shares immediately after this offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
RULE 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.
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<PAGE> 67
The following table indicates approximately when the 13.5 million shares of
our common stock that are not being sold in this offering, but which will be
outstanding at the time this offering is complete, will be eligible for sale
into the public market:
<TABLE>
<CAPTION>
NUMBER OF SHARES/
PERCENT OUTSTANDING
AFTER THE OFFERING DATE WHEN SHARES BECOME AVAILABLE FOR RESALE IN THE PUBLIC MARKET
- ------------------- -----------------------------------------------------------------
<S> <C>
5.2 million/30% 180 days after the date of this prospectus, pursuant to
agreements between the stockholders and the underwriters,
provided that Merrill Lynch can waive this restriction at any
time. Approximately 3.7 million of these shares will also be
subject to sales volume restrictions under Rule 144 under the
Securities Act.
8.2 million/48% Upon expiration of applicable one-year holding periods under Rule
144, which will expire between August 2000 and November 2000,
subject to sales volume restrictions under Rule 144.
</TABLE>
STOCK OPTIONS
Following the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering 4.5 million shares of
common stock issued or reserved for issuance under our various stock option
plans. The registration statement will become effective automatically upon
filing. As of January 6, 2000, options to purchase 3,711,153 shares of common
stock were issued and outstanding of which 1,191,232 shares have vested.
Accordingly, shares registered under the registration statement will, subject to
vesting provisions and Rule 144 volume limitations applicable to our affiliates,
be available for sale in the open market immediately after the 180-day lock-up
agreements expire.
REGISTRATION RIGHTS
On September 20, 1999, we entered into a registration rights agreement with
holders of our convertible preferred stock and common stock in which we granted
them registration rights in respect of 12.1 million shares of common stock. A
copy of the registration rights agreement has been filed as an exhibit to the
registration statement of which this prospectus forms a part. Pursuant to the
registration rights agreement, at any time after 180 days after the consummation
of this offering, previous holders of the preferred stock who hold at least a
total of approximately 10.4 million shares may request us to register their
shares under the Securities Act. All holders which are party to the registration
rights agreement may demand registration of their shares, provided the demand
relates to at least $500,000, we are then qualified to use Form S-3, and the
holders of the preferred stock did not exercise their demand rights within the
previous 180 days. We are not obligated to effect a registration statement on
Form S-3 more than once in any 180-day period.
These registration rights are subject to our right to delay the filing of a
registration statement in certain circumstances for up to 90 days.
In addition, the registration rights agreement provides these holders of
restricted stock with "piggyback" registration rights. If we propose to register
any common stock under the Securities Act, other than pursuant to this offering
or in connection with the registration of securities issued under an employee
benefit plan or in consideration for an acquisition, each of these holders may
require us to include all or a portion of their restricted stock in such
registration. However, the managing underwriter, if any, of any such offering
has rights to limit the number of shares of restricted stock proposed to be
included in such registration.
We would bear all registration expenses incurred in connection with these
registrations. Each participating seller of restricted stock would bear their
proportionate share of all underwriting discounts and selling commissions.
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<PAGE> 68
IMPORTANT UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS OF OUR COMMON STOCK
The following is a general summary of the material United States federal
tax consequences of the purchase, ownership, and sale or other taxable
disposition of the common stock by any person or entity other than:
- a citizen or resident of the United States;
- a partnership, corporation or other entity created or organized in or
under the laws of the United States or of any political subdivision
thereof;
- a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust or the trust has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a U.S. person; or
- an estate, the income of which is includible in gross income for United
States income tax purposes regardless of its source.
This summary does not address all tax considerations that may be relevant
to non-U.S. holders in light of their particular circumstances or to certain
non-U.S. holders that may be subject to special treatment under United States
federal income or estate tax laws. This summary is based upon the Internal
Revenue Code of 1986, existing, temporary and proposed regulations promulgated
thereunder and administrative and judicial decisions, all of which are subject
to change, possibly with retroactive effect. In addition, this summary does not
address the effect of any state, local or foreign tax laws. Each prospective
purchaser of common stock should consult its tax advisor with respect to the tax
consequences of purchasing, owning and disposing of the common stock.
DIVIDENDS
Dividends paid to a non-U.S. holder of common stock generally will be
subject to a withholding of United States federal income tax at a 30 percent
rate or such lower rate as may be specified by an applicable income tax treaty,
unless:
- the dividend is effectively connected with the conduct of a trade or
business of the non-U.S. holder within the United States; or
- if a tax treaty applies, it is attributable to a United States permanent
establishment of the non-U.S. holder.
In these cases, the dividend will be taxed at ordinary federal income tax
rates. If the non-U.S. holder is a corporation, such effectively connected
income may also be subject to an additional branch profits tax. A non-U.S.
holder may be required to satisfy certain certification requirements in order to
claim treaty benefits or otherwise claim a reduction of, or exemption from, the
withholding described above.
SALE OR OTHER DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to United States federal
income tax in respect of any gain recognized on the sale or other taxable
disposition of common stock, unless:
- the gain is effectively connected with the conduct of a trade or business
of the non-U.S. holder within the United States or, if a tax treaty
applies, is attributable to a United States permanent establishment of
the non-U.S. holder;
- in the case of a non-U.S. holder who is an individual and holds the
common stock as a capital asset, the holder is present in the United
States for 183 or more days in the taxable year of the disposition and
certain other tests are met;
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<PAGE> 69
- the non-U.S. holder is subject to tax under the provisions of United
States federal income tax law applicable to certain United States
expatriates; or
- we are or have been during certain periods preceding the disposition a
"United States real property holding corporation" for United States
federal income tax purposes and certain other requirements are met. We
currently believe that we are not a United States real property holding
corporation and we do not anticipate that we will become one.
ESTATE TAX
Common stock owned or treated as owned by an individual non-U.S. holder at
the time of death will be includible in the individual's gross estate for United
States federal estate tax purposes, unless an applicable treaty provides
otherwise, and may be subject to United States federal estate tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
DIVIDENDS. United States backup withholding tax generally will not apply
to dividends paid on the common stock that are subject to the 30 percent or
reduced treaty rate of United States withholding tax previously discussed. We
must report annually to the Internal Revenue Service and to each non-U.S. holder
the amount of dividends paid to, and the tax withheld with respect to, such
holder, regardless of whether any tax was withheld. This information may also be
made available to the tax authorities in the non-U.S. holder's country of
residence.
SALE OR OTHER DISPOSITION OF COMMON STOCK. Upon the sale or other taxable
disposition of common stock by a non-U.S. holder to or through a United States
office of a broker, the broker must backup withhold at a rate of 31 percent and
report the sale to the Internal Revenue Service, unless the holder certifies its
non-U.S. holder status under penalties of perjury or otherwise establishes an
exemption. Upon the sale or other taxable disposition of common stock by a
non-U.S. holder to or through the foreign office of a United States broker, or a
foreign broker with a certain relationship to the United States, the broker must
report the sale to the Internal Revenue Service, but not backup withhold, unless
the broker has documentary evidence in its files that the seller is a non-U.S.
holder and certain other conditions are met or the holder otherwise establishes
an exemption.
Backup withholding is not an additional tax. Amounts withheld under the
backup withholding rules generally are allowable as a refund or credit against a
non-U.S. holder's United States federal income tax liability, if any, provided
that the required information is furnished to the Internal Revenue Service on a
timely basis.
The U.S. Treasury Department has issued regulations generally effective for
payments made after December 31, 2000 that will affect the procedures to be
followed by a non-U.S. holder in establishing such holder's status as a non-U.S.
holder for purposes of the withholding, backup withholding and information
reporting rules described herein. In general, such regulations do not
significantly alter the substantive withholding and information reporting
requirements, but unify current certification procedures and forms and clarify
reliance standards. Prospective investors should consult their tax advisors
concerning the effect of such regulations on an investment in the common stock.
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<PAGE> 70
UNDERWRITING
GENERAL
We intend to offer our common stock through a number of underwriters.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc. and
Prudential Securities Incorporated are acting as representatives of each of the
underwriters named below. Subject to the terms and conditions contained in a
purchase agreement among us and the underwriters, we have agreed to sell to the
underwriters, and the underwriters severally have agreed to purchase from us,
the number of shares listed opposite their names below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Lehman Brothers Inc.........................................
Prudential Securities Incorporated..........................
----------
Total.......................................... 3,650,000
==========
</TABLE>
The underwriters have agreed to purchase all of the shares sold under the
purchase agreement if any of these shares are purchased. If an underwriter
defaults, the purchase agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.
We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make because of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreement, such as receipt by the underwriters of
officer's certificates and legal opinions. The underwriters reserve the right to
withdraw, cancel or modify offers to the public and to reject orders in whole or
in part.
COMMISSIONS AND DISCOUNTS
The representatives have advised us that the underwriters propose initially
to offer the shares to the public at the initial public offering price on the
cover of this prospectus, and to dealers at that price less a concession not in
excess of $ per share. The underwriters may allow, and the dealers may
reallow, a discount not in excess of $ per share to other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.
We will sell the shares to the underwriters at a per-share price of
$ , which represents a $ discount from the public offering price of
$ . This discount, which equals % of the public offering price, is
the underwriters' compensation. The following table shows the public offering
price, underwriting discount and proceeds before expenses to LendingTree. In
addition, the table includes certain other items considered by the NASD to be
underwriting compensation for purposes of the NASD's
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<PAGE> 71
Conduct Rules. This information assumes either no exercise or full exercise by
the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- --------------- -----------
<S> <C> <C> <C>
Public offering price.............................
Underwriting discount.............................
Proceeds, before expenses, to LendingTree.........
Other items.......................................
</TABLE>
As described in more detail below, Prudential Securities Incorporated holds
a warrant to purchase 127,000 shares of common stock at an exercise price equal
to the public offering price of the shares offered by this prospectus. The
compensation included in the table above in the line titled "other items"
represents the value of this warrant for NASD purposes computed in accordance
with a formula prescribed by the NASD's Conduct Rules.
The expenses of the offering, not including the underwriting discount, are
estimated at $2,000,000 and are payable by us, as set forth in the following
table.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 13,298
NASD filing fee............................................. 17,500
Nasdaq National Market listing fee.......................... 100,000
Printing and engraving expenses............................. 500,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 300,000
Blue sky fees and expenses (including legal fees)........... 10,000
Transfer agent and registrar fees and expenses.............. 20,000
Premiums for director and officer insurance................. 250,000
Miscellaneous............................................... 289,202
----------
Total............................................. $2,000,000
----------
</TABLE>
OVER-ALLOTMENT OPTION
We have granted an option to the underwriters to purchase up to 547,500
additional shares at the public offering price less the underwriting discount.
The underwriters may exercise this option for 30 days from the date of this
prospectus solely to cover any over-allotments. If the underwriters exercise
this option, each will be obligated, subject to customary conditions contained
in the purchase agreement, to purchase a number of additional shares
proportionate to that underwriter's initial amount reflected in the above table.
RESERVED SHARES
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 438,000 shares offered by this prospectus for sale
to some of our directors, officers, employees and friends and to some of the
officers and employees of the institutions comprising the LendingTree network.
If these persons purchase reserved shares, this will reduce the number of shares
available for sale to the general public. Any reserved shares that are not
orally confirmed for purchase within one day of the pricing of this offering
will be offered by the underwriters to the general public on the same terms as
the other shares offered by this prospectus. Merrill Lynch is administering this
reserved share program.
Purchasers of shares pursuant to the reserved share program will not be
subject to lock-up agreements in respect of the shares so purchased unless
required by the Conduct Rules of the NASD. The NASD's conduct rules will require
that some purchasers of shares who are affiliated or associated with NASD
70
<PAGE> 72
members or who hold senior positions at financial institutions or members of
their immediate families be subject to three-month lock-up agreements.
NO SALES OF COMMON STOCK OR SIMILAR SECURITIES
We and our officers, directors and persons beneficially owning in the
aggregate more than 95% of our outstanding common stock have agreed, with
limited exceptions, not to sell or transfer any common stock for 180 days after
the date of this prospectus without first obtaining the written consent of
Merrill Lynch. Specifically, we and these other individuals and entities have
agreed not to directly or indirectly
- offer, pledge, sell or contract to sell any common stock,
- sell any option or contract to purchase any common stock,
- purchase any option or contract to sell any common stock,
- grant any option, right or warrant for the sale of any common stock,
- lend or otherwise dispose of or transfer any common stock,
- request or demand that we file a registration statement related to the
common stock, or
- enter into any swap or other agreement that transfers all or any portion
of the economic consequence of ownership of any common stock, whether any
such swap or transaction is to be settled by delivery of shares or other
securities, in cash or otherwise.
This lockup provision applies to common stock and to securities convertible
into or exchangeable or exercisable for or repayable with common stock. It also
applies to common stock owned now or acquired later by the person executing the
agreement or for which the person executing the agreement later acquires the
power of disposition.
NASDAQ NATIONAL MARKET LISTING
We expect the shares to be approved for quotation on the Nasdaq National
Market, subject to notice of issuance, under the symbol " ."
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations
between us and the representatives. In addition to prevailing market conditions,
the primary factors considered in determining the initial public offering price
were:
- the valuation multiples of publicly traded companies that the
representatives believed to be comparable to us,
- our financial information,
- the history of, and the prospects for, our company and the industry in
which we compete,
- an assessment of (1) our management, (2) our past and present operations,
(3) the prospects for, and timing of, future revenue of our company and
(4) the present state of our development, and
- the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also
possible that after the offering the shares will not trade in the public market
at or above the initial public offering price.
The underwriters do not expect to sell more than 5% of the shares in the
aggregate to accounts over which they exercise discretionary authority.
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<PAGE> 73
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of the shares is completed, SEC rules may limit
underwriters and selling group members from bidding for and purchasing our
common stock. However, the representatives may engage in transactions that
stabilize the price of our common stock, such as bids or purchases to peg, fix
or maintain that price.
If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares than are listed on
the cover of this prospectus, the representatives may reduce that short position
by purchasing shares in the open market. The representatives may also elect to
reduce any short position by exercising all or part of the over-allotment option
described above. Purchases of the common stock to stabilize its price or to
reduce a short position may cause the price of the common stock to be higher
than it might be in the absence of such purchases.
The representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares in
the open market to reduce the underwriters' short position or to stabilize the
price of the shares they may reclaim the amount of the selling concession from
the underwriters and selling group members who sold those shares. The imposition
of a penalty bid may also affect the price of the shares in that it discourages
resales of those shares.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice. These transactions may be effected on
the Nasdaq National Market, in the over-the-counter market or otherwise.
ELECTRONIC PROSPECTUS
Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
Advisor(SM), a full service brokerage program, may view offering terms and a
prospectus online and place orders through their financial advisors.
OTHER RELATIONSHIPS
Prudential Securities Incorporated, an underwriter, acted as placement
agent in connection with a private placement of our Series D convertible
preferred stock in September 1999. Prudential received a warrant to purchase
127,000 shares of common stock at an exercise price of $7.52 per share. In
January 2000 Prudential Securities Incorporated agreed to exchange the warrant
for a new warrant to purchase 127,000 shares of common stock at an exercise
price equal to the public offering price of the shares offered by this
Prospectus. This warrant is exercisable for a five-year period ending on
September 21, 2004. Other than the shares to be purchased by Prudential
Securities Incorporated as an underwriter in this offering, Prudential
Securities Incorporated has agreed that it will not transfer or dispose of,
directly or indirectly, shares of common stock or any securities convertible
into or exercisable or exchangeable for or repayable with shares of common stock
for one year after the date of this prospectus.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for LendingTree by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Brown & Wood LLP, New York, New York.
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<PAGE> 74
EXPERTS
Our financial statements as of December 31, 1997 and 1998 and as of
September 30, 1999 and for the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1999 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock we propose to sell in
this offering. This prospectus, which constitutes part of the registration
statement, does not contain all of the information set forth in the registration
statement. For further information with respect to us and the common stock we
propose to sell in this offering, we refer you to the registration statement and
the exhibits and schedule filed as a part of the registration statement.
Statements contained in this prospectus regarding the contents of any contract
or any other document filed as an exhibit to the registration statement are not
necessarily complete, and, in each instance, we refer you to the copy of that
contract or other document filed as an exhibit to the registration statement. A
copy of the registration statement and the exhibits and schedule filed as a part
of the registration statement may be inspected without charge at the public
reference facilities maintained by the SEC in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at the
Citicorp Center, 5000 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of all or any part of the registration statement may be obtained from
those offices upon the payment of the fees prescribed by the SEC. You can obtain
information on the operation of the public reference facilities maintained by
the SEC by calling 1-800-SEC-0330. The SEC also maintains a World Wide website
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
website is http://www.sec.gov.
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<PAGE> 75
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets as of December 31, 1997 and 1998 and
September 30, 1999........................................ F-3
Statements of Operations for the years ended December 31,
1997 and 1998 and the nine months ended September 30, 1998
and 1999.................................................. F-4
Statements of Changes in Shareholders' Equity (Deficit) for
the years ended December 31, 1997 and 1998 and the nine
months ended September 30, 1999........................... F-5
Statements of Cash Flows for the years ended December 31,
1997 and 1998 and the nine months ended September 30, 1998
and 1999.................................................. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 76
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
LendingTree, Inc.
The stock split described in Note 2 to the financial statements has not been
consummated at January 10, 2000. When it has been consummated, we will be in a
position to furnish the following report:
"In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in shareholders' equity (deficit) and of cash
flows present fairly, in all material respects, the financial position of
LendingTree, Inc. at December 31, 1997 and 1998 and September 30, 1999, and
the results of its operations and its cash flows for the years ended
December 31, 1997 and 1998 and the nine months ended September 30, 1999, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards, which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above."
PRICEWATERHOUSECOOPERS LLP
Charlotte, North Carolina
November 24, 1999
F-2
<PAGE> 77
LENDINGTREE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1997 1998 1999
---------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 402,000 $ 3,085,000 $ 37,492,000
Accounts receivable, net of allowance for doubtful
accounts of $0, $8,000, and $95,000 respectively........ 2,000 245,000 1,825,000
Prepaid expenses and other current assets................. -- 87,000 276,000
---------- ----------- ------------
Total current assets............................... 404,000 3,417,000 39,593,000
Property and equipment, net (Note 3)........................ 18,000 210,000 619,000
Other assets................................................ 2,000 60,000 75,000
---------- ----------- ------------
Total assets....................................... $ 424,000 $ 3,687,000 $ 40,287,000
========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 71,000 $ 736,000 $ 2,540,000
Accrued expenses (Note 4)................................. -- 15,000 1,646,000
---------- ----------- ------------
Total current liabilities.......................... 71,000 751,000 4,186,000
---------- ----------- ------------
Commitments and contingencies (Note 7)...................... -- -- --
Mandatorily redeemable securities (Note 5):
Series A Convertible Preferred stock, $.01 par value, 8%
cumulative, 3,049,031 shares authorized, 833,334 shares
issued and outstanding at December 31, 1998............. -- 4,379,000 --
Series A Convertible Preferred stock warrants............. -- 252,000 --
Shareholders' equity (deficit) (Note 5):
Series A Convertible Preferred stock, $.01 par value, 8%
cumulative, 3,049,031 shares authorized, 1,666,667
shares issued and outstanding at September 30, 1999..... -- -- 9,885,000
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
shares issued and outstanding at September 30, 1999..... -- -- 49,432,000
Common stock, $.01 par value, 38,100,000 shares
authorized, 2,654,373, 3,750,172, and 3,934,736 shares
issued at December 31, 1997 and 1998 and September 30,
1999, respectively...................................... 27,000 38,000 39,000
Deferred compensation..................................... -- -- (262,000)
Treasury stock (948,971 shares at September 30, 1999)..... -- -- (5,978,000)
Additional paid-in-capital................................ 1,293,000 5,668,000 6,367,000
Accumulated deficit....................................... (967,000) (7,401,000) (23,382,000)
---------- ----------- ------------
Total shareholders' equity (deficit)............... 353,000 (1,695,000) 36,101,000
---------- ----------- ------------
Total liabilities and shareholders' equity
(deficit)........................................ $ 424,000 $ 3,687,000 $ 40,287,000
========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 78
LENDINGTREE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------- --------------------------
1997 1998 1998 1999
--------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
LendingTree network......................... $ 2,000 $ 273,000 $ 157,000 $ 3,398,000
[i]close and other technology............... -- 136,000 125,000 630,000
--------- ----------- ----------- ------------
Total revenue....................... 2,000 409,000 282,000 4,028,000
--------- ----------- ----------- ------------
Cost of revenue:
LendingTree network......................... -- 235,000 146,000 1,330,000
[i]close and other technology............... -- 149,000 133,000 246,000
--------- ----------- ----------- ------------
Total cost of revenue............... -- 384,000 279,000 1,576,000
--------- ----------- ----------- ------------
Gross profit.................................. 2,000 25,000 3,000 2,452,000
--------- ----------- ----------- ------------
Operating expenses:
Product development......................... 293,000 1,051,000 712,000 808,000
Marketing and advertising................... 54,000 2,494,000 1,028,000 12,069,000
Sales, general and administrative........... 621,000 2,955,000 1,770,000 5,636,000
--------- ----------- ----------- ------------
Total operating expenses............ 968,000 6,500,000 3,510,000 18,513,000
--------- ----------- ----------- ------------
Loss from operations.......................... (966,000) (6,475,000) (3,507,000) (16,061,000)
Interest income, net.......................... 3,000 41,000 41,000 80,000
--------- ----------- ----------- ------------
Net loss...................................... (963,000) (6,434,000) (3,466,000) (15,981,000)
--------- ----------- ----------- ------------
Accretion of mandatorily redeemable preferred
stock....................................... -- -- -- (131,000)
Dividends issued to preferred shareholders on
conversion of preferred stock warrants to
common stock warrants....................... -- -- -- (525,000)
Dividends on mandatorily redeemable preferred
stock....................................... -- (24,000) -- (616,000)
--------- ----------- ----------- ------------
Net loss attributable to common
shareholders................................ $(963,000) $(6,458,000) $(3,466,000) $(17,253,000)
========= =========== =========== ============
Net loss per common share -- basic and
diluted..................................... $ (1.20) $ (1.88) $ (1.03) $ (4.60)
========= =========== =========== ============
Weighted average shares used in basic and
diluted net loss per common share
calculation................................. 803,370 3,434,736 3,350,765 3,747,888
========= =========== =========== ============
Pro forma per common share data (unaudited) --
Note 2:
Pro forma basic and diluted net loss per
common share............................. $ (1.84) $ (2.91)
=========== ============
Pro forma weighted average basic and diluted
shares outstanding....................... 3,501,425 5,930,360
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 79
LENDINGTREE, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
STOCK COMMON STOCK
----------------------- ------------------- ADDITIONAL
NUMBER OF NUMBER OF TREASURY PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT STOCK CAPITAL DEFICIT
--------- ----------- --------- ------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................... -- $ -- 259,080 $3,000 $ -- $ -- $ (4,000)
Sale of common stock,
including exercise of
common stock options...... 1,125,928 11,000 1,012,000
Issuance of common stock
in lieu of compensation/
services rendered....... 1,269,365 13,000 30,000
Issuance of stock
options................. 251,000
Net loss.................. (963,000)
--------- ----------- --------- ------- ----------- ------------ ------------
Balance at December 31,
1997.................... -- -- 2,654,373 27,000 -- 1,293,000 (967,000)
Sale of common stock...... 1,041,401 10,000 3,918,000
Issuance of warrants in
conjunction with sale of
Series A Convertible
Preferred stock and line
of credit............... 56,000
Issuance of common stock
in lieu of compensation/
services rendered....... 54,398 1,000 210,000
Issuance of stock
options................. 215,000
Dividends on mandatorily
redeemable preferred
stock................... (24,000)
Net loss.................. (6,434,000)
--------- ----------- --------- ------- ----------- ------------ ------------
Balance at December 31,
1998.................... -- -- 3,750,172 38,000 -- 5,668,000 (7,401,000)
Exercise of common stock
options................. 143,581 1,000 307,000
Issuance of common stock
in lieu of
compensation............ 40,983 193,000
Sale of Series D
Convertible Preferred
stock, net.............. 6,024,096 47,542,000
Issuance of warrants in
conjunction with sale of
Series A Convertible
Preferred stock and
issuance of convertible
notes................... 25,000
Conversion of preferred
stock from mandatorily
redeemable.............. 1,666,667 9,382,000
Conversion of preferred
stock warrants to common
stock warrants.......... 303,000
Conversion of convertible
notes into Series D
Convertible Preferred
stock................... 214,076 1,777,000
Repurchase of common
stock................... (5,978,000)
Issuance of stock options
in conjunction with
consulting and severance
agreements.............. 618,000
Amortization of deferred
compensation............
Accretion of mandatorily
redeemable preferred
stock................... (131,000)
Dividends on convertible
preferred stock......... 616,000 (616,000)
Net loss.................. (15,981,000)
--------- ----------- --------- ------- ----------- ------------ ------------
Balance at September 30,
1999.................... 7,904,839 $59,317,000 3,934,736 $39,000 $(5,978,000) $ 6,367,000 $(23,382,000)
========= =========== ========= ======= =========== ============ ============
<CAPTION>
TOTAL
SHAREHOLDERS'
DEFERRED EQUITY
COMPENSATION (DEFICIT)
------------ -------------
<S> <C> <C>
Balance at December 31,
1996.................... $ -- $ (1,000)
Sale of common stock,
including exercise of
common stock options...... 1,023,000
Issuance of common stock
in lieu of compensation/
services rendered....... 43,000
Issuance of stock
options................. 251,000
Net loss.................. (963,000)
----------- ------------
Balance at December 31,
1997.................... -- 353,000
Sale of common stock...... 3,928,000
Issuance of warrants in
conjunction with sale of
Series A Convertible
Preferred stock and line
of credit............... 56,000
Issuance of common stock
in lieu of compensation/
services rendered....... 211,000
Issuance of stock
options................. 215,000
Dividends on mandatorily
redeemable preferred
stock................... (24,000)
Net loss.................. (6,434,000)
----------- ------------
Balance at December 31,
1998.................... -- (1,695,000)
Exercise of common stock
options................. 308,000
Issuance of common stock
in lieu of
compensation............ 193,000
Sale of Series D
Convertible Preferred
stock, net.............. 47,542,000
Issuance of warrants in
conjunction with sale of
Series A Convertible
Preferred stock and
issuance of convertible
notes................... 25,000
Conversion of preferred
stock from mandatorily
redeemable.............. 9,382,000
Conversion of preferred
stock warrants to common
stock warrants.......... 303,000
Conversion of convertible
notes into Series D
Convertible Preferred
stock................... 1,777,000
Repurchase of common
stock................... (5,978,000)
Issuance of stock options
in conjunction with
consulting and severance
agreements.............. (269,000) 349,000
Amortization of deferred
compensation............ 7,000 7,000
Accretion of mandatorily
redeemable preferred
stock................... (131,000)
Dividends on convertible
preferred stock......... --
Net loss.................. (15,981,000)
----------- ------------
Balance at September 30,
1999.................... $ (262,000) $ 36,101,000
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 80
LENDINGTREE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------- ---------------------------
1997 1998 1998 1999
---------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................ $ (963,000) $(6,434,000) $(3,466,000) $(15,981,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization............... -- 46,000 21,000 126,000
Provision for doubtful accounts............. -- 8,000 -- 87,000
Common stock issued in lieu of compensation/
services rendered......................... 43,000 210,000 210,000 193,000
Common stock options issued in lieu of
compensation/services rendered............ -- -- 161,000 356,000
Issuance of stock options and warrants...... 251,000 223,000 -- --
Issuance of Series D Convertible Preferred
stock in lieu of interest................. -- -- -- 40,000
Changes in assets and liabilities:
Accounts receivable....................... (2,000) (251,000) (220,000) (1,667,000)
Prepaid expenses and other current
assets................................. -- (87,000) (16,000) (189,000)
Other assets.............................. (2,000) (58,000) (1,000) (15,000)
Accounts payable.......................... 70,000 665,000 425,000 1,804,000
Accrued expenses.......................... -- 15,000 -- 1,631,000
---------- ----------- ----------- ------------
Net cash used in operating
activities........................... (603,000) (5,663,000) (2,886,000) (13,615,000)
---------- ----------- ----------- ------------
Cash flows from investing activities:
Purchase of property and equipment............ (18,000) (231,000) (160,000) (535,000)
---------- ----------- ----------- ------------
Net cash used in investing
activities........................... (18,000) (231,000) (160,000) (535,000)
---------- ----------- ----------- ------------
Cash flows from financing activities:
Proceeds from sales of common stock and
warrants and exercise of stock options...... 1,023,000 3,921,000 3,198,000 308,000
Repurchase of common stock.................... -- -- -- (5,978,000)
Proceeds from issuance of convertible notes... -- -- -- 1,750,000
Proceeds from sale of mandatorily redeemable
Series A Convertible Preferred stock and
warrants, net of offering costs............. -- 4,656,000 -- 4,935,000
Proceeds from sale of Series D Convertible
Preferred stock, net of offering costs...... -- -- -- 47,542,000
---------- ----------- ----------- ------------
Net cash provided by financing
activities........................... 1,023,000 8,577,000 3,198,000 48,557,000
---------- ----------- ----------- ------------
Net increase in cash and cash equivalents....... 402,000 2,683,000 152,000 34,407,000
Cash and cash equivalents, beginning of
period........................................ -- 402,000 402,000 3,085,000
---------- ----------- ----------- ------------
Cash and cash equivalents, end of period........ $ 402,000 $ 3,085,000 $ 554,000 $ 37,492,000
========== =========== =========== ============
Supplemental disclosure of cash flow
information:
Interest paid................................. $ -- $ -- $ -- $ --
Income taxes paid............................. -- -- -- --
Supplemental schedule of non-cash financing
activities (Note 2)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 81
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY
LendingTree, Inc. (the "Company") was incorporated in the State of Delaware
on June 7, 1996.
The Company is an Internet-based loan marketplace for consumers and
lenders. Loan types include mortgage, home equity, automobile, credit cards and
personal loans.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents. As of September 30, 1999, cash
equivalents included amounts in a repurchase agreement of $37,433,000.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts payable and
accounts receivable at December 31, 1997 and 1998 and September 30, 1999
approximated their fair value due to the short-term nature of these items. The
carrying value of the Company's short-term investments at December 31, 1997 and
1998 and September 30, 1999 approximated their fair values.
Property and Equipment
Property and equipment is primarily comprised of furniture and computer
equipment which are stated at cost less accumulated depreciation and are being
depreciated using the straight-line method over their estimated useful lives,
which range from one to five years. Leasehold improvements are depreciated over
the shorter of the lease period or the estimated useful life of the improvement.
Ordinary maintenance and repair costs are expensed as incurred.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its property and equipment and
intangible assets in accordance with Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," ("SFAS No. 121"). SFAS No. 121 requires recognition
of impairment of long-lived assets in the event the net book value of such
assets exceeds the future undiscounted cash flows attributable to such assets or
the business to which such assets relate. No impairments were required to be
recognized during the years ended December 31, 1997 and 1998 or the nine month
period ended September 30, 1999.
Income Taxes
The Company accounts for income taxes using the liability method whereby
deferred tax assets or liabilities are recognized for the temporary differences
between financial reporting and tax bases of the
F-7
<PAGE> 82
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company's assets and liabilities and for tax carryforwards. In estimating future
tax consequences, the Company generally considers all expected future events
other than enactment of changes in tax law or rates. If it is "more likely than
not" that some portion or all of a deferred tax asset will not be realized, a
valuation allowance is recorded.
Revenue Recognition
LendingTree network revenue is generated principally from the transmission
of qualification forms ("Transmission Revenue") and the closing of loans
("Closed Loan Revenue"). LendingTree network revenue also includes lender set-up
fees and monthly maintenance fees. Transmission Revenue is recognized at the
time qualification forms are transmitted, while Closed Loan Revenue is
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 network. Monthly maintenance fees are recognized as the
service is provided.
[i]close and other technology revenue is related primarily to modifying the
Company's proprietary software for use by certain 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, as this
software requires significant modification and customization. Losses, if any,
are recognized when the liability is identified. Included in accounts
receivable, net, as of December 31, 1997 and 1998 and September 30, 1999 is $0,
$105,000, and $5,000, respectively, of unbilled revenue related to percentage of
completion contracts.
Cost of Revenue
LendingTree network cost of revenue includes salary and benefit costs of
the borrower relations and implementation groups, credit agency scoring
expenses, revenue sharing costs, closed loan rebate costs, and the costs of
website hardware.
[i]close cost of revenue includes direct costs of modifying the Company's
proprietary software for licensing to lenders, as well as the cost of servers
related to these licenses.
Marketing and Advertising Expenses
Marketing and advertising expenses consist primarily of costs, including
salaries, of all personnel involved in marketing and advertising. Marketing and
advertising expenses also include costs of advertising, trade shows, affiliate
bounty fees, and certain indirect costs. All costs of advertising the services
and products offered by the Company are expensed as incurred. Advertising
expense totaled approximately $50,000 and $1,812,000 in the years ended December
31, 1997 and 1998, respectively, and was approximately $691,000 and $11,157,000
for the nine months ended September 30, 1998 and 1999, respectively.
Product Development Costs
Product development costs primarily include expenses incurred by the
Company to develop our proprietary software and to enhance, manage, monitor, and
operate the Company's website. Prior to January 1, 1999, the software
development costs component of product development costs were accounted for 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. Through December 31, 1998, completion of a
working model of
F-8
<PAGE> 83
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the Company's product and general release have substantially coincided. Costs
incurred by the Company between the completion of the working model and the
point at which the product is ready for general release have been insignificant.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued 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 is
effective for financial statements for fiscal years beginning after December 15,
1998. The Company adopted SOP 98-1 effective January 1, 1999. With the adoption
of this standard, the Company began accounting for the software development
component of product development costs in accordance with SOP 98-1, which
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. The adoption of SOP 98-1 did not have a material impact on the
Company's financial statements.
Stock-Based Compensation
The Company accounts for the effect of its stock-based compensation plans
for employees under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," ("SFAS No. 123") using the optional
intrinsic value method. The intrinsic value method results in compensation cost
equal to the excess of the fair value of the stock over the exercise or purchase
price at the date of award. The Company also discloses the pro forma income
statement effect of its stock-based compensation plans as if the Company had
adopted the fair value approach. The fair value approach results in compensation
cost using an option-pricing model that takes into account the fair value price
at the grant date, the exercise price, the expected life of the award, the
expected dividends, and the risk-free interest rate expected over the life of
the award.
The Company accounts for the effect of its stock-based compensation for
non-employees under SFAS No. 123, using the fair value approach.
Risks and Uncertainties, Significant Customers and Concentrations
Since inception, the Company has incurred significant losses and had an
accumulated deficit of $23,382,000 as of September 30, 1999. The losses and
accumulated deficit have resulted from the significant costs incurred for
advertising and employment expenses related to the development of [i]close and
establishing relationships with lenders. Because the Company plans to continue
to invest in advertising, product development, and marketing, the Company will
continue to incur substantial losses in the foreseeable future. Although the
Company has experienced significant revenue growth, the operating results for
future periods are subject to numerous uncertainties, and there can be no
assurance that revenue growth will continue or that the Company will be able to
achieve or sustain profitability. The Company plans to raise additional equity
capital through its IPO in order to continue to fund its operating needs.
However, if it is unable to successfully raise sufficient funds, management
believes it could reduce discretionary operating expenditures, including
advertising and marketing and certain overhead costs, to permit the Company to
continue as a going concern.
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable. Cash equivalents are invested in repurchase agreements on an
overnight basis with high credit quality financial institutions.
F-9
<PAGE> 84
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For the year ended December 31, 1997, two lenders comprised all of the
Company's revenue. For the year ended December 31, 1998, four lenders comprised
27%, 13%, 12%, and 11% of the Company's revenue. For the nine months ended
September 30, 1998, three lenders comprised 37%, 15% and 11% of the Company's
revenue. For the nine months ended September 30, 1999, one lender comprised 10%
of the Company's revenue. All of the Company's revenues are from transactions
originating in the United States.
As of December 31, 1997, two lenders comprised all of the Company's
accounts receivable balance. As of December 31, 1998, two lenders comprised 41%
and 13% of the Company's accounts receivable balance. As of September 30, 1999,
one lender comprised 11% of the Company's accounts receivable balance.
Concentrations of credit risk with respect to accounts receivable are limited
due to the large number of lenders comprising the Company's customer base.
Comprehensive Income
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"
("SFAS No. 130"). SFAS No. 130 establishes standards for reporting comprehensive
income and its components in financial statements. Comprehensive income, as
defined, includes all changes in equity during a period from non-owner sources.
The Company had no items of other comprehensive income for the years ended
December 31, 1997 or 1998 or the nine months ended September 30, 1998 and 1999.
NET LOSS PER COMMON SHARE
Historical
The Company computes net loss per common share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share," ("SFAS No.
128") and SEC Staff Accounting Bulletin No. 98 ("SAB No. 98"). Under the
provisions of SFAS No. 128 and SAB No. 98, basic net loss per common share
("Basic EPS") is computed by dividing net loss available to common shareholders
by the weighted average number of common shares outstanding. Diluted net loss
available to common shareholders ("Diluted EPS") is computed by dividing net
loss by the weighted average number of common shares and dilutive potential
common shares then outstanding. Potential common shares consist of shares
issuable upon the exercise of stock options and warrants and shares issuable
upon conversion of convertible preferred stock.
Pro Forma (Unaudited)
Pro forma net loss per common share is calculated assuming the conversion
of all outstanding shares of preferred stock which converts automatically upon
completion of the Company's IPO into 1,058,334 and 10,039,145 shares of common
stock at December 31, 1998 and September 30, 1999, respectively. Therefore,
accretion of discounts on mandatorily redeemable preferred stock of $131,000 for
the nine months ended September 30, 1999 and dividends on mandatorily redeemable
preferred stock of $24,000 and $616,000 during the year ended December 31, 1998
and the nine months ended September 30, 1999, respectively, are excluded from
the calculation of pro forma net loss per common share. It is assumed that each
series of preferred stock was converted as of January 1, 1998 or the date of
issuance, if later.
The calculation of pro forma net loss per common share for the year ended
December 31, 1998 and for the nine months ended September 30, 1999 does not
include 722,559 and 810,053, respectively, of potential common shares, as their
impact would be anti-dilutive.
F-10
<PAGE> 85
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Stock Split
On January 5, 2000, the Board of Directors approved a 1.27-for-1 common
stock split which will be effective prior to the effective date of the Company's
planned IPO. 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 certificate of incorporation to take effect as of
the effective date of the 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.
Segment Reporting
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," ("SFAS No. 131"). This statement
establishes standards for the way companies report information about operating
segments in annual financial statements. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The disclosures prescribed by SFAS No. 131 are effective for the year
ended December 31, 1998. Management has determined that the Company does not
have any separately reportable operating segments as of December 31, 1998 or
September 30, 1999.
Start-Up Costs
In April 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position No. 98-5, "Reporting on the Costs of Start-Up
Activities," ("SOP No. 98-5") which is effective for fiscal years beginning
after December 15, 1998. SOP No. 98-5 requires companies to expense as incurred
all pre-operating, startup and organizational costs that are not capitalizable
as long-lived assets. The Company adopted SOP No. 98-5 effective January 1,
1999. The adoption of SOP No. 98-5 had no impact on the Company's financial
condition or results of operations.
F-11
<PAGE> 86
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Cash Flow Information
A supplemental schedule of non-cash financing activities follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------ -------------------------
1997 1998 1998 1999
---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Accretion of mandatorily
redeemable preferred stock... $ -- $ -- $ -- $ 131,000
Dividends issued to preferred
shareholders on conversion of
preferred stock warrants to
common stock warrants.......... $ -- $ -- $ -- $ 525,000
Dividends on convertible
preferred stock.............. $ -- $24,000 $ -- $ 616,000
Conversion of convertible notes
and accrued interest into
Series D Convertible
Preferred stock.............. $ -- $ -- $ -- $1,777,000
Issuance of warrants in
conjunction with Series A
financing and convertible
promissory notes............. $ -- $56,000 $ -- $ 63,000
Issuance of stock options in
conjunction with consulting
and severance agreements..... $ -- $ -- $ -- $ 356,000
</TABLE>
Reclassifications
Certain reclassifications were made to the December 31, 1997 and 1998
financial statements to conform them to the September 30, 1999 presentation.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," ("SFAS No. 133"). SFAS No. 133 establishes a new model
for accounting for derivatives and hedging activities and supercedes several
existing standards. SFAS No. 133, as amended by SFAS No. 137, is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. The Company
does not expect that the adoption of SFAS No. 133 will have a material impact on
the Company's financial statements.
F-12
<PAGE> 87
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
EXPECTED DECEMBER 31,
LIFE -------------------- SEPTEMBER 30,
(YEARS) 1997 1998 1999
-------- ---- ---- -------------
<S> <C> <C> <C> <C>
Computer hardware............... 3 $18,000 $174,000 $ 368,000
Office furniture and
equipment....................... 5 -- 70,000 388,000
Computer systems software....... 1 -- 5,000 21,000
Leasehold improvements.......... 5 -- -- 7,000
------- -------- -------------
18,000 249,000 784,000
Accumulated depreciation........ -- (39,000) (165,000)
------- -------- -------------
Net............................. $18,000 $210,000 $ 619,000
======= ======== =============
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1999 was $0, $39,000 and $126,000, respectively.
4. ACCRUED EXPENSES
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1997 1998 1999
---- ------- -------------
<S> <C> <C> <C>
Advertising................................... $-- $ -- $ 491,000
Incentive and other compensation.............. -- 15,000 357,000
Deferred revenues............................. -- -- 340,000
Professional services......................... -- -- 285,000
Other......................................... -- -- 173,000
-- ------- ----------
Total accrued expenses.............. $-- $15,000 $1,646,000
== ======= ==========
</TABLE>
5. SHAREHOLDERS' EQUITY
Common Stock
On March 24, 1998, the Company effected a 2-for-1 stock split in the form
of a stock dividend. All share and per share amounts have been restated to
reflect the stock split. The holder of each share of common stock is entitled to
one vote per share.
Preferred Stock
On September 20, 1999, the shareholders approved an amendment of the
Company's certificate of incorporation, under which the Company authorized
10,467,194 shares of preferred stock, $.01 par value per share, consisting of
four series of convertible preferred stock (the "Series A Preferred," "Series B
Preferred," "Series C Preferred" and "Series D Preferred" stock). Preferred
shareholders are entitled to cumulative dividends which accrue on a daily basis
at a rate of 8% per annum. Dividends to Series A Preferred shareholders are paid
quarterly in additional shares of preferred stock or in cash at the option of
the Company and subject to certain conditions. Dividends to Series D Preferred
shareholders are paid in kind in additional shares of common stock at the IPO
effective date. As of September 30, 1999, there
F-13
<PAGE> 88
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
were $640,000 of accrued dividends, of which $527,000 was satisfied with the
issuance of 87,817 shares of Series A Preferred stock on October 15, 1999.
The liquidation value of convertible preferred stock is $6.00, $9.00,
$12.00, and $8.30 per share for Series A Convertible Preferred, Series B
Convertible Preferred, Series C Convertible Preferred, and Series D Convertible
Preferred, respectively. If liquidation proceeds are insufficient to pay such
amounts, holders would share ratably in any proceeds on liquidation based on the
number of shares into which the preferred stock is convertible. If such proceeds
are in excess of $50 million, in addition to the liquidation preference, the
holders of preferred stock are entitled to participate ratably with common
shareholders on an as-if-converted basis.
Each holder of outstanding shares of preferred stock is entitled to the
number of votes equal to the number of whole shares of common stock into which
the shares are convertible. The holders of shares of preferred stock vote
together with holders of shares of common stock as a single class. The holders
in interest of a majority of the outstanding shares of preferred stock, voting
together as a single class, are entitled to elect one director to the Company's
Board of Directors.
Each share of preferred stock is convertible, at the option of the holder,
into 1.27 shares of common stock, subject to certain anti-dilution provisions.
Effective upon the closing of the sale of shares of common stock by the Company
pursuant to a qualified public offering, as defined in the instrument governing
the preferred stock, all outstanding shares of preferred stock automatically
convert to shares of common stock, including the payment of accrued and unpaid
dividends on the preferred stock.
Prior to September 20, 1999, the Company was required to redeem, in three
installments, commencing on the fourth anniversary of the date of issuance of
the first share of Series A Convertible Preferred, and continuing on the
immediately succeeding two anniversaries, the number of shares of preferred
stock held by all holders. The redemption price of a share of a series of
convertible preferred stock shall mean the original issue price of a share plus
all accrued and unpaid dividends thereon. In connection with the Series D
Convertible Preferred stock financing, the Series A Convertible Preferred
shareholders relinquished their rights to mandatory redemption. Accretion
related to the mandatory redemption feature ceased on September 20, 1999.
Convertible Promissory Notes
During June and July 1999, the Company entered into Convertible Promissory
Note Agreements (the "Notes") with certain individuals from which LendingTree
received a total of $1.75 million. The Company also issued 53,340 warrants to
purchase common stock at approximately $7.87 per share to the purchasers of
these Notes. These warrants were valued at approximately $19,000 using an option
valuation model. The value of these warrants was recognized as interest expense
during the nine months ended September 30, 1999, when the Notes converted to
preferred stock.
These Notes were to be due on July 13, 2000 (the "maturity date") and bore
interest at 8% per annum, compounded quarterly. They could be prepaid at any
time without penalty.
Under the terms of the Notes, if the Company engaged in a subsequent
financing at any time before December 31, 1999, and provided that the financing
was for a minimum of $10,000,000, the principal outstanding under the Notes and
all accrued interest thereon would be immediately converted into shares of the
offered securities at a conversion price equal to the per share purchase price
of the offered securities. $500,000 of the amount received related to the Notes
was from a party related to an Executive Officer of the Company. This individual
invested under the same terms as other investors in the Notes. These Notes and
related accrued interest converted to Series D Convertible Preferred stock in
connection with the Series D Convertible Preferred stock sale described below.
