<PAGE>
As filed with the Securities and Exchange Commission on April 18, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under the Securities Act of 1933
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COLLEGECLUB.COM, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
Delaware 7375 33-0736747
(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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1010 Second Avenue, Suite 600
San Diego, California 92101
(619) 237-7000
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
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Mr. Michael C. Pousti, Jr.
Chairman and Chief Executive Officer
COLLEGECLUB.COM, INC.
1010 Second Avenue, Suite 600
San Diego, California 92101
(619) 237-7000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:
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<S> <C>
Faye H. Russell, Esq. Robert M. Mattson, Jr. Esq.
Maria P. Sendra, Esq. Craig S. Mordock, Esq.
Ross L. Burningham, Esq. Thomas M. Ffrench, Esq.
Brobeck, Phleger & Harrison LLP Morrison & Foerster LLP
12390 El Camino Real 19900 MacArthur Blvd.
San Diego, California 92130 Irvine, California 92612
(858) 720-2500 (949) 251-7500
</TABLE>
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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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. / /
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
Title of Each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price(1) Registration Fee(1)
<S> <C> <C>
Common Stock, par value $0.001 per
share................................. $85,250,000 $22,506
</TABLE>
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating the
amount of the registration fee.
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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, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Commission, acting
pursuant to Section 8(a), may determine.
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<PAGE>
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission becomes effective. This preliminary
prospectus is not an offer to sell these securities nor does it seek offers to
buy these securities in any jurisdiction where the offer or sale is not
permitted.
<PAGE>
Subject to Completion, Dated April 18, 2000
[LOGO]
Shares
Common Stock
This is the initial public offering of CollegeClub.com, Inc. and we are offering
shares of our common stock. We anticipate that the initial public offering
price will be between $ and $ per share.
We have applied to have our common stock listed on the Nasdaq National Market
under the symbol "CLBS."
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 7.
Neither the Securities Exchange Commission nor any state securities commission
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
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<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions CollegeClub.com
<S> <C> <C> <C>
Per share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to additional
shares to cover over-allotments.
Deutsche Banc Alex. Brown
Merrill Lynch & Co.
Wit SoundView
Roth Capital Partners
The date of this prospectus is , 2000
<PAGE>
Front Cover:
Inside Front Cover:
Graphics will include our logo as well as screen shots showing three
different sections of our Web site. There will also be three bubbles containing
text describing each of the sections which will be titled: "Universal
Messaging," "Class Lecture Notes" and "Instant Messenger."
Inside Front Gatefold:
Graphics will include a picture of a hub with ten spokes. At the center of
the hub will be our logo as well as a graph showing the growth in our registered
members over a three year period. Each of the spokes will contain text
describing content or functionality that can be accessed through our Web site,
including: "Financial Aid," "Class Lecture Notes," "Campus Bookstores," "Jobs,"
"Student Auctions," "Educators," "Sponsor and Merchants," "Local Content,"
"Local Housing" and "Other Students."
<PAGE>
TABLE OF CONTENTS
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Page
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Prospectus Summary.................... 3
Risk Factors.......................... 7
Forward-Looking Statements............ 23
Use of Proceeds....................... 23
Dividend Policy....................... 23
Capitalization........................ 24
Dilution.............................. 26
Selected Consolidated Financial
Data................................ 28
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 30
Business.............................. 36
</TABLE>
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Page
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Management............................ 47
Certain Relationships and Related
Transactions........................ 60
Principal Stockholders................ 62
Description of Capital Stock.......... 64
Shares Eligible for Future Sale....... 69
Underwriting.......................... 71
Legal Matters......................... 74
Experts............................... 74
Where You Can Find More Information... 74
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD CAREFULLY READ THE
ENTIRE PROSPECTUS INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS, BEFORE
MAKING AN INVESTMENT DECISION.
CollegeClub.com, Inc.
We are an integrated communications, education and media Internet company
that operates the leading online destination targeting college students. We
offer both students and educators proprietary Web-based communication,
education, commerce and community tools as well as engaging content that enhance
and simplify the college experience. We derive revenue primarily from the sale
of sponsorships, advertising and other promotional services and also generate
fees from our various commerce relationships. We have registered over 2 million
members and, during January 2000, our Web site generated approximately
227 million page views according to PC Data. During the same period, Media
Metrix rated our Web site as the stickiest site on the Internet for users ages
18 through 24 as measured by minutes per user per month.
We have established a centralized hub that acts as an intermediary between
students and key elements of the college experience, such as:
- Other students. Our proprietary technology allows students to instantly
identify other students based on specific search criteria such as major,
school, location, interests and hobbies. After identifying students based
upon these profiles, users can then choose to communicate directly with
them using our proprietary instant messenger or universal integrated
e-mail and voicemail system, which can be accessed either through the
Internet or telephonically. We also provide other communications tools
that allow students to share their college experience with each other.
- Campus bookstores. Through our exclusive relationship with the National
Association of College Stores, our proprietary turn-key commerce
infrastructure enables campus bookstores at over 100 universities such as
Cornell and Princeton to sell books, school supplies and apparel over the
Internet.
- Lenders and financial aid offices. Through our eStudentLoan.com division
we provide students centralized access to various student loan providers
including Bank of America and The Student Loan Corporation, an affiliate
of Citibank. We also provide financial aid offices at various universities
with access to software and Web-based technology that enables them to more
effectively manage the financial aid process.
- Faculty and administrators. We provide professors, administrators and
students with Web-based access to class-specific information and course
management tools currently used throughout a number of campuses such as
Stanford and Harvard. We also offer student-generated lecture notes for
over 6,900 classes on campuses throughout the country.
In the United States, there are over 15.5 million students attending
approximately 4,000 colleges and universities. Increasingly, college students
are using the Internet to enhance the college experience, simplify the academic
process and buy and sell goods and services. Jupiter Communications estimated
that Internet penetration among college students was 90% in 1999. In 1998,
Jupiter Communications also estimated that college student total spending power
was approximately $120 billion and that college students made online purchases
totaling $429 million. Jupiter projects online purchases by college students to
grow to $2.5 billion by 2002. From a
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marketing perspective, college students have traditionally been challenging to
reach due to their active and mobile lifestyles and their unpredictable
consumption of conventional media. We believe that the Internet is an effective
mechanism for accessing college students.
Our goal is to be the leader in online communication, education and commerce
for students, educators and alumni. To achieve this strategy we intend to:
- extend our anytime, anywhere, anyone communications platform;
- increase the number of educational tools and services we offer our users;
- expand our unique online commerce program;
- enhance our offerings through strategic alliances and acquisitions;
- expand internationally; and
- expand into related markets such as the high school and alumni markets.
Consistent with our objective of developing strategic relationships, we have
entered into several key alliances that allow us to expand the products and
services we offer our users. Specifically, we have a relationship with Sony
Corporation of America to provide us with proprietary content and advice
regarding the development of the broadband market as well as to assist in
potential international expansion. Similarly, we have entered into strategic
alliances with Ericsson to extend our proprietary tools to wireless consumer
devices and with NBC to promote us within their online and broadcast networks.
Sony and NBC are equity investors in CollegeClub.com.
We launched our Web site in December 1995, establishing one of the first
online communities for college students. We were incorporated in California as
Public Online Communications Corporation in July 1996, and reincorporated in
Delaware as CollegeClub.com, Inc. in September 1999. Our principal executive
office is located at 1010 Second Avenue, Suite 700, San Diego, CA 92101, and our
telephone number is (619) 237-7000. Our primary Web site is located at
WWW.COLLEGECLUB.COM. The information contained in our Web sites does not
constitute a part of this prospectus. We have submitted or are in the process of
submitting registration applications for the following service marks:
"CollegeClub (SM)," "CollegeClub.com (SM)," "HighSchoolClub (SM),"
"HighSchoolClub.com (SM)" "The world is our campus (SM)" and "it's all U. (SM)."
All other trademarks and service marks that we refer to in the prospectus are
the property of their respective owners.
The Offering
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<S> <C>
Common stock offered by CollegeClub.com.................... shares
Common stock to be outstanding after this offering......... shares
Use of proceeds............................................ To fund the continued growth and
expansion of our business, brand and
technology infrastructure, as well as for
working capital and other general
corporate purposes. We may also use a
portion of the proceeds for strategic
alliances and acquisitions. Please see
"Use of Proceeds."
Proposed Nasdaq National Market Symbol..................... "CLBS"
</TABLE>
The number of shares of our common stock that will be outstanding after this
offering is based on the shares outstanding on December 31, 1999, assumes the
conversion into common stock of 22,667,215 shares of preferred stock outstanding
as of such date, includes the issuance of 5,819,978 shares in connection with
our recent acquisition of Versity.com and the issuance of
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<PAGE>
970,874 shares of our Series C-2 preferred stock to NBC in connection with a
recent strategic relationship and the conversion of these shares into common
stock upon completion of this offering. The number of shares to be outstanding
after this offering excludes:
- 784,422 shares of our common stock issuable upon the exercise of options
issued in connection with our acquisition of Versity.com;
- up to 3,449,384 additional shares of our common stock that may be issued
in connection with our acquisition of Versity.com;
- up to 464,910 additional shares of our common stock issuable upon the
exercise of options that may be issued in connection with our acquisition
of Versity.com;
- 11,722,070 shares of our common stock issuable upon exercise of options
outstanding at December 31, 1999 with a weighted average exercise price of
$0.74 per share;
- 55,435 shares of our common and preferred stock issued on March 27, 2000
under letter agreements with existing stockholders;
- 2,538,448 shares of our common and preferred stock issuable upon the
exercise of warrants outstanding at December 31, 1999 with a weighted
average exercise price of $1.50 per share;
- 1,880,503 shares of our common stock available for issuance under our
stock option plans as of December 31, 1999, which amount was increased by
an aggregate of 12,000,000 shares in January, February and April 2000
subject to stockholder approval; and
- 500,000 shares of our common stock issuable under our employee stock
purchase plan approved by our board of directors in February 2000 subject
to stockholder approval. For a description of our stock option plans,
please see "Management--Benefit Plans."
From January 1, 2000 through April 3, 2000, we have granted additional
options to purchase an aggregate of 3,958,667 shares of our common stock with a
weighted average exercise price of $2.00 per share under our stock option plans.
Unless otherwise indicated, this prospectus assumes:
- that the underwriters' over-allotment option is not exercised;
- conversion of all outstanding shares of preferred stock into shares of
common stock on a one-for-one basis upon completion of this offering; and
- the filing of an amended and restated certificate of incorporation upon
completion of this offering to increase our authorized common stock and
decrease our authorized preferred stock.
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<PAGE>
Summary Financial Data
The following summary financial information is derived from our financial
statements included elsewhere in this prospectus. You should read the following
summary financial information in conjunction with those financial statements and
the related notes.
The unaudited pro forma statement of operations data for the year ended
December 31, 1999 reflects our acquisitions of Collegestudent.com, Campus24 and
Versity.com as if these combinations had occurred on January 1, 1999. The
unaudited pro forma balance sheet data as of December 31, 1999 reflects our
recent acquisition of Versity.com as if it had been completed as of
December 31, 1999, the issuance of 970,874 shares of our Series C-2 preferred
stock in connection with our March 27, 2000 strategic relationship with NBC as
if it had been completed as of December 31, 1999 and assumes the conversion of
all of our outstanding shares of preferred stock into shares of common stock
upon completion of this offering.
The unaudited pro forma as adjusted balance sheet data listed below reflects
the sale of shares of common stock included in this offering at an assumed
initial public offering price of $ per share after deducting underwriting
discounts and commissions, estimated offering expenses payable by us and the
application of proceeds from this offering. Please see "Use of Proceeds" and
"Capitalization" for a discussion about how we intend to use the proceeds from
this offering and about our capitalization.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
Pro Forma
1995 1996 1997 1998 1999 1999
--------- -------- --------- -------- -------- ---------
(in thousands, except per share data)
unaudited unaudited
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenue................................. $ 1 $ 196 $ 802 $ 332 $ 2,913 $ 4,079
Costs and expenses:
Operating expenses.......................... 436 2,255 2,985 2,561 22,996 32,198
Depreciation and amortization............... 1 145 354 344 1,498 15,916
Stock-based compensation.................... -- -- 1,545 1,156 4,151 4,794
------- ------- -------- ------- -------- --------
Total expenses............................ 437 2,400 4,884 4,061 28,645 52,908
------- ------- -------- ------- -------- --------
Loss from operations.......................... (436) (2,204) (4,082) (3,729) (25,732) (48,829)
Other income (expense), net................... 7 (29) (130) (94) (33) (116)
------- ------- -------- ------- -------- --------
Net loss...................................... $ (429) $(2,233) $ (4,212) $(3,823) $(25,765) $(48,945)
======= ======= ======== ======= ======== ========
Net loss per share:
Basic and diluted........................... $ (0.03) $ (0.15) $ (0.27) $ (0.24) $ (1.57) $ (1.00)
======= ======= ======== ======= ======== ========
Shares used in per share calculations:
Basic and diluted........................... 15,000 15,009 15,372 16,035 16,388 49,035
======= ======= ======== ======= ======== ========
</TABLE>
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<CAPTION>
As of December 31, 1999
----------------------------------
Pro Forma
As
Actual Pro Forma Adjusted
-------- --------- -----------
(in thousands)
unaudited
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................... $ 29,740 $36,290
Working capital............................................. 24,669 30,868
Total assets................................................ 56,432 91,610
Total liabilities........................................... 7,837 8,301
Convertible preferred stock................................. 61,363 --
Total stockholders' equity (deficit)........................ (12,768) 83,309
</TABLE>
6
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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
WOULD LIKELY SUFFER. IN ANY SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK
COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR
COMMON STOCK.
Risks Related to Our Business
It is difficult to evaluate our business and prospects because we have a limited
operating history.
We launched our Web site in December 1995 and were incorporated in
July 1996. Accordingly, we have a relatively short operating history from which
to evaluate our business and our prospects. Investors should consider our
prospects in light of the risks, expenses and difficulties frequently
encountered by early-stage companies, particularly companies in the intensely
competitive Internet industry. These risks include our ability to:
- develop and manage our business model;
- attract a larger number of members to our Web site;
- increase awareness of our brand;
- offer compelling content;
- maintain our current, and develop new, strategic relationships;
- attract a large number of sponsors and merchants from a variety of
industries;
- attract, retain and motivate qualified personnel;
- respond effectively to competition;
- generate sufficient revenue and control costs to achieve and maintain
profitability;
- improve our operational and financial systems; and
- manage our growth.
We may not be able to adequately address any of these risks.
We have a history of losses, and we anticipate losses in the foreseeable future.
We have not generated enough revenue to cover the substantial amounts we
have spent to create, launch and enhance our products and services. We have
incurred net losses since the formation of our business in 1996. At
December 31, 1999, we had an accumulated deficit of $35.0 million. We expect to
continue to incur significant operating losses and negative cash flows for the
foreseeable future. We may never achieve profitability. Even if we do achieve
profitability, we may not be able to sustain it on a quarterly or annual basis
in the future. Successfully executing our business plan depends on, among other
things, our ability to significantly increase our revenue and meet the following
challenges, to:
- increase awareness of our brands;
- increase membership and member usage of our Web site;
- provide our users with superior communications, educational, commerce and
community features; and
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- enhance our systems and technology to support increased traffic to our Web
site.
Accordingly, we expect to incur significant expenses in order to:
- maintain and form new business alliances with sponsors and strategic
partners;
- acquire entities that provide us with complementary product or content
offerings or technologies;
- expand our technology infrastructure to effectively manage our growth; and
- increase our marketing and promotional activities.
We may not generate sufficient revenue to offset these expenditures. If our
revenue does not grow as we anticipate or if our operating expenses exceed our
expectations or cannot be adjusted quickly to match revenue, we will continue to
experience significant losses on a quarterly or annual basis.
If we do not provide attractive goods and services, our Web site will not
generate interest from our members, sponsors and merchants, and our business
model will suffer.
Our business model relies on using our platform and membership base to
generate revenue from different sources. To be profitable, we will need to
provide goods and services that are attractive to our members, sponsors and
merchants. We rely mostly on our users to generate content that is attractive
and pertinent to develop and maintain our Web site. A decline in engaging
member-generated and third party content could make our Web site less
attractive. We cannot guarantee that Internet users will continue to be
interested in our Web site. A decline in membership or usage of our Web site
would decrease our revenue.
If we are unable to generate sufficient advertising-related and online commerce
revenue, our total revenue will be significantly reduced.
We currently derive substantially all of our revenue from the sale of
sponsorships, advertisements and other promotional services. We also expect to
derive a growing portion of our revenue in the future from the generation of
online commerce. If we fail to sell advertising or generate online commerce
revenue, our total revenue will be significantly reduced. Advertising and online
commerce revenue are directly related to Web site traffic. Market acceptance of
Internet-based advertising is uncertain and depends largely on advertisers'
determinations that the Internet is an effective medium for advertising. Our
ability to generate significant advertising and online commerce revenue depends
upon several other factors, including:
- the continued development of strong brand recognition and engaging content
to attract and retain a large, demographically-attractive base of members
and significant Web site traffic;
- our ability to continue to develop and update effective advertising
delivery and measurement systems;
- our ability to maintain and increase the number of our advertisers given
the growing number of outlets for advertisers on the Internet; and
- the volume of online commerce sales and our ability to charge commissions
for online commerce sales generated by our Web site.
Our operating results depend on our ability to maintain and form new business
alliances.
Our ability to develop and maintain strategic alliances and relationships is
an important factor in maintaining our membership base. Our failure to acquire
or maintain sponsors, strategic partners
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and other key relationships could result in a decrease in revenue and the number
of members or an increase in expenses. Additionally, committing significant
managerial, technical and financial resources to developing business alliances
may divert our resources and our management's time and attention from our other
business efforts.
If we are not successful in integrating acquisitions, we will not be able to
execute on our business strategy.
Since June 30, 1999, we have acquired four businesses. Our management has
had limited experience in assimilating acquired organizations and products into
our operations. We may not successfully integrate the operations, personnel or
products that we have acquired in the past or may acquire in the future. Our
growth strategy includes acquiring or making investments in complementary
businesses, products, services or technologies. As a result, we may from time to
time evaluate acquisition opportunities that could provide us with additional
product or content offerings or additional industry expertise. We may not be
successful in completing an acquisition or in making the acquisition on
commercially viable terms. Any future acquisition could result in difficulties
assimilating acquired operations and products, diversion of our attention away
from other business issues and amortization of acquired intangible assets which
could negatively impact our earnings. Specifically, we expect that future
transactions may involve the acquisition of early-stage technology companies.
Acquiring these companies may result in problems related to the integration of
technology and inexperienced management teams. Furthermore, we may incur debt or
issue equity securities to pay for future acquisitions. Issuing convertible debt
or equity securities would dilute the ownership of our existing stockholders.
Growth in our operations has and will continue to strain our resources and our
failure to effectively manage growth could harm our business.
We have recently experienced significant growth and are planning to further
expand our business. As of February 29, 2000, we had 255 employees, compared to
57 employees as of June 30, 1999. We also manage a team of over 1,200
independent contractors on college campuses nationwide. This growth has placed a
significant strain on our management, operational and financial resources. We
are currently in the process of upgrading our systems software. If we are not
successful in implementing these new systems, our growth could be curtailed and
we may not be able to take advantage of all market opportunities. In addition,
to support the expected growth, management will have to identify, hire, train
and manage required personnel. Furthermore, our success also depends to a
significant extent on the ability of our management to operate effectively, both
individually and as a group. A number of the members of our senior management
team joined us recently. Our management team has had a limited time to work
together and as a result, may have difficulty working together to successfully
manage our business.
If we are unable to expand our online capacity, computer systems and related
features to support increased volume on our Web site in a timely manner, our
business may suffer.
A key element of our strategy is to generate a high volume of traffic on our
Web site. However, growth in the number of users accessing our site may strain
or exceed the capacity of our computer systems and lead to declines in
performance or systems failure. We believe that we will need to continually
improve and enhance the functionality and performance of our content and
advertisement distribution, online commerce and other technical systems to
accommodate growth in user demand. As a result, we intend to continually upgrade
our existing systems and implement new systems to keep pace with rapidly
changing technologies and evolving industry standards. Our
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inability to add additional hardware and software to upgrade our existing
technology or network infrastructure to accommodate increased traffic would
cause decreased levels of customer service and satisfaction.
We are in the process of transitioning the hosting of our Web site from
Simple Network Communications in San Diego, California to another provider. We
are also in the process of migrating our SQL Server database to an Oracle 8i
infrastructure. We may experience interruptions in our systems or our Web site
during these transitions. Any interruption or disruption of our systems could
have a material adverse effect on our business and financial condition.
We depend on third parties for software, systems and related services. For
example, we rely on Simple Network Communications for our Web site hosting.
Several of the third parties that provide software, systems or services to us
have limited operating histories and are themselves dependent on reliable
delivery of services from others. If the software, systems or related services
we currently obtain from third parties do not function properly or are not
updated, we would need to purchase these items from other third party providers.
This would require an unplanned increase in operating expenses and could cause a
disruption in our business.
If we are unable to retain key personnel or attract new personnel we will not be
successful.
Our success will depend to a significant extent on the continued service of
our senior executives and other key employees, including sales and marketing
personnel, many of whom would be difficult to replace. Our future success and
ability to grow our business also depends in large part on our ability to
attract and retain additional experienced sales, marketing and technical
personnel. If we lost the services of one or more of our executives or key
employees or failed to hire the necessary additional people, our ability to
implement our business strategy would be adversely affected and our business
would suffer.
Competition for qualified people in the Internet industry is intense. We
expect this competition to remain intense, and we may not succeed in attracting
or retaining such people. In addition, new employees generally require
substantial training. This training will require significant resources and
management attention.
Competition for users and advertisers could adversely affect our position in the
market and our financial results.
The market for online users and advertisers on the Internet is rapidly
evolving. Competition for members, visitors, sponsors and merchants is intense
and is expected to increase over time. Barriers to entry are relatively low. We
compete for visitors, traffic, sponsors and online merchants with Web
directories, search engines, content sites, online service providers and
traditional media companies. We also face competition from other companies
maintaining Web sites dedicated to college students as well as high-traffic Web
sites sponsored by companies such as CBS, Disney, Excite, Lycos, MTV, Time
Warner and Yahoo!
We also compete with other companies targeting the student population, such
as:
- publishers and distributors of traditional offline media, particularly
those targeting college students, such as campus newspapers, other print
media, television and radio; and
- vendors of college student information, merchandise, products and services
distributed through online and offline means, including retail stores,
mail and schools.
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Increased competition from these and other sources could require us to
respond to competitive pressures by establishing pricing, marketing and other
programs or seeking out additional strategic alliances or acquisitions that may
be less favorable to us than we could otherwise establish or obtain.
Many of our competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we do. In addition, substantially all of
our current advertising customers have established collaborative relationships
with other high-traffic Web sites. Our advertising customers might conclude that
other Internet businesses, such as search engines, commercial online services
and sites that offer professional editorial content are more effective sites for
advertising than we are. Moreover, we may be unable to maintain either the level
of traffic on our Web site or a stable membership base, which would make our
site less attractive than those of our competitors.
We currently derive substantially all of our revenue from sponsorships,
advertising and other promotional services, and our business model depends in
part on increasing the amount of such revenue. The market for this type of
revenue is highly competitive. We must maintain and increase our traffic to
attract sponsors and advertisers and compete successfully for advertising
revenue.
We believe that the primary competitive factors in attracting and retaining
users are:
- quality and pertinence of content and services;
- brand recognition as well as consumer awareness of our content and
services;
- user affinity and loyalty;
- demographic focus;
- variety of value-added services; and
- critical mass of users.
We believe that the principal competitive factors in attracting and
retaining sponsors and advertisers are:
- the amount of traffic on a Web site;
- brand recognition;
- the demographics of a site's users;
- the ability to offer targeted audiences;
- the average duration of user visits; and
- cost-effectiveness.
Our competitors may develop content and service offerings that are superior
to ours or that achieve greater market acceptance than our services. If our
content and service offerings fail to achieve success in the short term, we
could suffer an insurmountable loss in market share and brand acceptance.
Our business is subject to seasonal fluctuations that will affect our revenue
and operating results and could cause the price of our common stock to decline.
Our operating results are dependent upon the college student market and they
vary seasonally based upon the typical school year. If we are unable to
effectively manage our resources in anticipation of the seasonality of our
revenue and the increased costs we expect to incur during periods of lower
revenue, our business, operating results and financial condition will be
materially
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adversely affected. We tend to experience increased Web site traffic and
membership enrollment in the beginning of the fall and winter academic terms,
which places a strain on our systems during these periods. Our limited operating
history and rapid growth make it difficult for us to fully assess the impact of
seasonal factors on our business. However, because our business is dependent
upon the student market, we expect that our revenue will be subject to seasonal
fluctuations. We expect our revenue to be higher during our first and fourth
quarters due to the increased activity associated with the school term.
Conversely, the second and third quarters may have relatively less revenue since
they include months when schools are not typically in session. In addition, we
may undertake activities designed to improve our Web site or other services
during periods when school is not in session to prepare for the next school
year, increasing our costs during periods of decreased revenue.
In addition to the seasonality which we experience due to our emphasis on
the college market, seasonality in Internet usage and advertising expenditures
is also likely to cause fluctuations in operating results from quarter to
quarter. Usage on the Internet has typically declined during the summer and
year-end vacation and holiday periods. Advertising sales in traditional media,
such as broadcast and cable television, generally decline in the first and third
quarters of each year. Depending on the extent to which Internet and commercial
online services are accepted as an advertising medium, seasonality in the level
of advertising expenditures would become more pronounced for Internet-based
advertising.
Due to the factors discussed above, our revenue and operating results are
difficult to forecast. We believe that our quarterly revenue, expenses and
operating results will vary significantly in the future and that
period-to-period comparisons are not necessarily meaningful and are not
indicative of future performance. As a result, it is likely that in some future
quarter or years our results of operations will fall below the expectations of
securities analysts or investors, which would cause the trading price of our
common stock to decline.
The ability of colleges and universities to prevent our student representatives
from conducting promotional activities on campus could impede our membership
growth.
We currently derive a significant percentage of our membership through
promotional activities conducted primarily on universities and college campuses
by our student campus representatives. At present, we employ over 1,200 student
representatives on over 1,000 college and university campuses nationwide. These
student representatives conduct promotional activities on these campuses to
recruit new members by, among other things, sponsoring various events and
posting digital photos of students and campus events on our online photo
gallery.
Our ability to recruit new members may be impaired if colleges and
universities restrict our ability to market on campus. Some colleges and
universities have tried to prevent us from conducting promotional activities on
campus by sending us cease-and-desist letters and telling our campus
representatives to stop their activities. In addition, colleges and universities
may enter into exclusive contracts with other online companies that might
prohibit us from promoting our Web site on campus. If colleges and universities
increasingly prevent our student representatives from conducting promotional
activities on campus, the growth in our student membership could suffer.
Our success depends on the protection of our intellectual property rights which
may be difficult and costly.
Our success depends on the protection of our databases and proprietary Web
site-related software as well as the goodwill associated with our service marks
and other proprietary intellectual property rights. A substantial amount of
uncertainty exists concerning the application of copyright and trademark laws to
the Internet and other digital media. Existing laws may not adequately
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protect our content, our software code or our Internet addresses, commonly
referred to as domain names. We have filed applications to register a number of
our service marks, but we may not be able to secure registration for these
service marks. We have not applied for the registration of all of our service
marks. Effective trademark, service mark, copyright and trade secret protection
may not be available in every country in which our content, products and
services are offered. If we are prevented from using our service marks, we would
need to obtain different universal resource locators. We would also need to
rebuild our brand identity with our customers and users. Our operating expenses
would substantially increase if we had to rebuild our brand identity or
reimplement our Web sites.
We also have invested resources in acquiring domain names for current and
potential future use. We may not be entitled to use such names under applicable
trademark and similar laws, and other desired domain names may not be available.
Despite our efforts to protect our proprietary rights, the steps we have
taken may not be adequate. Third parties may infringe or misappropriate our
copyrights, trademarks or other intellectual property. In addition, others could
independently develop substantially equivalent intellectual property. Enforcing
our intellectual property rights could entail significant expense and could
prove difficult or impossible. In addition, third parties may bring claims of
copyright, trademark or service mark infringement, patent violation,
misappropriation of creative ideas or formats or other infringement claims
against us with respect to our content, including the design and functionality
of our Web site or any third-party content carried by us. Any such claims, with
or without merit, could prove time-consuming to defend, result in costly
litigation, divert management attention, require us to enter into costly royalty
or licensing arrangements or prevent us from using important technologies or
offering products and services.
Our content and technology offerings could infringe the intellectual property
rights of others, and claims against us could be costly and require us to enter
into licensing or royalty arrangements and discontinue the use of that content
or technology.
We currently offer online lecture notes for college courses and hire
students to produce and post these notes to our Web site. We may be subject to
claims that our online lecture notes infringe on the intellectual property
rights of professors and universities. In most cases, we have not obtained a
license or other authorization to post these lecture notes. From time to time,
we have received requests from professors and universities that we remove the
lecture notes from our Web site. Professors and universities may assert
trademark, copyright, and other types of infringement, unfair competition or
trespass claims against us or our student representatives. If we are forced to
defend against any such claims or any other claims of infringement of third
party intellectual property rights, whether they are with or without merit or
are determined in our favor, we may face costly litigation, loss of access to,
and use of, some of our content, diversion of managerial resources, or
disruption of our operations. As a result of such a dispute, we may be required
to develop non-infringing content, enter into royalty or licensing agreements,
discontinue use and remove this content from our Web sites, or be forced to pay
potentially significant damages for past conduct with respect to this content.
Royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. If there is a successful claim of infringement
against us and we are unable to develop non-infringing content or license the
infringed or similar content on a timely basis, our business could be materially
harmed.
Colleges may attempt to restrict access to our Web site
We believe a significant portion of our users access our Web site through
their local university computer networks. Recently, some universities have begun
to restrict access to certain Web sites due to the strains placed on the
universities' systems resulting from the high volume of data being
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uploaded and downloaded to and from these Web sites. Colleges may also attempt
to limit access to our Web site due to its content. Given the interactive nature
of our Web site, universities may in the future limit access to our site through
their networks. If a substantial number of universities restrict access to our
Web site, the traffic on our Web site will decrease and our business and
financial condition could be materially and adversely harmed.
Third-party technology necessary for the successful operation of our business
may not be available on commercially reasonable terms or at all.
Some of the technology incorporated in our Web site is based on technology
licensed from third parties. As we continue to introduce new services, we may
need to license additional technology from third parties. If we are unable to
timely license needed technology on commercially reasonable terms, we could
experience delays and reductions in the quality of our services. If someone
makes a claim against us relating to proprietary technology or information, we
may seek to license such intellectual property. We may not be able to obtain
licenses on commercially reasonable terms, or at all.
Our prospects for obtaining additional financing, if required, are uncertain and
failure to obtain needed financing could affect our ability to pursue future
growth.
Although we believe that, following this offering, our cash reserves and
cash flows from operations will be adequate to fund our operations at least
through the next 12 months, we do not have a long enough operating history to
know with certainty whether our existing cash and the proceeds of this offering
will be sufficient to finance our anticipated growth. Accordingly, these funds
may not be adequate and additional funds may be required either during or after
that period. We may need to raise additional funds if our estimates of revenue,
working capital or capital expenditure requirements change or prove inaccurate,
if we are required to respond to unforeseen technological or marketing hurdles
or if we choose to take advantage of unanticipated opportunities. Further,
additional financing may not be available when required. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
our then existing stockholders will be reduced. Any new securities issued may
have rights, preferences or privileges senior to those securities held by you.
If we raise additional funds through the issuance of debt, we may become subject
to restrictive covenants. If adequate funds are not available to satisfy either
short- or long-term capital requirements, we may be required to limit our
operations significantly. Our future capital requirements are dependent upon
many factors, including:
- the rate at which we expand our sales and marketing operations;
- the extent to which we expand our content and service offerings;
- the extent to which we develop and upgrade our technology and data network
infrastructure; and
- the response of competitors to our content and service offerings.
We believe that we have a contingent liability of approximately $3.3 million
plus interest due to our issuances of securities, which may have been in
violation of securities laws.
We have issued shares or options to purchase shares of our common stock to
some of our existing stockholders, our employees, consultants, directors and
on-campus representatives. At the time these options were issued, we believed
that each of the issuances were exempt from the registration requirements of the
Securities Act. However, due to the total number of shares and options issued,
the issuance of these shares and options may not have qualified for any
exemption from qualification under California and other state securities laws.
In addition, we have assumed
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options issued by Versity.com and converted them into options to purchase shares
of our common stock. Our assumption of these options also may not qualify for
any exemption from qualification under California and other state securities
laws.
We may be required, or we may elect, at some time in the future, to make a
rescission offer, in which we would offer to repurchase from these persons all
shares issued pursuant to option exercises by these persons at the purchase or
exercise price paid for these shares, plus interest at the rate of 10% per year
from the date of issuance until the rescission offer expires. To comply with
California and other state securities laws, we may also offer, or be required to
offer, to repurchase all unexercised options issued to such persons at 20% of
the option exercise price multiplied by the number of shares subject to such
options, plus interest at the rate of 10% per year from the date of issuance
until the rescission offer expires. We believe we could be required to pay up to
approximately $3.3 million plus the total amount of interest on that amount as
described above based on the number of securities that may have been improperly
issued. As of the date of this prospectus, we are not aware of any claims for
rescission against us with respect to the foregoing securities issuances. If we
are required to repurchase all of the securities which may have been issued in
violation of securities laws, our operating results and liquidity during the
period in which such repurchase occurs could be materially adversely affected.
Risks Related To Our Industry
If sponsors and merchants do not continue or increase their usage of the
Internet as an advertising medium, our revenue may decline or we may not grow.
We expect to derive a substantial portion of our revenue from sponsorships
and advertising for the foreseeable future. The prospects for continued demand
and market acceptance for Internet marketing solutions are uncertain. If the
Internet does not develop as an effective and measurable medium for advertising,
or if it develops more slowly than expected, our business will suffer. Most
advertising agencies and potential advertisers, particularly local advertisers,
have only limited experience advertising on the Internet and may not devote a
significant portion of their advertising expenditures to Internet advertising.
Moreover, advertisers that have traditionally relied on other advertising media
may not advertise on the Internet. In addition, advertising on the Internet is
at a much earlier stage of development in international markets as compared to
the United States and may not fully develop in these markets.
As the Internet evolves, advertisers may find Internet advertising to be a
less attractive or effective means of promoting their products and services
relative to traditional methods of advertising and may not continue to allocate
funds for Internet advertising. This growth may not occur or may occur more
slowly than estimated. In addition, if a large number of Internet users use
filter software programs that limit or remove advertising from the user's
monitor, advertisers may choose not to advertise on the Internet. Moreover,
there are no widely accepted standards for measuring the effectiveness of
Internet advertising, and standards may not develop sufficiently to support
Internet advertising as a significant advertising medium.
Intense competition in the sale of advertising on the Internet has led
different vendors to quote a wide range of rates and offer a variety of pricing
models for various advertising services. As a result, we have difficulty
projecting future advertising revenue and predicting which pricing models
advertisers will adopt. This difficulty could cause us to adopt a pricing model
which later proves not to be commercially viable.
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Our success depends on continued growth in the use of the Internet and the
ability of the Internet infrastructure to support such growth.
Our industry is new and rapidly evolving. A decrease in the growth of Web
usage, particularly usage by college students, would harm our business. The
following factors may inhibit growth in Web usage:
- inadequate Internet infrastructure;
- security and privacy concerns;
- inconsistent quality of content and service; and
- lack of cost-effective, high-speed service.
Our success depends in large part on the maintenance of the Internet
infrastructure, such as a reliable network that provides adequate speed, data
capacity and security, and timely development of products that enable reliable
Internet access and services, such as high-speed modems. To the extent that the
Internet continues to experience significant growth in the number of users,
frequency of use and amount of data transmitted, there can be no assurance that
the Internet infrastructure will continue to be able to support the demands
placed on it or that the performance or reliability of the Internet will not be
adversely affected. Web sites have experienced interruptions in their service as
a result of outages and other delays occurring throughout the Internet network
infrastructure. If these outages or delays occur frequently in the future,
Internet usage, as well as the usage of our Web sites, could grow more slowly
than expected or could decline.
In addition, the Internet could lose its commercial viability as a form of
media due to delays in the development or adoption of new standards and
protocols to accommodate increased levels of Internet activity. There can be no
assurance that the infrastructure or complementary products and services
necessary to establish and maintain the Internet as a viable commercial medium
will be developed on a timely basis or at all, or, if they are developed, that
the Internet will become a viable commercial medium for us or for our affiliates
and advertisers. If the necessary infrastructure or complementary services or
facilities are not developed, or if the Internet does not become a viable
commercial medium or platform for advertising, promotions and e-commerce, our
business, our financial condition and the results of our operations would
suffer.
Our networks may be vulnerable to unauthorized access, computer viruses and
other disruptive problems.
A party who is able to circumvent our security measures could misappropriate
proprietary information or cause interruptions in our operations. Internet and
online service providers have in the past experienced, and may in the future
experience, interruptions in service as a result of the accidental or
intentional actions of Internet users, current and former employees or others.
Moreover, any well-publicized compromise of security could deter people from
using the Internet or from using it to conduct transactions that involve
transmitting confidential information. We may be required to expend significant
capital or other resources to protect against the threat of security breaches or
to alleviate problems caused by such breaches. Although we intend to continue to
implement industry-standard security measures, there can be no assurance that
the measures we implement will not be circumvented in the future. Eliminating
computer viruses and alleviating other security problems may require
interruptions, delays or cessation of service to users accessing Web pages that
deliver our content and services, any of which could harm our business, our
financial condition and the results of our operations.
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Our storage or use of personal information about our users may expose us to
significant liability.
If third parties are able to penetrate our network security or otherwise
misappropriate our users' personal information, we could be subject to
liability. We could be held responsible for third party impersonations of our
members or other similar fraud claims. We could also be held responsible for
disclosing personal information or images, such as our disclosing such
information for unauthorized marketing purposes or for including it in our photo
gallery and Web cam section. These claims could result in litigation. Although
we carry general liability insurance, this insurance may not be available to
cover a particular claim or may be insufficient. Additionally, our user
community exists in part because of our members' willingness to provide
information about themselves. If claims, litigation, regulation or the acts of
third parties reduce our members' willingness to share this information or our
ability to use it, the attractiveness of our Web site will decline, which would
reduce our ability to generate revenue.
In addition, the Federal Trade Commission and state agencies have been
investigating various Internet companies regarding their use of personal
information. In 1998, the United States Congress enacted the Children's Online
Privacy Protection Act of 1998. The regulations promulgated under this act have
made it necessary for us to restrict membership on our sites to individuals who
are age 13 or older. In addition, the FTC, the federal government and various
states have indicated that each may enact additional regulations regarding the
use of personal information unless companies put into place and enforce their
own privacy policies. We could incur additional expenses if new regulations
regarding the use of personal information are introduced or if our privacy
practices are investigated. Furthermore, the European Union recently adopted a
directive addressing data privacy that may limit the collection and use of
information regarding Internet users. This directive and regulations enacted by
other countries may limit our ability to target advertising or collect and use
information internationally.
We may be held liable for our services and user-generated content.
We host a wide variety of communication, education, commerce and community
features that enable our users to exchange information, conduct business and
engage in various online activities. Claims could be made against us for
obscenity, negligence, defamation, libel, copyright, service mark or trademark
infringement, personal injury or on other legal grounds based on the nature and
content of information that may be posted online by our users. The law is
currently unsettled as to the liability of providers of these online services
for the activities of their users. In addition, we could be exposed to liability
with respect to the selection of listings that may be accessible through our
CollegeClub.com-branded products and properties, or through content and
materials that may be posted by users on message boards or in clubs, chat rooms
or other interactive community-building services. If any information provided
through our services contains errors, third parties could make claims against us
for losses incurred in reliance on such information. Our e-mail and other
communication services expose us to potential risks, such as liabilities or
claims resulting from unsolicited e-mail, voicemail, lost or misdirected
messages, illegal or fraudulent use of e-mail or telephone lines, or
interruptions or delays in communications service.
The imposition of potential liability for our content or services could
require us to implement measures to reduce our exposure to such liability, which
may require us to expend substantial resources or to discontinue some content or
service offerings. While we carry general liability insurance, it may not be
adequate to compensate us in the event we become liable for our content or
services.
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We may lose members and our reputation may suffer because of unsolicited bulk
e-mail, or spam.
Unsolicited bulk e-mail, or spam, and our attempts and others' attempts to
control spam could harm our business and our reputation. To the extent our
spam-blocking efforts are not effective, our systems may become unavailable or
may suffer from reduced performance. Spam-blocking efforts by others may also
result in others blocking our members' legitimate messages. Additionally, our
reputation may be harmed if e-mail addresses with our domain names are used in
this manner. Any of these events may cause members to become dissatisfied and
discontinue their use of our Web site.
Our systems may fail or be interrupted, limiting our user traffic and harming
our business.
We maintain substantially all of our computer and communications hardware at
the facilities of Simple Network Communications in San Diego, California but we
are in the process of transitioning the hosting of our Web site to another
provider. We may experience interruptions in our systems or our Web site during
this transition. Any disruption or interruption of our systems could have a
material adverse effect on our business and financial condition. Our systems and
operations could be damaged or interrupted by fire, flood, power loss,
telecommunications failure, break-ins, earthquake and similar events at that
location. Computer viruses, physical or electronic break-ins and similar
disruptions could also cause system interruptions, delays and loss of critical
data and could prevent us from providing services.
The ability of college students to access our Web site directly affects our
revenue. In the past we have experienced infrequent system interruptions that
made our Web site unavailable. Similar system interruptions may reduce the
traffic to our Web site. We expect that these interruptions will continue in the
future from time to time. We may need to add additional software and hardware
from time to time and otherwise upgrade our systems and network infrastructure
to accommodate increased traffic on our Web site and to promote the stability of
our network. We are currently in the process of upgrading our systems software
and functionality in order to increase the capacity and scalability of our Web
site to accommodate increased user traffic. We cannot accurately project the
rate or timing of any increases in traffic on our site and, therefore the
integration and timing of future upgrades are uncertain. In addition, we cannot
guarantee that our current system or functionality upgrades will be completed on
a timely basis or that they will not result in system interruptions.
Our Web site services depend on complex software developed by third parties
and us. Software often contains defects, particularly when first introduced or
when new versions are released, that cannot be detected until the software is
deployed. These defects could:
- cause service interruptions that damage our reputation;
- increase our service costs;
- cause us to lose revenue;
- discourage advertisers from placing advertisements on our Web site; or
- divert our development resources.
Our reliance on third-party telecommunications service providers also
exposes us to the risks that those providers will fail to provide service or
that their service quality will not be acceptable. In either event, we would
likely lose users who are dissatisfied with our service or face reduced traffic.
Since we do not have direct control over our telecommunications carriers'
network reliability and the quality of their service, we may not be able to
provide consistently reliable access for our users.
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If we are unable to respond to rapid technology change in the Internet market,
we will not remain competitive and may lose users.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our Web site. If we are unable,
for technical, legal, financial or other reasons, to adapt in a timely manner in
response to changing technology in the Internet market, we will not remain
competitive. The Internet is characterized by rapid technological change that
could render our existing Web site and proprietary technology and systems
obsolete. Our success will depend, in part, on our ability to:
- license leading technologies useful in our business;
- enhance our existing services;
- develop new services and technology that address the increasingly
sophisticated and varied needs of college students; and
- respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
We may experience difficulties that delay or prevent us from being able to
do any of the above. Material delays in introducing new technologies and
enhancements to our services may cause customers and advertisers to make
purchases from or visit the Web sites of our competitors. We could also incur
substantial costs if we need to modify our services or infrastructure to adapt
to these changes.
Existing and future regulation of the Internet may slow its growth, resulting in
decreased demand for our services and increased costs of doing business.
We expect more stringent laws and regulations to be enacted due to the
increasing popularity and use of the Internet and other online services.
New and existing laws and regulations are likely to address a variety of
issues, including:
- user privacy and expression;
- taxation and pricing;
- the rights and safety of children;
- intellectual property;
- information security;
- anticompetitive practices;
- the convergence of traditional channels with Internet commerce;
- property ownership;
- negligence;
- defamation;
- obscenity and indecency;
- distribution;
- the characteristics and quality of products and services;
- online content;
- data collection;
- access charges;
- liability for third party activities; and
- jurisdiction.
Regulation could limit growth in the use of the Internet generally and
decrease the acceptance of the Internet as a communications and commercial
medium.
Other federal, state, local or foreign laws, regulations and policies,
either now existing or that may be adopted in the future, may apply to our
business and may subject us to significant liability, significantly limit growth
in Internet usage, prevent us from offering particular Internet services or
otherwise harm our business, our financial condition and the results of our
operations. Although our
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online transmissions generally originate in California, the governments of other
states or foreign countries might attempt to regulate our transmissions or levy
sales or other taxes relating to our activities.
We may be subject to Sections 5 and 12 of the Federal Trade Commission Act,
or the FTC Act, which regulate advertising in all media, including the Internet,
and require advertisers to have substantiation for advertising claims before
disseminating advertisements. The FTC Act prohibits the dissemination of false,
deceptive, misleading and unfair advertising, and grants the Federal Trade
Commission, or the FTC, enforcement powers to impose and seek civil and criminal
penalties, consumer redress, injunctive relief and other remedies upon persons
who disseminate prohibited advertisements. We could be subject to liability
under the FTC Act if we were found to have participated in creating and/or
disseminating a prohibited advertisement with knowledge, or had reason to know
that the advertising was false or deceptive. The FTC recently brought several
actions charging deceptive advertising via the Internet, and is actively seeking
new cases involving advertising via the Internet.
We may also be subject to the provisions of the recently enacted
Communications Decency Act, or the CDA, which, among other things, imposes
substantial monetary fines and/or criminal penalties on anyone who distributes
or displays prohibited material over the Internet or knowingly permits a
telecommunications device under its control to be used for such purpose.
Although the manner in which the CDA will be interpreted and enforced and its
effect on our operations cannot yet be fully determined, the CDA could subject
us to substantial liability. The CDA could also limit the growth of the Internet
generally and decrease the acceptance of the Internet as an advertising medium.
Increased use of the Internet has burdened the existing telecommunications
infrastructure and has led to interruptions in phone service in areas with high
Internet use. Several telecommunications companies and local telephone carriers
have petitioned the Federal Communications Commission to regulate online service
providers in a manner similar to long distance telephone carriers and to impose
access fees. If this were to occur, the cost of communicating on the Internet
could increase substantially, potentially decreasing the use of the Internet.
The applicability of existing laws in various jurisdictions governing issues
such as property ownership, sales and other taxes, libel and personal privacy to
the Internet and other online services is uncertain and may take years to
resolve. Any new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to our
business, or the application of existing laws and regulations to the Internet
and other online services could increase our costs of doing business, discourage
Internet communications and reduce demand for our services.
We may be subject to liability for products sold through our Web site.
Consumers may sue us if any of the products sold through our Web site are
defective, fail to perform properly or injure the user. Although we intend to
include provisions in our agreements with manufacturers and companies to limit
our exposure to liability claims, these limitations may not prevent all
potential claims. Liability claims resulting from our sale of products could
require us to spend significant time and money in litigation or to pay
significant damages.
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Risks Related To This Offering
The number of shares eligible for public sale after this offering could cause
our stock price to decline.
If our existing stockholders sell their shares of our common stock in the
public market following the offering, the market price of our common stock could
decline. Moreover, the perception in the public market that our existing
stockholders might sell shares of common stock could depress the market price of
the common stock. These sales, and the possibility of these sales, could make it
more difficult for us to sell equity or equity-related securities in the future
at a time and price that we deem appropriate. Please see "Shares Eligible for
Future Sale" for further details regarding the number of shares eligible for
public sale after this offering.
The liquidity of our stock is uncertain because it has never been publicly
traded, and it could be difficult to sell your shares.
Prior to this offering, there has been no public market for our common
stock. We cannot predict if an active trading market in our common stock will
develop or how liquid that market might become. The market price of the common
stock may decline below the initial public offering price. The initial public
offering price for the shares will be determined by negotiations between us and
the representatives of the underwriters and may not be indicative of prices that
will prevail in the trading market. Please see "Underwriting" for more
information regarding how the initial public offering price was determined.
We may apply the proceeds of this offering to uses that do not increase our
operating results or market value.
We presently intend to use a portion of the net proceeds from this offering
to promote our brand, expand sales and marketing and engage in strategic
business alliances and acquisitions. The balance of the net proceeds of this
offering will be used for working capital and general corporate purposes,
including Web site expansion as more fully described in "Use of Proceeds."
General corporate purposes also include expenditures made in the day-to-day
operation of our business. Our use of proceeds is subject to change at our
management's discretion. The amounts actually expended for each of the purposes
listed above may vary significantly depending upon a number of factors,
including the progress of our marketing programs, capital spending requirements
and developments in Internet commerce.
We will have broad discretion in how we use the proceeds from this offering.
You will not have the opportunity to evaluate the economic, financial or other
information on which we base our decisions regarding how to use the proceeds
from this offering, and we may spend these proceeds in ways that do not increase
our operating results or market value. Pending our expenditure on any of these
uses, we plan to invest the proceeds of this offering in short-term,
investment-grade, interest-bearing securities. We cannot predict whether these
investments will yield a favorable return.
The market price of our stock may be particularly volatile because of the
industry in which we operate.
The market prices of the securities of Internet-related companies have been
especially volatile and have experienced extreme volume fluctuations. Volatility
in the market price of our stock could lead to claims against us, including
securities class action litigation. If we were the object of any
21
<PAGE>
litigation, it could result in substantial costs and a diversion of our
management's attention and resources. The trading price of our common stock
could be subject to wide fluctuations in response to a number of factors,
including:
- actual or anticipated variations in quarterly results of operations;
- the introduction of new or enhanced offerings by us or our competitors;
- changes in financial estimates or recommendations by securities analysts;
- conditions or trends in the Internet and online commerce industries;
- changes in the market valuations of other Internet companies;
- announcements by us of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
- additions or departures of key personnel;
- sales of common stock; and
- general political and economic conditions.
In addition, the stock market in general, and the Nasdaq National Market and
the market for Internet and technology companies in particular, have experienced
extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of these companies. These broad
market and industry factors may adversely affect the market price of our common
stock, regardless of our operating performance. The trading prices of the stocks
of many Internet and technology companies are at or near historical highs and
reflect price-earnings ratios substantially above historical levels. These
trading prices and price earnings ratios may not be sustained. In addition, our
stock may not trade at the same levels as other Internet or Internet-related
companies' stock.
Our controlling stockholders may make decisions which you do not consider to be
in your best interest.
We anticipate that our principal stockholders, executive officers, directors
and entities affiliated with them will beneficially own, in the aggregate,
approximately % of our outstanding common stock following the completion of
this offering. These stockholders will be able to exercise control over all
matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership may also have the effect of delaying or preventing another entity
from acquiring or merging with us. Please see "Management" and "Principal
Stockholders" for detailed information on the beneficial ownership of the
principal stockholders, executive officers, directors and affiliates.
Anti-takeover provisions in our charter documents and Delaware law could delay,
defer or prevent a tender offer or takeover attempt that you consider to be in
your best interest.
Anti-takeover provisions of our restated certificate of incorporation, our
restated bylaws and Delaware law could make it more difficult for a third party
to acquire us. As a result, we could delay, defer or prevent a takeover attempt
or third party acquisition that our stockholders consider in their best
interest, including an attempt that might result in a premium over the market
price for the shares held by our stockholders. Please see "Description of
Capital Stock" for detailed information on these provisions.
22
<PAGE>
You will suffer immediate and substantial dilution in the value of your shares.
The initial public offering price of our common stock will be substantially
higher than the net tangible book value per share of our common stock
immediately after this offering. The exercise of outstanding options and
warrants may result in further dilution. Please see "Dilution" for detailed
information on dilution resulting from this offering.
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 may be
forward-looking statements that are not based on historical facts. We may
identify these statements by the use of words such as "believe," "expect,"
"will," "anticipate," "intend" and "plan" and similar expressions. 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, including those
discussed under "Risk Factors." We are not obligated to update or revise these
forward-looking statements to reflect new events or circumstances.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares offered
by us will be approximately $ million, assuming an initial public offering
price of $ per share and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us. If the
underwriters' over-allotment is exercised in full, we estimate that such net
proceeds will be approximately $ million.
We expect to use the net proceeds of this offering to fund the continued
growth and expansion of our business, build our brand, expand our Web site and
technology infrastructure and for working capital and other general corporate
purposes. Additionally, we plan to expand both horizontally into related markets
and internationally. We also anticipate future strategic alliances and
acquisitions that may require cash investments at closing as well as on an
ongoing basis for operations.
We are not currently able to estimate the allocation of proceeds
specifically, and our management will have broad discretion over the allocation
of proceeds of this offering. Pending use of the net proceeds of the offering,
we intend to invest the funds in short-term, investment-grade, interest-bearing
securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
do not expect to pay any cash dividends for the foreseeable future. We currently
intend to retain any future earnings to support operations and to finance the
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of our board of directors and will be dependent on
financial condition, operating results, capital requirements and other factors
that our board deems relevant.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999,
- on an actual basis;
- on a pro forma basis as if the following had been effected on
December 31, 1999:
(1) the issuances of 5,819,978 shares of our common stock in connection
with the acquisition of Versity.com;
(2) the issuance of 970,874 shares of our Series C-2 convertible
preferred stock in connection with our recent strategic relationship
with NBC and the conversion of these shares into common stock on a
one-for-one basis; and
(3) the conversion of all outstanding preferred stock into common stock
on a one-for-one basis prior to the consummation of this offering;
and
- on a pro forma as adjusted basis to reflect the estimated net proceeds
from the sale of shares offered hereby at an assumed initial public
offering price of $ per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses
payable by us.