F-14
<PAGE> 89
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Series D Sale
On September 20, 1999, the Company entered into a Series D Convertible
Preferred Stock Purchase Agreement (the "Series D Agreement") under which it
sold 6,024,076 shares of Series D Convertible Preferred stock at $8.30 per share
for total gross proceeds of approximately $50,000,000. The Company utilized
approximately $5,978,000 of these proceeds to repurchase 948,971 shares of
common stock from existing Board of Directors members in connection with their
departure from the Board, which has been reflected as treasury stock in the
accompanying financial statements. The Company also incurred approximately
$2,458,000 in offering costs, which have been netted against the proceeds. The
Company granted a warrant to purchase 127,000 shares of common stock at
approximately $7.52 per share to a broker in connection with the Series D
Agreement, the fair value of which (approximately $458,000) was calculated using
an option valuation model and is included in offering costs.
In connection with the Series D Agreement, the following additional
transactions occurred:
- Series A Convertible Preferred shareholders gave up their mandatory
redemption rights.
- $1,750,000 of Convertible Notes plus accrued interest that were
outstanding at the closing converted into shares of Series D Convertible
Preferred stock at $8.30 per share. The Company issued a total of 214,076
shares to settle this obligation.
- A consulting agreement was entered into with a former member of the Board
of Directors and a severance agreement was entered into with a former
executive. Both individuals had their existing incentive stock options
cancelled, and new non-qualified stock options were issued at the current
fair value. They received 76,200 and 114,300 options, respectively, to
purchase common stock at approximately $4.72. The Company recorded
expense of $7,000 and $349,000, respectively, as determined using an
option valuation model, related to these two individuals during the nine
months ended September 30, 1999. Additional expense of $262,000 related
to the consulting agreement will be incurred ratably during the remaining
three years of the consulting agreement, and has been recorded as
deferred compensation as of September 30, 1999.
- All preemptive rights were terminated. All Board representation
agreements were terminated.
Series A Sale
Effective December 9, 1998, the Company entered into a Convertible
Preferred Stock and Warrant Purchase Agreement (the "Preferred Stock Agreement")
under which it sold, in the Initial Closing, 833,334 shares of Series A
Convertible Preferred stock at $6 per share and a warrant to purchase 260,000
shares of Series A Convertible Preferred stock with an exercise price of $6 per
share (the "Series A Warrant"). The Series A Warrant was recorded by allocating
the fair value of this warrant determined using an option valuation model, from
the proceeds received in the Initial Closing. Proceeds from the Initial Closing
totaled $4,656,000, net of expenses of approximately $344,000. In addition, the
Company issued a warrant to purchase 63,500 shares of common stock at
approximately $4.72 per share (the "Common Warrant") to a broker in connection
with the Agreement, the fair value of which (approximately $48,000) is included
in offering costs. The fair value of the common warrants was calculated
utilizing an option valuation model.
During March 1999 (the "Second Closing") the Company sold 500,000 shares of
Series A Convertible Preferred stock at a price of $6 per share and a warrant to
purchase 40,000 shares of Series B Convertible Preferred stock at $9 per share
(the "Series B Warrant"), for gross proceeds of $3,000,000. During May 1999 (the
"Third Closing") the Company sold 333,334 shares of Series A Convertible
Preferred stock at $6 per share for gross proceeds of $2,000,000. The Company
also granted a warrant to the investors in the Third Closing to purchase 33,020
shares of common stock at approximately $7.87 per
F-15
<PAGE> 90
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
share. The fair value of these warrants was approximately $12,000 and was
calculated using an option valuation model.
Series A and B Warrants
In conjunction with the sale of Series D Convertible Preferred stock, the
Series A Convertible Preferred shareholders exchanged their Series A and Series
B Warrants for warrants to purchase 381,000 shares of common stock at
approximately $4.72 per share. The exchange has been reflected in the financial
statements as a distribution to the preferred shareholders equivalent to the
excess of the current fair value of the new warrant over the carrying value of
the existing warrants, and has been included in the calculation of net loss
attributable to common shareholders. The new warrants issued were valued at
approximately $828,000 utilizing an option valuation model.
Common Warrants
In addition to common warrants issued as described above, the Company also
issued a warrant to purchase 9,525 shares of common stock at approximately $4.72
per share in connection with a line of credit provided by a shareholder. The
fair value of this warrant (approximately $7,000) was recognized in expense
during the year ended December 31, 1998. This warrant was valued using an option
valuation model. The line of credit is no longer available and no amounts were
outstanding at December 31, 1998 or September 30, 1999.
At September 30, 1999, the Company had outstanding warrants to purchase
667,385 shares of common stock, with exercise prices ranging from approximately
$4.72 - $7.87. Expiration dates range from November 2003 through September 2005.
Stock Option Plans
During January 1997, the Board of Directors approved the 1997 Stock Option
Plan (the "1997 Plan") which provides for the granting of both incentive stock
options and non-qualified stock options to employees, officers, directors and
consultants of the Company. The 1997 Plan allows for a maximum of 1,556,890
shares for option grants to be issued prior to January 15, 2007. During February
1998, the Company established the 1998 Stock Option Plan (the "1998 Plan"). The
1998 Plan, as amended, authorized 1,187,450 shares for option grants to be
issued prior to February 2008. During September 1999, the Company established
the 1999 Stock Option Plan (the "1999 Plan"). The 1999 Plan, as amended,
authorized 2,286,000 shares for option grants prior to September 2009. The 1999
Plan permits the granting of any combination of incentive stock options and
nonqualified stock options.
Under all of the Company's stock option plans, the exercise price of any
incentive stock option shall not be less than the fair value of the stock on the
date of grant or less than 110% of the fair value in the case of optionees
holding more than 10% of the total combined voting power of all classes of stock
of the Company. Options under the Company's stock option plans are exercisable
for ten years from the date of grant, except for incentive stock options granted
to optionees holding more than 10% of the total combined voting power of all
classes of stock, which must be exercised within five years.
The Company's stock option plans generally provide for a four-year vesting
requirement with one-third of such shares vesting at the end of one full year
and on an annual basis thereafter. Upon a change of control, as defined, 50% of
all unvested stock options shall vest.
F-16
<PAGE> 91
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of incentive stock options awarded to employees during the years
ended December 31, 1997 and 1998 and the nine months ended September 30, 1999
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
NUMBER OF EXERCISE PRICE
OPTIONS PRICE RANGE
--------- -------- ----------
<S> <C> <C> <C>
OUTSTANDING AS OF DECEMBER 31, 1996............ -- $ -- $ --
Granted at fair value.......................... 479,563 0.35 0.02-1.43
Exercised...................................... (367,030) 0.02 0.02
--------
OUTSTANDING AS OF DECEMBER 31, 1997............ 112,533 1.43 1.43
Granted at fair value.......................... 571,695 4.56 1.43-5.20
Forfeited...................................... (65,087) 3.09 1.43-4.72
--------
OUTSTANDING AS OF DECEMBER 31, 1998............ 619,141 4.15 1.43-5.20
Granted at fair value.......................... 531,608 5.09 4.72-6.06
Forfeited...................................... (205,678) 4.86 4.72-5.20
--------
OUTSTANDING AS OF SEPTEMBER 30, 1999........... 945,071 $4.53 $1.43-6.06
======== ===== ==========
Exercisable as of September 30, 1999........... 161,648 $2.49 $1.43-4.72
======== ===== ==========
</TABLE>
A summary of non-qualified stock options awarded during the years ended
December 31, 1997 and 1998 and the nine months ended September 30, 1999 follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
NUMBER OF EXERCISE PRICE
OPTIONS PRICE RANGE
--------- -------- ----------
<S> <C> <C> <C>
OUTSTANDING AS OF DECEMBER 31, 1996............. -- $ -- $ --
Granted at fair value........................... 938,262 1.43 1.43-1.57
---------
OUTSTANDING AS OF DECEMBER 31, 1997............. 938,262 1.43 1.43-1.57
Granted at fair value........................... 274,439 4.76 3.54-5.20
---------
OUTSTANDING AS OF DECEMBER 31, 1998............. 1,212,701 2.19 1.43-5.20
Granted at fair value........................... 477,195 5.46 4.72-6.06
Exercised....................................... (143,581) 2.14 1.43-4.72
Forfeited....................................... (111,610) 4.80 4.72-5.20
---------
OUTSTANDING AS OF SEPTEMBER 30, 1999............ 1,434,705 3.07 $1.43-6.06
========= ===== ==========
Exercisable as of September 30, 1999............ 1,045,080 $2.15 $1.43-5.20
========= ===== ==========
</TABLE>
F-17
<PAGE> 92
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about the Company's stock
options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
AT SEPTEMBER 30, 1999
-------------------------------
NUMBER REMAINING
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE OPTIONS EXERCISABLE
- -------------- ----------- ---------------- -------------------
<C> <C> <S> <C>
$1.43 940,656 8 years 927,957
3.54 41,910 8.6 years 27,940
4.72 713,315 8 years 174,631
5.20 173,990 8.7 years 76,200
5.51 319,405 9.9 years --
6.06 190,500 9.9 years --
--------- ---------
2,379,776 1,206,728
</TABLE>
Compensation costs recognized during the years ended December 31, 1997 and
1998 and the nine months ended September 30, 1998 and 1999 for stock-based
compensation awards totaled $251,000, $215,000, $158,000 and $77,000,
respectively. The weighted average fair value at date of grant for options
granted at fair value during the years ended December 31, 1997 and 1998 and the
nine months ended September 30, 1999 was $0.37, $0.80 and $1.17, respectively.
The weighted average fair value at date of grant for options granted in excess
of fair value for the years ended December 31, 1997 and 1998 and the nine months
ended September 30, 1999 was $0.003, $0.49 and $0.86, respectively. The fair
value of each option grant was estimated on the date of grant using the minimum
value method based upon the following assumptions: dividend yield -- 0%; risk
free interest rate -- 6% (1997); 5.1% (1998); 4.75 -- 5.75% (1999) and weighted
average expected option term -- 5 years (1997); 4 years (1998); 5 years (1999).
Had compensation expense for the Company's employee options been recorded
based on the fair value of the options at the grant date, as prescribed by SFAS
No 123, the Company's net loss and net loss per common share -- basic and
diluted would have been as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ---------------------------
1997 1998 1998 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net loss............................. $ (963,000) $(6,458,000) $(3,466,000) $(17,253,000)
Pro forma adjustment for stock
compensation expense................. (150,000) (392,000) (381,000) (990,000)
----------- ----------- ----------- ------------
Pro forma net loss................... $(1,113,000) $(6,850,000) $(3,847,000) $(18,243,000)
=========== =========== =========== ============
Net loss per common share -- basic
and diluted........................ $ (1.20) $ (1.88) $ (1.03) $ (4.60)
Pro forma adjustment for stock
compensation expense............... (.19) (.11) (.12) (.27)
----------- ----------- ----------- ------------
Pro forma net loss per common share--
basic and diluted.................. $ (1.39) $ (1.99) $ (1.15) $ (4.87)
=========== =========== =========== ============
</TABLE>
Because options vest over several years and additional options are expected
to be granted in subsequent years, the pro forma impact on periods presented may
not be representative of the pro forma effects on reported net income or loss in
future years.
F-18
<PAGE> 93
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
There is no current income tax provision or benefit for the years ended
December 31, 1997 or 1998 or for the nine months ended September 30, 1999 as the
Company has generated net operating losses for income tax purposes for which
there is no carryback potential. There is no deferred provision or benefit for
income taxes recorded as the Company is in a net deferred tax asset position for
which a full valuation allowance has been recorded due to uncertainty of
realization.
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1997 and 1998 and September 30, 1999 consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1997 1998 1999
--------- ----------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Domestic net operating loss carryforwards............ $ 277,000 $ 2,683,000 $ 8,695,000
Stock compensation................................. 98,000 182,000 317,000
Other.............................................. 2,000 65,000 125,000
--------- ----------- -----------
Gross deferred tax assets....................... 377,000 2,930,000 9,137,000
Less: Valuation allowance....................... (376,000) (2,926,000) (9,137,000)
--------- ----------- -----------
Net deferred tax assets......................... 1,000 4,000 --
Deferred tax liabilities:
Fixed assets....................................... 1,000 4,000 --
--------- ----------- -----------
Total deferred tax liabilities............. 1,000 4,000 --
--------- ----------- -----------
Net deferred tax asset (liability).............. $ -- $ -- $ --
========= =========== ===========
</TABLE>
The Company has net operating loss carryforwards for income tax purposes of
approximately $6,800,000 available at December 31, 1998 and approximately
$22,450,000 available at September 30, 1999 to offset future federal and state
taxable income. These net operating loss carryforwards begin to expire in 2011.
Should the Company undergo an ownership change as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change may be subject to annual limitation
which could reduce or defer the utilization of these losses.
Taxes computed at the statutory Federal income tax rate of 34% are
reconciled to the provision for income taxes as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- SEPTEMBER 30,
1997 1998 1999
----------------------- ------------------------- -------------------------
% OF % OF % OF
AMOUNT PRETAX LOSS AMOUNT PRETAX LOSS AMOUNT PRETAX LOSS
--------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Federal tax benefit at
statutory rate............... $(327,000) (34.0%) $(2,188,000) (34.0%) $(5,434,000) (34.0%)
State taxes (net of federal
benefit)....................... (50,000) (5.2) (317,000) (4.9) (789,000) (5.0)
Change in valuation
allowance.................... 376,000 39.0 2,550,000 39.6 6,211,000 38.9
Other nondeductible expenses... 1,000 0.2 (45,000) (0.7) 12,000 0.1
--------- ----- ----------- ----- ----------- -----
Provision for income taxes..... $ -- 0 % $ -- 0 % $ -- 0 %
========= ===== =========== ===== =========== =====
</TABLE>
F-19
<PAGE> 94
LENDINGTREE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES
The Company leases certain office facilities and equipment under operating
leases. These leases are generally renewable. The following is a schedule of
future minimum rental payments required under the leases as of September 30,
1999:
<TABLE>
<S> <C>
1999..................................................... $ 190,000
2000..................................................... 542,000
2001..................................................... 497,000
2002..................................................... 390,000
2003..................................................... 328,000
2004..................................................... 27,000
----------
$1,974,000
==========
</TABLE>
Rent expense totaled $7,000 and $109,000 for the years ended December 31,
1997 and 1998, and $57,000 and $403,000 for the nine months ended September 30,
1998 and 1999.
The Company is subject to various legal matters in the ordinary course of
business. In the opinion of management, the ultimate outcome of any such matters
will not have a material adverse effect on the financial condition, results of
operations or cash flows of the Company.
8. SUBSEQUENT EVENTS (UNAUDITED)
During December 1999, the Company entered into a lease agreement for a new
facility in Charlotte, North Carolina. The lease expires in June 2007. The
minimum lease payment is approximately $55,000 per month. In connection with
this lease agreement, the Company subleased its existing space in Charlotte,
North Carolina. The Company anticipates that it will lose approximately $360,000
on this sublease over the remaining term. The Company will recognize this
expense in the income statement during the three month period ending December
31, 1999.
Subsequent to September 30, 1999, the Company has granted stock options to
employees as follows:
<TABLE>
<CAPTION>
MONTH OPTIONS GRANTED EXERCISE PRICE
- -------------- --------------- --------------
<S> <C> <C>
Oct - Dec 1999 642,683 $ 5.51
Dec 1999 88,265 $ 6.54
Jan 2000 743,966 $ 9.25
---------
1,474,914
=========
</TABLE>
The Company anticipates recognizing deferred compensation of approximately
$741,000 related to the granting of certain of these options at below fair
market value as determined by the Board of Directors during the three month
period ending December 31, 1999. This deferred compensation will be amortized to
expense over the vesting period of the underlying options, or four years.
F-20
<PAGE> 95
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THROUGH AND INCLUDING (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
3,650,000 SHARES
LENDINGTREE, INC.
COMMON STOCK
----------------------
PROSPECTUS
----------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 96
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the costs and expenses, other
than the underwriting discounts and commissions, payable by the Registrant in
connection with the sale of the common stock being registered.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC registration fee........................................ $ 13,298
NASD filing fee............................................. 17,500
Nasdaq National Market listing fee.......................... 95,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 300,000
Printing and engraving...................................... 500,000
Blue sky fees and expenses (including legal fees)........... 10,000
Transfer agent fees......................................... 20,000
Premiums for director and officer insurance................. 250,000
Miscellaneous............................................... 294,202
----------
Total............................................. $2,000,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law ("DGCL"), as amended,
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the DGCL provides, among other things, that the Company may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the Company) by reason of the fact that the
person is or was a director, officer, agent or employee of the Company or is or
was serving at the Company's request as a director, officer, agent, or employee
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgment, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding. The power to indemnify applies (a) if such
person is successful on the merits or otherwise in defense of any action, suit
or proceeding, or (b) if such person acted in good faith and in a manner he
reasonably believed to be in the best interest, or not opposed to the best
interest, of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The power to
indemnify applies to actions brought by or in the right of the Company as well,
but only to the extent of defense expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably incurred and not
to any satisfaction of judgment or settlement of the claim itself, and with the
further limitation that in such actions no indemnification shall be made in the
event of any adjudication of negligence or misconduct in the performance of his
duties to the Company, unless the court believes that in light of all the
circumstances indemnification should apply.
Section 174 of the DGCL provides, among other things, that a director, who
willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption, may be held liable for such actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her dissent to such
actions to be entered in the
II-1
<PAGE> 97
books containing the minutes of the meetings of the board of directors at the
time such action occurred or immediately after such absent director receives
notice of the unlawful acts.
Our Amended and Restated Certificate of Incorporation includes a provision
that eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to LendingTree or its
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
These provisions are permitted under Delaware law.
Our Amended and Restated Bylaws provide that:
- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law;
- we may indemnify our other employees and agents to the same extent that
we indemnified our officers and directors, unless otherwise determined by
our Board of Directors; and
- we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware Law.
The indemnification provisions contained in the Company's Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws are not
exclusive of any other rights to which a person may be entitled by law,
agreement, vote of stockholders or disinterested directors or otherwise. In
addition, the Company maintains insurance on behalf of its directors and
executive officers insuring them against any liability asserted against them in
their capacities as directors or officers or arising out of such status.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
From our inception in June of 1996, until October 1997, we were financed
through contributions from our founders and through issuances of common stock.
In return for their contributions, our founders received certain amounts of our
common stock. The number of shares and prices per share indicated below have
been adjusted to reflect a two for one stock split which occurred in March 1998
and a 1.27-for-1 stock split effected prior to this offering. The sales and
issuances of securities in each of these transactions and those that follow were
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof, on the basis that the transactions did not involve a public offering.
No underwriters were involved in connection with these sales and issuances.
In October 1997, we sold 558,449 shares of our common stock at a price of
approximately $1.43 per share in exchange for an aggregate price of $800,000 to
ten investors, including 209,550 shares to Richard Field and 69,778 shares to W.
James Tozer, Jr., both of whom are currently directors, and 69,781 shares to
Donald Colby, a former director.
In November 1997, we issued 2,540 shares of our common stock at a price of
approximately $3.15 per share to a consultant in exchange for $8,000 of services
rendered.
In March 1998, we sold 564,443 shares of our common stock to Phoenix
Strategic Capital and an additional 282,224 shares of our common stock to
Theodore Kheel, Jeffrey Hughes, John Prince and William Shiebler at a price of
approximately $3.54 per share in exchange for an aggregate price of $3,000,000.
II-2
<PAGE> 98
In March 1998, Phoenix Strategic Capital provided us with a $1.0 million
line of credit. In connection with this transaction Phoenix Strategic Capital
received a warrant to purchase 9,525 shares of our common stock at an exercise
price of approximately $4.72 per share.
In July 1998, we sold 42,332 shares of our common stock at a price of
approximately $4.72 per share to H. Eugene Lockhart, a former director, in
exchange for $200,000.
In August 1998, we issued 2,937 shares of our common stock at a price of
approximately $4.72 per share to two persons in exchange for $13,875 of services
rendered.
In November 1998, we sold 152,400 shares of our common stock at a price of
approximately $4.72 per share to three investors for an aggregate price of
$720,000, including 12,700 shares which were sold to James Carthaus, who is
currently a director. We also issued 12,700 shares to an employee at a price of
approximately $4.72 per share in exchange for $60,000 of services rendered.
In December 1998, we sold 833,334 shares of our Series A convertible
preferred stock at a price of $6.00 per share and a warrant to purchase 260,000
shares of our Series A convertible preferred stock at an exercise price of $6.00
per share to The Union Labor Life Insurance Company in exchange for an aggregate
price of $5,000,000. We granted a warrant to purchase 63,500 shares of our
common stock at an exercise price of approximately $4.72 per share to Seacris
Group, Ltd. in exchange for services rendered in connection with the December
1998 private placement. In March 1999, we sold an additional 500,000 shares of
our Series A convertible preferred stock at a price of $6.00 per share and a
warrant to purchase 40,000 shares of our Series B convertible preferred stock at
an exercise price of $9.00 per share to The Union Labor Life Insurance Company
in exchange for a total price of $3,000,000.
In May 1999, we sold 333,334 shares of our Series A convertible preferred
stock at a price of $6.00 per share and warrants to purchase 33,020 shares of
our common stock at an exercise price of approximately $7.87 per share to W.
James Tozer, Jr. and Richard Field, both of whom are currently directors, in
exchange for an aggregate price of $2,000,000.
In July 1999, we issued 8% convertible promissory notes in an aggregate
principal amount of $1,750,000 and warrants to purchase 53,340 shares of our
common stock to Hovde Financial Institution Partners II, L.P., Hovde Investment
Corp., L.L.C., Norman Garrity, William N. Schiebler, Barbara A. and Peter A.
Georgescu, and John B. Prince in exchange for an aggregate price of $1,750,000
of which Norman Garrity, a family member of Douglas Lebda, provided $500,000 of
the financing and received a warrant to purchase 15,240 shares.
In July 1999, we issued 6,350 shares of our common stock at a price of
approximately $4.72 per share to an employee in exchange for $30,000 for
services rendered.
In September 1999, we sold 6,024,096 shares of our Series D convertible
preferred stock at a price per share of $8.30 for a total price of $50,000,000
to Capital Z, The Goldman Sachs Group, Inc., General Electric, priceline.com
Incorporated and Marsh & McLennan Risk Capital.
In connection with the September 1999 transaction, the warrants to purchase
series A and series B convertible preferred stock held by The Union Labor Life
Insurance Company were exchanged for a warrant to purchase 381,000 shares of our
common stock at an exercise price of approximately $4.72 per share, and the
convertible promissory notes with a face amount of $1,750,000 held by investors
were exchanged for 214,076 shares of Series D convertible preferred stock. We
redeemed 282,222, 127,000 and 539,750 shares of common stock at a price per
share of approximately $6.30, from Phoenix Strategic Capital Corp., Donald Colby
and Robert Wilson, respectively, for a total price of $5,977,776. In addition,
we granted a warrant to purchase 127,000 shares of common stock at an exercise
price of approximately $7.52 per share valued at $450,000 to Prudential
Securities Inc. in exchange for services rendered in connection with the
September 1999 private placement. In January 2000, Prudential agreed to exchange
the warrant for a new warrant to purchase 127,000 shares of common stock at an
exercise price equal to the price paid by public investors in the offering
pursuant to its role as an underwriter.
II-3
<PAGE> 99
In November 1999, we issued 78,633 shares of our Series A convertible
preferred stock to The Union Labor Life Insurance Company and an aggregate of
9,184 shares of our Series A convertible preferred stock to W. James Tozer, Jr.
and Richard Field to satisfy $527,000 of accrued dividends.
From time to time, we have granted stock options to employees. No
underwriters were involved in connection with these sales and issuances. The
sales and issuances of these securities were exempt from registration under the
Securities Act pursuant to Rule 701 promulgated thereunder on the basis that
these options were offered and sold either pursuant to a written compensatory
benefit plan or pursuant to written contracts relating to consideration, as
provided by Rule 701 of the Securities Act. The following table sets forth
information regarding the grants during the past three fiscal years:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES GRANTED EXERCISE PRICE
-------------- ----------------
<S> <C> <C>
January 1, 1997 through December 31, 1997...... 1,417,825 $1.07
January 1, 1998 through December 31, 1998...... 814,067 $4.70
January 1, 1999 through December 31, 1999...... 1,720,701 $5.43
</TABLE>
In March 1999, Mitchell York, our former president, exercised an option to
purchase 25,400 shares of our common stock for approximately $4.72 per share for
an aggregate of $120,000.
In September 1999, Donald Colby exercised an option to purchase 94,899
shares of our common stock for $1.43 per share. We repurchased 57,219 shares of
the common stock for a price of $6.30 share.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
1.1* Form of Purchase Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation to
be in effect upon the closing of this offering.
3.2 Form of Amended and Restated Bylaws to be in effect upon the
closing of this offering.
4.1* Specimen Common Stock certificate.
4.2 Form of LendingTree's Rights Plan
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 Employment Agreement between LendingTree, Inc. and Douglas
R. Lebda, dated September 2, 1999.
10.2 Employment Agreement between LendingTree, Inc. and Thomas J.
Reddin, dated November 26, 1999.
10.3* 1999 Stock Option Plan of LendingTree, Inc., dated November
20, 1999.
10.4 1998 Stock Option Plan of LendingTree, Inc., dated February
3, 1998.
10.5 1997 Stock Option Plan of CreditSource USA, Inc. (formerly
known as Lewisburg Ventures, Inc. and a predecessor to
LendingTree, Inc.), dated January 15, 1997.
10.6 Internet, Marketing and Licensing Agreement between
LendingTree, Inc. and priceline.com Incorporated, dated as
of August 1, 1998 (incorporated herein by reference to
Exhibit 10.13 of Amendment No. 1 to priceline.com's
Registration Statement on Form S-1, File No. 333-69657 filed
February 16, 1999).
10.7 Registration Rights Agreement, dated September 20, 1999.
10.8 Warrant to Purchase 7,500 shares of Common Stock issued to
Phoenix Strategic Capital, dated November 30, 1998.
10.9 Warrant to Purchase 50,000 shares of Common Stock issued to
Seacris Group, Ltd., dated December 9, 1998.
</TABLE>
II-4
<PAGE> 100
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
10.10 Form of Warrant to purchase 13,000 shares of Common Stock
issued to Richard D. Field, dated May 25, 1999, as amended
September 20, 1999.
10.11 Warrant to purchase 13,000 shares of Common Stock issued to
W. James Tozer, Jr., dated May 25, 1999, as amended
September 20, 1999.
10.12 Form of Warrant to grant a right to purchase an aggregate of
42,000 shares of Common Stock issued to five individual
investors, dated July 13, 1999.
10.13 Warrant to Purchase 300,000 shares of Common Stock issued to
The Union Labor Life Insurance Company, dated September 20,
1999.
10.14 Warrant to Purchase 100,000 shares of Common Stock issued to
Prudential, dated September 20, 1999.
23.1 Consent of PricewaterhouseCoopers LLP
23.2* Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be supplied by amendment
(b) Financial Statement Schedules.
None.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the purchase agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424 (b)(1) or (4), or 497(h)
under the Securities Act of 1933, shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Charlotte,
State of North Carolina, on this 11th day of January, 2000.
LENDINGTREE, INC.
By: /s/ DOUGLAS R. LEBDA
------------------------------------
Name: Douglas R. Lebda
Title: Chief Executive Officer and
Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated and on the date below:
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ DOUGLAS R. LEBDA Chief Executive Officer January 11, 2000
--------------------------------------------------- and Director (principal
Douglas R. Lebda executive officer)
* Senior Vice President and January 11, 2000
--------------------------------------------------- Chief Financial Officer
Keith B. Hall
* Vice President and January 11, 2000
--------------------------------------------------- Controller
Brian Regan
* Director January 11, 2000
---------------------------------------------------
James A. Carthaus
* Director January 11, 2000
---------------------------------------------------
Richard Field
* Director January 11, 2000
---------------------------------------------------
Robert Kennedy
* Director January 11, 2000
---------------------------------------------------
Daniel Charles Lieber
* Director January 11, 2000
---------------------------------------------------
Adam Mizel
</TABLE>
II-6
<PAGE> 102
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
* Director January 11, 2000
---------------------------------------------------
W. James Tozer, Jr.
*By: /s/ DOUGLAS R. LEBDA
---------------------------------------------
Douglas R. Lebda
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 103
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ -----------
<C> <S>
1.1* Form of Purchase Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation to
be in effect upon the closing of this offering.
3.2 Form of Amended and Restated Bylaws to be in effect upon the
closing of this offering.
4.1* Specimen Common Stock certificate.
4.2 Form of LendingTree's Rights Plan.
5.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 Employment Agreement between LendingTree, Inc. and Douglas
R. Lebda, dated September 2, 1999.
10.2 Employment Agreement between LendingTree, Inc. and Thomas J.
Reddin, dated November 26, 1999.
10.3* 1999 Stock Option Plan of LendingTree, Inc., dated November
20, 1999.
10.4 1998 Stock Option Plan of LendingTree, Inc., dated February
3, 1998.
10.5 1997 Stock Option Plan of CreditSource USA, Inc. (formerly
known as Lewisburg Ventures, Inc. and a predecessor to
LendingTree, Inc.), dated January 15, 1997.
10.6 Internet, Marketing and Licensing Agreement between
LendingTree, Inc. and priceline.com Incorporated, dated as
of August 1, 1998 (incorporated herein by reference to
Exhibit 10.13 of Amendment No. 1 to Priceline.com's
Registration Statement on Form S-1, File No. 333-69657 filed
February 16, 1999).
10.7 Registration Rights Agreement, dated September 20, 1999.
10.8 Warrant to Purchase 7,500 shares of Common Stock issued to
Phoenix Strategic Capital, dated November 30, 1998.
10.9 Warrant to Purchase 50,000 shares of Common Stock issued to
Seacris Group, Ltd., dated December 9, 1998.
10.10 Form of Warrant to purchase 13,000 shares of Common Stock
issued to Richard D. Field, dated May 25, 1999, as amended
September 20, 1999.
10.11 Warrant to purchase 13,000 shares of Common Stock issued to
W. James Tozer, Jr., dated May 25, 1999, as amended
September 20, 1999.
10.12 Form of Warrant to grant a right to purchase an aggregate of
42,000 shares of Common Stock dated July 13, 1999.
10.13 Warrant to Purchase 300,000 shares of Common Stock issued to
The Union Labor Life Insurance Company, dated September 20,
1999.
10.14 Warrant to Purchase 100,000 shares of Common Stock issued to
Prudential, dated September 20, 1999.
23.1 Consent of PricewaterhouseCoopers LLP
23.2* Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be supplied by amendment.
<PAGE> 1
Exhibit 3.1
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
LENDINGTREE, INC.
The undersigned, Douglas R. Lebda, certifies that he is Chief
Executive Officer of LendingTree, Inc., a corporation organized and existing
under the laws of the State of Delaware (hereinafter called the "Corporation"),
and does hereby certify as follows:
1. The current name of the Corporation is LendingTree, Inc.
2. The name under which the Corporation was originally incorporated was
Lewisburg Ventures, Inc. and the original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
June 7, 1996.
3. This Fourth Amended and Restated Certificate of Incorporation was
duly adopted by and in accordance with the provisions of Sections 228, 242 and
245 of the General Corporation Law of the State of Delaware as set forth in
Title 8 of the Delaware Code (the "GCL").
4. This Fourth Amended and Restated Certificate of Incorporation not
only restates and integrates, but also amends the provisions of the
Corporation's Certificate of Incorporation.
5. The text of the Fourth Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended and restated to read in its
entirety as follows:
FIRST: The name of the Corporation is LendingTree, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, State of Delaware 19801. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware (the "GCL").
FOURTH: (a) Authorized Capital Stock. The total number of shares of
stock which the Corporation shall have authority to issue is 110,000,000 shares
of capital stock, consisting of (i) 100,000,000 shares of common stock, par
value $0.01 per share (the "Common Stock") and (ii) 10,000,000 shares of
preferred stock, par value $0.01 per share (the "Preferred Stock").
(b) Common Stock. The powers, preferences and rights, and the
qualifications,
1
<PAGE> 2
limitations and restrictions, of each class of the Common Stock are as follows:
(1) No Cumulative Voting. The holders of shares of
Common Stock shall not have cumulative voting rights.
(2) Dividends; Stock Splits. Subject to the rights of
the holders of Preferred Stock, and subject to any other provisions of this
Fourth Amended and Restated Certificate of Incorporation, as it may be amended
from time to time, holders of shares of Common Stock shall be entitled to
receive such dividends and other distributions in cash, stock or property of the
Corporation when, as and if declared thereon by the Board of Directors from time
to time out of assets or funds of the Corporation legally available therefor.
(3) Liquidation, Dissolution, etc. In the event of any
liquidation, dissolution or winding up (either voluntary or involuntary) of the
Corporation, the holders of shares of Common Stock shall be entitled to receive
the assets and funds of the Corporation available for distribution after
payments to creditors and to the holders of any Preferred Stock of the
Corporation that may at the time be outstanding, in proportion to the number of
shares held by them, respectively.
(4) Merger, etc. In the event of a merger or
consolidation of the Corporation with or into another entity (whether or not the
Corporation is the surviving entity), the holders of each share of Common Stock
shall be entitled to receive the same per share consideration on a per share
basis.
(5) No Preemptive or Subscription Rights. No holder of
shares of Common Stock shall be entitled to preemptive or subscription rights.
(6) Power to Sell and Purchase Shares. Subject to the
requirements of applicable law, the Corporation shall have the power to issue
and sell all or any part of any shares of any class of stock herein or hereafter
authorized to such persons, and for such consideration, as the Board of
Directors shall from time to time, in its discretion, determine, whether or not
greater consideration could be received upon the issue or sale of the same
number of shares of another class, and as otherwise permitted by law. Subject to
the requirements of applicable law, the Corporation shall have the power to
purchase any shares of any class of stock herein or hereafter authorized from
such persons, and for such consideration, as the Board of Directors shall from
time to time, in its discretion, determine, whether or not less consideration
could be paid upon the purchase of the same number of shares of another class,
and as otherwise permitted by law.
(c) Preferred Stock. The Board of Directors is hereby
expressly authorized to provide for the issuance of all or any shares of the
Preferred Stock in one or more classes or series, and to fix for each such class
or series such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights and such qualifications, limitations or restrictions thereof, as shall be
stated and expressed
2
<PAGE> 3
in the resolution or resolutions adopted by the Board of Directors providing for
the issuance of such class or series, including, without limitation, the
authority to provide that any such class or series may be (i) subject to
redemption at such time or times and at such price or prices; (ii) entitled to
receive dividends (which may be cumulative or non-cumulative) at such rates, on
such conditions, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or any other
series; (iii) entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation; or (iv) convertible into, or
exchangeable for, shares of any other class or classes of stock, or of any other
series of the same or any other class or classes of stock, of the Corporation at
such price or prices or at such rates of exchange and with such adjustments; all
as may be stated in such resolution or resolutions.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(c) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(d) The number of directors of the Corporation shall be as
from time to time fixed by the Board of Directors, and such number shall never
be less than three nor more than THIRTEEN. Election of directors need not be by
written ballot unless the By-Laws so provide.
(e) The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. The initial division of the Board of Directors
into classes shall be made by the decision of the affirmative vote of a majority
of the entire Board of Directors. The term of the initial Class I directors
shall terminate on the date of the 2001 annual meeting; the term of the initial
Class II directors shall terminate on the date of the 2002 annual meeting; and
the term of the initial Class III directors shall terminate on the date of the
2003 annual meeting. At each succeeding annual meeting of stockholders beginning
in 2001, successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible,
and any additional director of any class elected to fill a vacancy resulting
from an in crease in such class shall hold office for a term that shall coincide
with the remaining term of that class, but in no case will a decrease in the
number of directors shorten the term of any incumbent director.
(f) A director shall hold office until the annual meeting for
the year in which his or her term expires and until his or her successor shall
be elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office.
3
<PAGE> 4
(g) Subject to the terms of any one or more classes or series
of Preferred Stock, any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled by a majority of the Board of
Directors then in office, provided that a quorum is present, and any other
vacancy occurring on the Board of Directors may be filled by a majority of the
Board of Directors then in office, even if less than a quorum, or by a sole
remaining director. Any director of any class elected to fill a vacancy
resulting from an increase in the number of directors of such class shall hold
office for a term that shall coincide with the remaining term of that class. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his predecessor.
Subject to the rights, if any, of the holders of shares of Preferred Stock then
outstanding, any or all of the directors of the Corporation may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of at least a majority of the voting power of the Corporation's then
outstanding capital stock entitled to vote generally in the election of
directors. Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Fourth Amended and Restated Certificate of Incorporation
applicable thereto, and such directors so elected shall not be divided into
classes pursuant to this Article FIFTH unless expressly provided by such terms.
(h) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the GCL,
this Fourth Amended and Restated Certificate of Incorporation, and any By-Laws
adopted by the stockholders; provided, however, that no By-Laws hereafter
adopted by the stockholders shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been adopted.
SIXTH: No director shall be personally liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the GCL as the same exists or may hereafter be
amended. If the GCL is amended hereafter to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest extent authorized
by the GCL, as so amended. Any repeal or modification of this Article SIXTH by
the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification with respect to acts or omissions occurring prior to such repeal
or modification.
SEVENTH: The Corporation shall indemnify its directors and officers to
the fullest extent authorized or permitted by law, as now or hereafter in
effect, and such right to indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
provided, however, that, except for proceedings to enforce rights to
indemnification, the
4
<PAGE> 5
Corporation shall not be obligated to indemnify any director or officer (or his
or her heirs, executors or personal or legal representatives) in connection with
a proceeding (or part thereof) initiated by such person unless such proceeding
(or part thereof) was authorized or consented to by the Board of Directors. The
right to indemnification conferred by this Article SEVENTH shall include the
right to be paid by the Corporation the expenses incurred in defending or
otherwise participating in any proceeding in advance of its final disposition.
The Corporation may, to the extent authorized from time to
time by the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar to
those conferred in this Article SEVENTH to directors and officers of the
Corporation.
The rights to indemnification and to the advance of expenses
conferred in this Article SEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under this Fourth Amended and
Restated Certificate of Incorporation, the ByLaws of the Corporation, any
statute, agreement, vote of stockholders or disinterested directors or
otherwise.
Any repeal or modification of this Article SEVENTH by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director or officer of
the Corporation existing at the time of such repeal or modification with
respect to any acts or omissions occurring prior to such repeal or modification.
EIGHTH: (a) In addition to any affirmative vote required by law or this
Fourth Amended and Restated Certificate of Incorporation or the By-Laws of the
Corporation, and except as otherwise expressly provided in Section B of this
Article EIGHTH, a Business Combination (as hereinafter defined) shall require
the affirmative vote of not less than eighty percent (80%) of the votes entitled
to be cast by the holders of all the then outstanding shares of Voting Stock (as
hereinafter defined), voting together as a single-class, excluding Voting Stock
beneficially owned by any Interested Stockholder (as hereinafter defined). Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage or separate class vote may be specified,
by law or in any agreement with any national securities exchange or otherwise.
(b) The provisions of Section (a) of this Article EIGHTH shall
not be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is required by
law or by any other provision of this Fourth Amended and Restated Certificate of
Incorporation or the By-Laws of the Corporation, or any agreement with any
national securities exchange, if all of the conditions specified in either of
the following Paragraphs (1) or (2) are met or, in the case of a Business
Combination not involving the payment of consideration to the holders of the
Corporation's outstanding Capital Stock (as hereinafter defined), if the
condition specified in the following Paragraph (1) is met:
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(1) The Business Combination shall have been approved
by a majority (whether such approval is made prior to or subsequent to the
acquisition of beneficial ownership of the Voting Stock that caused the
Interested Stockholder to become an Interested Stockholder) of the Continuing
Directors (as hereinafter defined).
(2) All of the following conditions shall have been
met:
(A) The aggregate amount of cash and the
Fair Market Value (as hereinafter defined), as of the date of the consummation
of the Business Combinations, of consideration other than cash to be received
per share by holders of Common Stock in such Business Combination shall be at
least equal to the highest amount determined under clauses (i), (ii), (iii) and
(iv) below:
(i)(if applicable) the highest per
share price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for any share
of Common Stock in connection with the acquisition by the Interested Stockholder
of beneficial ownership of shares of Common Stock (x) within the two-year period
immediately prior to the first public announcement of the proposed Business
Combination (the "Announcement Date") or (y) in the transaction in which it
became an Interested Stockholder, whichever is higher, in either case as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock;
(ii) the Fair Market Value per
share of Common Stock on the Announcement Date or on the date on which the
Interested Stockholder became an Interested Stockholder (the "Determination
Date"), whichever is higher, as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to Common Stock;
(iii) (if applicable) the price per
share equal to the Fair Market Value per share of Common Stock determined
pursuant to the immediately preceding clause (ii), multiplied by the ratio of
(x) the highest per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by or on behalf of the Interested
Stockholder for any share of Common Stock in connection with the acquisition by
the Interested Stockholder of beneficial ownership of shares of Common Stock
within the two-year period immediately prior to the Announcement Date, as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock to (y) the Fair Market Value per
share of Common Stock on the first day in such two-year period on which the
Interested Stockholder acquired beneficial ownership of any share of Common
Stock, as adjusted for any subsequent stock split, stock dividend, subdivision
or reclassification with respect to Common Stock; and
(iv) the Corporation's net income
per share of Common Stock for the four full consecutive fiscal quarters
immediately preceding the Announcement Date, multiplied by the higher of the
then price/earnings multiple (if any) of such Interested Stockholder
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<PAGE> 7
or the highest price/earnings multiple of the Corporation within the two-year
period immediately preceding the Announcement Date (such price/earnings
multiples being determined as customarily computed and reported in the financial
community).
(B) The aggregate amount of cash and the Fair Market
Value, as of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders of shares of
any class or series of outstanding Capital Stock, other than Common Stock, shall
be at least equal to the highest amount determined under clauses (i), (ii),
(iii) and (iv) below:
(i) (if applicable) the highest per
share price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for any share
of such class or series of Capital Stock in connection with the acquisition by
the Interested Stockholder of beneficial ownership of shares of such class or
series of Capital Stock (x) within the two-year period immediately prior to the
Announcement Date or (y) in the transaction in which it became an Interested
Stockholder, whichever is higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with respect to
such class or series of Capital Stock;
(ii) the Fair Market Value per share
of such class or series of Capital Stock on the Announcement Date or on the
Determination Date, whichever is higher, as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock;
(iii) (if applicable) the price per
share equal to the Fair Market Value per share of such class or series of
Capital Stock determined pursuant to the immediately preceding clause (ii),
multiplied by the ratio of (x) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or
on behalf of the Interested Stockholder for any share of such class or series of
Capital Stock in connection with the acquisition by the Interested Stockholder
of beneficial ownership of shares of such class or series of Capital Stock
within the two-year period immediately prior to the Announcement Date, as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital Stock to (y)
the Fair Market Value per share of such class or series of Capital Stock on the
first day in such two-year period on which the Interested Stockholder acquired
beneficial ownership of any share of such class or series of Capital Stock, as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital Stock; and
(iv) (if applicable) the highest
preferential amount per share to which the holders of shares of such class or
series of Capital Stock would be entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation regardless of whether the Business Combination to be consummated
constitutes such an event.
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The provisions of this Paragraph 2 shall be required to be met
with respect to every class or series of outstanding Capital Stock, whether or
not the Interested Stockholder has previously acquired beneficial ownership of
any shares of a particular class or series of Capital Stock.
(C) The consideration to be received by
holders of a particular class or series of outstanding Capital Stock shall be in
cash or in the same form as previously has been paid by or on behalf of the
Interested Stockholder in connection with its direct or indirect acquisition of
beneficial ownership of shares of such class or series of Capital Stock. If the
consideration so paid for shares of any class or series of Capital Stock varied
as to form, the form of consideration for such class or series of Capital Stock
shall be either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock previously
acquired by the Interested Stockholder.
(D) After the Determination Date and prior
to the consummation of such Business Combination: (i) except as approved by a
majority of the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) payable in accordance with the terms of any
outstanding Capital Stock; (ii) there shall have been no reduction in the annual
rate of dividends paid on the Common Stock (except as necessary to reflect any
stock split, stock dividend or subdivision of the Common Stock), except as
approved by a majority of the Continuing Directors; (iii) there shall have been
an increase in the annual rate of dividends paid on the Common Stock as
necessary to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction that has the effect
of reducing the number of outstanding shares of Common Stock, unless the failure
so to increase such annual rate is approved by a majority of the Continuing
Directors; and (iv) such Interested Stockholder shall not have become the
beneficial owner of any additional shares of Capital Stock except as part of the
transaction that results in such Interested Stockholder becoming an Interested
Stockholder and except in a transaction that, after giving effect thereto, would
not result in any increase in the Interested Stockholder's percentage beneficial
ownership of any class or series of Capital Stock.
(E) After the Determination Date, such
Interested Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder of the Corporation), of any
loans, advances, guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
(F) A proxy or information statement
describing the proposed Business Combination and complying with the requirements
of the Securities Exchange Act of 1934 and the rules and regulations thereunder
(the "Act") (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to all stockholders of the Corporation at least 30
days prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to such Act or
subsequent provisions).
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The proxy or information statement shall contain on the first page thereof, in a
prominent place, any statement as to the advisability (or inadvisability) of the
Business Combination that the Continuing Directors, or any of them, may choose
to make and, if deemed advisable by a majority of the Continuing Directors, the
opinion of an investment banking firm selected by a majority of the Continuing
Directors as to the fairness (or not) of the terms of the Business Combination
from a financial point of view to the holders of the outstanding shares of
Capital Stock other than the Interested Stockholder and its Affiliates or
Associates (as hereinafter defined), such investment banking firm to be paid a
reasonable fee for its services by the Corporation.
(G) Such Interested Stockholder shall not
have made any major change in the Corporation's business or equity capital
structure without the approval of a majority of the Continuing Directors.
(c) The following definitions shall apply with respect to this
Article EIGHTH:
(1) The term "Business Combination" shall mean:
(A) any merger or consolidation of the
Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested
Stockholder or (ii) any other company (whether or not itself an Interested
Stockholder) which is or after such merger or consolidation would be an
Affiliate or Associate of an Interested Stockholder; or
(B) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition or security arrangement, investment, loan,
advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one transaction or
a series of transactions) with or for the benefit of any Interested Stockholder
or any Affiliate or Associate of any Interested Stockholder involving any
assets, securities or commitments of the Corporation, any Subsidiary or any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder having an aggregate Fair Market Value and/or involving aggregate
commitments of $10,000,000 or more or constituting more than 5 percent of the
book value of the total assets (in the case of transactions involving assets or
commitments other than capital stock) or 5 percent of the stockholders' equity
(in the case of transactions in capital stock) of the entity in question (the
"Substantial Part"), as reflected in the most recent fiscal year-end
consolidated balance sheet of such entity existing at the time the stockholders
of the Corporation would be required to approve or authorize the Business
Combination involving the assets, securities and/or commitments constituting any
Substantial Part; or
(C) the adoption of any plan or proposal for
the liquidation or dissolution of the Corporation which is voted for or
consented to by any Interested Stockholder; or
(D) any reclassification of securities
(including any reverse stock split), or recapitalization of the Corporation, or
any merger or consolidation of the Corporation
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<PAGE> 10
with any of its Subsidiaries or any other transaction (whether or not with or
otherwise involving an Interested Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class or series of
Capital Stock, or any securities convertible into Capital Stock or into equity
securities of any Subsidiary, that is beneficially owned by any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(E) any agreement, contract or other
arrangement providing for any one or more of the actions specified in the
foregoing clauses (a) to (d).
(2) The term "Capital Stock" shall mean all capital
stock of the Corporation authorized to be issued from time to time under Article
FOURTH of this Fourth Amended and Restated Certificate of Incorporation, and the
term "Voting Stock" shall mean all Capital Stock which by its terms may be voted
on all matters submitted to stockholders of the Corporation generally.
(3) The term "person" shall mean any individual,
firm, company or other entity and shall include any group comprised of any
person and any other person with whom such person or any Affiliate or Associate
of such person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
Capital Stock.
(4) The term "Interested Stockholder" shall mean any
person (other than the Corporation or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of or fiduciary with respect to any
such plan when acting in such capacity) who (A) is the beneficial owner of
Voting Stock representing ten percent (10%) or more of the votes entitled to be
cast by the holders of all then outstanding shares of Voting Stock; or (B) is an
Affiliate or Associate of the Corporation and at any time within the two-year
period immediately prior to the date in question was the beneficial owner of
Voting Stock representing ten percent (10%) or more of the votes entitled to be
cast by the holders of all then outstanding shares of Voting Stock.
(5) A person shall be a "beneficial owner" of any
Capital Stock (A) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; (B) which such person or any of its
Affiliates or Associates has, directly or indirectly, (i) the right to acquire
(whether such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or
understanding; or (C) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Capital Stock. For the purposes of
determining whether a person is an Interested Stockholder pursuant to Paragraph
4 of this Section (c), the number of shares of Capital Stock deemed to be
outstanding shall include shares deemed beneficially owned by such person
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through application of this Paragraph 5 of Section (c), but shall not include
any other shares of Capital Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(6) The terms "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2 under the Act as in
effect on the date that this Article EIGHTH is approved by the Board (the term
"registrant" in said Rule 12b-2 meaning in this case the Corporation).
(7) The term "Subsidiary" means any company of which
a majority of any class of equity security is beneficially owned by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 4 of this Section (c), the term
"Subsidiary" shall mean only a company of which a majority of each class of
equity security is beneficially owned by the Corporation.
(8) The term "Continuing Director" means any member
of the Board of Directors of the Corporation (the "Board of Directors"), while
such person is a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and was a member of
the Board of Directors prior to the time that the Interested Stockholder became
an Interested Stockholder, and any successor of a Continuing Director while such
successor is a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and is recommended or
elected to succeed the Continuing Director by a majority of Continuing
Directors.
(9) The term "Fair Market Value" means (A) in the
case of cash, the amount of such cash; (B) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Act on which such stock is listed, or, if such stock is not listed on any
such exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations System or any
similar system then in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock as determined by a
majority of the Continuing Directors in good faith; and (C) in the case of
property other than cash or stock, the fair market value of such property on the
date in question as determined in good faith by a majority of the Continuing
Directors.
(10) In the event of any Business Combination in
which the Corporation survives, the phrase "consideration other than cash to be
received" as used in Paragraphs 2(A) and 2(B) of Section (b) of this Article
EIGHTH shall include the shares of Common Stock and/or the shares of any other
class or series of Capital Stock retained by the holders of such shares.
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(d) A majority of the Continuing Directors shall have the
power and duty to determine for the purposes of this Article EIGHTH, on the
basis of information known to them after reasonable inquiry, (1) whether a
person is an Interested Stockholder, (2) the number of shares of Capital Stock
or other securities beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, (4) whether the assets that are the subject
of any Business Combination have, or the consideration to be received for the
issuance or transfer of securities by the Corporation or any Subsidiary in any
Business Combination has, an aggregate Fair Market Value of $10,000,000 or more,
and (5) whether the assets or securities that are the subject of any Business
Combination constitute a Substantial Part. Any such determination made in good
faith shall be binding and conclusive on all parties.
(e) Nothing contained in this Article EIGHTH shall be
construed to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
(f) The fact that any Business Combination complies with the
provisions of Section (b) of this Article EIGHTH shall not be construed to
impose any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business Combination or
recommend its adoption or approval to the shareholders of the Corporation, nor
shall such compliance limit, prohibit or otherwise restrict in any manner the
Board of Directors, or any member thereof, with respect to evaluations of or
actions and responses taken with respect to such Business Combination.
(g) Notwithstanding any other provisions of this Fourth
Amended and Restated Certificate of Incorporation or the By-Laws of the
Corporation (and notwithstanding the fact that a lesser percentage or separate
class vote may be specified by law, this Fourth Amended and Restated Certificate
of Incorporation or the By-Laws of the Corporation), the affirmative vote of the
holders of not less than eighty percent (80%) of the votes entitled to be cast
by the holders of all the then outstanding shares of Voting Stock, voting
together as a single class, excluding Voting Stock beneficially owned by any
Interested Stockholder, shall be required to amend or repeal, or adopt any
provisions inconsistent with, this Article EIGHTH; provided, however, that this
Section G shall not apply to, and such eighty percent (80%) vote shall not be
required for, any amendment, repeal or adoption unanimously recommended by the
Board of Directors if all of such directors are persons who would be eligible to
serve as Continuing Directors within the meaning of Section (c), Paragraph 8 of
this Article EIGHTH.
NINTH: Unless otherwise required by law, special meetings of
stockholders, for any purpose or purposes may be called by either (i) the
Chairman of the Board of Directors, if there be one, (ii) the Chief Executive
Officer, or (iii) the Board of Directors. The ability of the stockholders to
call a special meeting is hereby specifically denied.
TENTH: Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation, and the ability of the stockholders to
consent in writing to the taking of any action is
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hereby specifically denied.
ELEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
TWELFTH: In furtherance and not in limitation of the powers conferred
upon it by the laws of the State of Delaware, the Board of Directors shall have
the power to adopt, amend, alter or repeal the Corporation's By-Laws. The
affirmative vote of at least a majority of the entire Board of Directors shall
be required to adopt, amend, alter or repeal the Corporation's By-Laws. The
Corporation's By-Laws also may be adopted, amended, altered or repealed by the
affirmative vote of the holders of at least eighty percent (80%) of the voting
power of the shares entitled to vote at an election of directors.
THIRTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Fourth Amended and Restated
Certificate of Incorporation in the manner now or hereafter prescribed in this
Fourth Amended and Restated Certificate of Incorporation, the Corporation's
By-Laws or the GCL, and all rights herein conferred upon stockholders are
granted subject to such reservation; provided, however, that, notwithstanding
any other provision of this Fourth Amended and Restated Certificate of
Incorporation (and in addition to any other vote that may be required by law),
the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of the shares entitled to vote at an election of directors shall be
required to amend, alter, change or repeal, or to adopt any provision as part of
this Fourth Amended and Restated Certificate of Incorporation inconsistent with
the purpose and intent of Articles FIFTH, EIGHTH, NINTH, TENTH and TWELFTH of
this Fourth Amended and Restated Certificate of Incorporation or this Article
THIRTEENTH.
* * * * * * *
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IN WITNESS WHEREOF, the Corporation has caused this Fourth
Amended and Restated Certificate of Incorporation to be executed as of this __
day of February, 2000 in its name and on its behalf by its Chief Executive
Officer, pursuant to Section 103 of the General Corporation Law of the State of
Delaware.
LENDINGTREE, INC.
By: _____________________________
Name: Douglas R. Lebda
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
LENDINGTREE, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places, both within and without the State of Delaware, as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, either within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Section 3. Annual Meetings. The annual meetings of
stockholders shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect directors, and transact
such other business as may prop-
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
OFFICES
Section 1. Registered Office.................................... 1
Section 2. Other Offices........................................ 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings.................................... 1
Section 2. Annual Meetings...................................... 1
Section 3. Special Meetings..................................... 2
Section 4. Quorum............................................... 2
Section 5. Proxies.............................................. 2
Section 6. Voting............................................... 3
Section 7. Nature of Business at Meetings of Stockholders....... 4
Section 8. List of Stockholders Entitled to Vote................ 5
Section 9. Stock Ledger......................................... 5
Section 10. Record Date. ...................................... 5
Section 11. Inspectors of Election.............................. 6
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors..................... 6
Section 2. Nomination of Directors.............................. 7
Section 3. Vacancies............................................ 8
Section 4. Duties and Powers.................................... 8
Section 5. Organization......................................... 9
Section 6. Resignations and Removals of Directors............... 9
Section 7. Meetings............................................. 9
Section 8. Quorum............................................... 10
Section 9. Actions of Board..................................... 10
Section 10. Meetings by Means of Conference Telephone........... 10
Section 11. Committees.......................................... 10
Section 12. Compensation........................................ 11
Section 13. Interested Directors................................ 11
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PAGE
ARTICLE IV
OFFICERS
Section 1. General.............................................. 12
Section 2. Election............................................. 12
Section 3. Voting Securities Owned by the Corporation........... 12
Section 4. Chairman of the Board of Directors................... 13
Section 5. President............................................ 13
Section 6. Vice Presidents...................................... 13
Section 7. Secretary............................................ 14
Section 8. Treasurer............................................ 14
Section 9. Assistant Secretaries................................ 15
Section 10. Assistant Treasurers................................ 15
Section 11. Other Officers...................................... 15
ARTICLE V
STOCK
Section 1. Form of Certificates................................. 16
Section 2. Signatures........................................... 16
Section 3. Lost, Destroyed, Stolen or Mutilated Certificates.... 16
Section 4. Transfers............................................ 16
Section 5. Transfer and Registry Agents......................... 17
Section 6. Beneficial Owners.................................... 17
ARTICLE VI
NOTICES
Section 1. Notices.............................................. 17
Section 2. Waivers of Notice.................................... 17
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends............................................ 18
Section 2. Disbursements........................................ 18
Section 3. Fiscal Year.......................................... 18
Section 4. Corporate Seal....................................... 18
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PAGE
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings
Other than Those by or in the Right of the
Corporation................................... 19
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation......... 19
Section 3. Authorization of Indemnification.................... 20
Section 4. Good Faith Defined.................................. 20
Section 5. Indemnification by a Court.......................... 21
Section 6. Expenses Payable in Advance......................... 21
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses...................................... 21
Section 8. Insurance........................................... 22
Section 9. Certain Definitions................................. 22
Section 10. Survival of Indemnification and Advancement of
Expenses........................................... 23
Section 11. Limitation on Indemnification...................... 23
Section 12. Indemnification of Employees and Agents............ 23
ARTICLE IX
AMENDMENTS
Section 1. Amendments.......................................... 23
Section 2. Entire Board of Directors........................... 23
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erly be brought before the meeting. Written notice of the annual meeting stating
the place, date and hour of the meeting shall be given to each stockholder
entitled to vote at such meeting not less than ten nor more than sixty days
before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by
law or by the certificate of incorporation of the Corporation, as amended and
restated from time to time (the "Certificate of Incorporation"), special
meetings of stockholders, for any purpose or purposes, may be called by either
(i) the Chairman of the Board of Directors, (ii) the President, or (iii) the
Board of Directors in accordance with the provisions of the Certificate of
Incorporation in effect as of the date hereof. Such request shall state the
purpose or purposes of the proposed meeting. At a special meeting of the
stockholders, only such business shall be conducted as shall be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise required by law or by
the Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established, shall
not be broken by the withdrawal of enough votes to leave less than a quorum. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 5. Proxies. Any stockholder entitled to vote may do so
in person or by his or her proxy appointed by an instrument in writing
subscribed by such stockholder or by his or her attorney thereunto authorized,
delivered to the
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Secretary of the meeting; provided, however, that no proxy shall be voted or
acted upon after three years from its date, unless said proxy provides for a
longer period. Without limiting the manner in which a stockholder may authorize
another person or persons to act for him or her as proxy, either of the
following shall constitute a valid means by which a stockholder may grant such
authority:
(i) A stockholder may execute a writing authorizing
another person or persons to act for him or her as proxy. Execution may
be accomplished by the stockholder or his or her authorized officer,
director, employee or agent signing such writing or causing his or her
signature to be affixed to such writing by any reasonable means,
including, but not limited to, by facsimile signature.
(ii) A stockholder may authorize another person or
persons to act for him or her as proxy by transmitting or authorizing
the transmission of a telegram or other means of electronic
transmission to the person who will be the holder of the proxy or to a
proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the proxy
to receive such transmission, provided that any such telegram or other
means of electronic transmission must either set forth or be submitted
with information from which it can be determined that the telegram or
other electronic transmission was authorized by the stockholder.
Any copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission authorizing another person or persons to act as proxy
for a stockholder may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used; provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
Section 6. Voting. At all meetings of the stockholders at
which a quorum is present, except as otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the affirmative vote of the holders of a
majority of the total number of votes of the capital stock present in person or
represented by proxy and entitled to vote on such question, voting as a single
class. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders,
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in his or her discretion, may require that any votes cast at such meeting shall
be cast by written ballot.
Section 7. Nature of Business at Meetings of Stockholders. No
business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (c) otherwise properly brought before the
annual meeting by any stockholder of the Company (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 7
and on the record date for the determination of stockholders entitled to vote at
such annual meeting and (ii) who complies with the notice procedures set forth
in this Section 7.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company not less than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however, that in
the event that the annual meeting is called for a date that is not within thirty
(30) days before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth (10th) day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure of the date of the annual
meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the Company
which are owned beneficially or of record by such stockholder, (iv) a
description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material
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interest of such stockholder in such business and (v) a representation that such
stockholder intends to appear in person or by proxy at the annual meeting to
bring such business before the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 7, provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 7 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting determines that business was not properly brought before the annual
meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted.
Section 8. List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 9. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 8 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 10. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the
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Board of Directors and which record date: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall not be more than sixty nor less than ten days before the date of
such meeting; and (2) in the case of any other action, shall not be more than
sixty days prior to such other action. If no record date is fixed: (1) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; and (2) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 11. Inspectors of Election. In advance of any meeting
of stockholders, the Board by resolution or the Chairman or President shall
appoint one or more inspectors of election to act at the meeting and make a
written report thereof. One or more other persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is present, ready and willing to act at a meeting of stockholders, the
Chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Unless otherwise required by law, inspectors may be officers, employees
or agents of the Corporation. Each inspector, before entering upon the discharge
of his or her duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his or
her ability. The inspector shall have the duties prescribed by law and shall
take charge of the polls and, when the vote is completed, shall make a
certificate of the result of the vote taken and of such other facts as may be
required by law.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of
Directors shall initially consist of 7 members, which number may be changed from
time to time by resolution adopted by the Board of Directors, in accordance with
the provisions of the Certificate of Incorporation. Except as provided in
Section 3 of this Article III, directors shall be elected by the stockholders at
the annual meetings of stockholders, and each director so elected shall hold
office until such director's
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successor is duly elected and qualified, or until such director's death, or
until such director's earlier resignation or removal. Directors need not be
stockholders.
Section 2. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Company, except as may be otherwise provided in the
Certificate of Incorporation with respect to the right of holders of preferred
stock of the Corporation to nominate and elect a specified number of directors
in certain circumstances. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders, or at any special
meeting of stockholders called for the purpose of electing directors, (a) by or
at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Company (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 2
and on the record date for the determination of stockholders entitled to vote at
such meeting and (ii) who complies with the notice procedures set forth in this
Section 2.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company (a) in the case of an annual meeting, not less than ninety (90) days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs; and (b) in the case of a special meeting of stockholders called
for the purpose of electing directors, not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
special meeting was mailed or public disclosure of the date of the special
meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or
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series and number of shares of capital stock of the Company which are owned
beneficially or of record by the person and (iv) any other information relating
to the person that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and (b) as to the stockholder giving the notice (i) the
name and record address of such stockholder, (ii) the class or series and number
of shares of capital stock of the Company which are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by such stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice and (v) any other information relating to such stockholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a director of the
Company unless nominated in accordance with the procedures set forth in this
Section 2. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Section 3. Vacancies. The filling of any vacancy on the Board
of Directors that results from an increase in the number of directors shall be
governed by the Certificate of Incorporation. Whenever the holders of any one or
more class or classes or series of preferred stock of the Corporation shall have
the right, voting separately as a class, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall also be governed by the
Certificate of Incorporation.
Section 4. Duties and Powers. The business of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not
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by statute or by the Certificate of Incorporation or by these By-Laws required
to be exercised or done by the stockholders.
Section 5. Organization. At each meeting of the Board of
Directors, the Chairman of the Board of Directors, or, in his or her absence, a
director chosen by a majority of the directors present, shall act as Chairman.
The Secretary of the Corporation shall act as Secretary at each meeting of the
Board of Directors. In case the Secretary shall be absent from any meeting of
the Board of Directors, an Assistant Secretary shall perform the duties of
Secretary at such meeting; and in the absence from any such meeting of the
Secretary and all the Assistant Secretaries, the Chairman of the meeting may
appoint any person to act as Secretary of the meeting.
Section 6. Resignations and Removals of Directors. Any
director of the Corporation may resign at any time, by giving written notice to
the Chairman of the Board of Directors, the President or the Secretary of the
Corporation. Such resignation shall take effect at the time therein specified
or, if no time is specified, immediately; and, unless otherwise specified in
such notice, the acceptance of such resignation shall not be necessary to make
it effective. Except as otherwise required by law and subject to the rights, if
any, of the holders of shares of preferred stock then outstanding, any director
or the entire Board of Directors may be removed from office at any time, but
only for cause, and only by the affirmative vote of the holders of at least a
majority in voting power of the issued and outstanding capital stock of the
Corporation entitled to vote in the election of directors.
Section 7. Meetings. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware. Regular meetings of the Board of Directors may be held at such time
and at such place as may from time to time be determined by the Board of
Directors and, unless required by resolution of the Board of Directors, without
notice. Special meetings of the Board of Directors may be called by the Chairman
of the Board of Directors, the Vice Chairman, if there be one, or a majority of
the directors then in office. Notice thereof stating the place, date and hour of
the meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone, facsimile
or telegram on twenty-four (24) hours' notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 8. Quorum. Except as may be otherwise required by law,
the Certificate of Incorporation or these By-Laws, at all meetings of the Board
of Direc-
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tors, a majority of the entire Board of Directors shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting of the time and
place of the adjourned meeting, until a quorum shall be present.
Section 9. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 10. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 10 shall
constitute presence in person at such meeting.
Section 11. Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent permitted by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corpora-
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tion. Each committee shall keep regular minutes and report to the Board of
Directors when required.
Section 12. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary, or such other emoluments as the Board of Directors shall
from time to time determine. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 13. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because such person's or their
votes are counted for such purpose if (i) the material facts as to such person's
or their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to such person's or their relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
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ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall include a President, a Secretary and
a Treasurer. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director), a Chairman
Emeritus, and one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Certificate of Incorporation or
these By-Laws. The officers and Chairman Emeritus of the Corporation need not be
stockholders of the Corporation nor, except in the case of the Chairman of the
Board of Directors, need such officers or Chairman Emeritus be directors of the
Corporation.
Section 2. Election. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall elect the officers
of the Corporation who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until their earlier
resignation or removal. Any officer elected by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the President or any Vice
President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
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Section 4. Chairman of the Board of Directors. The Chairman of
the Board of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. Except where by law the signature of
the President is required, the Chairman of the Board of Directors shall possess
the same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him or her by these By-Laws or by the Board of
Directors.
Section 5. Chief Executive Officer. The Chief Executive
Officer shall, subject to the control of the Board of Directors and, if there be
one, the Chairman of the Board of Directors, have general supervision of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. In the event no President is
appointed, the Chief Executive Officer shall act as the President, possess the
same power as the President and may sign as the President. During the absence or
disability of the President, the Chief Executive Officer shall exercise all the
powers and discharge all the duties of the President. Except where by law the
signature of the President is required, the Chief Executive Officer shall
possess the same power as the President to sign all contracts, certificates and
other instruments of the Corporation which may be authorized by the Board of
Directors shall possess the same power as the President. The Chief Executive
Officer shall also perform such other duties and may exercise such other powers
as from time to time may be assigned to him or her by these By-Laws or by the
Board of Directors.
Section 6. President. The President, if there be one, shall,
subject to the control of the Board of Directors, the Chief Executive Officer
and, if there be one, the Chairman of the Board of Directors, be responsible for
the day-to-day operations of the business of the Corporation. The President
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him or her by these ByLaws or by
the Board of Directors.
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Section 7. Vice Presidents. At the request of the President or
in his or her absence or in the event of his or her inability or refusal to act
(and if there be no Chairman of the Board of Directors), the Vice President or
the Vice Presidents if there is more than one (in the order designated by the
Board of Directors) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If there
be no Chairman of the Board of Directors and no Vice President, the Board of
Directors shall designate the officer of the Corporation who, in the absence of
the President or in the event of the inability or refusal of the President to
act, shall perform the duties of the President, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President.
Section 8. Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision the Secretary shall be. If the Secretary
shall be unable or shall refuse to cause to be given notice of all meetings of
the stockholders and special meetings of the Board of Directors, and if there be
no Assistant Secretary, then either the Board of Directors or the President may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his or her signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
Section 9. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of
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Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all transactions as Treasurer and
of the financial condition of the Corporation. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of the office of Treasurer and for the
restoration to the Corporation, in case of the Treasurer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in the Treasurer's possession or under control
of the Treasurer belonging to the Corporation.
Section 10. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the President, any Vice President, if there be one, or
the Secretary, and in the absence of the Secretary or in the event of his or her
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 11. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of the Treasurer's disability or refusal to act, shall
perform the duties of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer. If required
by the Board of Directors, an Assistant Treasurer shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of the office
of Assistant Treasurer and for the restoration to the Corporation, in case of
the Assistant Treasurer's death, resignation, retirement or removal from office,
of all books, papers, vouchers, money and other property of whatever kind in the
Assistant Treasurer's possession or under control of the Assistant Treasurer
belonging to the Corporation.
Section 12. Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
15
<PAGE> 19
Section 12. Chairman Emeritus. The honorary position of
Chairman Emeritus, if there be any, shall be appointed by the Board of Directors
in recognition of past service to the Corporation. Chairman Emeriti have no
official capacity, obligation or power to act on behalf of or in the interest of
the Corporation.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation, (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by such holder of stock in the Corporation.
Section 2. Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 3. Lost, Destroyed, Stolen or Mutilated Certificates.
The Board of Directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or such person's legal
representative, to advertise the same in such manner as the Board of Directors
shall require and/or to give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or
16
<PAGE> 20
by such person's attorney lawfully constituted in writing and upon the surrender
of the certificate therefor, properly endorsed for transfer and payment of all
necessary transfer taxes; provided, however, that such surrender and endorsement
or payment of taxes shall not be required in any case in which the officers of
the Corporation shall determine to waive such requirement. Every certificate
exchanged, returned or surrendered to the Corporation shall be marked
"Cancelled," with the date of cancellation, by the Secretary or Assistant
Secretary of the Corporation or the transfer agent thereof. No transfer of stock
shall be valid as against the Corporation for any purpose until it shall have
been entered in the stock records of the Corporation by an entry showing from
and to whom transferred.
Section 5. Transfer and Registry Agents. The Corporation may
from time to time maintain one or more transfer offices or agencies and registry
offices or agencies at such place or places as may be determined from time to
time by the Board of Directors.
Section 6. Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, facsimile, telex or cable.
Section 2. Waivers of Notice.
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<PAGE> 21
(a) Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance of a person at
a meeting, present by person or represented by proxy, shall constitute a waiver
of notice of such meeting, except where the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened.
(b) Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors or
members of a committee of directors need be specified in any written waiver of
notice unless so required by law, the Certificate of Incorporation or these
By-Laws.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Subject to the requirements of the GCL
and the provisions of the Certificate of Incorporation, dividends upon the
capital stock of the Corporation may be declared by the Board of Directors at
any regular or special meeting of the Board of Directors, and may be paid in
cash, in property, or in shares of the Corporation's capital stock. Before
payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for purchasing any of the shares of capital
stock, warrants, rights, options, bonds, debentures, notes, scrip or other
securities or evidences of indebtedness of the Corporation, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for any other proper purpose, and the Board of Directors may modify or abolish
any such reserve.
Section 2. Disbursements. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
18
<PAGE> 22
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings
Other than Those by or in the Right of the Corporation. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, such person had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that such person did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director,
19
<PAGE> 23
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation; except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders. To
the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith, without
the necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article VIII, a person shall be deemed to
have acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation, or, with respect to
any criminal action or proceeding, to have had no reasonable cause to believe
his or her conduct was unlawful, if such person's action is based on the records
or books of account of the Corporation or another enterprise, or on information
supplied to such person by the officers of the Corporation or another enterprise
in the course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or reports
made to the Corporation or another enterprise by an independent
20
<PAGE> 24
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 4 shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth in
Section 1 or 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery of the State of Delaware
or any other court of competent jurisdiction in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
21
<PAGE> 25
Section 7. Nonexclusivity of Indemnification and Advancement
of Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation or any By-Law, agreement,
contract, vote of stockholders or disinterested directors or pursuant to the
direction (howsoever embodied) of any court of competent jurisdiction or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Section 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the GCL, or otherwise.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power or
the obligation to indemnify such person against such liability under the
provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article
VIII, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of
22
<PAGE> 26
the Corporation" shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by, such
director or officer with respect to an employee benefit plan, its participants
or beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VIII.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding
anything contained in this Article VIII to the contrary, except for proceedings
to enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer (or his or her heirs, executors or personal or legal representatives) or
advance expenses in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of expenses
to employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended
or repealed, in whole or in part, or new By-Laws may be adopted by the Board of
Directors or by the stockholders as provided in the Certificate of
Incorporation.
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<PAGE> 27
Section 2. Entire Board of Directors. As used in this Article
IX and in these By-Laws generally, the term "entire Board of Directors" means
the total number of directors which the Corporation would have if there were no
vacancies.
24
<PAGE> 1
EXHIBIT 4.2
RIGHTS AGREEMENT
Between
LENDINGTREE INC.
And
FIRST UNION NATIONAL BANK,
AS RIGHTS AGENT
Dated as of [ ], 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Certain Definitions...................................................................... 3
2. Appointment of Rights Agent............................................................... 14
3. Issuance of Rights Certificates........................................................... 15
4. Form of Rights Certificates............................................................... 19
5. Countersignature and Registration......................................................... 21
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates.................................. 23
7. Exercise of Rights; Purchase Price; Expiration Date of Rights............................. 25
8. Cancellation and Destruction of Rights
Certificates.............................................................................. 31
9. Reservation and Availability of Capital Stock............................................. 32
10. Preferred Stock Record Date.............................................................. 36
11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights................................................................................ 37
12. Certificate of Adjusted Purchase Price or Number of Shares............................... 61
13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or
Earning Power............................................................................ 61
14. Fractional Rights and Fractional Shares.................................................. 68
15. Rights of Action......................................................................... 72
16. Agreement of Rights Holders.............................................................. 73
17. Rights Certificate Holder Not Deemed a Stockholder....................................... 75
18. Concerning the Rights Agent.............................................................. 75
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
19. Merger or Consolidation or Change of Name of Rights Agent................................ 77
20. Duties of Rights Agent................................................................... 78
21. Change of Rights Agent................................................................... 83
22. Issuance of New Rights Certificates...................................................... 86
23. Redemption and Termination............................................................... 87
24. Exchange................................................................................. 91
25. Notice of Certain Events................................................................. 94
26. Notices.................................................................................. 97
27. Supplements and Amendments............................................................... 98
28. Successors.............................................................................. 100
29. Determinations and Action by the Board, etc.............................................. 101
30. Benefits of this Agreement............................................................... 102
31. Severability............................................................................. 103
32. Governing Law............................................................................ 104
33. Counterparts............................................................................. 104
34. Descriptive Headings..................................................................... 105
</TABLE>
EXHIBITS
Exhibit A -- Form of Certificate of Designation,
Preferences and Rights
Exhibit B -- Form of Rights Certificates
Exhibit C -- Form of Summary of Rights
<PAGE> 4
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of [ ], 2000 (the "Agreement"),
between LendingTree Inc., a Delaware corporation (the "Company"), and First
Union National Bank, a banking corporation (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on [ ], 2000 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of common
stock, par value $0.01 per share, of the Company (the "Common Stock")
outstanding at the close of business on the date of the consummation of the
initial public offering of the Common Stock of the Company (the "Record Date"),
and has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the Distribution Date (as
hereinafter defined) each Right initially representing the right to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the
Company (the "Preferred Stock") having the rights, powers and preferences set
forth in the form of Certificate of Designation,
<PAGE> 5
Preferences and Rights attached hereto as Exhibit A, upon the terms and subject
to the conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any employee benefit plan of the Company, or of any Subsidiary of the Company,
or any Person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan, (iv) any Person who becomes the
Beneficial Owner of fifteen percent (15%) or more of the shares of Common Stock
then outstanding as a result of a reduction in the number of shares of Common
Stock outstanding due to the repurchase of shares of Common Stock by the Company
unless and until such Person, after becoming aware that such Person has become
the Beneficial Owner of fifteen percent (15%) or more of the then outstanding
shares of Common Stock, acquires beneficial ownership of additional shares of
Common Stock representing one percent (1%) or more of the shares of Common Stock
then outstanding, (v) any
2
<PAGE> 6
Person who owns shares of Common Stock on the date hereof in the event that upon
the consummation of the initial public offering of the Common Stock of the Com-
pany such Person is the Beneficial Owner of 15% or more of the then outstanding
shares of Common Stock, unless and until such Person shall purchase or otherwise
become the Beneficial Owner of additional shares of Common Stock constituting 1%
or more of the shares of Common Stock then outstanding, or (vi) any such Person
who has reported or is required to report such ownership (but less than 20%) on
Schedule 13G under the Securities and Exchange Act of 1934, as amended and in
effect on the date of the Agreement (the "Exchange Act") (or any comparable or
successor report) or on Schedule 13D under the Exchange Act (or any comparable
or successor report) which Schedule 13D does not state any intention to or
reserve the right to control or influence the management or policies of the
Company or engage in any of the actions specified in Item 4 of such schedule
(other than the disposition of the Common Stock) and, within 10 Business Days of
being requested by the Company to advise it regarding the same, certifies to
the Company that such Person acquired shares of Common Stock in excess of 14.9%
inadvertently or without knowledge of the terms of the Rights and who, together
with all Affiliates and Associates, thereafter does not acquire additional
shares of Common Stock while the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding; provided, however, that if the Person
requested to so certify fails to do so within 10
3
<PAGE> 7
Business Days, then such Person shall become an Acquiring Person immediately
after such 10-Business-Day period.
(b) "Act" shall mean the Securities Act of 1933.
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Exchange Act.
(d) A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such
Person's Affiliates or Associates, directly or indirectly, has the
right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person or
any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of
a Triggering
4
<PAGE> 8
Event (as hereinafter defined), or (C) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any of such Person's
Affiliates or Associates prior to the Distribution Date (as
hereinafter defined) or pursuant to Section 3(a) or Section 22 hereof
(the "Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such
Person's Affiliates or Associates, directly or indirectly, has the
right to vote or dispose of or has "beneficial ownership" of (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange
5
<PAGE> 9
Act, (B) is not reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report) and (C) does not
constitute a trust, proxy, power of attorney or other device with the
purpose or effect of allowing two or more persons, acting in concert,
to avoid being deemed "beneficial owners" of such security or otherwise
avoid the status of "Acquiring Person" under the terms of this
Agreement or as part of a plan or scheme to evade the reporting
requirements under Schedule 13D or Section 13(d) or 13(g) of the
Exchange Act; or
(iii) which are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether
or not in writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (d)) or disposing of any voting
securities of the Company; provided, however, that nothing in this
paragraph (d) shall cause a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such Person's
participation in good faith in
6
<PAGE> 10
a firm commitment underwriting until the expiration of forty days after
the date of such acquisition, and then only if such securities continue
to be owned by such Person at such expiration of forty days and
provided further, however, that any stockholder of the Company, with
affiliate(s), associate(s) or other person(s) who may be deemed
representatives of it serving as director(s) of the Company, shall not
be deemed to beneficially own securities held by other Persons as a
result of (i) persons affiliated or otherwise associated with such
stockholder serving as directors or taking any action in connection
therewith, (ii) discussing the status of its shares with the Company
or other stockholders of the Company similarly situated or (iii) voting
or acting in a manner similar to other stockholders similarly situated,
absent a specific finding by the Board of Directors of an express
agreement among such stockholders to act in concert with one another
as stockholders so as to cause, in the good faith judgment of the Board
of Directors, each such stockholder to be the Beneficial Owner of the
shares held by the other stockholder(s).
(e) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of New York
are authorized or obligated by law or executive order to close.
7
<PAGE> 11
(f) "Close of business" on any given date shall mean
5:00 P.M., New York City time, on such date; provided, however, that if such
date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the
next succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par
value $0.01 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(h) "Common Stock Equivalents" shall have the meaning
set forth in Section 11(a)(iii) hereof.
(i) "Current Market Price" shall have the meaning set
forth in Section 11(d)(i) hereof.
(j) "Current Value" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning set
forth in Section 3(a) hereof.
(l) "Equivalent Preferred Stock" shall have the
meaning set forth in Section 11(b) hereof.
8
<PAGE> 12
(m) "Exchange Act" shall mean the Securities and
Exchange Act of 1934.
(n) "Exchange Ratio" shall have the meaning set forth
in Section 24 hereof.
(o) "Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(p) "Final Expiration Date" shall have the meaning
set forth in Section 7(a) hereof.
(q) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(r) "Preferred Stock" shall mean shares of Series A
Junior Participating Preferred Stock, par value $0.01 per share, of the Company,
and, to the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of preferred stock of the Company designated for
such purpose containing terms substantially similar to the terms of the Series A
Junior Participating Preferred Stock.
(s) "Principal Party" shall have the meaning set
forth in Section 13(b) hereof.
(t) "Purchase Price" shall have the meaning set forth
in Section 4(a)(ii) hereof.
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<PAGE> 13
(u) "Qualified Offer" shall have the meaning set
forth in Section 11(a)(ii) hereof.
(v) "Record Date" shall have the meaning set forth in
the WHEREAS clause at the beginning of this Agreement.
(w) "Rights" shall have the meaning set forth in the
WHEREAS clause at the beginning of this Agreement.
(x) "Rights Agent" shall have the meaning set forth
in the parties clause at the beginning of this Agreement.
(y) "Rights Certificate" shall have the meaning set
forth in Section 3(a) hereof.
(z) "Rights Dividend Declaration Date" shall have the
meaning set forth in the WHEREAS clause at the beginning of this Agreement.
(aa) "Section 11(a)(ii) Event" shall mean any event
described in Section 11(a)(ii) hereof.
(ab) "Section 13 Event" shall mean any event
described in clauses (x), (y) or (z) of Section 13(a) hereof.
(ac) "Spread" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(ad) "Stock Acquisition Date" shall mean the first
date of public announcement (which, for purposes of this definition, shall
include, without
10
<PAGE> 14
limitation, a report filed or amended pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such other than pursuant to a Qualified Offer.
(ae) "Subsidiary" shall mean, with reference to any
Person, any corporation of which an amount of voting securities sufficient to
elect at least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by such
Person.
(af) "Substitution Period" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(ag) "Summary of Rights" shall have the meaning set
forth in Section 3(b) hereof.
(ah) "Trading Day" shall have the meaning set forth
in Section 11(d)(i) hereof.
(ai) "Triggering Event" shall mean any Section
11(a)(ii) Event or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company
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<PAGE> 15
may from time to time appoint such co-rights agents as it may deem necessary or
desirable.
Section 3. Issuance of Rights Certificates.
(a) Until the earlier of (i) the close of business on
the tenth Business Day after the Stock Acquisition Date (or, if the tenth
Business Day after the Stock Acquisition Date occurs before the Record Date, the
close of business on the Record Date), or (ii) the close of business on the
tenth Business Day (or such later date as the Board shall determine) after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would become an Acquiring Person ,in either instance other
than pursuant to a Qualified Offer (the earlier of (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection
12
<PAGE> 16
with the transfer of the underlying shares of Common Stock (including a transfer
to the Company). As soon as practicable after the Distribution Date, the Rights
Agent will send by first-class, insured, postage-prepaid mail, to each record
holder of the Common Stock as of the close of business on the Distribution Date,
at the address of such holder shown on the records of the Company, one or more
right certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) The Company will make available, as promptly as
practicable following the Record Date, a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit C (the "Summary of Rights")
to any holder Rights who may so request from time to time prior to the
Expiration Date (as such term is defined in Section 7(a) hereof). With respect
to certificates for the Common Stock outstanding as of the Record Date, until
the Distribution Date, the Rights will
13
<PAGE> 17
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date, the transfer of any certificates representing shares of Common Stock in
respect of which Rights have been issued shall also constitute the transfer of
the Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares
of Common Stock which are issued (whether originally issued or from the
Company's treasury) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such shares
of Common Stock shall also be deemed to be certificates for Rights, and shall
bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between
LENDINGTREE INC. (the "Company") and the Rights Agent thereunder (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge, promptly after receipt
of a written request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
14
<PAGE> 18
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Rights may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-hundredths
of a share of Preferred Stock as shall be set forth therein at the price set
forth
15
<PAGE> 19
therein (such exercise price per one one-hundredth of a share, the "Purchase
Price"), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) Any Rights Certificate issued pursuant to Section
3(a), Section 11(i) or Section 22 hereof that represents Rights beneficially
owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of Section 7(e) hereof, and
any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
16
<PAGE> 20
The Rights represented by this Rights Certificate are or were benefi-
cially owned by a Person who was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of the Rights Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the
17
<PAGE> 21
Company to sign such Rights Certificate, although at the date of the execution
of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent
will keep, or cause to be kept, at its principal office or offices designated as
the appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b),
Section 7(e) and Section 14 hereof, at any time after the close of business on
the Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Certificates (other than Rights
Certificates representing Rights that may have been exchanged pursuant to
Section 24 hereof) may be transferred, split up, combined or exchanged for
another Rights Certificate or Certificates, entitling the registered holder to
purchase a like number of one one-hundredths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates
surrendered then
18
<PAGE> 22
entitles such holder (or former holder in the case of a transfer) to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Certificates
to be transferred, split up, combined or exchanged at the principal office or
offices of the Rights Agent designated for such purpose. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Rights Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e), Section 14 hereof and Section 24 hereof, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require pay-
ment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation
19
<PAGE> 23
of a Rights Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.
(a) Subject to Section 7(e) hereof, at any time after
the Distribution Date the registered holder of any Rights Certificate may
exercise the Rights evidenced thereby (except as otherwise provided herein
including, without limitation, the restrictions on exercisability set forth in
Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part
upon surrender of the Rights Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earlier of (i) 5:00 P.M.,
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<PAGE> 24
New York City time, on the tenth anniversary of the date of the consummation of
the initial public offering of the Common Stock of the Company, or such later
date as may be established by the Board of Directors prior to the expiration of
the Rights (such date, as it may be extended by the Board, the ("Final
Expiration Date"), or (ii) the time at which the Rights are redeemed or
exchanged as provided in Section 23 and Section 24 hereof (the earlier of (i)
and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-hundredth of
a share of Preferred Stock pursuant to the exercise of a Right shall initially
be the amount equal to the product of four times the average daily closing price
of the Common Stock for the first five days of trading subsequent to the
consummation of the initial public offering of the Common Stock, and shall be
subject to adjustment from time to time as provided in Section 11 and Section
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-hundredth of a share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to
21
<PAGE> 25
Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer
agent of the shares of Preferred Stock (or make available, if the Rights Agent
is the transfer agent for such shares) certificates for the total number of one
one-hundredths of a share of Preferred Stock to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of shares of Preferred Stock issuable upon exercise of the Rights hereunder with
a depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a share of Preferred Stock as
are to be purchased (in which case certificates for the shares of Preferred
Stock represented by such receipts shall be deposited by the transfer agent with
the depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or, upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) shall be made in cash or by certified bank check or bank draft payable
to the order of the Company or shares of Common
22
<PAGE> 26
Stock (having a value determined pursuant to Section 11(a)(iii) hereof). In the
event that the Company is obligated to issue other securities (including Common
Stock) of the Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of, the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who
23
<PAGE> 27
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or any other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set
24
<PAGE> 28
forth on the reverse side of the Rights Certificate surrendered for such
exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split-up, combination or exchange shall, if surrendered to the Company
or any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights Certifi-
cates, and in such case shall deliver a certificate of destruction thereof to
the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available out of its authorized and unissued
shares of Preferred
25
<PAGE> 29
Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the earliest date after the first
occurrence of a Section 11(a)(ii) Event on which the consideration to be
delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) hereof, a registration statement under the
Act, with respect to the securities purchasable upon exercise of the Rights on
an appropriate form, (ii) cause such registration statement to become effective
as soon as practicable after such filing, and (iii) cause
26
<PAGE> 30
such registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension has been rescinded. In addition, if
the Company shall determine that a registration statement is required following
the Distribution Date, the Company may temporarily suspend the exercisability of
the Rights until such time as a registration statement has been declared
effective. Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained, the exercise
thereof shall not be permitted under applicable law, or a registration statement
shall not have been declared effective.
27
<PAGE> 31
(d) The Company covenants and agrees that it will
take all such action as may be necessary to ensure that all one one-hundredths
of a share of Preferred Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable.
(e) The Company further covenants and agrees that it
will pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Rights Certificates and of any certificates for a number of one one-hundredths
of a share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Rights Certificates to a Person other than, or the issuance or
delivery of a number of one one-hundredths of a share of Preferred Stock (or
Common Stock and/or other securities, as the case may be) in respect of a name
other than that of the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates for a
number of one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
28
<PAGE> 32
paid (any such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose
name any certificate for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of
a Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be
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exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding Preferred
Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including
any such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combina-
tion or reclassification, and the number and kind of shares of Pre-
ferred Stock or capital stock, as the case may be, issuable on such
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<PAGE> 34
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of
the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which,
if such Right had been exercised immediately prior to such date and at
a time when the Preferred Stock transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled
to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) In the event any Person shall, at any
time after the Rights Dividend Declaration Date, become an Acquiring
Person, unless the event causing such Person to become an Acquiring
Person is a transaction set forth in Section 13(a) hereof, or is an
acquisition of shares of Common Stock pursuant to a tender offer or an
exchange offer for all outstanding shares of Common Stock at a price
and on terms determined by at least a majority of the members of the
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<PAGE> 35
Board of Directors who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of an Acquiring
Person, after receiving advice from one or more investment banking
firms, to be
(a) at a price which is fair to stockholders and not
inadequate (taking into account all factors which such members
of the Board deem relevant, including, without limitation,
prices which could reasonably be achieved if the Company or
its assets were sold on an orderly basis designed to realize
maximum value) and (b) otherwise in the best interests of the
Company and its stockholders (a "Qualified Offer"),
then, promptly following the occurrence of such event, proper provision
shall be made so that each holder of a Right (except as provided below
and in Section 7(e) hereof) shall thereafter have the right to receive,
upon exercise thereof at the then current Purchase Price in accordance
with the terms of this Agreement, in lieu of a number of one
one-hundredths of a share of Preferred Stock, such number of shares of
Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
one-hundredths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, and (y) dividing that product (which, following such
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<PAGE> 36
first occurrence, shall thereafter be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by 50% of
the Current Market Price (determined pursuant to Section 11(d) hereof)
per share of Common Stock on the date of such first occurrence (such
number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares
of Common Stock which are authorized by the Company's Restated
Certificate of Incorporation, but which are not outstanding or reserved
for issuance for purposes other than upon exercise of the Rights, are
not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a),
the Company shall (A) determine the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value"), and (B)
with respect to each Right (subject to Section 7(e) hereof), make
adequate provision to substitute for the Adjustment Shares, upon the
exercise of a Right and payment of the applicable Purchase Price, (1)
cash, (2) a reduction in the Purchase Price, (3) Common Stock or other
equity securities of the Company (including, without limitation,
shares, or units of shares, of preferred stock, such as the Preferred
Stock, which the Board has deemed to have essentially the same value or
economic
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<PAGE> 37
rights as shares of Common Stock (such shares of preferred stock being
referred to as "Common Stock Equivalents")), (4) debt securities of
the Company, (5) other assets, or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value (less the amount
of any reduction in the Purchase Price), where such aggregate value has
been determined by the Board based upon the advice of a nationally
recognized investment banking firm selected by the Board; provided,
however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days
following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"), then the
Company shall be obligated to deliver, upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary, cash,
which shares and/or cash have an aggregate value equal to the Spread.