<TABLE>
<CAPTION>
December 31, 1999
------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- ----------- -----------
(unaudited) (unaudited)
(in thousands, except share data)
<S> <C> <C> <C>
Long-term debt, less current portion........................ $ 1,353 $ 1,353
-------- -------- --------
Convertible preferred stock:
Preferred stock, $0.001 par value, 26,213,537 shares
authorized (actual); 26,213,537 shares authorized (pro
forma) and 10,000,000 (pro forma as adjusted):
Series A convertible preferred stock, 1,536,537 shares
authorized, 1,536,516 shares issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).................. 2,110
Series B convertible preferred stock, 8,000,000 shares
authorized, 7,409,566 shares issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).................. 16,478
Series B-1 convertible preferred stock, 777,000 shares
authorized, 761,259 issued and outstanding (actual); no
shares authorized, issued or outstanding (pro forma and
pro forma as adjusted)................................. 521
Series C convertible preferred stock, 12,700,000 shares
authorized, 11,322,897 shares issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).................. 36,590
Series C-1 convertible preferred stock, 1,700,000 shares
authorized, 1,636,977 shares issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).................. 5,664
-------- -------- --------
61,363
Stockholders' equity:
Common stock, $0.001 par value, 81,700,000 shares
authorized (actual and pro-forma), 19,972,895 shares
issued and outstanding (actual); 49,430,962 shares issued
and outstanding (pro forma); and 120,000,000 shares
authorized, shares issued and outstanding (pro
forma as adjusted)....................................... 20 50
Additional paid-in capital................................ 31,070 127,117
Stock-based compensation.................................. (8,856) (8,856)
Accumulated deficit....................................... (35,002) (35,002)
-------- -------- --------
Total stockholders' equity (deficit)........................ (12,768) 83,309
-------- -------- --------
Total capitalization.................................... $ 49,948 $ 84,662
======== ======== ========
</TABLE>
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<PAGE>
The table above excludes:
- 784,422 shares of our common stock issuable upon the exercise of options
assumed in connection with our acquisition of Versity.com;
- up to 3,449,384 additional shares of our common stock that may be issued
in connection with our acquisition of Versity.com;
- up to 464,910 additional shares of our common stock issuable upon the
exercise of options that may be issued in connection with our acquisition
of Versity.com;
- 11,722,070 shares of our common stock issuable upon the exercise of
options outstanding at December 31, 1999 with a weighted average exercise
price of $0.74 per share;
- 55,435 shares of our common and preferred stock issued on March 27, 2000
under letter agreements with existing stockholders;
- 2,538,448 shares of our common and preferred stock issuable upon the
exercise of warrants outstanding at December 31, 1999 with a weighted
average exercise price of $1.50 per share;
- 1,880,503 shares of our common stock available for issuance under our
stock option plans as of December 31, 1999, which amount was increased by
an aggregate of 12,000,000 shares in January, February and April 2000
subject to stockholder approval; and
- 500,000 shares of our common stock issuable under our employee stock
purchase plan approved by our board of directors in February 2000 subject
to stockholder approval. For a description of our stock option plans,
please see "Management--Benefit Plans."
From January 1, 2000 through April 3, 2000, we have granted additional
options to purchase an aggregate of 3,958,667 shares of our common stock with a
weighted average exercise price of $2.00 per share under our stock option plans.
This information in the table above should be read in conjunction with our
financial statements and the notes relating to such statements appearing
elsewhere in this prospectus. Please see "Management--Benefit Plans,"
"Description of Capital Stock" and the more detailed financial statements and
notes appearing elsewhere in this prospectus.
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<PAGE>
DILUTION
Our historical net tangible book value as of December 31, 1999 was
approximately $29.0 million, or $1.45 per share, based on the number of common
shares outstanding as of December 31, 1999. Historical net tangible book value
per share is equal to the amount of our total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding as of
December 31, 1999.
Our pro forma net tangible book value as of December 31, 1999 was
approximately $35.6 million, or $0.82 per share, based on the pro forma number
of shares outstanding as of December 31, 1999 of 42,640,110, calculated after
giving effect to the automatic conversion of 22,667,215 shares of our preferred
stock outstanding at December 31, 1999 into shares of our common stock on a
one-for-one basis.
Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of our
common stock in this offering after giving effect to the sale of shares in
this offering at an assumed initial public offering price of $ per share.
This represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution in pro forma
net tangible book value of $ per share to new investors. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............ $
Pro forma net tangible book value per share as of
December 31, 1999....................................... $
Increase attributable to new investors...................
------
Pro forma net tangible book value per share after the
offering.................................................
------
Net tangible book value dilution per share to new
investors................................................ $
======
</TABLE>
If the underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value per share after this offering would be $ per
share, the increase in net tangible book value per share to existing
stockholders would be $ per share and the dilution in net tangible book
value to new investors would be $ per share.
The following table summarizes, on a pro forma basis as of December 31,
1999, after giving effect to the automatic conversion of all outstanding shares
of preferred stock into common stock, the total number of shares of common stock
purchased from us, the total consideration paid to us and the average price per
share paid by existing stockholders and by new investors (based upon an assumed
initial public offering price of $ per share and before deducting estimated
underwriting discounts and commissions and estimated offering expenses):
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------- -------------------- Average Price
Number Percent Amount Percent Per Share
-------- -------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... % $ % $
New investors............
------- ----- -------- ----- ------
Total.................. 100.0% $ 100.0% $
======= ===== ======== ===== ======
</TABLE>
The tables and calculations above as of December 31, 1999 exclude:
- 5,819,978 shares of our common stock issued in connection with our
acquisition of Versity.com in April 2000;
- 784,422 shares of our common stock issuable upon the exercise of options
issued in connection with our acquisition of Versity.com;
26
<PAGE>
- up to 3,449,384 additional shares of our common stock that may be issued
in connection with our acquisition of Versity.com;
- up to 464,910 additional shares of our common stock issuable upon the
exercise of options that may be issued in connection with our acquisition
of Versity.com;
- 970,874 shares of our Series C-2 preferred stock issued to NBC on
March 27, 2000 in connection with a recent strategic relationship;
- 11,722,070 shares of our common stock issuable upon the exercise of
options outstanding at December 31, 1999 with a weighted average exercise
price of $0.74 per share;
- 55,435 shares of our common and preferred stock issued on March 27, 2000
under letter agreements with existing stockholders;
- 2,538,448 shares of our common and preferred stock issuable upon the
exercise of warrants outstanding at December 31, 1999 with a weighted
average exercise price of $1.50 per share;
- 1,880,503 shares of our common stock available for issuance under our
stock option plans as of December 31, 1999, which amount was increased by
an aggregate of 12,000,000 shares in January, February and April 2000
subject to stockholder approval; and
- 500,000 shares of our common stock issuable under our employee stock
purchase plan as approved by our board of directors in February 2000
subject to stockholder approval. For a description of stock options plans,
please see "Management--Benefit Plans."
From January 1, 2000 through April 3, 2000, we have granted additional
options to purchase an aggregate of 3,958,667 shares of our common stock with a
weighted average exercise price of $2.00 per share under our stock option plans.
27
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and related notes
beginning on page F-1 of this prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" beginning on page 30
of this prospectus. The selected consolidated statement of operations data for
each of the three years ended December 31, 1999, and the selected consolidated
balance sheet data at December 31, 1998 and 1999, are derived from our audited
financial statements included elsewhere in this prospectus, which have been
audited by PricewaterhouseCoopers LLP, independent accountants. The selected
consolidated statement of operations data for the year ended December 31, 1996,
and the selected consolidated balance sheet data at December 31, 1996 and 1997
are derived from our audited financial statements not included in this
prospectus. The selected consolidated statement of operations data for the year
ended December 31, 1995, and the selected consolidated balance sheet data at
December 31, 1995, are derived from unaudited financial statements not included
in this prospectus. Our unaudited financial statements have been prepared on a
basis consistent with the audited financial statements appearing elsewhere in
this prospectus and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for fair presentation
of such data. The historical results are not necessarily indicative of results
to be expected for any future periods.
The unaudited pro forma information assumes the conversion of all
outstanding shares of preferred stock into common stock and reflects our
acquisitions of Collegestudent.com, Campus24 and Versity.com and has been
derived from our unaudited pro forma combined condensed financial statements
included elsewhere in this prospectus. The unaudited pro forma combined
condensed statement of operations data is derived from our statement of
operations data combined with the statement of operations data of
Collegestudent.com, Campus24 and Versity.com for the year ended December 31,
1999, giving effect to the acquisitions as if they had occurred on January 1,
1999. The unaudited pro forma combined condensed balance sheet data presents our
balance sheet data combined with the balance sheet data of Versity.com as of
December 31, 1999, giving effect to the acquisition as if it had occurred on
December 31, 1999. The unaudited pro forma information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the transactions had
been consummated at the dates indicated, nor is it necessarily indicative of the
future operating results or financial position of the combined companies.
28
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, Pro
----------------------------------------------------- Forma
1995 1996 1997 1998 1999 1999
--------- -------- -------- -------- -------- ---------
unaudited unaudited
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenue:.......................... $ 1 $ 196 $ 802 $ 332 $ 2,913 $ 4,079
Costs and expenses:
Product development and technology.... 112 269 859 763 3,483 6,896
Sales and marketing................... 186 1,012 1,319 930 12,503 15,247
General and administrative............ 138 974 807 868 7,010 10,055
Depreciation and amortization......... 1 145 354 344 1,498 15,916
Stock-based compensation.............. -- -- 1,545 1,156 4,151 4,794
------- ------- ------- ------- -------- --------
Total expenses...................... 437 2,400 4,884 4,061 28,645 52,908
------- ------- ------- ------- -------- --------
Loss from operations.................... (436) (2,204) (4,082) (3,729) (25,732) (48,829)
Other income (expense), net............. 7 (29) (130) (94) (33) (116)
------- ------- ------- ------- -------- --------
Net loss................................ $ (429) $(2,233) $(4,212) $(3,823) $(25,765) $(48,945)
======= ======= ======= ======= ======== ========
Basic and diluted net loss per
share................................ $ (0.03) $ (0.15) $ (0.27) $ (0.24) $ (1.57) $ (1.00)
======= ======= ======= ======= ======== ========
Shares used in per share calculations:
Basic and diluted..................... 15,000 15,009 15,372 16,035 16,388 49,035
======= ======= ======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
As of December 31, Pro
----------------------------------------------------- Forma
1995 1996 1997 1998 1999 1999
--------- -------- -------- -------- -------- ---------
unaudited unaudited
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............. $ 7 $ 56 $ -- $ 409 $ 29,740 $ 36,290
Working capital (deficit)............. 5 (305) (1,533) (3,982) 24,669 30,868
Total assets.......................... 28 585 415 1,251 56,432 85,677
Total liabilities..................... 23 1,737 2,024 5,393 7,837 8,301
Convertible preferred stock........... -- -- 2,108 2,110 61,363 --
Total stockholders' equity
(deficit)............................ 5 (1,152) (3,717) (6,252) (12,768) 77,376
</TABLE>
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ TOGETHER WITH "SELECTED CONSOLIDATED FINANCIAL
DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING
ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND ANALYSIS MAY CONTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS.
THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN ANY SUCH
FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, INCLUDING THOSE UNDER
"RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
Overview
We are an integrated communications, education and media Internet company
that operates the leading online destination targeting college students. Our
members constitute a valuable demographic group because many buying habits are
set during the college years. We provide our members with an integrated
communications solution, an interactive online community, academic tools,
engaging content and specialized online commerce opportunities that expand and
enrich a college student's experience and provide our sponsors and merchants
with access to an attractive demographic group. In addition to being a leader in
facilitating student-to-student interaction, we have, through the development of
proprietary technologies and strategic relationships, established a centralized
hub that acts as an intermediary between students and key elements of the
college experience. Our ability to track and aggregate key demographic data such
as consumer preferences, interests and buying patterns is valuable to
advertisers and sponsors in targeting their marketing message and developing new
products.
We have incurred significant net losses and negative cash flows from
operations since our inception. As of December 31, 1999, we had an accumulated
deficit of $35.0 million. We intend to continue to make significant financial
investments in our company, including product, technology and infrastructure
development and hiring new personnel. As a result, we believe that we will
continue to incur significant operating losses and negative cash flows for the
foreseeable future.
Our revenue is principally generated from the sale of marketing campaigns
for sponsors and merchants targeting college students. Revenue includes fees for
sponsorships and other marketing programs under contracts in which we commit to
provide customers with promotional opportunities in addition to revenue from
traditional banner advertising. These sponsorship agreements typically provide
for the delivery of special content, services or promotional offers. We also
charge fees to design and develop promotional programs that we technologically
integrate into our Web site. In addition to fixed fees earned under these
contracts, we typically receive incremental payments for traffic driven to an
advertiser's site. Fees from these types of contracts, including any up-front
nonrefundable fees specified in the contract relating to the up-front design
work, are recognized on a straight-line basis over the life of the contract. We
also derive revenue from short-term contracts for banner advertisements, buttons
and textlinks. Under these contracts, we guarantee advertisers a minimum number
of impressions for which we will receive a fixed fee. This form of revenue is
recognized at the lesser of the ratio of impressions delivered over total
guaranteed impressions or the straight-line basis over the term of the contract.
To the extent that minimum guaranteed impression levels or other obligations are
not met, we defer recognition of the corresponding revenue until guaranteed
levels are achieved. In accordance with EITF 99-17, we have not recognized
revenue related to barter transactions.
We also generate commerce revenue by charging transaction fees to merchants
based on a percentage of purchase price, for lead generation or for product
positioning on our Web site. We structure our commerce relationships so that we
do not directly incur the cost and challenges of product fulfillment and
distribution. To date we have generated limited commerce revenue.
30
<PAGE>
In the past, we expanded the scope of our business to include professional
design and hosting of third-party Web sites in order to meet our financial
obligations; however, we no longer perform these services. Instead, we currently
focus on building the communications, education, commerce and community features
of our Web site.
Acquisition of Versity.com
In April 2000, we acquired privately held Versity.com, a leading provider of
Web-based educational tools for the college student market. Versity.com's
products include online lecture notes and class management tools for both
faculty and students. In connection with this acquisition, we issued 5,819,978
shares of our common stock and options to acquire 784,422 shares of our common
stock in exchange for all outstanding shares of Versity.com's capital stock and
outstanding options and warrants to acquire Versity.com capital stock. Up to
3,449,384 additional shares of our common stock and options to acquire up to
464,910 additional shares of our common stock may be issued to Versity.com
stockholders and optionholders in the event that we do not meet specified
valuation milestones.
Versity.com is a Delaware corporation, incorporated in February 1999, and
introduced its first product, Class Notes, in February 1999. Versity.com had
total revenue of $9,000 for the period from inception to June 30, 1999 and
$22,000 for the six months ended December 31, 1999. Versity.com's total
operating expenses were $0.6 million for the period from inception through
June 30, 1999 and $5.6 million for the six month period ended December 31, 1999.
As of December 31, 1999, Versity.com had an accumulated deficit of
$6.3 million. As of December 31, 1999, Versity.com had 140 employees.
We are accounting for the Versity.com acquisition using the purchase method
of accounting. Under the purchase method, the purchase price of $32.9 million is
allocated to the assets acquired and liabilities assumed from Versity.com.
$22.2 million of the purchase price is being recorded on our balance sheet as
intangible assets and goodwill. As a result, we expect to record amortization
expenses of $4.9 million for 2000, $7.4 million for 2001 and $7.4 million for
2002. These charges will delay and thereafter reduce our profitability.
Results of Operations
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
TOTAL REVENUE. Our total revenue increased to $2.9 million for the year
ended December 31, 1999 from $0.3 million for the year ended December 31, 1998.
The increase was primarily related to the increased number of sponsors and
advertisers purchasing space on our Web site as well as increased sales and
marketing efforts. Our revenue decreased to $0.3 million for the year ended
December 31, 1998 from $0.8 million for the year ended December 31, 1997. During
1997, we had $0.7 million in professional Web site design and hosting services
revenue, generated to provide working capital and support the growth of our Web
site. We did not generate revenue from professional services in 1998 as we
focused our efforts on enhancing the features of our Web site and gaining
members. In 1999, one customer accounted for over 17% of our revenue under a
one-time licensing of our software. In 1998 and 1997, no customer accounted for
over 10% of revenue. We derive all of our revenue from operations in the United
States.
PRODUCT DEVELOPMENT AND TECHNOLOGY. Product development and technology
expenses consist primarily of employee compensation and outside consulting
services relating to developing and enhancing the features and functionality of
our Web site. Product development and technology expenses increased to
$3.5 million for the year ended December 31, 1999 from $0.8 million for the year
ended December 31, 1998 and $0.9 million for the year ended December 31, 1997.
This increase is primarily due to increased hiring of production and technology
personnel and the use of
31
<PAGE>
outside consultants to further enhance our Web site. To date, all internal
product development costs have been expensed as incurred. We believe that
significant investment in product development is required to remain competitive.
As a result, we expect to incur increased product development expenses in
absolute dollars in future periods.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
advertising and other marketing-related expenses, including distribution costs,
compensation and employee-related expenses, sales commissions and travel costs.
Sales and marketing expenses increased to $12.5 million for the year ended
December 31, 1999 from $0.9 million for the year ended December 31, 1998. This
increase is primarily due to higher advertising and distribution costs
associated with our aggressive brand-building strategy and an increase in
compensation expense associated with growth in our direct sales force and
marketing personnel. Sales and marketing expenses decreased to $0.9 million for
the year ended December 31, 1998 from $1.3 million for the year ended
December 31, 1997. This decrease is primarily due to a decrease in personnel in
sales and marketing as we de-emphasized our professional services to focus on
our CollegeClub.com Web site. We anticipate that sales and marketing expenses
will increase in future periods as we continue to pursue an aggressive
brand-building strategy through advertising and distribution, expand operations
and build our direct sales organization.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel and related costs for corporate functions including
accounting and finance, human resources, facilities and legal. General and
administrative expenses increased to $7.0 million for the year ended
December 31, 1999 from $0.9 million for the year ended December 31, 1998 and
$0.8 million for the year ended December 31, 1997. These increases are primarily
due to the hiring of additional personnel and related recruitment fees in
addition to increased outside consulting, legal and accounting fees required to
grow our business. We expect general and administrative expenses to increase as
a result of an increase in personnel and increased fees for professional
services.
DEPRECIATION AND AMORTIZATION. Depreciation of property and equipment is
provided over their estimated useful lives, generally two to three years using
the straight-line method. Intangible assets, which consist primarily of goodwill
resulting from businesses acquired, are being amortized over a period of
approximately three years using the straight-line method. Depreciation and
amortization expenses increased to $1.5 million for the year ended December 31,
1999 from $0.3 million for the year ended December 31, 1998 and $0.4 million for
the year ended December 31, 1997. The increase in 1999 reflects the growth in
capital additions as well as goodwill amortization relating to our acquisitions
of Collegestudent.com and Campus24.
STOCK-BASED COMPENSATION. Stock-based compensation represents the aggregate
differences, at the dates of the grant, between the respective exercise prices
of the stock options and the deemed fair value of the underlying stock.
Stock-based compensation is amortized using the graded amortization method over
the vesting period of the related options, which is generally five years.
Stock-based compensation expenses increased to $4.2 million for the year ended
December 31, 1999 from $1.2 million for the year ended December 31, 1998. This
increase is primarily due to increased options granted to new and existing
employees as well as an increase in fair market value of the underlying stock.
Stock-based compensation expenses decreased to $1.2 million for the year ended
December 31, 1998 from $1.5 million for the year ended December 31, 1997. This
decrease was due to a reduction in the number of employees hired in 1998.
OTHER INCOME (EXPENSE) NET. Other expense, net, decreased to $(33,000) for
the year ended December 31, 1999 from other expense, net, of $(94,000) for the
year ended December 31, 1998 and $(130,000) for the year ended December 31,
1997. This decrease is primarily due to increased interest income earned on cash
proceeds from issuances of convertible preferred stock that offset interest
expenses relating to capital equipment leases.
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<PAGE>
PROVISION FOR INCOME TAXES. No provision for federal or state income taxes
was recorded through December 31, 1999 as we incurred net operating losses from
inception through that date. As of December 31, 1999, we had approximately
$25.8 million for both federal and state net operating loss carry forwards which
expire on various dates beginning 2011 and 2004, respectively. Due to the
uncertainty regarding the ultimate use of the net operating loss carry forwards,
we have not recorded any benefit for the losses and a valuation allowance has
been recorded for the entire amount of net deferred tax assets. In addition,
annual use of our net operating losses will be limited due to cumulative changes
in ownership as required under Section 382 of the Internal Revenue Code.
Liquidity and Capital Resources
We have funded our operations and met our capital requirements primarily
through issuance of convertible debt, long term debt, convertible preferred
stock and common stock, which resulted in cumulative proceeds of $56.3 million
through December 31, 1999. We had $29.7 million in cash and cash equivalents at
December 31, 1999 as compared to $0.4 million at December 31, 1998.
In September 1999, we entered into a master lease agreement to provide
financing for the acquisition and lease of up to $2.3 million of computer
equipment and software. The lease will expire in January 2003. As of February
2000, the lease facility was fully drawn. We issued to the lessor warrants to
purchase 60,000 shares of common stock at a price equal to $3.56 per share,
exercisable over a period of seven years. The master lease agreement does not
include any financial covenants.
Net cash used in operating activities increased to $19.1 million for the
year ended December 31, 1999 from $1.0 million for the year ended December 31,
1998. This increase was primarily due to the increased operating net loss,
offset in part by increased non-cash charges including depreciation,
amortization and stock-based compensation charges. Net cash used in operating
activities decreased to $1.0 million for the year ended December 31, 1998 from
$1.9 million in 1997. This decrease was primarily due to a decrease in operating
net loss, offset in part by decreased non-cash charges relating to stock-based
compensation charges.
Net cash used in investing activities increased to $1.9 million for the year
ended December 31, 1999 from $0.3 million for the year ended December 31, 1998
and $14,000 for the year ended December 31, 1997. This increase was primarily
due to increased purchases of property and equipment and issuance of notes
receivable, partially offset by cash acquired in business combinations. We
expect to continue to invest in capital equipment and information systems to
support the growth of our Web site. Specifically, we anticipate investing
approximately $5.0 million in the purchase of hardware and software during the
first half of 2000 to accommodate such growth. We expect to fund these
expenditures through a combination of third-party financing and working capital.
Net cash provided by financing activities increased to $50.4 million for the
year ended December 31, 1999 from $1.7 million for the year ended December 31,
1998. Of this increase, approximately $7.0 million of the net proceeds were
received through the sale of Series B and B-1 convertible preferred stock,
approximately $27.0 million of the net proceeds were received through the sale
of Series C convertible preferred stock and approximately $17.9 million of the
net proceeds were received through the issuance of convertible debt that has
since converted into Series B and Series C convertible preferred stock offset,
in part by payments of $1.5 million on long-term debt and capital lease
obligations in 1999. Net cash provided by financing activities decreased to
$1.7 million for the year ended December 31, 1998 from $1.8 million for the year
ended December 31, 1997. The net cash provided by financing activities for 1998
was primarily due to the issuance of long-term debt of $1.6 million and the
issuance of common stock of $0.1 million. The
33
<PAGE>
net cash provided by financing activities for 1997 was primarily due to the
issuance of long-term debt of $0.4 million and the proceeds from the sale of
Series A convertible preferred stock of $1.4 million and common stock of
$0.1 million.
We expect that the net proceeds from this offering, together with available
funds, will be sufficient to meet our anticipated needs for working capital and
capital expenditures for at least the next 12 months. We cannot guarantee,
however, that the assumption underlying our projections for revenue and expenses
will prove to be accurate. If we fail to achieve our projected revenue targets
or encounter unexpected costs or strategic opportunities, we may seek additional
funds to support our working capital requirements, increase our staffing, make
significant capital expenditures, make acquisitions of complementary businesses,
products and technologies and expand our sales and marketing programs or for
other purposes. Adequate funds may not be available when needed or may not be
available on favorable terms. If additional funds are raised through the
issuance of equity securities, dilution to existing stockholders may result. If
insufficient funds are available, we may be unable to support our working
capital requirements, enhance our Web site and brand, make acquisitions of
complementary business or respond to actions by competitors, any of which could
materially harm our business, operating results and financial condition.
Quarterly Results of Operations
The following table sets forth our unaudited quarterly statement of
operations data for the six quarters ended December 31, 1999. The information
for each of these quarters has been prepared on substantially the same basis as
the audited financial statements included elsewhere in this prospectus, and in
the opinion of management, include all adjustments necessary for a fair
presentation of the results of operations for such periods. These results are
not necessarily indicative of the results to be expected in the future, and the
results of interim periods are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1998 1998 1999 1999 1999 1999
-------------- -------------- ---------- --------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
Total revenue..................... $ 56 $ 207 $ 97 $ 215 $ 488 $ 2,113
Costs and expenses:
Product development and
technology..................... 157 305 301 521 1,125 1,536
Sales and marketing............. 207 489 754 1,987 4,105 5,657
General and administration...... 146 514 510 1,090 1,302 4,108
Depreciation and amortization... 65 83 120 126 261 991
Stock-based compensation........ 253 212 172 1,417 1,112 1,450
----- ------- ------- ------- ------- --------
Total expenses................ 828 1,603 1,857 5,141 7,905 13,742
Loss from operations.............. (772) (1,396) (1,760) (4,926) (7,417) (11,629)
Other income (expense), net....... (9) (49) (12) (114) 96 (3)
----- ------- ------- ------- ------- --------
Net loss.......................... $(782) $(1,445) $(1,772) $(5,040) $(7,321) $(11,632)
===== ======= ======= ======= ======= ========
</TABLE>
We have historically experienced seasonality, with use of our Internet
services being somewhat lower during the months in which students are not at
school. We believe seasonality favorably impacts usage of our Web site during
the first and fourth calendar quarters. We may experience seasonal fluctuations
in our total revenue and the risks associated with those fluctuations in the
future.
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<PAGE>
In addition, our revenue and operating results are likely to vary
significantly from quarter to quarter in the future due to a number of factors,
many of which are beyond our control. These factors include:
- the ability to attract and retain new members, customers and advertisers;
- new sites, services or products introduced by us or our competitors;
- the timing and uncertainty of sales cycles;
- the mix of online advertisements sold;
- seasonal weakness in advertising sales;
- the level of Web and online service usage;
- the ability to attract, integrate and retain qualified personnel;
- technical difficulties or system downtime affecting the Internet generally
or the operation of our business; and
- general economic conditions as well as economic conditions specific to
Internet companies.
Our revenue for the foreseeable future will be substantially dependent on
advertising and sponsorship contracts, many of which are short-term and subject
to cancellation without penalty until shortly before delivery. In addition, we
derive a material portion of our revenue from sales of advertising to a limited
number of customers. Accordingly, the loss of any advertising relationship, or
the cancellation or deferral of advertising orders, could harm our results in
any one quarter. As a result of these and other factors, period-to-period
comparisons of our operating results should not be relied upon as an indication
of future performance.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. Generally, it
requires that an entity recognize all derivatives as either an asset or
liability and measure those instruments at fair value, as well as identify the
conditions for which a derivative may be specifically designed as a hedge. SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000. We do not
currently engage or plan to engage in any derivative or hedging activities.
Disclosures About Market Risk
Our exposure to market risk is limited to interest income sensitivity, which
is affected by changes in the general level of interest rates in the United
States, particularly since the majority or our investments are in short-term
debt securities issued by corporations. We place our investments with high
quality issuers and limit the amount of credit exposure to any one issuer. Due
to the nature of our short-term investments, we believe that we are not subject
to any material market risk exposure.
We do not have any foreign currency hedging or other derivative financial
instruments as of December 31, 1999.
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<PAGE>
BUSINESS
The Company
We are an integrated communications, education and media Internet company
that operates the leading online destination targeting college students. We
offer both students and educators proprietary Web-based communication,
education, commerce and community tools as well as engaging content that enhance
and simplify the college experience. We have registered over 2 million members
and during January 2000 our Web site generated approximately 227 million page
views according to PC Data. During the same period, Media Metrix rated our Web
site as the stickiest site on the Internet for users ages 18 through 24 as
measured by minutes per user per month.
We provide centralized access to what we believe is the world's largest
online community of students to sponsors and merchants, as well as to college
faculty and staff. We attract students through the combination of our over 1,200
student marketing representatives, word-of-mouth and advertising. We serve and
retain students by offering them an integrated suite of proprietary
communication, education and community tools as well as exclusive commerce
offerings. We derive revenue primarily from the sale of sponsorships,
advertising and other promotional services and also generate fees from our
various commerce relationships.
Through the development of proprietary technologies and strategic
relationships, we have established a centralized hub that acts as an
intermediary between students and key elements of the college experience, such
as:
- OTHER STUDENTS. Our proprietary technology allows students to instantly
identify other students based on specific search criteria such as major,
school, location, interests and hobbies. After identifying students based
upon these profiles, users can then choose to communicate directly with
them using our proprietary instant messenger or universal integrated
e-mail and voicemail system which can be accessed either through the
Internet or telephonically. We also provide other communications tools
that allow students to share their college experience with each other.
- CAMPUS BOOKSTORES. Through our exclusive relationship with the National
Association of College Stores, our proprietary turn-key commerce
infrastructure enables campus bookstores at over 100 universities such as
Cornell and Princeton to sell books, school supplies and apparel over the
Internet.
- LENDERS AND FINANCIAL AID OFFICES. Through our eStudentLoan.com division
we provide students centralized access to various student loan providers
including Bank of America and The Student Loan Corporation, an affiliate
of Citibank. We also provide financial aid offices at various universities
with access to software and Web-based technology that enables them to more
effectively manage the financial aid process.
- FACULTY AND ADMINISTRATORS. We provide professors, administrators and
students with Web-based access to class-specific information and course
management tools currently used throughout a number of campuses such as
Stanford and Harvard. We also offer student-generated lecture notes for
over 6,900 classes on campuses throughout the country.
In order to provide our members with leading services and product offerings,
we have entered into key strategic alliances. Specifically, we have formed a
relationship with Sony Corporation of America to provide us with proprietary
content and advice regarding the development of the broadband market as well as
to assist in potential international expansion. Similarly, we have entered into
strategic alliances with Ericsson to extend our proprietary tools to wireless
consumer devices and with NBC to promote us within their online and broadcast
networks.
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<PAGE>
Industry Background
THE INTERNET HAS EMERGED AS A GLOBAL MEDIUM FOR COMMERCE, COMMUNITY,
ADVERTISING AND EDUCATION
The Internet has emerged as a significant global medium enabling millions of
people to communicate and conduct commerce. The number of Internet users, the
amount of time they spend online and the amount of commerce transacted over the
Internet is growing rapidly. Jupiter Communications estimates that the number of
Internet users worldwide will grow from 232 million at the end of 1999 to
approximately 498 million by the end of 2003. Jupiter Communications also
estimates that online consumer commerce in the United States will increase from
$14.9 billion in 1999 to $78.0 billion by the year 2003.
The interactive nature of the Internet and its real-time communication
abilities has resulted in dramatic growth in online communities. Online
communities are groups of people united by common interests who congregate at
Web sites, news groups or other online locales. Members of these communities can
create relevant content for other users who share common interests. Leading
communities develop a loyal following of registered active users who typically
disclose personal information and preferences to other users and the entity
maintaining the Web site. This information enhances member interaction,
personalizes the online experience and encourages repeat visits.
Online communities provide a forum for sponsors and merchants to reach
demographically concentrated audiences with targeted and personalized messages
or offerings. Internet advertisers can quickly adjust advertising content in
response to market factors, current trends and consumer feedback. Jupiter
Communications estimates that Internet advertising in the United States will
grow from $3.2 billion in 1999 to more than $11.5 billion in 2003.
Education is a major component of United States domestic spending,
representing over $584 billion for the 1997-98 school year according to the
National Center for Education Statistics. Education impacts most of society, yet
we believe only a small amount of educational content and services are currently
delivered via the Internet. We believe that there are a number of opportunities
for the Internet to automate and facilitate traditional educational processes.
The Internet provides the ability for students, educators and administrators to
communicate and share information more efficiently, which we believe enhances
and simplifies the educational process.
COLLEGE STUDENTS SEEK AN INTEGRATED INTERNET SOLUTION
College students face numerous challenges and demands unique to the college
experience. Students are attempting to balance social and financial issues with
academic demands and are seeking solutions that simplify and enhance their
lives. Increasingly, college students, with their propensity to adopt new
technologies, are using the Internet to enhance the educational experience,
simplify the academic process and buy and sell goods and services more
conveniently. Jupiter Communications' research indicates the following:
- the average college student spends approximately 7.8 hours a week online;
- Internet penetration among college students was 90% in 1999, and is
expected to increase to 95% in 2003; and
- in 1998 college students made online purchases of $429 million, with this
number expected to grow to $2.5 billion in 2002.
We believe that a significant opportunity exists to provide an
Internet-based integrated education-based community, communications and commerce
solution to college students.
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COLLEGE STUDENTS ARE AN IMPORTANT AUDIENCE TO SPONSORS AND MERCHANTS
College students represent a significant and growing segment of the online
audience. They also represent an important demographic group to sponsors and
merchants because we believe the college years are the period during which
lifetime buying habits and brand loyalties are established. According to the
United States Census Bureau, as of September 1999, there were over 15.5 million
college students attending colleges and universities in the United States. In
1998, Jupiter Communications estimated that annual college student spending
power was approximately $120 billion. Furthermore, the National Association of
College Stores estimates that for the 1998-1999 academic year approximately
$9 billion was spent in college bookstores in the United States and Canada, and
according to the National Center for Education Statistics, more than
$40.9 billion in financial aid was awarded in the 1995-96 school year. From a
marketing perspective, college students have traditionally been challenging to
reach due to students' active and mobile lifestyles, their unpredictable
consumption of conventional media and their susceptibility to trends.
The CollegeClub.com Solution
We focus on the unique communication, education, commerce and community
demands of college students. We provide our members with an integrated
communications solution, an interactive online community, academic tools,
engaging content and specialized online commerce opportunities that enhance and
simplify the student's experience. We also provide our sponsors and merchants
with access to an attractive demographic group. In addition, we connect students
with campus bookstores, financial aid services and faculty in a way that
optimizes the educational experience. Key elements of our solution include the
following:
WE DELIVER VALUE TO COLLEGE STUDENTS
COMMUNICATION AND COMMUNITY. We provide an integrated and comprehensive
communications platform to our members. Our Web site offers numerous interactive
tools that promote connectivity among our members, including our proprietary
universal messaging system which includes free integrated voicemail and e-mail
and fosters interaction and community among our members. Through our emphasis on
member connectivity, we have created an online community that attracts users and
builds member loyalty. For example, our users have generated over 200,000 online
clubs where they exchange ideas on subjects ranging from third-century Shamanism
to hip-hop music.
EDUCATION. We provide students with numerous academic-related tools
including class-specific lecture notes, study guides, diagnostic tools, testing
strategies and research utilities that improve the learning experience. Our Web
site allows students to better organize their academic activities by providing
centralized online access to course information such as class schedules,
assignments, office hour postings and grades. By allowing students to connect
with each other as well as with professors, our educational tools extend the
educational process beyond the classroom.
STUDENT-ORIENTED CONTENT. We offer our members engaging content that
appeals to the college demographic. We typically do not develop our own content;
rather, we aggregate student-oriented online content that is either
user-generated or provided by third parties. We derive much of our
user-generated content through our community features such as message boards,
online chat, members' personal Web pages and online polls. We also use selected
third-party-generated content from entertainment and information sites favored
by our members. Student-generated and selected third-party content, combined
with the dynamic nature of our community, enables us to consistently offer our
members engaging material even as trends and preferences change. As a result, in
January 2000, our Web site generated approximately 227 million page views
according to PC Data.
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<PAGE>
COMMERCE. We tailor our commerce offerings to match our members'
preferences and offer goods and services complementary to our content and
community at discounts or other favorable terms available only to our members.
Through our Web site we provide students with discounts on products and services
from over 50 merchants. To receive a discount, our members are required to
access a co-branded version of our merchants' Web sites through our Web site. We
also offer localized online auction and classified advertising services focused
exclusively on college students. In addition, we also offer a loyalty program
that allows users to earn points redeemable in specified auctions.
WE DELIVER VALUE TO SPONSORS AND MERCHANTS
We offer our sponsors and merchants access to what we believe is the largest
online community of college students. Our users constitute an important
demographic because many buying habits are set during the college years. Our
ability to track and aggregate key demographic data such as preferences,
interests and buying patterns is valuable to sponsors and merchants in targeting
their marketing message. Some of our advertising customers include Gateway,
General Motors and Warner Brothers. Additionally, we provide sponsors and
merchants with the option to integrate offline marketing activities with their
online programs. Our campus representatives distribute flyers, posters and other
promotional materials and conduct campus-based marketing activities for sponsors
and merchants.
The Student Savings Center feature of our Web site attracts students looking
for convenience and value. Through the Student Savings Center, participating
merchants can offer their products or services via online commerce, auctions and
classified advertisements. In addition, we allow merchants to target specific
segments of our audience by matching their offerings with related content
throughout our Web site. Some of the leading companies offering products or
services to our members include Clinique, Federated Stores and OfficeMax.
WE DELIVER BENEFITS TO EDUCATORS AND ADMINISTRATORS
Our proprietary solution enables educators and administrators to more
efficiently manage traditional educational processes. Our classroom automation
tools allow educators to use the Internet to improve communication with students
and augment the learning experience by distributing class-related information
such as course schedules and grades and by offering students centralized access
to educational material. Our solution also provides an online link between
financial aid offices, students and financial aid lenders, allowing school
administrators to streamline the financial aid process. Additionally, through
our exclusive relationship with the National Association of College Stores, we
provide campus bookstores with a comprehensive online commerce solution. Using
an integrated solution, college bookstores establish online stores quickly with
relatively little investment in additional technology infrastructure or
personnel.
Strategy
Our goal is to be the leader in online communication, education and commerce
for students, educators and alumni. We intend to achieve this goal by pursuing
the following strategies:
Extend our anytime, anywhere, anyone communications platform. We will
continue to evolve our proprietary communications platform to capitalize on
emerging technological trends and to address the needs of our technologically
savvy users. We intend to expand access to our communications platform through
various devices using wireless, telephony and broadband networks. We will
enhance the ability of our users to customize and personalize our communications
platform to their specific needs. To this end, we have entered into a strategic
alliance with Ericsson to extend our proprietary tools to wireless consumer
devices.
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<PAGE>
Increase the number of educational tools and services we offer. We will
continue to expand our educational solutions that simplify and enhance the
college experience for students, faculty and educational institutions. We intend
to continue to improve the functionality of the online tools we currently offer,
including lecture notes for students and course management tools for professors,
and to introduce new educational-focused features as well.
Expand our unique online commerce program. We intend to continue to make
online commerce an integrated and valuable part of CollegeClub.com. We plan to
utilize our exclusive relationship with the National Association of College
Stores to increase the number of college bookstores that use our Web-based
commerce solution to transact online with their customers. We also intend to
increase the number of our online commerce partners to compliment and extend the
variety of products and services available through the college bookstores. We
also plan to expand our proprietary online auction services which enable
students to transact locally.
Enhance our offerings through strategic alliances and acquisitions. We plan
to continue to acquire and partner with companies that provide our users with
increased functionality and product breadth. For example, since June 1999, we
have made a number of key acquisitions including Campus24, CollegeBeat.com,
Collegestudent.com and Versity.com. Additionally, we will pursue strategic
partnerships with established leaders in a variety of markets. For example,
since September 1999, we have entered into strategic relationships with
Ericsson, NBC and Sony.
Expand internationally. We believe our communications tools and community
features offer benefits to, and can be utilized by, students throughout the
world. Therefore we plan to launch localized versions of our Web site in various
countries worldwide. We intend to leverage our strategic relationships with
Ericsson and Sony to facilitate our international expansion.
Expand into related markets. We plan to extend our leading position in the
online college market vertically by taking advantage of our unique combination
of proprietary technology and community building expertise. We intend to apply
our experience in developing online communities to expand into the high school
and alumni markets.
Products and Services
We offer our members proprietary Web-based communication, educational,
commerce and community tools, and user-generated and third party content that
enhance and simplify the student experience. Some of these tools and features
are described below:
<TABLE>
<S> <C>
COMMUNICATION FEATURES
Feature Description
- --------------------------------------- ----------------------------------------------------------
<S> <C>
Universal Messaging.................... We provide each registered member with free integrated
voicemail and e-mail. Members can access both their
voicemail and e-mail via either the Internet or any
touch-tone phone.
VOICEMAIL. Our proprietary voicemail is accessible
through a nationwide toll-free number. E-mail may be
accessed through the voicemail system using text-to-speech
technology, and voicemail may be accessed over the
Internet through streaming audio technologies.
</TABLE>
40
<PAGE>
<TABLE>
<S> <C>
COMMUNICATION FEATURES (CONT.)
Feature Description
- --------------------------------------- ----------------------------------------------------------
E-MAIL. Our proprietary e-mail system is accessible via
the Web, providing our members with access to their e-mail
from any Internet-enabled computer. Our members can also
set up our mail system to consolidate messages from most
other e-mail accounts, including university-based
accounts, making all of their e-mail accessible via the
Web or touch-tone telephone.
Instant Messenger...................... Our proprietary Web-based Instant Messenger allows members
to communicate in real-time with other members who are
also logged onto our Web site. One of the key features of
our Instant Messenger is that it does not require a
download, making it immediately accessible to our entire
member base.
Chat................................... Our customized chat functionality allows members to
participate in real-time chat with multiple community
members. Use of this functionality does not require a
download. We have hosted chat sessions each month,
including sessions with nationally recognized celebrities,
students and industry professionals.
</TABLE>
<TABLE>
<S> <C>
EDUCATIONAL FEATURES
Feature Description
- --------------------------------------- ----------------------------------------------------------
Class Notes and Academic Research...... Our members can access online lecture notes for over 6,900
classes at over 145 universities across the country. All
notes are prepared by students enrolled in the subject
class. We also integrate pertinent research links with
these class-specific lecture notes.
Course and Professor Evaluations....... Our members can read course and professor evaluations
provided by students.
Scholarship Finder..................... Our members can use our proprietary engine to search for
scholarship awards. This scholarship engine sources awards
from a number of different databases, containing thousands
of scholarship offers.
Classroom Automation Tools............. Professors can use our proprietary classroom automation
tools to manage their teaching activities online,
including listing class assignments, posting office hours,
administering quizzes and posting grades. These tools
allow our members to receive and submit assignments,
review grades, check class schedules and communicate with
classmates.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
COMMERCE FEATURES
Feature Description
- --------------------------------------- ----------------------------------------------------------
Campus Bookstores...................... We have developed proprietary technology that provides
campus bookstores with online commerce capabilities.
Students can buy textbooks, software, electronics and
other goods from their local campus bookstore through
CollegeClub.com or the campus bookstore's own Web site.
Shop Online............................ With over 50 participating merchants, this area provides
members with discounts on thousands of items. Members can
browse the listings by store or brand, and comparison shop
for the best deal.
Local Auctions......................... We have built a proprietary, localized auction service
that allows our members to buy and sell goods at the
campus level as well as nationally.
Local Discounts........................ Our members are offered discounts from thousands of local
restaurants and merchants.
Student Loan Analysis Engine........... We have built a loan analysis engine that allows students
to compare loan programs from major national lenders such
as Bank of America and the Student Loan Corporation, an
affiliate of Citibank, as well as smaller regional
lenders.
</TABLE>
<TABLE>
<S> <C>
COMMUNITY FEATURES
Feature Description
- --------------------------------------- ----------------------------------------------------------
Clubs.................................. Our members have created over 200,000 clubs in over 245
different special interest and course-specific categories
to provide centralized forums for group communication.
Members can join existing clubs or create new ones through
our user-friendly club-generating system.
Who's Online........................... Through our proprietary Who's Online feature, users can
identify and sort all logged-on members by school, gender,
age, major, location, keyword or any combination thereof.
Using our Instant Messenger, members can communicate real-
time with other identified logged-on members.
Profile System......................... User-generated member profiles display general information
and can include additional detailed information such as
their personal characteristics, club affiliations and
other interests. Each member controls the personal
information that can be accessed by others and is
protected by the company's privacy policy.
Match U................................ Our proprietary Match U. service matches members who have
similar information in their personal profiles. The
communication tools on our Web site allow matched members
to connect with each other in a number of ways.
</TABLE>
42
<PAGE>
<TABLE>
<S> <C>
COMMUNITY FEATURES (CONT.)
Feature Description
- --------------------------------------- ----------------------------------------------------------
CCLive................................. We have developed a proprietary Web-cam feature where
students can view online video feeds from over 250 members
nationwide.
C-Points............................... Our proprietary loyalty program allows members to earn
points for doing various activities on our Web site, such
as referring new members, building home pages, voting in
polls and posting to our message boards. Members use
points to bid on items in our C-Points auction area.
Home Page Builder...................... We provide our members with a home page builder that
allows them to create and edit personal home pages using a
simple template or a more advanced drag-and-drop
technology.
Message Boards......................... Our proprietary message boards allow users to read or
respond to our members' postings. Message boards are
integrated throughout our Web site, allowing members to
easily respond to or create new discussions at any time.
Photo Gallery.......................... We have created an area of our Web site, featuring over
1,000 campus-specific photo galleries, in which our
members have uploaded over 700,000 photographs.
Community Channels..................... Our channels provide our members with areas to read and
respond to topic-based content created by other students.
They also allow sponsors to provide topic-specific
articles and promotions. Our current channels include
Entertainment, Jobs, College, Love, Local, Games and
Money.
Live Help.............................. We provide our members with real-time customer service
through online chat or a toll-free number, offering
assistance 24 hours a day, 7 days a week.
</TABLE>
We continually update our Web site to respond to member feedback and to
evolving user needs, trends and technologies. We intend to continue to enhance
the functionality of our existing features as well as add additional online
features to provide maximum benefit to our members.
Advertising and Sales
Substantially all of our revenue is currently generated from the sale of
marketing campaigns for sponsors and merchants targeting college students. Our
online sponsorship opportunities primarily consist of the following:
- CHANNEL AND SECTION SPONSORSHIPS. Advertisers may sponsor specific member
channels, or provide integrated editorial and promotional content;
- SPONSORED PRODUCT AND SERVICE OFFERINGS. We allow companies to provide
online products and services that are targeted to college students. We
allow our users to access and utilize our sponsors' products and services
directly through our Web site;
- BANNER ADVERTISING. Our advertisers may purchase banner advertising
throughout our Web site or in specific sections:
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<PAGE>
- PERMISSION MARKETING AND OPT-IN E-MAIL ADVERTISING. During member
registration and throughout our Web site, we provide our users with the
opportunity to opt-in, or request, specific information about products or
subjects of interest; and
- WEEKLY E-MAIL ADVERTISING. We distribute weekly online newsletters to our
members that include community news, editorial content, advertising and
promotional messages.
Our offline sponsorship opportunities primarily consist of the following:
- ON-CAMPUS MARKETING PROGRAMS. Our extensive network of on-campus marketing
representatives are able to promote our advertisers' products through
table-top displays, flyer distribution or other on-campus events; and
- VOICEMAIL AUDIO ADVERTISEMENTS. Merchants can purchase short audio
advertisements that are played when members retrieve messages from their
free voicemail accounts. Callers can be transferred directly to a
merchant's call center with the press of a button.
In addition, we collect members' demographic information regarding their
buying patterns and interests, allowing us to provide better targeting for our
advertisers. We currently perform polling, trend-tracking and other analyses to
capture data reflecting the habits and attitudes of our members. We are
currently aggregating user data and intend to make this data available
generically on a subscription basis. We do not intend to disclose individual
user data except when users request specific information from an advertiser or
sponsor.
Online Commerce
Through a combination of our proprietary technologies and strategic
relationships with campus bookstores, local and national merchants and student
loan providers, we believe that we are well-positioned to capitalize on online
commerce opportunities in the college student market. We intend to leverage
these relationships and technologies to generate commerce revenue, capture
valuable consumer data and enhance the user experience. We structure these
relationships so that we do not directly incur the cost and challenges of
product fulfillment and distribution. We currently have a number of online
commerce programs, including:
- CAMPUS BOOKSTORES. We have entered into an exclusive technology and
marketing relationship with the National Association of College Stores.
Our proprietary technology enables campus bookstores to quickly and
efficiently establish an online presence. Using this Web-based technology,
bookstores can sell books, school supplies and apparel to students, alumni
and others online. We generally receive a fee for each online transaction
conducted by the bookstore. As of February 29, 2000, campus bookstores at
over 100 universities were using our proprietary technology, including
Cornell and Princeton.
- STUDENT LOANS. We provide our members with a proprietary loan analysis
tool that allows them to identify student loan packages based on
individual criteria and preferences. We also offer financial aid
administrators a unique online tool that enables them to recommend
specific loan programs and provide other financing advice to students. We
earn a fee from each lead that we provide to commercial loan providers.
- STUDENT SAVINGS CENTER. We have contracts with national and online
merchants who offer our members special discounts on products and services
relevant to college students and complimentary to our other commerce
offerings. In the Shop Online area of our Web site, our members can search
for discounts by either vendor or product. We receive a transaction fee on
each purchase made through our Web site. As of February 29, 2000, we had
contracts with over 50 national and online merchants, including Clinique,
Federated Stores and OfficeMax.
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<PAGE>
- STUDENT AUCTIONS AND CLASSIFIEDS. Through our online auction and
classified services, members are able to identify and purchase goods that
are available on a local, regional or national basis. Auctions and
classifieds services are currently offered for free to our members;
however, in the future, we intend to collect a fee for each transaction.
Marketing
We intend to maintain our position as the largest online destination
targeting college students by executing an integrated marketing plan. This plan
consists of on-campus and off-campus marketing efforts designed to expand brand
awareness and membership, as well as to increase member retention and usage of
our Web site.
CAMPUS MARKETING. As of February 29, 2000, our campus marketing
organization consisted of over 1,200 student representatives on over 1,000
campuses, managed by approximately 70 regional coordinators. We work with our
student marketing representatives to develop grassroots promotional activities
to recruit new members. These initiatives include tabling, event sponsorships
and our online photo gallery where our representatives post digital photos of
students and campus events.
OFF-CAMPUS MARKETING. Our off-campus marketing programs include traditional
and online promotional efforts. Traditional marketing activities include campus
newspaper, print media, television and radio advertising. Online marketing
consists of preferred Web-site listings, keyword listings on search engines,
promotional sponsorships, opt-in e-mail and other direct marketing.
Technology and Systems
We have implemented a combination of proprietary and commercially available
licensed technologies across our Web properties. Our Web site is built on
industry standard technologies. The business logic of the site is contained in a
variety of proprietary programs that handle user interface, member
communication, content management, and online ordering. We expect to add
additional servers and capacity as needed in the long-term. Our system includes
redundant hardware on mission critical components, which we believe can survive
the failure of several entire servers with little or no downtime. We are
currently migrating our SQL Server database to an Oracle 8i infrastructure to
increase our long-term scalability. We expect little or no disruptions to the
site during this migration.
We are in the process of transitioning the hosting of our website from
Simple Network Communications in San Diego, California to another provider and
expect to complete such transition during the second quarter of 2000. Currently,
eStudentLoan.com is hosted at Frontier Global Center in Herndon, Virginia, and
CollegeStore.com is hosted in-house in Austin, Texas; however, in the future we
may transition all of our Web properties to another provider.
Competition
The market for online users and advertisers on the Internet is rapidly
evolving. With relatively low barriers to entry, competition for members,
visitors, advertisers, sponsors and online merchants is intense and is expected
to increase over time. We face competition from and compete for visitors,
traffic, sponsors and online merchants with Web directories, search engines,
content sites, online service providers, and traditional media companies. We
compete with sites, and sites with content specific sections, that are primarily
focused on targeting college students online. We may also face online
competition in the future from search engine providers, content sites,
commercial online services, sites maintained by Internet service providers,
traditional media companies, such as CBS, Disney, Excite, Lycos, MTV, Time
Warner and Yahoo!, many of which have recently made significant acquisitions or
investments in Internet companies and other entities that attempt to
45
<PAGE>
establish communities on the Internet by developing their own or purchasing one
of our competitors. We also compete directly and indirectly with other companies
targeting the student population, such as:
- publishers and distributors of traditional offline media, particularly
those targeting college students, such as campus newspapers, other print,
television and radio; and
- vendors of college student information, merchandise and products and
services distributed through online and offline means, including retail
stores, mail and schools.
We believe that the principal competitive factors in attracting and
retaining college students as community members and attracting advertisers and
online merchants are:
- the growth and maintenance of a critical mass of members and high Web site
traffic;
- brand recognition;
- the quality and breadth of content, product and service offerings;
- the ability to target a specific demographic; and
- the cost-effectiveness of the advertising medium.
We believe that the strong CollegeClub.com brand, combined with our leading
position in online traffic in our market, our ability to offer value-added
services in communications, education and commerce areas to our members, our
ability to deliver a demographically-attractive audience to advertisers and
sponsors are our principal competitive advantages.
Many of our competitors, current and potential, have longer operating
histories, sufficiently greater financial, technical and marketing resources
than we do. In addition, many of these current and potential competitors can
devote substantially greater resources to product development, marketing and
promotional campaigns and Web site and systems development than we can.
Employees
As of February 29, 2000, we had a total of 255 full-time employees. In
addition, we have over 1,200 student campus representatives. The student
representatives work as independent contractors and are compensated based on
peformance.
Legal Proceedings
Except as set forth below, we are not currently a party to any material
legal proceeding. In addition to the proceeding described below, we may from
time to time become involved in litigation relating to claims arising from our
ordinary course of business. These claims, even if not meritorious, could result
in the expenditure of significant financial and managerial resources.
On April 6, 2000, a former consultant filed a complaint against
CollegeClub.com and Michael Pousti in California Superior Court for the County
of San Diego, alleging breach of contract and fraud. The plaintiff seeks, among
other things, compensatory and punitive damages, attorney's fees and an option
to purchase 300,000 shares of CollegeClub.com common stock at a per share
exercise price of $0.22. Although CollegeClub.com intends to vigorously defend
its position, there can be no assurance that a favorable outcome will be
obtained or that, if the matter were resolved in favor of the plaintiff, there
would not be a material adverse effect on CollegeClub.com.
Facilities
Our primary administrative sales and marketing facility is located in San
Diego and consists of approximately 40,000 square feet. We also lease additional
office space in Austin, Chicago, New York, Menlo Park and Washington, D.C. We
believe our existing facilities meet our current needs and that we will be able
to obtain additional commercial space as needed.
46
<PAGE>
MANAGEMENT
Executive Officers and Directors
Set forth below is the name, age, position and a brief account of the
business experience of each of our executive officers, key employees and
directors.
<TABLE>
<CAPTION>
Name Age Position
- ---- -------- -----------------------------------------------------
<S> <C> <C>
Michael C. Pousti, Jr.................. 33 Chief Executive Officer, Chairman of the Board of
Directors, Co-Founder and Office of the President
James B. DeBello....................... 41 Office of the President, Chief Operating Officer and
Director
Ruby L. Randall........................ 37 Office of the President
Eric D. Rindahl........................ 32 Chief Financial Officer
Donald R. Freda, Jr.................... 48 Executive Vice President, Campus Marketing and
Director
Monte M. Brem.......................... 31 Senior Vice President, Corporate Development
Raffaele G. Fazio...................... 30 Vice President, Legal and Secretary
Debra M. Gibb.......................... 43 Vice President, Internet Technology
Jody L. Zevenbergen.................... 37 Vice President, Accounting and Treasurer
Eric B. Berman......................... 28 General Manager, San Diego and Co-Founder
Charles E. Miller...................... 27 General Manager, Austin
Lawrence S. Clark(1)(2)................ 41 Director
Eric Di Benedetto(1)(2)................ 34 Director
Stephen C. Lake(2)..................... 40 Director
</TABLE>
- ------------------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
Michael C. Pousti, Jr. has been our Chief Executive Officer and Chairman of
our board of directors since 1996. In addition, Mr. Pousti is a member of the
Office of the President. From July 1996 to January 2000, Mr. Pousti also served
as our President. Prior to co-founding CollegeClub.com, Mr. Pousti was the
President and Chief Executive Officer of Productivity Solutions Corporation, a
client/server transactional software firm that was sold to Unisys Corporation.
As a college student at the University of California at San Diego, Mr. Pousti
founded an Internet company that assisted students in their search for financial
aid. Mr. Pousti attended the University of California at San Diego from 1984 to
1987.
James B. DeBello is a member of our Office of the President and has been our
Chief Operating Officer since April 1999. In addition, Mr. DeBello has been a
member of our board of directors since April 1999. Prior to joining us, from
November 1998 to April 1999, Mr. DeBello served as Chief Operating Officer at
Wireless Knowledge LLC, an Internet technology company jointly formed by
Microsoft and Qualcomm, Inc. to deliver wireless data services. From
October 1996 to November 1998, Mr. DeBello served as Vice President and General
Manager of the Eudora Internet Software division of Qualcomm, Inc. Prior to
working at Qualcomm, from September 1989 to October 1996, Mr. DeBello served as
President and Chief Executive Officer of Solectek Corporation, a company he
founded which developed wireless Internet working products.
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<PAGE>
Mr. DeBello currently serves on the board of directors of Mitek Systems, Inc.
Mr. DeBello received a B.A. from Harvard University in 1980 and an M.B.A. from
the Harvard Graduate School of Business in 1986.
Ruby L. Randall is a member of the Office of the President where she is
responsible for our sales and marketing efforts. Ms. Randall also served as our
Chief Marketing Officer from September 1999 to January 2000. Prior to joining
us, from October 1996 to August 1999, Ms. Randall was Vice President of
Marketing and New Media at the Upper Deck Company, LLC, a sports-licensing
company, where she oversaw marketing, new media, business development and
product development. Prior to working at Upper Deck, from June 1990 to
September 1996, Ms. Randall held several positions with Twentieth Century Fox
Home Entertainment, including Vice President of Marketing. Ms. Randall received
a B.A. from the University of Rochester in 1984 and an M.B.A. from the
University of California at Los Angeles in 1990.
Eric D. Rindahl has served as our Chief Financial Officer since May 1999.
Prior to joining us, Mr. Rindahl was a principal with Roth Capital Partners from
July 1997 to May 1999 where he focused on the telecommunications and Internet
industries. Prior to that, from October 1994 to July 1997, Mr. Rindahl was Vice
President and a founding principal of Toronto Dominion Capital, a $500 million
private equity fund. Prior to Toronto Dominion Capital, Mr. Rindahl worked for
the mergers and acquisitions and private equity groups at Toronto Dominion
Securities and for Arthur Andersen LLP. Mr. Rindahl received a B.A. from the
University of California at Irvine in 1989 and an M.B.A. from New York
University in 1993.
Donald R. Freda, Jr. has served as our Executive Vice President of Campus
Marketing since December 1998. Mr. Freda has served as a member of our board of
directors since February 1999 and previously served on our board from July 1997
to May 1998. Prior to joining us, from May 1997 to November 1998, Mr. Freda
served as President and Chief Executive Officer of Questcom Corporation, a
company which sold Internet Web sites. From January 1981 to January 1997,
Mr. Freda served as the President and Chief Executive Officer of Vector
Marketing Corporation, a company he founded which recruits and provides sales
training to college students. Mr. Freda attended Widener University from 1969 to
1972.
Monte M. Brem has served as our Senior Vice President of Corporate
Development since April 2000. Mr. Brem has served as our Vice President of
Corporate Development since May 1999. Prior to joining us, from September 1997
to May 1999 Mr. Brem served as a Vice President in the Corporate Finance
Department of Roth Capital Partners, focusing on the Internet sector. From
August 1995 to September 1997, Mr. Brem worked as a corporate associate with the
law firm of Gibson, Dunn & Crutcher LLP. Mr. Brem received a. B.S. from San
Diego State University in 1991, a J.D. from the University of San Diego School
of Law in 1995, and an M.B.A. from the University of San Diego School of
Business in 1995.
Raffaele G. Fazio has served as our Vice President of Legal and Secretary
since October 1999. Prior to joining us, Mr. Fazio worked as a corporate
associate with the law firm of Gibson, Dunn & Crutcher LLP from September 1996
to October 1999. From August 1995 to September 1996, Mr. Fazio served as a law
clerk to the Honorable Frederick J. Martone of the Arizona Supreme Court.
Mr. Fazio received a B.A. from the University of Arizona in 1991 and a J.D. from
the University of Arizona School of Law in 1995.
Debra M. Gibb has served as our Vice President of Internet Technology since
May 1999. Prior to joining us, Ms. Gibb served as Director of Information
Technology at Qualcomm, Inc. from September 1997 to May 1999. From
February 1996 to August 1997, Ms. Gibb served as Director of Operations and
Information Technology for First Virtual Holdings, Inc. Prior to that, from
July 1995 to
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<PAGE>
February 1996, Ms. Gibb served as Director of Operations and Information
Technology for BioData, Inc., an internet technology consulting firm. Ms. Gibb
received an A.S. from Bay Path College in 1977.
Jody L. Zevenbergen has served as our Vice President of Accounting and
Treasurer since July 1999. Prior to joining us, from January 1998 to July 1999,
Mr. Zevenbergen was an Audit Senior Manager at Ernst & Young LLP. From
June 1990 to January 1998, Mr. Zevenbergen was an Audit Manager at Deloitte &
Touche, LLP. Mr. Zevenbergen received a B.A. from the California State
University at Fresno in 1990 and is a Certified Public Accountant.
Eric B. Berman is one of our co-founders and has served as the General
Manager of our San Diego Office since November 1999. From November 1998 to
November 1999, Mr. Berman served as our Vice President of Corporate Development.
Prior to that, Mr. Berman served as our Director of Business Development from
November 1997 to November 1998 and as our Director of National Accounts from
November 1996 to November 1997. From June 1996 to November 1996, Mr. Berman
worked as our Director of New Media and Content, and from September 1995 to
June 1996, Mr. Berman served as our Director of Sales. Mr. Berman received a
B.A. from the University of California at San Diego in 1993.
Charles E. Miller has served as the General Manager of our Austin office
since December 1999. From June 1996 to December 1999, Mr. Miller served as
President and Chief Executive Officer of Collegestudent.com, Inc., a company
that he co-founded which operated a college oriented Web site focused on local
college communities, which we acquired in December 1999. Prior to that, from
December 1992 to March 1994, Mr. Miller served as President at Fibercom
Services, Inc., a telecommunications consulting company that he co-founded and
eventually sold to Concord Network Services in Chicago, Illinois. Mr. Miller
received a B.S. and B.A. in 1995 and an M.A. in 1996 from the University of
Texas.
Lawrence S. Clark has been a member of our board of directors since
October 1999. Mr. Clark has been the Senior Vice President of Corporate
Development for Sony Pictures Entertainment, Inc. since April 1997. As the
Senior Vice President, Mr. Clark works with senior executives and operating
management on corporate planning, integration and execution of new strategic
businesses and financing and risk management initiatives, including strategic
alliances, new media ventures, investments and startups. Prior to joining Sony
Pictures Entertainment, Inc., Mr. Clark was a Director, International at The
Carlyle Group, a leveraged buyout fund from February 1995 to April 1997. Prior
to that, Mr. Clark co-founded Global Film Equity Corp., an entertainment-focused
investment bank, and held corporate finance positions at the investment banking
firms of Salomon Brothers Inc. and Goldman, Sachs & Co. Mr. Clark serves on the
board of The Bulldog Group, an enterprise-wide digital asset management software
and services company. Mr. Clark received a B.A. from Duke University in 1981 and
an M.B.A. from the Fuqua School of Business at Duke University in 1987.
Mr. Clark also served in the United States Marine Corps as an Infantry and
Intelligence Officer.
Eric Di Benedetto has been a member of our board of directors since
June 1999. Mr. Di Benedetto is a founder and general partner of Convergence
Partners, L.P., an Internet venture capital firm established in April 1997.
Prior to founding Convergence Partners, Mr. Di Benedetto was the managing
director of U.S. venture capital funds managed by BANEXI, the merchant banking
arm of Banque Nationale de Paris from 1991 to 1997. Prior to that, Mr. Di
Benedetto was a workout and restructuring specialist with the PARGESA/Lambert
Brussels Group, an international investment holding company, and he was a
mergers and acquisitions associate covering defense electronics for Bankers
Trust Co. Mr. Di Benedetto serves on the board of the following private
companies: Adauction.com, Inc., B2Bworks, Inc., L3Sites, Inc., Magnifi, Inc. and
US Creative, Inc. Also, Mr. Di Benedetto represents Convergence Partners, L.P.
on the board of campsix (DE), Inc., a full-service
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<PAGE>
business-to-business Internet incubator based in San Francisco. Mr. Di Benedetto
previously served as a director of Signio, Inc., acquired by Verisign, Inc.,
AdForce, Inc., acquired by CMGI, Inc. and Decisive Technology, Inc., acquired by
MessageMedia, Inc. Mr. Di Benedetto received an M.B.A. from E.S.S.E.C. in France
in 1989.
Stephen C. Lake has been a member of our board of directors since
June 1999. Since January 2000, Mr. Lake has been Chief Executive Officer of
eFrenzy, Inc., an Internet company that operates an online marketplace for
buying and selling services. From January 1997 to January 2000, Mr. Lake served
as Senior Vice President of Corporate Development for iVillage, Inc., a company
that sponsors a Web site dedicated to the interests and needs of women, and was
responsible for strategic development, networking marketing, membership,
business metrics and market research. Prior to working at iVillage, from
January 1994 to December 1997, Mr. Lake worked at Reuters, where he was a
founding executive of Reuters NewMedia and held a variety of strategic and
financial positions. Mr. Lake also co-managed various venture capital
investments for Reuters that included investments in Yahoo!, Infoseek and CBS
Sportsline. Mr. Lake received a B.A. from the University of Wales, Bangor in the
United Kingdom in 1980, an M.B.A. from the Theseus Institut in France in 1992
and is a chartered accountant in the United Kingdom.
Classes of the Board
Prior to the consummation of this offering, we expect that our certificate
of incorporation and bylaws will be amended to provide for a classified board of
directors consisting of three classes of directors, each serving staggered
three-year terms. As a result a portion of our board will be elected each year.
To implement this classified structure, prior to the consummation of the
offering, two of the nominees to the board will be elected to one-year terms,
two will be elected to two-year terms and three will be elected to three-year
terms. After these initial terms, directors will be elected for three-year
terms.
Board Committees
The audit committee of the board of directors was established in June 1999
and reviews, acts on and reports to the board of directors with respect to
various auditing and accounting matters, including the recommendation of our
auditors, the scope of the annual audits, fees to be paid to the auditors, the
performance of our independent auditors and our accounting practices. The
current members of the audit committee are Messrs. Lake, Di Benedetto and Clark.
The compensation committee of the board of directors was established in
June 1999 and recommends, reviews and oversees the salaries, benefits and stock
option plans for our employees, consultants, directors and other individuals
compensated by us. The compensation committee also administers our compensation
plans. The current members of the compensation committee are Messrs. Clark and
Di Benedetto.
Director Compensation
Prior to our completion of this offering, our directors did not receive cash
compensation for their service as members of the board of directors, although
they were reimbursed for the reasonable expenses of attending the meetings of
the board of directors or committees. In addition, Mr. Lake was issued options
to purchase 93,546 shares of common stock in June 1999 with an exercise price of
$0.86 per share and options to purchase an additional 93,546 shares of common
stock in April 2000 with an exercise price of $2.00 per share. Under our 2000
stock incentive plan, each individual who first becomes a non-employee member of
the board of directors at any time after the completion of this offering will
receive an option to purchase 50,000 shares of common stock on the date such
individual joins the board of directors, provided such individual has not
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<PAGE>
previously been employed by us or any parent or subsidiary corporation. In
addition, on the date of each annual stockholders' meeting beginning in 2001,
each non-employee member of the board of directors will automatically be granted
an option to purchase 10,000 shares of common stock, provided such individual
has served as a non-employee member of the board of directors for at least six
months. Please see "--Benefit Plans."
Compensation Committee Interlocks and Insider Participation
Our compensation committee currently consists of Messrs. Clark and Di
Benedetto. Messrs. Clark and Di Benedetto have never been an officer or employee
of us at any time. None of our executive officers serves as a member of the
board of directors or compensation committee of any other company that has one
or more executive officers serving as a member of our board of directors or
compensation committee. Prior to the formation of the compensation committee in
June 1999, the board of directors as a whole made decisions relating to
compensation of our executive officers. Messrs. Pousti, DeBello and Freda
participated in all such discussions and decisions concerning the compensation
of our executive officers except those regarding their own respective
compensation.
Executive Compensation
The following table sets forth all compensation received during the year
ended December 31, 1999 by our Chief Executive Officer and each of our other
most-highly compensated executive officers whose salary and bonus exceeded
$100,000 for services rendered in all capacities to us during 1999. Other annual
compensation for Mr. Pousti includes repayment of a note payable for $346,273
and accrued interest of $50,283. Mr. DeBello commenced his employment as Chief
Operating Officer in April 1999 at a base salary of $225,000. Mr. DeBello's
bonus includes a signing bonus of $100,000. Mr. Rindahl commenced his employment
as Chief Financial Officer in May 1999 at a base salary of $150,000. Other
annual compensation for Mr. Rindahl includes a loan in the amount of $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual Compensation Shares
--------------------- Other Annual Underlying
Name and Principal Position Salary Bonus Compensation Options
- --------------------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Michael C. Pousti, Jr. .................... $102,878 $ 22,361 $396,556 0
Chief Executive Officer, Chairman of the
Board of Directors, Co-Founder and Office
of the President
James B. DeBello .......................... 161,250 166,103 0 813,276
Office of the President, Chief Operating
Officer and Director
Eric D. Rindahl ........................... 95,833 17,689 100,000 363,000
Chief Financial Officer
Donald R. Freda, Jr. ...................... 154,686 210,083 0 95,619
Executive Vice President,
Campus Marketing and Director
</TABLE>
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<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information regarding options granted to the
executive officers listed in the Summary Compensation Table during the fiscal
year ended December 31, 1999. We have not granted any stock appreciation rights.
Each option represents the right to purchase one share of common stock. The
options shown in this table are incentive stock options and non-statutory stock
options granted under our stock option plan. Except for options granted to
Mr. DeBello, all stock options vest over a 60-month period with a one-year
cliff. Upon the one-year anniversary of the employee's service, the grant
becomes 20% vested and thereafter vests monthly. Mr. DeBello's stock options
vest over a 48-month period with a six-month cliff. Upon the six-month
anniversary of Mr. DeBello's service, the grant became 12.5% vested and
thereafter has vested monthly. Upon the closing of this offering, we will
immediately accelerate that number of Mr. DeBello's unvested options with a fair
market value of $500,000. Pursuant to the terms of their offer letters,
Messrs. DeBello and Rindahl's options will become fully vested in the event of a
change of control with the consent of the Chief Executive Officer. In the year
ended December 31, 1999, we granted options to purchase an aggregate of
7,418,787 shares of common stock.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
----------------------------------------------- Value at Assumed
Number of Annual Rates of Stock
Securities % of Total Price Appreciation for
Underlying Options Option Term
Options Granted Exercise Expiration -----------------------
Name Granted in 1999 Price Date 5% 10%
- ---- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael C. Pousti, Jr......... -- --% $ -- -- $ -- $ --
James B. DeBello.............. 813,276 11.0 0.22 05/17/09 112,522 285,154
Eric D. Rindahl............... 300,000 4.0 0.22 05/17/09 41,507 105,187
63,000 0.8 1.14 08/25/09 45,167 114,463
Donald R. Freda, Jr........... 95,619 1.3 0.22 05/17/09 13,230 33,526
</TABLE>
The potential realizable value at assumed annual rates of stock price
appreciation for the option term represents hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
The 5% and 10% assumed annual rates of compounded stock price appreciation are
mandated by rules of the SEC and do not represent our estimate or projection of
our future common stock prices. These amounts represent assumed rates of
appreciation in the value of our common stock from the fair market value on the
date of grant. Actual gains, if any, on stock option exercises are dependent on
the future performance of the common stock and overall stock market conditions.
The amounts reflected in the table may not necessarily be achieved.
52
<PAGE>
Aggregated Option Exercises in the Year Ended December 31, 1999 and Year-End
Option Values
The following table sets forth information concerning the number and value
of unexercised options held by each of the executive officers listed in the
Summary Compensation Table at December 31, 1999. None of these executive
officers exercised options to purchase common stock during the year ended
December 31, 1999.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
December 31, 1999 at December 31, 1999
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael C. Pousti, Jr..................... 464,274 204,081 $1,504,248 $ 661,222
James B. DeBello.......................... 152,489 660,787 494,064 2,140,950
Eric D. Rindahl........................... 0 363,000 0 1,118,160
Donald R. Freda, Jr....................... 650,880 0 2,108,851 0
</TABLE>
There was no public trading market for the common stock as of December 31,
1999. Accordingly, the value of unexercised in-the-money options listed above
has been calculated on the basis of $3.46 per share, which is the assumed fair
value of the common stock at December 31, 1999, less the applicable exercise
price per share, multiplied by the number of shares underlying such options.
Benefit Plans
2000 STOCK INCENTIVE PLAN
INTRODUCTION. Our 2000 Stock Incentive Plan is intended to serve as a
comprehensive equity incentive plan for our officers, employees, non-employee
board members and other individuals in our service. Our 2000 plan was adopted by
our board in February 2000 and is subject to the approval of our stockholders.
Our 2000 plan will become effective on the date the underwriting agreement for
this offering is signed. At that time, all outstanding options under our
existing stock option plan will be transferred to our 2000 plan, and no further
option grants will be made under that earlier plan. The transferred options will
continue to be governed by their existing terms, unless our compensation
committee elects to extend one or more features of our 2000 plan to those
options. Except as otherwise noted below, the transferred options have
substantially the same terms as will be in effect for grants made under the
discretionary option grant program of our 2000 plan.
SHARE RESERVE. 26,700,000 shares of common stock have been authorized for
issuance under our 2000 plan. Such share reserve consists of the number of
shares that were carried over from our existing stock option plan, including the
shares subject to outstanding options thereunder, plus an additional increase of
approximately 6,000,000 shares. The number of shares of common stock reserved
for issuance under our 2000 plan will automatically increase on the first
trading day in January each calendar year, beginning in calendar year 2001, by
an amount equal to 5% of the total number of shares of common stock outstanding
on the last trading day in December of the preceding calendar year, but in no
event will any such annual increase exceed 6,250,000 shares. In addition, no
participant in our 2000 plan may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances for more than
1,000,000 shares of common stock per calendar year.
EQUITY INCENTIVE PROGRAMS. Our 2000 plan is divided into five separate
components:
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<PAGE>
- the discretionary option grant program, under which eligible individuals
in our employ or service may be granted options to purchase shares of
common stock at an exercise price not less than 85% of the fair market
value of those shares on the grant date;
- the stock issuance program, under which such individuals may be issued
shares of common stock directly, through the purchase of such shares at a
price not less than 85% of their fair market value at the time of issuance
or as a bonus tied to the attainment of performance milestones or the
completion of a specified period of service;
- the salary investment option grant program, under which our executive
officers and other highly compensated employees may be given the
opportunity to apply a portion of their base salary to the acquisition of
special below-market stock option grants;
- the automatic option grant program, under which option grants will
automatically be made at periodic intervals to our non-employee board
members to purchase shares of common stock at an exercise price equal to
100% of the fair market value of those shares on the grant date; and
- the director fee option grant program, under which our non-employee board
members may be given the opportunity to apply a portion of the annual
retainer fee otherwise payable to them in cash each year to the
acquisition of special below-market option grants.
ELIGIBILITY. The individuals eligible to participate in our 2000 plan
include our officers and other employees, our non-employee board members and any
consultants we hire.
ADMINISTRATION. The discretionary option grant program and the stock
issuance program will be administered by the compensation committee. This
committee will determine which eligible individuals are to receive option grants
or stock issuances under those programs, the time or times when such option
grants or stock issuances are to be made, the number of shares subject to each
such grant or issuance and the exercise or issue price payable per share, the
status of any granted option as either an incentive stock option or a
non-statutory stock option under the federal tax laws, the vesting schedule to
be in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding. The compensation committee
will also have the exclusive authority to select the executive officers and
other highly compensated employees who may participate in the salary investment
option grant program in the event that program is activated for one or more
calendar years.
PLAN FEATURES. Our 2000 plan will include the following features:
- The exercise price for the shares of common stock subject to option grants
made under our 2000 plan may be paid in cash or in shares of common stock
valued at fair market value on the exercise date. The option may also be
exercised through a same-day sale program without any cash outlay by the
optionee. In addition, the compensation committee may provide financial
assistance to one or more optionees in the exercise of their outstanding
options or the purchase of their unvested shares by allowing such
individuals to deliver a full-recourse, interest-bearing promissory note
in payment of the exercise price and any associated withholding taxes
incurred in connection with such exercise or purchase. The issue price for
shares issued under the stock issuance program may be paid in cash or,
with the approval of our compensation committee, through a full-recourse
promissory note. Alternatively, the shares may be issued as a bonus for
past services, without any cash outlay required of the recipient.
- The compensation committee will have the authority to cancel outstanding
options under the discretionary option grant program, including options
transferred from the 1996 plan, in return
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<PAGE>
for the grant of new options for the same or a different number of option
shares with an exercise price per share based upon the fair market value
of our common stock on the new grant date.
- Shares of common stock may be issued directly under our 2000 plan at an
issue price not less than 85% of the market price of the shares at the
time of issuance. The issued shares may be vested or subject to a vesting
schedule pursuant to which those shares will vest in one or more
installments over the recipient's period of service or the attainment of
personal or corporate performance milestones.
- Stock appreciation rights are authorized for issuance under the
discretionary option grant program. Such rights will provide the holders
with the election to surrender their outstanding options for an
appreciation distribution from us equal to the fair market value of the
vested shares of common stock subject to the surrendered option, less the
aggregate exercise price payable for those shares. Such appreciation
distribution may be made in cash or in shares of common stock. None of the
outstanding options under our existing stock option plan contain any stock
appreciation rights.
- The 2000 plan will include the following change in control provisions
which may result in the accelerated vesting of outstanding option grants
and stock issuances:
- In the event that we are acquired by merger or asset sale, each
outstanding option under the discretionary option grant program which
is not to be assumed by the successor corporation will automatically
accelerate in full, and all unvested shares under the discretionary
option grant and stock issuance programs will immediately vest, except
to the extent our repurchase rights with respect to those shares are to
be assigned to the successor corporation.
- The compensation committee will have complete discretion to structure
one or more options under the discretionary option grant program so
those options will vest as to all the option shares in the event those
options are assumed in the acquisition but the optionee's service with
us or the acquiring entity is subsequently terminated. The vesting of
outstanding shares under the stock issuance program may be accelerated
upon similar terms and conditions.
- The compensation committee will also have the authority to grant
options which will immediately vest in the event we are acquired,
whether or not those options are assumed by the successor corporation.
- The compensation committee may grant options and structure repurchase
rights so that the shares subject to those options or repurchase rights
will immediately vest in connection with a successful tender offer for
more than 50% of our outstanding voting stock or a change in the
majority of our board through one or more contested elections for board
membership. Such accelerated vesting may occur either at the time of
such transaction or upon the subsequent termination of the individual's
service.
- The options currently outstanding under our existing stock option plan
will immediately vest in the event we are a party to a merger,
consolidation or sale of substantially all our assets or more than 50%
of our outstanding voting stock, unless those options are assumed by
the acquiring entity or otherwise continued in effect and our
repurchase rights with respect to any unvested shares subject to those
options are assigned to such entity or otherwise continued in effect.
SALARY INVESTMENT OPTION GRANT PROGRAM. In the event the compensation
committee elects to activate the salary investment option grant program for one
or more calendar years, each of our
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<PAGE>
executive officers and other highly compensated employees selected for
participation may elect, prior to the start of the calendar year, to reduce his
or her base salary for that calendar year by a specified dollar amount not less
than $10,000 nor more than $50,000. Each selected individual who files such a
timely election will automatically be granted, on the first trading day in
January of the calendar year for which his or her salary reduction is to be in
effect, an option to purchase that number of shares of common stock determined
by dividing the salary reduction amount by two-thirds of the fair market value
per share of our common stock on the grant date. The option will be exercisable
at a price per share equal to one-third of the fair market value of the option
shares on the grant date. As a result, the option will be structured so that the
fair market value of the option shares on the grant date less the exercise price
payable for those shares will be equal to the amount by which the optionee's
salary is to be reduced under the program. The option will become exercisable in
a series of 12 equal monthly installments over the calendar year for which the
salary reduction is to be in effect.
AUTOMATIC OPTION GRANT PROGRAM. Under the automatic option grant program,
each individual who first becomes a non-employee board member at any time after
the completion of this offering will automatically receive an option grant for
50,000 shares on the date such individual joins the board, provided such
individual has not been in our prior employ. In addition, on the date of each
annual stockholders meeting held after the completion of this offering, each
non-employee board member who is to continue to serve as a non-employee board
member, including each of our current non-employee board members, will
automatically be granted an option to purchase 10,000 shares of common stock,
provided such individual has served on our board for at least six months.
Each automatic grant will have an exercise price per share equal to the fair
market value per share of our common stock on the grant date and will have a
term of 10 years, subject to earlier termination following the optionee's
cessation of board service. The option will be immediately exercisable for all
of the option shares; however, we may repurchase, at the exercise price paid per
share, any shares purchased under the option which are not vested at the time of
the optionee's cessation of board service. The shares subject to each initial
50,000 share automatic option grant will vest in a series of 4 successive annual
installments upon the optionee's completion of each year of board service over
the 4-year period measured from the grant date. The shares subject to each
annual 10,000 share automatic option grant will vest upon the optionee's
completion of one year of board service measured from the grant date. However,
the shares will immediately vest in full upon significant changes in control or
of ownership or upon the optionee's death or disability while a board member.
DIRECTOR FEE OPTION GRANT PROGRAM. Should the director fee option grant
program be activated in the future, each non-employee board member will have the
opportunity to apply all or a portion of any cash retainer fee for the year to
the acquisition of a below-market option grant. The option grant will
automatically be made on the first trading day in January in the year for which
the retainer fee would otherwise be payable in cash. The option will have an
exercise price per share equal to one-third of the fair market value of the
option shares on the grant date, and the number of shares subject to the option
will be determined by dividing the amount of the retainer fee applied to the
program by two-thirds of the fair market value per share of our common stock on
the grant date. As a result, the option will be structured so that the fair
market value of the option shares on the grant date less the exercise price
payable for those shares will be equal to the portion of the retainer fee
applied to that option. The option will become exercisable in a series of 12
equal monthly installments over the calendar year for which the election is to
be in effect. However, the option will become immediately exercisable for all
the option shares upon the optionee's death or disability while serving as a
board member.
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<PAGE>
Our 2000 plan will also have the following features:
- Outstanding options under the salary investment and director fee option
grant programs will immediately vest if we are acquired by a merger or
asset sale or if there is a successful tender offer for more than 50% of
our outstanding voting stock or a change in the majority of our board
through one or more contested elections.
- Limited stock appreciation rights will automatically be included as part
of each grant made under the salary investment option grant program and
the automatic and director fee option grant programs, and these rights may
also be granted to one or more officers as part of their option grants
under the discretionary option grant program. Options with this feature
may be surrendered to us upon the successful completion of a hostile
tender offer for more than 50% of our outstanding voting stock. In return
for the surrendered option, the optionee will be entitled to a cash
distribution from us in an amount per surrendered option share based upon
the highest price per share of our common stock paid in that tender offer.
- The board may amend or modify the 2000 plan at any time, subject to any
required stockholder approval. The 2000 plan will terminate no later than
February 2010.
EMPLOYEE STOCK PURCHASE PLAN
INTRODUCTION. Our Employee Stock Purchase Plan was adopted by the board in
February 2000. Subject to stockholder approval, the plan will become effective
immediately upon the signing of the underwriting agreement for this offering.
The plan is designed to allow our eligible employees and the eligible employees
our participating subsidiaries to purchase shares of common stock, at
semi-annual intervals, with their accumulated payroll deductions.
SHARE RESERVE. 500,000 shares of our common stock will initially be
reserved for issuance. The reserve will automatically increase on the first
trading day in January each calendar year, beginning in calendar year 2001, by
an amount equal to 1% of the total number of outstanding shares of our common
stock on the last trading day in December in the prior calendar year. In no
event will any such annual increase exceed 1,250,000 shares.
OFFERING PERIODS. The plan will have a series of successive offering
periods, each with a maximum duration of 24 months. However, the initial
offering period may have a duration in excess of 24 months and will start on the
date the underwriting agreement for this offering is executed and will end on
the last business day in April 2002. The next offering period will start on the
first business day in May 2002, and subsequent offering periods will be set by
our compensation committee.
ELIGIBLE EMPLOYEES. Individuals scheduled to work more than 20 hours per
week for more than 5 calendar months per year may join an offering period on the
start date or any semi-annual entry date within that period. Semi-annual entry
dates will occur on the first business day of May and November each year.
Individuals who become eligible employees after the start date of an offering
period may join the plan on any subsequent semi-annual entry date within that
offering period.
PAYROLL DEDUCTIONS. A participant may contribute up to 15% of his or her
cash earnings through payroll deductions, and the accumulated deductions will be
applied to the purchase of shares on each semi-annual purchase date. The
purchase price per share will be equal to 85% of the fair market value per share
on the participant's entry date into the offering period or, if lower, 85% of
the fair market value per share on the semi-annual purchase date. Semi-annual
purchase dates will occur on the last business day of April and October each
year. However, a participant may
57
<PAGE>
not purchase more than 1,250 shares on any purchase date, and not more than
150,000 shares may be purchased in total by all participants on any purchase
date. Our compensation committee will have the authority to change these
limitations for any subsequent offering period.
RESET FEATURE. If the fair market value per share of our common stock on
any purchase date is less than the fair market value per share on the start date
of the 24-month offering period, then that offering period will automatically
terminate, and a new 24-month offering period will begin on the next business
day. All participants in the terminated offering will be transferred to the new
offering period.
CHANGE IN CONTROL. Should we be acquired by merger or sale of substantially
all of our assets or more than fifty percent of our voting securities, then all
outstanding purchase rights will automatically be exercised immediately prior to
the effective date of the acquisition. The purchase price will be equal to 85%
of the market value per share on the participant's entry date into the offering
period in which an acquisition occurs or, if lower, 85% of the fair market value
per share immediately prior to the acquisition.
PLAN PROVISIONS. The following provisions will also be in effect under the
plan:
- The plan will terminate no later than the last business day of
April 2010.
- The board may at any time amend, suspend or discontinue the plan. However,
some amendments may require stockholder approval.
Employment Agreements
All of our current employees have entered into agreements with us which
contain specific restrictions and covenants. These provisions include covenants
relating to the protection of our confidential information, the assignment of
inventions, and restrictions on competition and soliciting our clients,
employees, or independent contractors.
In March 1999, we entered into an employment offer letter with James B.
DeBello, our Chief Operating Officer and a member of the Office of the
President. Under the offer letter, Mr. DeBello's annual compensation was set at
a base salary of $225,000 with a target bonus of up to 50% of his base salary.
We also paid Mr. DeBello a signing bonus of $100,000, payable in either stock or
cash at his discretion. In addition, we granted Mr. DeBello an option under our
1996 Stock Option Plan to purchase 813,276 shares of our common stock at an
exercise price of $0.22 per share. The option vests under a four-year vesting
schedule, with 12.5% of the option shares vesting after the first six months of
continuous service and the remaining balance of the shares vesting in forty-two
equal monthly installments under the terms of the offer letter. In the event of
a change of control with the consent of the Chief Executive Officer, all of
Mr. DeBello's option shares will become fully vested. Upon the closing of this
offering, we will immediately accelerate that number of unvested options with a
fair market value of $500,000. In the event that Mr. DeBello's employment is
terminated without cause after the first six months of his employment, he will
receive his base salary at a rate of $225,000 per year for twelve months.
In May 1999, we entered into an employment offer letter with Eric D.
Rindahl, our Chief Financial Officer. Under the terms of the offer letter,
Mr. Rindahl's annual compensation was set at $150,000. In addition, we also
granted Mr. Rindahl an option under our 1996 Stock Option Plan to purchase
300,000 shares of our common stock at an exercise price of $.22 per share. The
option vests under a five-year vesting schedule, with 20% of the option shares
vesting after the first twelve months of continuous service and the remaining
balance of the shares vesting in forty-eight equal monthly installments. In
addition, under the offer letter, Mr. Rindahl became eligible to receive an
additional option to purchase up to 60,000 shares of common stock, provided that
he satisfies
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<PAGE>
performance goals. In the event of a change of control with the consent of the
Chief Executive Officer, all of Mr. Rindahl's option shares will become fully
vested. Under the offer letter, we also agreed to loan Mr. Rindahl $100,000 for
a period of three years at the applicable federal rate of interest on the date
of the loan.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. In addition, our bylaws require us to
indemnify our directors and officers to the fullest extent permitted by law.
Prior to the consummation of this offering, we intend to have entered into
agreements to indemnify some of our directors and executive officers. At
present, there is no pending litigation or proceeding involving any director or
officer where indemnification will be required or permitted. We are not aware of
any threatened litigation or proceeding that might result in a claim for such
indemnification. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors or officers, we have been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Sales of Securities
Since January 1997, we issued the following securities in private placement
transactions: 3,479,724 shares of common stock in connection with the
acquisition of Collegestudent.com in December 1999; 1,536,516 shares of
Series A preferred stock at $1.37 per share from November 1997 through
January 1998; 5,141,736 shares of Series B preferred stock at $2.85 per share
from May through July 1999; 1,769,922 shares of Series B preferred stock and
761,259 shares of Series B-1 preferred stock for $1.4 million and other non-cash
consideration in connection with the strategic alliance with Sony in
September 1999; 11,600,397 shares of Series C preferred stock at $3.46 per share
in December 1999; warrants exercisable for 464,370 shares of Series C preferred
stock from August 1999 through November 1999. None of the below listed executive
officers, directors and holders of more than 5% of our outstanding common stock
or their affiliates have Series C-1 or Series C-2 preferred stock or warrants
exercisable for shares of our common or Series B preferred stock. The table
below does not set forth stock issuances prior to January 1, 1997. Some of the
shares listed below were issued in connection with contractual agreements with
Sony and the Convergence entities.
<TABLE>
<CAPTION>
Executive Officers Preferred Stock Warrants
Directors and 5% Common --------------------------------------------- --------
Stockholders Stock Series A Series B Series B-1 Series C Series C
- ------------------ ----------- -------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Donald R. Freda, Jr........................ 150,000 223,482 0 0 0 0
Convergence entities....................... 6,613 0 1,459,647 0 581,997 22,543
Sony Corporation of America................ 0 0 1,774,383 763,178 300,025 14,451
Abode Development LLC...................... 2,394,380 0 0 0 0 0
Seligman entities.......................... 0 0 0 0 2,202,341 108,381
</TABLE>
Eric Di Benedetto, a member of our board of directors, is a general partner
in Convergence Partners. Lawrence S. Clark, a member of our board of directors,
is Senior Vice President of Corporate Development for Sony Pictures
Entertainment. Charles E. Miller, the General Manager of our Austin office, is a
25% stockholder of Abode Development LLC. Mr. Freda's shares of Series A
preferred stock include 34,665 shares that he transferred by gift to members of
his immediate family and 183,003 shares that he transferred by gift to
individuals that are not members of his immediate family.
In connection with the preferred stock financings referenced above, we
entered into agreements with the investors providing for registration rights
with respect to their shares. For a more complete description of the rights we
granted to these stockholders, see "Description of Securities--Registration
Rights."
For additional information regarding the ownership of our of securities by
executive officers, directors and holders of more than 5% of our outstanding
common stock, please see "Principal Stockholders."
Employment Agreements with Directors and Executive Officers
We have entered into employment agreements with each of Messrs. DeBello and
Rindahl. Please see "Management--Employment Agreements" for more details
regarding these agreements.
Indebtedness of Directors and Executive Officers
In September 1996, we executed promissory notes in the aggregate principal
amount of $50,000 payable to Michael C. Pousti, Jr., our Chief Executive
Officer. Under the terms of each of the notes, we agreed to repay the principal
amount, together with interest accruing annually at
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<PAGE>
10.0%, upon the earlier of December 31, 2005 or our receiving financing from
outside investors in excess of $5,000,000. As of December 31, 1999, we had
repaid the total amount outstanding owed to Mr. Pousti under the notes.
In April, May, October, November and December 1997, we executed promissory
notes in the aggregate principal amount of $228,000 payable to Mr. Pousti. Under
the terms of each of the notes, we agreed to repay the principal amount,
together with interest accruing annually at 10.0%, upon the earlier of
December 31, 2005 or our receiving financing from outside investors in excess of
$5,000,000. As of December 31, 1999, we had repaid the total amount outstanding
owed to Mr. Pousti under the notes.
In October 1997, we executed a promissory note in the principal amount of
$100,000 payable to Donald R. Freda, Jr., our Executive Vice President of Campus
Marketing. Under the terms of the note, we agreed to repay the principal amount,
together with interest accruing annually at 10.0%, upon the earlier of
December 31, 2005 or our receiving financing from outside investors in excess of
$5,000,000. As of December 31, 1999, we had repaid the total amount outstanding
owed to Mr. Freda under the notes.
In January, February, March and April 1998, we executed promissory notes in
the aggregate principal amount of $228,000 payable to Mr. Pousti. Under the
terms of each of the notes, we agreed to repay the principal amount, together
with interest accruing annually at 10.0%, upon the earlier of December 31, 2005
or upon our receiving financing in excess of $5,000,000. As of December 31,
1999, we had repaid the total amount outstanding owed to Mr. Pousti under the
note.
In July 1999, Eric D. Rindahl, our Chief Financial Officer, executed a
promissory note in the principal amount of $100,000. Under the terms of the
note, Mr. Rindahl agreed to repay the principal amount, together with interest
accruing annually at 4.98%, by June 10, 2002. As of December 31, 1999, this
amount is still outstanding.
Option Agreements with Directors
In June 1999 and April 2000, we granted Stephen C. Lake options to purchase
93,546 shares and 93,546 shares, respectively of our common stock with an
exercise price of $0.86 and $2.00, respectively per share. Under the terms of
the grant, the options vest over a four year period.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of April 3, 2000, and as adjusted to reflect
the sale of the shares of common stock offered hereby, by:
- each person (or group of affiliated persons) who we know owns beneficially
5% or more of our common stock;
- our executive officers listed in the Summary Compensation Table;
- each of our directors; and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules and
regulations of the Commission. Except as indicated in the footnotes to this
table, the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them. The
table below includes the number of shares underlying options which are
exercisable within 60 days from April 3, 2000. Percentage ownership is based on
43,947,406 shares of common stock outstanding at April 3, 2000, assuming the
conversion of all outstanding shares of preferred stock into common stock. The
address for those individuals for which an address is not otherwise indicated
is: 1010 Second Avenue, Suite 600, San Diego, California 92101.
<TABLE>
<CAPTION>
Number of
Shares Percentage of
Underlying Shares
Options and Outstanding
Warrants -------------------
Name and Address Number of Shares Beneficially Before After
of Beneficial Owner Beneficially Owned Owned Offering Offering
- ------------------- ------------------ ------------ -------- --------
<S> <C> <C> <C> <C>
Abode Development L.L.C.(1) .................. 2,394,380 0 5.5% %
Charles Eben Miller
715 West 23rd Street, Suite M
Austin, TX 78705
Convergence Partners(2) ...................... 2,048,257 22,543 4.7
Eric DiBenedetto
3000 Sand Hill Road
Building 2, Suite 235
Menlo Park, CA 94025
J&W Seligman(3) .............................. 2,202,341 108,381 5.2
Paul Wick
125 University Avenue
Palo Alto, CA 94301
Sony Corporation of America(4) ............... 2,837,586 14,451 6.5
Lawrence C. Clark
550 Madison Avenue, 12th Floor
New York, NY 10022
Mitra Isfahani ............................... 3,500,000 -- 8.0
1761 Calle Delicada
La Jolla, California 92037
Michael C. Pousti, Jr......................... 10,130,975 519,555 24.0
James B. DeBello(5)........................... 0 237,206 *
Eric D. Rindahl............................... 0 78,650 *
Donald R. Freda, Jr........................... 155,814 739,380 2.0
Stephen C. Lake............................... 0 23,387 *
All directors and executive officers as a 15,172,632 1,708,017 37.0% %
group (12 persons)..........................
</TABLE>
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<PAGE>
- ------------------------
* Represents less than 1%.
(1) Charles Eben Miller is the General Manager of our Austin office and is the
managing member of Abode Development L.L.C.
(2) Includes 1,969,480 shares and a warrant to purchase 21,676 shares held by
Convergence Ventures I and 78,777 shares and a warrant to purchase 867
shares held by Convergence Entrepreneurs Fund I. Convergence Ventures I and
Convergence Entrepreneur Fund I are part of an affiliated group of
investment partnerships referred to collectively as Convergence Partners.
Mr. Di Benedetto, a member of our board of directors, is a general partner
of Convergence Partners. In such capacity, Mr. Di Benedetto may be deemed to
beneficially own the shares held of record by Convergence Ventures I and
Convergence Entrepreneur Fund I. Mr. Di Benedetto disclaims beneficial
ownership of such shares, except to the extent he holds a pecuniary
interest, if any in such shares.
(3) Includes 1,507,870 shares and a warrant to purchase 74,241 shares held by
Seligman New Technologies Fund Inc., 293,645 shares and a warrant to
purchase 14,415 shares held by Seligman Communications and information
Fund Inc. and 400,826 shares and a warrant to purchase 19,725 shares held by
Seligman Investment Opportunities Fund-NTV Portfolio. Seligman New
Technologies Fund Inc., Seligman Communications and Information Fund Inc.,
and Seligman Investment Opportunities Fund-NTV Portfolio are part of an
affiliated group of investment funds referred to collectively as J&W
Seligman & Co.
(4) Includes 2,837,586 shares and a warrant to purchase 14,451 shares held by
Sony Corporation of America. Lawrence S. Clark, a member of our board of
directors, is a Senior Vice President of Corporate Development of Sony
Pictures Entertainment, Inc. In such capacity, Mr. Clark may be deemed to
beneficially own the shares held of record by Sony. Mr. Clark disclaims
beneficial ownership of such shares, except to the extent he holds a
pecuniary interest, if any, in such shares.
(5) Excludes options to purchase a number of shares of our common stock with a
market value equal to $500,000 which will become vested upon the closing of
this offering.
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DESCRIPTION OF CAPITAL STOCK
The following information describes our common stock and preferred stock and
anti-takeover and indemnification provisions of our certificate of incorporation
and our bylaws (as will be in effect upon the closing of this offering). This
description is only a summary. You should also refer to the certificate and
bylaws which have been filed with the SEC as exhibits to our registration
statement, of which this prospectus forms a part. The descriptions of the common
stock and preferred stock reflect changes to our capital structure that will
occur upon the receipt of the requisite board of directors and stockholder
approvals and upon the closing of this offering in accordance with the terms of
the certificate.
Our authorized capital stock as of December 31, 1999 consisted of 81,700,000
shares of common stock and 24,713,537 shares of preferred stock, which was
increased to 26,213,537 shares in March 2000. As of December 31, 1999, there
were outstanding 19,972,895 shares of common stock and 22,667,215 shares of
preferred stock. Such shares were held of record by a total of 413 stockholders.
Upon the closing of this offering:
- our certificate of incorporation will be amended and restated to provide
for total authorized capital stock consisting of 120,000,000 shares of
common stock and 10,000,000 shares of preferred stock; and
- all shares of preferred stock will convert into shares of common stock on
a one-for-one basis, and a total of 42,640,110 shares of common stock and
no shares of preferred stock will be outstanding based on the number of
shares outstanding as of December 31, 1999 and assuming no exercise of the
underwriters' over-allotment option, after giving effect to the sale of
common stock we are offering.
Common Stock
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared by the board of directors out of
funds legally available therefor, subject to any preferential dividend rights of
any outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of common
stock are, and the shares offered by us in this offering will be, when issued in
consideration for payment thereof, fully paid and nonassessable. The rights,
preferences and privileges of holders of common stock are subject to, and may be
materially adversely affected by, the rights of the holders of shares of any
series of preferred stock which we may designate and issue in the future. Upon
the closing of this offering, there will be no shares of preferred stock
outstanding.
Preferred Stock
Upon the closing of this offering, the board of directors will be
authorized, without further stockholder approval, to issue from time to time up
to an aggregate of 10,000,000 shares of preferred stock in one or more series
and to fix or alter the designations, powers, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. We have no present plans
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to issue any shares of preferred stock. Please see "--Anti-Takeover Effects of
Selected Provisions of Delaware Law and our Certificate of Incorporation and
Bylaws" for a detailed description of the possible uses and effects of the
Company's authorized but unissued shares of preferred stock.
Options
As of December 31, 1999, options to purchase a total of 11,722,070 shares of
common stock were outstanding, all of which are subject to lock-up agreements
entered into with the underwriters or with us. Options to purchase a total of
12,880,503 shares of common stock remain which may be granted under the
company's stock option plans. Please see "Management--Benefit Plans" and "Shares
Eligible for Future Sale" for a detailed description of our Stock Option Plan
and the options.
Common Stock Warrants
We have outstanding warrants to purchase a total of 2,538,448 shares of
common stock, at a weighted average exercise price of $1.50 per share. The
warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares underlying the warrants upon the
occurrence of specific events, including any recapitalization, reclassification,
stock dividend, stock split, stock combination or similar transaction. The
warrants grant to the holders registration rights with respect to the Common
Stock issuable upon their exercise, which are described below. All of these
warrants will be exercisable immediately prior to this offering. Warrants to
purchase 150,000 shares expire upon the completion of this offering, warrants to
purchase 150,000 shares expire in May 2003, warrants to purchase 397,410 shares
expire in June 2004, warrants to purchase 313,215 shares expire in August 2004,
warrants to purchase 145,375 shares expire in October 2004, warrants to purchase
11,780 shares expire in November 2004, warrants to purchase 1,150,668 shares
expire in December 2004, warrants to purchase 100,000 shares expire in
March 2005, warrants to purchase 60,000 shares expire in April 2006 and warrants
to purchase 60,000 shares expire in September 2006.
Registration Rights
Under the terms of the Series A preferred stock subscription agreements,
after the closing of this offering the holders of 1,536,516 shares of common
stock will be entitled to rights with respect to the registration of their
shares under the Securities Act of 1933. Under the terms of the subscription
agreements, if we propose to register any of our securities under the Securities
Act, either for our own account or for the account of other security holders,
the holders are entitled to notice of such registration and are entitled to
include shares of common stock in the registration. The rights are subject to
conditions and limitations, among them the right of the underwriters of the
offering subject to the registration to limit the number of shares included in
such registration.
Under the terms of a third amended and restated investors' rights agreement
dated March 27, 2000, after the closing of this offering the holders of
33,270,726 shares of common stock and the holders of warrants to purchase
328,773 shares of common stock will be entitled to rights with respect to the
registration of their shares under the Securities Act. Under the agreement,
Convergence Partners I, LP and its affiliates, Sony Corporation of America and
its affiliates and funds controlled by J. & W. Seligman & Co. Incorporated may
each demand that we register 25% or greater of their shares subject to the
agreement, subject to conditions and limitations. In addition, if we propose to
register any of our securities under the Securities Act, either for our own
account or for the account of other security holders, the holders of at least
300,000 shares of common stock issued in connection with the acquisition of
Versity.com and holders of at least 300,000 shares of our Series B and B-1
preferred stock and all holders of our Series C, C-1 and C-2 preferred stock are
entitled to notice of such registration and are entitled to include shares of
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common stock in the registration, subject to conditions and limitations.
Finally, stockholders holding 2% or greater of the securities subject to the
agreement may require us to file additional registration statements on
Form S-3, subject to conditions and limitations.
Anti-Takeover Effects of Selected Provisions of Delaware Law and our Certificate
of Incorporation and Bylaws
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to some exceptions, Section 203 prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
interested stockholder attained such status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to some
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to us and, accordingly, may discourage attempts to acquire us.
In addition, anti-takeover and indemnification provisions of our certificate
and bylaws, which provisions will be in effect upon the closing of this offering
and are summarized in the following paragraphs, may be deemed to have an
anti-takeover effect and may delay, defer 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.
BOARD OF DIRECTORS VACANCIES. Our bylaws authorize the board of directors
to fill vacant directorships or increase the size of the board of directors.
This 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.
STAGGERED BOARD. Upon the consummation of this offering, we expect that our
bylaws will provide that our board will be classified into three classes of
directors beginning at the next annual meeting of stockholders. Please see
"Management--Classes of the Board" for more information regarding the staggered
board.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our certificate
provides that stockholders may not take action by written consent, but only at
duly called annual or special meetings of stockholders. Our bylaws further
provide that special meetings of our stockholders may be called only by the
President, Chief Executive Officer or Chairman of the board of directors or a
majority of the board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The bylaws provide that stockholders seeking to bring business
before our annual meeting of stockholders, or to nominate candidates for
election as directors at our annual meeting of stockholders, must provide timely
notice thereof 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 120 days prior to the first anniversary of the date of our notice of
annual meeting provided with respect to the previous year's annual meeting of
stockholders; provided, that if no annual meeting of stockholders was held in
the previous year or the date of the annual meeting of stockholders has been
changed to be more than 30 calendar days earlier than such anniversary, notice
by the stockholder, to be timely, must be so received a reasonable time before
the solicitation is made.
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The bylaws also specify requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before our annual meeting of stockholders or from making nominations for
directors at our annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. Our authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to limitations imposed by the Nasdaq National
Market. 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 and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of us by means of a proxy
contest, tender offer, merger or otherwise.
Delaware 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 a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage.
Limitation of Liability and Indemnification Matters
Our certificate provides that, except to the extent prohibited by the
Delaware law, our directors shall not be personally liable to us or our
stockholders for monetary damages for any breach of fiduciary duty as our
directors. Under the Delaware law, the directors have a fiduciary duty to us
which is not eliminated by this provision of the certificate and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to us for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or which involve
intentional misconduct, or knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions that are prohibited by the Delaware
law. This provision also does not affect the directors' responsibilities under
any other laws, such as the Federal securities laws or state or Federal
environmental laws.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director for the following:
- any breach of the director's duty of loyalty to us or our stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock purchases or redemptions;
- for any transaction from which the director derived an improper personal
benefit.
Delaware law provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under our bylaws, any agreement, a vote of stockholders
or otherwise. The certificate eliminates the personal liability of directors to
the fullest extent permitted by Delaware law. In addition, the certificate
provides that we may fully 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) by
reason of the fact that such person is or was one of our directors or officers
or is or was serving at our request as a director or officer of another
corporation,
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partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding.
We have also entered into agreements to indemnify our directors and
executive officers, in addition to the indemnification provided for in our
bylaws. We believe that these provisions and agreements are necessary to attract
and retain qualified directors and executive officers. Our bylaws also permit us
to secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions, regardless of whether
Delaware law would permit indemnification. We have applied for liability
insurance for our officers and directors.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate. We are not aware of any threatened
litigation or proceeding that may result in a claim for such indemnification.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is .
Listing
We have applied to list our common stock on the Nasdaq National Market under
the symbol "CLBS."
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market after
the offering could adversely affect the market price of our common stock and our
ability to raise equity capital in the future on terms favorable to us.
After the offering, shares of our common stock will be outstanding,
assuming that the underwriters do not exercise the over-allotment option. 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 these 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 Rules 144 or 701 under the Securities Act, which rules are
summarized below.
The following table shows approximately when the shares of our common stock
that are not being sold in this offering but which will be outstanding when this
offering is complete, including shares which may be issued upon exercise of
outstanding warrants, will be eligible for sale in the public market:
<TABLE>
<CAPTION>
Number of
Shares Eligible
for Future
Relevant Dates Sale Comment
- -------------- --------------- --------------------------------------
<S> <C> <C>
On effective date..................... 1,830,224 Shares eligible for sale under
Rule 144(k)
90 days after effective date.......... 347,667 Additional shares eligible for sale
under Rules 144 and 701
180 days after effective date......... 21,292,297 All shares subject to expired lock-up
agreements; additional shares eligible
for sale under Rules 144 or 701
At various times more than 180 days
after effective date................ 28,579,644 Additional shares becoming eligible
for sale under Rule 144 more than
180 days after the effective date
</TABLE>
Rule 144
In general, under Rule 144 as currently in effect, 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 is entitled to sell, within any three-month
period, a number of shares that is not more than the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 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 before a notice of the sale
on Form 144 is filed.
Sales under Rule 144 must also comply with manner of sale provisions and
notice requirements and are subject to the availability of current public
information about us.
Rule 144(K)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the 90 days before a sale, and who has beneficially owned the
restricted shares for at least two years, is entitled to sell the shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
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Rule 701
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with some of the restrictions, including the holding period
requirement, of Rule 144. Any employee, officer or director of, or consultant to
us who purchased his or her shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 701. Rule 701
permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell such shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares are
required to wait until 90 days after the date of this prospectus before selling
such shares.
Stock Plans
As of April 3, 2000, options to purchase a total of 15,680,737 shares of
common stock were outstanding. All of these option holders have either entered
into a 180 day lock-up agreement with Deutsche Bank Securities Inc. or are
subject to a market stand-off provision, which allows the Company to restrict
the sale of shares obtained through the exercise of options for up to 180 days
from the date of this offering.
As soon as practicable after the completion of this offering, we intend to
file a registration statement under the Securities Act covering the
27,200,000 shares of our common stock reserved for issuance under our equity
incentive plans, including the 15,908,976 currently outstanding options. Such
registration statement will automatically become effective upon filing.
Accordingly, subject to the exercise of such options, shares registered under
such registration statement will be available for sale in the open market
immediately after the 180-day lock-up period expires.