For purposes of the preceding sentence, the term "Spread" shall mean
the excess of (i) the Current Value over (ii) the Purchase Price. If
the Board determines in good faith that it is
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<PAGE> 38
likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, the thirty
(30) day period set forth above may be extended to the extent nec-
essary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek shareholder approval
for the authorization of such additional shares (such thirty (30) day
period, as it may be extended, is herein called the "Substitution
Period"). To the extent that action is to be taken pursuant to the
first and/or third sentences of this Section 11(a)(iii), the Company
(1) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (2) may suspend
the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such shareholder approval for such
authorization of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as
a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of each
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<PAGE> 39
Adjustment Share shall be the current market price per share of the
Common Stock on the Section 11(a)(ii) Trigger Date and the per share or
per unit value of any Common Stock Equivalent shall be deemed to equal
the current market price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for
the issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per share,
if a security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or
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<PAGE> 40
Equivalent Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or Equivalent Preferred Stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration, part or all of which may be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. Shares of Preferred Stock owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing
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<PAGE> 41
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or evidences of indebtedness, or of
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Stock, and
the denominator of which shall be such Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock. Such adjustments
shall be made successively whenever such a record date is fixed, and in the
event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d)(i) For the purpose of any computation hereunder,
other than computations made pursuant to Section 11(a)(iii) hereof, the Current
Market
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<PAGE> 42
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the Current Market
Price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with
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<PAGE> 43
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or such other system then in use,
or, if on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith
by the Board shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is not publicly held or
not so listed or traded, Current Market Price per share shall mean the
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<PAGE> 44
fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation
hereunder, the Current Market Price per share of Preferred Stock shall
be determined in the same manner as set forth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last sentence
thereof). If the Current Market Price per share of Preferred Stock
cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described in
clause (i) of this Section 11(d), the Current Market Price per share of
Preferred Stock shall be conclusively deemed to be an amount equal to
100 (as such number may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect to the
Common Stock occurring after the date of this Agreement) multiplied by
the Current Market Price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or
traded, Current Market Price per share of the Preferred Stock shall
mean the fair value per share as determined in good faith by the Board,
whose determination shall be described in a statement
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<PAGE> 45
filed with the Rights Agent and shall be conclusive for all purposes.
For all purposes of this Agreement, the Current Market Price of a Unit
shall be equal to the Current Market Price of one share of Preferred
Stock divided by 100.
(e) Anything herein to the contrary notwithstanding,
no adjustment in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock or other share or one-millionth of a share of Preferred Stock,
as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which mandates
such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock other
than Preferred Stock, thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a
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manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Stock shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the number of one
one-hundredths of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths
of a share covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
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<PAGE> 47
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-hundredths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one one-hundredths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be
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<PAGE> 48
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-hundredths of a share of Preferred Stock
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per one
one-hundredth of a share and the number of one one-hundredth of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated value, if any, of
the number of one one-hundredths of a share of Preferred Stock issuable upon
exercise of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully
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paid and nonassessable such number of one one-hundredths of a share of Preferred
Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised after
such record date the number of one one-hundredths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise over and above the number of one one-hundredths of a share of Preferred
Stock and other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise) or securities upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for
cash of any shares of Preferred Stock at
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<PAGE> 50
less than the Current Market Price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it shall
not, at any time after the Distribution Date, (i) consolidate with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets, cash
flow or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the shareholders of the
Person
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who constitutes, or would constitute, the "Principal Party" for purposes of
Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of
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<PAGE> 52
Common Stock outstanding immediately prior to the occurrence of the event and
the denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 and Section
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate
and (c) if a Distribution Date has occurred, mail a brief summary thereof to
each holder of a Rights Certificate in accordance with Section 27 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets, Cash Flow or Earning Power.
(a) In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company
in a transaction which complies with
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Section 11(o) hereof) shall consolidate with, or merge with or into, the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any Subsidiary of the Company in one or more transactions
each of which complies with Section 11(o) hereof), then, and in each such case
(except as may be contemplated by Section 13(d) hereof), proper provision shall
be made so that: (i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price in accordance with the terms of this Agreement,
such number of validly authorized and issued, fully paid, non-assessable and
freely tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-hundredths
of a share of Preferred Stock for which a
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Right is exercisable immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying the number of such one
one-hundredths of a share for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately prior to such first occurrence), and dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (2) 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party
on the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as may
be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its shares of Common
Stock thereafter deliverable upon the exercise of the Rights; and (v) the
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provisions of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described
in clause (x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of Common Stock
of the Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(iv) in the case of any transaction
described in clause (z) of the first sentence of Section 13(a), the
Person that is the party receiving the greatest portion of the assets,
cash flow or earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party"
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shall refer to whichever of such Persons is the issuer of the Common Stock
having the greatest aggregate market value.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock which have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger or sale of assets mentioned in paragraph
(a) of this Section 13, the Principal Party will
(i) prepare and file a registration
statement under the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and
will use its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and (B)
remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date; and
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(ii) take such all such other action as may
be necessary to enable the Principal Party to issue the securities
purchasable upon exercise of the Rights, including but not limited to
the registration or qualification of such securities under all
requisite securities laws of jurisdictions of the various states and
the listing of such securities on such exchanges and trading markets as
may be necessary or appropriate; and
(vi) will deliver to holders of the Rights
historical financial statements for the Principal Party and each of
its Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer
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or exchange offer for all outstanding shares of Common Stock which is a
Qualified Offer as such term is defined in Section 11(a)(ii) hereof (or a wholly
owned subsidiary of any such Person or Persons), (ii) the price per share of
Common Stock offered in such transaction is not less than the price per share of
Common Stock paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such tender offer or exchange offer and (iii) the form of
consideration being offered to the remaining holders of shares of Common Stock
pursuant to such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue
fractions of Rights, except prior to the Distribution Date as provided in
Section 11(p) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, the Company shall pay to
the registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The
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closing price of the Rights for any day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading, or if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights, selected by the Board of Directors
of the Company. If on any such date no such market maker is making a market in
the Rights, the fair value of the Rights on such date as determined in good
faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue
fractions of shares of Preferred Stock (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock) upon exercise of
the Rights or to dis-
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tribute certificates which evidence fractional shares of Preferred Stock (other
than fractions which are integral multiples of one one-hundredth of a share of
Preferred Stock). In lieu of fractional shares of Preferred Stock that are not
integral multiples of one one-hundredth of a share of Preferred Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event,
the Company shall not be required to issue fractions of shares of Common Stock
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of Common
Stock shall be the
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closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the
Rights expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.
Section 15. Rights of Action. All rights of action in respect
of this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or
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threatened violations of the obligations hereunder of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will
be transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent designated
for such purposes, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof,
the Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company
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nor the Rights Agent, subject to the last sentence of Section 7(e) hereof, shall
be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 34. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the number of
one one-hundredths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to
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stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 36. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from
time to time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and disbursements and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement in reliance upon any
Rights Certificate or
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certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.
(a) Any corporation into which the Rights Agent or
any successor Rights Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust, stock transfer or other shareholder services
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
but only if such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so counter-
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signed; and in case at that time any of the Rights Certificates shall not have
been countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full
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and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person and the determination of Current Market Price) be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by THE CHAIRMAN OF THE BOARD, THE PRESIDENT, ANY VICE
PRESIDENT, THE TREASURER, ANY ASSISTANT TREASURER, THE SECRETARY or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only
for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Rights Certificates or be required to verify the same (except as to
its countersignature on
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such Rights Certificates), but all such statements and recitals are and shall be
deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11, Section 13 or Section 24 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock or Preferred Stock will, when so issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
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delivered all such further and other acts, instruments and assurances as may
reason ably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
such officer.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or
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accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to purchase, as the case
may be, has either not been completed or indicates an affirmative response to
clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first consulting
with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
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certified mail, and, if such resignation occurs after the Distribution Date, to
the registered holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
(30) days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and, if such removal occurs
after the Distribution Date, to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
legal business entity organized and doing business under the laws of the United
States or of the State of New York or of any other state of the United States,
in good standing, having an office in the State of New York, which is authorized
under such laws to exercise corporate trust or stock transfer or shareholder
services powers and which
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has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (b) an affiliate of a legal business entity
described in clause (a) of this sentence. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Preferred Stock, and, if
such appointment occurs after the Distribution Date, mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or
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property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the close of business on the
tenth Business Day following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have
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occurred prior to the Record Date, the close of business on the tenth Business
Day following the Record Date), or (ii) the Final Expiration Date, redeem all
but not less than all of the then outstanding Rights at a redemption price of
$.01 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"). Notwithstanding anything contained in this Agreement to the contrary,
the Rights shall not be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Company's right of redemption hereunder
has expired. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the Current Market Price, as defined in Section
11(d)(i) hereof, of the Common Stock at the time of redemption) or any other
form of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and
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the holders of the then outstanding Rights by mailing such notice to all such
holders at each holder's last address as it appears upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Stock for or pursuant to the terms of
any such plan), together with all Affiliates and
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Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Stock then outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to
subsection (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
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(c) In any exchange pursuant to this Section 24, the
Company, at its option, may substitute Preferred Stock (or Equivalent Preferred
Stock, as such term is defined in paragraph (b) of Section 11 hereof) for Common
Stock exchangeable for Rights, at the initial rate of one one-hundredth of a
share of Preferred Stock (or Equivalent Preferred Stock) for each share of
Common Stock, as appropriately adjusted to reflect stock splits, stock dividends
and other similar transactions after the date hereof.
(d) In the event that there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the shares of Company shall take all such action as may be necessary to
authorize additional shares of Common Stock for issuance upon exchange of the
Rights.
(e) The Company shall not be required to issue
fractions of shares of Common Stock or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of such fractional shares of Common
Stock, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional shares of Common Stock would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole share of Common Stock. For the purposes of this subsection (e),
the current market value of a whole share of Common Stock shall be the closing
price of a share of Common
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Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time
after the Distribution Date, (i) to pay any dividend payable in stock of any
class to the holders of Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the holders
of Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or to
effect any sale or other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with
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Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier.
(b) In case any of the events set forth in Section
11(a)(ii) hereof shall occur, then, in any such case, (i) the Company shall as
soon as practicable thereafter give to each holder of a Rights Certificate, to
the extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Pre-
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ferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Rights Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing by the Rights Agent with the Company) as follows:
LendingTree Inc.
6701 Carmel Rd. Suite 205
Charlotte, North Carolina 28226
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing by the Rights Agent with the Company) as follows:
[AMERICAN STOCK TRANFER & TRUST COMPANY
40 WALL STREET
NEW YORK, NY 10005
ATTENTION: CORPORATE TRUST DEPARTMENT]
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Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any Rights Certificate
(or, if prior to the Distribution Date, to the holder of certificates
representing shares of Common Stock) shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the
Distribution Date, and subject to the last sentence of this Section 27, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder in any
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, this Agreement may not be supplemented or amended to lengthen any time
period
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hereunder, pursuant to clause (iii) of this sentence, (A) a time period relating
to when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment.* Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock. Notwithstanding anything herein to the contrary,
this Agreement may not be amended at a time when the Rights are not redeemable.
Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of
- ----------
* If the Rights Agent objects to this provision, consider proposing the
following addition:
"unless the Rights Agent shall have determined in good faith that such
supplement or amendment would increase its duties or obligations or
limit its rights or benefits under this Agreement."
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<PAGE> 83
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board, or any of the directors on the Board to any liability to the
holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution
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<PAGE> 84
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth Business Day following the date of such determination by the Board of
Directors. Without limiting the foregoing, if any provision requiring a specific
group of Directors of the Company to act is held to by any court of competent
jurisdiction or other authority to be invalid, void or unenforceable, such
determination shall then be
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<PAGE> 85
made by the Board of Directors of the Company in accordance with applicable law
and the Company's Amended and Restated Certificate of Incorporation and By-laws.
Section 32. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
LENDINGTREE INC.
By: __________________________
Name: Douglas R. Lebda
Title: Chief Executive Officer and President
First Union National Bank
By: __________________________
Name:
Title:
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<PAGE> 87
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
of
LENDINGTREE INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Douglas R. Lebda, Chief Executive Officer and President,
and Robert J. Flemma, Jr., General Counsel, Vice-President and Secretary, of
LendingTree Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation, as amended, of the said
Corporation, the said Board of Directors on December 18, 1999, adopted the
following resolution creating, effective upon the filing of the Fourth Amended
and Restated Certificate of Incorporation, a series of [1,000,000] shares of
Preferred Stock designated as Series A Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of its
Amended and Restated Certificate of Incorporation, a series of Preferred Stock
of the Corporation be and it hereby is created, and that the designation and
amount thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" and the
number of shares constituting such series shall be [1,000,000].
<PAGE> 88
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the fifteenth day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to the greater of (a) $[10.00] or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount of
all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock,
par value $0.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after [ ], 2000 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Junior Participating Preferred Stock as provided in Paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $[10.00] per share on
the Series A Junior Participating Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
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<PAGE> 89
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
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<PAGE> 90
(C) (i) If at any time dividends on any Series A
Junior Participating Preferred Stock shall be in arrears in an amount
equal to six (6) quarterly dividends thereon, the occurrence of such
contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and
for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default period,
all holders of Preferred Stock (including holders of the Series A
Junior Participating Preferred Stock) with dividends in arrears in an
amount equal to six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2)
directors.
(ii) During any default period, such voting right of
the holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders of
any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of directors shall be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right. At any meeting at
which the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right,
voting as a class, to elect directors to fill such vacancies, if any,
in the Board of Directors as may then exist up to two (2) directors or,
if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special meeting
does not amount to the required number, the holders of the Preferred
Stock shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall have
exercised their right to elect directors in any default period and
during the continuance of such period, the number of directors shall
not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A
Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their
right to elect directors,
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<PAGE> 91
the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent (10%) of the total
number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the
President, a Vice-President or the Secretary of the Corporation. Notice
of such meeting and of any annual meeting at which holders of Preferred
Stock are entitled to vote pursuant to this Paragraph (C)(iii) shall be
given to each holder of record of Preferred Stock by mailing a copy of
such notice to him at his last address as the same appears on the books
of the Corporation. Such meeting shall be called for a time not earlier
than 20 days and not later than 60 days after such order or request or
in default of the calling of such meeting within 60 days after such
order or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this Paragraph (C)(iii),
no such special meeting shall be called during the period within 60
days immediately preceding the date fixed for the next annual meeting
of the stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if applicable,
shall continue to be entitled to elect the whole number of directors
until the holders of Preferred Stock shall have exercised their right
to elect two (2) directors voting as a class, after the exercise of
which right (x) the directors so elected by the holders of Preferred
Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided
in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining directors theretofore elected by the holders of the
class of stock which elected the director whose office shall have
become vacant. References in this Paragraph (C) to directors elected by
the holders of a particular class of stock shall include directors
elected by such directors to fill vacancies as provided in clause (y)
of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a class to
elect directors shall cease, (y) the term of any directors elected by
the holders of Preferred Stock as a class shall terminate, and (z) the
number of directors shall be such number as may be provided for in the
certificate of incorporation or by-laws irrespective of any increase
made pursuant to the provisions of Paragraph (C)(ii) of this
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<PAGE> 92
Section 3 (such number being subject, however, to change thereafter in
any manner provided by law or in the certificate of incorporation or
by-laws). Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with
the Series A Junior Participating Preferred Stock, except dividends
paid ratably on the Series A Junior Participating Preferred Stock and
all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Participating Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or
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<PAGE> 93
upon dissolution, liquidation or winding up) to the Series A Junior
Participating Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating Preferred
Stock, or any shares of stock ranking on a parity with the Series A
Junior Participating Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon
any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to $100 per share of Series A Participating
Preferred Stock, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph (C) below to reflect such events as stock
splits, stock dividends and
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<PAGE> 94
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the
Series A Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by mul-
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<PAGE> 95
tiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the Corporation's
Preferred Stock as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise.
Section 10. Amendment. At any time when any shares of Series A
Junior Participating Preferred Stock are outstanding, neither the Amended and
Restated Certificate of Incorporation of the Corporation nor this Certificate of
Designation shall be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holder's fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred
Stock.
9
<PAGE> 96
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this [ ] day of , 2000.
By: _______________________
Name: Douglas R. Lebda
Title: Chief Executive Officer and President
By: _______________________
Name: Robert J. Flemma, Jr.
Title: General Counsel, Vice-President and
Secretary
10
<PAGE> 97
Exhibit B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER _________ __, 2009 (THE TENTH ANNIVERSARY OF THE DATE OF
THE CONSUMMATION OF THE INITIAL PUBLIC OFFERING OF THE COMMON STOCK OF THE
COMPANY), UNLESS EXTENDED PRIOR THERETO BY THE BOARD OF DIRECTORS, OR EARLIER IF
REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF
THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF
SUCH RIGHTS MAY BECOME NULL AND VOID.
Rights Certificate
LENDINGTREE INC.
This certifies that _____________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of ________ __, 2000 (the "Rights
Agreement"), between LendingTree Inc., a Delaware corporation (the "Company"),
and ________________________, a [New York] banking corporation (the "Rights
Agent"), to purchase from the Company at
<PAGE> 98
any time prior to 5:00 P.M. (New York City time) on _______, __, 2009 (the tenth
anniversary of the date of the consummation of the initial public offering of
the Common Stock) (unless such date is extended prior thereto by the Board of
Directors) at the office or offices of the Rights Agent designated for such
purpose, or its successors as Rights Agent, one one-hundredth of a fully paid,
non-assessable share of Series A Junior Participating Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of $_____ (the amount
equal to the product of four times the average closing price of the Common Stock
for the first five days of trading subsequent to the consummation of the initial
public offering of the Common Stock) per one one-hundredth of a share (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and related Certificate duly executed. The
number of Rights evidenced by this Rights Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number and Purchase Price as of
_________ __, 2000 (the close of business on the fifth day of trading subsequent
to the consummation of the initial public offering of the Common Stock), based
on the Preferred Stock as constituted at such date. The Company reserves the
right to require prior to the occurrence of a Triggering Event (as such term is
defined in the Rights Agreement) that a number of Rights be exercised so that
only whole shares of Preferred Stock will be issued.
2
<PAGE> 99
Upon the occurrence of a Section 11(a)(ii) Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of shares of Preferred Stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the
3
<PAGE> 100
Company and the holders of the Rights Certificates, which limitations of rights
include the temporary suspension of the exercisability of such Rights under the
specific circumstances set forth in the Rights Agreement. Copies of the Rights
Agreement are on file at the above-mentioned office of the Rights Agent and are
also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-hundredths
of a share of Preferred Stock as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled such holder to purchase.
If this Rights Certificate shall be exercised in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.01 per Right at any time prior to the earlier of the close
of business on (i) the tenth Business Day following the Stock Acquisition Date
(as such time period may be extended pursuant to the Rights Agreement), and (ii)
the Final Expiration Date. In addition, under certain circumstances following
the Stock
4
<PAGE> 101
Acquisition Date, the Rights may be exchanged, in whole or in part, for shares
of the Common Stock, or shares of preferred stock of the Company having
essentially the same value or economic rights as such shares. Immediately upon
the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced hereby (other than fractions
which are integral multiples of one one-hundredth of a share of Preferred Stock,
which may, at the election of the Company, be evidenced by depositary receipts),
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement. The Company, at its election, may require that a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter
5
<PAGE> 102
submitted to stockholders at any meeting thereof, or to give consent to or
withhold consent from any corporate action, or, to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
6
<PAGE> 103
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of _________ __, ____
LENDINGTREE INC.
By: _______________________________
Name: Douglas R. Lebda
Title: Chief Executive Officer and President
7
<PAGE> 104
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED_________________________________
hereby sells, assigns and transfers unto______________________________________
______________________________________________________________________________
(Please print name and address of transferee)
______________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within named
Company, with full power of substitution.
Dated: __________________, _____
__________________________________
Signature
Signature Guaranteed:
Certificate
<PAGE> 105
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: _______________, _____ __________________________________
Signature
Signature Guaranteed:
<PAGE> 106
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE> 107
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights repre-
sented by the Rights Certificate.)
To: LENDINGTREE INC.:
The undersigned hereby irrevocably elects to exercise
__________ Rights represented by this Rights Certificate to purchase the shares
of Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be
issued in the name of and delivered to:
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
<PAGE> 108
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
______________________________________________________________________________
Dated: _______________, _____
__________________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are
[ ] are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined pursuant to the Rights Agreement);
<PAGE> 109
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ______________, _____ __________________________________
Signature
Signature Guaranteed:
<PAGE> 110
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
<PAGE> 111
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On [ ], 2000, the Board of Directors of LendingTree Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Company Common Stock to stockholders of record at the close of business
on [ ], 2000 (the date of the consummation of the initial public offering of the
Common Stock) (the "Record Date"). Each Right entitles the registered holder to
purchase from the Company a unit consisting of one one-hundredth of a share (a
"Unit") of Series A Junior Participating Preferred Stock, par value $0.01 per
share (the "Series A Preferred Stock") at a Purchase Price of $ per Unit (the
amount equal to the product of four times the average closing price of the
Common Stock for the first five days of trading subsequent to the consummation
of the initial public offering of the Common Stock), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and ________________ , as Rights Agent.
<PAGE> 112
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. Subject to certain exceptions specified in the
Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 business days following
a public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), other than
persons who acquire 15% beneficial ownership as a result of repurchases of stock
by the Company or certain inadvertent actions by institutional or certain other
stockholders or, in certain circumstances, persons who are holders of shares of
Common Stock prior to the initial public offering and upon consummation thereof,
become beneficial owners of 15% or more of the outstanding shares of Common
Stock, or (ii) 10 business days (or such later date as the Board shall
determine) following the commencement of a tender offer or exchange offer that
would result in a person or group becoming an Acquiring Person. Until the
Distribution Date, (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock cer-
tificates, (ii) new Common Stock certificates issued after the Record Date will
contain a notation incorporating the Rights Agreement by reference and (iii)
the surrender for transfer of any certificates for Common Stock outstanding
will also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. Pursuant to the Rights Agreement, the Company
reserves the right to
<PAGE> 113
require prior to the occurrence of a Triggering Event (as defined below) that,
upon any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.
The Rights are not exercisable until the Distribution Date and
will expire at 5:00 P.M. (New York City time) on , 2010 (the tenth
anniversary of the date of the consummation of the initial public offering of
the Common Stock), unless such date is extended or the Rights are earlier
redeemed or exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that a Person becomes an Acquiring Person, except
pursuant to an offer for all outstanding shares of Common Stock which the
independent directors determine to be fair and not inadequate to and to
otherwise be in the best interests of the Company and its stockholders, after
receiving advice from one or more investment banking firms (a "Qualified
Offer"), each holder of a Right will
<PAGE> 114
thereafter have the right to receive, upon exercise, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. Notwithstanding any
of the foregoing, following the occurrence of the event set forth in this
paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void. However, Rights are not exercisable following the occurrence of the
event set forth above until such time as the Rights are no longer redeemable by
the Company as set forth below.
For example, at an exercise price of $200.00 per Right, each
Right not owned by an Acquiring Person (or by certain related parties) following
an event set forth in the preceding paragraph would entitle its holder to
purchase $400.00 worth of Common Stock (or other consideration, as noted above)
for $200.00. Assuming that the Common Stock had a per share value of $20.00 at
such time, the holder of each valid Right would be entitled to purchase 20
shares of Common Stock for $200.00.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company engages in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than
with an entity which acquired the shares pursuant to a Qualified Offer), (ii)
the Company engages in a merger or other business combination transaction in
which the Company is the
<PAGE> 115
surviving corporation and the Common Stock of the Company is changed or ex-
changed, or (iii) 50% or more of the Company's assets, cash flow or earning
power is sold or transferred, each holder of a Right (except Rights which have
previously been voided as set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right. The events set forth in this
paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
At any time after a person becomes an Acquiring Person and
prior to the acquisition by such person or group of fifty percent (50%) or more
of the outstanding Common Stock, the Board may exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one share of Common Stock, or one one-hundredth of
a share of Preferred Stock (or of a share of a class or series of the Company's
preferred stock having equivalent rights, preferences and privileges), per Right
(subject to adjustment).
At any time until ten business days following the Stock
Acquisition Date, the Company may redeem the Rights in whole, but not in part,
at a price of $.01 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors). Immediately upon
the action of the Board
<PAGE> 116
of Directors ordering redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the $.01 redemption
price.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company or in the event of the
redemption of the Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended
by the Board of Directors of the Company prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights, or to shorten or lengthen any time
period under the Rights Agreement. The foregoing notwithstanding, no amendment
may be made at such time as the Rights are not redeemable.
A form of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration Statement on
Form S-1 dated
<PAGE> 117
_______ , 2000. A copy of the Rights Agreement is available free of charge from
the Rights Agent. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
BETWEEN
LENDINGTREE, INC.
AND
DOUGLAS R. LEBDA
This Employment Agreement (this "Agreement") is made and
entered into this 2nd day of September, 1999 (the "Effective Date"), between
LendingTree, Inc, a Delaware corporation, (the "Company") and Douglas R. Lebda
(the "Executive") residing at 9313 Olivia Lane, Charlotte, North Carolina 28277.
WITNESSETH:
In consideration of the premises and the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
1. DEFINITIONS
The following terms used in this Agreement shall have the meaning
specified below unless the context clearly indicates the contrary:
"Base Salary" shall mean the annual base salary payable to the
Executive at the rate set forth in Section 4.
"Board" shall mean the Board of Directors of the Company,
"Bad Performance" shall mean the Executive's continuing poor
performance of his duties to the Company, as determined, in their absolute
discretion, by at least two-thirds of the members of the Board who are not also
members of the Company's senior management; provided, however, that the
Executive's performance shall not be deemed to
<PAGE> 2
constitute Bad Performance for purposes of this Agreement unless (i) the
Executive shall have received written notice of any such determination of the
existence of such poor performance, which notice shall identify the poor
performance that has been determined to exist, (ii) the Executive shall have
been given at least thirty (30) days following such notice to improve his
performance and (iii) following the expiration of such period, at least
two-thirds of the members of the Board who are not also members of the Company's
senior management shall have determined, in their absolute discretion, that the
Executive has failed to remedy the poor performance identified in such notice.
"Cause" shall mean the Executive's (a) commission of an act of fraud,
theft or embezzlement or other similar willful misconduct; (b) conviction of (or
pleas of nolo contendere with respect to) a felony or other crime involving
moral turpitude; (c) a serious neglect of his material duties or failure to
perform his material obligations under this Agreement, or (d) refusal to follow
lawful directives of the Board, provided however, that the Company shall give
the Executive written notice specifying any actions alleged to constitute Cause
under clauses (c) or (d), and the Executive shall have 30 days from the date of
receipt of the Company's written notice in which to cure any such alleged Cause.
"Employment Term" shall mean the period beginning on the Effective Date
and ending on the close of business on the effective date of the Executive's
termination of employment with the Company.
"Expiration Date" shall have the meaning ascribed to such term in
Section 2.
"Good Reason" shall mean (a) a material reduction in the nature of the
Executive's duties and responsibilities without the Executive's consent, or (b)
a material breach of any
2
<PAGE> 3
provision hereof by the Company; provided however that the Executive shall give
the Company written notice specifying actions alleged to constitute Good Reason
and the Company shall have 30 days from the date of receipt of the Executive's
written notice in which to cure any such alleged Good Reason.
"Merger Event" shall mean the termination of the Executive's employment
with the Company due to any merger, acquisition, share exchange, consolidation
or other reorganization or business combination, regardless of whether the
Company is the surviving or continuing entity, 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.
"Qualified IPO" shall mean an underwritten public offering of common
stock of the Company by a nationally recognized underwriter pursuant to a
registration statement under the Securities Act of 1933, as amended, where both
(i) the proceeds to the Company (prior to deducting any underwriters' discounts
and commissions) equal or exceed Thirty-Five Million Dollars ($35,000,000) and
(ii) the initial price per share at which such common stock is sold to the
public in such offering is at least $15.00 (subject to equitable adjustments
for stock splits, stock combinations, recapitalizations and similar
occurrences).
"Termination of Employment" shall mean the first to occur of the
following events:
(a) the date of death of the Executive;
(b) the effective date specified in the Company's written
notice to the Executive of the Company's termination of his employment
without Cause;
3
<PAGE> 4
(c) the effective date specified in the Company's written
notice to the Executive of the Company's termination of his employment
for Cause;
(d) the effective date specified in the Company's written
notice to the Executive of the Company's termination of his employment
for Bad Performance;
(e) the effective date specified in the Executive's written
notice to the Company of the Executive's termination of his employment
for Good Reason;
(f) the effective date specified in the Executive's written
notice to the Company of the Executive's termination of his employment
without Good Reason;
(g) the occurrence of the Expiration Date; and
(h) the last day of the Executive's employment with the
Company due to a Merger Event.
"Termination without Cause" shall mean a termination by the
Company of the Executive's employment without Cause (but such term shall not
include termination by the Company of the Executive's employment due to Bad
Performance).
2. EMPLOYMENT
The Executive's Employment Term shall become effective and
begin as of the Effective Date, and shall continue until the close of business
on the fourth (4th) anniversary of the Effective Date (the "Expiration Date"),
unless the Executive's employ-
4
<PAGE> 5
ment is earlier terminated pursuant to a Termination of Employment. The
Executive will serve the Company subject to the general supervision, advice and
direction of the Board and upon the terms and conditions set forth in this
Agreement.
3. TITLE AND DUTIES
(a) The Executive's job title shall be Chief Executive Officer
of the Company. During the Employment Term, the Executive shall perform such
services and duties as the Board may from time to time designate consistent with
such position, including, without limitation, general charge of the Company's
business, subject to the direction and control of the Board. Throughout the
Employment Term, the Company shall also nominate the Executive to serve as a
member of the Board and upon such nomination Executive shall agree to so serve.
(b) The Executive shall report to the Board. All senior
officers of the Company shall report directly or indirectly through other senior
officers, to the Executive, and the Executive shall be responsible for reviewing
the performance of other senior officers of the Company, and shall from time to
time advise the Board of his recommendations for any adjustments to the
salaries of and bonus payments to such officers. The Executive shall, subject to
discussion with and approval by the Board, have the authority to enter into
employment contracts on behalf of the Company with other executives of the
Company. The Executive initially shall be based in Charlotte, North Carolina.
(c) The Executive shall devote his full time, attention and
energies to the business affairs of the Company as may be reasonably necessary
for the discharge of his duties as Chief Executive Officer, provided, however,
the Executive may engage in
5
<PAGE> 6
reasonable investment and other personal activities that do not interfere with
the Executive's obligations hereunder. By way of example, such activities may
include, but are not limited to serving on the Boards of Directors of
not-for-profit agencies, associations and organizations or managing personal
investment activities, and continuing to serve on the Board of Advisors of the
particular entity on which he currently serves, in each case so long as such
activities do not interfere with the Employee's obligations hereunder. In
addition, the Executive may engage in such other activities that from time to
time are approved by the Board.
4. COMPENSATION AND BENEFITS
(a) Base Salary. During the Employment Term, the Company shall
pay the Executive, in installments according to the Company's regular payroll
practice, Base Salary at the annual rate of not less than Two Hundred Thousand
Dollars ($200,000).
(b) Bonus. The Executive shall be entitled to participate in
any senior executive bonus plan or arrangement from time to time may be
established and maintained by the Board. The Executive's bonus for any fiscal
year under any such bonus, plan or arrangement shall be between 0% and 50% of
his Base Salary, with a target bonus equal to 25% of his Base Salary, the
receipt of which shall be dependent upon the satisfaction of such Company
performance standards and individual performance standards as are established by
the Board. Any such bonus shall be determined and paid as promptly as
practicable following the end of each fiscal year.
(c) Stock Options. The Board's Compensation Committee has
approved the grant of 150,000 stock options to the Executive. As a result of the
Compensation
6
<PAGE> 7
Committee's approval, the Company and the Executive are entering into a stock
option agreement ("New Option Agreement"). The New Option Agreement shall be in
the standard form used for options granted under the Company's 1998 Stock Option
Plan, except that the New Option Agreement shall include the provisions
described in Section 6(d). In the event that, for any reason (other than the
Executive's refusal to sign the New Option Agreement), the New Option Agreement
is not duly executed by the Company within 90 days following the date of this
Agreement, then this Agreement shall become null and void, and the Executive's
Employment Agreement dated October 13, 1998 shall control the rights,
obligations and benefits of the Company and the Executive.
(d) The Board shall review the Executive's compensation as set
forth in this Section 4 as soon as practicable at the end of the Company's
fiscal year, and at least on an annual basis thereafter. In such review, the
Board shall take into account the compensation of Chief Executive Officers of
other companies which engage in similar business activities to those of the
Company, the performance of the Company, the development of the Company's
business and such other factors as the Board deems relevant. Based on such
review, the Board may adjust the Executive's compensation as the Board shall
determine. The Company shall not, however, reduce any part of the Executive's
total compensation below its then current level without the advance written
consent of the Executive.
(e) Vacation. During each complete twelve (12) month period of
the Employment Term, the Executive shall be entitled to no fewer than three (3)
weeks of paid vacation. For any period less than twelve (12) months, the
Executive shall be entitled to a
7
<PAGE> 8
proportionate amount of vacation. The Executive shall be entitled to carry over
to the next succeeding year one week of accrued but unused vacation from the
immediately proceeding year.
(f) Employee Benefits. During the Employment Term, the
Executive shall be entitled to participate in all employee benefit plans,
including but not limited to health plans and other employee welfare benefit
plans, with respect to which the Executive's position and tenure make him
eligible to participate. Nothing in this Section 4(f) shall be construed to
require the Company to maintain any particular employee benefit plans for its
employees.
5. REIMBURSEMENT OF EXPENSES
In addition to the compensation provided for under Section 4
hereof, upon submission of proper vouchers in accordance with the Company's
expense reimbursement policies and procedures as may exist from time to time,
the Company will reimburse the Executive for all normal and reasonable travel
and other expenses incurred by the Executive during the Employment Term in
performance of the Executive's responsibilities to the Company.
6. TERMINATION BENEFITS
(a) Upon the termination of the Executive's employment with
the Company for any reason, the Company shall, not later than the next regularly
scheduled payroll date, pay to the Executive all Base Salary (and, to the extent
the Company's then current severance policy provides therefor, accrued vacation)
earned through the date of
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such termination. The Executive shall be entitled to the other payments and
benefits described below only as each is expressly applicable to such
termination of employment.
(b) In the event of any Termination without Cause, in the
event the Executive's employment is terminated by the Company for Bad
Performance, or in event the Executive's employment is terminated by the
Executive for Good Reason, then, the Company shall, subject to the other
provisions of this Section 6(b), continue, until the first anniversary of the
date of such termination, to pay to the Executive the Base Salary, as if such
termination of employment had not occurred. Such payments shall be conditioned
on the Executive giving a general release to the Company and its affiliates in
the form reasonably satisfactory to the Company, but the general release shall
not be required to include a release of any of the Executive's claims with
regard to any payment or other benefit due to him under this Agreement where the
payment or other benefit has not been received by the Executive. In addition,
the amount of such payments shall be reduced by the amount of any new
compensation received by the Executive from any new employer for services
rendered during such period. The Company also will give the Executive a general
release, but the general release shall not be required to include a release of
any claim of the Company with regard to any breach by the Executive of any
provision of Section 7 or Section 8 of this Agreement, or of any claim arising
from the dishonesty or other willful misconduct of the Executive.
(c) In the event that the Executive's employment is terminated
as a result of a Merger Event, then the Company shall, subject to the other
provisions of this Section 6(c) pay to the Executive twelve months of his then
current Base Salary in a lump
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<PAGE> 10
sum. Such payments shall be conditioned on the Executive giving a general
release to the Company and its affiliates in the form reasonably satisfactory to
the Company, but the general release shall not be required to include a release
of any the Executive's claims with regard to any payment or other benefit due to
him under this Agreement where the payment or other benefit has not been
received by the Executive. The Company also will give the Executive a general
release, but the general release shall not be required to include a release of
any claim of the Company with regard to any breach by the Executive of any
provision of Section 7 or Section 8 of this Agreement or of any claim arising
from the dishonesty or other willful misconduct of the Executive.
(d) In the event (1) of any Termination without Cause, (2) the
Executive's employment is terminated by the Executive for Good Reason or (3)
the Executive's employment is terminated as a result of a Merger Event, then in
any such case, (A) the Executive's stock options granted to him prior to the
date of such termination shall continue to vest in accordance with the vesting
schedule in effect with respect to such stock options prior to the date of such
termination and the option agreements with respect to such stock options will so
provide (with the existing option agreements with respect to stock options
outstanding as of the date hereof being amended to so provide and the New Option
Agreement with respect to the new stock options referred in Section 4(c) being
executed in a form that will so provide), and (B) the Executive shall have the
right to exercise any such stock options until the date that is thirty (30) days
after the last such stock option vests. In the event the Executive's employment
is terminated by the Company for Bad Performance, (x) the Executive's stock
options granted to him prior to the date of this Agreement (and
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<PAGE> 11
specifically excluding the stock options granted pursuant to Section 4(c)) shall
continue to vest in accordance with the vesting schedule set forth in the New
Option Agreement as referenced in Section 4(c), and the option agreements with
respect to such options will be amended to so provide, and (y) the Executive
shall have the right to exercise any such stock options referred to in clause
(x) above until the date that is thirty (30) days after the last such option
vests.
7. PROPRIETARY INFORMATION AND DEVELOPMENTS
(a) The Executive will not at any time, whether during or for
a period of one (1) year after the termination of his employment for any reason,
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 his
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.
Further, the Executive agrees that during his employment he
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
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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 be shall not, after the termination
of his employment for a period of one (1) year, 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
his 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.
(b) If at any time or times during the Executive's employment,
he shall (either alone or with others) make, conceive, create, discover, invent
or reduce to practice any invention, modification, discovery, design,
development, improvement, process, software program, work of authorship,
documentation, formula, data technique, know-how, trade secret or intellectual
property right whatsoever or any interest therein (whether or not patentable or
registrable under copyright, trademark or similar statutes or subject to
analogous protection) (herein called "Developments") that (i) relates to the
business of the Company or any of the products or services being developed,
manufactured or sold by the Company or which may be used in relation therewith,
(ii) results from tasks assigned the Executive by the Company or (iii) results
from the use of premises or personal property (whether tangible or intangible)
owned, leased or contracted for by the Company, such Developments and the
benefits thereof are and shall immediately become the sole and absolute property
of the Company and its assigns, as works made for hire or otherwise, and
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<PAGE> 13
the Executive shall promptly disclose to the Company (or any persons designated
by it) each such Development and, as may be necessary to ensure the Company's
ownership of such Developments. The Executive hereby assigns any rights
(including, but not limited to, any copyrights and trademarks) the Executive may
have or acquire in the Developments and benefits or rights resulting therefrom
to the Company and its assigns without further compensation and shall
communicate, without cost or delay, and without disclosing to others the same,
all available information relating thereto (with all necessary plans and models)
to the Company.
The Executive will, during his employment and at any time
thereafter, at the request and cost (including the Executive's reasonable
attorney's fees) of the Company, promptly sign, execute, make and do all such
deeds, documents, acts and things as the Company and, its duly authorized agents
may reasonably require:
(i) to apply for, obtain, register and vest in the name
of the Company alone (unless the Company otherwise
directs) letters patent, copyrights, trademarks or
other analogous protection for any Developments in
any country throughout the world and when so obtained
or vested to renew and restore the same; and
(ii) to defend any judicial, opposition or other
proceedings in respect of such applications and any
judicial, opposition or other proceedings or
petitions or applications for revocation of such
letters patent, copyright, trademark or other
analogous propose.
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<PAGE> 14
In the event the Company is unable, after reasonable effort,
to secure the Executive's signature on any application for letters patent,
copyright or trademark registration or other documents regarding any legal
protection relating to a Development, whether because of the Executive's
physical or mental incapacity or for any other reason whatsoever, the Executive
hereby irrevocably designates and appoints the Company and its duly authorized
officers and agents as his agent and attorney-in-fact, to act for and in his
behalf and stead to execute and file any such application or applications or
other documents and to do all other lawfully permitted acts to further the
prosecution, and issuance of letters patent, copyright or trademark
registrations or any other legal protection thereon with the same legal force
and effect as if executed by the Executive.
8. NON-COMPETE; NON-HIRE
(a) The Executive agrees that, in the event of a Termination
of Employment, for a period of one (1) year following such Termination of
Employment, the Executive will not, without the Company's consent, directly or
alone or as a partner, joint venturer, officer, director employee, consultant,
agent, independent contractor or stockholder or other owner of any entity or
business, engage in (i) any business involving Internet-based or company
Internet-based loan origination or loan brokerage services or (ii) any other
line of business that is engaged in by the Company (or with respect to which the
Company has made preparations to engage) as of the date of such Termination of
Employment; provided, however, that the ownership by the Executive of not more
than five percent (5%) of the shares of any publicly traded class of stock of
any corporation shall not be deemed, in and of itself, to violate the
prohibitions of this Section 8(a).
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<PAGE> 15
(b) The Executive agrees that, in the event of any Termination
of Employment, for a period of one (1) year following such Termination of
Employment, the Executive will not hire or otherwise employ or retain, or
knowingly permit (to the extent reasonably within his 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 date of such
Termination of Employment.
(c) The restrictions in this Section 8, 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 Section 8 have been specifically negotiated and 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
Section 8 is in 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 Section 8 is separable from every
other provision, paragraph and subparagraph and constitutes a separate and
distinct covenant.
9. RELIEF
The Executive hereby expressly acknowledges that any breach or
threatened breach by the Executive of any of the terms set forth in Section 8 of
this Agreement may result in significant and continuing injury to the Company,
the monetary value of which
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<PAGE> 16
would be impossible to establish, and any such breach or threatened breach will
provide the Company with any and all rights and remedies to which it may be
entitled under the law, including but not limited to injunctive relief or other
equitable remedies.
10. PARTIES BENEFITED; ASSIGNMENTS
This Agreement shall be binding upon, and inure to the benefit
of, the Executive, his heirs and his personal representative or representatives,
and upon the Company and its successors and assigns. Neither this Agreement nor
any rights or obligations hereunder may be assigned by the Executive, other than
by will or by the laws of descent and distribution. From and after consummation
of any reorganization of the Company pursuant to which a new holding company
structure is effected, all rights and obligations of the Company under this
Agreement shall be assigned to and assumed by such new holding company.
11. NOTICES
Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested, or by
overnight courier, addressed to the Board and the Company at its then principal
office, or to the Executive at the address set forth in the preamble, as the
case may be, or to such other address or addresses as any party hereto may from
time to time specify in writing for the purpose in a notice given to the other
parties in compliance with this Section 12. Notices shall be deemed given when
received.
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12. GOVERNING LAW
This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of Delaware, without regard to conflict
of law principles.
13. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE
The Executive represents and warrants to the Company that (a)
the Executive is under no contractual or other restriction which is inconsistent
with the execution of this Agreement, the performance of his duties hereunder or
other rights of Company hereunder, and (b) the Executive is under no physical or
mental disability that would hinder the performance of his duties under this
Agreement.
14. MISCELLANEOUS
This Agreement contains the entire agreement of the parties
relating to the subject matter hereof. This Agreement supersedes any prior
written or oral agreements or understandings between the parties relating to the
subject matter hereof. No modification or amendment of this Agreement shall be
valid unless in writing and signed by or on behalf of the parties hereto. A
waiver of the breach of any term or condition of this Agreement shall not be
deemed to constitute a waiver of any subsequent breach of the same or any other
term or condition. This Agreement is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be held invalid or unenforceable, such invalidity and unenforceability shall not
affect the remaining provisions hereof and the
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application of such provisions to other persons or circumstances, all of which
shall be enforced to the greatest extent permitted by law. The compensation
provided to the Executive pursuant to this Agreement shall be subject to any
withholdings and deductions required by any applicable tax laws. Any amounts
payable under this Agreement to the Executive after the death of the Executive
shall be paid to the Executive's estate or legal representative. The headings in
this Agreement are inserted for convenience of reference only and shall not be a
part of or control or affect the meaning of any provision hereof.
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IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement as of the date first written above.
LENDINGTREE, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
---------------------------------------------
DOUGLAS R. LEBDA
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<PAGE> 1
EXHIBIT 10.2
LENDINGTREE
www.lendingtree.com
November 26, 1999
Mr. Thomas J. Reddin
837 Brookhaven Springs Court
Atlanta, GA 30342
RE: Written Offer of Employment
Dear Tom:
LendingTree, Inc. (the "Company") would like to extend you an offer of
employment as Chief Marketing Officer of our Company. You acknowledge that you
will be an at-will employee of the Company subject to the Company's normal
employment policies.
Your anticipated start date will be December 10, 1999. You will report to
Douglas Lebda in his capacity as Chief Executive Officer. The Company fully
expects to maintain this reporting structure for at least one year. This
position will be located in LendingTree's corporate offices in Charlotte, NC
with travel to other areas as necessary.
The Company irrevocably promises and agrees that your compensation package will
be as follows:
- - A base salary of $200,000 per year as Chief Marketing Officer or such
other position with comparable job title, duties, and responsibility to
which you may be assigned.
- - You will receive a one-time $65,000 signing bonus payable on the first
day of employment.
- - During your first year of employment, you will receive a $70,000 annual
bonus, paid at a rate of $17,500 quarterly within 30 days of the
quarter's end, beginning March 31, 2000. Bonuses, if any, for
subsequent years will be incentive based and range from 0 to 50% of
your base salary.