Lock-up Agreements
Our directors and officers and our stockholders who hold 42,394,682 shares
in the aggregate, together with the holders of options to purchase approximately
15,680,737 shares of common stock and the holders of warrants to purchase
2,175,423 shares of common stock, have entered into lock-up agreements with us
or with Deutsche Bank Securities Inc. pursuant to which they have agreed that
they will not sell, directly or indirectly, any shares of common stock without
the prior written consent of Deutsche Bank Securities Inc. for a period of
180 days from the effective date of the registration statement of which this
prospectus is a part. We have entered into a similar agreement, except that we
may, without such consent, grant options and sell shares pursuant to our
employee benefits plans described in this prospectus. Deutsche Bank
Securities Inc. may release the shares subject to the lock-up agreements in
whole or in part at any time without prior public notice. However, Deutsche Bank
Securities Inc. has no current plans to effect such a release.
Registration Rights
Holders of approximately 33,270,726 shares of common stock and warrants to
purchase approximately 328,773 shares of common stock have the right, subject to
conditions and limitations, to include their shares in registration statements
relating to our securities. By exercising their registration rights and causing
a large number of shares to be registered and sold in the public market, these
holders may cause the price of the common stock to fall. In addition, any demand
to include such shares in our registration statements could have a material
adverse effect on our ability to raise needed capital. Please see "Description
of Capital Stock--Registration Rights" for a detailed description of the
registration rights.
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank
Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wit
SoundView Corporation and Roth Capital Partners, have severally agreed to
purchase from us the following respective numbers of shares of common stock at
the public offering price less the underwriting discounts and commissions set
forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
- ----------- ---------
<S> <C>
Deutsche Bank Securities Inc................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Wit SoundView Corporation...................................
Roth Capital Partners.......................................
-------
Total...................................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all of
the shares of common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $
per share under the public offering price. The underwriters may allow, and
these dealers may re-allow, a concession of not more than $ per share to
other dealers. After the initial public offering, representatives of the
underwriters may change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to additional
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise the option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. To the extent the
underwriters exercise this option, each of the underwriters will become
obligated, subject to conditions, to purchase approximately the same percentage
of additional shares of common stock as the number of shares of common stock to
be purchased by it in the above table bears to the total number of shares of
common stock offered hereby. We will be obligated, pursuant to the option, to
sell these additional shares of common stock to the underwriters to the extent
the option is exercised. If any additional shares of common stock are purchased,
the underwriters will offer the additional shares on the same terms as those on
which the shares are being offered.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is
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currently expected to be approximately 7% of the initial public offering price.
We have agreed to pay the underwriters the following fees, assuming either no
exercise or full exercise by the underwriters of the underwriters'
over-allotment option:
<TABLE>
<CAPTION>
Total Fees
-------------------------------------------
Without Exercise of With Full Exercise of
Over-Allotment Over-Allotment
Fee Per Share Option Option
------------- ------------------- ---------------------
<S> <C> <C> <C>
Fees paid by CollegeClub................... $ $ $
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding the underwriting discounts and commissions, will be
approximately $ .
We have agreed to indemnify the underwriters against some specified types of
liabilities, including liabilities under the Securities Act and to contribute to
payments the underwriters may be required to make in respect of any of these
liabilities.
Each of our officers and directors and substantially all our stockholders
and holders of options and warrants to purchase our stock, has agreed not to
offer, sell, contract to sell or otherwise dispose of, or enter into any
transaction that is designed to, or could be expected to, result in the
disposition of any portion of our common stock held by these persons prior to
this offering or common stock issuable upon exercise of options or warrants held
by these persons for a period of 180 days after the effective date of the
registration statement of which this prospectus is a part without the prior
written consent of Deutsche Bank Securities Inc. This consent may be given at
any time without public notice. We have entered into a similar agreement with
representatives of the underwriters, except that we may grant options and sell
shares pursuant to our 1996 Stock Option Plan, our 2000 Stock Incentive Plan and
our 2000 Employee Stock Purchase Plan without such consent. There are no
agreements between the representatives and any of our stockholders or affiliates
releasing them from these lock-up agreements prior to the expiration of the
180-day period.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions to stabilize, maintain or otherwise affect the market
price of our common stock. Specifically, the underwriters may over-allot shares
of our common stock in connection with this offering, thus creating a short
position in our common stock for their own account. A short position results
when an underwriter sells more shares of common stock than the underwriter is
committed to purchase. Additionally, to cover these over-allotments or to
stabilize the market price of our common stock, the underwriters may bid for,
and purchase, shares of our common stock in the open market. Finally, the
representatives, on behalf of the underwriters, may also reclaim selling
concessions allowed to an underwriter or dealer. Any of these activities may
maintain the market price of our common stock at a level above that which might
otherwise prevail in the open market. These transactions may be effected on the
Nasdaq National Market or otherwise. The underwriters are not required to engage
in these activities and, if commenced, may end any of these activities at any
time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares for our employees, family members of
employees and other third parties. The number of shares of our common stock
available for sale to the general public will be reduced to the extent these
reserved shares are purchased. Any reserved shares that are not purchased by
these persons will be offered by the underwriters to the general public on the
same basis as the other shares in this offering.
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A prospectus in electronic format is being made available on an Internet Web
site maintained by Wit SoundView's affiliate, Wit Capital Corporation. In
addition, other dealers purchasing shares from Wit SoundView in this offering
have agreed to make a prospectus in electronic format available on Web sites
maintained by each of these dealers. Other than the prospectus in electronic
format, the information on Wit Capital's Web site and any information contained
on any other Web site maintained by Wit Capital is not part of the prospectus or
the registration statement of which this prospectus forms a part, has not been
approved and/or endorsed by CollegeClub.com or any underwriter in its capacity
as underwriter and should not be relied upon by investors.
In June 1999, we sold shares of our Series B preferred stock in a private
placement at a price of $2.85 per share. Each of the shares of Series B
preferred stock is convertible at the option of the holder into one share of our
common stock. In June 1999, we issued a warrant to Roth Capital Partners to
purchase 268,773 shares of our Series B preferred stock at an exercise price of
$3.42 per share in connection with the services rendered to us in the private
sale of our Series B preferred stock.
In December 1999, we sold shares of our Series C preferred stock in a
private placement at a price of $3.46 per share. Each of the shares of Series C
preferred stock is convertible at the option of the holder into one share of our
common stock. In this private placement, BT Investment Partners, Inc. and ABS
Employees' Venture Fund Limited Partnership, affiliates of Deutsche Bank
Securities Inc., purchased 433,526 shares and 393,800 shares, respectively, of
Series C preferred stock for an aggregate purchase price of $2,862,548. In
addition, employees of Deutsche Bank Securities Inc. or its affiliates purchased
an aggregate of 22,283 shares of Series C preferred stock and US Development
Capital Investment Company, in which Deutsche Bank Securities Inc. has
approximately a 4.9% beneficial ownership interest, purchased 289,017 shares of
Series C preferred stock for an aggregate purchase price of $999,999. BT
Investment Partners, Inc., ABS Employees' Venture Fund Limited Partnership, US
Development Capital Investment Company and the employees of Deutsche Bank
Securities Inc. or its affiliates purchased the Series C preferred stock on the
same terms as the other investors in the private placement. The National
Association of Securities Dealers, Inc. may deem the aggregate value of the
difference between the price paid per share for the Series C preferred stock and
the initial offering price per share of our common stock to be additional
underwriting compensation received in connection with this offering. If this is
deemed to be underwriting compensation, these shares of Series C preferred
stock, and the common stock issued upon conversion thereof, could not be sold,
transferred, assigned, pledged or hypothecated by any person for a period of one
year after the effective date of this offering, except to officers or partners
of the underwriters and members of the selling group and their officers or
partners.
In December 1999, we issued a warrant to Deutsche Bank Securities Inc. to
purchase 340,000 shares of our Series C preferred stock at an exercise price of
$3.46 in connection with the services rendered to us in the private sale of our
Series C preferred stock. The National Association of Securities Dealers, Inc.
may deem the aggregate value of the difference between the exercise price per
share for the Series C preferred stock and the initial offering price per share
of our common stock to be additional underwriting compensation received in
connection with this offering. If this is deemed to be underwriting
compensation, these shares of Series C preferred stock issuable upon exercise of
the warrant, and the common stock issued upon conversion thereof, could not be
sold, transferred, assigned, pledged or hypothecated by any person for a period
of one year after the effective date of this offering, except to officers or
partners of the underwriters and members of the selling group and their officers
or partners.
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<PAGE>
Pricing of this Offering
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stage of development of other companies that
we and the representatives of the underwriters believe to be comparable to
our business; and
- estimates of our business potential.
The estimated initial public offering price range set forth on the cover of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
Brobeck, Phleger & Harrison LLP, San Diego, California, will pass upon the
validity of the shares of common stock offered by this prospectus. Morrison &
Foerster LLP, Irvine, California is acting as legal counsel to the underwriters
in connection with this offering.
EXPERTS
The financial statements of CollegeClub.com as of December 31, 1998 and 1999
and for each of the three years in the period ended December 31, 1999 included
in this prospectus have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of CollegeStudent.com, a development stage
enterprise, as of December 31, 1998 and for the period from inception,
February 19, 1998, through December 31, 1998 included in this prospectus have
been included in reliance on the report, which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as discussed in
Note 1 to the financial statements, of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Versity.com, a development stage enterprise, as
of June 30, 1999 and for the period from inception, February 2, 1999, through
June 30, 1999 included in this prospectus have been 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 have filed with the SEC a registration statement on Form S-1, including
the exhibits, schedules and amendments to the registration statement, under the
Securities Act of 1933 with respect to the shares of common stock to be sold in
this offering. This prospectus does not contain all the information set forth in
the registration statement. For further information with respect to CollegeClub
and the shares of common stock to be sold in this offering, reference is made to
the registration statement. Statements contained in this prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract, agreement or other document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference.
74
<PAGE>
You may read and copy all or any portion of the registration statement or
any other information us files at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, are also available
to you on the Commission's Web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the SEC. Upon approval of the common stock for the quotation on
the Nasdaq National Market, such reports, proxy and information statements and
other information may also be inspected at the offices of Nasdaq Operations,
1735 K Street, N.W., Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each year containing unaudited interim consolidated financial information.
75
<PAGE>
Index to Financial Statements
<TABLE>
<S> <C>
COLLEGECLUB.COM, INC.
Financial Statements for the years ended December 31, 1997,
1998 and 1999
Report of Independent Accountants........................... F-2
Financial Statements
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Deficit.......... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-8
COLLEGESTUDENT.COM, INC.
Financial Statements for the period from February 19, 1998
(inception) through December 31, 1998
Report of Independent Accountants........................... F-26
Financial Statements
Balance Sheet............................................. F-27
Statement of Operations................................... F-28
Statement of Changes in Stockholders' Deficit............. F-29
Statement of Cash Flows................................... F-30
Notes to Financial Statements............................. F-31
Financial Statements (unaudited) for the nine months ended
September 30, 1999
Balance Sheet............................................. F-40
Statement of Operations................................... F-41
Statement of Cash Flows................................... F-42
Notes to Financial Statements............................. F-43
CAMPUS24, INC.
Financial Statements (unaudited) for the period from
February 2, 1999 (inception) through July 28, 1999
Balance Sheet............................................. F-44
Statement of Operations................................... F-45
Statement of Cash Flows................................... F-46
Notes to Financial Statements............................. F-47
VERSITY.COM, INC.
Financial Statements for the period from February 2, 1999
(inception) through June 30, 1999 and for the period from
February 2, 1999 (inception) through December 31, 1999
(unaudited)
Report of Independent Accountants........................... F-48
Financial Statements
Balance Sheets............................................ F-49
Statements of Operations.................................. F-50
Statements of Stockholders' Deficit....................... F-51
Statements of Cash Flows.................................. F-52
Notes to Financial Statements............................. F-53
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(Unaudited)............................................... F-63
Unaudited Pro Forma Combined Condensed Balance Sheet as of
December 31, 1999........................................ F-65
Unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended December 31, 1999.......... F-66
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements............................................... F-67
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
CollegeClub.com, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' deficit and of cash
flows present fairly, in all material respects, the financial position of
CollegeClub.com, Inc. and its subsidiaries (the "Company") at December 31, 1998
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. In addition, in
our opinion, the financial statement schedule listed in the index under Item
16(b) on page II-7 presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
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
San Diego, California
February 11, 2000, except as to Note 16,
which is as of April 18, 2000
F-2
<PAGE>
CollegeClub.com, Inc.
Consolidated Balance Sheets
December 31, 1998 and 1999
<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents................................. $ 409,000 $ 29,740,000
Accounts receivable, net.................................. 198,000 1,249,000
Other current assets...................................... 18,000 164,000
----------- ------------
Total current assets.................................... 625,000 31,153,000
Property and equipment, net................................. 580,000 4,225,000
Advances to employees....................................... -- 100,000
Goodwill and other intangible assets, net................... -- 19,561,000
Other assets................................................ 46,000 1,393,000
----------- ------------
Total assets............................................ $ 1,251,000 $ 56,432,000
=========== ============
Liabilities, Convertible Preferred Stock and Stockholders'
Deficit
Current liabilities
Accounts payable.......................................... $ 1,536,000 $ 3,681,000
Accrued interest.......................................... 16,000 16,000
Accrued wages, benefits and related taxes................. 167,000 563,000
Accrued liabilities....................................... 45,000 858,000
Software license deposit (Note 8)......................... 500,000 --
Current portion of long-term debt......................... 1,561,000 --
Current portion of capital lease obligation............... 782,000 622,000
Deferred revenue.......................................... -- 744,000
----------- ------------
Total current liabilities............................... 4,607,000 6,484,000
Accrued interest............................................ 74,000 --
Capital lease obligation, net of current portion............ 160,000 1,348,000
Long-term debt.............................................. 552,000 5,000
----------- ------------
Total liabilities....................................... 5,393,000 7,837,000
----------- ------------
Commitments and contingencies (Note 10 and Note 16)
Convertible preferred stock
Preferred stock, $.001 par value, authorized 26,213,537
shares:
Series A convertible preferred stock, designated
1,536,537 shares, 1,536,516 shares issued and outstanding
at December 31, 1998 and 1999; liquidation preference of
$2,110,000............................................... 2,110,000 2,110,000
Series B convertible preferred stock, designated 8,000,000
shares, none and 7,409,566 shares issued and outstanding
at December 31, 1998 and 1999, respectively; liquidation
preference of $21,120,000................................ -- 16,478,000
Series B-1 convertible preferred stock, designated 777,000
shares, none and 761,259 issued and outstanding at
December 31, 1998 and 1999, respectively; liquidation
preference of $2,604,000................................. -- 521,000
Series C convertible preferred stock, designated
12,700,000 shares, none and 11,322,897 shares issued and
outstanding at December 31, 1998 and 1999, respectively;
liquidation preference of $58,766,000.................... -- 36,590,000
Series C-1 convertible preferred stock, designated
1,700,000 shares, none and 1,636,977 shares issued and
outstanding at December 31, 1998 and 1999, respectively;
liquidation preference of $8,496,000..................... -- 5,664,000
----------- ------------
2,110,000 61,363,000
Stockholders' deficit
Common stock $.001 par value authorized 81,700,000 shares,
16,167,757 and 19,972,895 shares issued and outstanding
at December 31, 1998 and 1999, respectively.............. 16,000 20,000
Paid-in capital........................................... 4,426,000 31,070,000
Unearned compensation..................................... (1,457,000) (8,856,000)
Accumulated deficit....................................... (9,237,000) (35,002,000)
----------- ------------
Total stockholders' deficit............................. (6,252,000) (12,768,000)
----------- ------------
Total liabilities, convertible preferred stock and
stockholders' deficit.................................. $ 1,251,000 $ 56,432,000
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CollegeClub.com, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues, net
Advertising, sponsorship and service............. $ 802,000 $ 332,000 $ 2,413,000
License.......................................... -- -- 500,000
----------- ----------- ------------
802,000 332,000 2,913,000
Operating expenses
Production and technology, net of stock-based
compensation expense of $177,000, $98,000 and
$231,000, respectively.......................... 859,000 763,000 3,483,000
Selling and marketing, net of stock-based
compensation expense of $716,000, $447,000 and
$2,304,000, respectively........................ 1,319,000 930,000 12,503,000
General and administrative, net of stock-based
compensation expense of $652,000, $611,000 and
$1,616,000, respectively........................ 807,000 868,000 7,010,000
Depreciation and amortization.................... 354,000 344,000 1,498,000
Stock-based compensation......................... 1,545,000 1,156,000 4,151,000
----------- ----------- ------------
4,884,000 4,061,000 28,645,000
----------- ----------- ------------
Loss from operations........................... (4,082,000) (3,729,000) (25,732,000)
----------- ----------- ------------
Other income (expense)
Interest income.................................. -- -- 186,000
Interest expense................................. (136,000) (91,000) (537,000)
Other, net....................................... 6,000 (3,000) 318,000
----------- ----------- ------------
Net loss........................................... $(4,212,000) $(3,823,000) $(25,765,000)
=========== =========== ============
Net loss per common share.......................... $ (0.27) $ (0.24) $ (1.57)
=========== =========== ============
Basic and diluted common equivalent shares......... 15,371,994 16,034,576 16,387,676
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CollegeClub.com, Inc.
Consolidated Statements of Stockholders' Deficit
For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Common Stock
---------------------- Paid-in Unearned Accumulated
Shares Amount Capital Compensation Deficit Total
----------- -------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.... 15,100,000 $15,000 $ 35,000 $(1, 202,000) $ (1,152,000)
Issuance of common stock for
cash on exercise of stock
options....................... 465,417 1,000 101,000 102,000
Compensatory stock options
(Note 13)..................... 2,295,000 $ (889,000) 1,406,000
Issuance of warrants............ 139,000 139,000
Net loss........................ (4,212,000) (4,212,000)
---------- ------- ----------- ----------- ------------ ------------
Balance at December 31, 1997.... 15,565,417 16,000 2,570,000 (889,000) (5,414,000) (3,717,000)
Issuance of common stock for
cash on exercise of stock
options....................... 302,307 -- 66,000 66,000
Issuance of common stock for
cash.......................... 300,033 -- 66,000 66,000
Compensatory stock options
(Note 13)..................... 1,585,000 (568,000) 1,017,000
Issuance of warrants............ 139,000 139,000
Net loss........................ (3,823,000) (3,823,000)
---------- ------- ----------- ----------- ------------ ------------
Balance at December 31, 1998.... 16,167,757 16,000 4,426,000 (1,457,000) (9,237,000) (6,252,000)
Conversion of Series C
convertible preferred stock
into common stock............. 277,500 -- 960,000 960,000
Issuance of common stock
associated with the
Collegestudent acquisition
(Note 5)...................... 3,479,724 4,000 12,036,000 12,040,000
Issuance of common stock for
cash on exercise of stock
options....................... 29,670 -- 34,000 34,000
Issuance of common stock for
services rendered............. 18,244 -- 63,000 63,000
Compensatory stock options
(Note 13)..................... 11,550,000 (7,399,000) 4,151,000
Issuance of warrants (Notes 8,
9, 12 and 15)................. 2,001,000 2,001,000
Net loss........................ (25,765,000) (25,765,000)
---------- ------- ----------- ----------- ------------ ------------
Balance at December 31, 1999.... 19,972,895 $20,000 $31,070,000 $(8,856,000) $(35,002,000) $(12,768,000)
========== ======= =========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CollegeClub.com, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss.............................................. $(4,212,000) $(3,823,000) $(25,765,000)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization....................... 354,000 344,000 1,498,000
Loss on disposition of asset........................ -- -- 1,000
Non-cash compensation, expenses and gains........... 1,544,000 1,157,000 5,248,000
Increase (decrease) in cash resulting from changes
in
Accounts receivable, net.......................... (7,000) (190,000) (873,000)
Other current assets.............................. -- (18,000) (766,000)
Other assets...................................... -- (45,000) (1,259,000)
Accounts payable.................................. 315,000 882,000 1,404,000
Accrued interest.................................. 12,000 76,000 225,000
Accrued wages, benefits and related taxes......... 32,000 134,000 211,000
Deferred revenue.................................. -- -- 744,000
Software license deposit.......................... -- 500,000 (500,000)
Other accrued liabilities......................... 76,000 (51,000) 725,000
----------- ----------- ------------
Net cash used in operating activities........... (1,886,000) (1,034,000) (19,107,000)
----------- ----------- ------------
Cash flows from investing activities
Purchases of property and equipment................... (14,000) (256,000) (2,209,000)
Issuance of advances to employees..................... -- -- (100,000)
Cash acquired in business acquisitions................ -- -- 376,000
----------- ----------- ------------
Net cash used in investing activities........... (14,000) (256,000) (1,933,000)
----------- ----------- ------------
Cash flows from financing activities
Proceeds from issuance of convertible debt............ -- -- 17,855,000
Proceeds from issuance of long-term debt.............. 421,000 1,622,000 --
Proceeds from issuance of Series A convertible
preferred stock...................................... 1,389,000 2,000 --
Proceeds from issuance of Series B convertible
preferred stock...................................... -- -- 6,515,000
Proceeds from issuance of Series B-1 convertible
preferred stock...................................... -- -- 476,000
Proceeds from issuance of Series C convertible
preferred stock...................................... -- -- 26,953,000
Proceeds from issuance of common stock................ 102,000 132,000 34,000
Payments on long-term debt............................ -- -- (602,000)
Payments on capital lease obligation.................. (68,000) (57,000) (860,000)
----------- ----------- ------------
Net cash provided by financing activities....... 1,844,000 1,699,000 50,371,000
----------- ----------- ------------
Net increase (decrease) in cash................. (56,000) 409,000 29,331,000
Cash and cash equivalents at beginning of year.......... 56,000 -- 409,000
----------- ----------- ------------
Cash and cash equivalents at end of year................ $ -- $ 409,000 $ 29,740,000
=========== =========== ============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-6
<PAGE>
CollegeClub.com, Inc.
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Non-cash investing and financing activities
Acquisition of property and equipment through capital
lease agreements..................................... $ 219,000 $ 262,000 $ 1,882,000
=========== =========== ============
Conversion of subordinated convertible notes and
unpaid accrued interest to Series A convertible
preferred stock...................................... $ 719,000
===========
Conversion of subordinated convertible notes and
unpaid accrued interest to Series B convertible
preferred stock...................................... $ 8,318,000
============
Purchase of Campus24, Inc. in exchange for Series B
convertible preferred stock.......................... $ 1,111,000
============
Issuance of Series B and B-1 convertible preferred
stock in conjunction with in-kind contributions and
equipment from strategic partnership................. $ 6,248,000
============
Conversion of subordinated convertible notes and
unpaid accrued interest to Series C convertible
preferred stock...................................... $ 10,597,000
============
Conversion of Series C convertible preferred stock to
common stock......................................... $ 960,000
============
Purchase of Collegestudent.com, Inc. in exchange for
Series C-1 convertible preferred stock, common stock
and forgiveness of debt.............................. $ 18,154,000
============
Issuance of warrants.................................. $ 139,000 $ 139,000 $ 2,001,000
=========== =========== ============
Services rendered in exchange for common stock........ $ 63,000
============
Supplemental disclosures of cash flow information
Cash paid for interest................................ $ 124,000 $ 55,000 $ 245,000
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements
December 31, 1998 and 1999
1. Organization, Nature of Business and Basis of Presentations
CollegeClub.com, Inc., formerly known as Public Online Communication
Corporation (the "Company"), is an integrated communications and media Internet
company that operates an online destination targeting college students. The
Company derives revenues primarily from the sale of sponsorships, advertising
and other promotional services and also generates fees from various commerce
relationships.
2. Reincorporation
Effective September 28, 1999, the Company changed its state of incorporation
from California to Delaware. There was no impact on the Company's financial
condition or results of operations as a result of the reincorporation.
3. Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
REVENUE RECOGNITION
Fees generated from sponsorships and other marketing programs are recognized
on a straight-line basis over the life of each contract. Advertising revenue
based on the delivery of impressions is recognized at the lesser of
straight-line over the contracted period or as the related impressions are
displayed, provided no significant obligations remain and the collection of the
related receivable is probable. Commerce revenue includes transaction-based fees
earned from reselling products and services on behalf of the Company's business
partners, which is recognized upon the completion of the underlying related
contractual obligations.
Web site professional services consist of domain development, enhancement
and maintenance. Web site professional services revenue is recognized when the
related services are performed provided no significant obligations remain and
the collection of the related receivable is probable.
Income from one-time-charge licensed software is recognized when the program
is shipped with a deferral for post-contract customer support. This deferral is
earned over the support period. Any payments received in advance of revenue
being earned are recorded as deferred revenue.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At
December 31, 1999, the Company held $21,206,000 in interest bearing cash
accounts. This amount is included in cash and cash equivalents, the fair value
of which approximates cost.
F-8
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
3. Summary of Significant Accounting Policies (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable, capital lease obligations and long-term
debt. The carrying amounts of these instruments approximate fair value.
ADVERTISING COSTS
The cost of advertising is expensed as incurred. For the years ended
December 31, 1997, 1998 and 1999, the Company incurred advertising expense of
$78,000, $5,000 and $1,407,000, respectively.
CERTAIN RISKS AND CONCENTRATIONS
The Company has a limited operating history and its prospects are subject to
the risks, expenses and uncertainties frequently encountered by companies in the
new and rapidly evolving markets for Internet products and services. The risks
include failure to develop and extend the Company's online service brands, the
rejection of the Company's services by Web consumers, vendors and/or
advertisers, the inability of the Company to maintain and increase the levels of
traffic on its online services, as well as other risks and uncertainties. In the
event that the Company does not successfully implement its business plan,
certain assets may not be recoverable.
The Company's financial instruments that are subject to concentrations of
credit risk consist primarily of cash and cash equivalents and trade
receivables.
At times, cash balances held at financial institutions were in excess of
federally insured limits. To date, the Company has experienced no losses in
connection with such deposits.
The Company's customers are concentrated in the United States. The Company
generally does not require collateral. The Company maintains an allowance for
doubtful accounts based upon the expected collectibility of accounts receivable.
For the year ended December 31, 1999, the Company had sales to one customer
which represented 17% of total net revenues.
As of December 31, 1999, the Company had amounts due from three major
customers, which represented 61% of the net accounts receivable.
EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share is calculated by dividing net income
(loss) for the period by the weighted-average number of common shares
outstanding during the period. Diluted earnings per common share is calculated
by dividing net income (loss) for the period by the weighted-average number of
common shares outstanding during the period, increased by dilutive potential
common shares ("dilutive securities") that were outstanding during the period.
Dilutive securities include the Company's Series A convertible preferred stock,
Series B convertible preferred stock, Series B-1 convertible preferred stock,
Series C convertible preferred stock, Series C-1 convertible preferred stock and
Series C-2 convertible preferred stock, options issued under the
F-9
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
3. Summary of Significant Accounting Policies (Continued)
Company's 1996 Stock Option Plan and warrants to purchase stock as may be issued
by the Company from time to time. Dilutive securities are included in the
calculation of diluted earnings per common share using the treasury stock
method. During the years ended December 31, 1997, 1998 and 1999, all dilutive
securities were excluded from the calculation of diluted loss per share, as
their effect would have been antidilutive.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation of property and equipment is provided over their estimated useful
lives, generally two to three years, using the straight-line method. Repair and
maintenance costs are expensed as incurred. The Company periodically evaluates
the recoverability of its long-lived assets based on expected undiscounted cash
flows and recognizes impairments, if any, based on expected discounted future
cash flows.
INTANGIBLE ASSETS
Intangible assets consists of goodwill resulting from acquired businesses,
technology and strategic contracts, all of which are being amortized over the
estimated useful lives of two and one-half to three years using the
straight-line method. Amortization expense totaled $786,000 for the year ended
December 31, 1999.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair value
of the Company's common stock at the date of grant. If the Company issues
options to employees in fixed amounts and with fixed exercise prices at less
than the fair value of the Company's common stock, compensation expense is
recorded for such difference over the period the related options are earned. The
Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, through
disclosure only (Note 13). All stock-based awards to non-employees are accounted
for at their fair value in accordance with SFAS No. 123.
INCOME TAXES
Current income tax expense or benefit is the amount of income taxes expected
to be payable or refundable for the current year. A deferred income tax asset or
liability is computed for the expected future impact of differences between the
financial reporting and tax basis of assets and liabilities and for the expected
future tax benefit to be derived from tax credits and loss carryforwards.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
F-10
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
3. Summary of Significant Accounting Policies (Continued)
COMPREHENSIVE INCOME
The Company reports all components of comprehensive income in the financial
statements in the period in which they are recognized. During the years ended
December 31, 1997, 1998 and 1999, the Company did not have any components of
comprehensive income other than net loss.
SEGMENT INFORMATION
Management has determined that its operations can be aggregated into one
reportable segment. Additionally, as the Company operates its Web site within
the U.S., no segment disclosures, other than sales to significant customers,
have been included in the accompanying notes to the consolidated financial
statements.
RECLASSIFICATIONS
Certain reclassifications were made to prior year's consolidated financial
statements to conform to the current year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
4. Composition of Certain Financial Statement Captions
ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1998 1999
--------- -----------
<S> <C> <C>
Accounts receivable.................................. $198,000 $1,404,000
Less allowance for doubtful accounts................. -- (155,000)
-------- ----------
$198,000 $1,249,000
======== ==========
</TABLE>
F-11
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
4. Composition of Certain Financial Statement Captions (Continued)
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Computers and software............................. $1,138,000 $4,890,000
Equipment.......................................... 200,000 370,000
Furniture and fixtures............................. 83,000 385,000
Leasehold improvements............................. 3,000 131,000
---------- ----------
1,424,000 5,776,000
Less accumulated depreciation...................... (844,000) (1,551,000)
---------- ----------
Property and equipment, net........................ $ 580,000 $4,225,000
========== ==========
</TABLE>
Depreciation expense with respect to property and equipment for the years
ended December 31, 1997, 1998 and 1999 was $354,000, $344,000 and $709,000,
respectively. Included in the table above at December 31, 1998 and 1999 are
property and equipment under capital leases of $1,137,000 and $3,019,000,
respectively, with accumulated depreciation of $740,000 and $1,267,000,
respectively.
GOODWILL AND INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1998 1999
--------- ------------
<S> <C> <C>
Goodwill........................................... $ -- $10,861,000
Technology......................................... -- 4,743,000
Strategic contracts................................ -- 4,743,000
-------- -----------
-- 20,347,000
Less accumulated amortization...................... -- (786,000)
-------- -----------
$ -- $19,561,000
======== ===========
</TABLE>
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1998 1999
-------- ---------
<S> <C> <C>
Accrued legal settlement (Note 11)..................... $ -- $500,000
Other.................................................. 45,000 358,000
------- --------
$45,000 $858,000
======= ========
</TABLE>
5. Acquisitions
COLLEGEBEAT.COM, INC.
In June 1999, the Company acquired the assets of CollegeBeat.com, Inc.,
which primarily maintained a Web site that offered college students free e-mail
access and other online services.
F-12
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
5. Acquisitions (Continued)
The purchase price was equal to $250 per active user acquired through
February 15, 2000. Based upon the users acquired, the Company issued a total of
100,087 shares of Series B convertible preferred stock with an estimated fair
value of $425,000.
The acquisition was accounted for as a purchase. The purchase price was
allocated to identifiable assets of approximately $5,000 based on their
estimated fair value, with the excess of the purchase price over the fair value
of such assets reflected as goodwill of approximately $420,000, which is being
amortized over three years.
CAMPUS24, INC.
In July 1999, the Company acquired all outstanding shares of common and
preferred stock of Campus24, Inc. ("Campus24"), a Delaware corporation that
commenced operations in February 1999 and primarily administered a Web site that
facilitated person-to-person trading of personal items in an auction format.
In consideration, the Company issued 389,925 shares of Series B convertible
preferred stock with an estimated fair value of approximately $1,111,000. The
acquisition was accounted for as a purchase with goodwill being amortized over a
period of three years.
The purchase price was allocated to identifiable assets and liabilities
based on their estimated fair values, with the excess of the purchase price over
the fair value of such net assets acquired reflected as goodwill, as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 176,000
Other current assets........................................ 1,000
Property and equipment...................................... 22,000
Other assets................................................ 1,000
Goodwill.................................................... 911,000
----------
$1,111,000
==========
</TABLE>
The unaudited pro forma results of operations below represents the effect on
the Company's results of operations as if the acquisition of Campus24 had
occurred on January 1, 1999, instead of on the acquisition date.
<TABLE>
<CAPTION>
Unaudited
------------
<S> <C>
Net revenue................................................. $ 2,915,000
Net loss.................................................... (26,165,000)
Net loss per common share................................... $ (1.60)
</TABLE>
F-13
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
5. Acquisitions (Continued)
COLLEGESTUDENT.COM, INC.
In December 1999, the Company acquired all outstanding shares of common and
preferred stock of Collegestudent.com, Inc. ("Collegestudent"), a business that
primarily maintains a Web site focused on developing online campus communities
that provide student-oriented material for the college market targeted to
college students.
The Company also assumed all outstanding stock options. In conjunction with
the acquisition all outstanding warrants to purchase common shares of
Collegestudent were canceled.
In consideration, the Company issued 1,636,977 shares of Series C-1
convertible preferred stock with an estimated fair value of approximately
$5,664,000 and 3,479,724 shares of common stock with an estimated fair value of
approximately $12,040,000. The acquisition was accounted for as a purchase.
The purchase price was allocated to identifiable assets and liabilities
based on their estimated fair values, with the excess of the purchase price over
the fair value of the net liabilities acquired reflected as intangible assets,
as follows:
<TABLE>
<S> <C>
Cash........................................................ $ 200,000
Other current assets........................................ 209,000
Property and equipment...................................... 110,000
Other assets................................................ 90,000
Technology.................................................. 4,743,000
Strategic relationships..................................... 4,743,000
Goodwill.................................................... 9,486,000
Liabilities assumed......................................... (1,227,000)
-----------
Purchase price.............................................. $18,354,000
===========
</TABLE>
The unaudited pro forma results of operations below represents the effect on
the Company's results of operations for the years ended December 31, 1998 and
1999 as if the acquisition of Collegestudent had occurred as of January 1, 1998,
instead of on the acquisition date.
<TABLE>
<CAPTION>
1998
------------
(unaudited)
<S> <C>
Net revenue................................................. $ 599,000
Net loss.................................................... (10,972,000)
Net loss per common share................................... $ (0.56)
<CAPTION>
1999
------------
(unaudited)
<S> <C>
Net revenue................................................. $ 4,047,000
Net loss.................................................... (34,154,000)
Net loss per common share................................... $ (1.72)
</TABLE>
F-14
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
6. Letter of Credit
The Company was extended an irrevocable standby letter of credit of
$1,000,000 by a bank, which acts as an additional security for the Company's San
Diego office lease agreement. The letter of credit is automatically renewed
until the end of the lease term of November 2006. As a condition, the bank
required the Company to invest $1,000,000 in the form of a 30-day certificate of
deposit that will continue to roll over for the term of the lease.
7. Strategic Relationship
During September 1999, the Company entered into an agreement with a
strategic partner and a number of the partner's affiliates. The agreement called
for an equity investment by the partner, whereby the Company sold to the partner
1,769,922 shares of Series B convertible preferred stock at a price of $2.85 per
share and 761,259 shares of Series B-1 convertible preferred stock at a price of
$3.42 per share in exchange for $1,400,000 in cash, $130,000 of tangible
equipment and a commitment to deliver certain proprietary content and
promotional items from the partner as well as online promotion throughout the
partner's network of Web sites for a period of three years. The estimated fair
value of the future promotional commitments of approximately $6,118,000 has been
recorded as a reduction of convertible preferred stock and will be recognized as
selling and marketing expense as the services are delivered.
8. Software Agreement
In November 1998, the Company entered into a software agreement with a note
holder whereby the Company agreed to license an Internet product suitable for
marketing to the agricultural industry and other prospective customers in a form
and format essentially the same as has been developed for the Company's Web
site. In consideration for the software, the Company received $500,000 in cash
and upon delivery, the note holder forgave $800,000 of previously issued
promissory notes. In conjunction with the sale, the Company issued warrants to
purchase 885,129 shares of common stock at $0.22 per share. The estimated fair
value of the warrants was recorded as a reduction of revenues under the
agreement for the year ended December 31, 1999.
Under the terms of the agreement, the note holder was entitled to additional
warrants if the Company did not obtain at least $3,000,000 of financing by a
specified date. The Company did not obtain the required financing; however, the
number of warrants to be issued had been in dispute. In January 2000, the
parties agreed in principal for the Company to issue additional warrants to
purchase 265,538 shares of the Company's common stock at $0.22 per share. The
estimated fair value of approximately $918,000 is included in general and
administrative expense in the Company's statement of operations for the year
ended December 31, 1999.
As a result of issuing the additional warrants, the Company issued 4,461,
1,919, 25,966, and 23,089 shares of Series B convertible preferred stock,
Series B-1 convertible preferred stock, Series C convertible preferred stock and
common stock, respectively, to comply with anti-dilution agreements with certain
stockholders. The estimated fair value of those additional shares, $282,000, in
aggregate, will be included in general and administrative expense in the
Company's statement of operations for the year ending December 31, 2000.
F-15
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
9. Long Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1998 1999
----------- --------
<S> <C> <C>
10% subordinated convertible notes, principal and
interest due April 30, 1999.......................... $ 34,000 $ --
8% subordinated convertible notes, principal and
interest due December 31, 1999....................... 1,527,000 --
8% subordinated convertible notes, principal and
interest due June 30, 2000........................... 25,000 --
10% notes payable, principal and interest due
December 31, 2005.................................... 527,000 --
10% notes payable, principal and interest due
April 12, 2001....................................... -- 5,000
---------- ------
2,113,000 5,000
Less current portion................................... (1,561,000) --
---------- ------
Total long-term debt................................. $ 552,000 $5,000
========== ======
</TABLE>
At December 31, 1998, notes payable consisted of borrowings from related
parties. As a result of financing obtained in June 1999, principal and accrued
interest of $527,000 and $91,000, respectively, was paid to the noteholders.
During 1999, the Company issued approximately $6,596,000 in subordinated
convertible notes, which bore interest at a rate equal to 8% per annum. In June
1999, all outstanding subordinated convertible notes were voluntarily converted
into 2,941,689 shares of Series B convertible preferred stock at a rate equal to
one share per $2.85 of principal and interest payable, or approximately
$8,384,000. In conjunction with this conversion, the noteholders were issued
warrants to purchase 128,638 shares of Series B convertible preferred stock at
$2.85 per share, which expire in June 2004. The estimated fair value of these
warrants of $69,000 is included in the net loss for the year ended December 31,
1999. Also during 1999, the Company issued approximately $10,460,000 in
subordinated convertible notes, which bore interest at a rate equal to 10% per
annum. Such subordinated convertible notes were voluntarily converted into
3,062,825 shares of Series C convertible preferred stock at a rate equal to one
share per $3.46 of principal and interest payable, or approximately $10,597,000.
In conjunction with this conversion, the noteholders were issued warrants to
purchase 151,155 shares of Series C convertible preferred stock at $3.46 per
share, which expire in October 2004. The estimated fair value of these warrants
of $68,000 is included in the net loss for the year ended December 31, 1999.
10. Commitments and Contingencies
LEASE COMMITMENTS
The Company currently leases property and equipment under non-cancelable
capital leases and leases office facilities under operating leases. Capital
leases are collateralized by the underlying equipment.
F-16
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
10. Commitments and Contingencies (Continued)
Future minimum commitments as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year Ending December 31, Leases Leases
- ------------------------ ----------- -----------
<S> <C> <C>
2000............................................... $ 874,000 $ 844,000
2001............................................... 766,000 742,000
2002............................................... 763,000 667,000
2003............................................... 47,000 691,000
2004............................................... -- 714,000
Thereafter......................................... -- 1,435,000
---------- ----------
2,450,000 $5,093,000
==========
Less imputed interest.............................. (480,000)
----------
Present value of net minimum lease payments........ 1,970,000
Less current portion............................... (622,000)
----------
Long-term capital lease obligations................ $1,348,000
==========
</TABLE>
Rent expense under all operating leases for the years ended December 31,
1997, 1998 and 1999 was $221,000, $77,000 and $595,000, respectively.
LEASE SETTLEMENTS
The Company is currently finalizing negotiations with various lessors to
settle amounts due for capital leases, which were in default. As of
December 31, 1999, the principal portion of capital leases in default was
$69,000, which is included in the current portion of leases payable.
JOINT MARKETING AGREEMENT
In June 1999, the Company entered into a joint marketing agreement with a
company that primarily develops and sells student planners. Under the terms of
the agreement, the Company is required to issue up to 71,052 shares of the
Series B convertible preferred stock as consideration for providing marketing
initiatives for the Company's online services in connection with the student
planners and the Company's registered users.
In addition, the Company is required to pay $3.00 for every new user brought
in by additional marketing efforts performed by the said business.
11. Legal Proceedings
In December 1999, the Company settled and subsequently paid $500,000 to a
competitor who filed a complaint against the Company for, among other things,
false advertising and interference with contractual relationships.
F-17
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
11. Legal Proceedings (Continued)
The Company is also, from time to time, subject to legal proceedings and
claims, which arise, in the normal course of its business. In the opinion of
management, the amount of ultimate liability with respect to these actions will
not have a material adverse effect on the Company's financial position, results
of operations or cash flows.
12. Convertible Preferred Stock and Warrants
STOCK SPLIT
Effective August 1999, the Board of Directors approved a three-for-one stock
split. All share and per share information in the consolidated financial
statements has been adjusted to reflect the stock split on a retroactive basis.
PREFERRED STOCK
The Series A convertible preferred ("Series A") stockholders, Series B
convertible preferred ("Series B") stockholders, Series B-1 convertible
preferred ("Series B-1") stockholders, Series C convertible preferred
("Series C") stockholders, Series C-1 convertible preferred ("Series C-1")
stockholders and Series C-2 convertible preferred ("Series C-2") stockholders
have the following rights and privileges:
DIVIDENDS
The Series A, Series B, Series B-1, Series C, Series C-1 and Series C-2
stockholders are not entitled to receive any dividends unless declared by the
Company's Board of Directors. In the event that dividends are declared by the
Company's Board of Directors, the Series A, Series B, Series B-1, Series C,
Series C-1 and Series C-2 stockholders are entitled to receive dividends in cash
at the rate per annum of $0.1099, $0.2280, $0.2736, $0.2768, $0.2768 and
$0.2768, respectively.
LIQUIDATION PREFERENCES
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, including a change in control, the Series C,
Series C-1 and Series C-2 stockholders will receive prior to and in preference
of any payment to the Series A, Series B and Series B-1 stockholders and the
holders of common stock, an amount of $5.19 per share for Series C and for
Series C-1 and $5.07 for Series C-2 for one year after the issuance of the
Series C and thereafter, $3.46 per share, as adjusted to reflect any subsequent
stock dividends, stock splits or recapitalizations, and all declared and unpaid
dividends to the data fixed for distribution. The Series A, Series B and
Series B-1 stockholders are entitled to receive, out of the assets of the
Company available for distribution to its shareholders, in preference to the
holders of the common stock, an amount of $1.37, $2.85 and $3.42 per share of
Series A, Series B and Series B-1 stock then outstanding, respectively, as
adjusted to reflect any subsequent stock dividends, stock splits or
recapitalizations, and all declared and unpaid dividends to the date fixed for
distribution. The remaining assets of the Company following the initial
distribution to the preferred stockholders shall be distributed among the
holders of common stock pro rata based on the number of shares of common stock
held by each such holder.
F-18
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
12. Convertible Preferred Stock and Warrants (Continued)
ANTIDILUTION
The conversion price of each series of preferred stock is subject to
adjustment in the event the Company issues additional shares of capital stock
for consideration less than the conversion price then in effect. For the first
year following the issuance of the Series C stock, the conversion price will be
reduced to equal the applicable consideration paid in any subsequent issuance,
to a minimum conversion price of $2.85. Thereafter, the adjustment will be made
according to a broad-based, weighted average formula. The weighted average
formula is based on outstanding shares of common stock (including outstanding
stock options), Series A, Series B, Series B-1 and Series C on a fully-diluted
basis. No adjustment will be made, however, in connection with issuances of
common stock (i) upon conversion of preferred stock, (ii) to employees,
consultants and directors at not less than fair market value and otherwise on
terms approved by the board of directors, (iii) as a dividend or distribution on
the preferred stock, (iv) in connection with issuances of capital stock at fair
market value as consideration in an acquisition or asset purchase approved by
the board of directors, and (v) in connection with any borrowing from a
commercial lending institution or in connection with the lease of equipment or
property approved by the board of directors.
VOTING
Each holder of the Series A, Series B, Series B-1, Series C and Series C-2
stock is entitled to a number of votes equal to the number of shares of common
stock into which each share of such stock is convertible. The shares of the
Series C-1 are non-voting, except as required by law.
CONVERSION
Holders of the Series A, Series B, Series B-1, Series C, Series C-1 and
Series C-2 may convert their shares into common stock at any time following the
date of issuance of such share at the then applicable conversion rate and
without payment of further consideration into fully paid and nonassessable
shares of common stock of the Company.
AUTOMATIC CONVERSION
Each share of Series A, Series B, Series B-1, Series C and Series C-1 will
convert automatically into common stock upon written consent of the majority of
holders or in the event of a firm commitment initial public offering of common
stock with aggregate gross proceeds of at least $20,000,000, provided that the
per share public offering price (before any underwriting commissions) is at
least 1.75 times the applicable Series C conversion price. Each share of Series
C-2 will convert automatically into common stock upon written consent of the
majority of holders or in the event of the completion of an initial public
offering with aggregate gross proceeds of at least $20,000,000, provided that
the per share public offering price (before any underwriting commissions) is at
least $6.05.
F-19
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
12. Convertible Preferred Stock and Warrants (Continued)
The following summarizes issuances of convertible preferred stock for the
three years in the period ended December 31, 1999.
<TABLE>
<CAPTION>
Series A Series B Series B-1
Convertible Convertible Convertible
Preferred Stock Preferred Stock Preferred Stock
----------------------- ------------------------ --------------------
Shares Amount Shares Amount Shares Amount
--------- ----------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.......
Issuance of Series A convertible
preferred stock for cash......... 1,011,516 $1,389,000
Issuance of Series A convertible
preferred stock upon conversion
of subordinated convertible notes
and unpaid accrued interest (Note
9)............................... 523,544 719,000
--------- ----------
Balance at December 31, 1997....... 1,535,060 2,108,000
Issuance of Series A convertible
preferred stock for cash......... 1,456 2,000
--------- ----------
Balance at December 31, 1998....... 1,536,516 2,110,000
Issuance of Series B convertible
preferred stock for cash, less
direct costs incurred upon
issuance of $681,000............. 2,195,662 $ 5,579,000
Issuance of Series B convertible
preferred stock upon conversion
of subordinated convertible notes
and unpaid accrued interest
(Note 9)......................... 2,941,689 8,318,000
Issuance of Series B convertible
preferred stock for services
rendered......................... 4,386 13,000
Issuance of Series B convertible
preferred stock associated with
Campus24, Inc. acquisition
(Note 5)......................... 389,925 1,111,000
Issuance of Series B convertible
preferred stock associated with
CollegeBeat, Inc. acquisition
(Note 5)......................... 100,087 425,000
Issuance of Series B convertible
preferred stock associated with
joint marketing agreement (Note
10).............................. 7,895 23,000
Issuance of Series B and B-1
convertible preferred stock
associated with strategic
partnership agreement
(Note 7)......................... 1,769,922 1,009,000 761,259 $521,000
Issuance of Series C convertible
preferred stock for cash, less
direct costs incurred upon
issuance of $2,587,000...........
Issuance of Series C convertible
preferred stock upon conversion
of subordinated convertible notes
and unpaid accrued interest
(Note 9).........................
Conversion of Series C convertible
preferred stock into common
stock............................
Issuance of Series C-1 convertible
preferred stock associated with
CollegeStudent acquisition
(Note 5).........................
--------- ---------- --------- ----------- ------- --------
Balance at December 31, 1999....... 1,536,516 $2,110,000 7,409,366 $16,478,000 761,259 $521,000
========= ========== ========= =========== ======= ========
<CAPTION>
Series C Series C-1
Convertible Convertible
Preferred Stock Preferred Stock
-------------------------- -----------------------
Shares Amount Shares Amount
----------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1996.......
Issuance of Series A convertible
preferred stock for cash.........
Issuance of Series A convertible
preferred stock upon conversion
of subordinated convertible notes
and unpaid accrued interest (Note
9)...............................
Balance at December 31, 1997.......
Issuance of Series A convertible
preferred stock for cash.........
Balance at December 31, 1998.......
Issuance of Series B convertible
preferred stock for cash, less
direct costs incurred upon
issuance of $681,000.............
Issuance of Series B convertible
preferred stock upon conversion
of subordinated convertible notes
and unpaid accrued interest
(Note 9).........................
Issuance of Series B convertible
preferred stock for services
rendered.........................
Issuance of Series B convertible
preferred stock associated with
Campus24, Inc. acquisition
(Note 5).........................
Issuance of Series B convertible
preferred stock associated with
CollegeBeat, Inc. acquisition
(Note 5).........................
Issuance of Series B convertible
preferred stock associated with
joint marketing agreement (Note
10)..............................
Issuance of Series B and B-1
convertible preferred stock
associated with strategic
partnership agreement
(Note 7).........................
Issuance of Series C convertible
preferred stock for cash, less
direct costs incurred upon
issuance of $2,587,000........... 8,537,572 $26,953,000
Issuance of Series C convertible
preferred stock upon conversion
of subordinated convertible notes
and unpaid accrued interest
(Note 9)......................... 3,062,825 10,597,000
Conversion of Series C convertible
preferred stock into common
stock............................ (277,500) (960,000)
Issuance of Series C-1 convertible
preferred stock associated with
CollegeStudent acquisition
(Note 5)......................... 1,636,977 $5,664,000
---------- ----------- --------- ----------
Balance at December 31, 1999....... 11,322,897 $36,590,000 1,636,977 $5,664,000
========== =========== ========= ==========
</TABLE>
F-20
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
12. Convertible Preferred Stock and Warrants (Continued)
WARRANTS
In exchange for services rendered during the year ended December 31, 1999,
the Company issued warrants to purchase 268,773 shares of Series B convertible
preferred stock, 313,214 shares of Series C convertible preferred stock, and
366,000 shares of common stock. In connection with a lease commitment, the
Company issued warrants to purchase 60,000 shares of Series B convertible
preferred stock. The warrants are generally immediately vested, have exercise
prices ranging from $0.22 to $3.56 per share and expire between January 2002 and
September 2006.
13. Stock Option Plan
The 1996 Stock Option Plan (the "Plan") permits the granting of incentive
and non-statutory stock options to the Company's employees, consultants, and
directors; 12,900,000 shares of common stock are reserved under the Plan. Any
person who is not an employee on the effective date of grant of an option may be
granted only a non-statutory stock option. Incentive stock options may be
granted for a term not to exceed ten years, and generally vest over a five year
period. The exercise price under each non-statutory stock option shall not be
less than 85% of the fair market value of the Company's common stock on the
effective date of grant of the stock option.
The following table summarizes stock option activity for the years ended
December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Weighted-Average
Shares Exercise Price
----------- ----------------
<S> <C> <C>
Outstanding, December 31, 1996................. 2,178,636 $0.22
Granted...................................... 2,563,479 $0.22
Exercised.................................... (465,417) $0.22
Canceled..................................... (421,077) $0.22
----------
Outstanding, December 31, 1997................. 3,855,621 $0.22
Granted...................................... 1,773,588 $0.22
Exercised.................................... (302,307) $0.22
Canceled..................................... (225,111) $0.22
----------
Outstanding, December 31, 1998................. 5,101,791 $0.22
Granted...................................... 7,418,787 $1.07
Exercised.................................... (174,005) $0.58
Canceled..................................... (624,503) $0.39
----------
Outstanding, December 31, 1999................. 11,722,070 $0.74
==========
</TABLE>
F-21
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
13. Stock Option Plan (Continued)
The following table summarizes information regarding options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
Weighted-Average
Remaining
Exercise Options Contractual Age Options Weighted-Average
Prices Outstanding (Years) Exercisable Exercise Price
- -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
$0.22 6,840,018 8.03 3,618,116 $0.22
$0.34 229,272 9.92 229,272 $0.34
$0.86 419,679 9.54 24,697 $0.86
$1.14 868,483 9.61 292,080 $1.14
$1.43 236,349 9.69 45,000 $1.43
$1.71 1,370,948 9.64 5,400 $1.71
$1.83 150,861 9.70 124,044 $1.83
$1.92 43,605 9.46 32,703 $1.92
$2.00 1,562,855 9.87 8,934 $2.00
---------- ---------
11,722,070 9.50 4,380,246 $0.37
========== =========
</TABLE>
During 1997, 1998 and 1999, the Company recorded $1,406,000, $1,017,000 and
$4,151,000, respectively, in compensation expense for certain options to
purchase shares of common stock granted to employees and non-employees. The
valuation of the options granted to non-employees is estimated using the
Black-Scholes option pricing model.
Unearned compensation has been charged for the value of options granted to
employees on the measurement date based on the intrinsic value method. These
amounts are amortized over the vesting period. The unamortized portion of
unearned compensation is shown as a reduction of stockholders' equity in the
accompanying consolidated balance sheet.
If the Company had elected to recognize compensation expense based upon the
fair value at the grant date for employee awards under this plan, the Company's
pro forma net loss would be changed to $(4,215,000), $(3,826,000) and
$(26,177,000) for the years ended December 31, 1997, 1998 and 1999,
respectively. Basic and diluted net loss per share would not have changed from
the amounts reported for the years ended December 31, 1997 and 1998. For the
year ended December 31, 1999, the basic and diluted net loss per share would
have changed to $(1.60). The fair value of employee stock options was estimated
at the date of grant using the Black-Scholes option pricing model with the
following assumptions for the years ended December 31, 1997, 1998 and 1999:
dividend yield of 0%, expected volatility of 0%, risk free interest rates of
approximately 4.6% to 7.6% and expected lives of three years.
F-22
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
14. Income Taxes
Deferred tax assets comprise the following:
<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Net operating loss carryforwards................. $ 2,202,000 $ 10,227,000
Nonqualified stock options....................... 920,000 1,650,000
Software license deposit......................... 199,000 --
Accruals and other............................... 29,000 395,000
Depreciation..................................... 95,000 (47,000)
----------- ------------
3,445,000 12,225,000
Less valuation allowance......................... (3,445,000) (12,225,000)
----------- ------------
Net deferred tax asset......................... $ -- $ --
=========== ============
</TABLE>
Based upon the lack of prior earnings history of the Company and other
available evidence, management has recorded a full valuation allowance for
deferred tax assets as it is more likely than not that such assets will not be
realized.