<PAGE> 2
- - You will receive upon commencement of employment Incentive Stock
Options to purchase 225,000 shares of LendingTree common stock at an
exercise price of $7 per share. These options (granted under the
Company's 1999 Employee Stock Option Plan) will vest evenly over a
four-year period in the amount of 56,250 shares per annum on each of
your first, second, third, and fourth employment anniversaries. Should
the Company's stock split during this period, the number of options
offered shall be increased proportionally. These options will expire
if not exercised within ten years of vesting or if upon your voluntary
termination of employment you fail to exercise any vested option within
90 days of said termination or such other time specified in the
Employee Stock Option Plan, if longer.
- - You will be covered under the Company's Directors and Officers
liability insurance policy and any other such indemnification provided
under the Company's Bylaws and Articles of Incorporation.
- - The Company will provide you health care coverage according to its
standard offering to employees for health care. The present offering
provides for the payment of 100% of the premiums for you and your
family under our Blue Cross/Blue Shield PPO plan. There is a 30-day
waiting period from the start of your employment, however the Company
will reimburse you for any COBRA continuation during those 30 days.
- - You are eligible for fifteen days of paid vacation per annum, the
timing of which is subject to your Manager's approval.
- - The Company will reimburse you up to $2,500 per month for all
reasonable and documented living expenses associated with traveling
from Atlanta, Georgia to corporate offices in Charlotte, North
Carolina, through March 30, 2000, at which time you will be required to
relocate to Charlotte. These expenses include airfare, lodging, and
personal use of a vehicle. (This amount does not include the cost of
travel to locations other than your home and Charlotte for the purpose
of conducting company business, for which the company will also
reimburse you).
- - LendingTree, Inc. will pay for reasonable and documented expenses
related to your relocation to Charlotte, NC, including all closing
costs and real estate agency commissions involved with the sale of your
current residence. Such expenses must be approved by LendingTree in
advance, and the Company
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will provide the moving agency. Within the first year of your
employment, should you voluntarily terminate your employment, you agree
to reimburse the company for all expenses the Company incurred relating
to your relocation and will be required to sign an interest-free
promissory note stating such upon your start of employment.
- - Should you voluntarily terminate your employment or if you are
terminated for "Cause" as defined in the paragraph immediately
following, you will not receive the severance benefits in the paragraph
immediately following.
- - Regardless of your at-will status, should your employment be terminated
by the Company for reasons other than "Cause," herein defined as "(a)
your conviction, or the entry of a pleading of guilty or nolo
contendere by you, to any crime involving moral turpitude or any
felony, or (b) unethical business activity to include fraud,
embezzlement or the unlawful misappropriation or theft of Company
assets," the Company irrevocably promises and agrees to pay you
severance as follows:
(i) You will continue to receive, for up to one year or until you
take another full-time job, whichever comes first: (a) your
first year's bonus, and (b) compensation based on your base
salary in effect at the time of termination, payable
bimonthly. However, if you secure other employment within one
year of your termination for which your base salary, bonus or
wages is less than your base salary at the time of
termination, the Company will pay you (for the remainder of
the one year period) an amount equal to the difference between
the base salary, bonus and wages from your new employer and
your base salary as of the date of your termination from the
LendingTree. If your employment terminates after your first
anniversary of employment, you will receive only the
severance compensation described above in (i)(b) for up to one
year but shall have no further bonus entitlement as described
above in (i)(a).
(ii) If your employment is terminated by the Company for a reason
other than "Cause" prior to your first anniversary date, you
will still be entitled to options that would have otherwise
vested on that date. If your employment is terminated by the
Company for a reason other than "Cause" after your first
anniversary date, you will be entitled to a pro rata number of
options based on the number of months you have
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<PAGE> 4
worked in the year of your termination before your next
anniversary date (e.g., 6 months worked equates to a right to
50% of the shares of stock that would have otherwise vested on
your anniversary date if you had remained an employee). A
partial month's service shall be rounded up to an additional
month in calculating your pro rata entitlement. No vested
options shall be forfeited by you as a result of your
termination by the Company or for any other reason, except
your failure to exercise any vested option within 90 days
thereafter or such other time specified in the Employee Stock
Option Plan, if longer. In addition, if any options granted
hereunder do not vest immediately for any reason you shall
have at least 90 days from the date on which those options
vest in which to exercise those options. The Company
represents and acknowledges that this provision does not
violate the Employee Stock Option Plan and takes priority over
any provision in the Plan to the contrary, if any.
- - Upon the termination of your employment (regardless of the date, cause
or manner of such termination), you (or in the event of your death,
your personal representatives, heirs, legatees, successors and assigns)
shall turn over and return to the Lending Tree all property whatsoever
of the Company or its Customers in or under your possession or control,
including without limitation all Confidential Information and
LendingTree property. Any and all compensation due you at the time of
such termination may be withheld by LendingTree pending receipt of such
property, and you hereby expressly authorize such unilateral action by
LendingTree.
- - You agree that you will not, during or after your employment for a
period of five years (i) use any Confidential Information (as defined
below), except in the performance of your services hereunder, (ii)
except in the performance of your services hereunder reveal or disclose
any such Confidential Information to any person, firm, corporation or
other entity outside the Company, or (iii) except in the performance of
your services hereunder, remove or aid in the removal from the premises
of the Company any such Confidential Information or any material which
relates thereto.
"Confidential Information" means any information which: (i) is, or is
designed to be, used in the business of the LendingTree, or a Customer
or Vendor, (ii) is private or confidential and derives independent
actual or potential commercial value from not being generally known or
available to
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the public, and (iii) gives the LendingTree or a Customer or Vendor an
opportunity to obtain an advantage over competitors who do not know or
use such information, and shall include, but shall not be limited to
the Company's trade secrets as defined by N.C. Gen. Stat.
Section 66-152(l), 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.
"Customer" means any person or entity (i) who was or is a customer or
client of LendingTree during your employment, and (ii) with whom you
had dealings in the course of your employment with the Company
hereunder, at any time during the twelve (12) month period immediately
preceding the date of termination of your employment.
"Vendor" means any person or entity (i) who was or is a lending
institution or client of the LendingTree during your employment, and
(ii) with whom you had dealings in the course of your employment with
the Company hereunder, at any time during the twelve (12) month period
immediately preceding the date of termination of your employment.
- - If the Company terminates your employment for reasons other than
"Cause" before the first anniversary of your employment, you will not
be bound by the provisions of the paragraph immediately following.
- - You agree and covenant that during the term of your employment
hereunder and for a period of one (1) year [twelve (12) full calendar
months] following the effective date of the termination of your
employment, regardless of the date, cause or manner of such
termination, except as provided in the above paragraph, without the
advance written consent of LendingTree and other than in conjunction
with services rendered by you, directly or indirectly, for you or as
agent, employee, consultant, owner, partner, member, stockholder or
otherwise of others, you will not:
(i) engage in any business involving internet based or
company intranet based loan origination or loan
brokerage services or any other line of business that
is engaged in by the Company (or with respect to
which the Company has made significant preparations
to engage) as of the date of such termination of
employment;
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<PAGE> 6
(ii) call upon or in any manner contact any Customer or
Vendor located in the Restricted Territory (as
defined below) for the purpose of marketing and/or
selling or providing to such Customer products or
services the same as, or similar in nature to, the
Products (as defined below) of Lending Tree;
(iii) accept a Customer or Vendor located in the Restricted
Territory as a customer or vendor for such purposes;
or
(iv) otherwise interfere with any business relationship
between a Customer or Vendor located in the
Restricted Territory and LendingTree, or assist
another in taking such action.
- - You agree and covenant that during the term of your employment
hereunder and for a period of one (1) year [twelve (12) full calendar
months] following the effective date of the termination of your
employment, regardless of the date, cause or manner of such
termination, you will not, without the advance written consent of the
LendingTree and other than in conjunction with services rendered by
you, directly or indirectly, for you or as agent, employee,
consultant, owner, partner, member, stockholder or otherwise of others,
you will not attempt to induce, hire or otherwise employ or retain, or
knowingly permit (to the extent reasonable and within your control) any
other entity or business which employs you or in which you have any
ownership interest or are otherwise involved to attempt to induce, hire
or otherwise employ or retain, any person who was employed by the
Company as of the date of your termination.
"Products" means products or services offered by LendingTree at any
time during the term of your employment.
"Restricted Territory" means the following:
(i) any city or county, including Charlotte, Mecklenburg
County, within which you have provided services or
had Customer or Vendor contacts for LendingTree
hereunder within one year preceding your termination;
(ii) any state, including North Carolina, within which you
have provided services or had Customer or Vendor
contacts for
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<PAGE> 7
LendingTree hereunder within one year preceding your
termination; and
(iii) all other States of the United States of America
within which you have provided services or had
Customer or Vendor contacts for LendingTree
hereunder within one year preceding your termination.
You agree that the Restricted Territory is reasonable in scope given
the real and potential competition encountered by LendingTree and
reasonably expected to be encountered by LendingTree and the fact that
Vendors and Customers are located throughout the United States.
- - You agree that you will promptly, from time to time, fully inform,
disclose and assign to LendingTree all inventions, designs, documents,
marks, names, improvements, discoveries and trade secrets which pertain
or relate to the business of LendingTree, or any business incidental or
related thereto, and which in whole or in part are derived from or are
the result of your work with LendingTree, that you shall conceive, make
or come into possession of during your period of employment with
LendingTree under this letter agreement. LendingTree may, at its own
expense, prepare and prosecute applications for copyrights,
trademarks, service marks, trade names or letters patent, or may take
other actions that it deems necessary or appropriate to protect its
rights, with respect to the aforementioned items. Simultaneously with
the preparation of such applications, or the taking of such other
protective actions, you shall execute such applications and assign them
to LendingTree and shall cooperate with LendingTree in any such other
protective actions, and you shall thereafter, from time to time, as
required, execute all further papers pertaining to said inventions,
designs, documents, marks, names, improvements, discoveries, trade
secrets, applications and protective actions and shall otherwise
cooperate with LendingTree in enforcing and protecting the rights and
position of LendingTree hereunder.
- - You and LendingTree agree that any claim or controversy that arises out
of or relates to your employment, or the breach of the terms of this
letter agreement, will be settled by arbitration, utilizing procedures
followed by the American Arbitration Association in Charlotte, North
Carolina. Judgment upon award rendered in arbitration may be entered in
any Federal Court in North Carolina possessing jurisdiction of
arbitration awards.
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We are excited to have you as a member of our team and know you will find the
work challenging, exciting, and most rewarding.
Sincerely,
Douglas R. Lebda
Chief Executive Officer
Accepted:
- ------------------------------------ ---------------------------
Thomas J. Reddin Date
LENDINGTREE, INC. IS AN EQUAL OPPORTUNITY EMPLOYER.
8
<PAGE> 1
EXHIBIT 10.4
1998 STOCK OPTION PLAN
OF LENDINGTREE, INC.
1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS
LendingTree, Inc. (the "Company") hereby establishes the LendingTree,
Inc. 1998 Stock Option Plan (the "Plan"). The purpose of the Plan is to promote
the long-term growth and profitability of the Company by (i) providing key
people with incentives to improve stockholder value and to contribute to the
growth and financial success of the Company, and (ii) enabling the Company to
attract, retain and reward the best available persons for positions of
substantial responsibility.
The Plan permits the granting of stock options (including incentive
stock options qualifying under Section 422 of the Code and nonqualified stock
options) in any combination (collectively, "Options").
2. DEFINITIONS
Under the Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Affiliate" shall mean any entity, whether now or hereafter
existing, that controls, is controlled by, or is under common control with, the
Company (including, but not limited to, joint ventures, limited liability
companies, and partnerships). For this purpose, "control" shall mean ownership
of 50% or more of the voting power of the entity.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Change in Control" shall mean (i) any sale, exchange or other
disposition of all or substantially all of the Company's assets; or (ii) 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 become entitled to receive cash,
securities of the Company other than voting common stock, or securities of
another issuer.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
<PAGE> 2
(e) "Committee" shall mean the Board or committee of Board members
appointed pursuant to Section 3 of the Plan to administer the Plan.
(f) "Common Stock" shall mean shares of the Company's common stock par
value of one cent ($0.01) per share.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" of a share of the Common Stock for any purpose
on a particular date shall be determined in a manner such as the Board or the
Committee, as applicable, shall in good faith determine to be appropriate;
provided, however, that in the case of incentive stock options, the
determination of Fair Market Value shall be made by the Committee in good faith
in conformance with the Treasury Regulations under Section 422 of the Code.
(i) "Grant Agreement" shall mean a written agreement between the
Company and a grantee memorializing the terms and conditions of an Option
granted pursuant to the Plan.
(j) "Grant Date" shall mean the date on which the Committee formally
acts to grant an Option to a grantee or such other date as the Committee shall
so designate at the time of taking such formal action.
(k) "Grantee" shall mean a person granted an Option pursuant to the
Plan.
(l) "Parent" shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of "parent corporation" provided
in Section 424(e) of the Code, or any successor thereto of similar import.
(m) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange
Act on the effective date of the Plan, or any successor provision prescribing
conditions necessary to exempt the issuance of securities under the Plan (and
further transactions in such securities) from Section 16(b) of the Exchange Act.
(n) "Subsidiary" and "Subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the Code,
or any successor thereto of similar import.
<PAGE> 3
3. ADMINISTRATION
(a) Procedure. The Plan shall be administered by the Board. In the
alternative, the Board may appoint a Committee consisting of not less than two
(2) members of the Board to administer the Plan on behalf of the Board, subject
to such terms and conditions as the Board may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time, the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and, thereafter, directly administer the Plan. In
the event that the Board is the administrator of the Plan in lieu of a
Committee, the term "Committee" as used herein shall be deemed to mean the
Board.
Members of the Board or Committee who are either eligible for
awards of stock options ("Awards") or have been granted Awards may vote on any
matters affecting the administration of the Plan or the grant of Awards pursuant
to the Plan, except that no such member shall act upon the granting of an Award
to himself or herself, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board or the Committee during which
action is taken with respect to the granting of an Award to him or her.
The Committee shall meet at such times and places and upon
such notice as it may determine. A majority of the Committee shall constitute a
quorum. Any acts by the Committee may be taken at any meeting at which a quorum
is present and shall be by majority vote of those members entitled to vote.
Additionally, any acts reduced to writing or approved in writing by all of the
members of the Committee shall be valid acts of the Committee.
(b) Procedure After Registration of Common Stock. Notwithstanding
anything to the contrary contained in the provisions of subsection (a) above, in
the event that the Common Stock or any other capital stock of the Company
becomes registered under Section 12 of the Exchange Act, the members of the
Committee shall be both "Non-Employee Directors" within the meaning of Rule
16b-3 and, to the extent that the Board has resolved to take actions necessary
to enable compensation arising with respect to Awards under the Plan to
constitute performance-based compensation for purposes of Section 162(m) of the
Code, "outside directors" within the meaning of Section 162(m) of the Code.
<PAGE> 4
(c) Powers of the Committee. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Options under the Plan, prescribe Grant
Agreements evidencing such Options and establish programs for granting Options.
The Committee shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not
limited to, the authority to:
(i) determine the eligible persons to whom, and the time or
times at which, Options shall be granted;
(ii) determine the types of Options to be granted;
(iii) determine the number of shares to be covered by each
Option;
(iv) impose such terms, limitations, restrictions and
conditions upon any such Option as the Committee shall deem
appropriate;
(v) modify, extend or renew outstanding Options, accept the
surrender of outstanding Options and substitute new Options;
(vi) accelerate or otherwise change the time in which an
Option may be exercised or becomes payable and to waive or accelerate
the lapse, in whole or in part, of any restriction or condition with
respect to such Option, including, but not limited to, any restriction
or condition with respect to the vesting or exercisability of an Option
following termination of any grantee's employment; and
(vii) to establish objectives and conditions, if any, for
earning the grant of an Option and determining whether Options will be
granted after the end of a performance period.
The Committee shall have full power and authority to administer and interpret
the Plan and to adopt such rules, regulations, agreements, guidelines and
instruments for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable and to interpret same,
all within the Committee's sole and absolute discretion.
(d) Limited Liability. To the maximum extent permitted by law, no
member of the Board or Committee shall be liable for any action taken or
decision made in good faith relating to the Plan or any Option thereunder.
<PAGE> 5
(e) Indemnification. To the maximum extent permitted by law and the
Company's charter or by-laws, the members of the Board and Committee shall be
indemnified by the Company in respect of all their activities under the Plan.
(f) Effect of Committee's Decision. All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Company, its stockholders, any participants in the Plan
and any other employee of the Company, and their respective successors in
interest.
4. SHARES AVAILABLE FOR THE PLAN
Subject to adjustments as provided in SECTION 11 of the Plan, the
shares of stock that may be delivered or purchased with respect to Options
granted under the Plan, including with respect to incentive stock options
intended to qualify under Section 422 of the Code, shall not exceed an aggregate
of 150,000 shares of Common Stock of the Company. The Company shall reserve
said number of shares for Options under the Plan, subject to adjustments as
provided in SECTION 11 of the Plan. If any Option, or portion of an Option,
under the Plan expires or terminates unexercised, becomes unexercisable or is
forfeited or otherwise terminated, surrendered or canceled as to any shares
without the delivery of shares of Common Stock or other consideration, the
shares subject to such Option shall thereafter be shares with respect to which
further Options may be granted under the Plan.
5. PARTICIPATION
Participation in the Plan shall be open to all employees, directors,
officers and consultants of the Company, or of any Affiliate of the Company, as
may be selected by the Committee from time to time. Notwithstanding the
foregoing, participation in the Plan with respect to grants of incentive stock
options shall be limited to employees of the Company or of any Parent or
Subsidiary of the Company.
Options may be granted to such eligible persons and for such number of
shares of Common Stock as the Committee shall determine, subject to the
limitations in SECTION 4 of the Plan. A grant of any type of Option made in any
one year to an eligible person shall neither guarantee nor preclude a further
grant of that or any other type of Option to such person in that year or
subsequent years.
<PAGE> 6
6. VESTING
Unless earlier terminated pursuant to the provisions of the Plan or the
Grant Agreement, a portion of each Option shall become vested in accordance with
the vesting schedule specified in the Grant Agreement; provided, however, that
vesting of any Option that is time-based only (i.e., such option vests only
through the passage of time and does not contain any performance-based vesting
criteria) shall be accelerated so that the unvested portion of the Option shall
become fifty percent (50%) vested in the grantee upon any Change in Control of
the Company.
7. TERMINATION OF OPTIONS
(a) Upon Termination of Employment or Service Relationship for Reason
Other Than Death, Disability or Retirement. Unless earlier terminated pursuant
to the provisions of the Plan or the Grant Agreement, Options shall terminate in
their entirety, whether vested in whole or in part, three (3) years after the
date the Grantee is no longer employed by, nor in a service relationship with,
the Company and its affiliates for any reason other than the Grantee's death,
Disability, or Retirement. Notwithstanding the foregoing, a Grantee's Options
shall terminate in their entirety, whether vested in whole or in part, upon
termination of the employment or service relationship of the Grantee by the
Company or an affiliate for "cause". If a Grantee is a party to a written
employment agreement with the Company or an affiliate which contains a
definition of "cause", "termination for cause" or any other similar term or
phrase, whether such Grantee is terminated for "cause" pursuant to this SECTION
7(a) shall be determined according to the terms of and in a manner consistent
with the provisions of such written employment agreement. If a Grantee is not
party to such a written employment agreement with the Company or an affiliate,
then for purposes of this SECTION 7(a), "cause" shall mean (i) any substantiated
act by Grantee involving dishonesty or bad faith against the Company or an
affiliate, or any act or omission that demonstrates a lack of integrity of
Grantee with respect to the Company or an affiliate; (ii) Grantee engaging in
acts or omissions that demonstrably and materially injure the business and
affairs of the Company or an affiliate, monetarily or otherwise; (iii) breach or
threatened breach by Grantee of any non-competition or confidentiality agreement
entered into between Grantee and the Company or its affiliate; (iv) chronic use
of alcohol, drugs or other similar substances affecting Grantee's work
performance; or (v) Grantee being convicted of, or pleading guilty or no lo
contendere to, or being indicted for a felony or other crime involving theft,
fraud or moral turpitude. The good faith determination by the Committee of
whether Grantee's employment or service relationship was terminated by the
Company for 'cause' shall be final and binding for all purposes hereunder.
<PAGE> 7
(b) Upon Grantee's Death. Unless earlier terminated pursuant to the
provisions of the Plan or the Grant Agreement, upon a Grantee's death Grantee's
executor, personal representative, or the person to whom Options shall have been
transferred by will or the laws of descent and distribution, as the case may be,
may exercise all or any part of outstanding Options with respect to shares of
Common Stock as to which the Options are vested as of Grantee's date of death,
provided such exercise occurs within three (3) years after the date of Grantee's
death, but not later than the end of the stated term of the Option. If not
earlier terminated, Options shall terminate upon expiration of the 3 year period
immediately following a Grantee's death.
(c) Upon Termination of Employment or Service Relationship by Reason of
Disability or Retirement. Unless earlier terminated pursuant to the provisions
of the Plan or the Grant Agreement, in the event that a Grantee ceases, by
reason of Disability or Retirement, to be an employee of or in a service
relationship with the Company or an affiliate, the vested portion of an
outstanding Option may be exercised in whole or in part at any time within
three (3) years after the date of Disability or Retirement, as the case may be,
but not later than the end of the stated term of the Option. If not earlier
terminated, Options shall terminate upon expiration of the three-year period
immediately following a Grantee's Disability or Retirement, as the case may be.
For purposes of the Plan, "Disability" shall mean the inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months. The Committee may require such proof of Disability as the Committee in
its sole discretion deems appropriate and the Committee's determination as to
whether Grantee is Disabled shall be final and binding on all parties concerned.
For purposes of the Plan, 'Retirement' shall mean termination of employment or
service, other than for cause, on or after attainment of age 65."
8. STOCK OPTIONS
Subject to the other applicable provisions of the Plan, the Committee
may from time to time grant to eligible participants awards of incentive stock
options as that term is defined in Section 422 of the Code or nonqualified stock
options. The Option awards granted shall be subject to the following terms and
conditions.
(a) Grant of Option. The grant of an Option shall be evidenced by a
Grant Agreement, executed by the Company and the grantee, stating the number of
<PAGE> 8
shares of Common Stock subject to the Option evidenced thereby and the terms and
conditions of such Option, in such form as the Committee may from time to time
determine.
(b) Price. The price per share payable upon the exercise of each Option
("exercise price") shall be determined by the Committee; provided, however, that
in the case of incentive stock options, the exercise price shall not be less
than 100% of the Fair Market Value of the shares on the date the Option is
granted.
(c) Payment. Stock options may be exercised in whole or in part by
payment of the exercise price of the shares to be acquired in accordance with
the provisions of the Grant Agreement, or such rules and regulations as the
Committee may have prescribed, or such determinations, orders, or decisions as
the Committee may have made. Payment may be made in cash (or cash equivalents
acceptable to the Committee) or by such other means as the Committee may
prescribe. The Company may make or guarantee loans to grantees to assist
grantees in exercising Options and satisfying any related withholding tax
obligations.
If the Common Stock is registered under Section 12 of the Exchange Act,
the Committee, subject to such limitations as it may determine, may authorize
payment of the exercise price, in whole or in part, by delivery of a properly
executed exercise notice, together with irrevocable instructions: (i) to a
brokerage firm designated by the grantee and approved by the Company to deliver
promptly to the Company the aggregate amount of sale or loan proceeds to pay the
exercise price and any withholding tax obligations that may arise in connection
with the exercise, and (ii) to the Company to deliver the certificates for such
purchased shares directly to such brokerage firm.
(d) Terms of Options. The term during which each Option may be
exercised shall be determined by the Committee; provided, however, that in no
event shall an incentive stock option be exercisable more than 10 years from the
date it is granted. Prior to the exercise of the Option and delivery of the
shares certificates represented thereby, the grantee shall have none of the
rights of a stockholder with respect to any shares represented by an outstanding
Option.
(e) Restrictions on Incentive Stock Options. Incentive stock options
granted under the Plan shall comply in all respects with Code Section 422 and,
as such, shall meet the following additional requirements:
<PAGE> 9
(i) Grant Date. An incentive stock option must be granted
within 10 years of the earlier of the Plan's adoption by the Board of
Directors or approval by the Company's shareholders.
(ii) Exercise Price and Term. The exercise price of an
incentive stock option shall not be less than 100% of the Fair Market
Value of the shares on the date the Option is granted and the term of
the stock option shall not exceed ten years. Notwithstanding anything
to the contrary contained in the immediately preceding sentence, the
exercise price of any incentive stock option granted to a grantee who
owns (within the meaning of Section 422(b)(6) of the Code, after the
application of the attribution rules in Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of
shares of the Company, or its Parent or Subsidiary corporations, shall
be not less than 110% of the Fair Market Value of the Common Stock on
the grant date and the term of such Option shall not exceed five years.
(iii) Maximum Grant. The aggregate Fair Market Value (deter
mined as of the Grant Date) of shares of Common Stock with respect to
which all incentive stock options first become exercisable by any
grantee in any calendar year under this or any other plan of the
Company and its Parent and Subsidiary corporations may not exceed
$100,000 or such other amount as may be permitted from time to time
under Section 422 of the Code. To the extent that such aggregate Fair
Market Value shall exceed $100,000, or other applicable amount, such
Options shall be treated as nonqualified stock options. In such case,
the Company may designate the shares of Common Stock that are to be
treated as stock acquired pursuant to the exercise of an incentive
stock option by issuing a separate certificate for such shares and
identifying the certificate as incentive stock option shares in the
stock transfer records of the Company.
(iv) Grantee. Incentive stock options shall only be issued to
employees of the Company, or of a Parent or Subsidiary of the Company.
(v) Tandem Options Prohibited. An incentive stock option may
not be granted in tandem with a nonqualified option in such a manner
that the exercise of one affects a grantee's right to exercise the
other.
(vi) Designation. No Option shall be an incentive stock option
unless so designated by the Committee at the time of grant or in the
Grant Agreement evidencing such Option.
<PAGE> 10
(f) Other Terms and Conditions. Options may contain such other
provisions, not inconsistent with the provisions of the Plan, as the Committee
shall determine appropriate from time to time.
9. WITHHOLDING OF TAXES
The Company may require, as a condition to the exercise of any Option
under the Plan or the delivery of certificates for shares issued or payments of
cash to a grantee pursuant to the Plan or a Grant Agreement (hereinafter
collectively referred to as a "taxable event"), that the grantee pay to the
Company in cash any federal, state or local taxes of any kind required by law to
be withheld with respect to any taxable event under the Plan. The Company, to
the extent permitted or required by law, shall have the right to deduct from any
payment of any kind (including salary or bonus) otherwise due to a grantee any
federal, state or local taxes of any kind required by law to be withheld with
respect to any taxable event under the Plan, or to retain or sell without notice
a sufficient number of the shares to be issued to such grantee to cover any such
taxes.
10. TRANSFERABILITY
Except as otherwise determined by the Committee, and in any event in
the case of an incentive stock option, no Option granted under the Plan shall be
transferable by a grantee otherwise than by will or the laws of descent and
distribution. Unless otherwise determined by the Committee in accord with the
provisions of the immediately preceding sentence, an Option may be exercised
during the lifetime of the grantee, only by the grantee or, during the period
the grantee is under a legal disability, by the grantee's guardian or legal
representative.
11. ADJUSTMENTS; BUSINESS COMBINATIONS
In the event of a reclassification, recapitalization, stock split,
stock dividend, combination of shares, or other similar event, the maximum
number and kind of shares reserved for issuance or with respect to which Options
may be granted under the Plan as provided in SECTION 4 shall be adjusted to
reflect such event, and the Committee shall make such adjustments as it deems
appropriate and equitable in the number, kind and price of shares covered by
outstanding Options made under the Plan, and in any other matters which relate
to Options and which are affected by the changes in the Common Stock referred to
above.
<PAGE> 11
In the event of any proposed Change in Control, the Committee shall
take such action as it deems appropriate and equitable to effectuate the
purposes of this Plan and to protect the grantees of Options, which action may
include, but without limitation, any one or more of the following: (i)
acceleration or change of the exercise dates of any Option; (ii) arrangements
with grantees for the payment of appropriate consideration to them for the
cancellation and surrender of any Option; and (iii) in any case where equity
securities other than Common Stock of the Company are proposed to be delivered
in exchange for or with respect to Common Stock of the Company, arrangements
providing that any Option shall become one or more Options with respect to such
other equity securities.
The Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Options in recognition of unusual
or nonrecurring events (including, without limitation, the events described in
the preceding two paragraphs of this SECTION 11) affecting the Company, or the
financial statements of the Company or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
In the event the Company dissolves and liquidates (other than pursuant
to a plan of merger or reorganization), then notwithstanding any restrictions on
exercise set forth in this Plan or any Grant Agreement: (i) each grantee shall
have the right to exercise his Option at any time up to ten (10) days prior to
the effective date of such liquidation and dissolution; and (ii) the Committee
may make arrangements with the grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any Option that is
so canceled or surrendered at any time up to ten (10) days prior to the
effective date of such liquidation and dissolution. The Committee may establish
a different period (and different conditions) for such exercise, delivery,
cancellation, or surrender to avoid subjecting the grantee to liability under
Section 16(b) of the Exchange Act. Any Option not so exercised, canceled, or
surrendered shall terminate on the last day for exercise prior to such effective
date.
12. TERMINATION AND MODIFICATION OF THE PLAN
The Board, without further approval of the stockholders, may modify or
terminate the Plan or any portion thereof at any time, except that no
modification shall become effective without prior approval of the stockholders
of the Company if stockholder approval is necessary to comply with any tax or
regulatory requirement or rule of any exchange or Nasdaq System upon which the
Common Stock is listed
<PAGE> 12
or quoted; including for this purpose stockholder approval that is required to
enable the Committee to grant incentive stock options pursuant to the Plan.
The Committee shall be authorized to make minor or administrative
modifications to the Plan as well as modifications to the Plan that may be
dictated by requirements of federal or state laws applicable to the Company or
that may be authorized or made desirable by such laws. The Committee may amend
or modify the grant of any outstanding Option in any manner to the extent that
the Committee would have had the authority to make such Option as so modified or
amended.
13. NON-GUARANTEE OF EMPLOYMENT OR SERVICE
Nothing in the Plan or in any Grant Agreement thereunder shall confer
any right on an employee, director, or consultant to continue in the employ or
service of the Company or shall interfere in any way with the right of the
Company to terminate an employee or sever any service relationship of an
individual at any time.
14. TERMINATION OF EMPLOYMENT
For purposes of maintaining a grantee's continuous status as an
employee and accrual of rights under any Option granted pursuant to the Plan,
transfer of an employee among the Company and the Company's Affiliates shall not
be considered a termination of employment with the employer.
15. WRITTEN AGREEMENT
Each Grant Agreement entered into between the Company and a grantee
with respect to an Option granted under the Plan shall incorporate the terms of
this Plan and shall contain such provisions, consistent with the provisions of
the Plan, as may be established by the Committee.
16. NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive Options, the form, amount
and timing of such Options, the terms and provisions of such Options and the
agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Options under
the Plan, whether or not such persons are similarly situated.
<PAGE> 13
17. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to Options granted under the Plan will be used for general corporate
purposes.
18. LISTING AND REGISTRATION
If the Company determines that the listing, registration or
qualification upon any securities exchange or upon any listing or quotation
system established by the National Association of Securities Dealers, Inc.
("Nasdaq System") or under any law, of shares subject to any Option is necessary
or desirable as a condition of, or in connection with, the granting of same or
the issue or purchase of shares thereunder, no such Option may be exercised in
whole or in part, unless such listing, registration or qualification is effected
free of any conditions not acceptable to the Company.
19. COMPLIANCE WITH SECURITIES LAW
Common Stock shall not be issued with respect to an Option granted
under the Plan unless the exercise of such Option and the issuance and delivery
of share certificates for such Common Stock pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any national securities exchange or Nasdaq System upon
which the Common Stock may then be listed or quoted, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance to the extent such approval is sought by the Committee. All
certificates for Common Stock delivered under the Plan pursuant to any Option or
the exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange or Nasdaq System upon which such securities are then listed
or quoted, and any applicable Federal or state laws, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
20. NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS
Nothing contained in the Plan shall prevent the Company or its Parent
or Subsidiary Companies from adopting or continuing in effect other compensation
arrangements (whether such arrangements be generally applicable or applicable
only
<PAGE> 14
in specific cases) as the Committee in its discretion determines desirable,
including without limitation the granting of Options, stock awards, stock
appreciation rights or phantom stock units otherwise than under the Plan.
21. NO TRUST OR FUND CREATED
Neither the Plan nor any Option shall create or be construed to create
a trust or separate fund of any kind or a fiduciary relationship between the
Company and a grantee or any other person. To the extent that any grantee or
other person acquires a right to receive payments from the Company pursuant to
an Option, such right shall be no greater than the right of any unsecured
general creditor of the Company.
22. GOVERNING LAW
The validity, construction and effect of the Plan, of Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations
or decisions made by the Board or Committee relating to the Plan or such Grant
Agreements, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with applicable federal laws and the laws of the State of North Carolina,
without regard to its conflict of laws rules and principles.
23. PLAN SUBJECT TO CHARTER AND BY-LAWS
This Plan is subject to the Charter and By-Laws of the Company, as they
may be amended from time to time.
24. EFFECTIVE DATE; TERMINATION DATE
The Plan is effective as of the date on which the Plan is adopted by
the Board, or such other date as the Board may specify as the effective date,
subject to approval of the stockholders within twelve months before or after
such date. No Option shall be granted under the Plan after the close of business
on the day immediately preceding the tenth anniversary of the effective date of
the Plan. Subject to other applicable provisions of the Plan, all Options made
under the Plan prior to such termination of the Plan shall remain in effect
until such Options have been satisfied or terminated in accordance with the Plan
and the terms of such Options.
Date Approved by the Board: February 3, 1998
<PAGE> 15
Date Approved by the Shareholders: ___________________
<PAGE> 16
LENDING TREE, INC.
AMENDMENT NO. 1 TO
1998 STOCK OPTION PLAN
THIS AMENDMENT NO. 1 TO 1997 STOCK OPTION PLAN
("Amendment No. 1") is made and effective this 20th day of March, 1998 by the
Board of Directors of LendingTree, Inc. (the "Company").
WHEREAS, the Board of Directors previously adopted the
Company's 1998 Stock Option Plan (the "1998 Plan") on February 3, 1998;
WHEREAS, as presently written 150,000 shares of Common Stock
are available for grant under the 1998 Plan;
WHEREAS, the Board of Directors deems it advisable and in the
best interests of the Company to increase the number of shares of Common Stock
available for award under the 1998 Plan to 180,000, shares; and
WHEREAS, pursuant to Section 12 of the 1998 Plan, the terms
and provisions of the 1998 Plan may be modified or amended by the Board of
Directors.
NOW THEREFORE:
the 1998 Plan is hereby amended by deleting the first sentence of
Section 4 in its entirety and inserting the following sentence in lieu thereof:
"Subject to adjustments as provided in Section 11 of the Plan, the
shares of stock that may be delivered or purchased with respect to Options
granted under the Plan, including with respect to incentive stock options
intended to qualify under Section 422 of the Code, shall not exceed an aggregate
of 180,000 shares of Common Stock of the Company."
<PAGE> 1
Exhibit 10.5
1997 STOCK OPTION PLAN
OF CREDITSOURCE USA, INC.
(FORMERLY KNOWN AS LEWISBURG VENTURES, INC.)
1. ESTABLISHMENT, PURPOSE AND TYPES OF AWARDS
CreditSource USA, Inc. (the "Company") hereby establishes the
CreditSource USA, Inc. 1997 Stock Option Plan (the "Plan"). The purpose of the
Plan is to promote the long-term growth and profitability of the Company by (i)
providing key people with incentives to improve stockholder value and to
contribute to the growth and financial success of the Company, and (ii) enabling
the Company to attract, retain and reward the best available persons for
positions of substantial responsibility.
The Plan permits the granting of stock options (including incentive
stock options qualifying under Section 422 of the Code and nonqualified stock
options) in any combination (collectively, "Options").
2. DEFINITIONS
Under the Plan, except where !he context otherwise indicates, the
following definitions apply:
(a) "Affiliate" shall mean any entity, whether now or hereafter
existing, that controls, is controlled by, or is under common control with, the
Company (including, but not limited to, joint ventures, limited liability
companies, and partnerships). For this purpose, "control" shall mean ownership
of 50% or more of the voting power of the entity.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Change in Control" shall mean (i) any sale, exchange or other
disposition of all or substantially all of the Company's assets; or (ii) 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 become entitled to receive cash,
securities of the Company other than voting common stock, or securities of
another issuer.
<PAGE> 2
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
(e) "Committee" shall mean the Board or committee of Board members
appointed pursuant to Section 3 of the Plan to administer the Plan.
(f) "Common Stock" shall mean shares of the Company's common stock par
value of one cent ($0.01) per share.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" of a share of the Common Stock for any purpose
on a particular date shall be determined in a manner such as the Board or the
Committee as applicable, shall in good faith determine to be appropriate;
provided, however, that in the case of incentive stock options, the
determination of Fair Market Value shall be made by the Committee in good faith
in conformance with the Treasury Regulations under Section 422 of the Code.
(i) "Grant Agreement" shall mean a written agreement between the
Company and a grantee memorializing the terms and conditions of an Option
granted pursuant to the Plan.
(j) "Grant Date" shall mean the date on which the Committee formally
acts to grant an Option to a grantee or such other date as the Committee shall
so designate at the time of taking such formal action.
(k) "Grantee" shall mean a person granted an Option pursuant to the
Plan.
(l) "Parent" shall mean a corporation, whether now or hereafter
existing, within the meaning of the definition of "parent corporation" provided
in Section 424(e) of the Code, or any successor thereto of similar import.
(m) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange
Act on the effective date of the Plan, or any successor provision prescribing
conditions necessary to exempt the issuance of securities under the Plan (and
further transactions in such securities) from Section 16(b) of the Exchange Act.
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<PAGE> 3
(n) "Subsidiary" and "Subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the Code,
or any successor thereto of similar import.
3. ADMINISTRATION
(a) Procedure. The Plan shall be administered by the Board. In the
alternative, the Board may appoint a Committee consisting of not less than two
(2) members of the Board to administer the Plan on behalf of the Board, subject
to such terms and conditions as the Board may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time, the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and, thereafter, directly administer the Plan. In
the event that the Board is the administrator of the Plan in lieu of a
Committee, the term "Committee" as used herein shall be deemed to mean the
Board.
Members of the Board or Committee who are either eligible for
awards of stock options ("Awards") or have been granted Awards may vote on any
matters affecting the administration of the Plan or the grant of Awards pursuant
to the Plan, except that no such member shall act upon the granting of an Award
to himself or herself, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board or the Committee during which
action is taken with respect to the granting of an Award to him or her.
The Committee shall meet at such times and places and upon
such notice as it may determine. A majority of the Committee shall constitute a
quorum. Any acts by the Committee may be taken at any meeting at which a quorum
is present and shall be by majority vote of those members entitled to vote.
Addition ally, any acts reduced to writing or approved in writing by all of the
members of the Committee shall be valid acts of the Committee.
(b) Procedure After Registration of Common Stock. Notwithstanding
anything to the contrary contained in the provisions of subsection (a) above, in
the event that the Common Stock or any other capital stock of the Company
becomes registered under Section 12 of the Exchange Act, the members of the
Committee shall be both "Non-Employee Directors" within the meaning of Rule
16b-3 and, to
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<PAGE> 4
the extent that the Board has resolved to take actions necessary to enable
compensation arising with respect to Awards under the Plan to constitute
performance-based compensation for purposes of Section 162(m) of the Code,
"outside directors" within the meaning of Section 162(m) of the Code.
(c) Powers of the Committee. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Options under the Plan, prescribe Grant
Agreements evidencing such Options and establish programs for granting Options.
The Committee shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not
limited to, the authority to:
(i) determine the eligible persons to whom, and the time or
times at which, Options shall be granted;
(ii) determine the types of Options to be granted;
(iii) determine the number of shares to be covered by each
Option;
(iv) impose such terms, limitations, restrictions and
conditions upon any such Option as the Committee shall deem
appropriate;
(v) modify, extend or renew outstanding Options, accept the
surrender of outstanding Options and substitute new Options;
(vi) accelerate or otherwise change the time in which an
Option may be exercised or becomes payable and to waive or accelerate
the lapse, in whole or in part, of any restriction or condition,
respect to such Option, including, but not limited to, any restriction
or condition with respect to the vesting or exercisability of an Option
following termination of any grantee's employment; and
(vii) to establish objectives and conditions, if any, for
earning the grant of an Option and determining whether Options will be
granted after the end of a performance period.
The Committee shall have full power and authority to administer and interpret
the Plan and to adopt such rules, regulations, agreements, guidelines and
instruments for the administration of the Plan and for the conduct of its
business as the Committee
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<PAGE> 5
deems necessary or advisable and to interpret same, all within the Committee's
sole and absolute discretion.
(d) Limited Liability. To the maximum extent permitted by law, no
member of the Board or Committee shall be liable for any action taken or
decision made in good faith relating to the Plan or any Option thereunder.
(e) Indemnification. To the maximum extent permitted by law and the
Company's charter or by-laws, the members of the Board and Committee shall be
indemnified by the Company in respect of all their activities under the Plan.
(f) Effect of Committee's Decision. All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Company, its stockholders, any participants in the Plan
and any other employee of the Company, and their respective successors in
interest.
4. SHARES AVAILABLE FOR THE PLAN
Subject to adjustments as provided in SECTION 11 of the Plan, the
shares of stock that may be delivered or purchased with respect to Options
granted under the Plan, including with respect to incentive stock options
intended to qualify under Section 422 of the Code, shall not exceed an aggregate
300 shares of Common Stock of the Company. The Company shall reserve said number
of shares for Options under the Plan, subject to adjustments as provided in
SECTION 11 of the Plan. If any Option, or portion of an Option, under the Plan
expires or terminates unexercised, becomes unexercisable or is forfeited or
otherwise terminated, surrendered or canceled as to any shares without the
delivery of shares of Common Stock or other consideration, the shares subject to
such Option shall thereafter be shares with respect to which further Options may
be granted under the Plan.
5. PARTICIPATION
Participation in the Plan shall be open to all employees, directors,
officers and consultants of the Company, or of any Affiliate of the Company, as
may be selected by the Committee from time to time. Notwithstanding the
foregoing, participation in the Plan with respect to grants of incentive stock
options shall be limited to employees of the Company or of any Parent or
Subsidiary of the Company.
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<PAGE> 6
Options may be granted to such eligible persons and for such number of
shares of Common Stock as the Committee shall determine, subject to the
limitations in SECTION 4 of the Plan. A grant of any type of Option made in any
one year to an eligible person shall neither guarantee nor preclude a further
grant of that or any other type of Option to such person in that year or
subsequent years.
6. VESTING
Unless earlier terminated pursuant to the provisions of the Plan or the
Grant Agreement, a portion of each Option shall become vested in accordance with
the vesting schedule qualified in the Grant Agreement; provided, however, that
vesting of any Option that is time-based only (i.e., such option vests only
through the passage of time and does not contain any performance-based vesting
criteria) shall be accelerated so that the unvested portion of the Option shall
become fifty percent (50%) vested in the grantee upon any Change in Control of
the Company.
7. TERMINATION OF OPTIONS
(a) Upon Termination of Employment or Service Relationship for Reason
Other Than Death, Disability or Retirement. Unless earlier terminated pursuant
to the provisions of the Plan or the Grant Agreement, Options shall terminate in
their entirety, whether vested in whole or in part, ninety (90) days after the
date the Grantee is no longer employed by, nor in a service relationship with,
the Company and its affiliates for any reason other than the Grantee's death,
Disability, or Retirement. Notwithstanding the foregoing, a Grantee's Options
shall terminate in their entirety, whether vested in whole or in part, upon
termination, of the employment or service relationship of the Grantee by the
Company or an affiliate for "cause". If a Grantee is a party to a written
employment agreement with the Company or an affiliate which contains a
definition of "cause", "termination for cause" or any other similar term or
phrase, whether such Grantee is terminated for "cause" pursuant to this SECTION
7(a) shall be determined according to the terms of and in a manner consistent
with the provisions of such written employment agreement. If a Grantee is not
party to such a written employment agreement with the Company or an affiliate,
then, for purposes of this SECTION 7(a), "cause" shall mean (i) any
substantiated act by Grantee involving dishonesty or bad faith against the
Company or an affiliate, or any act or omission that demonstrates a lack of
integrity of Grantee with respect to the Company or an affiliate; (ii) Grantee
engaging in acts or omissions that demonstrably and materially injure the
business and affairs of the Company or an affiliate, monetarily or otherwise;
(iii) breach or threatened breach by Grantee of any
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<PAGE> 7
non-competition or confidentiality agreement entered into between Grantee and
the Company or its affiliate; (iv) chronic use of alcohol, drugs or other
similar substances affecting Grantee's work performance; or (v) Grantee being
convicted of, or pleading guilty or no lo contendere to, or being indicted for a
felony or other crime involving theft, fraud or moral turpitude. The good faith
determination by the Committee of whether Grantee's employment or service
relationship was terminated by the Company for "cause" shall be final and
binding for all purposes hereunder.
(b) Upon Grantee's Death. Unless earlier terminated pursuant to the
provisions of the Plan or the Grant Agreement, upon a Grantee's death Grantee's
executor, personal representative, or the person to whom Options shall have been
transfered by will or the laws of descent and distribution, as the case may be,
may exercise all or any part of outstanding Options with respect to shares of
Common Stock as to which the Options are vested as of Grantee's date of death,
provided such exercise occurs within one (1) year after the date of Grantee's
death, but not later than the end of the stated term of the Option. If not
earlier terminated, Options shall terminate upon expiration of the one-year
period immediately following a Grantee's death.
(c) Upon Termination of Employment or Service Relationship by Reason of
Disability or Retirement. Unless earlier terminated pursuant to the provisions
of the Plan or the Grant Agreement, in the event that a Grantee ceases, by
reason of Disability or Retirement, to be an employee of or in a service
relationship with the Company or an affiliate, the vested portion of an
outstanding Option may be exercised in whole or in part at any time within one
(1) year after the date of Disability or Retirement, as the case may be, but not
later than the end of the stated term of the Option. If not earlier terminated,
Options shall terminate upon expiration of the one-year period immediately
following a Grantee's Disability or Retirement, as the case may be. For purposes
of the Plan, "Disability" shall mean the inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to for a continuous period of not less than twelve (12) months. The
Committee may require such proof of Disability as the Committee in its sole
discretion deems appropriate and the Committee's determination as to whether
Grantee is Disabled shall be final and binding on all parties concerned. For
purposes of the Plan, "Retirement" shall mean termination of employment or
service, other than for cause, on or after attainment of age 65.
8. STOCK OPTIONS
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<PAGE> 8
Subject to the other applicable provisions of the Plan, the Committee
may from time to time grant to eligible participants awards of incentive stock
options as that term is defined in Section 422 of the Code or nonqualified stock
options. The Option awards granted shall be subject to the following terms and
conditions.
(a) Grant of Option. The grant of an Option shall be evidenced by a
Grant Agreement, executed by the Company and the grantee, stating the number of
shares of Common Stock subject to the Option evidenced thereby and the terms and
conditions of such Option, in such form as the Committee may from time to time
determine.
(b) Price. The price per share payable upon the exercise of each Option
("exercise price") shall be determined by the Committee; provided, however, that
in the case of incentive stock options, the exercise price shall not be less
than 100% of the Fair Market Value of the shares on the date the Option is
granted.
(c) Payment. Stock options may be exercised in whole or in part by
payment of the exercise price of the shares to be acquired in accordance with
the provisions of the Grant Agreement, or such rules and regulations as the
Committee may have prescribed, or such determinations, orders, or decisions as
the Committee may have made. Payment may be made in cash (or cash equivalents
acceptable to the Committee) or by such other means as the Committee may
prescribe. The Company may make or guarantee loans to grantees to assist
grantees in exercising Options and satisfying any related withholding tax
obligations.
If the Common Stock is registered under Section 12 of the Exchange Act,
the Committee, subject to such limitations as it may determine, may authorize
payment of the exercise price, in whole or in part, by delivery of a properly
executed exercise notice, together with irrevocable instructions: (i) to a
brokerage firm designated by the Committee and approved by the Company to
deliver promptly to the Company the aggregate amount of sale or loan proceeds to
pay the exercise price and any withholding tax obligations that may arise in
connection with the exercise, and (ii) to the Company to deliver the
certificates for such purchased shares directly to such brokerage firm.
(d) Terms of Options. The term during which each Option may be
exercised shall be determined by the Committee; provided, however, that in no
event shall an incentive stock option be exercisable more than 10 years from the
date it is
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<PAGE> 9
granted. Prior to the exercise of the Option and delivery of the shares
certificates represented thereby, the grantee shall have none of the rights of a
stockholder with respect to any shares represented by an outstanding Option.
(e) Restrictions on Incentive Stock Options. Incentive stock options
granted under the Plan shall comply in all respects with Code Section 422 and,
as such, shall meet the following additional requirements:
(i) Grant Date. An incentive stock option must be granted
within 10 years of the earlier of the Plan's adoption by the Board of
Directors or approval by the Company's shareholders.
(ii) Exercise Price and Term. The exercise price of an
incentive stock option shall not be less than 100% of the Fair Market
Value of the shares on the date the Option is granted and the term of
the stock option shall not exceed ten years. Notwithstanding anything
to the contrary contained in the immediately preceding sentence, the
exercise price of any incentive stock option granted to a grantee who
owns (within the meaning of Section 422(b)(6) of the Code, after the
application of the attribution rules in Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of
shares of the Company, or its Parent or Subsidiary corporations, shall
be not less than 110% of the Fair Market Value of the Common Stock on
the grant date and the term of such Option shall not exceed five years.
(iii) Maximum Grant. The aggregate Fair Market Value
(determined as of the Grant Date) of shares of Common Stock with
respect to which all incentive stock options first become exercisable
by any grantee in any calendar year under this or any other plan of the
Company and its Parent and Subsidiary corporations may not exceed
$100,000 or such other amount as may be permitted from time to time
under Section 422 of the Code. To the extent that such aggregate Fair
Market Value shall exceed $100,000, or other applicable amount, such
Options shall be treated as nonqualified stock options. In such case,
the Company may designate the shares of Common Stock that are to be
treated as stock acquired pursuant to the exercise of an incentive
stock option by issuing a separate certificate for such shares and
identifying the certificate as incentive stock option shares in the
stock transfer records of the Company.
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(iv) Grantee. Incentive stock options shall only be issued to
employees of the Company, or of a Parent or Subsidiary of the Company.
(v) Tandem Options Prohibited. An incentive stock option may
not be granted in tandem with a nonqualified option in such a manner
that the exercise of one affects a grantee's right to exercise the
other.
(vi) Designation. No Option shall be an incentive stock option
unless so designated by the Committee at the time of grant or in the
Grant Agreement evidencing such Option.
(f) Other Terms and Conditions. Options may contain such other
provisions, not inconsistent with the provisions of the Plan, as the Committee
shall determine appropriate from time to time.
9. WITHHOLDING OF TAXES
The Company may require, as a condition, to the exercise of any Option
under the Plan or the delivery of certificates for shares issued or payments of
cash to a grantee pursuant to the Plan or a Grant Agreement (hereinafter
collectively referred to as a "taxable event"), that the grantee pay to the
Company in cash any federal, state or local taxes of any kind required by law to
be withheld with respect to any taxable event under the Plan. The Company, to
the extent permitted or required by law, shall have the right to deduct from any
payment of any kind (including salary or bonus) otherwise due to a grantee any
federal, state or local taxes of any kind required by law to be withheld with
respect to any taxable event under the Plan, or to retain or sell without notice
a sufficient number of the shares to be issued to such grantee to cover any such
taxes.
10. TRANSFERABILITY
Except as otherwise determined by the Committee, and in any event in
the case of an incentive stock option, no Option granted under the Plan shall be
transferable by a grantee otherwise than by will or the laws of descent and
distribution. Unless otherwise determined by the Committee in accord with the
provisions of the immediately preceding sentence, an Option may be exercised
during the lifetime of the grantee, only by the grantee or, during the period
the grantee is under a legal disability, by the grantee's guardian or legal
representative.
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11. ADJUSTMENTS; BUSINESS COMBINATIONS
In the event of a reclassification, recapitalization, stock split,
stock dividend, combination of shares, or other similar event, the maximum
number and kind of shares reserved for issuance or with respect to which Options
may be granted under the Plan as provided in SECTION 4 shall be adjusted to
reflect such event, and the Committee shall make such adjustments as it deems
appropriate and equitable in the number, kind and price of shares covered by
outstanding Options made under the Plan, and in any other matters which relate
to Options and which are affected by the changes in the Common Stock referred to
above.
In the event of any proposed Change in Control, the Committee shall
take such action as it deems appropriate and equitable to effectuate the
purposes of this Plan and to protect the grantees of Options, which action may
include, but without limitation, any one, or more of the following: (i)
acceleration or change of the exercise dates of any Option; (ii) arrangements
with grantees for the payment of appropriate consideration to them for the
cancellation and surrender of any Option; and (iii) in any case where equity
securities other than Common Stock of the Company are proposed to be delivered
in exchange for or with respect to Common Stock of the Company, arrangements
providing that any Option shall become one or more Options with respect to such
other equity securities.
The Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Options in recognition of unusual
or nonrecurring events (including, without limitation, the events described in
the preceding two paragraphs of this SECTION 11) affecting the Company, or the
financial statements of the Company or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits intended to be made available under the Plan.
In the event the Company dissolves and liquidates (other than pursuant
to a plan of merger or reorganization), then notwithstanding any restrictions on
exercise set forth in this Plan or any Grant Agreement: (i) each grantee shall
have the right to exercise his Option at any time up to ten (10) days prior to
the effective date of such liquidation and dissolution; and (ii) the Committee
may make arrangements with the grantees for the payment of appropriate
consideration to them for the cancellation and surrender of any Option that is
so canceled or surrendered at any time up to ten (10) days prior to the
effective date of such liquidation and dissolution. The Com-
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mittee may establish a different period (and different conditions) for such
exercise, delivery, cancellation, or surrender to avoid subjecting the grantee
to liability under Section 16(b) of the Exchange Act. Any Option not so
exercised, canceled, or surrendered shall terminate on the last day for exercise
prior to such effective date.
12. TERMINATION AND MODIFICATION OF THE PLAN
The Board, without further approval of the stockholders, may modify or
terminate the Plan or any portion thereof at any time, except that no
modification shall become effective without prior approval of the stockholders
of the Company if stockholder approval is necessary to comply with any tax or
regulatory requirement or rule of any exchange or Nasdaq System upon which the
Common Stock is listed or quoted; including for this purpose stockholder
approval that is required to enable the Committee to grant incentive stock
options pursuant to the Plan.
The Committee shall be authorized to make minor or administrative
modifications to the Plan as well as modifications to the Plan that may be
dictated by requirements of federal or state laws applicable to the Company or
that may be authorized or made desirable by such laws. The Committee may amend
or modify the grant of any outstanding Option in any manner to the extent that
the Committee would have had the authority to make such Option as so modified or
amended.
13. NON-GUARANTEE OF EMPLOYMENT OR SERVICE
Nothing in the Plan or in any Grant Agreement thereunder shall confer
any right on an employee, director, or consultant to continue in the employ or
service of the Company or shall interfere in any way with the right of the
Company to terminate an employee or server any service relationship of an
individual at any time.
14. TERMINATION OF EMPLOYMENT
For purposes of maintaining a grantee's continuous status as an
employee and accrual of rights under any Option granted pursuant to the Plan,
transfer of an employee among the Company and the Company's Affiliates shall not
be considered a termination of employment with the employer.
15. WRITTEN AGREEMENT
Each Grant Agreement entered into between the Company and a grantee
with
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respect to an Option granted under the Plan shall incorporate the terms of this
Plan and shall contain such provisions, consistent with the provisions of the
Plan, as may be established by the Committee.
16. NON-UNIFORM DETERMINATIONS
The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive Options, the form, amount
and timing of such Options, the terms and provisions of such Options and the
agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or me eligible to receive, Options under
the Plan, whether or not such persons are similarly situated.
17. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to Options granted under the Plan will be used for general corporate
purposes.
18. LISTING AND REGISTRATION
If the Company determines that the listing, registration or
qualification upon any securities exchange or upon any listing or quotation
system established by the National Association of Securities Dealers, Inc.
("Nasdaq System") or under any law, of shares subject to any Option is necessary
or desirable as a condition of, or in connection with, the granting of same or
the issue or purchase of shares thereunder, no such Option may be exercised in
whole or in part, unless such listing, registration or qualification is effected
free of any conditions not acceptable to the Company.
19. COMPLIANCE WITH SECURITIES LAW
Common Stock shall not be issued with respect to an Option granted
under the Plan unless the exercise of such Option and the issuance and delivery
of share certificates for such Common Stock pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any national securities exchange or Nasdaq System upon
which the Common Stock may then be listed or quoted, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance to the extent such
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<PAGE> 14
approval is sought by the Committee. All certificates for Common Stock delivered
under the Plan pursuant to any Option or the exercise thereof shall be subject
to such stop transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations, and other requirements of
the Securities and Exchange Commission, any stock exchange or Nasdaq System upon
which such securities are then listed or quoted, and any applicable Federal or
state laws, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
20. NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS
Nothing contained in the Plan shall prevent the Company or its Parent
or Subsidiary Companies from adopting or continuing in effect other compensation
arrangements (whether such arrangements be generally applicable or applicable
only in specific cases) as the Committee in its discretion determines desirable,
including without limitation the granting of Options, stock awards, stock
appreciation rights or phantom stock units otherwise than under the Plan.
21. NO TRUST OR FUND CREATED
Neither the Plan nor any Option shall create or be construed to create
a trust or separate fund of any kind or a fiduciary relationship between the
Company and a grantee or any other person. To the extent that any grantee or
other person acquires a right to receive payments from the Company pursuant to
an Option, such right shall be no greater than the right of any unsecured
general creditor of the Company.
22. GOVERNING LAW
The validity, construction and effect of the Plan, of Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations
or decisions made by the Board or Committee relating to the Plan or such Grant
Agreements, and the rights of any and all persons having or claiming to have any
interest therein or thereunder, shall be determined exclusively in accordance
with applicable federal laws and the laws of the Commonwealth of Virginia,
without regard to its conflict of laws rules and principles.
23. PLAN SUBJECT TO CHARTER AND BY-LAWS
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This Plan is subject to the Charter and By-Laws of the Company, as they
may be amended from time to time.
24. EFFECTIVE DATE; TERMINATION DATE
The Plan is effective as of the date on which the Plan is adopted by
the Board, or such other date as the Board may specify as the effective date,
subject to approval of the stockholders within twelve months before or after
such date. No Option shall be granted under the Plan after the close of business
on the day immediately preceding the tenth anniversary of the effective date of
the Plan. Subject to other applicable provisions of the Plan, all Options made
under the Plan prior to such termination of the Plan shall remain in effect
until such Options have been satisfied or terminated in accordance with the Plan
and the terms of such Options.
Date Approved by the Board: January 15, 1997
Date Approved by the Shareholders:___________________
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Exhibit A
LENDING TREE, INC.
AMENDMENT NO. 2 TO
1997 STOCK OPTION PLAN
(formerly known as CreditSource USA, Inc.)
THIS AMENDMENT NO. 2 TO 1997 STOCK OPTION PLAN
("AMENDMENT NO.2") is made and effective this 20th day of March, 1998 by the
Board of Directors of Lending Tree, Inc. (the "COMPANY").
WHEREAS, the Board of Directors previously adopted the Com
pany's 1997 Stock Option Plan (the "1997 PLAN") on January 15, 1997;
WHEREAS, as presently written, only 300,000 shares of Common
Stock are available for award under the 1997 Plan;
WHEREAS, the Board of Directors has previously made option
grants exceeding 300,000 shares and it now desires to increase the number of
shares of Common Stock available for award under the plan to 612,949 shares; and
WHEREAS, pursuant to Section 12 of the 1997 Plan, the terms
and provisions of the 1997 Plan may be modified or amended by the Board of
Directors.
NOW THEREFORE
The 1997 Plan is hereby amended by deleting the first sentence of
Section 4 in its entirety and inserting the following sentence in lieu thereof:
"Subject to adjustments as provided in SECTION 11 of the Plan, the
shares of stock that may be delivered or purchased with respect to Options
granted under the Plan, including with respect to incentive stock options
intended to qualify under Section 422 of the Code, shall not exceed an aggregate
of 612,949 shares of Common Stock of the Company."
<PAGE> 17
CREDITSOURCE USA, INC.
AMENDMENT NO. 1 TO
1997 STOCK OPTION PLAN
THIS AMENDMENT NO. 1 TO 1997 STOCK OPTION PLAN ("AMENDMENT NO.
1") is made and effective this 10th day of October, 1997 by the Board of
Directors of CreditSource USA, Inc. (the "COMPANY").
WHEREAS, the Board of Directors previously adopted the
Company's 1997 Stock Option Plan (the "PLAN") on January 15, 1997;
WHEREAS, the Board of Directors deemed it desirable to extend
the applicable maximum exercise periods following an optionee's termination from
the Company from 90 days to three years for terminations other than death,
disability or retirement and from one year to three years for terminations
because of death, disability, or retirement;
WHEREAS, to effect such time extensions, the Plan must be
amended;
WHEREAS, the Board of Directors deemed it desirable and in the
best interest of the Company to change the governing law of the Plan from the
Commonwealth of Virginia to the State of North Carolina; and
WHEREAS, pursuant to Section 12 of the Plan the terms and
provisions of the Plan may be modified or amended by Board of Directors
approval.
NOW THEREFORE:
1. Section 7 of the Plan is deleted its entirety and the
following Section 7 shall be inserted in lieu thereof:
"7. TERMINATION OF OPTIONS
(a) Upon Termination of Employment or Service Relationship for Reason
Other Than Death, Disability or Retirement. Unless earlier terminated pursuant
to the provisions of the Plan or the Grant Agreement, Options shall terminate in
their entirety, whether vested in whole or in part, three (3) years after the
date the Grantee is no longer employed by, nor in a service relationship with,
the Company and its
<PAGE> 18
affiliates for any reason other than the Grantee's death, Disability, or
Retirement. Notwithstanding the foregoing, a Grantee's Options shall terminate
in their entirety, whether vested in whole or in part, upon termination of the
employment or service relationship of the Grantee by the Company or an affiliate
for "'cause". If a Grantee is a party to a written employment agreement with the
Company or an affiliate which contains a definition of "cause", "termination for
cause" or any other similar term or phrase, whether such Grantee is terminated
for "cause" pursuant to this SECTION 7(a) shall be determined according to the
terms of and in a manner consistent with the provisions of such written
employment agreement. If a Grantee is not party to such a written employment
agreement with the Company or an affiliate, then for purposes of this SECTION
7(a), "cause" shall mean (i) any substantiated act by Grantee involving
dishonesty or bad faith against the Company or so affiliate, or any act or
omission that demonstrates a lack of integrity of Grantee with respect to the
Company or an affiliate; (ii) Grantee engaging in acts or omissions that
demonstrably and materially injure the business and affairs of the Company or an
affiliate, monetarily or otherwise; (iii) breach or threatened breach by Grantee
of any non-competition or confidentiality agreement entered into between Grantee
and the Company or its affiliate; (iv) chronic use of alcohol, drugs or other
similar substances affecting Grantee's work performance; or (v) Grantee being
convicted of, or pleading guilty or no lo contendere to, or being indicted for a
felony or other crime involving theft, fraud or moral turpitude. The good faith
determination by the Committee of whether Grantee's employment or service
relationship was terminated by the Company for "cause" shall be final and
binding for all purposes hereunder.
(b) Upon Grantee's Death. Unless earlier terminated pursuant to the
provisions of the Plan or the Grant Agreement, upon a Grantee's death Grantee's
executor, personal representative, or the person to whom Options shall have been
transferred by will or the laws of descent and distribution, as the case may be,
may exercise all or any part of outstanding Options with respect to shares of
Common Stock as to which the Options are vested as of Grantee's date of death,
provided such exercise occurs within three (3) years after the date of Grantee's
death, but not later than the end of the stated term of the Option. If not
earlier terminated, Options Shall terminate upon expiration of the 3 year period
immediately following a Grantee's death.
(c) Upon Termination of Employment or Service Relationship by Reason of
Disability or Retirement. Unless earlier terminated pursuant to the provisions
of the Plan or the Grant Agreement, in the event that a Grantee ceases, by
reason of Disability or Retirement, to be an employee of or in a service
relationship with the
<PAGE> 19
Company or an affiliate, the vested portion of an outstanding Option may be
exercised in whole or in part at any time within three (3) years after the date
of Disability or Retirement, as the case may be, but not later than the end of
the stated term of the Option. If not earlier terminated, Options shall
terminate upon expiration of the three-year period immediately following a
Grantee's Disability or Retirement, as the case may be. For purposes of the
Plan, "Disability" shall mean the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months. The
Committee may require such proof of Disability as the Committee in its sole
discretion deems appropriate and the Committee's determination as to whether
Grantee is Disabled shall be final and binding on all parties concerned. For
purposes of the Plan, 'Retirement' shall mean termination of employment or
service, other than for cause, on or after attainment of age 65."
2. Section 22 of the Plan is deleted its entirety and the
following Section 22 shall be inserted in lieu thereof.
"22. GOVERNING LAW
The validity, construction and effect of the Plan, of Grant
Agreements entered into pursuant to the Plan, and of any rules, regulations,
determinations or decisions made by the Board or Committee relating to the Plan
or such Grant Agreements, and the rights of any and all persons having or
claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the State
of North Carolina without regard to its conflict of laws rules and principles."
This Amendment No. 1 was adopted and is effective the 10th day of October 1997.
<PAGE> 1
Exhibit 10.7
REGISTRATION RIGHTS AGREEMENT
DATED AS OF SEPTEMBER 20, 1999
AMONG
LENDINGTREE, INC.
AND
SIGNATORIES LISTED HEREIN
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
REGISTRATION RIGHTS
PAGE
Section 1.1 Demand Registration...................................... 1
Section 1.2 Piggyback Rights......................................... 4
Section 1.3 Holdback Agreement....................................... 6
Section 1.4 Registration Procedures.................................. 6
Section 1.5 Suspension of Dispositions............................... 8
Section 1.6 Registration Expenses.................................... 9
Section 1.7 Indemnification.......................................... 9
ARTICLE II
MISCELLANEOUS
Section 2.1 Notices................................................. 13
Section 2.2 Entire Agreement........................................ 13
Section 2.3 Non-Waiver.............................................. 14
Section 2.4 Transferees............................................. 14
Section 2.5 No Other Registration Rights............................ 14
Section 2.6 Severability............................................ 14
Section 2.7 Governing Law........................................... 14
Section 2.8 Construction............................................ 14
Section 2.9 Counterparts............................................ 15
Section 2.10 Amendments.............................................. 15
Section 2.11 Definitions............................................. 15
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
and effective as of September 20, 1999, by and among LendingTree, Inc., a
Delaware corporation (the "Company"), the holders of Preferred Stock or Common
Stock of the Company who are signatories hereto as of the date hereof and any
direct or indirect transferees of such holders who become parties to this
Agreement in accordance with the provisions of Section 2.4 hereof.
WHEREAS, the parties hereto desire to enter into this Agreement on the
terms set forth herein;
WHEREAS, capitalized terms used, but not otherwise defined herein shall
have the respective meanings indicated in Section 2.11 hereof.
In consideration of the premises, mutual covenants and agreements
hereinafter contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
REGISTRATION RIGHTS
Section 1.1 Demand Registration.
(a) Request for Registration.
(i) At anytime after the earlier of (A) the third
anniversary of the date hereof and (B) one hundred eighty (180) days after the
consummation by the Company of an underwritten public offering of its Common
Stock, a Preferred Holder or Preferred Holders who collectively own at least
thirty percent (30%) of the Registrable Shares held by all Preferred Holders,
may request the Company, in writing (a "Demand Request"), to effect the
registration under the Securities Act of all or part of its Registrable Shares
(a "Demand Registration").
(ii) In addition, at any time after the earlier of
(A) the third anniversary of the date hereof and (B) one hundred eighty (180)
days after the consummation by the Company of an underwritten public offering of
Common
1
<PAGE> 4
Stock, if the Company shall then be qualified to use Form S-3 promulgated under
the Securities Act or any successor form thereto, a Holder or Holders may make a
Demand Request for registration of Registrable Shares on Form S-3 or such
successor form; provided, however, that the aggregate market value (based on the
current market price) of the Registrable Shares to which such Demand Request
relates must be at least $500,000; provided further, that the Company shall not
be required to effect a Demand Registration under this Section 1.1 (a)(ii) if it
shall have effected a Demand Registration within the previous one hundred eighty
(180) days. As used in this Agreement, "Requesting Holder" means a Holder that
makes a Demand Request (regardless of whether such Demand Request is made
pursuant to Section 1.1(a)(i) or this Section 1.1(a)(ii)).
(iii) Each Demand Request shall specify the number of
Registrable Shares proposed to be sold. Subject to Section 1.1(f), the Company
shall file the Demand Registration within ninety (90) days after receiving a
Demand Request (the "Required Filing Date") and shall use all its best efforts
to cause the same to be declared effective by the SEC as promptly as practicable
after such filing; provided, however, that (A) the Company need effect only an
aggregate of three (3) Demand Registrations pursuant to Demand Requests made
pursuant to Section 1.1(a)(i); provided further, that if any Registrable Shares
requested to be registered pursuant to a Demand Request made pursuant to Section
1.1(a)(i) are excluded from the applicable Demand Registration pursuant to
Section 1.1(d) below, the Holders shall have the right, with respect to each
such exclusion, to request one (1) additional Demand Registration pursuant to
Section 1.1(a)(i).
(b) Effective Registration and Expenses. A registration will
not count as a Demand Registration until it has become effective (unless the
Requesting Holders withdraw all their Registrable Shares and the Company has
performed its obligations hereunder in all material respects, in which case such
demand will count as a Demand Registration unless the Requesting Holders pay all
Registration Expenses in connection with such withdrawn registration or unless
such withdrawal is a result of a change in circumstances occurring following the
time of the Demand Request); provided, that if, after it has become effective,
an offering of Registrable Shares pursuant to a registration is interfered with
by any stop order, injunction, or other order or requirement of the SEC or other
governmental agency or court, such registration will be deemed not to have been
effected and will not count as a Demand Registration.
2
<PAGE> 5
(c) Selection of Underwriters. The Requesting Holders of a
majority of the Registrable Shares to be registered in a Demand Registration
shall select the nationally recognized investment banking firm or firms to
manage the underwritten offering; provided, however, that such selection shall
be subject to the consent of the Company, which consent shall not be
unreasonably withheld or delayed.
(d) Priority on Demand Registrations. No securities to be sold
for the account of any Person (including the Company) other than a Requesting
Holder shall be included in a Demand Registration unless the managing
underwriter or underwriters shall advise the Company or the Requesting Holders
in writing that the inclusion of such securities will not materially and
adversely affect the price or success of the offering (a "Material Adverse
Effect"). Furthermore, in the event the managing underwriter or underwriters
shall advise the Company or the Requesting Holders that even after exclusion of
all securities of other Persons pursuant to the immediately preceding sentence,
the amount of Registrable Shares proposed to be included in such Demand
Registration by Requesting Holders is sufficiently large to cause a Material
Adverse Effect, the Registrable Shares of the Requesting Holders to be included
in such Demand Registration shall equal the number of shares which the Company
is so advised can be sold in such offering without a Material Adverse Effect and
such shares shall be allocated pro rata among the Requesting Holders on the
basis of the number of Registrable Shares requested to be included in such
registration by each such Requesting Holder.
(e) Rights of Nonrequesting Owners. Upon receipt of any Demand
Request, the Company shall promptly (but in any event within ten (10) days) give
written notice of such proposed Demand Registration to all other Holders, who
shall have the right, exercisable by written notice to the Company within twenty
(20) days of their receipt of the Company's notice, to elect to include in such
Demand Registration such portion of their Registrable Shares as they may
request. All Holders requesting to have their Registrable Shares included in a
Demand Registration in accordance with the preceding sentence shall be deemed
to be "Requesting Holders" for purposes of this Section 1.1 and Section 1.2.
(f) Deferral of Filing. The Company may defer the filing (but
not the preparation) of a registration statement required by this Section 1.1
until a date not later than one hundred twenty (120) days after the Required
Filing Date (or, if longer, one hundred twenty (120) days after the effective
date of the registration statement contemplated by clause (ii) below) if (i) at
the time the Company receives
3
<PAGE> 6
the Demand Request, the Company or any of its subsidiaries is engaged in
confidential negotiations or other confidential business activities, disclosure
of which would be required in such registration statement (but would not be
required if such registration statement were not filed), and the Board of
Directors of the Company determines in good faith that such disclosure would be
materially detrimental to the Company and its stockholders or would have a
material adverse effect on any such confidential negotiations or other
confidential business activities, or (ii) prior to receiving the Demand Request,
the Board of Directors of the Company had determined to effect a registered
underwritten public offering of the Company's securities for the Company's
account and the Company had taken substantial steps and is proceeding with
reasonable diligence to effect such offering. A deferral of the filing of a
registration statement pursuant to this Section 1.1(f) shall be lifted, and the
requested registration statement shall be filed forthwith, if, in the case of a
deferral pursuant to clause (i) of the preceding sentence, the negotiations or
other activities are disclosed or terminated, or, in the case of a deferral
pursuant to clause (ii) of the preceding sentence, the proposed registration for
the Company's account is abandoned. In order to defer the filing of a
registration statement pursuant to this Section 1.1(f), the Company shall
promptly (but in any event within ten (10) days), upon determining to seek such
deferral, deliver to each Requesting Holder a certificate signed by an executive
officer of the Company stating that the Company is deferring such filing
pursuant to this Section 1.1(f) and a general statement of the reason for such
deferral and an approximation of the anticipated delay. Within twenty (20) days
after receiving such certificate, the Holders of a majority of the Registrable
Shares held by the Requesting Holders and for which registration was previously
requested may withdraw such Demand Request by giving notice to the Company; and
if withdrawn, the Demand Request shall be deemed not to have been made for all
purposes of this Section 1.1. The Company may defer the filing of a particular
registration statement pursuant to this Section 1.1(f) only once.
Section 1.2 Piggyback Rights.
(a) Right to Piggyback. Each time the Company proposes,
following the completion by the Company of its initial underwritten public
offering of its Common Stock, to register any of its Common Stock under the
Securities Act (other than pursuant to an Excluded Registration) for sale to the
public and the registration form to be used may be used for the registration of
Registrable Shares, the Company shall give prompt written notice to the Holders
of its intention to effect such a registration (which notice shall be given not
less than twenty (20) days prior to the effective date of such registration
statement) and such notice shall offer such
4
<PAGE> 7
Holders the opportunity to have any or all of the Registrable Shares included in
such registration statement, subject to the limitations contained in Section
1.2(b). The Holders desiring to have their Registrable Shares registered under
this Section 1.2 will so advise the Company in writing within ten days after the
date of receipt of such notice from the Company. Subject to Section 1.2(b)
below, the Company shall include in such registration statement all such
Registrable Shares so requested to be included therein; provided, however, that
the Company may at any time withdraw or cease proceeding with any such
registration if it shall at the same time withdraw or cease proceeding with the
registration of all other Common Stock originally proposed to be registered.
(b) Priority on Registrations. If the managing underwriter
advises the Company in writing that the number of Shares requested to be
included in the registration by all Persons (including the Company) exceeds the
number of Shares which can be sold in such offering without having an adverse
effect on such offering, including without limitation, the price at which such
securities can be sold (the "Maximum Offering Size"), the Company will be
obligated to include in such registration only (i) first, (x) if such
registration was initiated by the Company for the sale of Shares for its own
account, any and all Shares for sale by the Company, or (y) if such registration
was initiated by any Holder or Holders pursuant to any Demand Request, any and
all Shares for sale by the Requesting Holders pursuant to such Demand Request,
(ii) second, to the extent of any remaining Shares which may be sold in such
offering without exceeding the Maximum Offering Size, each other Holder shall be
entitled to include any and all Shares held by such Holder in the registration
(pro rata based on the total number of such Shares requested to be included in
such registration by each such Holder), (iii) third, to the extent of any
remaining Shares which may be sold in such offering without exceeding the
Maximum Offering Size, pro rata among any other Shares requested to be included
pursuant to any other registration rights that may have been, or may hereafter
be, granted by the Company (on the basis of the total number of Shares that each
holder thereof has requested to be registered) and (iv) fourth, if such
registration was not initiated by the Company for the sale of Shares for its own
account, to the extent of any remaining Shares which may be sold in such
offering, without exceeding the Maximum Offering Size, any Shares for sale by
the Company. No Person may participate in any registration under this Section
1.2 unless such Person (x) agrees to sell such Person's Registrable Shares on
the basis provided in any underwriting arrangements approved by the Company and
(y) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements, and other documents required under the terms of such
underwriting arrangements.
5
<PAGE> 8
Section 1.3 Holdback Agreement. Unless the managing underwriter
otherwise consents, each of the Holders, in the case of the Company initial
underwritten public offering, and each of the Holders participating in any
subsequent underwritten registration (in the case of such registration) agrees
not to effect any public sale or private offer or distribution of any Common
Stock or Common Stock Equivalents during the ten Business Days prior to such
underwritten registration and during such time period after such underwritten
registration (not to exceed one hundred eighty (180) days in the case of the
Company's initial public offering or ninety (90) days in the case of subsequent
public offerings) (except, if applicable, as part of such underwritten
registration) as the Company and the managing underwriter may agree; provided,
however, that such period shall not exceed the period that the Company's senior
executives are bound by a similar restriction.
Section 1.4 Registration Procedures. Whenever the Holders have
requested that any Registrable Shares be registered pursuant to this Agreement,
the Company will use its commercially reasonable efforts to effect the
registration and the sale of such Registrable Shares in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the SEC a registration statement on
any appropriate form under the Securities Act with respect to such Registrable
Shares and use its commercially reasonable efforts to cause such registration
statement to become effective;
(b) prepare and file with the SEC such amendments,
post-effective amendments, and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than one hundred
eighty (180) days (or such lesser period as is necessary for the underwriters in
an underwritten offering to sell unsold allotments) and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) modify, at the request of any seller of Registrable
Shares, any information contained in such registration statement, amendment and
supplement thereto pertaining to such seller if such modification would be
required in order that
6
<PAGE> 9
the prospectus not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(d) furnish to each seller of Registrable Shares and the
underwriters of the securities being registered such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus),
and such other documents as such seller or underwriters may reasonably request
in order to facilitate the disposition of the Registrable Shares owned by such
seller or the sale of such securities by such underwriters;
(e) use its commercially reasonable efforts to register or
qualify such Registrable Shares under such other securities or blue sky laws of
such jurisdictions as the managing underwriter reasonably requests and do any
and all other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition of the Registrable Shares owned
by such seller in such jurisdictions (provided, however, that the Company will
not be required to (A) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subparagraph or
(B) consent to general service of process or taxation in any such jurisdiction);
(f) notify each seller of Registrable Shares promptly after it
shall receive notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(g) notify each seller of Registrable Shares promptly of any
request by the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information or, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the occurrence of any other event requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Shares, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
(h) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the opinion
of
7
<PAGE> 10
counsel for the Company or the managing underwriter, is required in connection
with the distribution of the Registrable Shares;
(i) enter into such agreements (including underwriting
agreements in the managing underwriter's customary form) as are customary in
connection with an underwritten registration;
(j) advise each seller of such Registrable Shares, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for such purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(k) furnish to each seller of Registrable Shares and the
underwriters of the securities being registered legal opinions of the Company's
counsel in customary form;
(l) furnish to each seller of Registrable Securities and the
under writers of the securities being registered auditors' comfort letters in
customary form; and
(m) make available the members of the Company's management, as
requested by any seller of Registrable Shares or the underwriters of the
securities being registered, to provide reasonable assistance in connection with
such registration, including but not limited to the attendance by such members
of management at road show presentations.
Section 1.5 Suspension of Dispositions. Each Holder agrees by
acquisition of any Registrable Shares that, upon receipt of any notice (a
"Suspension Notice") from the Company of the happening of any event of the kind
which, in the opinion of the Company, requires the amendment or supplement of
any prospectus, such Holder will forthwith discontinue disposition of
Registrable Shares until such Holder's receipt of the copies of the supplemented
or amended prospectus, or until it is advised in writing (the "Advice") by the
Company that the use of the prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
the prospectus, and, if so directed by the Company, such Holder will deliver to
the Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such
8
<PAGE> 11
Registrable Shares current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of registration statements set forth in Section 1.4(b) hereof
shall be extended by the number of days during the period from and including the
date of the giving of the Suspension Notice to and including the date when each
seller of Registrable Shares covered by such registration statement shall have
received the copies of the supplemented or amended prospectus or the Advice.
Section 1.6 Registration Expenses. All expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all registration and filing fees, all fees and expenses associated
with filings required to be made with the National Association of Securities
Dealers, Inc. ("NASD") (including, if applicable, the fees and expenses of any
"qualified independent underwriter" as such term is defined in Schedule E of the
By-Laws of the NASD, and of its counsel), as may be required by the rules and
regulations of the NASD, fees and expenses of compliance with securities or
"blue sky" laws (including reasonable fees and disbursements of counsel in
connection with "blue sky" qualifications of the Registrable Shares), internal
expenses of the Company, rating agency fees, printing expenses (including
expenses of printing certificates for the Registrable Shares in a form eligible
for deposit with Depository Trust Company and of printing prospectuses if the
printing of prospectuses is requested by a Holder of Registrable Shares),
messenger and delivery expenses, fees and expenses of counsel for the Company
and its independent certified public accountants (including the expenses of any
special audit or "cold comfort" letters required by or incident to such
performance), securities acts liability insurance (if the Company elects to
obtain such insurance), the fees and expenses of any special experts retained by
the Company in connection with such registration, reasonable fees and expenses
of up to one counsel for the Holders participating in the offering, and fees and
expenses of other Persons retained by the Company (all such expenses being
herein called "Registration Expenses") will be borne by the Company whether or
not any registration statement becomes effective; provided that in no event
shall Registration Expenses include any underwriting discounts or commissions
attributable to the sale of the Registrable Shares or fees and expenses of any
counsel (other than as permitted above), accountants, or other persons retained
or employed by the Holders.
Section 1.7 Indemnification.
(a) The Company agrees to indemnify and reimburse, to the
fullest extent permitted by law, each seller of Registrable Shares, and each of
its
9
<PAGE> 12
employees, advisors, agents, representatives, partners, officers, and directors
and each Person who controls such seller (within the meaning of the Securities
Act or the Exchange Act) (collectively, the "Seller Affiliates") (A) against all
losses, claims, damages, liabilities and expenses, joint or several (including,
without limitation, attorneys' fees except as limited by subparagraph (iii)
below) arising out of or caused by any untrue or alleged untrue statement of a
material fact contained in any registration statement, prospectus, or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of or
caused by any violation by the Company of any securities or blue sky laws of any
jurisdiction, (B) against any and all loss, liability, claim, damage, and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission or violation, and (C) against any and all
costs and expenses (including reasonable fees and disbursements of legal counsel
and other agents) as may be reasonably incurred in investigating, preparing, or
defending against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission or violation, to the extent
that any such expense or cost is not paid under subparagraph (A) or (B) above;
except insofar as the same are made in reliance upon and in strict conformity
with information furnished in writing to the Company by such seller or any
Seller Affiliate specifically for use therein or by such seller or any Seller
Affiliate's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Company has
furnished such seller or Seller Affiliate with a sufficient number of copies of
the same. The reimbursements required by this Section 1.7(a) will be made by
periodic payments during the course of the investigation or defense, as and when
bills are received or expenses incurred.
(b) In connection with any registration statement in which a
seller of Registrable Shares is participating, each such seller will indemnify
the Company, its directors, officers and other security holders, including
without limitation, each Person who controls the Company (within the meaning of
the Securities Act) against any losses, claims, damages, liabilities, and
expenses (including, without limitation, attorneys' fees except as limited by
subparagraph (iii) below) resulting from any untrue statement or alleged untrue
statement of a material fact contained in the registration statement,
prospectus, or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact
10
<PAGE> 13
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or alleged untrue
statement, or omission or alleged omission, is contained in any information or
affidavit so furnished in writing by such seller or any of its Seller
Affiliates specifically for use therein; provided that the obligation to
indemnify will be several, not joint and several, among such sellers of
Registrable Shares, and the liability of each such seller of Registrable Shares
will be in proportion to, and provided further that such liability will be
limited to, the net amount received by such seller from the sale of Registrable
Shares pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (A)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give such notice
shall not limit the rights of such Person) and (B) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with legal counsel
reasonably satisfactory to the indemnified party; provided, however, that any
Person entitled to indemnification hereunder shall have the right to employ
separate legal counsel and to participate in the defense of such claim, but the
fees and expenses of such legal counsel shall be at the expense of such Person
unless (X) the indemnifying party has agreed to pay such fees or expenses, (Y)
the indemnifying party shall have failed to assume (or shall not be permitted to
assume such defense pursuant to clause (B) above) the defense of such claim and
employ legal counsel reasonably satisfactory to such Person or (Z) such Person
shall have been advised by counsel that there may be legal defenses available to
it or them which are different from or additional to those available to the
indemnifying parties. If such defense is assumed, the indemnifying party will
not be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld);
provided, however, that the withholding of consent to any settlement by any
indemnified party will not be deemed to be unreasonable if such settlement (i)
does not contain an unconditional release of such indemnified party from each
Person asserting any claim or (ii) contains any admission of fault on the part
of such Indemnified Party. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one legal counsel for all parties indemnified by
such indemnifying party with respect to such claim (and one local counsel in
each jurisdiction where engagement of local counsel is necessary to defend such
claim), unless in the reasonable judgment of any indemnified party, a
11
<PAGE> 14
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 1.7(a) or Section 1.7(b) are
unavailable or insufficient (other than in accordance with the terms thereof) to
hold harmless an indemnified party in respect of any losses, claims, damages,
liabilities, or expenses (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, liabilities, or
expenses (or actions in respect thereof) in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and the indemnified party
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section 1.7(d)
were determined by pro rata allocation (even if the Holders or any underwriters
or all of them were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in this Section 1.7(d). The amount paid or payable by an indemnified
party as result of the losses, claims, damages, liabilities, or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such indemnified party in
connection with investigating or, except as provided in Section 1.7(c),
defending any such action or claim. Notwithstanding the provisions of this
Section 1.7(d), no Holder shall be required to contribute an amount greater than
the dollar amount of the proceeds received by such Holder with respect to the
sale of any Registrable Shares, less any amounts paid in indemnity. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Holders' obligations in
this Section 1.7(d) to contribute shall be several in proportion to the amount
of Registrable Shares registered by them and not joint.
12
<PAGE> 15
ARTICLE II
MISCELLANEOUS
Section 2.1 Notices. Any notice or request specifically provided for or
permitted to be given under this Agreement must be in writing. Notice may be
served in any manner, including by facsimile or nationally recognized overnight
courier service, but shall be deemed delivered and effective as of the time of
actual delivery thereof to the addressee. For purposes of notice the addresses
of the parties shall be as follows:
if to the Company, to
LendingTree, Inc.
6701 Carmel Road, Suite 205
Charlotte, North Carolina 28226
Attention: Douglas R. Lebda, Chief Executive Officer
Facsimile No.: (704) 541-1824
with copies to (which shall not constitute notice):
Brobeck, Phleger & Harrison LLP
701 Pennsylvania Avenue N.W., Suite 220
Washington, D.C. 20004
Attention: Brian D. Henderson, Esquire
Facsimile No.: (202) 220-5200
If to any Holder, at its address listed on the signature pages hereof.
Each party named above may change its address and that of its representative for
notice by the giving of notice thereof in the manner hereinabove provided.
Section 2.2 Entire Agreement. This Agreement sets forth the entire
agreement of the parties with respect to the matters set forth herein. This
Agreement supersedes and terminates any and all other agreements, oral or
written, between any of the parties with respect to such matters, including, but
not limited to that certain Amended and Restated Registration Rights Agreement
dated as of December 9, 1998, further amended as of May 25, 1999, among the
Company and securityholders
13
<PAGE> 16
of the Company listed therein, and that certain Convertible Promissory Note and
Warrant Purchase Agreement dated July 13, 1999 by and among the Company and the
Investors (defined therein) and the provisions relating to registration rights
set forth or incorporated by reference in that certain Consulting Agreement
referred to in Section 5.8 of that certain Convertible Preferred Stock Purchase
Agreement dated as of September __, 1999 among the Company and the other
signatories listed thereto.
Section 2.3 Non-Waiver. The failure of any party to insist upon strict
performance of any provision hereof shall not constitute a waiver of, or
estoppel against asserting, the right to require such performance in the future,
nor shall a waiver or estoppel with respect to a later breach of a similar
nature or otherwise.
Section 2.4 Transferees. Other than in the case of transfers to the
public pursuant to an effective Registration Statement or sales to the public
pursuant to Rule 144 promulgated under the Securities Act, each Holder may (but
shall not be required to) cause any proposed transferee of any Common Stock or
Common Stock Equivalent or any interest therein held by him or it to agree, by
execution of a counterpart signature page hereto, to take and hold such Common
Stock or Common Stock Equivalent subject to the provisions and upon the
conditions specified in this Agreement and to become a party to this Agreement.
Section 2.5 No Other Registration Rights. Without the written consent
of the holders of a majority of the outstanding shares of Preferred Stock, the
Company will not grant any other registration rights to any Person.
Section 2.6 Severability. If any provision of this Agreement is held
invalid, such invalidity shall not affect the other provisions hereof which can
be given effect without the invalid provision, and to this end the provisions of
this Agreement are intended to be and shall be deemed severable.
Section 2.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware without
regard to its provisions concerning conflicts of law.
Section 2.8 Construction. The headings in this Agreement are inserted
for convenience and identification only and are not intended to describe,
interpret, define or limit the scope, extent, or intent of this Agreement or any
provision hereof. Whenever the context requires, the gender of all words used in
this Agreement shall
14
<PAGE> 17
include the masculine, feminine, and neuter, and the number of all words shall
include the singular and the plural.
Section 2.9 Counterparts. This Agreement may be executed in any number
of counterparts with the same effect as if each of the parties had signed the
same document. All counterparts shall be construed together and shall constitute
one and the same instrument.
Section 2.10 Amendments. Any provision of this Agreement may be amended
or waived if, but only if, such amendment or waiver is in writing and is signed
by the Company and the Holders holding at least 66-2/3% of the Fully-Diluted
Common Shares held by all Holders.
Section 2.11 Definitions.
"Advice" shall have the meaning assigned in Section 1.5.
"Affiliate" shall mean, with respect to a specified Person, a Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified. The term
"control" (including the terms "controlling", "controlled by", or "under common
control with") for purposes of this definition shall mean the possession, direct
or indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Business Day" shall mean a day on which federally chartered banks located in
New York City, are not required or authorized to close and not be open for
business (other than a Saturday or Sunday) under the Legal Requirements of the
United States.
"Common Stock" shall mean the common stock, par value $.01 per share, of the
Company.