The reconciliation of income tax computed by applying the statutory federal
income tax rate (34%) to loss before income taxes to the Company's actual income
tax provision is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Benefit computed at statutory federal
rate............................... $ 1,432,000 $ 1,299,000 $ 8,699,000
State income tax benefits, net of
federal effect..................... 237,000 202,000 1,261,000
Meals and entertainment disallowed
and other.......................... (12,000) (1,000) (162,000)
Nondeductible stock option
compensation....................... (28,000) (105,000) (879,000)
Nondeductible goodwill............... -- -- (239,000)
Increase in valuation allowance...... (1,629,000) (1,395,000) (8,680,000)
----------- ----------- -----------
Tax expense.......................... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
At December 31, 1999, the Company has federal and California net operating
loss carryforwards of approximately $25,807,000 and $25,802,000, respectively,
which expire beginning in 2011 and 2004, respectively.
Pursuant to Section 382 of the Internal Revenue Code, annual use of the
Company's net operating losses will be limited due to cumulative changes in
ownership. However, management does not expect that the annual limitation will
result in any loss of tax benefits.
F-23
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
15. Related Party Transactions
TRANSACTIONS WITH EMPLOYEES
In June 1999, the Company entered into an agreement with an employee whereby
the employee borrowed $100,000 in exchange for a promissory note. The principal
and interest at a rate equal to 4.98% per annum, are payable June 2002.
STOCKHOLDER'S SALES
The Company sells Web site advertising through a stockholder of the Company.
During the years ended December 31, 1998 and 1999, gross sales of $113,000 and
$437,000, respectively, were sold to third parties through the stockholder. The
stockholder was paid commissions of $30,000 and $133,000, respectively, related
to these sales.
SETTLEMENT AGREEMENT
During December 1999, the Company received notification from a stockholder
alleging that the Company was in breach of an online recruiting agreement
entered into in 1996. Subsequent to year end as a result of a settlement
agreement, the Company issued the stockholder warrants to purchase 100,000
shares of common stock at $3.46 per share in settlement of such dispute.
16. Subsequent Events
BUILDING SUBLEASE
In January and February 2000, the Company entered into two sublease
agreements, whereby the Company subleased a portion of their facilities for
terms and conditions consistent with the Company's primary lease. The subleases
provide for a base monthly rent and expire in April 2001.
STRATEGIC RELATIONSHIP
In March 2000, the Company entered into an agreement with a strategic
partner and its affiliates. The Company sold 970,874 shares of Series C-2
convertible preferred stock in exchange for online promotion throughout the
partner's network of Web sites for a period of one year.
VERSITY.COM, INC.
In April 2000, the Company acquired all of the outstanding common and
preferred stock of Versity.com, Inc. ("Versity"), a company that primarily
operates an online academic community for college students that provides free
lecture notes, research resources and collaborative study tools to aggregate a
loyal user base. In exchange for all of the outstanding common and preferred
stock of Versity, the Company issued 5,819,978 shares of common stock and
assumed options to purchase 784,422 shares of common stock. The number of shares
and options to purchase shares of the Company's common stock are subject to
adjustment if certain milestones are not met.
RESCISSION OFFER
The Company has determined that certain amounts related to options are
subject to a potential rescission offer. The rescission offer will include an
offer to repurchase shares purchased pursuant
F-24
<PAGE>
CollegeClub.com, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 1998 and 1999
16. Subsequent Events (Continued)
to option exercises at the exercise price, plus interest at an annual rate of
10% from the date of issuance. To comply with California Securities Law, the
Company will also offer to repurchase all unexercised options issued to such
persons at 20% of the option exercise price multiplied by the number of shares
subject to such options, plus interest at an annual rate of 10% per year from
the date of issuance. Management estimates that the Company could be required to
pay up to approximately $3,300,000 plus interest pursuant to the rescission
offer.
LEGAL PROCEEDINGS
In April 2000, a former consultant filed a complaint against the Company in
California Superior Court for the County of San Diego, alleging breach of
contract and fraud. The plaintiff seeks, among other things, compensatory and
punitive damages, attorney's fees and an option to purchase 300,000 shares of
common stock at an exercise price of $0.22 per share. Although the Company
intends to vigorously defend its position, there can be no assurance that a
favorable outcome will be obtained or that, if the matter were resolved in favor
of the plaintiff, there would not be a material adverse effect on the Company.
F-25
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of Collegestudent.com, Inc.:
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholders' deficit and of cash flows present
fairly, in all material respects, the financial position of Collegestudent.com,
Inc. (a development stage enterprise) (the "Company") at December 31, 1998, and
the results of its operations and its cash flows for the period from inception
(February 19, 1998) through December 31, 1998, in conformity with accounting
principles generally accepted in the United States. 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 audit. We
conducted our audit of these statements in accordance with auditing standards
generally accepted in the United States, 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 audit provides a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered losses and negative cash flows
from operations that raise substantial doubt about its ability to continue as a
going concern. Management's plans with regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that may result from the outcome of this uncertainty.
PricewaterhouseCoopers LLP
Austin, Texas
November 5, 1999
F-26
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Balance Sheet
<TABLE>
<CAPTION>
December 31,
1998
-------------
<S> <C>
Assets
Current assets:
Cash and cash equivalents................................. $ 580,430
Accounts receivable, net of allowance of $15,008.......... 80,309
Receivable from related party............................. 12,064
Receivable from preferred stockholders.................... 175,000
Prepaid expenses.......................................... 15,000
----------
Total current assets.................................... 862,803
Property and equipment, net................................. 14,701
----------
Total assets............................................ $ 877,504
==========
Liabilities, Convertible Preferred Stock and Stockholders'
Deficit
Current liabilities:
Accounts payable.......................................... $ 45,712
Accrued professional fees................................. 31,268
Accrued liabilities....................................... 12,185
Accrued compensation...................................... 25,761
Deferred revenue.......................................... 18,616
Deposits.................................................. 28,000
----------
Total current liabilities............................... 161,542
----------
Commitments and contingencies (Note 5)
Convertible preferred stock: no par value; 20,000,000 shares
authorized, 3,196,539 shares issued and outstanding,
aggregate liquidation preference of $469,891.............. 1,225,000
----------
1,225,000
Stockholders' deficit
Common stock: no par value; 80,000,000 shares authorized,
7,460,000 shares issued and outstanding.................. --
Deficit accumulated during the development stage.......... (509,038)
----------
Total stockholders' deficit............................... (509,038)
----------
Total liabilities, convertible preferred stock and
stockholders' deficit.................................. $ 877,504
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Statement of Operations
<TABLE>
<CAPTION>
From Inception
(February 19, 1998)
through
December 31, 1998
--------------------
<S> <C>
Revenues.................................................... $ 266,596
---------
Operating expenses:
General and administrative................................ 427,432
Research and development.................................. 18,779
Sales and marketing....................................... 318,010
---------
Total operating expenses................................ 764,221
Loss from operations........................................ (497,625)
Other expenses, net......................................... (11,413)
---------
Net loss incurred during development stage.................. $(509,038)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Deficit
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock During Total
-------------------- Development Stockholders'
Shares Amount Stage Deficit
--------- -------- ------------ -------------
<S> <C> <C> <C> <C>
Issuance of common stock to founders (February 18,
1998)............................................. 7,460,000 $ -- $ -- $ --
Net loss incurred during development stage.......... -- -- (509,038) (509,038)
--------- ------- --------- ---------
Balance at December 31, 1998........................ 7,460,000 $ -- $(509,038) $(509,038)
========= ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Statement of Cash Flows
<TABLE>
<CAPTION>
From Inception
(February 19, 1998)
through
December 31,
1998
--------------------
<S> <C>
Cash flows from operating activities:
Net loss incurred during development stage................ $ (509,038)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 25,000
Provision for doubtful accounts......................... 15,008
Changes in current assets and liabilities:
Accounts receivable................................... (95,317)
Receivable from related party......................... (12,064)
Prepaid expenses...................................... (15,000)
Accounts payable...................................... 45,712
Accrued professional fees............................. 31,268
Accrued liabilities................................... 12,185
Accrued compensation.................................. 25,761
Deferred revenue...................................... 18,616
Deposits.............................................. 28,000
----------
Net cash used in operating activities............... (429,869)
----------
Cash flows from investing activities:
Purchase of property and equipment........................ (39,701)
----------
Net cash used in investing.......................... (39,701)
----------
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred
stock.................................................... 1,050,000
----------
Net cash provided by financing...................... 1,050,000
----------
Net increase in cash and cash equivalents........... 580,430
Cash and cash equivalents at beginning of period............ --
----------
Cash and cash equivalents at end of period.................. $ 580,430
==========
Non-cash financing activity:
Receivable from preferred stockholders.................... $ 175,000
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
Note 1--Organization and Description of Business
Collegestudent.com, Inc. (the "Company") was incorporated in Texas on
February 19, 1998 (date of inception). In conjunction with the formation of the
Company, the founders received 7,460,000 shares of the Company's no par value
common stock in exchange for contributions of intellectual property. A third
party also contributed cash of approximately $150,000 in exchange for 1,020,000
shares of the Company's Series A convertible preferred stock (the "Series A
preferred stock").
The Company maintains a Web site focused on developing online campus
communities that provide student-oriented material for the college market
targeted to college students. The Company is a development stage enterprise as
planned principal operations have not yet begun to generate significant revenue.
The Company's business plan contemplates increased investments in research and
development activities and sales and marketing. Successful implementation of the
Company's development program and, ultimately, the attainment of profitable
operations is dependent upon future events, including obtaining adequate
financing to fulfill its development activities and achieving a level of revenue
adequate to support the Company's cost structure. The Company had an accumulated
deficit of $509,038 at December 31, 1998.
In July 1998, the Company obtained additional financing of approximately
$150,000 through the issuance of an additional 1,020,000 shares of Series A
preferred stock. In August 1998, the Company entered into the preferred stock
Exchange Agreement (the "Agreement") with the stockholders of the Series A
preferred stock. The Agreement exchanged each share of the previously issued
Series A preferred stock for one share of the newly created Series B convertible
preferred stock (the "Series B preferred stock"). No additional cash was
received as a result of this exchange.
In August 1998, the board of directors authorized a 10-for-1 stock split of
the Company's common stock and preferred stock. The effect of the stock split on
all classes of stock has been reflected in these financial statements. The
Company's amended Articles of Incorporation authorize the Company to issue
80,000,000 shares of no par value common stock and 20,000,000 shares of no par
value preferred stock.
GOING CONCERN
The Company's financial statements at December 31, 1998 have been prepared
on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business. The
Company incurred a net loss of $509,038 and negative cash flows from operations
of $429,869 for the period from inception to December 31, 1998. These
circumstances combined with the Company's position at December 31, 1998 raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty. The Company's business plan contemplates
substantial expenditures to continue development of its systems and to expand
its subscriber base and includes significant efforts aimed at raising additional
capital from the issuance of debt and equity securities, which, if successful,
would generate sufficient resources to assure continuation of the Company's
operations. However, management recognizes that the Company must generate
additional resources or consider modifying the rate of
F-31
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
Note 1--Organization and Description of Business (Continued)
expansion of the Company's business. There can be no assurance that the Company
will be successful in its efforts to raise additional funds or reduce operating
costs in order to meet its business plan and continue operations.
Note 2--Summary of Significant Accounting Policies
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with generally
accepted accounting principles.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of expenses during the reporting
period. Actual results could differ from those estimates.
DEVELOPMENT STAGE ENTERPRISE
The Company is a development stage enterprise, as planned principal
operations have not yet begun to generate significant revenue. In its
development stage, all pre-operating costs have been expensed as incurred.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At
December 31, 1998, the Company held $580,430 in an interest bearing cash
account. This amount is included in cash and cash equivalents, the fair value of
which approximates cost.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, including cash
equivalents and payables, approximate fair values.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over their
useful lives, generally five years for hardware, three years for software and
seven years for furniture and fixtures using the straight-line method. Leasehold
improvements are amortized over the shorter of the life of the lease term or the
estimated useful life of the asset. Upon retirement or sale, the cost of assets
disposed of and the related accumulated depreciation are removed from the
accounts and any relating gain or loss is credited or charged to income. Repair
and maintenance costs are expensed as incurred.
F-32
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
Note 2--Summary of Significant Accounting Policies (Continued)
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" ("APB No. 25") and related
interpretations, and complies with the disclosure requirements of Statement of
Financial Accounting Standards No. 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION" ("SFAS No. 123") and related interpretations.
INCOME TAXES
The Company uses the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards No. 109, "ACCOUNTING FOR
INCOME TAXES" ("SFAS No. 109"). Under this method, deferred tax liabilities and
assets are recognized for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Valuation allowances are provided if, based
upon the weight of available evidence, it is more likely than not that some or
all of the deferred tax assets will not be realized.
REVENUE RECOGNITION
The Company's revenues are derived principally from the sale of banner
advertisements under short-term contracts. Advertising revenues are recognized
ratably over the period in which the advertisement is displayed, provided that
no significant company obligations remain and collection of the related
receivable is probable.
RESEARCH AND DEVELOPMENT EXPENSES
All costs to develop the Company's technology are expensed as incurred.
COMPREHENSIVE INCOME
The Company has had no items of comprehensive income for the period from
inception through December 31, 1998.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AICPA"), issued Statement of
Position No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP No. 98-1"), which provides guidance regarding
when software developed or obtained for internal use should be capitalized. SOP
No. 98-1 is effective for fiscal years beginning after December 15, 1998. The
Company does not expect that the adoption of SOP No. 98-1 will have a material
impact on its financial position or results of operations.
F-33
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
Note 3--Property and Equipment
<TABLE>
<CAPTION>
December 31,
1998
-------------
<S> <C>
Computer equipment.......................................... $ 24,795
Software.................................................... 8,297
Leasehold improvements...................................... 6,609
--------
39,701
Less: Accumulated depreciation and amortization............. (25,000)
--------
$ 14,701
========
</TABLE>
Depreciation and amortization expense relating to the Company's fixed assets
and leasehold improvements for the period from inception through December 31,
1998 was $25,000.
Note 4--Income Taxes
The income tax benefit is composed of the following:
<TABLE>
<CAPTION>
December 31,
1998
-------------
<S> <C>
Current..................................................... $(172,230)
Deferred.................................................... --
Increased in valuation allowance............................ 172,230
---------
Income tax benefit........................................ $ --
=========
</TABLE>
The difference between the tax benefit derived by applying the Federal
statutory income tax rate to the Company's net losses and the benefit recognized
in the financial statements is as follows:
<TABLE>
<CAPTION>
December 31,
1998
-------------
<S> <C>
Benefit derived by applying the Federal statutory income
rate to net losses before income taxes.................... $(173,073)
Expense attributable to change in valuation allowances...... 172,230
Permanent differences and other............................. 843
---------
Income tax benefit........................................ $ --
=========
</TABLE>
F-34
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
Note 4--Income Taxes (Continued)
Under the provisions of SFAS No. 109, the components of the net deferred tax
amounts recognized in the accompanying balance sheet are:
<TABLE>
<CAPTION>
December 31,
1998
-------------
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 160,987
Depreciation and amortization............................. 6,140
Other..................................................... 5,103
---------
Gross deferred tax assets............................... 172,230
---------
Valuation allowance......................................... (172,230)
---------
Net deferred tax asset.................................... $ --
=========
</TABLE>
Due to the uncertainty surrounding the realization of the benefits of its
favorable tax attributes in future tax returns, the Company provided a valuation
allowance for the full amount of its net deferred tax assets since realization
of any future benefit from deductible temporary differences and net operating
loss carryforwards cannot be sufficiently assured at December 31, 1998.
The Company's net operating loss carryforward totaling $473,491 at
December 31, 1998 expires in varying amounts through 2018. Under Section 382 of
the Internal Revenue Code, changes in ownership exceeding certain levels can
result in an annual limitation on losses and tax credit carryforwards. Such
limitation may limit the Company's ability to fully utilize its carryforwards
prior to expiration.
Note 5--Commitments
LEASES
The Company leases office space in Austin, Texas. Rent expense for the
period from inception through December 31, 1998 was $19,206. Minimum lease
payments for the next five years are as follows:
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
1999........................................................ $ 44,712
2000........................................................ 54,000
2001........................................................ 54,000
2002........................................................ 54,000
2003........................................................ 54,000
--------
Total minimum lease payments................................ $260,712
========
</TABLE>
F-35
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
Note 6--Convertible Preferred Stock
Convertible preferred stock at December 31, 1998 consists of the following:
<TABLE>
<CAPTION>
Shares
-------------------------
Authorized Outstanding Proceeds
----------- ----------- -----------
<S> <C> <C> <C>
Series:
A.................................... -- -- $ --
B.................................... 20,000,000 3,196,539 1,050,000
---------- --------- ----------
20,000,000 3,196,539 $1,050,000
========== ========= ==========
</TABLE>
Proceeds from the issuance of the Series A preferred stock, which was
converted to Series B preferred stock during 1998, was $300,000 and is included
in the total proceeds of $1,050,000. At December 31, 1998, there are no shares
of Series A preferred stock authorized for issuance.
Each share of Series B preferred stock is convertible on or before
August 1, 2000, at the option of the holder, at a 1 to 1 conversion ratio
subject to adjustments as defined in the applicable board of directors
resolutions. Each share of Series B preferred stock has voting rights equal to
the number of shares of common stock into which it is convertible and votes
together as one class with the common stock. Holders of Series B preferred stock
shall be entitled to receive dividends on the same pro rata basis as the common
stock in the event the Company elects to declare dividends on such common stock.
No dividends on either the preferred stock or common stock were declared by the
board of directors for the period from inception through December 31, 1998. The
Series B preferred stockholders also have certain pre-emptive rights to enable
them to maintain their respective ownership percentages. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
including a change in control, the holders of the Series B preferred stock shall
be entitled to be paid, out of assets of the Company available for distribution
to the stockholders, before any payment shall be made to common stockholders, an
amount equal to liquidation preference of $0.147 per share of Series B preferred
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares). At December 31, 1998, the Company had reserved 10,000,000
shares of common stock for the conversion of the convertible preferred stock.
Note 7--Stock Option Plan
The Company has established the 1998 Stock Plan (the "Plan"). The Plan
provides for a maximum number of 2,000,000 common shares to be optioned/issued.
Options granted under the Plan are considered and granted as either
incentive stock options or non-statutory stock options as determined by the
board of directors or by a committee of the board appointed to administer the
Plan at the date of grant. Incentive stock options ("ISO") may be granted only
to Company employees (including officers and directors who are also employees)
and shall be issued at an exercise price not less than 100% of the fair market
value of the Company's common stock at the date of grant as determined by the
board of directors or by a committee of the board appointed to administer the
Plan, except for incentive stock options granted to a stockholder that owns more
than 10% of the total combined voting power of all classes of common
F-36
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
Note 7--Stock Option Plan (Continued)
stock in which case the exercise price is at least 110% of the fair market value
of the common stock and such option by its terms is not exercisable after the
expiration of five years from the date of grant.
Non-statutory stock options ("NSO") may be granted to Company employees,
members of the board of directors, and independent consultants at an exercise
price determined by the board of directors or by a committee of the board
appointed to administer the Plan. The Plan provides that options are exercisable
no later than ten years from the date of grant. Generally 20% of the options
granted are exercisable one year from the date of grant, and then ratably over
the remaining four years.
Optionees may exercise all options prior to vesting in which case the
Company has the right to repurchase the unvested shares from the optionee at the
original purchase price upon the employee's termination from the Company.
Expired and cancelled options are available for regrant under the Plan.
Option activity under the Plan and related information follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
-------- ----------------
<S> <C> <C>
Granted........................................... 529,000 $0.147
Exercised......................................... -- --
Canceled.......................................... -- --
------- ------
Outstanding at December 31, 1998.................. 529,000 $0.147
======= ======
</TABLE>
The Company has elected to follow the provisions prescribed by APB No. 25,
and its related interpretations, for financial reporting purposes and has
adopted the disclosure only provisions of SFAS No. 123.
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value of the grant dates for the awards under a
method prescribed by SFAS No. 123, the Company's pro forma net loss would have
approximated the net loss for the period from inception through December 31,
1998.
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants for the period from inception through December 31,
1998; no dividend yield; risk-free interest rate of 4.43%; and expected lives of
10 years. The volatility of the Company's common stock underlying the options
was not considered because the Company's equity is not publicly-traded at
December 31, 1998.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------- ---------------------------------
Weighted-Average
Remaining
Exercise Number Contractual Life Weighted-Average Number Weighted-Average
Price Outstanding (in Years) Exercise Price Outstanding Exercise Price
- -------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.147 529,000 9.44 $0.147 529,000 $0.147
</TABLE>
F-37
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
Note 8--Related Party Transactions
In July 1998, the board of directors approved the distribution of certain
assets of the Company, which had no recorded book value, to designated
shareholders on a basis in proportion to the number of shares of common stock
then outstanding to those shareholders. The Company had an outstanding
receivable from a related party of $12,064 at December 31, 1998 related to
office rent and employee costs for services performed by the Company for an
unrelated entity owned by the Company's founders.
Note 9--Subsequent Events
In February and March, 1999, the Company received proceeds of $250,000,
which represented amounts due from preferred stockholders at December 31, 1998
and $75,000 received upon the issuance of 93,773 shares of Series B preferred
stock.
In April 1999, the Company executed a $10,000 promissory note (the "Note")
bearing an annual interest rate of 10% with a financial institution. Principal
and interest are due in equally monthly installments beginning in May 1999. The
Note matures in April 2001 and has been guaranteed by several officers of the
Company.
In September 1999, the Company executed a convertible promissory note (the
"Convertible Note") for $150,000 with a stockholder/officer of the Company. The
Convertible Note is collateralized by the assets of the Company as enumerated in
the Assignment and Security Agreement. Interest on the Convertible Note accrues
on a monthly basis at a rate equal to prime plus 3%. At the option of the
stockholder/officer, $75,000 of principal due under the Convertible Note may be
converted into shares of the Company's Series B preferred stock at an adjusted
conversion price as defined in the Convertible Note agreement. The conversion
option was exercised by the stockholder/officer upon execution of this note at a
conversion price of $1.33 or 56,268 shares of Series B preferred stock. The
remaining principal plus accrued interest mature on December 31, 1999.
In October 1999, the Company acquired 100% of the equity interest of
eStudentLoan, LLC ("eStudentLoan") as defined in the Purchase Agreement in
exchange for 520,000 shares of the Company's common stock. In addition, 100,000
stock options for the purchase of common stock were granted with an exercise
price of $1.00 to an employee of eStudentLoan. In addition, the Company executed
a Loan Agreement to lend up to a maximum of $198,000 to the selling stockholders
of eStudentLoan in accordance with the terms of the Loan Agreement. Amounts to
be advanced under the Loan Agreement will be used to fund payments of state and
federal income tax incurred by the former owners of eStudentLoan as a result of
this transaction.
Also in October 1999, the Company executed a Secured Promissory Note (the
"Secured Note") for $150,000 with a third party, which is senior to any
indebtedness of the Company. Interest is compounded annually at a rate equal to
prime plus 3%. Principal and accrued interest are due at the earlier of (i)
March 15, 2000, (ii) 5 business days subsequent to the closing of an acquisition
of the Company as defined in the Secured Note agreement or (iii) 5 business days
subsequent to the closing of an equity financing of the Company as defined in
the Secured Note agreement.
In October 1999, the Company also obtained an additional round of financing
of approximately $340,000 through the issuance of an additional 407,478 shares
of Series B preferred stock.
F-38
<PAGE>
Collegestudent.com, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements (Continued)
Note 10--Event (unaudited) Subsequent to Date of Report of Independent
Accountants
In November 1999, CollegeClub.com, Inc., executed an agreement and plan of
merger that provides for the exchange of all of the Company's outstanding common
and preferred stock for 1,636,977 shares of Series C-1 convertible preferred
stock and 3,479,724 shares of common stock.
F-39
<PAGE>
Collegestudent.com, Inc.
Balance Sheet
September 30, 1999 (Unaudited)
<TABLE>
<S> <C>
Assets
Current assets
Cash and cash equivalents................................. $ 16,363
Accounts receivable....................................... 195,449
Prepaid expenses.......................................... 601
-----------
Total current assets.................................. 212,413
Property and equipment, net................................. 96,340
-----------
Total assets.......................................... $ 308,753
===========
Liabilities, Convertible Preferred Stock and Stockholders'
Deficit
Current liabilities
Accounts payable.......................................... $ 292,851
Short-term loan payable................................... 75,000
Note payable, current..................................... 3,841
Accrued liabilities....................................... 84,638
Accrued compensation...................................... 30,691
Sales tax payable......................................... 5,060
Total current liabilities............................. 492,081
-----------
Note payable, net of current portion...................... 5,000
-----------
Total liabilities..................................... 497,081
-----------
Commitments and contingencies
Convertible preferred stock, no par value, authorized
20,000,000 shares:
Series A preferred stock, no shares issued or
outstanding............................................ --
Series B preferred stock, 3,346,580 shares issued and
outstanding............................................ 1,375,000
Stockholders' deficit
Common stock, no par value, authorized 80,000,000
shares, 7,980,000 shares issued and outstanding........ 333,242
Accumulated deficit..................................... (1,891,570)
-----------
Total stockholders' deficit........................... (183,328)
-----------
Total liabilities, redeemable convertible preferred
stock and shareholders' deficit...................... $ 308,753
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
Collegestudent.com, Inc.
Statement of Operations
For the Nine Months Ended September 30, 1999 (Unaudited)
<TABLE>
<S> <C>
Revenues, net............................................... $ 751,735
Operating expenses
General and administrative................................ 904,425
Research and development.................................. 239,299
Selling and marketing..................................... 990,543
-----------
2,134,267
-----------
Net loss................................................ $(1,382,532)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
Collegestudent.com, Inc.
Statement of Cash Flows
For the Nine Months Ended September 30, 1999 (Unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities
Net loss.................................................. $(1,382,532)
Adjustments to reconcile net income to net cash used in
operating activities
Depreciation and amortization........................... 7,355
Increase (decrease) in cash resulting from changes in...
Accounts receivable................................... (115,140)
Receivable from related party......................... 12,064
Prepaid expenses...................................... 14,399
Accounts payable...................................... 247,139
Accrued liabilities................................... 46,521
Accrued compensation.................................. 4,930
Sales tax payable..................................... (276)
Deferred revenue...................................... (18,616)
Deposits.............................................. (28,000)
-----------
Net cash used in operating activities............... (1,212,156)
-----------
Cash flows from investing activities
Purchases of property and equipment....................... (85,153)
-----------
Net cash used in investing activities............... (85,153)
-----------
Cash flows from financing activities
Proceeds from issuance of note payable.................... 150,000
Proceeds from issuance of Common stock.................... 333,242
Proceeds from issuance of Series B preferred stock........ 250,000
-----------
Net cash provided by financing activities........... 733,242
-----------
Net decrease in cash................................ (564,067)
Cash and cash equivalents at beginning of period............ 580,430
-----------
Cash and cash equivalents at end of period.................. $ 16,363
===========
Non-cash financing activity
Conversion of note payable to Series B preferred stock.... $ 75,000
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
Collegestudent.com, Inc.
Notes to Financial Statements
For the Nine Months Ended September 30, 1999
1. Summary of Significant Accounting Policies
STATEMENT OF ACCOUNTING POLICY
The accompanying unaudited financial statements of Collegestudent.com, Inc.
(the "Company") as of September 30, 1999 and for the nine months ended
September 30, 1999 have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the Company's management, all adjustments (consisting of only
normal recurring adjustments) considered necessary to present fairly the
consolidated financial statements have been made.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the period. Actual results could differ from those
estimates.
2. Sale of Company
Effective December 10, 1999, CollegeClub.com, Inc. ("CollegeClub") purchased
all of the outstanding shares of common and preferred stock of the Company. As
consideration, CollegeClub issued 1,636,977 shares of its Series C-1 convertible
redeemable preferred stock with an estimated fair value of approximately
$5,664,000 and 3,479,724 shares of its common stock with an estimated fair value
of approximately $12,040,000 to holders of the Company's outstanding common and
preferred shares.
F-43
<PAGE>
Campus24, Inc.
Balance Sheet
July 28, 1999 (Unaudited)
<TABLE>
<S> <C>
Assets
Current assets
Cash...................................................... $ 176,399
Accounts receivable....................................... 165
Other current assets...................................... 1,050
---------
Total current assets.................................... 177,614
Property and equipment, net................................. 22,540
---------
Total assets............................................ $ 200,154
=========
Liabilities, Convertible Redeemable Preferred Stock and
Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities.................. $ 17
---------
Total current liabilities............................... 17
---------
Commitments and contingencies
Convertible redeemable preferred stock, $.001 par value,
authorized 1,000,000 shares:
Series A preferred stock, designated 860,000 shares,
860,000 shares issued and outstanding.................... 860
---------
860
Stockholders' equity
Common stock, no par value, authorized 10,000,000 shares,
670,500 shares issued and outstanding.................... 670
Paid-in capital........................................... 434,811
Accumulated deficit....................................... (236,204)
---------
Total stockholders' equity.............................. 199,277
---------
Total liabilities, convertible redeemable preferred
stock and stockholders' equity......................... $ 200,154
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
Campus24, Inc.
Statement of Operations
For the Period from February 2, 1999 (Inception) Through
July 28, 1999 (Unaudited)
<TABLE>
<S> <C>
Revenues, net............................................... $ 1,076
Operating expenses
Production and technology 15,814
Selling and marketing..................................... 23,093
General and administrative................................ 185,171
---------
224,078
---------
Loss from operations.................................... (223,002)
---------
Other income (expense)
Interest.................................................. 1,775
Other, net................................................ (14,977)
---------
Net loss.................................................... $(236,204)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE>
Campus24, Inc.
Statement of Cash Flows
For the Period from February 2, 1999 (Inception)
Through July 28, 1999 (Unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities
Net loss.................................................. $(236,204)
Adjustments to reconcile net income to net cash used in
operating activities:
Increase (decrease) in cash resulting from changes in:
Accounts receivable................................... (165)
Other current assets.................................. (1,050)
Accounts payable and accrued liabilities.............. 17
---------
Net cash used in operating activities............... (237,402)
---------
Cash flows from investing activities
Purchases of property and equipment....................... (22,540)
---------
Net cash used in investing activities............... (22,540)
---------
Cash flows from financing activities
Proceeds from issuance of Series A preferred stock........ 436,341
---------
Net cash provided by financing activities........... 436,341
---------
Net increase in cash................................ 176,399
Cash at beginning of period................................. --
---------
Cash at end of period....................................... $ 176,399
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE>
Campus24, Inc.
Notes to Financial Statements
For the Period from February 2, 1999 (Inception)
Through July 28, 1999 (Unaudited)
1. Summary of Significant Accounting Policies
THE COMPANY
Campus24, Inc. (the "Company") was incorporated in Delaware in 1999. The
Company operates a Web site that facilitates person-to-person trading of
personal items in an auction format.
STATEMENT OF ACCOUNTING POLICY
The accompanying unaudited financial statements as of July 28, 1999 and for
the period from February 2, 1999 (inception) through July 28, 1999 have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, all
adjustments (consisting of only normal recurring adjustments) considered
necessary to present fairly the consolidated financial statements have been
made.
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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
2. Sale of Company
Effective July 28, 1999, CollegeClub.com, Inc. ("CollegeClub") purchased all
of the outstanding shares of common and preferred stock of the Company. As
consideration, CollegeClub issued 389,925 shares of its Series B convertible
redeemable preferred stock with an estimated fair value of approximately
$1,111,000 to holders of the Company's outstanding common and preferred shares.
F-47
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of CollegeClub.com, Inc.:
In our opinion, the accompanying balance sheet and the related statements of
operations, of stockholders' deficit and of cash flows present fairly, in all
material respects, the financial position of Versity.com, Inc. (a development
stage enterprise) (the "Company") at June 30, 1999, and the results of its
operations and its cash flows for the period from February 2, 1999 (inception)
to June 30, 1999, in conformity with accounting principles generally accepted in
the United States. 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 audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States, 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
audit provides a reasonable basis for the opinion expressed above.
Since the date of completion of our audit of the accompanying financial
statements and initial issuance of our report thereon dated February 18, 2000,
except for Note 10, which was as of March 28, 2000, which report contained an
explanatory paragraph regarding the Company's ability to continue as a going
concern, the Company, as discussed in Note 10, has been acquired. Therefore, the
conditions that raised doubt about whether the Company will continue as a going
concern no longer exist.
PricewaterhouseCoopers LLP
San Diego, California
February 18, 2000, except as to Note 10,
which is as of April 18, 2000
F-48
<PAGE>
Versity.com, Inc.
A development stage enterprise
Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1999 1999
--------- -------------
(unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents................................. $ 284,000 $ 6,550,000
Accounts receivable....................................... 2,000 23,000
Prepaid asset............................................. -- 90,000
--------- -----------
Total current assets.................................... 286,000 6,663,000
Property and equipment, net................................. 116,000 358,000
Advances to employees....................................... -- 4,000
--------- -----------
Total assets............................................ $ 402,000 $ 7,025,000
========= ===========
Liabilities, Convertible Preferred Stock and Stockholders'
Deficit
Current liabilities
Accounts payable.......................................... $ 16,000 $ 146,000
Accrued wages, benefits and related taxes................. -- 99,000
Accrued liabilities....................................... 45,000 219,000
--------- -----------
Total current liabilities............................... 61,000 464,000
--------- -----------
Commitments and contingencies (Note 4)
Convertible preferred stock (Note 5 and Note 6)
Preferred stock, $.0001 par value, authorized 15,000,000
shares:
Series A convertible redeemable preferred stock,
designated 4,377,500 shares, $.0001 par value, 4,377,500
shares issued and outstanding at June 30, 1999 and
December 31, 1999, respectively; redemption amount of
$1,094,000 ($.25 per share); liquidation preference of
$876,000................................................. 943,000 1,074,000
Series B convertible preferred stock, designated 6,500,000
shares, 0 and 5,710,246 (unaudited) shares issued and
outstanding at June 30, 1999 and December 31, 1999,
respectively; liquidation preference of $11,135,000...... -- 11,135,000
--------- -----------
943,000 12,209,000
Stockholders' deficit
Common stock, $.0001 par value, authorized 20,000,000
shares, 3,755,200 and 5,329,741 (unaudited) shares issued
and outstanding at June 30, 1999 and December 31, 1999,
respectively............................................. -- --
Paid-in capital........................................... 733,000 4,765,000
Unearned compensation..................................... (643,000) (4,122,000)
Deficit accumulated during the development stage.......... (692,000) (6,291,000)
--------- -----------
Total stockholders' deficit............................. (602,000) (5,648,000)
--------- -----------
Total liabilities, convertible preferred stock and
stockholders' deficit.................................. $ 402,000 $ 7,025,000
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE>
Versity.com, Inc.
A development stage enterprise
Statements of Operations
<TABLE>
<CAPTION>
Period from
Period From Six Months February 2, 1999
February 2, 1999 Ended (Inception) to
(Inception) to December 31, December 31,
June 30, 1999 1999 1999
----------------- ------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Revenues........................................ $ 9,000 $ 22,000 $ 31,000
Operating expenses
Product and technology, net of stock-based
compensation expense of $43,000, $48,000
(unaudited) and $91,000 (unaudited),
respectively................................. 275,000 2,725,000 3,000,000
Selling and marketing, net of stock-based
compensation expense of $31,000, $191,000
(unaudited) and $222,000 (unaudited),
respectively................................. 93,000 1,179,000 1,272,000
General and administrative, net of stock-based
compensation expense of $16,000, $314,000
(unaudited) and $330,000 (unaudited),
respectively................................. 167,000 1,103,000 1,270,000
Depreciation and amortization................. 14,000 53,000 67,000
Stock-based compensation...................... 90,000 553,000 643,000
--------- ----------- -----------
639,000 5,613,000 6,252,000
--------- ----------- -----------
Loss from operations........................ (630,000) (5,591,000) (6,221,000)
--------- ----------- -----------
Interest income................................. 5,000 113,000 118,000
Interest expense, net........................... (67,000) (121,000) (188,000)
--------- ----------- -----------
Net loss incurred during development stage...... $(692,000) $(5,599,000) $(6,291,000)
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE>
Versity.com, Inc.
A development stage enterprise
Statements of Stockholders' Deficit
<TABLE>
<CAPTION>
Common Stock
-------------------- Paid-in Unearned Accumulated
Shares Amount Capital Compensation Deficit Total
--------- -------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 2, 1999
(inception).......................
Issuance of founder's stock......... 3,623,000 $ -- $ --
Issuance of restricted common stock
(Note 7).......................... 132,200 -- --
Compensatory stock options
(Note 7).......................... $ 733,000 $ (643,000) 90,000
Net loss incurred during development
stage............................. $ (692,000) (692,000)
--------- ------- ---------- ----------- ----------- -----------
Balance at June 30, 1999............ 3,755,200 -- 733,000 (643,000) (692,000) (602,000)
Issuance of restricted common stock
(unaudited) (Note 7).............. 1,588,541 -- --
Compensatory stock options
(unaudited) (Note 7).............. 4,032,000 (3,479,000) 553,000
Repurchase of shares (unaudited).... (14,000) -- --
Net loss incurred during development
stage (unaudited)................. (5,599,000) (5,599,000)
--------- ------- ---------- ----------- ----------- -----------
Balance at December 31, 1999
(unaudited)....................... 5,329,741 $ -- $4,765,000 $(4,122,000) $(6,291,000) $(5,648,000)
========= ======= ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE>
Versity.com, Inc.
A development stage enterprise
Statements of Cash Flows
<TABLE>
<CAPTION>
Period From Period from
February 2, 1999 Six Months February 2, 1999
(Inception) to Ended (Inception) to
June 30, 1999 December 31, 1999 December 31, 1999
----------------- ------------------ ------------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss incurred during development stage... $(692,000) $(5,599,000) $(6,291,000)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization.............. 14,000 53,000 67,000
Stock-based compensation................... 90,000 553,000 643,000
Accretion of convertible preferred stock... 67,000 131,000 198,000
Increase (decrease) in cash resulting from
changes in
Accounts receivable, net................. (2,000) (21,000) (23,000)
Other current assets..................... -- (90,000) (90,000)
Advances to employees.................... -- (4,000) (4,000)
Accounts payable......................... 16,000 130,000 146,000
Accrued wages, benefits and related
taxes................................... -- 99,000 99,000
Other accrued liabilities................ 45,000 174,000 219,000
--------- ----------- -----------
Net cash used in operating
activities............................ (462,000) (4,574,000) (5,036,000)
--------- ----------- -----------
Cash flows from investing activities
Purchases of property and equipment.......... (100,000) (235,000) (335,000)
Investment in software development........... (30,000) (60,000) (90,000)
--------- ----------- -----------
Net cash used in investing
activities............................ (130,000) (295,000) (425,000)
--------- ----------- -----------
Cash flows from financing activities
Proceeds from issuance of Series A
convertible redeemable preferred stock...... 876,000 -- 876,000
Proceeds from issuance of Series B
convertible preferred stock................. -- 10,783,000 10,783,000
Proceeds from issuance of convertible notes
payable..................................... -- 352,000 352,000
--------- ----------- -----------
Net cash provided by financing
activities............................ 876,000 11,135,000 12,011,000
--------- ----------- -----------
Net increase in cash................... 284,000 6,266,000 6,550,000
Cash and cash equivalents at beginning of
period....................................... -- 284,000 --
--------- ----------- -----------
Cash and cash equivalents at end of period..... $ 284,000 $ 6,550,000 $ 6,550,000
========= =========== ===========
Non-cash investing and financing activity
Issuance of Series B convertible preferred
stock upon conversion of notes.............. $ -- $ 352,000 $ 352,000
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements
June 30, 1999
1. Organization, Nature of Business and Basis of Presentations
Versity.com, Inc. (the "Company"), was organized February 2, 1999
(inception) to provide college students with free lecture notes, research
resources and collaborative study tools in an online academic community.
The Company is a development stage enterprise as planned principal
operations have not yet begun to generate significant revenue. The Company's
business plan contemplates increased investments in research and development
activities and sales and marketing. Successful implementation of the Company's
development program and, ultimately, the attainment of profitable operations is
dependent upon future events, including obtaining adequate financing to fulfill
its development activities and achieving a level of revenue adequate to support
the Company's cost structure. The Company had an accumulated deficit of $692,000
at June 30, 1999.
The Company's ability to continue as a going concern is dependent on its
ability to generate sufficient cash flows to meet its obligations on a timely
basis, to obtain additional financing or refinancing as may be required, and
ultimately attain profitability.
2. Summary of Significant Accounting Policies
UNAUDITED INTERIM FINANCIAL DATA
The unaudited interim financial statements for the six months ended
December 31, 1999 and the period from February 2, 1999 (inception) to
December 31, 1999 have been prepared on the same basis as the audited financial
statements and, in the opinion of management, reflect all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
financial information set forth therein, in accordance with generally accepted
accounting principles. The data disclosed in the notes to the financial
statements for these interim periods are unaudited. Operating results for
interim periods are not necessarily indicative of operating results for an
entire year.
DEVELOPMENT STAGE ENTERPRISE
In the Company's development stage, all pre-operating costs have been
expensed as incurred.
REVENUE RECOGNITION
Web site advertising revenue is recognized at the lesser of straight line
over the contracted period or as the related impressions are displayed, provided
no significant obligations remain and the collection of the related receivable
is probable.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At June 30,
1999 the Company held $284,000 in interest bearing cash accounts. This amounts
is included in cash and cash equivalents, the fair value of which approximates
cost.
F-53
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements (Continued)
June 30, 1999
2. Summary of Significant Accounting Policies (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
accounts receivables and accounts payables. The carrying amounts of these
instruments approximate fair value.
ADVERTISING COSTS
The cost of advertising is expensed as incurred. For the period ended
June 30, 1999, the Company incurred advertising expense of $84,000. For the six
months ended December 31, 1999 and for the period from inception to
December 31, 1999, the Company incurred advertising expense of $693,000
(unaudited), and $777,000 (unaudited), respectively.
SOFTWARE DEVELOPMENT COSTS
Production and technology costs include expenses incurred by the Company to
enhance, manage, monitor and operate the Company's marketplace and are generally
expensed as incurred.
The software development component of production and technology costs are
accounted for in accordance with Statement of Position ("SOP") 98-1, ACCOUNTING
FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE. In
accordance with SOP 98-1, internal and external costs incurred to develop
internal-use computer software during the application development stage are
capitalized. Application development stage costs generally include software
configuration, coding, installation to hardware and testing. Costs of
significant upgrades and enhancements that result in additional functionality
are also capitalized. Costs incurred for maintenance and minor upgrades and
enhancements are expensed as incurred. Capitalized production and technology
costs are amortized on a straight-line basis over the estimated useful lives of
the related software applications of up to two years.
CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are subject to concentrations of
credit risk consist primarily of cash and cash equivalents.
At times, cash balances held at financial institutions were in excess of
federally insured limits. To date, the Company has experienced no losses in
connection with such deposits.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost less accumulated depreciation.
Depreciation of property and equipment is provided over their estimated useful
lives of three years, using the straight-line method. Repair and maintenance
costs are expensed as incurred. The Company periodically evaluates the
recoverability of its long-lived assets based on expected undiscounted cash
flows and recognizes impairments, if any based on expected discounted future
cash flows.
F-54
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements (Continued)
June 30, 1999
2. Summary of Significant Accounting Policies (Continued)
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts and with fixed exercise prices at least equal to the fair value
of the Company's common stock at the date of grant. If the Company issues
options to employees in fixed amounts and with fixed exercise prices at less
than the fair value of the Company's common stock, compensation expense is
recorded for such difference over the period the related options are earned. The
Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, through
disclosure only (Note 13). All stock-based awards to non-employees are accounted
for at their fair value in accordance with SFAS No. 123.
INCOME TAXES
Current income tax expense or benefit is the amount of income taxes expected
to be payable or refundable for the current year. A deferred income tax asset or
liability is computed for the expected future impact of differences between the
financial reporting and tax basis of assets and liabilities and for the expected
future tax benefit to be derived from tax credits and loss carryforwards.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
COMPREHENSIVE INCOME
Effective at inception, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. This statement requires that all components of
comprehensive income be reported in the financial statements in the period in
which they are recognized. During the period ended June 30, 1999, the six months
ended December 31, 1999 and the period from inception to December 31, 1999, the
Company did not have any components of comprehensive income other than net loss.
SEGMENT INFORMATION
Effective at inception, the Company adopted SFAS No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. This statement requires
disclosure of certain information about the Company's operating segments,
products, and geographic areas in which it operates and its major customers.
This statement also allows a company to aggregate similar segments for reporting
purposes. For the period ended June 30, 1999, sales to one customer approximated
$6,000. Management has determined that its operations can be aggregated into one
reportable segment. As the Company operates its Web site within the U.S., no
further segment disclosures have been included in the accompanying notes to the
financial statements.
F-55
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements (Continued)
June 30, 1999
2. Summary of Significant Accounting Policies (Continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
3. Property and Equipment
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1999
--------- -------------
(unaudited)
<S> <C> <C>
Computers and internal-use software................. $110,000 $378,000
Equipment........................................... 20,000 47,000
-------- --------
130,000 425,000
Less accumulated depreciation and amortization...... (14,000) (67,000)
-------- --------
Property and equipment, net......................... $116,000 $358,000
======== ========
</TABLE>
Depreciation and amortization expense for the period ended June 30, 1999 was
$14,000. Depreciation and amortization expense for the six months ended
December 31, 1999 and for the period from inception to December 31, 1999 was
$53,000 (unaudited) and $67,000 (unaudited), respectively.
4. Commitments and Contingencies
LEGAL PROCEEDINGS
The Company is currently involved in litigation with a former employee. The
former employee filed a complaint against the Company in the Circuit Court of
the State of Michigan. The complaint alleges that in February 1999, the Company
and former employee entered into an employment agreement and an agreement to
purchase up to a certain number of shares of stock that is currently in dispute.
The Company intends to defend itself vigorously. Based on a preliminary review
of the nature of the claims, the Company does not believe that the resolution of
this matter will materially harm the business. However, due to the inherently
uncertain nature of litigation, the Company cannot guarantee that it will not
suffer a material loss either in the context of a trial or as the result of a
negotiated settlement. The Company's defense of this litigation, regardless of
its outcome, could result in the expenditure of significant financial and
managerial resources, which could have a material adverse effect upon the
Company's financial position, results of operations or cash flows.
F-56
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements (Continued)
June 30, 1999
4. Commitments and Contingencies (Continued)
CEASE AND DESIST LETTERS
The Company engages students as independent contractors to post notes from
their college classes to the Company's Web site. From time to time, the Company
receives cease and desist requests from colleges and professors requesting that
the Company remove the notes from its Web site. The Company works with each
campus and or professor individually to resolve the concerns expressed in these
requests. To date, the Company has not received any indication that litigation
has been or will be filed on behalf of a college or a professor. There can be no
assurance that a claim arising from these requests, if asserted, would not have
a material adverse affect on the Company's financial position, results of
operations or cash flows.
The Company is also, from time to time, subject to legal proceedings and
claims which arise in the normal course of business. In the opinion of
management, the amount of ultimate liability with respect to these actions will
not have a material adverse effect on the Company's financial position, results
of operations or cash flows.
5. Series A Convertible Redeemable Preferred Stock
During March 1999, the Company issued 4,377,500 shares of Series A
convertible redeemable preferred (the "Series A") stock. The net proceeds to the
Company were $876,000. The Series A stockholders have the following rights and
privileges:
REDEMPTION
Commencing in February 2000, at the option of the stockholders, the
Series A stock may be redeemed for an amount equal to $0.25 per share if prior
to February 1, 2001 or $0.10 per share if after that date, unless otherwise
converted into common stock. The Company will not establish a sinking fund for
the payment of any redemptions. The difference between the carrying value and
redemption amount is accreted from earnings through February 2000 using the
interest method.
DIVIDENDS
The Series A stockholders are not entitled to receive any dividends unless
declared by the Company's Board of Directors. In the event that dividends are
declared by the Company's Board of Directors, the Series A stockholders are
entitled to receive dividends in preference to the holders of common stock cash
dividends at a rate per annum equal to 6% of the Series A stock issue price.
LIQUIDATION PREFERENCES
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, including change in control, the Series A
stockholders will receive, subordinate to any payment to the Series B
convertible preferred stockholders, but in preference to the holders of common
stock, an amount equal to $0.20 per share of Series A stock then outstanding, as
adjusted for any stock split, dividend, recapitalizations, plus all declared but
unpaid dividends to the date fixed
F-57
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements (Continued)
June 30, 1999
5. Series A Convertible Redeemable Preferred Stock (Continued)
for distribution. The remaining assets of the Company following distribution to
the Series A stockholders shall be distributed among the holders of Series B
convertible preferred stock and common stock pro rata based on the number of
shares of stock hold by each such holder.
VOTING
Each holder of the Series A stock is entitled to a number of votes equal to
the number of shares of common stock into which each share of such stock is
convertible.
CONVERSION
Each share of Series A stock is convertible, at the option of the holder,
into one share of common stock. Each share of Series A stock will convert
automatically into common stock upon written consent of the majority of holders
or upon the closing of an underwritten public offering of common stock with
aggregate gross proceeds of at least $10 million and the per share price of at
least $5.85.
6. Series B Convertible Preferred Stock
Series B convertible preferred ("Series B") stockholders have the following
rights and privileges:
DIVIDENDS
Series B stockholders are not entitled to receive any dividends unless
declared by the Company's Board of Directors. In the event that dividends are
declared by the Company's Board of Directors, the Series B stockholders are
entitled to receive dividends in cash at a rate per annum of 6% of the Series B
stock issue price.
LIQUIDATION PREFERENCES
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company including change of control, the Series B stockholders
will receive prior to and in preference of any payment to the Series A
stockholders and the holders of common stock, the sum of: (a) the Series B Issue
Price (as adjusted for any stock split, dividend, recapitalization and the
like), and (b) all declared but unpaid dividends on such shares. The remaining
assets of the Company following the initial distribution to the Series B and
Series A preferred stockholders shall be distributed among the holders of common
stock and Series B preferred stock pro rata based on the number of shares of
common stock held by each such holder.
CONVERSION
Each share of Series B stock is convertible, at the option of the holder,
into one share of common stock. Each share of Series B stock will convert
automatically into common stock upon
F-58
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements (Continued)
June 30, 1999
6. Series B Convertible Preferred Stock (Continued)
written consent of the majority of holders or upon the closing of an
underwritten public offering of common stock with aggregate gross proceeds of at
least $10 million and the per share price of at least $5.85.
7. Stock Option Plan
The 1999 Stock Option Plan (the "Plan") permits the granting of incentive
and non-statutory stock options to the Company's employees, consultants, and
directors. Shares reserved under the Plan consist of 3,300,000 shares. Any
person who is not an employee on the effective date of grant of an option may be
granted only a non-statutory stock option. Incentive stock options may be
granted for a term not to exceed ten years. The exercise price under each
non-statutory stock option shall not be less than eighty-five percent (85%) of
the fair market value of the Company's common stock on the effective date of
grant of the stock option. Awards under the Plan are immediately exercisable as
restricted common stock. The Company may repurchase unvested exercised options
at the original exercise price.
The following table summarizes stock option activity for the period ended
June 30, 1999 and for the six months ended December 31, 1999:
<TABLE>
<CAPTION>
Weighted-Average
Shares Exercise Price
--------- ----------------
<S> <C> <C>
Outstanding, February 2, 1999 (inception)....... --
Granted....................................... 354,750 $0.0001
---------
Outstanding, June 30, 1999...................... 354,750 $0.0001
Granted (unaudited)........................... 2,150,028 $0.0923
Canceled (unaudited).......................... (106,200) $0.0001
---------
Outstanding, December 31, 1999 (unaudited)...... 2,398,578 $0.0608
=========
</TABLE>
At June 30, 1999, a total of 354,750 options were exercisable at a weighted
average price of $0.0001 per share. At December 31, 1999, a total of 2,398,578
(unaudited) options were exercisable at a weighted average price of $0.0608
(unaudited) per share. At June 30, 1999 and December 31, 1999, the options
exercisable had a weighted average contractual life of 9.87 years and 9.42 years
(unaudited), respectively.
During the period ended June 30, 1999, the Company recorded $90,000 in
compensation expense for certain options to purchase shares of common stock
granted to employees and non-employees. During the six months ended
December 31, 1999 and the period from inception to December 31, 1999, the
Company recorded $553,000 (unaudited) and $643,000 (unaudited), respectively, in
compensation expense for certain options to purchase shares of common stock
granted to employees and non-employees. The valuation of the options granted to
non-employees is estimated using the Black-Scholes option pricing model.
F-59
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements (Continued)
June 30, 1999
7. Stock Option Plan (Continued)
Unearned compensation has been charged for the value of options to employees
on the measurement date based on the intrinsic value method. These amounts are
amortized over the vesting period. The unamortized portion of unearned
compensation is shown as a reduction of stockholders' equity in the accompanying
balance sheet.
If the Company had elected to recognize compensation expense based upon the
fair value at the grant date for employee awards under this plan, the Company's
pro forma net loss would not be changed from the amounts reported for the period
ended June 30, 1999, for the six months ended December 31, 1999 and for the
period from inception to date. The fair value of employee stock options was
estimated at the date of grant using the Black-Scholes option pricing model with
the following assumptions for each of the periods presented: dividend yield of
0%, expected volatility of 0%, risk free interest rates of approximately 4.9% to
5.92% and expected lives of three to six years.
8. Income Taxes
Deferred tax assets comprise the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1999
--------- -------------
(unaudited)
<S> <C> <C>
Net operating loss carryforwards................... $ 196,000 $ 2,103,000
Accruals and other................................. 33,000 279,000
--------- -----------
229,000 2,382,000
Less valuation allowance........................... (229,000) (2,382,000)
--------- -----------
Net deferred tax assets.......................... $ -- $ --
========= ===========
</TABLE>
Based upon the lack of prior earnings history of the Company and other
available evidence, management has recorded a full valuation allowance for
deferred tax assets as it is more likely than not that such assets will not be
realized.
F-60
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements (Continued)
June 30, 1999
8. Income Taxes (Continued)
The reconciliation of income tax computed by applying the statutory federal
income tax rate (34%) to loss before income taxes to the Company's actual income
tax provision is as follows:
<TABLE>
<CAPTION>
February 2,
1999 (inception)
June 30, December 31, to December 31,
1999 1999 1999
--------- ------------- ----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Benefit computed at statutory
federal rate...................... $(239,000) $(1,987,000) $(2,226,000)
State income tax benefits, net of
federal effect.................... (33,000) (313,000) (346,000)
Permanent items..................... 43,000 147,000 190,000
Increase in valuation allowance..... 229,000 2,153,000 2,382,000
--------- ----------- -----------
Tax expense......................... $ -- $ -- $ --
========= =========== ===========
</TABLE>
At June 30, 1999 and December 31, 1999, the Company has federal and
California net operating loss carryforwards of approximately $492,000 and
$5,279,000 (unaudited), respectively, which expire beginning in 2019 and 2007,
respectively.