"Common Stock Equivalent" shall mean (without duplication with any other Common
Stock or Common Stock Equivalent) rights, warrants, options, convertible
securities or convertible indebtedness, exchangeable securities or exchangeable
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock, whether at the time or upon the
occurrence of some future event.
15
<PAGE> 18
"Company" shall have the meaning assigned in the introductory paragraph hereof.
"Demand Registration" shall have the meaning assigned in Section 1.1.
"Demand Request" shall have the meaning assigned in Section 1.1.
"Excluded Registration" shall mean a registration under the Securities Act of
securities registered on Form S-4 or S-8 or any similar successor form.
"Fully-Diluted Common Shares" shall mean, at any time, the then outstanding
Common Stock of the Company plus (without duplication) all Common Stock
issuable, whether at such time or upon passage of time or the occurrence of
future events, upon the exercise, conversion, or exchange of all
then-outstanding Common Stock Equivalents.
"Holder" means (i) a holder of Preferred Stock or Common Stock listed on a
signature page hereof as of the date of this Agreement and (ii) any direct or
indirect transferee of any such security holder who shall become a party to this
Agreement in accordance with Section 3.4.
"Legal Requirement" shall mean any and all applicable (a) federal, state or
local laws, whether of the United States or other jurisdiction (statutory and
administrative), rules, ordinances, codes and regulations, (b) judgments,
orders, writs, injunctions and decrees and (c) undertakings to or agreements
with any court or governmental agency.
"Material Adverse Effect" shall have the meaning assigned in Section 1.1(d).
"Maximum Offering Size" shall have the meaning assigned in Section 1.2(b).
"NASD" shall have the meaning assigned in Section 1.6.
"Person" shall mean a natural person, partnership (whether general or limited
and whether domestic or foreign), limited liability company, foreign limited
liability company, trust, estate, association, corporation, custodian, nominee
or any other individual or entity in its own or any representative capacity.
"Preferred Holder" means a Holder who owns Preferred Stock.
16
<PAGE> 19
"Preferred Stock" shall mean the Series A Convertible Preferred Stock, par value
$0.01 per share, of the Company, the Series B Convertible Preferred Stock, par
value $.01 per share, of the Company, and/or the Series D Convertible Preferred
Stock, par value $0.01 per share, of the Company.
"Registrable Shares" means any Common Stock held by a Holder (including but not
limited to any Common Stock issuable upon conversion of any of the Preferred
Stock, Common Stock issued as a dividend or other distribution with respect to
any such shares and Common Stock acquired pursuant to the exercise of preemptive
rights); provided, however, that Registrable Shares shall not include any shares
(i) the sale of which has been registered pursuant to the Securities Act and
which shares have been sold pursuant to such registration or (ii) which have
been sold to the public pursuant to Rule 144(k) (or a successor rule or
regulation), as promulgated under the Securities Act.
"Registration Expenses" shall have the meaning assigned in Section 1.6.
"Requesting Holders" shall have the meaning assigned in Section 1.1(a).
"Required Filing Date" shall have the meaning assigned in Section 1.1(a).
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Affiliates" shall have the meaning assigned in Section 1.7.
"Shares" shall mean the shares of Common Stock of the Company.
"Suspension Notice" shall have the meaning assigned in Section 1.5.
[The remainder of this page intentionally left blank]
17
<PAGE> 20
IN WITNESS WHEREOF, the parties have hereunto executed this
Registration Rights Agreement as of September 20, 1999.
LENDINGTREE, INC.
By:
------------------------------------------
Douglas R. Lebda
Chief Executive Officer
18
<PAGE> 21
CAPITAL Z FINANCIAL SERVICES
FUND II, L.P.
By: Capital Z Partners, L.P., its sole
general partner
By: Capital Z Partners, Ltd., its sole
general partner
By:
------------------------
Name:
-------------------------
Title:
-------------------------
19
<PAGE> 22
CAPITAL Z FINANCIAL SERVICES
PRIVATE FUND II, L.P.
By: Capital Z Partners, L.P., its sole
general partner
By: Capital Z Partners, Ltd., its sole
general partner
By:
------------------------
Name:
-------------------------
Title:
-------------------------
20
<PAGE> 23
GENERAL ELECTRIC CAPITAL
ASSURANCE COMPANY
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
21
<PAGE> 24
GE CAPITAL RESIDENTIAL
CONNECTIONS CORPORATION
By:
------------------------------------
Name: Theodore F. Weiland
------------------------------------
Title: Sr. Vice President
------------------------------------
22
<PAGE> 25
THE GOLDMAN SACHS GROUP, INC.
By:
------------------------------------
Name: Joseph Gleberman, V.P.
------------------------------------
Title:
------------------------------------
23
<PAGE> 26
MARSH & McLENNAN RISK
CAPITAL HOLDINGS, LTD.
By:
------------------------------------
Name: Frank Borelli
------------------------------------
Title: Chairman
------------------------------------
24
<PAGE> 27
PRICELINE.COM INCORPORATED
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
25
<PAGE> 28
STONE STREET FUND 1999, LP.
By: Stone Street 1999 Corp.
Its General Partner
By:
-------------------------------
Eve M. Gerriets, Vice President
26
<PAGE> 29
THE UNION LABOR LIFE INSURANCE
COMPANY ACTING ON BEHALF OF
ITS SEPARATE ACCOUNT P
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
27
<PAGE> 30
------------------------------------
Douglas R. Lebda
28
<PAGE> 31
------------------------------------
Tara G. Lebda
29
<PAGE> 32
------------------------------------
Robert G. Wilson
30
<PAGE> 33
PHOENIX STRATEGIC CAPITAL
CORPORATION
By:
------------------------------------
Richard H. Booth
Executive Vice President
31
<PAGE> 34
------------------------------------
William N. Shiebler
32
<PAGE> 35
------------------------------------
Jeffrey P. Hughes
33
<PAGE> 36
------------------------------------
John B. Prince
34
<PAGE> 37
JOHN B. PRINCE, ACF
COURNTEY PRINCE/U/UT/UTMA
By:
------------------------------------
John B. Prince
35
<PAGE> 38
JOHN B. PRINCE ACF
MATTHEW PRINCE U/UT/UTMA
By:
------------------------------------
John B. Prince
36
<PAGE> 39
---------------------------------------
Theodore W. Kheel
37
<PAGE> 40
---------------------------------------
W. James Tozer, Jr.
38
<PAGE> 41
---------------------------------------
Richard D. Field
39
<PAGE> 42
BARBARA A. AND PETER A.
GEORGESCU
--------------------------------------
Barbara A. Georgescu
--------------------------------------
Peter A. Georgescu
40
<PAGE> 43
GARRITY INVESTMENTS LLC
By:
----------------------------------
Norman E. Garrity, Member
41
<PAGE> 44
FINANCIAL INSTITUTION PARTNERS
II, L.P., by its General Partner, HOVDE
CAPITAL, L.L.C.
By:
----------------------------------
Eric D. Hovde
Managing Member
42
<PAGE> 45
HOVDE INVESTMENT CORP., L.L.C.
By:
-----------------------------------
Eric D. Hovde
Managing Member
43
<PAGE> 46
THE SEACRIS GROUP, LTD.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
44
<PAGE> 1
Exhibit 10.8
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN TAKEN FOR INVESTMENT,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
No. CSW-1 Right to Purchase Shares of Common
Stock of LendingTree, Inc.
October _____, 1998 ("Issue Date")
LENDINGTREE, INC.
Common Stock Warrant
LendingTree, Inc., a Delaware corporation, hereby certifies that, for
value received from Phoenix Strategic Capital Corporation ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time before 5:00 P.M., Eastern Time, five years from
the Issue Date, or such earlier time as may be specified in Section 17 hereof,
7,500 shares of fully paid and nonassessable shares of Common Stock (as defined
below).
As used herein, the terms set forth below, unless the context otherwise
requires, have the following respective meanings:
(a) "Company" shall mean and include LendingTree, Inc.
and any corporation that may succeed of assume the
obligations of the Company hereunder.
(b) "Common Stock" shall mean the Company's common stock,
$.0l par value per share.
(c) "Purchase Price" shall mean $10.00 per share.
(d) "Warrant" shall mean this Warrant and any and all
additional Warrants to be issued by the Company to
Phoenix Strategic Capital Corporation or its assigns,
as approved by the Company pursuant to the terms and
conditions set forth in Section 13 hereof.
(e) "Warrant Shares" shall mean the shares of Common
Stock that are to be issued to the holder of this
Warrant upon such holder's exercise of this Warrant.
<PAGE> 2
1. Exercise of Warrant.
1.1. Full Exercise. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription
attached hereto, duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is exercisable by the
Purchase Price.
1.2. Partial Exercise. This Warrant may be exercised in part
by surrender of the Warrant in the manner and at the place provided in
subsection 1.1 except that the amount payable by the holder on such partial
exercise shall be the amount obtained by multiplying (a) the number of shares of
Common Stock designated by the holder in the subscription attached hereto hereof
by (b) the Purchase Price. On any such partial exercise the Company, at its
expense, will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. Right to Exercise Warrant for Common Stock; Net Issuance.
(a) Notwithstanding any provisions herein to the
contrary, in lieu of exercising this Warrant for cash in the manner set forth in
Sections 1.1 and 1.2, the Warrant holder may elect to exercise the Warrant
("Warrant Right") for shares of Common Stock, the aggregate value of which
shares shall be equal to the Purchase Price multiplied by 7,500 (as each value
may be adjusted from time to time as described elsewhere herein). The Warrant
Right may be exercised by delivery to the principal office of the Company
together with notice of the Warrant holder's intention to exercise the Warrant
Right, in which event the Company shall issue to the holder a number of shares
of the Common Stock computed using the following formula:
X = Y(A-B)
----------
A
X = The number of shares of Common Stock to be issued to holder.
Y = The number of shares of Common Stock purchasable under this
Warrant.
A = The fair market value of one share of Common Stock (at the date of
such calculation).
B = Purchase Price (as adjusted to the date of such calculation).
2
<PAGE> 3
(b) For purposes of this Section 1.3, "fair market
value" per share of the Company's Common Stock shall be determined by the
Company's Board of Directors in good faith; provided, however, that in the event
the Company makes an initial public offering of its Common Stock, the fair
market value per share shall be the closing price per share to the public on the
exchange upon which the Company's Common Stock is listed, as reported in The
Wall Street Journal, on the business day immediately preceding the day upon
which the Holder exercises the Warrant.
1.4. Registration Rights.
Company acknowledges and agrees that all shares of
Common Stock purchased or acquired in connection with the exercise of this
Warrant or issued in respect of such shares of Common Stock, will be deemed to
be "Registrable Shares" as such term is defined in that certain Amended and
Restated Registration Rights Agreement dated March 5, 1998, between the Company
and those certain other parties identified therein.
1.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof, acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
2. Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
15 days thereafter, the Company, at its expense (including the payment by it of
any applicable issue taxes), will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the Purchase Price of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or other
wise.
3. Adjustment for Dividends in Other Stock, Property, Reclassification.
In case at any time or from time to time, the holders of Common Stock shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other
securities or property (other than cash) by
way of dividend,
3
<PAGE> 4
(b) any cash (excluding cash dividends payable
solely out of earnings or earned surplus of
the Company), or
(c) other or additional stock or other
securities or property (including cash) by
way of spin-off, split-up, reclassification,
recapitalization, combination of shares or
similar corporate rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided in Section 5), then
and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) that such holder would hold on the
date of such exercise if on the date hereof he had been the holder of record of
the number of shares of Common Stock called for on the face of this Warrant and
had thereafter, during the period from the date hereof to and including the date
of such exercise, retained such shares and all such other or additional stock
and other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this section 3) receivable by him as aforesaid
during such period, giving effect to all adjustments called for during such
period by Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger.
4.1. General. In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, except as otherwise
provided in Section 4.3 hereof, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
4.2. Dissolution. Except as otherwise provided in Section 4.3
hereof, in the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the holder of the Warrant after the effective date of such dissolution pursuant
to this Section 4 to a bank or trust company, as trustee for the holder of the
Warrant.
4.3. Continuation of Terms. Except as otherwise hereinafter
provided, upon any reorganization, consolidation, merger or transfer (and any
dissolution following any transfer)
4
<PAGE> 5
referred to in this Section 4, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, regardless of whether such person shall
have expressly assumed the terms of this Warrant, provided, however, that if the
holder of Warrants exercisable into at least that number of shares of Common
Stock that represents a majority in interest of the Common Stock issuable upon
exercise of all the Warrants then issued and outstanding, agree in writing to
waive the terms of this Section 4, on and as of the date of the consummation of
such reorganization, consolidation or merger effective date of dissolution, as
the case may be, the rights of the holder of this Warrant and the obligations of
the Company under this Section 4 shall terminate and the provisions of this
Section 4 shall be of no further force and effect.
5. Adjustment for Extraordinary Events. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, or (iii) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 5. The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5) be issuable on
such exercise by a fraction of which (i) the numerator is the Purchase Price
which would otherwise (but for the provisions of this Section 5) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
6. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its treasurer or chief
financial officer to compute such adjustment or readjustment in accordance with
the terms of the Warrants and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock issued of sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock outstanding or deemed to be outstand-
5
<PAGE> 6
ing, and (c) the Purchase Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
issue or sale and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to each holder of a
Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders
of any class or securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other
securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital
stock of the Company or any transfer of all or
substantially all the assets of the Company to or
consolidation or merger of the Company with or into
any other person, or any voluntary or involuntary
dissolution, liquidation or winding-up of the
Company,
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed at least 20 days prior to
the date specified in such notice on which any such action is to be taken.
8. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the holders of Warrants
representing at least a majority of the number of shares of Common Stock then
issuable upon the exercise of the warrants. No such amendment, modification or
waiver shall be effective as to this Warrant unless the terms of such amendment,
modification or waiver shall apply with the same force and effect to all of the
other Warrants then outstanding.
6
<PAGE> 7
9. Reservation of Stock Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock from time to time
issuable on the exercise of the Warrant.
10. Exchange of Warrants. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company may, by written notice to each holder of
a Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of the Warrant pursuant to Section 1, exchanging
Warrants pursuant to Section 10, and replacing Warrants pursuant to Section 11,
or any of the foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by such agent.
13. Negotiability, etc. This Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof consents
and agrees:
(a) title to this Warrant may only be transferred or
assigned with the written consent of the Company;
(b) any person in possession of this Warrant properly
endorsed, and for which consent of the Company is
evidenced in writing, is authorized to represent
himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and
delivery hereof to a bona fide purchaser hereof for
value; each prior taker or owner waives and renounces
all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such
bona fide purchaser shall acquire absolute title
hereto and to all rights represented hereby; and
7
<PAGE> 8
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
14. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered of
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
15. Government Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. This Warrant is
being executed as an instrument under seal. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
17. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., Eastern Time, on the earlier provision of (i) five years from the Issue
Date, or (ii) the effective date of the waiver exercised pursuant to Section 4.3
hereof.
LENDINGTREE, INC.
By:
-----------------------------------------
Mitchell N. York
President
8
<PAGE> 9
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: LendingTree, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder,
shares of Common Stock of LendingTree, Inc. and herewith makes payment of
$ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to , whose address is:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Dated:
--------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
-------------------------------------------
(Address)
9
<PAGE> 1
Exhibit 10.9
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN TAKEN FOR INVESTMENT,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
No. CSW-2 Right to Purchase Shares of Common
Stock of LendingTree, Inc.
December 9, 1998 ("Issue Date")
LENDINGTREE, INC.
Common Stock Warrant
LendingTree, Inc., a Delaware corporation, hereby certifies that, for
value received The Seacris Group, Ltd. ("Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company at any time or from time to
time before 5:00 P.M., Eastern Time, six years from the Issue Date, or such
earlier time as may be specified in Section 17 hereof, 50,000 shares of fully
paid and nonassessable shares of Common Stock (as defined below).
As used herein, the terms set forth below, unless the context otherwise
requires, have the following respective meanings:
(a) "Company" shall mean and include LendingTree, Inc.
and any corporation that may succeed of assume the
obligations of the Company hereunder.
(b) "Common Stock" shall mean the Company's common stock,
$.0l par value per share.
(c) "Purchase Price" shall mean $6.00 per share.
(d) "Warrant" shall mean this Warrant and any and all
additional Warrants to be issued by the Company to
The Seacris Group, Ltd. Capital Corporation or its
assigns, as approved by the Company pursuant to the
terms and conditions set forth in Section 13 hereof.
(e) "Warrant Shares" shall mean the shares of Common
Stock that are to be issued to the holder of this
Warrant upon such holder's exercise of this Warrant.
<PAGE> 2
1. Exercise of Warrant.
1.1. Full Exercise. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription
attached hereto, duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is exercisable by the
Purchase Price.
1.2. Partial Exercise. This Warrant may be exercised in part
by surrender of the Warrant in the manner and at the place provided in
subsection 1.1 except that the amount payable by the holder on such partial
exercise shall be the amount obtained by multiplying (a) the number of shares of
Common Stock designated by the holder in the subscription attached hereto hereof
by (b) the Purchase Price. On any such partial exercise the Company, at its
expense, will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. Right to Exercise Warrant for Common Stock; Net Issuance.
(a) Notwithstanding any provisions herein to the
contrary, in lieu of exercising this Warrant for cash in the manner set forth in
Sections 1.1 and 1.2, the Warrant holder may elect to exercise the Warrant
("Warrant Right") for shares of Common Stock, the aggregate value of which
shares shall be equal to the Purchase Price multiplied by 50,000 (as each value
may be adjusted from time to time as described elsewhere herein). The Warrant
Right may be exercised by delivery to the principal office of the Company
together with notice of the Warrant holder's intention to exercise the Warrant
Right, in which event the Company shall issue to the holder a number of shares
of the Common Stock computed using the following formula:
X = Y(A-B)
----------
A
X = The number of shares of Common Stock to be issued to holder.
Y = The number of shares of Common Stock purchasable under this
Warrant.
A = The fair market value of one share of Common Stock (at the date of
such calculation).
B = Purchase Price (as adjusted to the date of such calculation).
2
<PAGE> 3
(b) For purposes of this Section 1.3, "fair market
value" per share of the Company's Common Stock shall be determined by the
Company's Board of Directors in good faith; provided, however, that in the event
the Company makes an initial public offering of its Common Stock, the fair
market value per share shall be the closing price per share to the public on the
exchange upon which the Company's Common Stock is listed, as reported in The
Wall Street Journal, on the business day immediately preceding the day upon
which the Holder exercises the Warrant.
1.4. Registration Rights.
Company acknowledges and agrees that all shares of
Common Stock purchased or acquired in connection with the exercise of this
Warrant or issued in respect of such shares of Common Stock, will be deemed to
be "Registrable Shares" as such term is defined in that certain Second Amended
and Restated Registration Rights Agreement of even date herewith, 1998, by and
among Holder, the Company and those certain other parties identified therein.
1.5. Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof, acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
2. Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
15 days thereafter, the Company, at its expense (including the payment by it of
any applicable issue taxes), will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the Purchase Price of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or other
wise.
3. Adjustment for Dividends in Other Stock, Property, Reclassification.
In case at any time or from time to time, the holders of Common Stock shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend,
3
<PAGE> 4
(b) any cash (excluding cash dividends payable solely out
of earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off,
split-up, reclassification, recapitalization,
combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided in Section 5), then
and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) that such holder would hold on the
date of such exercise if on the date hereof he had been the holder of record of
the number of shares of Common Stock called for on the face of this Warrant and
had thereafter, during the period from the date hereof to and including the date
of such exercise, retained such shares and all such other or additional stock
and other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this section 3) receivable by him as aforesaid
during such period, giving effect to all adjustments called for during such
period by Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger.
4.1. General. In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, except as otherwise
provided in Section 4.3 hereof, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
4.2. Dissolution. Except as otherwise provided in Section 4.3
hereof, in the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the holder of the Warrant after the effective date of such dissolution pursuant
to this Section 4 to a bank or trust company, as trustee for the holder of the
Warrant.
4.3. Continuation of Terms. Except as otherwise hereinafter
provided, upon any reorganization, consolidation, merger or transfer (and any
dissolution following any transfer)
4
<PAGE> 5
referred to in this Section 4, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, regardless of whether such person shall
have expressly assumed the terms of this Warrant, provided, however, that if the
holder of Warrants exercisable into at least that number of shares of Common
Stock that represents a majority in interest of the Common Stock issuable upon
exercise of all the Warrants then issued and outstanding, agree in writing to
waive the terms of this Section 4, on and as of the date of the consummation of
such reorganization, consolidation or merger effective date of dissolution, as
the case may be, the rights of the holder of this Warrant and the obligations of
the Company under this Section 4 shall terminate and the provisions of this
Section 4 shall be of no further force and effect.
5. Adjustment for Extraordinary Events. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, or (iii) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 5. The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5) be issuable on
such exercise by a fraction of which (i) the numerator is the Purchase Price
which would otherwise (but for the provisions of this Section 5) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
6. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its treasurer or chief
financial officer to compute such adjustment or readjustment in accordance with
the terms of the Warrants and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock issued of sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock outstanding or deemed to be outstand-
5
<PAGE> 6
ing, and (c) the Purchase Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
issue or sale and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to each holder of a
Warrant, and will, on the written request at any time of any holder of a
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders
of any class or securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other
securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital
stock of the Company or any transfer of all or
substantially all the assets of the Company to or
consolidation or merger of the Company with or into
any other person, or any voluntary or involuntary
dissolution, liquidation or winding-up of the
Company,
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed at least 20 days prior to
the date specified in such notice on which any such action is to be taken.
8. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the holders of Warrants
representing at least a majority of the number of shares of Common Stock then
issuable upon the exercise of the warrants. No such amendment, modification or
waiver shall be effective as to this Warrant unless the terms of such amendment,
modification or waiver shall apply with the same force and effect to all of the
other Warrants then outstanding.
6
<PAGE> 7
9. Reservation of Stock Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock from time to time
issuable on the exercise of the Warrant.
10. Exchange of Warrants. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company may, by written notice to each holder of
a Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of the Warrant pursuant to Section 1, exchanging
Warrants pursuant to Section 10, and replacing Warrants pursuant to Section 11,
or any of the foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by such agent.
13. Negotiability, etc. This Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof consents
and agrees:
(a) title to this Warrant may only be transferred or
assigned with the written consent of the Company;
(b) any person in possession of this Warrant properly
endorsed, and for which consent of the Company is
evidenced in writing, is authorized to represent
himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and
delivery hereof to a bona fide purchaser hereof for
value; each prior taker or owner waives and renounces
all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such
bona fide purchaser shall acquire absolute title
hereto and to all rights represented hereby; and
7
<PAGE> 8
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
14. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered of
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
15. Government Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. This Warrant is
being executed as an instrument under seal. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
17. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., Eastern Time, on the earlier provision of (i) six years from the Issue
Date, or (ii) the effective date of the waiver exercised pursuant to Section 4.3
hereof.
LENDINGTREE, INC.
By:
----------------------------------------
Mitchell N. York
President
8
<PAGE> 9
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: LendingTree, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder,
shares of Common Stock of LendingTree, Inc. and herewith makes payment of
$ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to , whose address is:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Dated:
--------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
--------------------------------------------
(Address)
9
<PAGE> 10
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the right represented by the within Warrant to purchase
shares of Common Stock of LendingTree, Inc. to which the within
Warrant relates, and appoints Attorney to transfer such right on
the books of LendingTree, Inc. with full power of substitution in the premises.
The Holder of this Warrant and any purchaser, assignee or transferee of
such Holder acknowledge that no sale, assignment or transfer of this Warrant
will be valid without the express written approval of the Company.
Dated:
-------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Warrant)
-------------------------------------------
(Address)
Signed in the presence of:
- -------------------------------
Name:
-------------------------
[Print Name]
10
<PAGE> 1
Exhibit 10.10
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN TAKEN FOR INVESTMENT,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT.
No. CSW-3 Right to Purchase Shares of Common
Stock of LendingTree, Inc.
May 25, 1999 ("Issue Date")
LENDINGTREE, INC.
Common Stock Warrant
LendingTree, Inc., a Delaware corporation, hereby certifies that, for
value received Richard D. Field ("Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company at any time or from time to time
before 5:00 P.M., Eastern Time, five years from the Issue Date, or such earlier
time as may be specified in Section 17 hereof, 13,000 shares of fully paid and
nonassessable shares of Common Stock (as defined below).
As used herein, the terms set forth below, unless the context otherwise
requires, have the following respective meanings:
(a) "Company" shall mean and include LendingTree, Inc.
and any corporation that may succeed or assume the
obligations of the Company hereunder.
(b) "Common Stock" shall mean the Company's common stock,
$.0l par value per share.
(c) "Purchase Price" shall mean $ 10.00 per share.
(d) "Warrant" shall mean this Warrant and any and all
additional Warrants to be issued by the Company to
the holder or its
<PAGE> 2
assigns, as approved by the Company pursuant to the
terms and conditions set forth in Section 13 hereof.
(e) "Warrant Shares" shall mean the shares of Common
Stock that are to be issued to the holder of this
Warrant upon such holder's exercise of this Warrant.
1. Exercise of Warrant.
1.1 This Warrant may be exercised in full by the holder hereof
by surrender of this Warrant, with the form of subscription attached hereto,
duly executed by such holder, to the Company at its principal office,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
shares of Common Stock for which this Warrant is exercisable by the Purchase
Price.
1.2 Partial Exercise. This Warrant may be exercised in part by
surrender of the Warrant in the manner and at the place provided in subsection
1.1 except that the amount payable by the holder on such partial exercise shall
be the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription attached hereto hereof by (b) the
Purchase Price. On any such partial exercise the Company, at its expense, will
forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3 Right to Exercise Warrant for Common Stock; Net Issuance.
(a) Notwithstanding any provisions herein to the
contrary, in lieu of exercising this Warrant for cash
in the manner set forth in Sections 1.1 and 1.2, the
Warrant holder may elect to exercise the Warrant
("Warrant Right") for shares of Common Stock, the
aggregate value of which shares shall be equal to the
Purchase Price multiplied by 13,000 (as each value
may be adjusted from time to time as described
elsewhere herein). The Warrant Right may be exercised
by delivery to the principal office of the Company
together with notice of the Warrant
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<PAGE> 3
holder's intention to exercise the Warrant Right, in
which event the Company shall issue to the holder a
number of shares of the Common Stock computed using
the following formula:
X = Y(A-B)
----------
A
X = The number of shares of Common Stock to be
issued to holder.
Y = The number of shares of Common Stock
purchasable under this Warrant.
A = The fair market value of one share of
Common Stock (at the date of such
calculation).
B = Purchase Price (as adjusted to the date of
such calculation).
(b) For purposes of this Section 1.3, "fair market value"
per share of the Company's Common Stock shall be
determined by the Company's Board of Directors in
good faith; provided, how ever, that in the event the
Company makes an initial public offering of its
Common Stock, the fair market value per share shall
be the closing price per share to the public on the
exchange upon which the Company's Common Stock is
listed, as reported in The Wall Street Journal, on
the business day immediately preceding the day upon
which the holder exercises the Warrant.
1.4 Registration Rights.
Company acknowledges and agrees that all shares of Common
Stock purchased or acquired in connection with the exercise of this Warrant or
issued in respect of such shares of Common Stock, will be deemed to be
"Registrable Shares" as such term is defined in that certain Amended and
Restated Registration Rights Agreement dated December 9, 1998, as amended by
Amendment No. 1 thereto, by and among Holder, the Company and those certain
other parties identified therein.
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<PAGE> 4
1.5 Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof, acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
2. Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
15 days thereafter, the Company, at its expense (including the payment by it of
any applicable issue taxes), will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the Purchase Price of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Dividends in Other Stock, Property, Reclassification.
In case at any time or from time to time, the holders of Common Stock shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend,
(b) any cash (excluding cash dividends payable solely out
of earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off,
split-up, reclassification, recapitalization,
combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided in Section 5), then
and in
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<PAGE> 5
each such case the holder of this Warrant, on the exercise hereof as provided in
Section 1, shall be entitled to receive the amount of stock and other securities
and property (including cash in the cases referred to in subdivisions (b) and
(c) of this Section 3) that such holder would hold on the date of such exercise
if on the date hereof he had been the holder of record of the number of shares
of Common Stock called for on the face of this Warrant and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and all such other or additional stock and other
securities and property (including cash in the cases referred to in subdivisions
(b) and (c) of this section 3) receivable by him as aforesaid during such
period, giving effect to all adjustments called for during such period by
Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger.
4.1 General. In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, except as otherwise
provided in Section 4.3 hereof, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
4.2 Dissolution. Except as otherwise provided in Section 4.3
hereof, in the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the holder of the Warrant after the effective date of such dissolution pursuant
to this Section 4 to a bank or trust company, as trustee for the holder of the
Warrant.
4.3 Continuation of Terms. Except as otherwise hereinafter
provided, upon any reorganization, consolidation, merger or transfer (and any
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<PAGE> 6
dissolution following any transfer) referred to in this Section 4, this Warrant
shall continue in full force and effect and the terms hereof shall be applicable
to the shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, regardless of whether such person shall have expressly assumed the
terms of this Warrant, provided, however, that if the holder of Warrants
exercisable into at least that number of shares of Common Stock that represents
a majority in interest of the Common Stock issuable upon exercise of all the
Warrants then issued and outstanding, agree in writing to waive the terms of
this Section 4, on and as of the date of the consummation of such
reorganization, consolidation or merger effective date of dissolution, as the
case may be, the rights of the holder of this Warrant and the obligations of the
Company under this Section 4 shall terminate and the provisions of this Section
4 shall be of no further force and effect.
5. Adjustment for Extraordinary Events. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, or (iii) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 5. The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5) be issuable on
such exercise by a fraction of which (i) the numerator is the Purchase Price
which would otherwise (but for the provisions of this Section 5) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
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<PAGE> 7
6. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the War
rants, the Company at its expense will promptly cause its treasurer or chief
financial officer to compute such adjustment or readjustment in accordance with
the terms of the Warrants and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock issued or sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to each holder of a Warrant, and
will, on the written request at any time of any holder of a Warrant, furnish to
such holder a like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders
of any class or securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other
securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital
stock of the Company or any transfer of all or
substantially all the assets of the Company to or
consolidation or merger of the Company with or into
any other person, or any voluntary or involuntary
dissolution, liquidation or winding-up of the
Company,
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and,
stating the amount and character of such dividend, distribution or right, (ii)
the date on which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be
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<PAGE> 8
fixed, as of which the holders of record of Common Stock (or Other Securities)
shall be entitled to exchange their shares of Common Stock (or Other Securities)
for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least 20 days prior to the date
specified in such notice on which any such action is to be taken.
8. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the holders of Warrants
representing at least a majority of the number of shares of Common Stock then
issuable upon the exercise of the Warrants. No such amendment, modification or
waiver shall be effective as to this Warrant unless the terms of such amendment,
modification or waiver shall apply with the same force and effect to all of the
other Warrants then outstanding.
9. Reservation of Stock Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock from time to time
issuable on the exercise of the Warrant.
10. Exchange of Warrants. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
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<PAGE> 9
12. Warrant Agent. The Company may, by written notice to each holder of
a Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of the Warrant pursuant to Section 1, exchanging War
rants pursuant to Section 10, and replacing Warrants pursuant to Section 11, or
any of the foregoing, and thereafter any such issuance, exchange or replacement,
as the case may be, shall be made at such office by such agent.
13. Negotiability, etc. This Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof consents
and agrees:
(a) title to this Warrant may only be transferred or
assigned with the written consent of the Company;
(b) any person in possession of this Warrant properly
endorsed, and for which consent of the Company is
evidenced in writing, is authorized to represent
himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and
delivery hereof to a bona fide purchaser hereof for
value; each prior taker or owner waives and renounces
all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such
bona fide purchaser shall acquire absolute title
hereto and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
14. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
15. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
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<PAGE> 10
16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. This Warrant is
being executed as an instrument under seal. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
17. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., Eastern Time, on the earlier provision of (i) five years from the Issue
Date, or (ii) the effective date of the waiver exercised pursuant to Section 4.3
hereof.
LENDINGTREE, INC.
By: _______________________
Mitchell N. York
President
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<PAGE> 11
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: LendingTree, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, __________
shares of Common Stock of LendingTree, Inc. and herewith makes payment of
$__________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to ____________ whose address is:
_______________________________________________________________________________
_______________________________________________________________________________
Dated:
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
___________________________________________
(Address)
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<PAGE> 12
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________ the right represented by the within Warrant to
purchase __________ shares of Common Stock of LendingTree, Inc. to which the
within Warrant relates, and appoints _____________ Attorney to transfer such
right on the books of LendingTree, Inc. with full power of substitution in the
premises.
The holder of this Warrant and any purchaser, assignee or transferee of
such holder acknowledge that no sale, assignment or transfer of this Warrant
will be valid without the express written approval of the Company.
Dated:
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
Signed in the presence of:
________________________________
Name: __________________________
[Print Name]
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<PAGE> 1
Exhibit 10.11
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN TAKEN FOR INVESTMENT,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT.
No. CSW-4 Right to Purchase Shares of Common Stock of
LendingTree, Inc.
May 25, 1999 ("Issue Date")
LENDINGTREE, INC.
Common Stock Warrant
LendingTree, Inc., a Delaware corporation, hereby certifies that, for
value received W. James Tozer, Jr. ("Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company at any time or from time to time
before 5:00 P.M., Eastern Time, five years from the Issue Date, or such earlier
time as may be specified in Section 17 hereof, 13,000 shares of fully paid and
nonassessable shares of Common Stock (as defined below).
As used herein, the terms set forth below, unless the context otherwise
requires, have the following respective meanings:
(a) "Company" shall mean and include LendingTree, Inc.
and any corporation that may succeed or assume the
obligations of the Company hereunder.
(b) "Common Stock" shall mean the Company's common stock,
$.0l par value per share.
(c) "Purchase Price" shall mean $10.00 per share.
(d) "Warrant" shall mean this Warrant and any and all
additional Warrants to be issued by the Company to
the holder or its assigns, as approved by the Company
pursuant to the terms and conditions set forth in
Section 13 hereof.
<PAGE> 2
(e) "Warrant Shares" shall mean the shares of Common
Stock that are to be issued to the holder of this
Warrant upon such holder's exercise of this Warrant.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription
attached hereto, duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is exercisable by the
Purchase Price.
1.2 Partial Exercise. This Warrant may be exercised in part by
surrender of the Warrant in the manner and at the place provided in subsection
1.1 except that the amount payable by the holder on such partial exercise shall
be the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription attached hereto hereof by (b) the
Purchase Price. On any such partial exercise the Company, at its expense, will
forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3 Right to Exercise Warrant for Common Stock, Net Issuance.
(a) Notwithstanding any provisions herein to the
contrary, in lieu of exercising this Warrant for cash in the manner set forth in
Sections 1.1and 1.2, the Warrant holder may elect to exercise the Warrant
("Warrant Right") for shares of Common Stock, the aggregate value of which
shares shall be equal to the Purchase Price multiplied by 13,000 (as each value
may be adjusted from time to time as described elsewhere herein). The Warrant
Right may be exercised by delivery to the principal office of the Company
together with notice of the Warrant holder's intention to exercise the Warrant
Right, in which event the Company shall issue to the holder a number of shares
of the Common Stock computed using the following formula:
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<PAGE> 3
X = Y(A-B)
---------
A
X = The number of shares of Common Stock to be
issued to holder.
Y = The number of shares of Common Stock
purchasable under this Warrant.
A = The fair market value of one share of
Common Stock (at the date of such
calculation).
B = Purchase Price (as adjusted to the date of
such calculation).
(b) For purposes of this Section 1.3, "fair market
value" per share of the Company's Common Stock shall be determined by the
Company's Board of Directors in good faith; provided, however, that in the event
the Company makes an initial public offering of its Common Stock, the fair
market value per share shall be the closing price per share to the public on the
exchange upon which the Company's Common Stock is listed, as reported in The
Wall Street Journal, on the business day immediately preceding the day upon
which the holder exercises the Warrant.
1.4 Registration Rights.
Company acknowledges and agrees that all shares of
Common Stock purchased or acquired in connection with the exercise of this
Warrant or issued in respect of such shares of Common Stock, will be deemed to
be "Registrable Shares" as such term is defined in that certain Amended and
Restated Registration Rights Agreement dated December 9, 1998, as amended by
Amendment No.1 thereto, by and among Holder, the Company and those certain other
parties identified therein.
1.5 Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof, acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such
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<PAGE> 4
failure shall not affect the continuing obligation of the Company to afford to
such holder any such rights.
2. Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
15 days thereafter, the Company, at its expense (including the payment by it of
any applicable issue taxes), will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the Purchase Price of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Dividends in Other Stock. Property. Reclassification.
In case at any time or from time to time, the holders of Common Stock shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend,
(b) any cash (excluding cash dividends payable solely
out of earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided in Section 5), then
and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) that such holder would hold on the
date of such exercise if on the date hereof he had been the holder of record of
the number of shares of Common Stock called for on the face of this Warrant and
had thereafter, during the period from the
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<PAGE> 5
date hereof to and including the date of such exercise, retained such shares and
all such other or additional stock and other securities and property (including
cash in the cases referred to in subdivisions (b) and (c) of this section 3)
receivable by him as aforesaid during such period, giving effect to all
adjustments called for during such period by Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger.
4.1 General. In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, except as otherwise
provided in Section 4.3 hereof, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
4.2 Dissolution. Except as otherwise provided in Section 4.3
hereof, in the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the holder of the Warrant after the effective date of such dissolution pursuant
to this Section 4 to a bank or trust company, as trustee for the holder of the
Warrant.
4.3 Continuation of Terms. Except as otherwise hereinafter
provided, upon any reorganization, consolidation, merger or transfer (and any
dissolution following any transfer) referred to in this Section 4, this Warrant
shall continue in full force and effect and the terms hereof shall be applicable
to the shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in
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<PAGE> 6
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, regardless of whether such person shall
have expressly assumed the terms of this Warrant, provided, however, that if the
holder of Warrants exercisable into at least that number of shares of Common
Stock that represents a majority in interest of the Common Stock issuable upon
exercise of all the Warrants then issued and outstanding, agree in writing to
waive the terms of this Section 4, on and as of the date of the consummation of
such reorganization, consolidation or merger effective date of dissolution, as
the case may be, the rights of the holder of this Warrant and the obligations of
the Company under this Section 4 shall terminate and the provisions of this
Section 4 shall be of no further force and effect.
5. Adjustment for Extraordinary Events. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, or (iii) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 5. The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5) be issuable on
such exercise by a fraction of which (i) the numerator is the Purchase Price
which would otherwise but for the provisions of this Section 5) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
6. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its treasurer or chief
financial officer to compute such adjustment or readjustment in accordance with
the terms of the Warrants and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based,
6
<PAGE> 7
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock issued or sold or deemed to
have been issued or sold, (b) the number of shares of Common Stock outstanding
or deemed to be outstanding, and (c) the Purchase Price and the number of shares
of Common Stock to be received upon exercise of this Warrant, in effect
immediately prior to such issue or sale and as adjusted and readjusted as
provided in this Warrant. The Company will forthwith mail a copy of each such
certificate to each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant, furnish to such holder a like certificate
setting forth the Purchase Price at the time in effect and showing how it was
calculated.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the
holders of any class or securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or any
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up, and (iii) the amount and
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed
7
<PAGE> 8
issue or grant is to be offered or made. Such notice shall be mailed at least 20
days prior to the date specified in such notice on which any such action is to
be taken.
8. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the holders of Warrants
representing at least a majority of the number of shares of Common Stock then
issuable upon the exercise of the Warrants. No such amendment, modification or
waiver shall be effective as to this Warrant unless the terms of such amendment,
modification or waiver shall apply with the same force and effect to all of the
other Warrants then outstanding.
9. Reservation of Stock Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock from time to time
issuable on the exercise of the Warrant.
10. Exchange of Warrants. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company may, by written notice to each holder of
a Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of the Warrant pursuant to Section 1, exchanging
Warrants pursuant to Section 10, and replacing Warrants pursuant to Section 11,
or any of the foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by such agent.
8
<PAGE> 9
13. Negotiability, etc. This Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof consents
and agrees:
(a) title to this Warrant may only be transferred or
assigned with the written consent of the Company;
(b) any person in possession of this Warrant properly
endorsed, and for which consent of the Company is evidenced in writing, is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and delivery hereof to a bona fide
purchaser hereof for value; each prior taker or owner waives and renounces all
of his equities or rights in this Warrant in favor of each such bona fide
purchaser, and each such bona fide purchaser shall acquire absolute title hereto
and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of
the Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
14. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
15. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. This Warrant is
being executed as an instrument under seal. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
9
<PAGE> 10
17. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., Eastern Time, on the earlier provision of (i) five years from the Issue
Date, or (ii) the effective date of the waiver exercised pursuant to Section 4.3
hereof.
LENDINGTREE, INC
By:
---------------------------------
Mitchell N. York
President
10
<PAGE> 11
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: LendingTree, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, _____ shares of
Common Stock of LendingTree, Inc. and herewith makes payment of $_________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to ___________________, whose address is:
________________________________________________________________________________
_______________________________________________________________________________
Dated:
_____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
11
<PAGE> 12
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________ the right represented by the within Warrant to
purchase ___________ shares of Common Stock of LendingTree, Inc. to which the
within Warrant relates, and appoints __________ Attorney to transfer such right
on the books of LendingTree, Inc. with full power of substitution in the
premises.
The holder of this Warrant and any purchaser, assignee or transferee of
such holder acknowledge that no sale, assignment or transfer of this Warrant
will be valid without the express written approval of the Company.
Dated:
_____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
_____________________________________________
(Address)
Signed in the presence of:
______________________________
Name:_________________________
[Print Name]
12
<PAGE> 13
AMENDMENT
TO
CONVERTIBLE AND PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
This Amendment to Convertible and Preferred Stock and Warrant
Purchase Agreement (this "Amendment") is being entered into as of the 20th day
of September, 1999, by and among W. James Tozer, Jr. ("Tozer"), Richard Field
("Field") and LendingTree, Inc., a Delaware corporation (the "Company").
WHEREAS, Tozer, Field and the Company have entered into that
certain Convertible Preferred Stock and Warrant Purchase Agreement dated as of
May 25, 1999 (the "Agreement"); and
WHEREAS, the parties desire to amend certain provisions of the
Agreement, as provided herein;
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Revision of Post-Closing Covenants of the Company. The provisions of
Article 7 to the Agreement are hereby deleted in their entirety.
2. No Other Amendments; Agreement Remain in Effect. Except as expressly
amended by this Amendment, the Agreement shall remain in full force and
effect in the form in which it existed immediately prior to the
execution and delivery of this Amendment.
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Amendment as of the date first above written.
LENDINGTREE, INC.
By:
--------------------------------
Douglas R. Lebda
Chief Executive Officer
-----------------------------------
W. James Tozer
-----------------------------------
Richard D. Field
2
<PAGE> 1
Exhibit 10.12
Schedule to Form of Common Stock Warrant
Documents Omitted
<TABLE>
<CAPTION>
Holder Number of Shares
------ ----------------
<S> <C>
1. Hovde Financial Institution Partners II, L.P. 7,200 shares
2. Hovde Investment Corp., L.L.C. 4,800 shares
3. Norman Garrity 12,000 shares
4. William N. Schiebler 6,000 shares
5. Barbara A. and Peter A. Georgescu 6,000 shares
6. John B. Prince 3,600 shares
7. John B. Prince, ACF Courtney Prince U/UT/UTMA 1,200 shares
8. John B. Prince, ACF Matthew B. Prince U/UT/UTMA 1,200 shares
</TABLE>
<PAGE> 2
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN TAKEN FOR INVESTMENT,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
No. CSW-[______] Right to Purchase Shares of Common
Stock of LendingTree, Inc.
July 13, 1999 ("Issue Date")
LENDINGTREE, INC.
Common Stock Warrant
LendingTree, Inc., a Delaware corporation, hereby certifies that, for
value received _________________ ("Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company at any time or from time to time
before 5:00 P.M., Eastern Time, five years from the Issue Date, or such earlier
time as may be specified in Section 17 hereof, shares of fully paid and
nonassessable shares of Common Stock (as defined below).
As used herein, the terms set forth below, unless the context otherwise
requires, have the following respective meanings:
(a) "Company" shall mean and include LendingTree, Inc.
and any corporation that may succeed or assume the
obligations of the Company hereunder.
(b) "Common Stock" shall mean the Company's common stock,
$.0l par value per share.
(c) "Purchase Price" shall mean $10.00 per share.
(d) "Warrant" shall mean this Warrant and any and all
additional Warrants to be issued by the Company to
the holder or its assigns, as approved by the Company
pursuant to the terms and conditions set forth in
Section 13 hereof.
<PAGE> 3
(e) "Warrant Shares" shall mean the shares of Common
Stock that are to be issued to the holder of this
Warrant upon such holder's exercise of this Warrant.
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription
attached hereto, duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is exercisable by the
Purchase Price.
1.2 Partial Exercise. This Warrant may be exercised in part by
surrender of the Warrant in the manner and at the place provided in subsection
1.1 except that the amount payable by the holder on such partial exercise shall
be the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription attached hereto hereof by (b) the
Purchase Price. On any such partial exercise the Company, at its expense, will
forthwith issue and deliver to or upon the order of the holder hereof a new
Warrant or Warrants of like tenor, in the name of the holder hereof or as such
holder (upon payment by such holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3 Right to Exercise Warrant for Common Stock. Net Issuance.
(a) Notwithstanding any provisions herein to the
contrary, in lieu of exercising this Warrant for cash
in the manner set forth in Sections 1.1 and 1.2, the
Warrant holder may elect to exercise the Warrant
("Warrant Right") for shares of Common Stock, the
aggregate value of which shares shall be equal to the
Purchase Price multiplied by [ ] (as each value may
be adjusted from time to time as described elsewhere
herein). The Warrant Right may be exercised by
delivery to the principal office of the Company
together with notice of the Warrant holder's
intention to exercise the Warrant Right, in which
event the Company shall issue to the holder a number
of
2
<PAGE> 4
shares of the Common Stock computed using the
following formula:
X = Y(A-B)
----------
A
X = The number of shares of Common Stock to be issued
to holder.