Pursuant to Section 382 of the Internal Revenue Code, annual use of the
Company's net operating losses will be limited due to cumulative changes in
ownership. However, management does not expect that the annual limitation will
result in any loss of tax benefits.
9. Related Party Transactions
TRANSACTIONS WITH EMPLOYEES
During January and February 1999, the Company borrowed a total of $54,000
from the founders. Interest was to accrue at 8% per annum. Amounts were repaid
in March 1999. Also in December 1999, the Company repurchased 14,000 shares of
Restricted common stock from certain employees.
STOCKHOLDER SALES
During the period ended June 30, 1999, the Company recorded revenues of
approximately $1,400 from Web banner advertisements sold to a stockholder of the
Company.
10. Subsequent Events
IZIO CORPORATION
In March 2000, the Company acquired all the outstanding common and preferred
stock of IZIO Corporation ("IZIO"), a company that primarily operates an online
academic community for college professors that facilitates the communication of
academic materials between higher education
F-61
<PAGE>
Versity.com, Inc.
A development stage enterprise
Notes to Financial Statements (Continued)
June 30, 1999
10. Subsequent Events (Continued)
institutions and students. All outstanding stock options of IZIO were exchanged
for $400,000 cash and 2,379,371 shares of the Company's common stock. The
acquisition will be accounted for as a purchase.
The purchase price was allocated to identifiable assets and liabilities
based on their estimated fair values, with the excess of the purchase price over
the fair value of such net liabilities acquired reflected as goodwill, as
follows:
<TABLE>
<S> <C>
Property and equipment...................................... $ 5,000
Goodwill.................................................... 5,035,000
----------
Purchase price.............................................. $5,040,000
==========
</TABLE>
The unaudited pro forma results of operations below represents the effect on
the Company's results of operations as if the acquisition of IZIO had occurred
on February 2, 1999 (inception), instead of on the acquisition date.
<TABLE>
<CAPTION>
1999
-----------
(unaudited)
<S> <C>
Net revenue................................................. $ 31,000
Net loss.................................................... $(1,401,000)
-----------
</TABLE>
SERIES B CONVERTIBLE PREFERRED STOCK
In September 1999, the Company obtained additional financing of
approximately $10,783,000 through the issuance of 5,529,984 shares of Series B
convertible preferred stock.
COLLEGECLUB.COM, INC.
In April 2000, the Company exchanged all of the then outstanding common and
preferred stock for 5,819,978 shares of common stock of CollegeClub.com, Inc. In
exchange for all issued and outstanding stock options of the Company,
CollegeClub.com also issued options to purchase 784,422 shares of common stock
of CollegeClub.com. The number of shares and options to purchase shares are
subject to adjustment if certain milestones are not met.
STOCK SPLIT
Effective June 1999, the Board of Directors approved a one hundred-for-one
stock split for all classes of stock. All share and per share information in the
financial statements have been adjusted to reflect the stock split on a
retroactive basis.
F-62
<PAGE>
CollegeClub.com, Inc. and Subsidiaries
Unaudited Pro Forma Combined Condensed Financial Information
The unaudited pro forma financial information gives effect to the following
transactions.
Acquisition of Campus24, Inc.
On July 20, 1999, CollegeClub.com entered into an agreement to acquire all
of the outstanding shares of common and preferred stock of Campus24, Inc., a
company that facilitates person to person trading of personal items in an
auction format, for 389,925 shares of CollegeClub.com's Series B convertible
preferred stock with an estimated fair value of approximately $1,111,000.
The acquisition was accounted for as a purchase with the difference between
the purchase price and the fair value of the assets acquired being recorded as
goodwill and amortized over the period of expected benefit which is estimated to
be three years.
Acquisition of Collegestudent.com
On December 10, 1999, CollegeClub.com entered into an agreement to acquire
all of the outstanding shares of common and preferred stock of
Collegestudent.com, Inc., a business that primarily maintains a Web site focused
on developing online campus communities that provide student-oriented material
for the college market targeted to college students, for 1,636,977 shares of
CollegeClub.com's Series C-1 convertible preferred stock with an estimated fair
value of approximately $5,664,000 and 3,479,724 shares of CollegeClub.com's
common stock with an estimated fair value of approximately $12,040,000.
The acquisition was accounted for as a purchase with the difference between
the purchase price and the fair value of the assets acquired and liabilities
assumed being recorded as intangible assets and amortized over the period of
expected benefit that is estimated to be two and one half to three years.
Strategic Relationship
On March 24, 2000, the Company entered into a cross-promotional advertising
and promotions agreement with National Broadcasting Company, Inc. ("NBC") that
includes, among other things, the issuance of 970,874 shares of
CollegeClub.com's Series C-2 convertible preferred stock.
Acquisition of Versity.com, Inc.
On April 18, 2000, the Company acquired all of the outstanding common and
preferred stock of Versity.com, Inc., a company that primarily operates an
online academic community for college students that provides free lecture notes,
research resources and collaborative study tools to aggregate a loyal user base.
In exchange for all of the outstanding common and preferred stock of
Versity.com, Inc., CollegeClub.com issued 5,819,978 shares of common stock and
issued options to purchase 784,422 shares of common stock with an aggregated
estimated fair value of approximately $32,904,000. The number of shares and
options to purchase shares of CollegeClub.com's common stock will be subject to
adjustment if certain milestones are not met.
Conversion of convertible preferred stock
Upon the closing of this proposed offering, all shares of then outstanding
convertible preferred stock will convert into common stock.
The accompanying unaudited pro forma combined condensed financial statements
illustrate the effect of all of the events discussed above as if they had
occurred on January 1, 1999 for the
F-63
<PAGE>
CollegeClub.com, Inc. and Subsidiaries
Unaudited Pro Forma Combined Condensed Financial Information
unaudited pro forma combined condensed statement of operations. The unaudited
pro forma combined balance sheet as of December 31, 1999 gives effect to the
Versity acquisition as if it had taken place on December 31, 1999.
The unaudited pro forma combined condensed financial statements have been
included as required by the rules of the Securities and Exchange Commission and
are provided for comparative purposes only. The unaudited pro forma combined
condensed financial statements do not purport to be indicative of the results of
operations or financial position that would have been obtained if the
transactions had been effected on the date indicated or which may be obtained in
the future.
The accompanying unaudited pro forma combined condensed financial statements
should be read in connection with the audited and unaudited historical financial
statements of CollegeClub.com which are contained elsewhere in this prospectus.
F-64
<PAGE>
CollegeClub.com, Inc.
Unaudited Pro Forma Combined Condensed Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
Pro forma
CollegeClub.com Versity.com adjustments Pro forma
----------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents........................ $ 29,740,000 $6,550,000 $ 36,290,000
Accounts receivable, net......................... 1,249,000 23,000 1,272,000
Other current assets............................. 164,000 90,000 254,000
------------ ----------- ------------
Total current assets......................... 31,153,000 6,663,000 $ 37,816,000
Property and equipment, net...................... 4,225,000 358,000 4,583,000
Advances to employees............................ 100,000 4,000 104,000
Goodwill and other intangibles, net.............. 19,561,000 -- 22,220,000 (7) 41,781,000
Other assets..................................... 1,393,000 -- 1,393,000
------------ ----------- ------------
Total assets................................. $ 56,432,000 $7,025,000 $ 85,677,000
============ =========== ============
Liabilities, Convertible preferred stock and
Stockholders' Equity (Deficit)
Current liabilities
Accounts payable............................... $ 3,681,000 $ 146,000 $ 3,827,000
Accrued interest............................... 16,000 -- 16,000
Accrued wages, benefits and related taxes...... 563,000 99,000 662,000
Accrued liabilities............................ 858,000 219,000 1,077,000
Current portion of capital lease obligation.... 622,000 -- 622,000
Deferred revenue............................... 744,000 -- 744,000
------------ ----------- ------------
Total current liabilities.................... 6,484,000 464,000 6,948,000
Capital lease obligation, net of current
portion....................................... 1,348,000 -- 1,348,000
Note payable................................... 5,000 -- 5,000
------------ ----------- ------------
Total liabilities............................ 7,837,000 464,000 8,301,000
------------ ----------- ------------
Commitments and contingencies
Convertible preferred stock.................... 61,363,000 12,209,000 (73,572,000)(1)(2) --
Stockholders' equity (deficit)
Common stock................................... 20,000 -- 30,000 (2)(3)(4)(9) 50,000
Paid-in capital................................ 31,070,000 4,765,000 89,471,000 (2)(3)(5)(9) 125,306,000
Unearned compensation.......................... (8,856,000) (4,122,000) (12,978,000)
Accumulated deficit............................ (35,002,000) (6,291,000) 6,291,000 (6) (35,002,000)
------------ ----------- ------------
Total stockholders' equity (deficit)......... (12,768,000) (5,648,000) 77,376,000
------------ ----------- ------------
Total liabilities, convertible preferred
stock and stockholders' equity (deficit).... $ 56,374,000 $7,025,000 $ 85,677,000
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
F-65
<PAGE>
CollegeClub.com, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
For the year ended December 31, 1999
<TABLE>
<CAPTION>
College- Pro Forma
CollegeClub student.com Campus24 Versity.com Adjustments Pro Forma
------------ ------------ ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues, net..................... $ 2,913,000 $ 1,134,000 $ 1,000 $ 31,000 $ 4,079,000
Operating expenses
Production and technology....... 3,483,000 397,000 16,000 3,000,000 6,896,000
Selling and marketing........... 12,503,000 1,449,000 23,000 1,272,000 15,247,000
General and administrative...... 7,010,000 1,590,000 185,000 1,270,000 10,055,000
Depreciation and amortization... 1,498,000 -- -- 67,000 14,351,000(8) 15,916,000
Stock-based compensation........ 4,151,000 -- -- 643,000 4,794,000
------------ ----------- --------- ----------- ------------
28,645,000 3,436,000 224,000 6,252,000 52,908,000
------------ ----------- --------- ----------- ------------
Loss from operations.......... (25,732,000) (2,302,000) (223,000) (6,221,000) (48,829,000)
------------ ----------- --------- ----------- ------------
Other income (expense)
Interest........................ (351,000) -- 2,000 (70,000) (419,000)
Other, net...................... 318,000 -- (15,000) -- 303,000
------------ ----------- --------- ----------- ------------
Net loss.......................... $(25,765,000) $(2,302,000) $(236,000) $(6,291,000) $(48,945,000)
============ =========== ========= =========== ============
</TABLE>
The accompanying notes are an integral part of these pro forma combined
condensed financial statements.
F-66
<PAGE>
CollegeClub.com, Inc.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
December 31, 1999
1. Basis of Pro Forma Presentation
The pro forma financial statements give effect the following transactions.
ACQUISITION OF CAMPUS24, INC.
On July 20, 1999, CollegeClub.com (College Club or the Company) entered into
an agreement to acquire all of the outstanding shares of common and preferred
stock of Campus 24, Inc., a Web site that facilitates person to person trading
of personal items in an auction format, for 389,925 shares of CollegeClub's
Series B convertible preferred stock with an estimated fair value of
approximately $1,111,000.
The acquisition was accounted for as a purchase with the difference between
the purchase price and the fair value of the assets acquired being recorded as
goodwill and amortized over the period of expected benefit which is estimated to
be three years.
ACQUISITION OF COLLEGESTUDENT.COM
On December 10, 1999, CollegeClub.com entered into an agreement to acquire
all of the outstanding shares of common and preferred stock of
Collegestudent.com, Inc., a business that primarily maintains a Web site focused
on developing online campus communities that provide student-oriented material
for the college market targeted to college students, for 1,636,977 shares of
CollegeClub's Series C-1 convertible preferred stock with an estimated fair
value of approximately $5,664,000 and 3,479,724 shares of CollegeClub's common
stock with an estimated fair value of approximately $12,040,000.
The acquisition was accounted for as a purchase with the difference between
the purchase price and the fair value of the assets acquired and liabilities
assumed being recorded as intangible assets and amortized over the period of
expected benefit that is estimated to be two and one half to three years.
STRATEGIC RELATIONSHIP
On March 24, 2000, the Company entered into a cross-promotional advertising
and promotions agreement with National Broadcasting Company, Inc. ("NBC") that
includes, among other things, the issuance of 970,874 shares of CollegeClub's
Series C-2 convertible preferred stock (the NBC Transaction).
ACQUISITION OF VERSITY.COM, INC.
On April 18, 2000 the Company acquired all of the then outstanding common
and preferred stock of Versity.com, Inc., (Versity), a company that primarily
operates an online academic community for college students that provides free
lecture notes, research resources and collaborative study tools to aggregate a
loyal user base. CollegeClub's acquisition of Versity, will be accounted for as
a purchase (the "Versity Acquisition"). All outstanding common and preferred
stock of Versity has been converted into shares of CollegeClub common stock and
all outstanding stock options to purchase Versity common stock have been
exchanged for options to purchase shares of
F-67
<PAGE>
CollegeClub.com, Inc.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements (Continued)
December 31, 1999
1. Basis of Pro Forma Presentation (Continued)
CollegeClub common stock. The aggregate CollegeClub shares and options to be
issued to Versity stockholders and option holders will equal approximately 6.6
million, which will be subject to adjustment if certain milestones are not met.
CONVERSION OF CONVERTIBLE PREFERRED STOCK
Upon the closing of this proposed offering, all shares of then outstanding
convertible preferred stock will convert into common stock.
The unaudited pro forma combined condensed financial statements have been
prepared on a the basis of assumptions and estimates described in the following
notes and include assumptions relating to the allocation of the consideration
paid for the assets and liabilities of Versity based on preliminary estimates of
their fair value. The actual allocation of such consideration may differ from
that reflected in the unaudited pro forma combined financial statements after
valuations and other procedures to be performed after the closing of the Versity
acquisition have been completed. CollegeClub does not expect that the final
allocation of the purchase price will differ materially from the preliminary
allocation.
In the opinion of the Company's management, all adjustments necessary to
present fairly such unaudited pro forma combined financial statements have been
made based on the terms and conditions and proposed terms and conditions of the
transactions described above. The unaudited pro forma combined statement of
operations for the year ended December 31, 1999 gives effect to the transactions
as if each had taken place on January 1, 1999. The unaudited pro forma combined
balance sheet as of December 31, 1999 gives effect to the Versity Acquisition as
if it had taken place on December 31, 1999.
The pro forma financial statements are not necessarily indicative of what
the actual financial results would have been had the transaction taken place on
January 1, 1999 and do not purport to indicate the results of future operations.
Aggregate consideration for the Versity Acquisition estimated to be
$32,904,000 is based on the following. CollegeClub anticipates issuing 5,819,978
shares of its common stock, valued at $5.07 per share, which is management's
best estimate of the fair value of its common stock on the anticipated closing
date of the transaction. In addition, the Company anticipates issuing 784,422
options to purchase shares of its common stock in exchange for all options to
purchase shares of Versity common stock. The value of the options to be issued
by the Company was determined by estimating their fair value as of March 2000
using the Black-Scholes option pricing model with the following assumptions; a
weighted average strike price of $1.00, risk free interest rate of 5.0%,
dividend yield of 0%, expected lives ranging from 1 to 5 years and expected
volatility of 50%.
Tangible assets of Versity acquired principally include cash, accounts
receivable, property and equipment and other assets. Liabilities of Versity
assumed principally include accounts payable and accrued liabilities.
Intangible assets is determined based on the residual difference between the
amount of consideration to be paid and the values assigned to identified
tangible and intangible assets. The intangible assets will be amortized on a
straight line basis over two to three years.
F-68
<PAGE>
CollegeClub.com, Inc.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements (Continued)
December 31, 1999
2. Pro Forma Adjustments
1. To eliminate Versity's outstanding convertible preferred stock ($12,209,000)
2. To reflect the conversion of the Company's convertible preferred stock
($61,363,000).
3. To reflect the issuance of 5,819,978 shares of the Company's common stock
($29,507,000) and 784,422 options to purchase the Company's common stock
$3,396,000.
4. To eliminate Versity's common stock.
5. To eliminate Versity's paid-in capital.
6. To eliminate Versity's accumulated deficit.
7. To record acquired intangible assets and goodwill.
8. To record the amortization of acquired intangible assets and goodwill.
9. To record the issuance of approximately 970,874 shares of the Company's
common stock in conjunction with the NBC Transaction.
F-69
<PAGE>
Inside Back Panel:
Graphics will include our logo as well as screen shots showing four
different sections of our Web site. There will also be four bubbles containing
text describing each of the sections which will be titled: "Campus Bookstores,"
"Classroom Tools," "Financial Aid" and "Photo Gallery."
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide information different from that contained
in this prospectus. We are offering to sell, and seeking offers to buy, shares
of common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of our common stock.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Forward-Looking Statements............ 23
Use of Proceeds....................... 23
Dividend Policy....................... 23
Capitalization........................ 24
Dilution.............................. 26
Selected Consolidated Financial
Data................................ 28
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 30
Business.............................. 36
Management............................ 47
Certain Relationships and Related
Transactions........................ 60
Principal Stockholders................ 62
Description of Capital Stock.......... 64
Shares Eligible for Future Sale....... 69
Underwriting.......................... 71
Legal Matters......................... 74
Experts............................... 74
Where You Can Find More Information... 74
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
Until , 2000 (25 days after the date of this prospectus), all
dealers that buy, sell or trade in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. Dealers
are also obligated to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
- -------------------------------------------
[LOGO]
Shares
Common Stock
Deutsche Banc Alex. Brown
Merrill Lynch & Co.
Wit SoundView
Roth Capital Partners
Prospectus
, 2000
- -
<PAGE>
PART II
Information Not Required in Prospectus
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the Registrant are as follows. All amounts other
than the SEC registration fee, the NASD filing fees and the Nasdaq National
Market listing fee are estimates.
<TABLE>
<CAPTION>
Amount to be Paid
-----------------
<S> <C>
SEC registration fee....................................... $22,506
NASD filing fee............................................
Nasdaq National Market listing fee.........................
Legal fees and expenses....................................
Accounting fees and expenses...............................
Printing and engraving.....................................
Blue sky fees and expenses (including legal fees)..........
Transfer agent fees........................................
Miscellaneous..............................................
-------
Total.................................................. $
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
some circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933.
As permitted by the Delaware General Corporation Law, the Registrant's
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 (1) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (2) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(3) under section 174 of the Delaware General Corporation Law (regarding
unlawful dividends and stock purchases) or (4) for any transaction from which
the director derived an improper personal benefit.
As permitted by the Delaware General Corporation Law, the bylaws of the
Registrant provide that (1) the Registrant is required to indemnify its
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law, subject to very limited exceptions, (2) the Registrant may
indemnify its other employees and agents as set forth in the Delaware General
Corporation Law, (3) the Registrant is required to advance expenses, as
incurred, to its directors and executive officers in connection with a legal
proceeding to the fullest extent permitted by the Delaware General Corporation
Law, subject to very limited exceptions and (4) the rights conferred in the
bylaws are not exclusive.
The Registrant has entered into indemnification agreements with each of its
directors and executive officers to give such directors and officers additional
contractual assurances regarding the scope of the indemnification set forth in
the Registrant's Certificate of Incorporation and to provide additional
procedural protections. At present, there is no pending litigation or proceeding
involving a director, officer or employee of the Registrant regarding which
indemnification is sought, nor is the Registrant aware of any threatened
litigation that may result in claims for indemnification.
Reference is also made to Section of the Underwriting Agreement, which
provides for the indemnification of officers, directors and controlling persons
of the Registrant against specified
II-1
<PAGE>
liabilities. The indemnification provision in the Registrant's Certificate of
Incorporation, bylaws and the indemnification agreements entered into between
the Registrant and each of its directors and executive officers may be
sufficiently broad to permit indemnification of the Registrant's directors and
executive officers for liabilities arising under the Securities Act of 1933.
The Registrant has applied for liability insurance for its officers and
directors.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere in this prospectus:
<TABLE>
<CAPTION>
Document Exhibit Number
- -------- --------------
<S> <C>
Underwriting Agreement (draft dated , 2000).... 1.1
Form of Amended and Restated Certificate of Incorporation of
Registrant................................................ 3.3
Form of Bylaws of Registrant................................ 3.5
Form of Indemnification Agreement........................... 10.30
Form of Indemnification Agreement........................... 10.31
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Registrant has sold and issued the following securities since
January 1, 1997:
(a) On January 22, 1998, the registrant closed an offering in which it
issued and sold an aggregate of 1,536,516 shares of its Series A preferred stock
to 25 investors for an aggregate purchase price of $2,110,177, which amount
consisted of cash and the conversion of subordinated convertible promissory
notes and interest.
(b) On April 29, 1998, the registrant closed an offering in which it issued
to two investors convertible promissory notes in the aggregate principal amount
of $34,000 that were convertible into shares of the registrant's Series B
preferred stock.
(c) On May 29, 1998 the registrant issued a warrant to purchase up to
150,000 shares of its common stock with an exercise price of $0.22 per share to
a consultant pursuant to a contractual agreement.
(d) On December 23, 1998, the registrant issued a warrant to purchase up to
1,150,668 shares of its common stock with an exercise price of $0.22 per share
to two entities pursuant to a contractual agreement.
(e) On April 13, 1999, the registrant issued a warrant to purchase up to
60,000 shares of its common stock at an exercise price of $0.22 per share to
Heidrick & Struggles, Inc. in consideration for recruiting services.
(f) On May 23, 1999, the registrant closed an offering in which it issued
to 114 investors convertible promissory notes in the aggregate principal amount
of $8,147,850 that were convertible into shares of the registrant's Series B
preferred stock.
(g) On June 7 1999, the registrant closed an offering in which it issued and
sold warrants to purchase up to 397,410 shares of Series B preferred stock with
exercise prices ranging from $2.85 to $3.42 per share and an aggregate of
5,113,932 shares of its Series B preferred stock to 125 investors in
consideration for services rendered to the Company in connection with the
offering and for an aggregate purchase price of $14,564,573, which consisted of
cash and the conversion of promissory notes and interest.
(h) On June 20, 1999, the registrant issued a warrant to purchase up to
60,000 shares of its Series B preferred stock to Silicon Valley Bank at an
exercise price of $3.56 per share.
II-2
<PAGE>
(i) On June 25, 1999, the registrant issued 7,896 shares of its Series B
preferred stock in consideration for marketing and promotional services rendered
by Overly Publishing.
(j) On July 8, 1999 the registrant issued 27,804 shares of its Series B
preferred stock to two investors in consideration for an aggregate purchase
price of $38,184, which amount reflected the conversion of promissory notes and
interest.
(k) On July 29, 1999, the registrant issued 389,925 shares of its Series B
preferred stock to the stockholders of Campus24, Inc. in exchange for the
670,555 shares of Campus24 common stock and the 860,000 shares of Campus24
Series A preferred stock held by such stockholders.
(l) On September 28, 1999, the registrant issued 1,769,922 shares of its
Series B preferred stock and 761,259 shares of its Series B-1 preferred stock to
Sony Corporation of America in exchange for aggregate cash proceeds of
$1,400,000 and marketing and promotional services.
(m) On November 17, 1999, the registrant closed an offering in which it
issued promissory notes in the aggregate principal amount of $10,460,001, that
were convertible into shares of the registrant's Series C preferred stock and
warrants to purchase up to 464,370 shares of its Series C preferred stock to
nine investors with an exercise price of $3.46 per share.
(n) On November 23, 1999, the registrant issued and sold a warrant to
purchase up to 6,000 shares of its common stock with an exercise price of $3.46
per share to Executive One Associates in consideration for entering into a
certain lease agreement.
(o) On December 10, 1999, the registrant issued an aggregate of 3,479,724
shares of its common stock and 1,636,977 shares of its Series C-1 preferred
stock to the stockholders of collegestudent.com, Inc. in exchange for the
7,980,000 shares of Collegestudent.com common stock and 3,754,058 shares of
Collegestudent.com Series B preferred stock held by such stockholders.
(p) In connection with the acquisition of Collegestudent.com, the registrant
also issued options to purchase 423,738 shares of its common stock to
Collegestudent.com option holders in consideration for options to purchase
971,800 shares of Collegestudent.com common stock held by such optionees.
(q) On December 23, 1999, the registrant closed an offering in which it
issued and sold an aggregate of 11,600,397 shares of its Series C preferred
stock to 168 investors in consideration for an aggregate purchase price of
$40,137,375, which consisted of cash and the conversion of promissory notes and
interest.
(r) On December 31, 1999, the registrant issued 18,245 shares of its common
stock to an entity and two individuals in consideration for recruiting services.
(s) On January 27, 2000, the registrant issued 28,902 shares of its common
stock to Suissa Miller in consideration for advertising services and $100,001 in
cash.
(t) On January 28, 2000, the registrant issued 100,087 shares of its
Series B Preferred Stock in connection with the registrant's asset acquisition
of CollegeBeat, Inc.
(u) On March 15, 2000, the registrant issued a warrant to purchase up to
100,000 shares of its common stock with an exercise price of $3.46 per share to
a consultant pursuant to a contractual agreement.
(v) On March 27, 2000 the registrant issued 970,874 shares of its
Series C-2 preferred stock to NBC in connection with a strategic relationship
where NBC will provide the registrant with marketing and promotional services.
II-3
<PAGE>
(w) On March 27, 2000 the registrant issued 23,089 shares of common stock,
4,461 shares of Series B preferred stock, 1,919 shares of Series B-1 preferred
stock and 25,966 shares of Series C preferred stock pursuant to contractual
agreements with stockholders.
(x) On April 18, 2000, the registrant issued 5,819,978 shares of its common
stock to the stockholders of Versity.com in exchange for 14,188,658 shares of
Versity.com common stock held by such stockholders.
(y) In connection with the acquisition of Versity.com, the registrant also
assumed options to purchase 2,116,554 shares of Versity.com common stock held by
Versity.com option holders which became options to purchase 784,422 shares of
the registrant's common stock.
The issuances described in Items (a) through (e), (h) through (o) and (r)
through (w) above were deemed by the registrant to be exempt from registration
under the Securities Act in reliance upon the exemption provided by Section
4(2) promulgated under the Securities Act. The issuances were made without
general solicitation or advertising. The recipients were sophisticated investors
and/or had adequate access through employment or other relationships to
information about the registrant, and they represented to the registrant that
the securities were being acquired for investment only and not with a view to
distribution thereof. No underwriters were involved in connection with the
issuances of these securities.
The issuances described in Items (f), (g), (q) and (x) above were deemed by
the registrant to be exempt from registration under the Securities Act in
reliance upon the exemption provided by Section 4(2) and/or Regulation D
promulgated under the Securities Act. The issuances were made without general
solicitation or advertising. The recipients were sophisticated investors with
adequate access through employment or other relationships to information about
the registrant, and they represented to the registrant that the securities were
being acquired for investment only and not with a view to distribution thereof.
No underwriters were involved in connection with the issuances of these
securities.
(z) From time to time since January 1, 1997, the registrant has granted
stock options to purchase shares of its common stock to various employees,
directors and consultants pursuant to its 1996 Stock Option Plan:
<TABLE>
<CAPTION>
Number of Exercise
Shares Prices
--------- ----------
<S> <C> <C>
January 1, 1997 to December 31,1997.................. 2,563,479 $.22
January 1, 1998 to December 31, 1998................. 1,773,588 $.22
January 1, 1999 to December 31, 1999................. 7,418,787 $.22-$2.00
January 1, 2000 to April 3, 2000..................... 3,958,667 $2.00
</TABLE>
(aa) From January 1, 1997 to April 3, 2000 1,267,751 shares of common stock
were issued through the exercise of options granted under the 1996 Stock Option
Plan for aggregate proceeds of $363,056. The exercise of these options was by 42
of the registrant's employees or consultants. For additional information
concerning these transactions, please see "Management--Benefit Plans" in the
Prospectus included in this registration statement.
At the time these options were issued under the Company's 1996 Stock Option
Plan, including options assumed in connection with our acquisitions described in
Items (p) and (y), the Company believed that each of the issuances were exempt
from the registration requirements of the Securities Act either by virtue of
(i) the exemption provided by Rule 701 for securities offered under compensatory
benefit plans and contracts or (ii) a "no-sale" theory under Section 5 of the
Securities Act of 1933, since none of the optionees provided any consideration
for the grants (the sale of the underlying option shares occurs only when the
option is exercised and the purchase price for the shares is paid to the
Company).
II-4
<PAGE>
However, due to the total number of shares and options issued, the issuance
of these shares and options may not have qualified under California and other
state securities laws. As a result, we may be required, or we may elect at some
time in the future, to make a rescission offer. The details of this rescission
offer are summarized on page 14 of the prospectus contained in this registration
statement.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation, as amended.
3.2 Certificate of Amendment to Certificate of Designations,
Preferences and Rights of Series A, Series B, Series B-1,
Series C, Series C-1 and Series C-2 Preferred Stock.
3.3 Form of Amended and Restated Certificate of Incorporation to
be in effect upon the closing of this offering.
3.4 Bylaws.
3.5 Form of Bylaws to be in effect upon the closing of this
offering.
4.1* Specimen common stock certificate.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Third Amended and Restated Investors' Rights Agreement among
us, certain of our stockholders and Mr. Pousti, dated March
27, 2000.
10.2 Form of Series A Preferred Stock Subscription Agreement.
10.3 Common Stock Purchase Warrant between us and Daniel Mirich,
dated November 13, 1996.
10.4 Common Stock Purchase Warrant between us and Heidrick &
Struggles, Inc., dated April 13, 1999.
10.5 Common Stock Purchase Warrant between us and Executive One
Associates, dated November 23, 1999.
10.6 Common Stock Purchase Warrant between us and Alan Weisman,
dated January 31, 2000.
10.7 Common Stock Purchase Warrant between us and Alan Weisman,
dated March 15, 2000.
10.8 Form of Common Stock Purchase Warrant between us and the
persons and entities listed on the attached Schedule.
10.9 Form of Warrant to Purchase Series B Preferred Stock between
us and the persons and entities listed on the attached
schedule.
10.10 Warrant to Purchase Series B Preferred Stock between us and
Silicon Valley Bank, dated September 16, 1999, as amended.
10.11 Warrant to Purchase Series B Preferred Stock between us and
Cruttenden Roth Incorporated, dated June 7, 1999.
10.12 Form of Warrant to Purchase Series C Preferred Stock between
us and the persons and entities listed on the attached
schedule.
10.13 Series C Preferred Stock Purchase Warrant between us and
Deutsche Bank Securities, Inc., dated August 23, 1999.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<C> <S>
10.14 Joint Marketing Agreement between us and Overly Publishing,
dated June 25, 1999.
10.15 Equity Securities Subscription Agreement between us and
Overly Publishing, dated June 25, 1999.
10.16+ Strategic Alliance and Services Agreement between us and
Ericsson Inc., dated February 14, 2000.
10.17 Software License and Services Agreement between us,
CourseWeb, L.L.C. and the National Association of College
Stores dated September 15, 1999.
10.18* Office Lease Executive Complex between us and Executive One
Associates, dated November 23, 1999.
10.19 Form of Employee Innovations and Proprietary Rights
Assignment Agreement.
10.20 Employment Agreement between us and James B. DeBello, dated
March 30, 1999.
10.21* Employment Agreement between us and Eric Rindahl, dated May
5, 1999.
10.22* Series C-2 Preferred Stock Purchase Agreement between us and
National Broadcasting Company, Inc., dated March 27, 2000.
10.23 1996 Stock Option Plan.
10.24 Form of 1996 Stock Option Plan Incentive Stock Option
Agreement.
10.25 Form of 1996 Stock Option Plan Incentive Stock Option
Agreement for key employees of CollegeStudent.
10.26 Form of 1996 Stock Option Plan Incentive Stock Option
Agreement for employees of CollegeStudent.
10.27 Form of 1996 Stock Option Plan Non-Qualified Stock Option
Agreement.
10.28 2000 Stock Incentive Plan.
10.29 2000 Stock Incentive Plan, Notice of Grant of Stock Option.
10.30 2000 Stock Incentive Plan, Form of Stock Option Agreement.
10.31 2000 Employee Stock Purchase Plan.
10.32 Form of Indemnification Agreement between us and each of our
directors.
10.33 Form of Indemnification Agreement between us and each of our
officers.
11.1* Statement re: Computation of Basic and Diluted Net Loss Per
Share.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney (See Signature Page on Page II-8).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ We have sought confidential treatment pursuant to Rule 406 of portions of the
referenced exhibit.
II-6
<PAGE>
(b) Financial Statement Schedules.
<TABLE>
<CAPTION>
Additions Additions
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Period Expenses Accounts Deductions Period
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Deducted from receivables
Allowance for doubtful accounts:
Year ended December 31, 1999...... $ -- $ 155 $ -- $ -- $ 155
Year ended December 31, 1998...... -- -- -- -- --
Year ended December 31, 1997...... -- -- -- -- --
Deducted from Other current assets
and Other assets
Valuation allowance on deferred tax
assets:
Year ended December 31, 1999...... $3,445 $8,680 $ -- $ -- $12,225
Year ended December 31, 1998...... 2,050 1,395 -- -- 3,445
Year ended December 31, 1997...... 421 1,629 -- -- 2,050
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter 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 SEC 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 the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in San Diego, California, on this
18th day of April, 2000.
<TABLE>
<S> <C> <C>
COLLEGECLUB.COM, INC.
By: /s/ MICHAEL C. POUSTI, JR.
----------------------------------------
Name: Michael C. Pousti, Jr.
TITLE: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and/or officers of COLLEGECLUB.COM, INC. (the
"Company"), hereby severally constitute and appoint Michael C. Pousti, Jr.,
Chairman and Chief Executive Officer, and Eric D. Rindahl, Chief Financial
Officer, 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 SEC, 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 in connection with the registration under the Securities
Act of 1933 of our equity securities, and to file or cause to be filed the same,
with all exhibits thereto and other documents in connection therewith, with the
SEC, 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.
Pursuant to the requirements of the Securities Act of 1933 this Registration
Statement has been signed by the following persons in the capacities indicated
on April 18, 2000:
<TABLE>
<CAPTION>
Signature Title(s)
--------- --------
<C> <S>
/s/ MICHAEL C. POUSTI, JR.
------------------------------- Chairman, Chief Executive Officer and Office of the
Michael C. Pousti, Jr. President, (principal executive officer)
/s/ ERIC D. RINDAHL
------------------------------- Chief Financial Officer (principal financial and
Eric D. Rindahl accounting officer)
/s/ JAMES B. DEBELLO
------------------------------- Office of the President, Chief Operating Officer and
James B. DeBello Director
/s/ DONALD R. FREDA, JR.
------------------------------- Executive Vice President, Campus Marketing and Director
Donald R. Freda, Jr.
/s/ LAWRENCE S. CLARK
------------------------------- Director
Lawrence S. Clark
/s/ ERIC DI BENEDETTO
------------------------------- Director
Eric Di Benedetto
/s/ STEPHEN C. LAKE
------------------------------- Director
Stephen C. Lake
</TABLE>
II-8
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation, as amended.
3.2 Certificate of Amendment to Certificate of Designations,
Preferences and Rights of Series A, Series B, Series B-1,
Series C, Series C-1 and Series C-2 Preferred Stock.
3.3 Form of Amended and Restated Certificate of Incorporation to
be in effect upon the closing of this offering.
3.4 Bylaws.
3.5 Form of Bylaws to be in effect upon the closing of this
offering.
4.1* Specimen common stock certificate.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Third Amended and Restated Investors' Rights Agreement among
us, certain of our stockholders and Mr. Pousti, dated March
27, 2000.
10.2 Form of Series A Preferred Stock Subscription Agreement.
10.3 Common Stock Purchase Warrant between us and Daniel Mirich,
dated November 13, 1996.
10.4 Common Stock Purchase Warrant between us and Heidrick &
Struggles, Inc., dated April 13, 1999.
10.5 Common Stock Purchase Warrant between us and Executive One
Associates, dated November 23, 1999.
10.6 Common Stock Purchase Warrant between us and Alan Weisman,
dated January 31, 2000.
10.7 Common Stock Purchase Warrant between us and Alan Weisman,
dated March 15, 2000.
10.8 Form of Common Stock Purchase Warrant between us and the
persons and entities listed on the attached Schedule.
10.9 Form of Warrant to Purchase Series B Preferred Stock between
us and the persons and entities listed on the attached
schedule.
10.10 Warrant to Purchase Series B Preferred Stock between us and
Silicon Valley Bank, dated September 16, 1999, as amended.
10.11 Warrant to Purchase Series B Preferred Stock between us and
Cruttenden Roth Incorporated, dated June 7, 1999.
10.12 Form of Warrant to Purchase Series C Preferred Stock between
us and the persons and entities listed on the attached
schedule.
10.13 Series C Preferred Stock Purchase Warrant between us and
Deutsche Bank Securities, Inc., dated August 23, 1999.
10.14 Joint Marketing Agreement between us and Overly Publishing,
dated June 25, 1999.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<C> <S>
10.15 Equity Securities Subscription Agreement between us and
Overly Publishing, dated June 25, 1999.
10.16+ Strategic Alliance and Services Agreement between us and
Ericsson Inc., dated February 14, 2000.
10.17 Software License and Services Agreement between us,
CourseWeb, L.L.C. and the National Association of College
Stores dated September 15, 1999.
10.18* Office Lease Executive Complex between us and Executive One
Associates, dated November 23, 1999.
10.19 Form of Employee Innovations and Proprietary Rights
Assignment Agreement.
10.20 Employment Agreement between us and James B. DeBello, dated
March 30, 1999.
10.21* Employment Agreement between us and Eric Rindahl, dated May
5, 1999.
10.22* Series C-2 Preferred Stock Purchase Agreement between us and
National Broadcasting Company, Inc., dated March 27, 2000.
10.23 1996 Stock Option Plan.
10.24 Form of 1996 Stock Option Plan Incentive Stock Option
Agreement.
10.25 Form of 1996 Stock Option Plan Incentive Stock Option
Agreement for key employees of CollegeStudent.
10.26 Form of 1996 Stock Option Plan Incentive Stock Option
Agreement for employees of CollegeStudent.
10.27 Form of 1996 Stock Option Plan Non-Qualified Stock Option
Agreement.
10.28 2000 Stock Incentive Plan.
10.29 2000 Stock Incentive Plan, Notice of Grant of Stock Option.
10.30 2000 Stock Incentive Plan, Form of Stock Option Agreement.
10.31 2000 Employee Stock Purchase Plan.
10.32 Form of Indemnification Agreement between us and each of our
directors.
10.33 Form of Indemnification Agreement between us and each of our
officers.
11.1* Statement re: Computation of Basic and Diluted Net Loss Per
Share.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney (See Signature Page on Page II-8).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ We have sought confidential treatment pursuant to Rule 406 of portions of the
referenced exhibit.
A-2
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CC.COM DELAWARE, INC.
FIRST: The name of this corporation is CC.com Delaware, Inc.
(hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is The Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, County of New Castle, and the name of the initial
registered agent therein and in charge thereof, upon whom process against the
Corporation may be served 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 Delaware.
FOURTH: The Corporation is authorized to issue a total of 17,400,000
shares of stock in two classes designated respectively "Preferred Stock" and
"Common Stock". The total number of shares of all series of Preferred Stock that
the Corporation shall have the authority to issue is 2,900,000 and the total
number of shares of Common Stock that the Corporation shall have the authority
to issue is 14,500,000. All of the authorized shares shall have a par value of
$0.001.
The shares of Preferred Stock may be divided into such number of series
as the Board of Directors may determine. The Board of Directors is authorized to
determine and alter the rights, preferences, privileges and restrictions granted
to and imposed upon the Preferred Stock or any series thereof with respect to
any wholly unissued series of Preferred Stock, and to fix the number of shares
of any such series of Preferred Stock. The Board of Directors, within the limits
and restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series, may
increase or decrease (but not below the number
<PAGE>
of shares of such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series.
FIFTH: The name and mailing address of the incorporator is:
Paul Johnson
c/o Gray Cary Ware & Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, CA 92121-2189
SIXTH: The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by Statute or by this Certificate of
Incorporation or the bylaws of the Corporation, 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. Election of directors need not be by
written ballot unless the Bylaws so provide.
SEVENTH: The Board of Directors is authorized to make, adopt, amend,
alter or repeal the Bylaws of the Corporation. The stockholders shall also have
power to make, adopt, amend, alter or repeal the Bylaws of the Corporation.
EIGHTH: This Corporation reserves the right to amend or repeal any of
the provisions contained in this Certificate of Incorporation in any manner now
or hereafter permitted by law, and the rights of the stockholders of this
Corporation are granted subject to this reservation.
NINTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involved intentional misconduct or a
2
<PAGE>
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
If the General Corporation Law of Delaware is hereafter amended to
authorize the further elimination or limitation of the liability of a director,
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the General Corporation Law of
Delaware, as so amended.
Any repeal or modification of the foregoing provisions of this Article
NINTH 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.
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming
a corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and accordingly, have hereto set my hand this 1st day of September, 1999.
/s/ Paul Johnson
----------------------------
Paul Johnson
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COLLEGECLUB.COM, INC.
CollegeClub.con Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
1. The Amendment to the Corporation's Certificate of Incorporation set
forth below was duly adopted in accordance with the provisions of Section 242
and has been consented to in writing by the stockholders, and written notice has
been given in accordance with Section 228 or the General Corporation Law of the
State of Delaware;
"RESOLVED, that at the effective time of this amendment and without
further action on the part of the Corporation or the holders of its stock, each
one (1) share of Common Stock of the Corporation outstanding or held in treasury
immediately prior thereto shall be changed and converted into three (3) shares
of Common Stock of the Corporation and at such time each holder of record of
Common Stock shall without further action, be and become the holder of three (3)
shares of Common Stock for each share of Common Stock held of record immediately
prior thereto. Also at the effective term of this amendment and without further
action on the part of the Corporation the holders of its stock, each one (1)
share of Preferred Stock of the Corporation outstanding or held in treasury
immediately prior thereto shall be changed and converted into three (3) shares
of Preferred Stock of the Corporation and at such time each holder of record of
Preferred Stock shall without further action, be and become the holder of three
(3) shares of Preferred Stock for each share of Preferred Stock held of record
immediately prior thereto.
RESOLVED, that Paragraph One of ARTICLE FOURTH of the Corporation's
Certificate of Incorporation shall be amended to read in its entirety as
follows:
"FOURTH: The Corporation is authorized to issue a total of 61,000,000
shares of stock in two classes designated respectively "Preferred Stock" and
"Common Stock." The total number of shares of all series of Preferred Stock that
the Corporation shall have the authority to issue is 11,000,000 and the total
number of shares of Common Stock that the Corporation shall have the authority
to issue is 50,000,000. All of the authorized shares shall have a par value of
$0.001."
IN WITNESS WHEREOF, CollegeClub.com Inc. has caused this Certificate to
be executed by James B. DeBello, its authorized officer, on this 28th day of
September, 1999.
/s/ James DeBello
--------------------------------
James B. DeBello, President
Attest:
By: /s/ Eric Berman
-----------------------------------
Eric Berman, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COLLEGECLUB.COM. INC.
CollegeClub.com, Inc. (the 'Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify:
1. The Amendment to the Corporation's Certificate of Incorporation set
forth below was duly adopted in accordance with the provisions of Section 242
and has been consented to in writing by the stockholders, and written notice has
been given in accordance with Section 228 of the General Corporation Law of the
State of Delaware;
RESOLVED, that Paragraph One of ARTICLE FOURTH of the Corporation's
Certificate of Incorporation shall be amended to read in its entirety as
follows:
"FOURTH: The Corporation is authorized to issue a total of 106,413,537
shares of stock in two classes designated respectively "Preferred Stock" and
"Common Stock." The total number of shares of all series of Preferred Stock that
the Corporation shall have the authority to issue is 24,713,537 and the total
number of shares of Common Stock that the Corporation shall have the authority
to issue is 81,700,000. All of the authorized shares shall leave a par value of
$0.001.
IN WITNESS WHEREOF, CollegeClub.com, Inc. has caused this Certificate
to be executed by James B. DeBello, its authorized officer, on this 7th day of
December, 1999.
/s/ James DeBello
--------------------------------
James B. DeBello, President
Attest:
By: /s/ Raffaele Fazio
----------------------------------
Raffaele Fazio, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COLLEGECLUB.COM, INC.
CollegeClub.com, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify:
1. The Amendment to the Corporation's Certificate of Incorporation set
forth below was duly adopted in accordance with the provisions of Section 242
and has been consented to in writing by the stockholders, and written notice has
been given in accordance with Section 228 of the General Corporation Law of the
State of Delaware;
RESOLVED, that Paragraph One of ARTICLE FOURTH of the Corporation's
Certificate of Incorporation shall be amended to read in its entirety as
follows:
"FOURTH: The Corporation is authorized to issue a total of
107,913,537 shares of stock in two classes designated respectively "Preferred
Stock" and "Common Stock." The total number of shares of all series of Preferred
Stock that the Corporation shall have the authority to issue is 26,213,537 and
the total number of shares of Common Stock that the Corporation shall have the
authority to issue is 81,700,000. All of the authorized shares shall have a par
value of $0.001.
IN WITNESS WHEREOF, CollegeClub.com, Inc. has caused this Certificate
of Amendment to be executed by James B. DeBello, its authorized officer, on this
24th day of March, 2000.
/s/ James D. DeBello
-------------------------------
James B. DeBello
Office of the President and
Chief Operating Officer
Attest:
By: /s/ Raffaele G. Fazio
------------------------------------
Raffaele G. Fazio, Secretary
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A, SERIES B, SERIES B-1, SERIES C, SERIES C-1 AND
SERIES C-2 PREFERRED STOCK
OF
COLLEGECLUB.COM, INC.
Duly Adopted Pursuant to Section 242 of the
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
The undersigned, as the President and Secretary, respectively, of
CollegeClub.com, Inc. (hereinafter called the "Company"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
FIRST: That pursuant to the authority conferred upon the Board of
Directors of the Company by the Certificate of Incorporation of the Company
filed with the Secretary of State of the State of Delaware on September 1, 1999,
as amended, the Board of Directors of the Company on February 28, 2000,
declaring the following resolution to be advisable and calling for a written
consent of the Company's stockholders with respect thereto, adopted the
following resolution increasing the number of authorized shares of Preferred
Stock, amending the rights, preferences and privileges of the Company's Series A
Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C
Preferred Stock, Series C-1 Preferred Stock, and creating a new series of
Preferred Stock designated as Series C-2 Convertible Preferred Stock:
RESOLVED: That the Certificate of Designations, Preferences and Rights of Series
A, Series B, Series B-1, Series C and Series C-1 Preferred Stock of
the Company be amended to increase the number of shares of Preferred
Stock authorized for issuance to 26,213,537 and that a new series of
Preferred Stock of the Company designated as Series C-2 Convertible
Preferred Stock be and are hereby created, and that the designations,
powers, preferences and rights of the shares of each such series and
the Company's existing Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series B-1 Convertible Preferred Stock,
Series C Convertible Preferred Stock and Series C-1 Convertible
Preferred Stock, and the qualification, limitations or restrictions
thereof are as set forth on EXHIBIT A attached hereto.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a written consent of the stockholders of the Company was duly
solicited and executed, pursuant to which the necessary number of shares as
required by statute and the Company's Certificate of Incorporation, as amended,
were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by James B. DeBello, holding the Office of the
President and Chief Operating Officer, and Raffaele G. Fazio, its Secretary,
this 24th day of May, 2000.
CollegeClub.com, Inc.
By: /s/ James B. DeBello
-----------------------------------
James B. DeBello,
Office of the President and
the Chief Operating Officer
By: /s/ Raffaele Fazio
-----------------------------------
Raffaele G. Fazio,
Secretary
<PAGE>
EXHIBIT A
DESCRIPTION AND DESIGNATIONS OF
SERIES A, SERIES B, SERIES B-1, SERIES C, SERIES C-1 AND SERIES C-2
CONVERTIBLE PREFERRED STOCK
1. DESIGNATIONS; NUMBER. The first series of Preferred Stock shall
consist of One Million Five Hundred Thirty-Six Thousand Five Hundred
Thirty-Seven (1,536,537) shares of the authorized and undesignated Preferred
Stock of the Company, $0.001 par value, which are hereby designated as the
"Series A Convertible Preferred Stock" (the "Series A Preferred Stock"). The
second series of Preferred Stock shall consist of Eight Million (8,000,000)
shares of the authorized and undesignated Preferred Stock of the Company, $0.001
par value, which are hereby designated as the "Series B Convertible Preferred
Stock" (the "Series B Preferred Stock"). The third series of Preferred Stock
shall consist of Seven Hundred Seventy-Seven Thousand (777,000) shares of the
authorized and undesignated Preferred Stock of the Company, $0.001 par value,
which are hereby designated as the "Series B-1 Convertible Preferred Stock" (the
"Series B-1 Preferred Stock"). The fourth series of Preferred Stock shall
consist of Twelve Million Seven Hundred Thousand (12,700,000) shares of the
authorized and undesignated Preferred Stock of the Company, $0.001 par value,
which are hereby designated as the "Series C Convertible Preferred Stock" (the
"Series C Preferred Stock"). The fifth series of Preferred Stock shall consist
of One Million Seven Hundred Thousand (1,700,000) shares of the authorized and
undesignated Preferred Stock of the Company, $0.001 per value, which are hereby
designated as the "Series C-1 Convertible Preferred Stock" (the "Series C-1
Preferred Stock"). The sixth series of Preferred Stock shall consist of One
Million Five Hundred Thousand (1,500,000) shares of the authorized and
undesignated Preferred Stock of the Company, $0.001 par value, which are hereby
designated as the "Series C-2 Convertible Preferred Stock" (the "Series C-2
Convertible Preferred Stock," collectively with the Series A Preferred Stock,
Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock
and Series C-1 Preferred Stock, the "Preferred Stock"). The rights, preferences,
privileges and restrictions granted to or imposed upon the Series A Preferred
Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred
Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock are as follows:
2. DIVIDENDS.
(a) Subject to the rights of holders of outstanding shares of
any series of Preferred Stock which may from time to time come into existence,
the holders of outstanding shares of Series A Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock and Series C-2 Preferred Stock shall be entitled to receive
in any fiscal year, when and as declared by the Board of Directors, out of any
assets at the time legally available therefor, dividends in cash at the rate per
annum of Ten and Ninety-Nine Hundredths Cents ($.1099) per share, Twenty-Two and
Eight Tenths Cents ($.228) per share, Twenty-Seven and Thirty-Six Hundredths
Cents ($.2736) per share, Twenty-Seven and Sixty-Eight Hundredths Cents ($.2768)
per share, Twenty-Seven and Sixty-Eight Hundredths Cents ($.2768) per share, and
Twenty-Seven and Sixty-Eight Hundredths Cents ($.2768) per share, respectively.
Such dividends may be payable quarterly or otherwise, as the
<PAGE>
Board of Directors may from time to time determine. The right to such dividends
on the Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred
Stock, Series C Preferred Stock, Series C-1 Preferred Stock and Series C-2
Preferred Stock shall not be cumulative and no right shall accrue to holders of
the Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred
Stock, Series C Preferred Stock, Series C-1 Preferred Stock and Series C-2
Preferred Stock by reason of the fact that dividends on said shares are not
declared in any prior year, nor shall any undeclared dividend bear or accrue
interest. Distributions (as defined below) may be declared or paid upon shares
of Common Stock in any fiscal year of the Company only if (i) dividends shall
have been paid or set aside upon all outstanding shares of Preferred Stock at
the annual rate described above for each quarter of such fiscal year of the
Company, including the quarter in which such distributions upon shares of Common
Stock are declared, and (ii) shares of Series A Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock and Series C-2 Preferred Stock participate in such
distributions on an as-converted basis.
(b) In the event the Company shall declare a distribution
(other than any distribution described below in Section 3) payable in securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends) or options or rights to purchase any
such securities or evidences of indebtedness, then, in each such case the
holders of the Series A Preferred Stock, Series B Preferred Stock, Series B-1
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock and Series
C-2 Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of the Series A Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock and Series C-2 Preferred Stock were the holders of the
number of shares of Common Stock of the Company into which their respective
shares of Series A Preferred Stock, Series B Preferred Stock, Series B-1
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock and Series
C-2 Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Company entitled to receive
such distribution.
3. PREFERENCES ON LIQUIDATION.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C
Preferred Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock then
outstanding shall be entitled to be paid, out of the assets of the Company
available for distribution to its stockholders, whether from capital, surplus or
earnings, before any payment shall be made with respect to the Company's Common
Stock, an amount equal to the sum of One Dollar and Thirty-Seven and
Thirty-Three Hundredths Cents ($1.3733) per share of Series A Preferred Stock,
Two Dollars and Eighty-Five Cents ($2.85) per share of Series B Preferred Stock,
Three Dollars and Forty-Two Cents ($3.42) per share of Series B-1 Preferred
Stock; and, in the case of the Series C Preferred Stock and Series C-1 Preferred
Stock, Five Dollars and Nineteen Cents ($5.19) per share of Series C Preferred
Stock and Series C-1 Preferred Stock if the event requiring such payment occurs
prior to November 1, 2000, and Three Dollars and Forty-Six Cents ($3.46) per
share of Series C Preferred Stock and Series C-1 Preferred Stock if such event
occurs on or after November 1, 2000; and, in the case of the Series C-2
Preferred Stock, Five Dollars and Seven Cents ($5.07) per share of Series C-2
Preferred
2
<PAGE>
Stock; all as adjusted to reflect any subsequent stock dividends, stock splits
or recapitalizations, plus all declared and unpaid dividends to the date fixed
for distribution. If upon liquidation, dissolution or winding up of the Company,
the assets of the Company available for distribution to its stockholders shall
be insufficient to pay the holders of Series A Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock and Series C-2 Preferred Stock the full amounts to which
they shall be entitled pursuant to this Section 3(a), the assets shall be
distributed first among the holders of Series C Preferred Stock, Series C-1
Preferred Stock and Series C-2 Preferred Stock on a pro rata basis until such
holders have received the full amount to which they are entitled pursuant to
this section, and second, if any funds remain available for distribution, among
the holders of Series A Preferred Stock, Series B Preferred Stock and Series B-1
Preferred Stock in proportion to the full preferential amount each such holder
is otherwise entitled to receive.