Y = The number of shares of Common Stock purchasable
under this Warrant.
A = The fair market value of one share of Common Stock
(at the date of such calculation).
B = Purchase Price (as adjusted to the date of such
calculation).
(b) For purposes of this Section 1.3, "fair market value"
per share of the Company's Common Stock shall be
determined by the Company's Board of Directors in
good faith; provided, however, that in the event the
Company makes an initial public offering of its
Common Stock, the fair market value per share shall
be the closing price per share to the public on the
exchange upon which the Company's Common Stock is
listed, as reported in The Wall Street Journal, on
the business day immediately preceding the day upon
which the holder exercises the Warrant.
1.4 Registration Rights.
Company acknowledges and agrees that all shares of
Common Stock purchased or acquired in connection with the exercise of this
Warrant or issued in respect of such shares of Common Stock, will be deemed to
be "Registrable Shares," as such term is defined in that certain Convertible
Promissory Note and Warrant Purchase Agreement dated July _, 1999, by and among
Holder, the Company and those certain other parties identified therein.
1.5 Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof,
acknowledge in
3
<PAGE> 5
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
2. Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
15 days thereafter, the Company, at its expense (including the payment by it of
any applicable issue taxes), will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the Purchase Price of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Dividends in Other Stock, Property, Reclassification.
In case at any time or from time to time, the holders of Common Stock shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend,
(b) any cash (excluding cash dividends payable solely out
of earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off,
split-up, reclassification, recapitalization,
combination of shares or similar corporate
rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided in Section 5), then
and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and
4
<PAGE> 6
property (including cash in the cases referred to in subdivisions (b) and (c) of
this Section 3) that such holder would hold on the date of such exercise if on
the date hereof he had been the holder of record of the number of shares of
Common Stock called for on the face of this Warrant and had thereafter, during
the period from the date hereof to and including the date of such exercise,
retained such shares and all such other or additional stock and other securities
and property (including cash in the cases referred to in subdivisions (b) and
(c) of this section 3) receivable by him as aforesaid during such period, giving
effect to all adjustments called for during such period by Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger.
4.1 General. In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, except as otherwise
provided in Section 4.3 hereof, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 3 and 5.
4.2 Dissolution. Except as otherwise provided in Section 4.3
hereof, in the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the holder of the Warrant after the effective date of such dissolution pursuant
to this Section 4 to a bank or trust company, as trustee for the holder of the
Warrant.
4.3 Continuation of Terms. Except as otherwise hereinafter
provided, upon any reorganization, consolidation, merger or transfer (and any
dissolution following any transfer) referred to in this Section 4, this Warrant
shall continue in full force and effect and the terms hereof shall be applicable
to the shares
5
<PAGE> 7
of stock and other securities and property receivable on the exercise of this
Warrant after the consummation of such reorganization, consolidation or merger
or the effective date of dissolution following any such transfer, as the case
may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, regardless
of whether such person shall have expressly assumed the terms of this Warrant,
provided, however, that if the holder of Warrants exercisable into at least that
number of shares of Common Stock that represents a majority in interest of the
Common Stock issuable upon exercise of all the Warrants then issued and
outstanding, agree in writing to waive the terms of this Section 4, on and as of
the date of the consummation of such reorganization, consolidation or merger
effective date of dissolution, as the case may be, the rights of the holder of
this Warrant and the obligations of the Company under this Section 4 shall
terminate and the provisions of this Section 4 shall be of no further force and
effect.
5. Adjustment for Extraordinary Events. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, or (iii) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 5. The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 5) be issuable on
such exercise by a fraction of which (i) the numerator is the Purchase Price
which would otherwise (but for the provisions of this Section 5) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
6. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the War-
6
<PAGE> 8
rants, the Company at its expense will promptly cause its treasurer or chief
financial officer to compute such adjustment or readjustment in accordance with
the terms of the Warrants and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock issued or sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such issue or sale
and as adjusted and readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to each holder of a Warrant, and
will, on the written request at any time of any holder of a Warrant, furnish to
such holder a like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders
of any class or securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other
securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital
stock of the Company or any transfer of all or
substantially all the assets of the Company to or
consolidation or merger of the Company with or into
any other person, or any voluntary or involuntary
dissolution, liquidation or winding-up of the
Company,
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for
7
<PAGE> 9
securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least 20 days prior to the date
specified in such notice on which any such action is to be taken.
8. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the holders of Warrants
representing at least a majority of the number of shares of Common Stock then
issuable upon the exercise of the Warrants. No such amendment, modification or
waiver shall be effective as to this Warrant unless the terms of such amendment,
modification or waiver shall apply with the same force and effect to all of the
other Warrants then outstanding.
9. Reservation of Stock Issuable on Exercise of Warrant. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock from time to time
issuable on the exercise of the Warrant.
10. Exchange of Warrants. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company may, by written notice to each holder of
a Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
8
<PAGE> 10
Securities) on the exercise of the Warrant pursuant to Section 1, exchanging
Warrants pursuant to Section 10, and replacing Warrants pursuant to Section 11,
or any of the foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by such agent.
13. Negotiability, Company's Right of First Offer.
(a) This Warrant is issued upon the following terms, to all of
which each holder or owner hereof by the taking hereof consents and agrees:
(i) title to this Warrant may only be transferred or
assigned with the written consent of the Company;
(ii) any person in possession of this Warrant properly
endorsed, and for which consent of the Company is
evidenced in writing, is authorized to represent
himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and
delivery hereof to a bona fide purchaser hereof for
value; each prior taker or owner waives and renounces
all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such
bona fide purchaser shall acquire absolute title
hereto and to all rights represented hereby; and
(iii) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
(b) Notwithstanding anything to the contrary contained in
subsection (a) above, at anytime prior to the exercise of this Warrant, if the
Holder shall seek to sell, transfer or otherwise assign this Warrant to a third
party making a bona fide offer for the purchase of this Warrant, the Company
shall have the absolute right, by delivery of written notice to the Holder, as
applicable to repurchase this Warrant or any portion hereof being offered for
sale on terms no less favorable to the Holder than those offered by such third
party.
(c) If the Company desires to repurchase this Warrant (or any
portion hereon being offered for sale, it shall communicate in writing (the
"Company Notice") its election to repurchase to the Holder, which communication
shall state
9
<PAGE> 11
that the Company desires to purchase such portion of the Warrant as is being
offered for sale and shall be delivered in person or by facsimile to the Holder
within twenty (20) days of the date of receipt of notice from the Holder of
receipt of a bona fide offer (the "Holder's Offer Date"). If the Company
determines that it does not desire to purchase all or any portion of this
Warrant, it shall communicate this determination in writing to the Holder
within twenty (20) days of the Holder's Offer Date. The Company Notice, when
taken in conjunction with the offer made by the Holder selling Prior Investor or
the Purchaser, as applicable, shall be deemed to constitute a valid, legally
binding and enforceable agreement for the sale and purchase of the Warrant.
Sales of the Warrant to be sold to the Company pursuant to this Section 3 shall
be made at the offices of the Company no later than the 20th day following the
delivery of the Company Notice (or if such 20th day is not a business day, then
on the next succeeding business day). Such sales shall be effected by the Holder
by delivering to the Company of a certificate or certificates evidencing
ownership of the Warrant to be purchased by the Company, duly endorsed for
transfer to the Company, against payment to the Holder of the purchase price
therefor by the Company.
14. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
15. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. This Warrant is
being executed as an instrument under seal. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
17. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., Eastern Time, on the earlier provision of (i) five years from the Issue
Date, or (ii) the effective date of the waiver exercised pursuant to Section 4.3
hereof
10
<PAGE> 12
LENDINGTREE, INC.
By:
--------------------------------
Mitchell N. York
President
11
<PAGE> 13
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: LendingTree, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ________ shares
of Common Stock of LendingTree, Inc. and herewith makes payment of $_______
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to ____________, whose address is:
_______________________________________________________________________________
_______________________________________________________________________________
Dated:
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
12
<PAGE> 14
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto __________ the right represented by the within Warrant to
purchase __________ shares of Common Stock of LendingTree, Inc. to which the
within Warrant relates, and appoints ___________ Attorney to transfer such right
on the books of LendingTree, Inc. with full power of substitution in the
premises.
The holder of this Warrant and any purchaser, assignee or transferee of
such holder acknowledge that no sale, assignment or transfer of this Warrant
will be valid without the express written approval of the Company.
Dated:
____________________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
____________________________________________
(Address)
Signed in the presence of:
___________________________
Name:______________________
[Print Name]
13
<PAGE> 1
Exhibit 10.13
COMMON STOCK WARRANT AGREEMENT
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii)
AN OPINION OF COUNSEL FOR THE HOLDER THAT SUCH REGISTRATION IS NOT REQUIRED OR
(iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION
TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
WHEREAS, the Company (as defined herein) Previously issued to ULLICO
(as defined herein) a Series A warrant agreement dated December 9, 1998, for the
purchase of 260,000 shares of the Company's Series A Convertible Preferred Stock
and a Series B Warrant Agreement dated March 4, 1999, for the purchase of 40,000
shares of the Company's Series B Convertible Preferred Stock (collectively, the
"Prior Warrants"); and
WHEREAS, in connection with the sale and issuance by the Company of up
to $50,000,000 in Series D Convertible Preferred Stock, the Company and ULLICO
have agreed to cancel the Prior Warrants and issue this Warrant in replacement
thereof.
NOW, THEREFORE, in consideration of the premises, promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows.
LENDINGTREE, INC.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
Number of Shares Issuable Upon Exercise: 300,000 September 20, 1999
No. CSW-13
<PAGE> 2
THIS CERTIFIES THAT, for value received, The Union Labor Life Insurance
Company, Acting on Behalf of its Separate Account P ("ULLICO") (ULLICO and any
transferee of ULLICO a "Warrantholder") is entitled to subscribe for and
purchase 300,000 shares, as adjusted pursuant to the provisions hereof (the
"Shares") of the Common Stock, $0.01 par value per share, of LendingTree, Inc.,
a Delaware corporation (the "Company"), at a price per share of $6.00 (the
"Exercise Price"), subject to the provisions and upon the terms and conditions
hereinafter set forth (such right being referred to as the "Warrant").
1. Term.
1.1 Exercisability. This Warrant is immediately exercisable as to all
of the Shares. This Warrant may be exercised in whole or in part, but in no
event may any partial exercise be for fewer than 10,000 Shares.
1.2 Termination and Expiration. If not earlier exercised, the Warrant
shall expire on the sixth anniversary of the date hereof (the "Expiration
Date").
1.3 Exceptions. In the event that an unaffiliated third party acquires
the Company in a bona fide transaction (i.e., not a recapitalization,
reincorporation for the purpose of changing corporate domicile or other similar
transaction), regardless of the form of the transaction (e.g., merger,
consolidation, sale of assets or sale of stock) (the "Acquisition"), then (i) no
less than twenty (20) business days prior to the record date for determining the
stockholders of the Company entitled to vote on (or otherwise approve) the
Acquisition, the Company shall provide the Warrantholder with notice of such
Acquisition, and (ii) the Company shall provide the Warrantholder with all
information with respect to the Acquisition that is otherwise provided to
stockholders of the Company at such time and from time to time during the
pendency of the Acquisition, including (but not limited to) the proposed price
to be paid in the proposed Acquisition.
2. Method of Exercise.
2.1 Method of Exercise: Payment. This Warrant may be exercised by the
holder hereof, at any time, by delivery of the duly executed Notice of Exercise
form attached hereto as Exhibit A to the principal office of the Company and by
the payment to the Company, by cash, wire transfer, check or cancellation of
indebtedness, if any, of an amount equal to the Exercise Price per share
multiplied by the aggregate number of Shares that the Warrantholder is entitled
to purchase hereunder.
2
<PAGE> 3
The person or persons in whose name(s) any certificate(s) representing Shares
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the Shares represented thereby (and such Shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of this
Warrant, certificates for the Shares so purchased shall be delivered to the
holder hereof as soon as possible.
2.2 Right to Exercise Warrant for Stock, Net Issuance.
(a) Notwithstanding any provisions herein to the contrary, in lieu of
exercising this Warrant by paying the Exercise Price in the manner set forth in
Section 2. 1, prior to its expiration pursuant to Section 1.2, the Warrantholder
may, by providing notice thereof to the Company along with the Notice of
Exercise, elect to exercise the Warrants, in whole or in part, for a reduced
number of Shares deter mined in accordance with the following formula:
X = Y(A-B)
------
A
Where:
X = The number of Shares to be issued to the Warrantholder.
Y = The number of Shares as to which this Warrant is being exercised.
A = The fair market value of one Share (at the date of such exercise).
B = Exercise Price (as adjusted to the date of such exercise).
(b) For purposes of this Section 2.2, the "fair market value" per Share
shall be determined in such reasonable manner as may be prescribed in good faith
by the Company's Board of Directors except as follows:
(i) in the event the Warrant is being exercised at the time
the Company is making a public offering of its Common Stock, the fair market
value per Share shall be the per share offering price to the public of the
Company's Common Stock in such public offering;
3
<PAGE> 4
(ii) in the event the Warrant is being exercised at the time
the Company's Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on any such exchange or listed for
trading on the NASDAQ National Market System, the fair market value per Share
shall be the last reported sale price of Common Stock on such exchange or system
on the last business day prior to the date of exercise of the Warrant (or if no
such sale is made on such day, the average of the closing bid and ask prices for
Common Stock for such day on such exchange or system); and
(iii) in the event the Warrant is being exercised at the time
of the consummation of an Acquisition, the fair market value per Share shall be
the consideration per share of Common Stock the holders thereof are to receive
in connection with such Acquisition.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of this Warrant shall, upon issuance, be validly
issued, fully paid and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof. During the period within which this Warrant
may be exercised, the Company will at all times have duly authorized and
reserved, for the purpose of issuance upon exercise of this Warrant, a
sufficient number of Shares.
4. Adjustments to Conversion Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as set forth in
Appendix I hereto upon the occurrence of certain events described therein. The
provisions of Appendix I are incorporated by reference herein with the same
effect as if set forth in full herein.
5. Fractional Shares. No fractional Shares will be issued in connection
with any exercise hereunder, but in lieu of such fractional Shares the Company
shall make a cash payment therefor based upon the per share fair market value
(determined in accordance with Section 2.2(b)) of the Shares on the date of
exercise.
6. Compliance with Securities Act; Disposition of Warrant or Shares of
Common Stock.
6.1 Compliance with Securities Act. The Warrantholder, by acceptance
hereof, agrees that this Warrant, the Shares to be issued upon exercise hereof
are being acquired for investment and that the Warrantholder will not offer,
sell or
4
<PAGE> 5
otherwise dispose of this Warrant or any Shares to be issued upon exercise
hereof except under circumstances which will not result in a violation of the
Securities Act. All Shares issued upon exercise of this Warrant (unless
registered under the Securities Act) shall be stamped or imprinted with a
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED.
6.2 Disposition of Warrant and Shares. With respect to any offer, sale
or other disposition of any Shares acquired pursuant to the exercise of this
Warrant, the Warrantholder agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of such Warrantholder's counsel, if reasonably requested by the Company, to the
effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Securities Act as then in effect or any
federal or state law then in effect) of such Shares and indicating whether under
the Securities Act certificates for such Shares to be sold or otherwise disposed
of require any restrictive legend as to applicable restrictions on
transferability to insure compliance with the Securities Act. Each certificate
representing the Shares thus transferred (except a transfer pursuant to Rule
144) shall bear a legend as to the applicable restrictions on transferability in
order to insure compliance with the Securities Act unless, in the aforesaid
opinion of counsel for the Warrantholder, such legend is not required in order
to insure compliance with the Securities Act. The foregoing legends shall be
removed from the certificates representing any Shares, at the request of the
holder thereof, at such time as:
(i) they are to be sold pursuant to Rule 144 promulgated under
the Securities Act or
(ii) they become eligible for resale pursuant to Rule 144(k)
promulgated under the Securities Act
5
<PAGE> 6
and the Company has been furnished with an opinion of counsel reasonably
satisfactory to the Company that such legends may be removed in connection with
such sales or eligibility for resale. Notwithstanding anything to the contrary
contained elsewhere in this Warrant Agreement, this Warrant may not be
transferred by the Warrantholder, whether to a partnership affiliated with the
initial Warrantholder or to any partner of such partnership, without compliance
by the Warrantholder with applicable federal and state securities laws. The
Company may issue stop transfer instructions to its transfer agent in connection
with the foregoing restrictions.
7. Rights as Stockholders. Except as set forth herein, the
Warrantholder shall not be entitled to vote upon any matter submitted to
shareholders at any meeting thereof, or to receive notice of meetings, or be
deemed the holder of Common Stock until this Warrant shall have been exercised
and the Shares purchasable upon such exercise shall have become deliverable, as
provided herein.
8. Modification and Waiver. This Warrant and any provision hereof may
be amended, changed, waived, discharged or terminated only by an instrument in
writing signed by the Company and Warrantholder.
9. Notices. Any notice, request or other document required or permitted
to be given or delivered to the Warrantholder or the Company shall be delivered
or sent to the Warrantholder at its address as shown on the books of the Company
or to the Company at the address indicated on the signature page of this Warrant
and shall be deemed received by the holder upon the earlier of actual receipt
or, if sent by certified mail (postage pre-paid), five (5) days after deposit in
the U.S. mail.
10. Binding Effect on Successors. This Warrant shall be binding upon
any corporation or other entity succeeding the Company and the Warrantholder by
merger, consolidation or acquisition of all or substantially all of the
Company's assets or stock. All of the obligations of the Company relating to the
Shares shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
11. Lost Warrant or Stock Certificates. The Company covenants to the
Warrantholder and any holder of shares of Common Stock received pursuant to the
exercise of this Warrant that upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction, or mutilation of this Warrant or
any stock certificate issued upon exercise thereof and, in the case of any such
loss, theft or
6
<PAGE> 7
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company shall make and deliver a new
Warrant or stock certificate, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant or stock certificate.
12. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
13. Recovery of Litigation Costs. If any legal action or other
proceeding is brought for the enforcement of this Warrant, or because of an
alleged dispute, breach, default or misrepresentation in connection with any of
the provisions of this Warrant, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
14. Governing Law. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF DELAWARE IRRESPECTIVE OF ANY CONFLICT OF LAWS PROVISION.
15. Supersedes Prior Warrants. The terms and conditions set forth in
this Warrant supersede and replace in their entirety the terms and conditions
set forth in the Prior Warrants, and upon execution hereof, the Prior Warrants
shall be of no further force or effect.
[THIS SPACE IS INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed Common Stock
Warrant Agreement as of September __, 1999.
LENDING TREE, INC.
By:
-----------------------------------------------
Douglas R. Lebda, Chief Executive Officer
Lending Tree, Inc.
6701 Carmel Road
Suite 205
Charlotte, North Carolina 28226
AGREED AND ACCEPTED this day of September, 1999.
--------
THE UNION LABOR LIFE INSURANCE COMPANY,
ACTING ON BEHALF OF ITS SEPARATE ACCOUNT P
By:
-----------------------------------------------
Michael R. Steed, Senior Vice President
The Union Labor Life Insurance Company
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed Common Stock
Warrant Agreement as of September 20, 1999.
LENDINGTREE, INC.
By:
-----------------------------------------------
Douglas R. Lebda, Chief Executive Officer
LendingTree, Inc.
6701 Carmel Road
Suits 205
Charlotte, North Carolina 28226
AGREED AND ACCEPTED this ____ day of September, 1999:
THE UNION LABOR LIFE INSURANCE COMPANY
ACTING ON BEHALF OF ITS SEPARATE ACCOUNT P
By:
-----------------------------------------------
Michael R. Steed, Senior Vice President
The Union Labor Life Insurance Company
9
<PAGE> 10
EXHIBIT A
TO COMMON STOCK WARRANT AGREEMENT
NOTICE OF EXERCISE
To: LendingTree, Inc.
1. The undersigned hereby elects to purchase shares of Common Stock of
the Company (as defined in the attached Warrant) pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. The undersigned wishes to utilize cashless exercise in payment of
the exercise price of the aforesaid shares and hereby authorizes the Company to
adjust the number of shares for which this Warrant may be exercised to properly
reflect such cashless exercise.
[ ] Yes, for _______ shares [ ] No
3. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
[ ]
4. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
except in accordance with the terms of the legend(s), if any, appearing on the
certificate or certificates representing said shares.
- ----------------------------------
(Date)
[ ]
10
<PAGE> 11
APPENDIX I
TO COMMON STOCK WARRANT AGREEMENT
1. Capitalized Terms. Capitalized terms used in this Appendix I that
are not otherwise defined herein shall have the respective meanings assigned to
them in the Warrant Agreement, to which this Appendix I is attached, if therein
defined.
2. Reclassification or Merger. In the event of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
the Warrantholder shall have the right upon exercise to receive, in lieu of each
Share theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change or conversion by a holder of one Share. The provisions
of this Section 2 shall similarly apply to successive reclassifications and
changes.
3. Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Exercise Price and the number of Shares issuable upon
exercise hereof shall be proportionately adjusted.
4. Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend on its Common Stock payable in
shares of Common Stock, then the Exercise Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution and the number of
Shares subject to this Warrant shall be proportionately adjusted.
5. Other Distributions. Other than ordinary cash dividends or
distributions paid out of the Company's current earnings, which are specifically
excluded from the provisions of this Section 5, in the event the Company shall
declare a dividend or distribution on its Common Stock payable in cash,
securities of the
11
<PAGE> 12
Company, securities of other persons, evidences of indebtedness issued by the
Company or other persons, assets or Warrants or rights not referred to in
Sections 3 or 4 of this Appendix I, then, in each such case, provision shall be
made by the Company such that the holder of this Warrant shall receive upon
exercise of this Warrant a proportionate share of any such dividend or
distribution as though it were the holder of the Shares as of the record date
fixed for the determination of the shareholders of the Company entitled to
receive such dividend or distribution.
12
<PAGE> 1
EXHIBIT 10.14
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN TAKEN FOR INVESTMENT,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
No. CSW-14 Right to Purchase Shares of Common
Stock of LendingTree, Inc.
September 20, 1999 ("Issue Date")
LENDINGTREE, INC.
Common Stock Warrant
LendingTree, Inc., a Delaware corporation, hereby certifies that, for
value received Prudential Securities Incorporated ("Holder"), is entitled,
subject to the terms set forth below, to purchase from the Company at any time
or from time to time before 5:00 P.M., Eastern Time, five years from the Issue
Date, or such earlier time as may be specified in Section 21 hereof, 100,000
shares of fully paid and nonassessable shares of Common Stock (as defined
below).
As used herein, the terms set forth below, unless the context otherwise
requires, have the following respective meanings:
(a) "Company" shall mean and include LendingTree, Inc. and any
corporation that may succeed or assume the obligations of the
Company hereunder.
(b) "Common Stock" shall mean the Company's common stock, $.01 par
value per share.
(c) "Purchase Price" shall mean $9.55 per share.
(d) "Warrant" shall mean this Warrant and any and all additional
Warrants to be issued by the Company to the holder or its
assigns, as approved by the Company pursuant to the terms and
conditions set forth in Section 14 hereof.
(e) "Warrant Shares" shall mean the shares of Common Stock that
are to be issued to the holder of this Warrant upon such
holder's exercise of this Warrant.
<PAGE> 2
1. Exercise of Warrant.
1.1 Full Exercise. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription
attached hereto, duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is exercisable by the
Purchase Price, but the number of such shares and the Purchase Price shall be
subject to adjustment as provided herein.
1.2 Partial Exercise. This Warrant may be exercised in part by
surrender of the Warrant in the manner and at the place provided in subsection
1.1 except that the amount payable by the holder on such partial exercise shall
be the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription attached hereto hereof by (b) the
Purchase Price, but the number of such shares and the Purchase Price shalt be
subject to adjustment as provided herein. On any such partial exercise the
Company, at its expense, will forthwith issue and deliver to or upon the order
of the holder hereof a new Warrant or Warrants of like tenor, in the name of the
holder hereof or as such holder (upon payment by such holder of any applicable
transfer taxes) may request, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock for which such Warrant or
Warrants may still be exercised.
1.3 Right to Exercise Warrant for Common Stock; Net Issuance.
(a) Notwithstanding any provisions herein to the contrary, in
lieu of exercising this Warrant for cash in the manner set forth in Sections
1.1 and 1.2, the Warrant holder may elect to exercise the Warrant ("Warrant
Right") for shares of Common Stock, the aggregate value of which shares shall be
equal to the Purchase Price multiplied by 100,000 (as each value may be adjusted
from time to time as described elsewhere herein). The Warrant Right may be
exercised by delivery to the principal office of the Company together with
notice of the Warrant holder's intention to exercise the Warrant Right, in which
event the Company shall issue to the holder a number of shares of the Common
Stock computed using the following formula:
X = Y(A-B)
---------
A
X = The number of shares of Common Stock to be issued to holder.
Y = The number of shares of Common Stock purchasable under this
Warrant (at the date of such calculation).
A = The fair market value of one share of Common Stock (at the
date of such calculation).
2
<PAGE> 3
B = Purchase Price (as adjusted to the date of such calculation).
(b) For purposes of this Section 1.3, "fair market value" per
share of the Company's Common Stock shall be determined by the Company's Board
of Directors in good faith; provided, however, that in the event the Company
makes an initial public offering of its Common Stock, the fair market value per
share shall be the closing price per share to the public on the exchange upon
which the Company's Common Stock is listed, as reported in The Wall Street
Journal, on the business day immediately preceding the day upon which the holder
exercises the Warrant.
1.4 Company Acknowledgment. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof, acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
2. Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
15 days thereafter, the Company, at its expense (including the payment by it of
any applicable issue taxes), will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the Purchase Price of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or other
wise.
3. Common Stock to be Duly Authorized and Issued Fully Paid and
Nonassessable. The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock delivered
upon the exercise of any Warrants, at the time of delivery of the certificates
for such shares, shall be duly and validly authorized and issued and fully paid
and nonassessable and the issuance of such shares will not be subject to
preemptive or other similar contractual rights of any other stockholder of the
Company.
4. Adjustment for Dividends in Other Stock, Property, Reclassification.
In case at any time or from time to time, the holders of Common Stock shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend,
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<PAGE> 4
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or
similar corporate rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided in Section 5), then
and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 4) that such holder would hold on the
date of such exercise if, on the date hereof, he had been the holder of record
of the number of shares of Common Stock called for on the face of this Warrant
and had thereafter, during the period from the date hereof to and including the
date of such exercise, retained such shares and all such other or additional
stock and other securities and property (including cash in the cases referred to
in subdivisions (b) and (c) of this Section 4) receivable by him as aforesaid
during such period, giving effect to all adjustments called for during such
period by Sections 5 and 6.
5. Adjustment for Reorganization, Consolidation, Merger.
5.1 General. In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, except as otherwise
provided in Section 5.3 hereof, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 4 and 6.
5.2 Dissolution. Except as otherwise provided in Section 5.3
hereof, in the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the holder of the Warrant after the effective date of such dissolution pursuant
to this Section 5 to a bank or trust company, as trustee for the holder of the
Warrant.
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<PAGE> 5
5.3 Continuation of Terms. Except as otherwise hereinafter
provided, upon any reorganization, consolidation, merger or transfer (and any
dissolution following any transfer) referred to in this Section 5, this Warrant
shall continue in full force and effect and the terms hereof shall be applicable
to the shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, regardless of whether such person shall have expressly assumed the
terms of this Warrant, provided, however, that if the holder of Warrants
exercisable into at least that number of shares of Common Stock that represents
a majority in interest of the Common Stock issuable upon exercise of all the
Warrants then issued and outstanding, agree in writing to waive the terms of
this Section 5, on and as of the date of the consummation of such
reorganization, consolidation or merger effective date of dissolution, as the
case may be, the rights of the holder of this Warrant and the obligations of the
Company under this Section 5 shall terminate and the provisions of this Section
5 shall be of no further force and effect.
6. Adjustment for Extraordinary Events. In the event that the Company
shall (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, or (iii) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted in the same
manner upon the happening of any successive event or events described herein in
this Section 6. The holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this Section 6) be issuable on
such exercise by a fraction of which (i) the numerator is the Purchase Price
which would otherwise (but for the provisions of this Section 6) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
7. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its treasurer or chief
financial officer to compute such adjustment or readjustment in accordance with
the terms of the Warrants and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the
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<PAGE> 6
Company for any additional shares of Common Stock issued or sold or deemed to
have been issued or sold, (b) the number of shares of Common Stock outstanding
or deemed to be outstanding, and (c) the Purchase Price and the number of
shares of Common Stock to be received upon exercise of this Warrant, in effect
immediately prior to such issue or sale and as adjusted and readjusted as
provided in this Warrant. The Company will forthwith mail a copy of each such
certificate to each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant, furnish to such holder a like certificate
setting forth the Purchase Price at the time in effect and showing how it was
calculated.
8. Certain Other Events. If any event occurs as to which the foregoing
provisions of Section 4, 5 or 6 are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board of Directors,
fairly protect the purchase rights of the Warrants in accordance with the
essential intent and principles of such provisions, then such Board of Directors
shall make such adjustment in the application of such provisions, in accordance
with such essential intent and principles, as shall be reasonably necessary, in
the good faith opinion of such Board of Directors, to protect such purchase
rights as aforesaid, but in no event shall any such adjustment have the effect
of increasing the Purchase Price or decreasing the number of shares of Common
Stock subject to purchase upon exercise of the Warrants.
9. Piggyback Registration. The Holder shall have the piggyback
registration rights and be obligated to the indemnification and contribution
provisions as set forth in Exhibit A attached hereto.
10. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders
of any class or securities for the purpose of
determining the holders thereof who are entitled to
receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other
securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital
stock of the Company or any transfer of all or
substantially all the assets of the Company to or
consolidation or merger of the Company with or into
any other person, or any voluntary or involuntary
dissolution, liquidation or winding-up of the
Company,
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other
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<PAGE> 7
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least 20 days prior to the date
specified in such notice on which any such action is to be taken.
11. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the holders of Warrants
representing at least a majority of the number of shares of Common Stock then
issuable upon the exercise of the Warrants. No such amendment, modification or
waiver shall be effective as to this Warrant unless the terms of such amendment,
modification or waiver shall apply with the same force and effect to all of the
other Warrants then outstanding.
12. Reservation of Stock Issuable on Exercise of Warrant; Registration
Books. The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrant, all shares of Common Stock
from time to time issuable on the exercise of the Warrant. The Company will keep
or cause to be kept, together with its shareholder records wherever held, books
for registration and transfer of this Warrant. Such books shall show the names
and addresses of the respective holders of this Warrant or any additional
Warrants issued hereunder, the registration number and the number of Warrants
evidenced on its face by each of the Warrants and the date of each of the
Warrants. The Company shall give prompt written notice to each holder of
Warrants upon any change of the office or location at which such records and
books are maintained.
13. Exchange of Warrants. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
14. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
15. Warrant Agent. The Company may, by written notice to each holder of
a Warrant, appoint an agent for the purpose of issuing Common Stock (or Other
Securities) on the exercise of the Warrant pursuant to Section 1, exchanging
Warrants pursuant to Section 13, and
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<PAGE> 8
replacing Warrants pursuant to Section 14, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
16. Negotiability, Company's Right of First Offer.
(a) This Warrant is issued upon the following terms, to all of
which each holder or owner hereof by the taking hereof consents and agrees:
(i) title to this Warrant may only be transferred or
assigned with the written consent of the Company;
such consent shall not be withheld with respect to a
transfer to an affiliate of the Holder.
(ii) any person in possession of this Warrant properly
endorsed, and for which consent of the Company is
evidenced in writing, is authorized to represent
himself as absolute owner hereof and is empowered to
transfer absolute title hereto by endorsement and
delivery hereof to a bona fide purchaser hereof for
value; each prior taker or owner waives and renounces
all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such
bona fide purchaser shall acquire absolute title
hereto and to all rights represented hereby; and
(iii) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
(b) Notwithstanding anything to the contrary contained in
subsection (a) above, at anytime prior to the exercise of this Warrant, if the
Holder shall seek to sell, transfer or otherwise assign this Warrant to a third
party (other than an affiliate of the Holder) making a bona fide offer for the
purchase of this Warrant, the Company shall have the absolute right, by delivery
of written notice to the Holder, as applicable to repurchase this Warrant or any
portion hereof being offered for sale on terms no less favorable to the Holder
than those offered by such third party.
(c) If the Company desires to repurchase this Warrant (or any
portion hereof) being offered for sale, it shall communicate in writing (the
"Company Notice") its election to repurchase to the Holder, which communication
shall state that the Company desires to purchase such portion of the Warrant as
is being offered for sale and shall be delivered in person or by facsimile to
the Holder within 20 days of the date of receipt of notice from the Holder of
receipt of a bona fide offer (the "Holder's Offer Date"). If the Company
determines that it does not desire to purchase all or any portion of this
Warrant, it shall communicate this determination in writing to the Holder within
20 days of the Holder's Offer Date. The Company Notice, when taken in
conjunction with the offer made by the Holder selling Prior Investor or the
Purchaser, as
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<PAGE> 9
applicable, shall be deemed to constitute a valid, legally binding and
enforceable agreement for the sale and purchase of the Warrant upon execution of
a mutually agreeable purchase agreement. Sales of the Warrant to be sold to the
Company pursuant to this Section 16 shall be made at the offices of the Company
no later than the 20th day following the delivery of the Company Notice (or if
such 20th day is not a business day, then on the next succeeding business day).
Such sales shall be effected by the Holder by delivering to the Company of a
certificate or certificates evidencing ownership of the Warrant to be purchased
by the Company, duly endorsed for transfer to the Company, against payment to
the Holder of the purchase price therefor by the Company.
17. Notices, etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
18. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware without giving effect to its
conflicts of laws provisions.
19. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. This Warrant is
being executed as an instrument under seal. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
20. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., Eastern Time, on the earlier provision of (i) five years from the Issue
Date, or (ii) the effective date of the waiver exercised pursuant to Section 5.3
hereof.
21. No Waiver, Cumulative Remedies. No failure or delay on the part of
the Company or the holder of this Warrant in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or
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remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
LENDINGTREE, INC.
By:_____________________________
Keith B. Hall
Sr. Vice President & Chief Financial
Officer
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FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
To: LendingTree, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ______ shares
of Common Stock of LendingTree, Inc. and herewith makes payment of $_______
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to ___________, whose address is:
Date:
_________________________________________________________
(Signature must conform to name of holder as specified on
the face of the Warrant)
_________________________________________________________
(Address)
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FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ______________ the right represented by the within Warrant to
purchase __________ shares of Common Stock of LendingTree, Inc. to which the
within Warrant relates, and appoints ________________ Attorney to transfer such
right on the books of LendingTree, Inc. with full power of substitution in the
premises.
The holder of this Warrant and any purchaser, assignee or transferee of
such holder acknowledge that no sale, assignment or transfer of this Warrant
will be valid without the express written approval of the Company.
Dated:
_________________________________________________________
(Signature must conform to name of holder as specified on
the face of the Warrant)
_________________________________________________________
(Address)
Signed in the presence of:
______________________________
Name:
_________________________
[Print Name]
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EXHIBIT A
Piggyback Registration
(a) Certain Definitions. As used in this Exhibit A and
elsewhere in this Common Stock Warrant, the following terms shall have the
following respective meanings:
"REGISTRATION STATEMENT" means a registration statement filed
by the Company with the Commission for a public offering and sale of securities
of the Company (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation); and
"REGISTRABLE SHARES" means (i) the shares of Common Stock (on
a fully diluted basis) purchased by the Holder, and (ii) any other shares of
Common Stock of the Company issued in respect of such shares described in clause
(i) (because of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); provided, however, that shares of Common
Stock that are Registrable Shares shall cease to be Registrable Shares (x) upon
any sale pursuant to a Registration Statement, Section 4(l) of the Securities
Act or Rule 144 under the Securities Act or (y) when the Holder is eligible to
sell, transfer or otherwise convey all of its Registrable Shares pursuant to
Rule 144 under the Securities Act in any three-month period.
(b) Right to Piggyback. Whenever the Company proposes to file
a Registration Statement at any time and from time to time, it will, prior to
such filing, give written notice to the Holder of its intention to do so and,
upon the written request of the Holder given within 20 days after the Company
provides such notice (which request shall state the intended method of
disposition of such Registrable Shares), the Company shall use its best efforts
to cause all Registrable Shares which the Company has been requested by the
Holder to register to be registered under the Securities Act to the extent
necessary to permit its sale or other disposition in accordance with the
intended methods of distribution specified in the request of the Holder;
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Exhibit A, subsection (b) without
obligation to the Holder.
(c) Priority on Registration. In connection with any offering
under this Exhibit A involving an underwriting, the Company shall not be
required to include any Registrable Shares in such underwriting unless the
holders thereof accept the terms of the underwriting as agreed upon between the
Company and the underwriters selected by it, and then only in such quantity as
will not, in the opinion of the underwriters, jeopardize the success of the
offering by the Company. If in the opinion of the managing underwriter the
registration of all, or part of, the Registrable Shares which the holders have
requested to be included would materially and adversely affect such public
offering, then the Company shall be required to include in the underwriting only
that number of Registrable Shares, if any, which the managing underwriter
believes may be sold without causing such adverse effect. If the number of
Registrable Shares to
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be included in the underwriting in accordance with the foregoing is less than
the total number of shares that the holders of shares of Common Stock have
requested to be included, then the holders of Common Stock who have requested
registration and other holders of shares of Common Stock entitled to include
shares of Common Stock in such registration shall participate in the
underwriting pro rata with one another (giving effect to the conversion into
shares of Common Stock of all securities convertible thereinto).
(d) Initial Public Offering Restriction. Notwithstanding
anything to the contrary contained elsewhere in this Exhibit A, no Registrable
Shares shall be included in the Company's first underwritten public offering of
shares of Common Stock pursuant to a Registration Statement.
(e) Allocation of Expense. The Company will pay all
Registration Expenses of all registrations under this Agreement. For purposes of
this Section, the term "REGISTRATION EXPENSES" shall mean all expenses incurred
by the Company in complying with this Exhibit A, including, without limitation,
all registration and filing fees, exchange listing fees, printing expenses, fees
and disbursements of counsel for the Company, state Blue Sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts and selling commissions
(f) Indemnification and Contribution. In the event of any
registration of any of the Registrable Shares under the Securities Act pursuant
to this Agreement, the Company will indemnify and hold harmless the seller of
such Registrable Shares, each underwriter of such Registrable Shares, and each
other person, if any, who controls such seller or underwriter within the meaning
of the Securities Act or the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which such seller, underwriter or controlling
person may become subject under the Securities Act, the Exchange Act, state
securities or Blue Sky laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement or any amendment or
supplement to such Registration Statement, or arise out of or based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse such seller, underwriter and each such controlling person
for any legal or any other expenses reasonably incurred by such seller,
underwriter or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or omission made in such Registration Statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by or on
behalf of such seller, underwriter or controlling person specifically for use in
the preparation thereof.
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<PAGE> 15
In the event of any registration of any of the Registrable Shares under
the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors and officers and each underwriter (if any) and each
person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which the Company, such directors
and officers, underwriter or controlling person may become subject under the
Securities Act, Exchange Act, state securities or Blue Sky laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement under which
such Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if the statement or omission was made in reliance upon
and in conformity with personal information tarnished in writing to the Company
by or on behalf of such seller, specifically for use in connection with the
preparation of such Registration Statement, prospectus, amendment or supplement;
provided, however, that the obligations of the Holder hereunder shall be limited
to an amount equal to the proceeds to the Holder as contemplated herein; and
provided, however, that any rights of indemnification contained herein shall
pertain solely to statements or omissions by the Holder of personal information,
and shall not include information concerning the Company furnished by the Holder
in their roles as employees, officers or directors, as applicable, of the
Company.
Each party entitled to indemnification under this Exhibit A subsection
(f) (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Exhibit A. The Indemnified
Party may participate in such defense at such party's expense; provided,
however, that the Indemnifying Party shall pay such expense if representation of
such Indemnified Party by the counsel retained by the Indemnifying Party would
be inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no
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<PAGE> 16
Indemnified Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying Party.
To provide for just and equitable contribution to joint liability under
the Securities Act in any case in which either (i) any holder of Registrable
Shares makes a claim for indemnification pursuant to this Exhibit A, subsection
(f) but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Exhibit A, subsection
(f) provides for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of the Holder, or any such
controlling person in circumstances for which indemnification is provided under
this Exhibit A, subsection (f); then, in each such cue, the Company and such
Holder, as applicable will contribute to the aggregate losses, claims, damages,
or liabilities to which they may be subject (after contribution from others) in
such proportions so that such holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Shares
offered by the Registration Statement bears to the public offering price or all
securities offered by such Registration Statement, and the Company is
responsible for the remaining portion; provided, however, that, in such case (A)
the Holder will not be required to contribute any amount in excess of the
proceeds to them of all Registrable Shares sold by it pursuant to such
Registration Statement, and (B) no person or entity guilty of fraudulent
misrepresentation, within the meaning of Section 11(f) of the Securities Act,
shall be entitled to contribution from any person or entity who is not guilty of
such fraudulent misrepresentation.
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AMENDMENT
TO
CONVERTIBLE AND PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
This Amendment to Convertible and Preferred Stock and Warrant
Purchase Agreement (this "Amendment") is being entered into as of the 20th day
of September, 1999, by and among W. James Tozer, Jr. ("Tozer"), Richard Field
("Field") and LendingTree, Inc., a Delaware corporation (the "Company").
WHEREAS, Tozer, Field and the Company have entered into that
certain Convertible Preferred Stock and Warrant Purchase Agreement dated as of
May 25, 1999 (the "Agreement"); and
WHEREAS, the parties desire to amend certain provisions of the
Agreement, as provided herein;
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Revision of Post-Closing Covenants of the Company. The provisions of
Article 7 to the Agreement are hereby deleted in their entirety.
2. No Other Amendments; Agreement Remain in Effect. Except as expressly
amended by this Amendment, the Agreement shall remain in full force and
effect in the form in which it existed immediately prior to the
execution and delivery of this Amendment.
<PAGE> 18
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Amendment as of the date first above written.
LENDINGTREE, INC.
By:
---------------------------------
Douglas R. Lebda
Chief Executive Officer
------------------------------------
W. James Tozer
------------------------------------
Richard D. Field
2
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Amendment
No. 1 to Form S-1 of our report dated November 24, 1999 relating to the
financial statements of LendingTree, Inc., which appear in such Registration
Statement. We also consent to the references to us under the headings "Experts"
and "Selected Financial and Other Data" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
Charlotte, North Carolina
January 10, 2000
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
We, the undersigned directors and/or officers of LendingTree, Inc. (the
"Company"), hereby severally constitute and appoint Douglas R. Lebda, Chief
Executive Officer, Keith B. Hall, Senior Vice President and Chief Financial
Officer, and Robert J. Flemma, Jr., Vice President and General Counsel, and each
of them individually, with full powers of substitution and resubstitution, our
true and lawful attorneys, with full powers to them and each of them to sign for
us, in our names and in the capacities indicated below, the Registration
Statement on Form S-1 filed with the Securities and Exchange Commission, and any
and all amendments to said Registration Statement (including post-effective
amendments), and any registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, in connection with the registration
under the Securities Act of 1933, as amended, of equity securities of the
Company, and to file or cause to be filed the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, and hereby ratifying and confirming all
that said attorneys, and each of them, or their substitute or substitutes, shall
do or cause to be done by virtue of this Power of Attorney.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ DOUGLAS R. LEBDA Chief Executive Officer and November 30, 1999
- ---------------------------------------------------- Director (principal
Douglas R. Lebda executive officer)
/s/ KEITH B. HALL Senior Vice President and November 30, 1999
- ---------------------------------------------------- Chief Financial Officer
Keith B. Hall
/s/ BRIAN REGAN Vice President and November 30, 1999
- ---------------------------------------------------- Controller
Brian Regan
/s/ JAMES A. CARTHAUS Director November 22, 1999
- ----------------------------------------------------
James A. Carthaus
/s/ RICHARD FIELD Director November 22, 1999
- ----------------------------------------------------
Richard Field
/s/ ROBERT KENNEDY Director November 29, 1999
- ----------------------------------------------------
Robert Kennedy
/s/ DANIEL CHARLES LIEBER Director November 30, 1999
- ----------------------------------------------------
Daniel Charles Lieber
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ ADAM MIZEL Director November 30, 1999
- - ---------------------------------------------------
Adam Mizel
/s/ W. JAMES TOZER, JR. Director November 30, 1999
- - ---------------------------------------------------
W. James Tozer, Jr.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001096479
<NAME> LENDING TREE, INC.
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 37,492
<SECURITIES> 0
<RECEIVABLES> 1,920
<ALLOWANCES> 95
<INVENTORY> 0
<CURRENT-ASSETS> 39,593
<PP&E> 784
<DEPRECIATION> 165
<TOTAL-ASSETS> 40,287
<CURRENT-LIABILITIES> 4,186
<BONDS> 0
0
59,317
<COMMON> 31
<OTHER-SE> (23,216)
<TOTAL-LIABILITY-AND-EQUITY> 40,287
<SALES> 4,028
<TOTAL-REVENUES> 4,028
<CGS> 1,576
<TOTAL-COSTS> 18,513
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 87
<INTEREST-EXPENSE> (80)
<INCOME-PRETAX> (15,981)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,981)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,981)
<EPS-BASIC> (5.85)
<EPS-DILUTED> (5.85)
</TABLE>