(b) Upon completion of and subordinate to the distribution
described in Section 3(a), and subject to the rights of Preferred Stock which
may from time to time come into existence, the remaining assets of the Company
legally available for distribution to stockholders shall be distributed among
the holders of Common Stock, Series B Preferred Stock and Series B-1 Preferred
Stock pro rata based on the number of shares of Common Stock held by each such
holder (assuming conversion of all such Series B Preferred Stock and Series B-1
Preferred Stock) until the holders of Series B Preferred Stock and Series B-1
Preferred Stock have received an aggregate of Four Dollars and Twenty-Seven and
Five-Tenths Cents ($4.275) per share of Series B Preferred Stock and Five
Dollars and Thirteen Cents ($5.13) per share of Series B-1 Preferred Stock,
respectively (including amounts paid pursuant to Section 3(a)). Thereafter, the
remaining assets of the Company legally available for distribution to
stockholders shall be distributed among the holders of Common Stock pro rata
based on the number of shares of Common Stock held by each holder.
(c) Any transaction or series of related transactions, including
the merger or consolidation of the Company into or with another corporation
(except a wholly-owned subsidiary), in which the stockholders of the Company
immediately prior thereto shall own less than a majority of the voting
securities of the surviving corporation, or the sale, transfer or lease (but not
including a transfer or lease by pledge or mortgage to a bona fide lender) of
all or substantially all of the assets of the Company shall be deemed to be a
liquidation, dissolution or winding up of the Company as those terms are used in
this Section 3.
(d) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the Company shall, within ten (10)
days after the date the Board of Directors approves such action, or twenty (20)
days prior to any stockholders' meeting called to approve such action, or twenty
(20) days after the commencement of any involuntary proceeding, whichever is
earlier, give each holder of shares of Preferred Stock initial written notice of
the proposed action. Such initial written notice shall describe the material
terms and conditions of such proposed action, including a description of the
stock, cash and property to be received by the holders of shares of Preferred
Stock upon consummation of the proposed action and the date of delivery thereof.
If any material change in the facts set forth in the initial notice shall occur,
the Company shall promptly give written notice to each holder of shares of
Preferred Stock of such material change.
3
<PAGE>
(e) The Company shall not consummate any voluntary or involuntary
liquidation, dissolution or winding up of the Company before the expiration of
thirty (30) days after the mailing of the initial notice or ten (10) days after
the mailing of any subsequent written notice, whichever is later; provided that
any such 30-day or 10-day period may be shortened upon the written consent of
the holders of a majority of the outstanding shares of Preferred Stock.
(f) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company which will involve the distribution of
securities or property other than cash, the value of such distribution of
securities or property shall be as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or the Nasdaq
National Market System, the value shall be deemed to be the average of the
closing sale prices of the securities on such exchange over the thirty-day
period ending three (3) days prior to the closing; and
(B) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the Company
and the holders of at least a majority of the voting power of all then
outstanding shares of Preferred Stock.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in Section 3(f)(i)(A) to reflect the approximate fair
market value thereof, as mutually determined by the Company and the holders of
at least a majority of the voting power of all then outstanding shares of
Preferred Stock.
4. VOTING RIGHTS. Except as otherwise required by law, and except as
set forth below, the shares of Series A Preferred Stock, Series B Preferred
Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-2
Preferred Stock shall be voted equally with the shares of the Company's Common
Stock at any annual or special meeting of stockholders of the Company, or may
act by written consent in the same manner as the Company's Common Stock, upon
the following basis: each holder of shares of Series A Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series
C-2 Preferred Stock shall be entitled to such number of votes for the Series A
Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C
Preferred Stock and Series C-2 Preferred Stock held by him on the record date
fixed for such meeting, or on the effective date of such written consent, as
shall be equal to the number of whole shares of the Company's Common Stock into
which all of his shares of such series of Preferred Stock are convertible on the
close of business on the record date fixed for such meeting or the effective
date of such written consent. The shares of the Series C-1 Preferred Stock shall
be non-voting, except as required by law.
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5. CONVERSION RIGHTS.
(a) Each share of Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the issuance of such share (the
"Issuance Date") and without payment of further consideration into fully paid
and nonassessable shares of Common Stock of the Company.
(b) Each share of Preferred Stock shall automatically be
converted into that number of shares of Common Stock at its then-effective
Conversion Price immediately upon (i) the closing of a bona fide firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
shares of Common Stock, the public offering price per share of which is not less
than 1.75 times the then-applicable Series C Preferred Conversion Price (as
defined below) per share (adjusted to reflect stock dividends, stock splits or
recapitalizations after the Issuance Date) with gross proceeds to the Company
(before any underwriting discounts and commissions) of at least Twenty Million
Dollars ($20,000,000) (a "Qualified IPO"); or (ii) the election to convert to
Common Stock all shares of Series A Preferred Stock, Series B Preferred Stock
and Series B-1 Preferred Stock by the holders of a majority of the
then-outstanding shares of Series A Preferred Stock, Series B Preferred Stock
and Series B-1 Preferred Stock voting together as a single class with respect to
the conversion of the Series A Preferred Stock, Series B Preferred Stock and
Series B-1 Preferred Stock; by a majority of the then-outstanding Series C
Preferred Stock, voting as a single class with respect to the conversion of the
Series C Preferred Stock and the Series C-1 Preferred Stock; and by a majority
of the then-outstanding Series C-2 Preferred Stock, voting as a single class
with respect to the conversion of the Series C-2 Preferred Stock.
(c) The number of shares of Common Stock into which each share of
Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock,
Series C Preferred Stock, Series C-1 Preferred Stock and Series C-2 Preferred
Stock may be converted shall be determined by dividing One Dollar and
Thirty-Seven and Thirty-Three Hundredths Cents ($1.3733), in the case of Series
A Preferred Stock, by the Conversion Price for the Series A Preferred Stock; Two
Dollars and Eighty-Five Cents ($2.85), in the case of Series B Preferred Stock,
by the Conversion Price for the Series B Preferred Stock; Three Dollars and
Forty-Two Cents ($3.42), in the case of the Series B-1 Preferred Stock, by the
Conversion Price for the Series B-1 Preferred Stock; Three Dollars and Forty-Six
Cents ($3.46), in the case of the Series C Preferred Stock, by the Conversion
Price for the Series C Preferred Stock; Three Dollars and Forty-Six Cents
($3.46), in the case of the Series C-1 Preferred Stock, by the Conversion Price
for the Series C-1 Preferred Stock; Five Dollars and Seven Cents ($5.07), in the
case of the Series C-2 Preferred Stock, by the Conversion Price for the Series
C-2 Preferred Stock; in effect at the time of the conversion (the Conversion
Prices for the Series A Preferred Stock, Series B Preferred Stock, Series B-1
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock and Series
C-2 Preferred Stock being determined as hereinafter provided). As of the time of
filing this document with the Delaware Secretary of State, the initial
Conversion Prices for the Series A Preferred Stock, Series B Preferred Stock,
Series B-1 Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock
and Series C-2 Preferred Stock shall be One Dollar and Thirty-Seven and
Thirty-Three Hundredths Cents ($1.3733) per share, Two Dollars and Eighty-Five
Cents ($2.85) per share, Three Dollars and Forty-Two Cents ($3.42) per share,
Three Dollars and Forty-Six Cents ($3.46) per share, Three Dollars and Forty-Six
Cents ($3.46) per share, and Five
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Dollars and Seven Cents ($5.07) per share, respectively, subject to adjustment
as provided in Section 6.
(d) The holder of any shares of Preferred Stock may exercise the
conversion rights after the Issuance Date as to such shares or any part thereof
by delivering to the Company during regular business hours, at the office of any
transfer agent of the Company for the Preferred Stock, or at the principal
office of the Company or at such other place as may be designated by the
Company, the certificate or certificates for the shares to be converted, duly
endorsed for transfer to the Company (if required by it), accompanied by written
notice stating that the holder elects to convert such shares. Conversion shall
be deemed to have been effected on the date when such delivery is made, and such
date is referred to herein as the "Conversion Date." As promptly as practicable
thereafter the Company shall issue and deliver to or upon the written order of
such holder, at such office or other place designated by the Company, a
certificate or certificates for the number of full shares of Common Stock to
which such holder is entitled and a check for cash with respect to any
fractional interest in a share of Common Stock as provided in Section 5(e). The
holder shall be deemed to have become a stockholder of record with respect to
the Common Stock on the applicable Conversion Date unless the transfer books of
the Company are closed on the date, in which event he shall be deemed to have
become a stockholder of record on the next succeeding business day, but the
Conversion Price for such series shall be that in effect on the Conversion Date.
Upon conversion of only a portion of the number of shares of Preferred Stock, as
the case may be, represented by a certificate surrendered for conversion, the
Company shall issue and deliver to or upon the written order of the holder of
the certificate so surrendered for conversion, at the expense of the Company, a
new certificate covering the number of shares of Preferred Stock representing
the unconverted portion of the certificate so surrendered.
(e) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. If more than one certificate evidencing
shares of Preferred Stock shall be surrendered for conversion at any one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any shares of
Preferred Stock, the Company shall pay a cash adjustment in respect of such
fractional interest equal to the fair market value of such fractional interest
as determined by the Company's Board of Directors.
(f) The Company shall pay any and all transfer and other taxes
that may be payable with respect to any issue, delivery or transfer of shares of
Common Stock on conversion of Preferred Stock pursuant hereto. The Company shall
not, however, be required to pay any tax which may be payable with respect to
any transfer involved in the issue and delivery of shares of Common Stock in a
name other than that in which the Preferred Stock so converted were registered
(unless the name is that of a person who is an affiliate of the transferor), and
no such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Company the amount of any such tax, or has
established, to the satisfaction of the Company, that such tax has been paid.
(g) The Company shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the Preferred Stock, the full number of shares of
Common Stock deliverable upon
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the conversion of all shares of Preferred Stock from time to time outstanding;
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then-outstanding shares
of such series of Preferred Stock, in addition to such other remedies as shall
be available to the holder of such Preferred Stock, the Company shall, in
accordance with the laws of the State of Delaware take such corporate action as
may be necessary to increase the authorized amount of its Common Stock to such
number of shares as shall be sufficient to permit the conversion of all of the
shares of Preferred Stock at the time outstanding, including, without
limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to the Company's Certificate of
Incorporation.
(h) All shares of Common Stock which may be issued upon
conversion of the shares of Preferred Stock will, upon issuance by the Company,
be without payment of further consideration, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
6. ADJUSTMENT OF CONVERSION PRICE. The Conversion Price as to all
authorized shares of each series of Preferred Stock, whether or not then
outstanding, shall be subject to adjustment from time to time as follows:
(a) STOCK SPLITS, DIVIDENDS AND COMBINATIONS. In the event the
Company should at any time or from time to time after the Purchase Date fix a
record date for the effectuation of a split or subdivision of the outstanding
shares of Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional shares of
Common Stock or other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly, additional shares of Common
Stock (hereinafter referred to as "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Price of the Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents with the number of shares issuable with
respect to Common Stock Equivalents determined from time to time in the manner
provided for deemed issuances in Section 6(c)(i)(F). If the number of shares of
Common Stock outstanding at any time after the Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for the Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(b) NONCASH DIVIDENDS, STOCK PURCHASE RIGHTS, CAPITAL
REORGANIZATIONS AND DISSOLUTIONS. In case:
(i) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend, or any
other distribution, payable otherwise than in cash; or
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(ii) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or purchase any
shares of stock of any class or to receive any other rights; or
(iii) of any capital reorganization of the Company,
reclassification of the capital stock of the Company (other than a subdivision
or combination of its outstanding shares of Common Stock), consolidation or
merger of the Company with or into another corporation or conveyance of all or
substantially all of the assets of the Company to another corporation; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, and in any such case, the Company shall cause to be mailed to the transfer
agent for the Preferred Stock, and to the holders of record of the outstanding
Preferred Stock, at least fifteen (15) days prior to the date a record is to be
taken, a notice stating the date on which such a record is to be taken for the
purpose of such dividend, distribution or rights, or such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up is to take place and the date, if any is to be fixed, as of which
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(c) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK.
(i) The Conversion Price of the Preferred Stock shall be
subject to adjustment from time to time as follows:
(A) (I) Should the Company issue or sell, prior to
November 1, 2000, any shares of Additional Stock (as defined below) for a
consideration per share less than the Series C Conversion Price in effect
immediately prior to the time of such issue or sale, then upon such issue or
sale the Series C Conversion Price and Series C-1 Conversion Price shall be
reduced, as of the opening of business on the date of such issue or sale, to a
price equal to the higher of (x) the consideration per share received by the
Company upon such issuance or sale of the newly sold equity securities or (y)
Two Dollars and Eighty-Five Cents ($2.85) per share. On and after the earlier of
November 1, 2000 or the date on which the Series C Conversion Price equals
$2.85, the Series C Conversion Price and Series C-1 Conversion Price shall be
adjusted in accordance with the provisions of Section 6(c)(i)(B).
(II) Should the Company issue or sell, prior to
November 1, 2000, any shares of Additional Stock for a consideration per share
less than the Series C-2 Conversion Price in effect immediately prior to the
time of such issue or sale, then upon such issue or sale the Series C-2
Conversion Price shall be reduced, as of the opening of business on the date of
such issue or sale, to a price equal to the higher of (x) the consideration per
share received by the Company upon such issuance or sale of the newly sold
equity securities or (y) Three Dollars and Forty-Six Cents ($3.46) per share. On
and after the earlier of November 1, 2000 or the date on which the Series C-2
Conversion Price equals $3.46, the Series C-2 Conversion Price shall be adjusted
in accordance with the provisions of Section 6(c)(i)(B).
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(B) Should the Company issue or sell any Additional
Stock after the date on which the shares of Series C Preferred Stock were first
issued (the "Purchase Date") without consideration or for a consideration per
share less than the Conversion Price in effect immediately prior to the issuance
of such Additional Stock for the Series A Preferred Stock, Series B Preferred
Stock, Series B-1 Preferred Stock, Series C-2 Preferred Stock or if on or after
the earlier of November 1, 2000 or the date on which the Series C Conversion
Price equals $2.85, the Series C Preferred Stock or Series C-1 Preferred Stock,
the Conversion Price for such series in effect immediately prior to each such
issuance shall be adjusted to a price determined by multiplying such series'
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding (assuming conversion of all outstanding
shares of Preferred Stock) (the "Outstanding Common Shares") plus the number of
shares of Common Stock which the aggregate consideration received by the Company
of such issuance would purchase at such Conversion Price; and the denominator of
which shall be the Outstanding Common Shares plus the number of shares of such
Additional Stock plus the number of outstanding Stock Options.
(C) No adjustment of the Conversion Price for the
Preferred Stock shall be made in an amount less than One Cent ($0.01) per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be taken into account in any
subsequent adjustment made prior to three (3) years from the date of the event
giving rise to the adjustment being carried forward. Except to the limited
extent provided for in Sections 6(c)(i)(F)(III) and 6(c)(i)(F)(IV) , no
adjustment of such Conversion Price pursuant to this Section 6(c)(i) shall have
the effect of increasing the Conversion Price above the Conversion Price in
effect immediately prior to such adjustment.
(D) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(E) In the case of the issuance of the Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to have the fair value thereof, as determined by the
Board of Directors, irrespective of any accounting treatment.
(F) In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this Section 6(c)(i):
(I) The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in Sections 6(c)(i)(D) and (E), if any,
received by the Company upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights for the Common Stock
covered thereby.
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(II) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the Company for any such securities and related options or rights, plus the
minimum additional consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in Sections 6(c)(i)(D) and (E)).
(III) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to the
Company upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of each series of the Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of Common Stock or any payment of such consideration upon
the exercise of any such options or rights or the conversion or exchange of such
securities.
(IV) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of each series of the Preferred Stock, to the
extent in any way affected by or computed using such options, rights or
securities or options or rights related to such securities, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock (and
convertible or exchangeable securities which remain in effect) actually issued
upon the exercise of such options or rights, upon the conversion or exchange of
such securities or upon the exercise of the options or rights related to such
securities.
(V) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to Sections
6(c)(i)(F)(I) and (II) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either Section
6(c)(i)(F)(III) or (IV) .
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to Section 6(c)(i)(F)) by
the Company after the Purchase Date, other than:
(A) Common Stock issued pursuant to a transaction
described in Section 6(a);
(B) Common Stock issued or issuable to employees,
consultants or directors of the Company at not less than fair market value for
such shares, as determined in good faith by the Board of Directors, directly or
pursuant to a stock option plan or restricted stock plan unanimously approved by
the Board of Directors of the Company;
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(C) Common Stock issued or issuable upon conversion of
shares of Preferred Stock;
(D) Common Stock issued or issuable at not less than
fair market value for such shares, as determined in good faith by the Board of
Directors, in connection with a merger, acquisition, combination, consolidation
or other reorganization involving the corporation approved by the Board of
Directors;
(E) Common Stock issued or issuable in connection with
any borrowings from a commercial lending institution or in connection with the
lease of equipment or property by the Company approved by the Board of
Directors;
(F) Common Stock issued or issuable as a dividend or
distribution with respect to the Series A Preferred Stock, Series B Preferred
Stock, Series B-1 Preferred Stock, Series C Preferred Stock and Series C-2
Preferred Stock; or
(G) Shares of the Company's Common Stock issuable
deemed to have been issued pursuant to Section 6(c)(i)(F) upon issuance of up to
72,000 shares of the Company's Series B Preferred stock to Overly Publishing
("Overly") pursuant to the Joint Marketing Agreement between the Company and
Overly dated as of June 1999.
(d) OTHER DISTRIBUTIONS. In the event the Company shall declare
or pay a distribution payable in securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 6(c), then, in each
case for the purpose of this Section 6(d), the holders of the Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of the Company
into which their shares of Preferred Stock are convertible as of the record date
fixed for the determination of the holders of Common Stock of the Company
entitled to receive such distribution.
(e) RECAPITALIZATION. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 6 or Section 2), provision shall be made so that the holders of the
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Preferred Stock the number of shares of stock or other securities or property of
the Company or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 6 with respect to the rights of the holders of the Preferred Stock
after the recapitalization to the end that the provisions of this Section 6
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Preferred Stock) shall be applicable
after that event as nearly equivalent as may be practicable.
(f) NO IMPAIRMENTS. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action or inaction, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the
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provisions of this Section 6 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of each adjustment
or readjustment of the Conversion Price of a series of Preferred Stock pursuant
to this Section 6, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof, and prepare and
furnish to each holder of Preferred Stock affected thereby a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment or
readjustment, (B) the Conversion Price at the time in effect for such series of
Preferred Stock, and (C) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of his shares.
7. PROTECTIVE PROVISIONS.
(a) Without the consent of the holders of two-thirds of such
affected series of outstanding Preferred Stock, voting as a separate class, the
Company shall not:
(i) take any action that either creates any new class or
series of shares having rights, privileges or preferences or priority as to
dividends or assets on par with, or senior to, the Series B Preferred Stock,
Series B-1 Preferred Stock, Series C Preferred Stock or Series C-2 Preferred
Stock, or increases or decreases the number of authorized shares of Preferred
Stock or Common Stock or increases or decreases (other than by conversion) the
total number of authorized shares of Series B Preferred Stock, Series B-1
Preferred Stock, Series C Preferred Stock or Series C-2 Preferred Stock;
(ii) adversely change the rights of the Series B Preferred
Stock, Series B-1 Preferred Stock, Series C Preferred Stock or Series C-2
Preferred Stock; or
(iii) amend, repeal or waive a provision of the Certificate
of Incorporation or By-laws of the Company in a manner which adversely affects
the holders of Series B Preferred Stock, Series B-1 Preferred Stock, Series C
Preferred Stock or Series C-2 Preferred Stock.
(b) Without the consent of the holders of two-thirds of the
outstanding Series B Preferred Stock, Series B-1 Preferred Stock, Series C
Preferred Stock and Series C-2 Preferred Stock, voting together as a single
class on an as-converted basis, the Company shall not:
(i) effect any sale or other conveyance of all or
substantially all of the assets of the Company, or any other transaction or
series of related transactions, including any consolidation or merger involving
the Company, pursuant to which the Company's stockholders immediately prior
thereto own less than a majority of the voting power of the Company's (or its
successor's or parent's) capital stock immediately after the transaction;
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(ii) redeem, purchase or otherwise acquire (or pay into or
set aside a sinking fund for such purpose) any outstanding shares of the capital
stock of the Company (excluding Common Stock repurchased at cost upon
termination of an officer, employee, director or consultant pursuant to the
terms of a restricted stock purchase agreement); or
(iii) change the authorized number of directors constituting
the Board of Directors of the Company from seven members.
(c) This Section 7 shall terminate and be of no further force or
effect immediately upon the consummation of a Qualified IPO.
8. BOARD OF DIRECTORS.
(a) The Board of Directors of the Company shall consist of seven
members. Two members (the "Series B Directors") shall be elected by (and may
only be removed by) the holders of the Series B Preferred Stock. One member (the
"Series B-1 Director") shall be elected by (and may only be removed by) the
holders of the Series B-1 Preferred Stock. One member (the "Series C Director")
shall be elected by (and may only be removed by) the holders of the Series C
Preferred Stock. The three remaining members shall be elected by the holders of
Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock,
Series C Preferred Stock, Series C-2 Preferred Stock and holders of Common Stock
voting together as a single class on an as-converted basis.
(b) If the office of any director becomes vacant, such director's
replacement shall be elected by the holders of the series of the Preferred Stock
(and Common Stock, if applicable) entitled to elect such director, voting
together as a separate class, with the Preferred Stock voting on an as-converted
basis.
(c) This section 8 shall terminate and be of no further force or
effect immediately upon the consummation of the Company's Qualified IPO.
9. STATUS OF CONVERTED STOCK. In the event any shares of Preferred
Stock shall be converted pursuant to Section 5 hereof, the shares so converted
shall be canceled and shall not be issuable by the Company. The Certificate of
Incorporation of the Company shall be appropriately amended to effect the
corresponding reduction in the Company's authorized capital stock.
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EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF COLLEGECLUB.COM, INC.,
A DELAWARE CORPORATION
COLLEGECLUB.COM, INC., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is COLLEGECLUB.COM, INC. The original
Certificate of Incorporation of the corporation was filed with the Secretary of
State of the State of Delaware on September 1, 1999 and was amended pursuant to
a Certificate of Agreement of Merger filed with the Secretary of State of the
State of Delaware on September 28, 1999, a Certificate of Amendment of
Certificate of Incorporation filed with the Secretary of State of the State of
Delaware on September 28, 1999, a Certificate of Amendment of Certificate of
Incorporation filed with the Secretary of State of the State of Delaware on
December 7, 1999, and a Certificate of Amendment of Certificate of Incorporation
filed with the Secretary of State of the State of Delaware on March 24, 2000.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Amended and Restated Certificate of Incorporation
was adopted by the corporation's Board of Directors and stockholders.
3. The text of the Certificate of Incorporation as heretofore amended
or supplemented is hereby restated and further amended to read in its entirety
as follows:
ARTICLE I
The name of this corporation is COLLEGECLUB.COM, INC.
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801. The name of its
registered agent at such address is The Corporation Trust Center.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
Delaware General Corporation Law.
ARTICLE IV
(A) CLASSES OF STOCK. This corporation is authorized to issue two
classes of stock, denominated Common Stock and Preferred Stock. The Common Stock
shall have a par value of $0.001 per share and the Preferred Stock shall have a
par value of $0.001 per share. The total number of shares of Common Stock which
the Corporation is authorized to issue is One Hundred Twenty Million
(120,000,000), and the total number of shares of Preferred Stock which the
<PAGE>
Corporation is authorized to issue is Ten Million (10,000,000), which shares of
Preferred Stock shall be undesignated as to series.
(B) ISSUANCE OF PREFERRED STOCK. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is hereby authorized,
by filing one or more certificates pursuant to the Delaware General Corporation
Law (each, a "Preferred Stock Designation"), to fix or alter from time to time
the designations, powers, preferences and rights of each such series of
Preferred Stock and the qualifications, limitations or restrictions thereof,
including without limitation the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), redemption price or prices, and the liquidation preferences of any
wholly-unissued series of Preferred Stock, and to establish from time to time
the number of shares constituting any such series and the designation thereof,
or any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
(C) RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS OF COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior or equal rights of
holders of all classes of stock at the time outstanding having prior or equal
rights as to dividends, the holders of the Common Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of any assets of
the corporation legally available therefor, such dividends as may be declared
from time to time by the Board of Directors.
2. REDEMPTION. The Common Stock is not redeemable upon demand
of any holder thereof or upon demand of this corporation.
3. VOTING RIGHTS. The holder of each share of Common Stock
shall have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
(A) EXCULPATION. A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
corporation's stockholders, further reductions in the liability of the
corporation's directors for breach of fiduciary duty, then a director of the
corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
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(B) INDEMNIFICATION. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
corporation, its stockholders and others.
(C) EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of any
of the foregoing provisions of this Article V shall be prospective and shall not
adversely affect any right or protection of a director, officer, agent or other
person existing at the time of, or increase the liability of any director of the
corporation with respect to any acts or omissions of such director occurring
prior to, such repeal or modification.
ARTICLE VI
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation. At the next Annual Meeting of
Stockholders, the Directors shall be classified into three classes, as nearly
equal in number as possible as determined by the Board of Directors, with the
term of office of the first class to expire at the second Annual Meeting of
Stockholders, the term of office of the second class to expire at the third
Annual Meeting of Stockholders and the term of the third class to expire at the
fourth Annual Meeting of Stockholders. At each Annual Meeting of Stockholders
following such initial classification and election, Directors elected to succeed
those Directors whose terms expire shall be elected for a term of office to
expire at the third succeeding Annual Meeting of Stockholders after their
election. Additional directorships resulting from an increase in the number of
Directors shall be apportioned among the classes as equally as possible as
determined by the Board of Directors.
ARTICLE VII
No holder of shares of stock of the corporation shall have any
preemptive or other right, except as such rights are expressly provided by
contract, to purchase or subscribe for or receive any shares of any class, or
series thereof, of stock of the corporation, whether now or hereafter
authorized, or any warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any share
of any class, or series thereof, of stock; but such additional shares of stock
and such warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any shares of any
class, or series thereof, of stock may be issued or disposed of by the Board of
Directors to such persons, and on such terms and for such lawful consideration
as in its discretion it shall deem advisable or as the corporation shall have by
contract agreed.
ARTICLE VIII
The corporation is to have a perpetual existence.
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ARTICLE IX
The corporation reserves the right to repeal, alter, amend or rescind
any provision contained in this Amended and Restated Certificate of
Incorporation and/or any provision contained in any amendment to or restatement
of this Amended and Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE X
The Board of Directors may from time to time make, amend, supplement or
repeal the Bylaws by the requisite affirmative vote of Directors as set forth in
the Bylaws; provided, however, that the stockholders may change or repeal any
bylaw adopted by the Board of Directors by the requisite affirmative vote of
stockholders as set forth in the Bylaws; and, provided further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except
at an annual or special meeting of stockholders called in accordance with the
Bylaws, and no action shall be taken by the stockholders by written consent.
ARTICLE XII
Advance notice of stockholder nominations for the election of directors
and of business to be brought by stockholders before any meeting of the
stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
ARTICLE XIII
This certificate shall be effective as of ___________ __, 2000 at 9:00
a.m. eastern daylight savings time.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed under the seal of the corporation as of this ____
day of ________, 2000.
COLLEGECLUB.COM, INC.,
a Delaware corporation
By: __________________________________
Raffaele G. Fazio
Secretary
<PAGE>
EXHIBIT 3.4
BYLAWS
OF
CC.COM DELAWARE, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I STOCKHOLDERS...................................................................................1
1.1. Annual Meeting.................................................................................1
1.2. Special Meetings...............................................................................1
1.3. Notice of Meetings.............................................................................1
1.4. Quorum.........................................................................................1
1.5. Organization...................................................................................2
1.6. Conduct of Business............................................................................2
1.7. Proxies and Voting.............................................................................2
1.8. Stock List.....................................................................................2
1.9. Stockholder Action by Written Consent..........................................................3
ARTICLE II BOARD OF DIRECTORS.............................................................................3
2.1. Number and Term of Office......................................................................3
2.2. Vacancies and Newly Created Directorships......................................................3
2.3. Removal........................................................................................3
2.4. Regular Meetings...............................................................................4
2.5. Special Meetings...............................................................................4
2.6. Quorum.........................................................................................4
2.7. Participation in Meetings by Conference Telephone..............................................4
2.8. Conduct of Business............................................................................4
2.9. Powers.........................................................................................4
2.10. Compensation of Directors......................................................................5
2.11. Nomination of Director Candidates..............................................................5
ARTICLE III COMMITTEES.....................................................................................5
3.1. Committees of the Board of Directors...........................................................5
3.2. Conduct of Business............................................................................6
ARTICLE IV OFFICERS.......................................................................................6
4.1. Generally......................................................................................6
4.2. Chairman of the Board..........................................................................6
4.3. Chief Executive Officer........................................................................6
4.4. President......................................................................................6
4.5. Vice President.................................................................................7
4.6. Chief Financial Officer........................................................................7
4.7. Secretary......................................................................................7
4.8 Delegation of Authority
4.9 Removal........................................................................................7
4.10. Action With Respect to Securities of Other Corporations........................................7
ARTICLE V STOCK..........................................................................................8
5.1. Certificates of Stock..........................................................................8
5.2. Transfers of Stock.............................................................................8
5.3. Record Date....................................................................................8
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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5.4. Lost, Stolen or Destroyed Certificates.........................................................8
5.5. Regulations....................................................................................8
ARTICLE VI NOTICES........................................................................................8
6.1. Notices........................................................................................8
6.2. Waivers........................................................................................9
ARTICLE VI MISCELLANEOUS..................................................................................9
7.1. Facsimile Signatures...........................................................................9
7.2. Corporate Seal.................................................................................9
7.3. Reliance Upon Books, Reports and Records.......................................................9
7.4. Fiscal Year....................................................................................9
7.5. Time Periods...................................................................................9
ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS......................................................9
8.1. Right to Indemnification.......................................................................9
8.2. Right of Claimant to Bring Suit...............................................................10
8.3. Non-Exclusivity of Rights.....................................................................11
8.4. Indemnification Contracts.....................................................................11
8.5. Insurance.....................................................................................11
8.6. Effect of Amendment...........................................................................11
ARTICLE IX AMENDMENTS....................................................................................11
</TABLE>
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<PAGE>
BYLAWS
OF
CC.COM DELAWARE, INC.
ARTICLE I
STOCKHOLDERS
Section 1.1. ANNUAL MEETING. An annual meeting of the stockholders of
CC.Com Delaware, Inc., (the "Corporation"), for the election of directors and
for the transaction of such other business as may properly come before the
meeting, shall be held at such place, on such date, and at such time as the
Board of Directors shall each year fix, which date shall be within thirteen
months subsequent to the later of the date of incorporation or the last annual
meeting of stockholders.
Section 1.2. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes prescribed in the notice of meeting, may be called
by (1) the Board of Directors pursuant to a resolution adopted by a majority of
the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any such resolution
is presented to the Board for adoption), (2) the President or (3) the holders of
shares entitled to cast not less than ten percent (10%) of the shares entitled
to cast votes at the meeting voting together as a single class, and shall be
held at such place, on such date, and at such time as they shall fix. Business
transacted at special meetings shall be confined to the purpose or purposes
stated in the notice.
Section 1.3. NOTICE OF MEETINGS. Written notice of the place, date, and
time of all meetings of the stockholders shall be given not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 1.4. QUORUM. At any meeting of the stockholders, the holders of
a majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law or by the Certificate of Incorporation or bylaws of this
Corporation.
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If a quorum shall fall to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date, or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 1.5. ORGANIZATION. Such person as the Board of Directors may
have designated or, in the absence of such a person, the chief executive officer
of the Corporation or, in his absence, such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person
or by proxy, shall call to order any meeting of the stockholders and act as
chairman of the meeting. In the absence of the Secretary of the Corporation, the
secretary of the meeting shall be such person as the chairman appoints.
Section 1.6. CONDUCT OF BUSINESS. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him in order.
Section 1.7. PROXIES AND VOTING. At any meeting of the stockholders,
every stockholder entitled to vote may vote in person or by proxy authorized by
an instrument in writing filed in accordance with the procedure established for
the meeting.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his name on the record date for the meeting,
except as otherwise provided herein or required by law.
All voting, except where otherwise required by law, may be by a voice
vote; provided, however, that upon demand therefor by a stockholder entitled to
vote or by his or her proxy, a stock vote shall be taken. Every stock vote shall
be taken by ballots, each of which shall state the name of the stockholder or
proxy voting and such other information as may be required under the procedure
established for the meeting. Every vote taken by ballots shall be counted by an
inspector or inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or these bylaws, all other matters shall be
determined by a majority of the votes cast.
Section 18. STOCK LIST. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of cash such stockholder and the number
of shares registered in his or her name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during
2
<PAGE>
ordinary business hours for a period of at least ten (10) 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 stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
Section 1.9. STOCKHOLDER ACTION BY WRITTEN CONSENT. Any action which
may be taken at any annual or special meeting of stockholders may be taken
without a meeting and without prior notice, if a consent in writing, setting
forth the actions so taken, is signed by the holders of outstanding shares
having not less than the minimum number of votes which would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. All such consents shall be filed with the
secretary of the Corporation and shall be maintained in the corporate records.
Prompt notice of the taking of a corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. NUMBER AND TERM OF OFFICE. The number of directors shall
initially be seven, and, thereafter, shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption). Each director shall hold
office until his successor is elected and qualified or until his earlier death,
resignation, retirement, disqualification or removal.
Section 2.2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, or other cause (other than removal
from office by a vote of the stockholders) may be filled only by a majority vote
of the directors then in office, though less than a quorum, and directors so
chosen shall hold office for a term expiring at the next annual meeting of
stockholders. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Section 2.3. REMOVAL. Subject to the limitations stated in the
Certificate of Incorporation, and the rights of the holders of any series of
Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time, with or without cause, but
only by the affirmative vote of the holders of at least a majority of voting
power of all of the then outstanding shares of stock of the Corporation entitled
to vote generally
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the election of directors, voting together as a single class. Vacancies in the
Board of Directors resulting from such removal may be filled by (i) a majority
of the directors then in office, though less than a quorum, or (ii) the
stockholders at a special meeting of the stockholders properly called for that
purpose, by the vote of the holders of a majority of the shares entitled to vote
at such special meeting. Directors so chosen shall hold office until the next
annual meeting of stockholders.
Section 2.4. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such place or places, on such date or dates, and at
such time or times as shall have been established by the Board of Directors and
publicized among all directors. A notice of each regular meeting shall not be
required.
Section 2.5. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by a majority of the directors then in office by the
chairman of the board or by the chief executive officer and shall be held at
such place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
each director by whom it is not waived by mailing written notice not fewer than
five (5) days before the meeting (one (1) day before the meeting if delivered by
an overnight courier service and two (2) days before the meeting if by overseas
courier service) or by telephoning, telecopying, telegraphing or personally
delivering the same not fewer than twenty-four (24) hours before the meeting.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 2.6. QUORUM. At any meeting of the Board of Directors, a
majority of the total number of authorized directors shall constitute a quorum
for all purposes. If a quorum shall fall to attend any meeting, a majority of
those present may adjourn the meeting to another place, date, or time, without
further notice or waiver thereof.
Section 2.7. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members
of the Board of Directors, or of any committee thereof, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting.
Section 2.8. CONDUCT OF BUSINESS. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
required by law. Action may be taken by the Board of Directors without a meeting
if all members thereof consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors.
Section 2.9. POWERS. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
4
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(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine.
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without
cause, and from time to time to pass on the powers and duties of any officer
upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent
with these bylaws, for the management of the Corporation's business and affairs.
Section 2.10. COMPENSATION OF DIRECTORS. Directors, as such, may
receive, pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
Section 2.11. NOMINATION OF DIRECTOR CANDIDATES. Subject to the rights
of holders of any series of Preferred Stock then outstanding, nominations for
the election of directors may be made by the Board of Directors or a proxy
committee appointed by the Board of Directors or by any stockholder entitled to
vote in the election of directors.
ARTICLE III
COMMITTEES
Section 3.1. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors, by a vote of a majority of the whole Board, may from time to time
designate committees of the Board, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of
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<PAGE>
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so designated
may exercise the power and authority of the Board of Directors to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of merger
or consolidation if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his place, the member or members of the committee present at the
meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 3.2. CONDUCT OF BUSINESS. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third of the authorized members shall constitute a quorum unless the
committee shall consist of one or two members, in which event one member shall
constitute a quorum; and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
ARTICLE IV
OFFICERS
Section 4.1. GENERALLY. The officers of the Corporation shall consist
of a Chief Executive Officer, a President, one or more Vice Presidents, a
Secretary and a Treasurer. The Corporation may also have, at the discretion of
the Board of Directors, a Chairman of the Board, and such other officers as may
from time to time be appointed by the Board of Directors. Officers shall be
elected by the Board of Directors, which shall consider that subject at its
first meeting after every annual meeting of stockholders. Each officer shall
hold office until his or her successor is elected and qualified or until his or
her earlier resignation or removal. Any number of offices may be held by the
same person.
Section 4.2. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors, and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or as provided by
these bylaws.
Section 4.3. CHIEF EXECUTIVE OFFICER. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the Chairman of the
Board, if there be such an officer, the Chief Executive Officer shall be the
general manager and chief executive officer of the Corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction, and control of the business and officers of the Corporation. He shall
preside at all
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meetings of the stockholders. He shall be ex officio a member of all the
standing committees, including the executive committee, if any, and shall have
the general powers and duties of management usually vested in the office of
Chief Executive Officer of a Corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or by these bylaws. He or
she shall have the power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized and shall have general
supervision and direction of all the other offices, employees and agents of the
Corporation.
Section 4.4. PRESIDENT. Subject to the supervising powers, if any, as
may be given by the Board of Directors to the Chairman of the Board or to the
Chief Executive Officer, if there be such officers, the President shall assist
the Chief Executive Officer in his or her duties. The President shall have all
of the powers granted to a Vice President to act in the absence or disability of
the Chief Executive Officer. The President shall also have such other powers and
perform such other duties as from time to time may be prescribed to him or her
by the Board of Directors, the Chief Executive Officer or these bylaws.
Section 4.5. VICE PRESIDENT. In the absence or disability of the Chief
Executive Officer and the President, the Vice Presidents in order of their rank
as fixed by the Board of Directors, or if not ranked, the Vice President
designated by the Board of Director, shall perform the duties of the Chief
Executive Officer and the President, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the Chief Executive
Officer and the President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors or these bylaws.
Section 4.6. TREASURER. The Treasurer shall keep and maintain or cause
to be kept and maintained, adequate and correct books and records of account in
written form or any other form capable of being converted into written form.
The Treasurer shall deposit all monies and other valuables in the name
and to the credit of the Corporation with such depositories as may be designated
by the Board of Directors. He or she shall disburse all funds of the Corporation
as may be ordered by the Board of Directors, shall render to the Chief Executive
Officer and directors, whenever they request it, an account of all of his or her
transactions as Treasurer and of the financial condition of the Corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or by these bylaws.
Section 4.7. SECRETARY. The Secretary shall keep, or cause to be kept,
a book of minutes in written form of the proceedings of the Board of Directors,
committees of the Board, and stockholders. Such minutes shall include all
waivers of notice, consents to the holding of meetings, or approvals of the
minutes of meetings executed pursuant to these bylaws or the Delaware General
Corporation Law. The Secretary shall keep, or cause to be kept at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of shares held by each.
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The Secretary shall give or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by these bylaws or by
law to be given, and shall keep the seal of the Corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or these bylaws.
Section 4.8. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 4.9. REMOVAL. Any officer of the Corporation may be removed at
any time, with or without cause, by the Board of Directors.
Section 4.10. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the Chief Executive Officer
or any officer of the Corporation authorized by the Chief Executive Officer
shall have power to vote and otherwise act on behalf of the Corporation, in
person or by proxy, at any meeting of stockholders of or with respect to any
action of stockholders of any other corporation in which this Corporation may
hold securities and otherwise to exercise any and all rights and powers which
this Corporation may posses by reason of its ownership of securities in such
other corporation.
ARTICLE V
STOCK
Section 5.1. CERTIFICATES OF STOCK. Each stockholder shall be entitled
to a certificate signed by, or in the name of the Corporation by, the Chief
Executive Officer, the President or a Vice President, and by the Secretary or an
Assistant Secretary, or the Treasurer or Assistant Treasurer, certifying the
number of shares owned by him or her. Any of or all the signatures on the
certificate may be facsimile.
Section 5.2. TRANSFERS OF STOCK. Transfers of stock shall be made only
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 5.4
of these bylaws, an outstanding certificate for the number of shares involved
shall be surrendered for cancellation before a new certificate is issued
therefor.
Section 5.3. RECORD DATE. The Board of Directors may fix a record date,
which shall not be more than sixty (60) nor fewer than ten (10) days before the
date of any meeting of stockholders, nor more than sixty (60) days prior to the
time for the other action hereinafter described, as of which there shall be
determined the stockholders who are entitled: to notice of or to vote at any
meeting of stockholders or any adjournment thereof, to receive payment of any
dividend or other distribution or allotment of any rights; or to exercise any
rights with respect to any change, conversion or exchange of stock or with
respect. to any other lawful action.
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Section 5.4. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event of
the loss, theft or destruction of any certificate of stock, another may be
issued in its place pursuant to such regulations as the Board of Directors may
establish concerning proof of such loss, theft or destruction and concerning the
giving of a satisfactory bond or bonds of indemnity.
Section 5.5. REGULATIONS. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VI
NOTICES
Section 6.1. NOTICES. Except as otherwise specifically provided herein
or required by law, all notices required to be given to any stockholder,
director, officer, employee or agent shall be in writing and may in every
instance be effectively given by hand delivery to the recipient thereof, by
depositing such notice in the mails, postage paid, or by sending such notice by
prepaid telegram, mailgram, telecopy or commercial courier service. Any such
notice shall be addressed to such stockholder, director, officer, employee or
agent at his or her last known address as the same appears on the books of the
Corporation. The time when such notice shall be deemed to be given shall be the
time such notice is received by such stockholder, director, officer, employee or
agent, or by any person accepting such notice on behalf of such person, if hand
delivered, or the time such notice is dispatched, if delivered through the mails
or by telegram, courier or mailgram.
Section 6.2. WAIVERS. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver. Attendance of a person at a meeting shall constitute a waiver
of notice for such meeting, except when the person attends a 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.
ARTICLE VII
MISCELLANEOUS
Section 7.1. FACSIMILE SIGNATURES. In addition to the provisions for
use of facsimile Signatures elsewhere specifically authorized in these bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 7.2. CORPORATE SEAL. The Board of Directors may provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seat may be
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kept and used by the Treasurer, Assistant Treasurer or by an Assistant Secretary
or other officer designated by the Board of Directors.
Section 7.3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the Corporation shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation, including reports made to the Corporation by any of its
officers, by an independent certified public accountant, or by an appraiser.
Section 7.4. FISCAL YEAR. The fiscal year of the Corporation shall be
as fixed by the Board of Directors.
Section 7.5. TIME PERIODS. In applying any provision of these bylaws
which require that an act be done or not done a specified number of days prior
to an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the act
shall be excluded, and the day of the event shall be included.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
("proceeding") by reason of the fact that he or she or a person of whom he or
she is the legal representative, is or was a director, officer or employee of
the Corporation or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation, or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer or employee or in any other capacity
while serving as a director, officer or employee, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said Law
permitted the Corporation to provide prior to such amendment) against all
expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties, amounts paid or to be paid in settlement and amounts
expended in seeking indemnification granted to such person under applicable law,
this bylaw or any agreement with the Corporation) reasonably incurred or
suffered by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer or employee and
shall inure to the benefit of his or her heirs, executors and administrators;
PROVIDED, HOWEVER, that, except as provided in Section 8.2, the Corporation
shall indemnify any such person seeking indemnity in connection with an action,
suit or proceeding (or part thereof) initiated by such person only if (a) such
indemnification is expressly required to be made by law, (b) the action, suit or
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation, (c) such indemnification is provided by the Corporation, in its
sole discretion,
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pursuant to the powers vested in the Corporation under the Delaware General
Corporation Law, or (d) the action, suit or proceeding (or part thereof) is
brought to establish or enforce a right to indemnification under an indemnity
agreement or any other statute or law or otherwise as required under Section 145
of the Delaware General Corporation Law. Such right shall be a contract right
and shall include the right to be paid by the Corporation expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law then so requires, the
payment of such expenses incurred by a director or officer of the Corporation in
his or her capacity as a director or officer (and not in any other capacity in
which service was or, is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it should be determined ultimately that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
Section 8.2. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under Section
8.1 is not paid in full by the Corporation within ninety (90) days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if such suit is not frivolous or brought in bad faith, the
claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any, has been tendered
to this Corporation) that the claimant has not met the standards of conduct
which make it permissible under the Delaware General Corporation Law for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that a claimant has not
met such applicable standard of conduct.
Section 8.3. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by Sections 8.1 and 8.2 shall not be exclusive of any other right which
such persons may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 8.4. INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, Joint venture, trust or other enterprise, including employee
benefit
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plans, providing for indemnification rights equivalent to or, if the Board of
Directors so determines, greater than, those provided for in this Article VIII.
Section 8.5. INSURANCE. The Corporation may maintain insurance to the
extent reasonably available, at its expense, to protect itself and any such
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under Delaware
General Corporation Law.
Section 8.6. EFFECT OF AMENDMENT. Any amendment, repeal or modification
of any provision of this Article VIII by the stockholders or the directors of
the Corporation shall not adversely affect any right or protection of a director
or officer of the Corporation existing at the time of such amendment, repeal or
modification.
ARTICLE IX
AMENDMENTS
The Board of Directors is expressly empowered to adopt, amend or repeal
bylaws of the Corporation, subject to the right of the stockholders to adopt,
amend, alter or repeal the bylaws of the Corporation. Any adoption, amendment or
repeal of bylaws of the Corporation by the Board of Directors shall require the
approval of a majority of the total number of authorized directors (whether or
not there exist any vacancies in previously authorized directorships at the time
any resolution providing for adoption, amendment or repeal is presented to the
Board). The stockholders shall also have power to adopt, amend or repeal the
bylaws of the Corporation.
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SECRETARY'S CERTIFICATE OF ADOPTION OF
THE BYLAWS OF
I hereby certify:
That I am the duty elected Secretary of CC.COM DELAWARE, INC., a
Delaware corporation;
That the foregoing bylaws comprising ELEVEN (11) pages, constitute the
bylaws of said corporation as duly adopted by the Board of Directors of the
Corporation on SEPTEMBER 3, 1999.
IN WITNESS WHEREOF, I have hereunder subscribed my name this 3rd day of
SEPTEMBER, 1999.
/s/ [ILLEGIBLE] , Secretary
-----------------------------------
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EXHIBIT 3.5
RESTATED BYLAWS
OF
COLLEGECLUB.COM, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office 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 or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of Directors shall be held in the City of San Diego, State of
California, at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of
California as shall be designated from time to time by the Board of Directors
and stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
California, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the
corporation, for the purpose of election of Directors and for such other
business as may lawfully come before it, shall be held on such date and at such
time as may be designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (A)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (B) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (C) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation no later than the date
specified in the corporation's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders, which date
shall be not less than one hundred twenty (120) calendar days in advance of the
date of such proxy statement;
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provided, however, that in the event that no annual meeting was held in the
previous year or the date of the annual meeting has been changed by more than
thirty (30) days from the date contemplated at the time of the previous year's
proxy statement, notice by the stockholder to be timely must be so received a
reasonable time before the solicitation is made. A stockholder's notice to the
Secretary shall set forth as to each matter the 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 address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his capacity as a proponent to a stockholder proposal. In
addition to the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act to the extent such regulations
require notice that is different from the notice required above. Notwithstanding
anything in these Bylaws to the contrary, no business shall be conducted at any
annual meeting except in accordance with the procedures set forth in this
paragraph (b) of this Section 2. The chairman of the annual meeting shall, if
the facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 2. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a Director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
that are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder, and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the 1934 Act (including without limitation such
person's written consent to being named in the proxy statement, if any, as a
nominee and to serving as a Director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
subitems (ii), (iii) and (iv) of paragraph (b) of this Section 2. At the request
of the Board of Directors, any person nominated by a stockholder for election as
a Director shall furnish to the
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Secretary of the corporation that information required to be set forth in the
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a Director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
Section 3. NOTICE OF ANNUAL MEETING. 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 (10) nor more
than sixty (60) days before the date of the meeting either by United States
mail, electronic mail or through other electronic means.
Section 4. VOTING LIST. The officer who has charge of the stock ledger
of the corporation shall prepare and make, or have prepared and made, at least
ten (10) 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 (10) 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 who is present.
Section 5. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, as amended from time to time, may only be called
as provided in this Section 5 by the President, Chief Executive Officer or
Chairman of the Board and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors. Such request shall
state the purpose or purposes of the proposed meeting. The place, date and time
of any special meeting shall be determined by the Board of Directors. Such
determination shall include the record date for determining the stockholders
having the right of and to vote at such meeting.
Section 6. NOTICE OF SPECIAL MEETING. 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 (10) nor more than
sixty (60) days before the date of the meeting, to each stockholder entitled to
vote at such meeting either by United States mail, electronic mail or through
other electronic means.
Section 7. ACTION AT SPECIAL MEETING. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
Section 8. QUORUM AND ADJOURNMENTS.
(a) The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all
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meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the Certificate of Incorporation, as amended from time
to time. 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 the 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 notified. If the
adjournment is for more than thirty (30) 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 of record entitled to vote at the
meeting.
(b) When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of statutes or of the
Certificate of Incorporation, as amended from time to time, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. VOTING RIGHTS. Unless otherwise provided in the Certificate
of Incorporation, as amended from time to time, each stockholder shall at every
meeting of the stockholders be entitled to one (1) vote in person or by proxy
for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on after three (3) years from its date,
unless the proxy provides for a longer period.
Section 10. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders of the corporation except at an annual or special meeting of
stockholders called in accordance with these Bylaws, and no action shall be
taken by the stockholders by written consent.
ARTICLE III
DIRECTORS
Section 1. CLASSES, NUMBER, TERM OF OFFICE AND QUALIFICATION. At the
next annual meeting of stockholders following the adoption of these Bylaws, the
Directors shall be classified into three classes, as nearly equal in number as
possible as determined by the Board of Directors, with the term of office of the
first class to expire at the 2002 Annual Meeting of Stockholders, the term of
office of the second class to expire at the 2003 Annual Meeting of Stockholders
and the term of office of the third class to expire at the 2004 Annual Meeting
of Stockholders. At each Annual Meeting of Stockholders, Directors elected to
succeed those Directors whose terms expire shall be elected for a term of office
to expire at the third succeeding Annual Meeting of Stockholders after their
election. Additional directorships resulting from an increase in the number of
Directors shall be apportioned among the classes as equally as possible as
determined by the Board of Directors. The number of Directors which shall
constitute the whole Board shall not be less than six (6) nor more than ten (10)
Directors, and the exact number shall be fixed by resolution of sixty-six and
two-thirds percent (66-2/3%) of the Directors then in office or by sixty-six and
two-thirds percent (66-2/3%) of the stockholders at the annual meeting of the
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stockholders, with the number initially fixed at six (6). Each Director elected
shall hold office until his successor is elected and qualified. Directors need
not be stockholders.
Section 2. VACANCIES. Vacancies may be filled only by a majority of the
Directors then in office, though less than a quorum, or by a sole remaining
Director. Each Director so chosen shall hold office until a successor is duly
elected and shall qualify or until his earlier death, resignation or removal. If
there are no Directors in office, then an election of Directors may be held in
the manner provided by statute; provided, however, that each Director shall be
elected by an affirmative vote of at least two-thirds of the stockholders. If,
at the time of filling any vacancy, the Directors then in office shall
constitute less than a majority of the whole Board (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent of the total number of
the shares at the time outstanding having the right to vote for such Directors,
summarily order an election to be held to fill any such vacancies, or to replace
the Directors chosen by the Directors then in office; provided, however, that
each Director shall be elected by an affirmative vote of at least two-thirds of
the stockholders.
Section 3. POWERS. The business of the corporation shall be managed by
or under the direction of its Board of Directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation, as amended from time to time, or
by these Bylaws directed or required to be exercised or done by the
stockholders.
Section 4. REGULAR AND SPECIAL MEETINGS. The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of California.
Section 5. ANNUAL MEETING. The annual meeting of each newly elected
Board of Directors shall be held without notice other than this Bylaw
immediately after, and at the same place as, the annual meeting of stockholders.
In the event the annual meeting of any newly elected Board of Directors shall
not be held immediately after, and at the same place as, the annual meeting of
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors.
Section 6. NOTICE OF REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
Section 7. NOTICE OF SPECIAL MEETINGS. Special meetings of the Board
may be called by the Chief Executive Officer or President on no less than
forty-eight (48) hours notice to each Director either personally, or by
telephone, United States mail, telegram, facsimile, electronic mail or by other
electronic means; special meetings shall be called by the Chief Executive
Officer, President or Secretary in like manner and on like notice on the written
request of two Directors unless the Board consists of only one Director, in
which case special meetings shall be called by the Chief Executive Officer,
President or Secretary in like manner and on like notice on the written request
of the sole Director. A written waiver of notice, signed by the person entitled
thereto, whether before or after the time of the meeting stated therein, shall
be deemed equivalent to notice.
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Section 8. QUORUM. At all meetings of the Board a majority of the
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, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation, as
amended from time to time. 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, until
a quorum shall be present.
Section 9. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation, as amended from time to time, or these Bylaws, 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
members of the Board 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 or committee.
Section 10. MEETINGS BY TELEPHONE CONFERENCE CALLS. Unless otherwise
restricted by the Certificate of Incorporation, as amended from time to time, or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
Section 11. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee.
In the absence of disqualification of a member of a committee,
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 such absent or disqualified member.
Any such committee, to the extent provided in the resolution
of the Board of Directors, 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 corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation, as
amended from time to time, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the Bylaws of the corporation; and, unless the resolution or the
Certificate of Incorporation, as amended from time to time, expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
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Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
Section 12. FEES AND COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation, as amended from time to time, or these Bylaws, the
Board of Directors shall have the authority to fix the compensation of
Directors. 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 as
Director. 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. REMOVAL. Subject to any limitations imposed by law or the
Certificate of Incorporation, as amended from time to time, the Board of
Directors, or any individual Director, may be removed from office at any time
only with cause by the affirmative vote of the holders of at least a majority of
shares entitled to vote at an election of Directors.
ARTICLE IV
NOTICES
Section 1. NOTICE. Whenever, under the provisions of the statutes or of
the Certificate of Incorporation, as amended from time to time, or of these
Bylaws, notice is required to be given to any Director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given by United
States mail, electronic mail or through other electronic means, addressed to
such Director or stockholder, at his 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, or
received by electronic means, as applicable. Notice to Directors may also be
given personally, by telephone, including a voice messaging system or other
system or technology designed to record and communicate messages, telegram,
facsimile, electronic mail or other electronic means.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provisions of the statutes or of the Certificate of
Incorporation, as amended from time to time, or of these Bylaws, 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
thereto.
ARTICLE V
OFFICERS
Section 1. ENUMERATION. The officers of the corporation shall be chosen
by the Board of Directors and shall be a Chief Executive Officer, a Chief
Financial Officer and a Secretary. The Board of Directors may elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
of Directors may also choose a President, one or more Vice Presidents and one or
more Assistant Secretaries. Any number of offices may be held by the same
person, unless the Certificate of Incorporation, as amended from time to time,
or these Bylaws otherwise provide.
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The compensation of all officers and agents of the corporation
shall be fixed by the Board of Directors, and no officer shall be prevented from
receiving such compensation by virtue of his also being a Director of the
corporation.
Section 2. ELECTION OR APPOINTMENT. The Board of Directors at its first
meeting after each annual meeting of stockholders shall choose a Chief Executive
Officer, Chief Financial Officer and a Secretary and may choose a President, one
or more Vice Presidents and one or more Assistant Secretaries.
The Board of Directors may appoint such other officers and
agents as it shall deem necessary 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.
Section 3. TENURE, REMOVAL AND VACANCIES. The officers of the
corporation shall hold office until their successors are chosen and qualified.
Any officer elected or appointed 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.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the stockholders
at which he shall be present. The Chairman of the Board shall have and may
exercise such powers as are, from time to time, assigned by the Board and as may
be provided by law.
Section 5. VICE CHAIRMAN OF THE BOARD. In the absence of the Chairman
of the Board, the Vice Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. The Vice Chairman of the Board shall have and may exercise such powers
as are, from time to time, assigned by the Board and as may be provided by law.
Section 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the corporation. The Chief Executive Officer shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a Chairman or Vice
Chairman of the Board at all meetings of the Board of Directors. The Chief
Executive Officer shall have the general powers and duties of management usually
vested in the Chief Executive Officer of a corporation, including general
supervision, direction and control of the business and supervision of other
officers of the corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws.
The Chief Executive Officer shall, without limitation, have
the authority to execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the corporation.
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Section 7. PRESIDENT. Subject to such supervisory powers as may be
given by these Bylaws or the Board of Directors to the Chairman of the Board or
the Chief Executive Officer, if there be such officers, the President shall have
general supervision, direction and control of the business and supervision of
other officers of the corporation, and shall have such other powers and duties
as may be prescribed by the Board of Directors or these Bylaws. In the event a
Chief Executive Officer shall not be appointed, the President shall have the
duties of such office.
Section 8. VICE PRESIDENTS. The Vice President, or if there shall be
more than one, the Vice Presidents in the order determined by the Board of
Directors, shall, in the absence or disability of the President, act with all of
the powers and be subject to all the restrictions of the President. The Vice
Presidents shall also perform such other duties and have such other powers as
the Board of Directors, the President or these Bylaws may, from time to time,
prescribe.
Section 9. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors, all meetings of the committees thereof and all meetings of
the stockholders and record all the proceedings of the meetings in a book or
books to be kept for that purpose. Under the Chief Executive Officer's or
President's supervision, the Secretary shall give, or cause to be given, all
notices required to be given by these Bylaws or by law; shall have such powers
and perform such duties as the Board of Directors, the Chief Executive Officer,
the President or these Bylaws may, from time to time, prescribe; and shall have
custody of the seal of the corporation. The Secretary, or an Assistant
Secretary, shall have authority to affix the seal of the corporation to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of 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.
Section 10. ASSISTANT SECRETARY. The Assistant Secretary, if any, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors, shall, in the absence, disability or refusal to act of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors,
the Chief Executive Officer, the President, the Secretary or these Bylaws may,
from time to time, prescribe.
Section 11. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
act as Treasurer and 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 Chief Financial Officer shall disburse the funds of the
corporation as may be ordered by the Board of 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 his or her transactions as Treasurer and of the financial
condition of the corporation.
If required by the Board of Directors, the Chief Financial
Officer shall give the corporation a bond (which shall be renewed every six
years) in such sum and with such surety or
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sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 12. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by the Board of Directors, the Chief
Executive Officer or the President.
Section 13. ABSENCE OR DISABILITY OF OFFICERS. In the case of the
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may delegate the powers and duties of such
officer to any officer or to any Director, or to any other person who it may
select.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the Chairman or Vice Chairman of the Board of Directors,
or the President or a Vice President and the Chief Financial Officer or an
Assistant Chief Financial Officer, or the Secretary or an Assistant Secretary of
the corporation, certifying the number of shares owned by him in the
corporation.
Certificates may be issued for partly paid shares and in such
case upon the face or back of the certificates issued to represent any such
partly paid shares, the total amount of the consideration to be paid therefor,
and the amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. EXECUTION OF CERTIFICATES. Any or all of the signatures on
the certificate may be 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 he were such officer, transfer agent or registrar at the date
of issue.
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Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates 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 or certificates, 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
certificates, or his legal representative, to advertise the same in such manner
as it 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. TRANSFER OF STOCK. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 5. FIXING RECORD DATE. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholder 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, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. 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 6. REGISTERED STOCKHOLDERS. 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
the laws of Delaware.
ARTICLE VII
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS. The
corporation shall indemnify its Directors and executive officers to the fullest
extent not prohibited by the Delaware General Corporation Law; provided,
however, that the corporation may limit the extent of such indemnification by
individual contracts with its Directors and executive officers; and, provided,
further, that the corporation shall not be required to indemnify any Director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person or any proceeding by such person against the corporation or its
Directors, officers, employees or other agents unless (i) such indemnification
is expressly required to be made by law, (ii) the
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proceeding was authorized by the Board of Directors of the corporation, and
(iii) such indemnification is provided by the corporation, in its sole
discretion, pursuant to the powers vested in the corporation under the Delaware
General Corporation Law.
Section 2. INDEMNIFICATION OF OTHER OFFICERS, EMPLOYEES AND OTHER
AGENTS. The corporation shall have power to indemnify its other officers,
employees and other agents as set forth in the Delaware General Corporation Law.
Section 3. GOOD FAITH.
(a) For purposes of any determination under this Bylaw, a
Director or officer shall be deemed to have acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe that any conduct was unlawful, if such Director's
or officer's action is based on information, opinions, reports and statements,
including financial statements and other financial data, in each case prepared
or presented by:
(1) one or more officers or employees of the
corporation whom the Director or executive officer believed
to be reliable and competent in the matters presented;
(2) counsel, independent accountants or other persons
as to matters which the Director or executive officer
believed to be within such person's professional competence;
and
(3) with respect to a Director, a committee of the
Board upon which such Director does not serve, as to matters
within such Committee's designated authority, which
committee the Director believes to merit confidence; so long
as, in each case, the Director or executive officer acts
without knowledge that would cause such reliance to be
unwarranted.
(b) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which was reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal proceeding,
that the person had reasonable cause to believe that his or her consent was
unlawful.
(c) The provisions of this Section 3 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 by the Delaware
General Corporation Law.
Section 4. EXPENSES. The corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by any Director or officer in connection with such proceeding upon
receipt of an undertaking by or on behalf of such person to repay said amounts
if it should be determined ultimately that such person is not entitled to be
indemnified under this Bylaw or otherwise.
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Notwithstanding the foregoing, unless otherwise determined
pursuant to Section 4 of this Bylaw, no advance shall be made by the corporation
if a determination is reasonably and promptly made (i) by the Board of Directors
by a majority vote of a quorum consisting of Directors who were not parties to
the proceeding, or (ii) if such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, that the facts known to the decision-making party
at the time such determination is made demonstrate clearly and convincingly that
such person acted in bad faith or in a manner that such person did not believe
to be in or not opposed to the best interests of the corporation.
Section 5. ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the Director or officer. Any right to indemnification or
advances granted by this Bylaw to a Director or officer shall be enforceable by
or on behalf of the person holding such right in any court of competent
jurisdiction if (i) the claim for indemnification or advances is denied, in
whole or in part, or (ii) no disposition of such claim is made within ninety
(90) days of request therefor. The claimant in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his or her claim. The corporation shall be entitled to raise as a
defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for
the corporation to indemnify the claimant for the amount claimed. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual determination
by the corporation (including its Board of Directors, independent legal counsel
or its stock-holders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 6. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, as amended from time to time, Bylaws, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding office. The
corporation is specifically authorized to enter into individual contracts with
any or all of its Directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the
Delaware General Corporation Law.
Section 7. SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 8. INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase
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insurance on behalf of any person required or permitted to be indemnified
pursuant to this Bylaw.
Section 9. AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
Section 10. SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and officer to the full
extent not prohibited by any applicable portion of this Bylaw that shall not
have been invalidated, or by any other applicable law.
Section 11. CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(a) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of the testimony
in, any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative.
(b) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(c) The term 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, officers, and employees or agents, so that any person
who is or was a Director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a Director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(d) References to a "Director," "officer," "employee," or
"agent" of the corporation shall include, without limitation, situations where
such person is serving at the request of the corporation as a Director, officer,
employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
(e) References to "other enterprises" shall include employee
benefit plans; 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 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, officer, employee, or agent with respect to
an employee
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benefit plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner he 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 Bylaw.
ARTICLE VIII
LOANS TO OFFICERS
Section 1. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the Corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this Bylaw shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE IX
GENERAL PROVISIONS
Section 1. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, as amended from time to time, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the Certificate of Incorporation, as amended from time to
time.
Section 2. DIVIDEND RESERVE. 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 Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purposes as the Directors shall think conducive to the interest
of the corporation, and the Directors may modify or abolish any such reserve in
the manner in which it was created.
Section 3. EXECUTION OF CORPORATE INSTRUMENTS. 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 4. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The Board of Directors may adopt a corporate
seal having 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.
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ARTICLE X
AMENDMENTS
Section 1. AMENDMENTS.
(a) Except as otherwise set forth in Section 9 of Article
VII of these Bylaws, the Bylaws may be altered or amended or new Bylaws adopted
by the affirmative vote of a majority of the voting power of all of the
then-outstanding shares of capital stock of the corporation entitled to vote
generally in the election of Directors (the "Voting Stock"). The Board of
Directors shall also have the power, if such power is conferred upon the Board
of Directors by the Certificate of Incorporation, as amended from time to time,
to adopt, amend or repeal Bylaws by a vote of the majority of the Board of
Directors unless a greater or different vote is required pursuant to the
provisions of the Bylaws, the Certificate of Incorporation or any applicable
provision of law.
(b) Notwithstanding any other provisions of these Bylaws or
any provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation, as
amended from time to time, or any Preferred Stock Designation (as the term is
defined in the Certificate of Incorporation, as amended), the affirmative vote
of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock, voting
together as a single class, shall be required to alter, amend or repeal this
paragraph (b) or Section 2, Section 5 or Section 10 of Article II or Section 1,
Section 2 or Section 13 of Article III of these Bylaws.
(c) Notwithstanding any other provisions of these Bylaws or
any provision of law which might otherwise permit a lesser vote or no vote, but
in addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, the Certificate of Incorporation, as
amended from time to time, or any Preferred Stock Designation (as the term is
defined in the Certificate of Incorporation, as amended from time to time), the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
Directors, shall be required to alter, amend or repeal this paragraph (c) or
Section 2, Section 5 or Section 10 of Article II or Section 1, Section 2 or
Section 13 of Article III of these Bylaws.
16
<PAGE>
CERTIFICATE OF SECRETARY
The undersigned, being the Secretary of CollegeClub.com, Inc.,
a Delaware corporation, does hereby certify the foregoing to be the Bylaws of
said Corporation, as adopted by the requisite vote or votes of the stockholders
and Directors of the Corporation and which remain in full force and effect as of
the date hereof.
Executed at San Diego, California effective as of __________
__, 2000.
________________________________________
Raffaele G. Fazio
<PAGE>
EXHIBIT 10.1
COLLEGECLUB.COM, INC.
THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
----------------------------------
MARCH 27, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. REGISTRATION RIGHTS.....................................................................................3
1.1 DEFINITIONS....................................................................................3
1.2 DEMAND REGISTRATION............................................................................4
1.3 COMPANY REGISTRATION...........................................................................6
1.4 FORM S-3.......................................................................................7
1.5 EXPENSES OF REGISTRATION.......................................................................8
1.6 REGISTRATION PROCEDURES........................................................................9
1.7 INDEMNIFICATION...............................................................................10
1.8 INFORMATION BY HOLDER.........................................................................12
1.9 RULE 144 REPORTING............................................................................12
1.10 TRANSFER OF REGISTRATION RIGHTS...............................................................13
1.11 "MARKET STAND-OFF" AGREEMENT..................................................................13
1.12 TERMINATION OF RIGHTS.........................................................................13
2. RIGHT OF FIRST OFFER TO PURCHASE EQUITY SECURITIES.....................................................14
2.1 PURCHASE RIGHT................................................................................14
2.2 NOTICE OF INTENT TO SELL AND ISSUE............................................................14
2.3 INVESTOR FAILURE TO PURCHASE..................................................................14
2.4 INVESTOR PURCHASE.............................................................................15
2.5 EXCLUDED SECURITIES...........................................................................15
2.6 TERMINATION...................................................................................15
2.7 EQUITY SECURITIES.............................................................................15
3. RIGHT OF FIRST REFUSAL.................................................................................15
3.1 NOTICE........................................................................................15
<PAGE>
3.2 EXERCISE OF RIGHT OF FIRST REFUSAL............................................................16
3.3 SETTLEMENT....................................................................................17
3.4 REVIVAL OF RIGHT OF FIRST REFUSAL.............................................................17
4. CO-SALE RIGHT..........................................................................................17
4.1 NOTICE OF SALES...............................................................................17
4.2 CO-SALE RIGHT.................................................................................18
4.3 DELIVERY OF CERTIFICATES......................................................................18
4.4 TRANSFER......................................................................................18
4.5 NO ADVERSE EFFECT.............................................................................19
4.6 PERMITTED TRANSACTIONS........................................................................19
4.7 TERMINATION OF RIGHTS.........................................................................19
4.8 ASSIGNMENT OF RIGHTS..........................................................................19
4.9 PROHIBITED TRANSFERS..........................................................................19
4.10 LEGENDED CERTIFICATES.........................................................................19
5. BOARD VISITATION.......................................................................................20
6. AMENDMENT, RESTATEMENT AND WAIVER OF RIGHTS OF PARTIES TO PRIOR RIGHTS AGREEMENT; ADDITION OF PARTIES..20
6.1 AMENDMENT, RESTATEMENT OF PRIOR RIGHTS AGREEMENT; APPROVAL OF GRANT OF RIGHTS TO INVESTORS....20
6.2 WAIVER OF RIGHT OF FIRST REFUSAL..............................................................20
7. INFORMATION RIGHTS; ADDITIONAL COVENANTS...............................................................20
7.1 FINANCIAL STATEMENTS AND INFORMATION..........................................................20
7.2 INSPECTION....................................................................................21
7.3 NOTICE OF CERTAIN EVENTS......................................................................21
8. GENERAL............................................................................................... 21
8.1 WAIVERS AND AMENDMENTS........................................................................21
<PAGE>
8.2 GOVERNING LAW.................................................................................22
8.3 SUCCESSORS AND ASSIGNS........................................................................22
8.4 ENTIRE AGREEMENT..............................................................................22
8.5 NOTICES, ETC..................................................................................22
8.6 SEVERABILITY..................................................................................22
8.7 TITLES AND SUBTITLES..........................................................................22
8.8 COUNTERPARTS..................................................................................23
8.9 QUALIFIED SMALL BUSINESS STOCK STATUS.........................................................23
8.10 AFFILIATED FUNDS..............................................................................23
</TABLE>
<PAGE>
COLLEGECLUB.COM, INC.
THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is entered into as of March 27, 2000, by and among COLLEGECLUB.COM,
INC., a Delaware corporation (the "Company"), and the entities and individuals
listed on the EXHIBIT A attached hereto (the "Investors") and, for the purpose
of Sections 3 and 4 only, Michael C. Pousti, Jr. ("Pousti").
RECITALS:
A. Certain of the Investors previously purchased from the Company
shares of the Company's Series B Preferred Stock and Series B-1 Preferred Stock
and concurrently therewith entered into an Amended and Restated Investors'
Rights Agreement setting forth certain registration and other rights of such
Investors (the "First Rights Agreement").
B. The Company and certain of the Investors entered into a Series
C Preferred Stock Purchase Agreement pursuant to which certain of the Investors
purchased from the Company shares of the Company's Series C Preferred Stock.
CollegeStudent.com, Inc., a Texas corporation ("CollegeStudent.com") and the
Company entered into an Agreement and Plan of Merger (the "CollegeStudent Merger
Agreement") pursuant to which the Company issued to certain Investors (the
"CollegeStudent.com Investors") shares of the Company's Common Stock and Series
C-1 Preferred Stock and concurrently therewith the Investors holding Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock and the
CollegeStudent.com Investors entered into the Second Amended and Restated
Investors' Rights Agreement which replaced the First Rights Agreement ("Second
Rights Agreement" and collectively with the First Rights Agreement, the "Prior
Rights Agreement").
C. The Company, Versity.com, Inc., a Delaware corporation
("Versity"), certain shareholders of Versity.com (the "Versity Investors"), and
Ver Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of
Parent ("Acquisition"), intend to enter into that certain Agreement and Plan of
Merger (the "Versity Merger Agreement"), providing for the merger of Acquisition
with and into Versity, pursuant to which the Versity Investors will be
exchanging their shares of common stock of Versity for shares of Common Stock of
the Company. In addition, the Company is issuing shares of the Company's Series
C-2 Preferred Stock in connection with a strategic alliance it is entering into
with National Broadcasting Company, Inc., a Delaware corporation ("NBC").
D. By this Agreement, the Company and the Investors desire to
amend and restate the Second Amended and Restated Investors' Rights Agreement
and set forth certain registration and other rights of the parties as set forth
below.
1
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AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
2
<PAGE>
1. REGISTRATION RIGHTS.
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) The terms "register," "registered" and
"registration" refer to a registration effected by the preparation and filing of
a registration statement in compliance with the Securities Act of 1933, as
amended (the "Securities Act"), and the declaration or ordering of the
effectiveness of such registration statement.
(b) The term "Registrable Securities" means (i) any
and all shares of Common Stock of the Company issued or issuable upon conversion
of the Company's Series B Preferred Stock and Series B-1 Preferred Stock
(including any shares issuable under the Antidilution Agreements, as defined in
Section 2.5) (collectively, "Series B Shares"), (ii) any and all shares of
Common Stock of the Company issued or issuable upon conversion of the Company's
Series C Preferred Stock (the "Series C Shares"), (iii) any and all shares of
Common Stock of the Company issued pursuant to the CollegeStudent Merger
Agreement, (iv) any and all shares of Common Stock of the Company issued
pursuant to the Versity Merger Agreement, (v) any and all shares of Common Stock
of the Company issued or issuable upon conversion of the Company's Series C-1
Preferred Stock issued pursuant to the CollegeStudent Merger Agreement (the
"Series C-1 Shares"), (vi) any and all shares of Common Stock of the Company
issued or issuable upon conversion of the Company's Series C-2 Preferred Stock
(the "Series C-2 Shares") and (vii) any and all shares of Common Stock of the
Company issued in lieu of stock referred to in clauses (i), (ii), (iii), (iv),
(v) or (vi) in any reorganization (except on acquisition of the Company by a
public company), or (vii) stock issued in respect of the stock referred to in
(i), (ii), (iii), (iv), (v), (vi) or (vii) as a result of a stock split, stock
dividend, other distribution, recapitalization or the like.
(c) The terms "Holder" or "Holders" means any person
or persons to whom Registrable Securities were originally issued or qualifying
transferees under Section 1.10 hereof who hold Registrable Securities.
(d) The term "Initiating Holders" means any Holder or
Holders of 2% or greater of the aggregate of the Registrable Securities then
outstanding.
(e) The term "SEC" means the Securities and Exchange
Commission.
(f) The term "Registration Expenses" shall mean all
expenses incurred by the Company in complying with Sections 1.2, 1.3 and 1.4
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, reasonable fees and disbursements of one counsel for the
Holders, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
3
<PAGE>
1.2 DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company
shall receive from Convergence Partners I, LP or an affiliated stockholder
("Convergence"), Sony Corporation of America or an affiliated stockholder
("Sony"), or funds controlled by J. & W. Seligman & Co. Incorporated
("Seligman") (such holders the "Requesting Holders"), a written request that the
Company file a registration statement under the Securities Act covering the
registration of at least 25% of the aggregate number of Registrable Securities
then held by such Requesting Holders, the Company will:
(i) promptly (and in any event within 10
days after receipt thereof) give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best
efforts to effect all such registrations, qualifications and compliances
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualifications under the applicable blue
sky or other state securities laws and appropriate compliance with exemptive
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of the Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within twenty (20) days
after receipt of such written notice from the Company; provided that the Company
shall not be obligated to take any action to effect such registration,
qualification or compliance pursuant to this Section 1.2:
a) at any time prior to the earlier
of (i) nine (9) months following the effective date of the registration
statement on Form S-1 under the Securities Act for the Company's initial
registered firm commitment underwritten public offering resulting in gross
proceeds (net of underwriting discounts and commissions) to the Company of at
least $19,000,000 and with a public offering price of at least $6.33 per share
(as adjusted for any stock split, dividend, combination or the like) (the "IPO")
of its securities to the general public (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction) or (ii) April 30, 2002;
b) in any particular jurisdiction
in which the Company would be required to execute a general qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as required by the Securities Act;
c) after the Company has effected
one (1) such registration pursuant to Section 1.2(a) and such registration has
been declared or ordered effective;
d) unless the anticipated aggregate
proceeds, net of underwriting discounts and commissions, for such registration
are at least Five Million Dollars ($5,000,000).
4
<PAGE>
Subject to the foregoing clauses (a) through (d), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, but in any event within sixty (60)
days, after receipt of the request of the Requesting Holders; provided, however,
that if the Company shall furnish the Requesting Holders a certificate signed by
the President of the Company stating that in the good faith judgment of the
Board of Directors it would be detrimental to the Company and its stockholders
for such registration statement to be filed at the date filing would be required
and it is therefore essential to defer the filing of such registration
statement, the Company shall have an additional period of not more than ninety
(90) days after the expiration of the initial 60-day period within which to file
such registration statement; provided, however, that the Company may not utilize
this right more than once in any twelve month period.
(b) UNDERWRITING. If the Requesting Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, such Requesting Holders shall so advise the Company as part of
their request made pursuant to this Section 1.2 and the Company shall include
such information in the written notice referred to in Section 1.2(a)(i). In such
event, the underwriter shall be selected by mutual agreement of the Company and
the requesting Holder. The right of any other Holder to include its Registrable
Securities in the registration made pursuant to this Section 1.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by the requesting Holder and such other Holder) to the
extent provided herein. The Company shall (together with all Holders proposing
to distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters.
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Requesting Holders and the Company in writing that marketing factors
require a limitation of the number of shares to be underwritten, the Company
shall so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all Holders thereof in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders; PROVIDED,
HOWEVER, that Registrable Securities held by Holders other than Sony,
Convergence, funds advised by Seligman, the Holders of the Series C Shares, the
holders of the Series C-1 Shares, and the Holders of the Series C-2 Shares shall
be excluded first pro rata from the registration and PROVIDED, FURTHER, that the
Registrable Securities held by Holders who were not Requesting Holders shall be
excluded next from the registration so that the Requesting Holders shall be
entitled to include their Registrable Securities in the registration to the
maximum extent permitted by the underwriter, and PROVIDED, FURTHER, that any
further cutbacks shall be made among the Requesting Holders in proportion to the
number of Registrable Securities being offered by such Requesting Holders. If
any Holder of Registrable Securities disapproves of the terms of the
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company, the underwriter and the Holder requesting registration. Any
Registrable Securities which are excluded from the underwriting by reason of the
underwriter's marketing limitation or withdrawn from such underwriting shall be
withdrawn from such registration.
(c) COMPANY SHARES. If the managing underwriter has
not limited the number of Registrable Securities to be underwritten pursuant to
subsection (b) above, the
5
<PAGE>
Company may include securities for its own account or for the account of others
in such registration if the managing underwriter so agrees and if the number of
Registrable Securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
1.3 COMPANY REGISTRATION.
(a) REGISTRATION. If at any time or from time to
time, the Company shall determine to register any of its securities, for its own
account or the account of any of its stockholders, other than a registration on
S-8 relating solely to employee stock option or purchase plans, or a
registration relating solely to an SEC Rule 145 transaction, a registration in
which the only stock being registered is Common Stock issuable upon conversion
of debt securities which are also being registered or a registration on any
other form (other than Form S-1, S-2, S-3, SB-1 or SB-2, or their successor
forms) or any successor to such forms, which does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(i) promptly give to each Holder of at least
300,000 shares of Registrable Securities issued or issuable in connection with
the Versity Merger Agreement or upon conversion of the Company's Series B
Preferred Stock or Series B-1 Preferred Stock, or in the case of Sony, both
aggregated together (as adjusted for stock splits, dividends, combinations or
the like), and each holder of Series C Shares, Series C-1 Shares, or Series C-2
Shares (each a "Qualified Holder"), written notice thereof; and
(ii) include in such registration (and
compliance), and in any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made within 20 days after
receipt of such written notice from the Company, by any Qualified Holder, except
as set forth in Section 1.3(b) below.
(b) UNDERWRITING. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 1.3(a)(i). In such event the right of any
Holder to registration pursuant to this Section 1.3 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other stockholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 1.3, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, and (i)
if such registration is the first registered offering of the sale of the
Company's securities to the general public, the underwriter may limit the number
of Registrable Securities to be included in the registration and underwriting on
a pro rata basis according to the number of shares of Registrable Securities
held by such Holder as a percentage of the total number of Registrable
Securities, or may exclude Registrable Securities entirely from such
registration and underwriting, PROVIDED that all securities other than
Registrable Securities are first excluded from such registration; or (ii) if
such registration is other than the first registered offering of the sale of
6
<PAGE>
the Company's securities to the general public, the underwriter may limit the
amount of Registrable Securities to be included in the registration and
underwriting by the Company's stockholders on a pro rata basis according to the
number of shares of Registrable Securities held by such Holder as a percentage
of the total number of Registrable Securities; PROVIDED, HOWEVER, the number of
Registrable Securities to be included in such registration and underwriting
under this Section 1.3(b) shall not be reduced to less than thirty percent (30%)
of the aggregate securities included in such registration without the prior
consent of the Holders holding at least a majority of the Registrable Securities
requested to be included in such registration and underwriting. The Company
shall so advise all Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto. If any Holder disapproves of the
terms of the any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
For any selling Holder which is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single selling
Holder such that any pro rata reduction with respect to such selling Holder
shall be based upon the aggregate amount of Registrable Securities owned by all
entities and individuals included in such selling Holder.
1.4 FORM S-3. In addition to the rights and obligations set
forth in Section 1.2 and 1.3 above, if the Company shall receive from Initiating
Holders a written request that the Company file a registration statement on Form
S-3 (or any successor to Form S-3) for a public offering of shares of
Registrable Securities and any related qualification or compliance, the
reasonably anticipated aggregate price to the public of which (net of
underwriting discounts and commissions) would equal at least $1,000,000 and the
Company is then a registrant entitled to use Form S-3 to register the shares for
such an offering, the Company will give prompt written notice of the proposed
registration, qualification and compliance to all other Holders and shall file
such registration statement within sixty (60) days after receipt of the request
from the Initiating Holders and shall use its best efforts to cause such shares
to be registered for the offering as may be requested in writing within fifteen
(15) days after receipt of such written notice from the Company as soon as
practicable on Form S-3 (or any successor form to Form S-3); PROVIDED, HOWEVER,
the Company shall not be required to effect a registration pursuant to this
Section 1.4:
(a) in any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(b) if the Company, within ten (10) days of the
receipt of the request of the Initiating Holders, gives notice of its bona fide
intention to effect the filing of a registration statement with the SEC within
sixty (60) days of receipt of such request (other than with respect to a
registration statement relating to a Rule 145 transaction, an offering solely to
employees or any other registration which is not appropriate for the
registration of Registrable Securities);
7
<PAGE>
(c) during the period starting with the date of
filing of, and ending on a date one hundred eighty (180) days following the
effective date of, a registration statement pursuant to Sections 1.2 or 1.3,
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective and further
provided that no other person or entity could require the Company to file a
registration statement in such period;
(d) if the Company has effected two (2) registrations
pursuant to this Section 1.4 within the 12-month period prior to the date of
such request; or
(e) if the Company shall furnish to such Initiating
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
detrimental to the Company and its stockholders for such registration statement
to be filed on or before the date filing would be required and it is therefore
essential to defer the filing of such registration statement, in which case the
Company shall have the right to defer such filing for a period of not more than
ninety (90) days after receipt of the request of the Initiating Holders under
this Section 1.4, provided that the Company may not defer such filing pursuant
to this Section 1.4 more than once in any 12-month period.
In the event such Initiating Holders propose to offer the shares of
Registrable Securities pursuant to this Section 1.4 by means of an underwriting,
the proposed underwriters shall be selected by the Company and shall be
reasonably acceptable to a majority in interest of the Initiating Holders. The
Company shall give written notice to all Holders of the receipt of a request for
registration pursuant to this Section 1.4 and shall provide a reasonable
opportunity for other Holders to participate in the registration, provided that
if the registration is for an underwritten offering, the terms of Section 1.2(b)
shall apply to all participants in such offering. Registrations effected
pursuant to this Section 1.4 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2 or 1.3, respectively.
1.5 EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to this Section 1 shall be borne by the Company except as follows:
(a) The Company shall not be required to pay for
expenses of any registration proceeding begun pursuant to Sections 1.2 or 1.4,
the request for which has been subsequently withdrawn by the Requesting Holders
or the Initiating Holders, in which case such expenses shall be borne by all of
the participating Holders unless, at the time of such withdrawal, the Holders
have learned of a material adverse change in the condition, business or
prospects of the Company from that known to the Requesting Holders or the
Initiating Holders at the time of their request.
(b) The Company shall not be required to pay
underwriters' fees, discounts or commissions, or stock transfer taxes relating
to Registrable Securities. The Company shall be required to pay the reasonable
fees and disbursements of one counsel for the Holders to be selected by Holders
of a majority of the Registrable Securities.
8
<PAGE>
1.6 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Rights
Agreement, the Company will keep each Holder participating therein advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. Whenever required under this Section 1 to
effect the registration of any Registrable Securities, the Company will as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective until the distribution
contemplated by such registration statement is complete.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or, except as required under
the Securities Act, to file a general consent to service of process in any such
states or jurisdictions.
(e) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes any untrue statement of material fact or
omits to state a material fact necessary to make the statements therein not
misleading in the light of the circumstances then existing, such obligation to
continue for one hundred twenty (120) days.
(f) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange or automated
quotation system on which similar securities issued by the Company are then
listed.
(g) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(h) Use its best efforts to furnish, at the request
of any Holder requesting registration of Registrable Securities pursuant to this
Section 1.6, on the date that such
9
<PAGE>
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to Section 1.6, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accounts of the Company, in form and substance
as is customarily given by independent certified public accounts to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
to the Holders requesting registration of Registrable Securities.
1.7 INDEMNIFICATION.
(a) The Company will indemnify and hold harmless each
Holder of Registrable Securities and each of its officers, directors and
partners, and each person controlling such Holder, with respect to which such
registration, qualification or compliance has been effected pursuant to this
Rights Agreement, and each underwriter, if any, and each person who controls any
underwriter of the Registrable Securities held by or issuable to such Holder,
against all claims, losses, expenses, damages and liabilities (or actions in
respect thereto) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement
(including any preliminary or final prospectus contained therein or any
amendments or supplements thereto) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statement therein not misleading, or any violation or alleged violation by
the Company of the Securities Act, the Securities Exchange Act of 1934 (the
"Exchange Act") any state securities law or any rule or regulation promulgated
under the Securities Act, or the Exchange Act, and will reimburse each such
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, as incurred, for any reasonable legal and any other expenses
incurred by them in connection with investigating, defending or settling any
such claim, loss, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 1.7(a) shall not apply to amounts
paid in settlement of any such claim, loss, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld); and provided further, that the Company will not
be liable in any such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by such Holder, controlling person or underwriter specifically for use therein.
(b) Each Holder will, if Registrable Securities held
by or issuable to such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold
harmless the Company, each of its directors and officers who has signed the
registration statement, each underwriter, if any, of the Company's securities
covered by such a registration statement, each person who controls the Company
within the meaning of the Securities Act, the Company's legal counsel and each
other such selling Holder, each of its officers, directors and partners and each
person controlling such
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Holder, against all claims, losses, expenses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement of a
material fact contained in any such registration statement, (including any
preliminary or final prospectus contained therein or any amendments or
supplements thereto) or any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company, such Holders, such directors, officers,
partners, persons or underwriters for any reasonable legal or any other expenses
incurred in connection with investigating, defending or settling any such claim,
loss, damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement in reliance upon and in
conformity with written information furnished to the Company by the Holder in an
instrument duly executed by such Holder specifically for use therein; provided,
however, that the indemnity agreement contained in this Section 1.7(b) shall not
apply to amounts paid in settlement of any such claim, loss, damage, liability
or action if such settlement is effected without the consent of the Holder
(which consent shall not be unreasonably withheld); and provided further, that
the total amount for which any Holder shall be liable under this Section 1.7(b)
shall not in any event exceed the net proceeds received by such Holder from the
sale of Registrable Securities held by such Holder in such registration.
(c) Each party entitled to indemnification under this
Section 1.7 (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 the Indemnified Party may participate in such
defense at such party's expense; 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 hereunder, unless such failure resulted in
prejudice to the Indemnifying Party's ability to defend such action but the
omission so to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Section 1.7; and provided further, that an Indemnified Party
(together with all other Indemnified Parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the Indemnifying Party, 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 such 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 to such
claim or litigation.
(d) If the indemnification provided for in this
Section 1.7 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
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by such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; PROVIDED that in no event shall any contribution by a Holder
under this Subsection 1.7(d)exceed the net proceeds from the offering received
by such Holder. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) The obligations of the Company and Holders under
this Section 1.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.8 INFORMATION BY HOLDER. Any Holder or Holders of
Registrable Securities included in any registration shall promptly furnish to
the Company such information regarding such Holder or Holders and the
distribution proposed by such Holder or Holders as the Company may request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
1.9 RULE 144 REPORTING. With a view to making available to
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees at all times to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, after ninety (90) days
after the effective date of the first registration filed by the Company for an
offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the Exchange Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(d) so long as a Holder owns any Registrable
Securities, to furnish to such Holder forthwith upon reasonable request a
written statement by the Company that it has complied with the reporting
requirements of said Rule 144 (at any time after ninety (90) days after the
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold under Form S-3 (at any time after it so qualifies) a copy of the most
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recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as the Holder may reasonably request in
complying with any rule or regulation of the SEC allowing the Holder to sell any
such securities without registration.
1.10 TRANSFER OF REGISTRATION RIGHTS. Holders' rights to cause
the Company to register their securities and keep information available granted
to them by the Company under Section 1 may be assigned to a transferee or
assignee of at least the lesser of all or 300,000 shares (as adjusted for stock
splits, dividends, combinations or the like) of a Holder's Registrable
Securities or to an affiliated limited partnership or other affiliate of such
Holder, provided that the Company is given written notice by such Holder at the
time of or within a reasonable time after said transfer, stating the name and
address of said transferee or assignee and identifying the securities with
respect to which such registration rights are being assigned. The foregoing
limitation shall not apply, however, to (i) transfers by a Holder which is a
limited partnership to its partners or retired partners, an affiliated limited
partnership or other affiliate of such Holder; provided, however, that all such
transferees or assignees agree in writing to appoint a single representative as
their attorney-in-fact for the purpose of receiving any notices and exercising
their rights under this Section 1, (ii) transfers to another holder of
Registrable Securities who already possesses registration rights pursuant to the
terms of this Agreement, or (iii) transfers to a transferee or assignee
acquiring more than ten percent (10%) of the Company's outstanding capital
stock. The Company may prohibit the transfer of any Holders' rights under this
Section 1.10 to any proposed transferee or assignee who the Company reasonably
believes is a competitor of the Company.
1.11 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees
that, during the period of duration (not to exceed 180 days) specified by the
Company and an underwriter of common stock or other securities of the Company
following the effective date of a registration statement of the Company filed
under the Securities Act in connection with its initial public offering, it
shall not, to the extent requested by the Company and such underwriter, directly
or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase, pledge or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any Common Stock of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that such
agreement shall not be required unless all officers and directors of the Company
enter into similar agreements. Anything in this Agreement to the contrary
notwithstanding, no Investor shall be prohibited under this Agreement from
freely acquiring or disposing of any Shares of the Common Stock of the Company
acquired by it on the public market (including, without limitation, shares of
the Company's Common Stock acquired in its initial public offering or any market
that may develop pursuant to Rule 144A under the Securities Act).
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares of securities of every other person subject to the
foregoing restriction) until the end of such period.
1.12 TERMINATION OF RIGHTS. All rights to cause the Company to
register securities under Sections 1.2, 1.3 or 1.4 shall terminate with respect
to such Holder upon the earlier to occur of (i) three years after the closing
date of the Company's initial public offering, or (ii) such time after the
Company has completed an initial public offering, it is subject to the
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provisions of the Exchange Act, and such Holder, Holder's affiliates, partners
or former partners are able to distribute all Registrable Securities held or
issuable to such Holder, Holder's affiliates, partners or former partners
pursuant to Rule 144 during any ninety (90) day period.
2. RIGHT OF FIRST OFFER TO PURCHASE EQUITY SECURITIES.
2.1 PURCHASE RIGHT. If at any time the Company should desire
to issue any Equity Securities (as hereinafter defined) in a transaction not
registered under the Securities Act in reliance upon a claimed exemption
thereunder, it shall give each Investor who holds at least 300,000 Series B
Shares, 300,000 Series B-1 Shares (or, in the case of Sony, 300,000 of Series B
Shares and Series B-1 Shares combined), any Series C Shares, any Series C-1
Shares or any Series C-2 Shares (as adjusted for stock splits, dividends,
combinations or the like) (a "Qualifying Investor") the first right to purchase
each Qualifying Investors' pro rata share (or any part thereof) of all of such
privately offered Equity Securities on the same terms as the Company is willing
to sell such Equity Securities to any other person (the "Purchase Right"). The
Qualifying Investors' pro rata share of the Equity Securities shall be equal to
that percentage of the outstanding Common Stock of the Company beneficially
owned by the Investors on the date hereof. For purposes of this Section 2, the
outstanding Common Stock of the Company shall include (i) outstanding shares of
Common Stock, and (ii) shares of Common Stock issued or issuable upon conversion
of any then outstanding Preferred Stock of the Company.
2.2 NOTICE OF INTENT TO SELL AND ISSUE. Prior to any sale or
issuance by the Company of any Equity Securities, the Company shall notify each
Qualifying Investor in writing of its intention to sell and issue such
securities, setting forth the number of shares to be offered and the price and
terms under which it proposes to make such sale. Within fifteen (15) days after
receipt of such notice, each Qualifying Investor shall notify the Company
whether the Qualifying Investor desires to exercise the option to purchase the
Qualifying Investor's pro rata share (or any part thereof) of the Equity
Securities so offered. In no event shall the Qualifying Investor be obligated to
purchase any Equity Securities pursuant to this Section 2, nor does the
Qualifying Investor make any representation or warranty that it plans to do so.
The foregoing notwithstanding, each Qualifying Investor purchasing its full pro
rata share of the Equity Securities so offered shall be further entitled to
elect to purchase within ten (10) days after receipt of notice the additional
Equity Securities available as a result of other Investors not purchasing their
full pro rata shares on a pro rata basis based on the number of shares of
Outstanding Common Stock held by such fully exercising Qualifying Investor as a
percentage of the Outstanding Common Stock held by all fully exercising
Qualifying Investors.
2.3 INVESTOR FAILURE TO PURCHASE. After termination of the
twenty-five (25) day period specified in Section 2.2 above, the Company may,
during a period of sixty (60) days following the end of such twenty-five (25)
day period, sell and issue such Equity Securities as to which the Qualifying
Investors do not indicate a desire to purchase to another person at a price not
less than, and upon terms and conditions no less favorable to the Company than
those set forth in the notice to the Investors. In the event the Company has not
sold the Equity Securities, or has not entered into an agreement to sell the
Equity Securities, within said sixty (60) day period, the Company shall not
thereafter issue or sell any Equity Securities without first offering such
securities to the Qualifying Investors in the manner provided above.
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2.4 INVESTOR PURCHASE. If a Qualifying Investor gives the
Company notice that the Qualifying Investor desires to purchase any of the
Equity Securities offered by the Company, payment for the Equity Securities
shall be by check or wire transfer against delivery of the Equity Securities at
the executive offices of the Company within twenty (20) days after giving the
Company such notice, or, if later, the closing date for the sale of such Equity
Securities. The Company shall take all such action as may be required by any
regulatory authority in connection with the exercise by the Qualifying Investor
of the Purchase Right.
2.5 EXCLUDED SECURITIES. The Purchase Right contained in this
Section 2 shall not apply to the issuance by the Company of Equity Securities
(i) to employees, officers, directors or consultants of the Company pursuant to
stock purchase or stock option plans or agreements when unanimously approved by
the Company's Board of Directors, (ii) as part of an acquisition by the Company
of assets or shares of another company or entity whether through a merger,
exchange, reorganization or the like, (iii) issued pursuant to the Antidilution
Agreements dated as of June 7, 1999, September 28, 1999 and December 14, 1999
(the "Antidilution Agreements") by and between the Company and certain
Investors, (iv) issued upon conversion of the Preferred Stock of the Company,
(v) issued in connection with any stock split, stock dividend, recapitalization
or similar event, (vi) issued in connection with any commercial debt or lease
financing transaction approved by the Company's Board of Directors, (vii) issued
in the IPO, (viii) issued to Overly Publishing ("Overly") pursuant to the terms
of the Joint Marketing Agreement between the Company and Overly dated as of June
1999, (ix) issued to vendors or customers or to other persons in similar
commercial situations with the Company if such issuance is approved by the
Company's Board of Directors, or (x) issued in connection with corporate
partnering transactions on terms approved by the Company's Board of Directors.
2.6 TERMINATION. The Purchase Right shall terminate as to all
Qualifying Investors upon the closing of the IPO.
2.7 EQUITY SECURITIES. The term "Equity Securities" shall mean
(i) Common Stock and rights, options or warrants to purchase Common Stock, (ii)
any security other than Common Stock having voting rights in the election of the
Board of Directors, not contingent upon a failure to pay dividends, (iii) any
security convertible into or exchangeable for any of the foregoing, and (iv) any
agreement or commitment to issue any of the foregoing.
3. RIGHT OF FIRST REFUSAL.
3.1 NOTICE.
(a) In the event Michael C. Pousti, Jr. ( "Pousti")
desires to accept one or more bona fide offers (a "Purchase Offer") from any
person to purchase any of the 10,130,975 shares of Common Stock owned by Pousti
or his affiliates, or any shares acquired by Pousti or his affiliates in the
future (collectively, the "Founders Shares"), other than as specifically
provided in Section 4.6 below, Pousti, must notify Investors holding a minimum
of 300,000 (as adjusted for stock splits, dividends, combinations or the like)
Series B Shares, Series B-1 Shares, or, in the case of Sony, Series B Shares and
Series B-1 Shares together, Series C Shares, Series C-1 Shares or Series C-2
Shares and the Company in writing (the "Notice"). The Notice shall state the
terms and conditions of the Purchase Offer, including the number of Founders
Shares
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proposed to be sold or transferred, the nature of such sale or transfer, the
consideration to be paid, and the name and address of each prospective purchaser
or transferee.
(b) In the event the proposed transfer is partially
or completely in exchange for assets other than cash, then such assets shall be
deemed to have a cash value in the amount determined unanimously by the
Company's Board of Directors (with Pousti abstaining) in its sole good faith
opinion, in which case such cash value ascertained by the Board, when added to
any cash to be exchanged and then divided by the number of Founders Shares to be
transferred, shall be deemed the price per share set forth in the Notice. In the
event of a gift, property settlement or other transfer in which the proposed
purchaser or transferee is not paying the full price for the Founders Shares,
which transfer is not otherwise exempted pursuant to Section 4.6 hereof, the
price shall be deemed to be the fair market value of the Founders Shares as
determined unanimously and in good faith by the Board of Directors (with Pousti
abstaining).
3.2 EXERCISE OF RIGHT OF FIRST REFUSAL.
(a) The Company shall have an exclusive, irrevocable
option (the "Company Option"), at any time within thirty (30) days of receipt of
the Notice, to purchase some or all of the Founders Shares to which the Notice
refers at the price per share specified in the Notice (or as otherwise
calculated pursuant to Section 3.1(b)). The Company shall exercise the Company's
Option by written notice signed by an officer of the Company and delivered or
mailed to Pousti (the "Company's Settlement Notice"), which notice shall specify
the time, place and date for settlement of such purchase.
(b) In the event (i) the Company elects not to
exercise the Company's Option, (ii) the Company elects to exercise the Company's
Option for only a portion of the Founders Shares to which the Notice refers, or
(iii) the Company's Option expires upon the failure of the Company to timely
deliver or mail the Company's Settlement Notice, Investors holding a minimum of
300,000 (as adjusted for stock splits, dividends, combinations or like) of
Series B Shares, Series B-1 Shares, or, in the case of Sony, Series B Shares and
Series B-1 Shares together, Series C Shares, Series C-1 Shares, Series C-2
Shares or their assignee(s) shall have an exclusive, irrevocable option (the
"Investors' Option"), at any time within twenty (20) days after the earlier of:
(A) the Investor's receipt of such election notice of the Company pursuant to
subsection 3.2(b) (i) or (ii) or (B) the expiration of such thirty (30) day
period, to elect to purchase some or all of the Founders Shares to which the
Notice refers, or the balance of the Founders Shares to which the Notice refers
for which the Company has not exercised the Company's Option, at the price per
share specified in the Notice (or as otherwise calculated pursuant to Section
3.1 (b)). Each such Investor shall have the right to purchase its pro rata share
of the Founders' Shares so offered, based on the number of Series B Shares,
Series B-1 Shares, Series C Shares, Series C-1 Shares or Series C-2 Shares held
by such Investor as a percentage of the number of Series B Shares, Series B-1
Shares, Series C Shares, Series C-1 Shares or Series C-2 Shares held by all such
Investors holding at least 300,000 Series B Shares, Series B-1 Shares, Series C
Shares, Series C-1 Shares or Series C-2 Shares. The Investors shall exercise the
Investors' Option by written notice delivered or mailed to Pousti (the
"Investors' Settlement Notice") within such 20-day period, which notice shall
specify the time, place and date for settlement of such purchase. If any
Investors do not exercise their Investor's Option, the Shares that would
otherwise be allocated to such non-exercising Investors shall be allocated to
each
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exercising Investor on a pro rata basis (based upon the number of Series B
Shares, Series B-1 Shares, Series C Shares, Series C-1 Shares or Series C-2
Shares held by such Investor relative to the aggregate number of Series B
Shares, Series B-1 Shares, Series C Shares, Series C-1 Shares or Series C-2
Shares held by all such exercising Investors), provided that the Investor's
Option must be exercised, if at all, on or before three days after the
expiration of the twenty day period referenced above.
3.3 SETTLEMENT.
(a) Within ten (10) days of receipt of the Company
Settlement Notice, Pousti must deliver to the Company all certificates for the
Equity Securities being acquired by the Company which are not already in the
Company's custody, together with proper assignments in blank of the Founders
Shares with signatures properly guaranteed and with such other documents as may
be required by the Company to provide reasonable assurance that each necessary
endorsement is genuine and effective, and the Company must thereupon deliver to
Pousti full cash payment for the Founders Shares being acquired, provided that
if the terms of payment set forth in the Notice were other than cash against
delivery, the Company shall pay for said shares on the same terms and conditions
set forth in such Notice.
(b) Within ten (10) days of receipt of the Investors'
Settlement Notice, Pousti and the Company, to the extent certificates for said
Founders Shares may be held by each, respectively, must deliver to the Investors
all certificates for the Founders Shares being acquired by the Investors which
are not already in the Investors' custody, together with proper assignments in
blank of the Founders Shares with signatures properly guaranteed and with such
other documents as may be required by the Investors to provide reasonable
assurance that each necessary endorsement is genuine and effective, and the
Investors must thereupon deliver to Pousti full cash payment for the Founders
Shares being acquired, provided that if the terms of payment set forth in the
Notice were other than cash against delivery, the Investors shall pay for said
shares on the same terms and conditions set forth in such Notice.
3.4 REVIVAL OF RIGHT OF FIRST REFUSAL. If all of the Founders
Shares which the Company and/or the Investors are entitled to obtain pursuant to
Section 3.2 hereof is not elected to be obtained as provided in Section 3.2
hereof and the Co-Sale Right in Section 4 is not exercised, Pousti may, during
the sixty (60) day period following the expiration of the last period provided
in Section 4.2 hereof, offer the remaining unsubscribed portion of such Founders
Shares to any person or persons at a price not less than, and upon terms no more
favorable to the transferee than those specified in the Notice. If Pousti does
not enter into an agreement for the sale of the Founders Shares within such
sixty (60) day period, or if such agreement is not consummated within sixty (60)
days after the execution thereof, the right provided hereunder shall be deemed
to be revived and such Founders Shares shall not be offered unless first
re-offered in accordance with Section 3.2 hereof.
4. CO-SALE RIGHT.
4.1 NOTICE OF SALES. Should Pousti propose to accept one or
more bona fide offers (collectively, a "Purchase Offer") from any persons to
purchase Founders Shares owned by him (other than as set forth in Section 4.6
hereof), then subject to the rights of the Investors
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and the Company as set forth in Section 3 above, and upon the expiration or
waiver of such right of first refusal, Pousti shall promptly deliver a Notice to
the Company and each Investor holding a minimum of 300,000 (as adjusted for
stock splits, dividends, combinations or the like) Series B Shares, Series B-1
Shares or, in the case of Sony, Series B Shares and Series B-1 Shares together,
Series C Shares, Series C-1 Shares or Series C-2 Shares.
4.2 CO-SALE RIGHT. Each Investor described in Section 4.1
shall have the right (the "Co-Sale Right"), exercisable upon written notice to
the Company within thirty (30) days after the expiration of the Investors'
Option pursuant to Section 3.2, to participate in Pousti's sale, pursuant to the
specified terms and conditions of such Purchase Offer. Each Investor described
in Section 4.1 may sell all or any part of that number of Series B Shares,
Series B-1 Shares, Series C Shares, Series C-1 Shares or Series C-2 Shares (or
Common Stock issued on conversion thereof) equal to the product obtained by
multiplying (i) the aggregate number of Founders Shares covered by the Purchase
Offer by (ii) a fraction, the numerator of which is the number of Series B
Shares, Series B-1 Shares, Series C Shares, Series C-1 Shares or Series C-2
Shares (assuming conversion thereof) at the time owned by such Investor and the
denominator of which is the sum of (A) the total number of Series B Shares,
Series B-1 Shares, Series C Shares, Series C-1 Shares or Series C-2 Shares
(assuming conversion thereof) at the time owned by all such Investors
participating in such sale plus (B) the total number of Founders Shares at the
time owned by such Founder, including shares transferred by such Founder to
Permitted Transferees (as defined below) in accordance with this Agreement. To
the extent an Investor exercises such Co-Sale Right in accordance with the terms
and conditions set forth below, the number of Equity Securities which Pousti may
sell pursuant to such Purchase Offer shall be correspondingly reduced.
4.3 DELIVERY OF CERTIFICATES. Each Investor exercising the
Co-Sale Right may effect its participation in Pousti's sale by delivering to
Pousti for transfer to the prospective purchaser one or more certificates,
properly endorsed for transfer, which represent that Investor's Equity
Securities which such Investor elects to sell.
4.4 TRANSFER. The stock certificate or certificates which the
participating Investor delivers to Pousti pursuant to Section 4.3 shall be
delivered by Pousti to the prospective purchaser in consummation of the sale
pursuant to the terms and conditions specified in the Notice, and Pousti shall
promptly thereafter remit to such Investor that portion of the sale proceeds to
which such Investor is entitled by reason of its participation in such sale. To
the extent that any prospective purchaser or purchasers prohibit such assignment
or otherwise refuse to purchase such Investor's Series B Shares, Series B-1
Shares, Series C Shares, Series C-1 Shares or Series C-2 Shares (or Common Stock
issued on conversion thereof) from an Investor exercising its Co-Sale Right
hereunder, Pousti shall not sell to such prospective purchaser or purchasers any
Founders Shares unless and until, simultaneously with such sale, Pousti shall
purchase such Investor's Series B Shares, Series B-1 Shares, Series C Shares,
Series C-1 Shares or Series C-2 Shares (or Common Stock issued on conversion
thereof) from such Investor for the same consideration and on the same terms and
conditions as the proposed transfer described in the Notice (which terms and
conditions shall be no less favorable than those governing the sale to the
purchaser by Pousti).
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4.5 NO ADVERSE EFFECT. The exercise or non-exercise of the
Co-Sale Rights of the qualified Investors hereunder to participate in one or
more sales of Founders Shares made by a Founder shall not adversely affect their
rights to participate in subsequent sales of Founders Shares by a Founder.
4.6 PERMITTED TRANSACTIONS. The provisions of Sections 3 and 4
of this Agreement shall not pertain or apply to:
(a) Any bona fide gift; or
(b) Any transfer to Pousti's ancestors, descendants
or spouse or to a trust for his or their benefit (and any distributions from
such trust); PROVIDED, in each case, that the transferee or donee (each a
"Permitted Transferee") shall execute a written agreement to be bound by and
comply with all provisions of this Agreement applicable to Pousti.
4.7 TERMINATION OF RIGHTS. The provisions of Sections 3 and 4
of this Agreement shall terminate upon the closing of an IPO or a merger or
acquisition of the Company by a public company.
4.8 ASSIGNMENT OF RIGHTS. The rights of the Investors set
forth in Section 2, Section 3 and/or Section 4 may be assigned (but only with
all related obligations) only to a transferee or assignee of at least the lesser
of all or 300,000 (as adjusted for stock splits, dividends, combinations or the
like) Series B Shares, Series B-1 Shares, Series C Shares, Series C-1 Shares or
Series C-2 Shares (or Common Stock issued on conversion thereof), provided that
(a) the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such rights are being assigned; (b) such
transferee agrees in writing to be bound by the provisions of this Agreement;
and (c) such transferee is not a competitor of the Company, as determined in
good faith by the Company's Board of Directors. Notwithstanding the foregoing,
any Investor may transfer its rights set forth in Section 2, Section 3 and/or
Section 4 without regard to the minimum number of shares described in the first
sentence of this Section 4.8 if the transferee is a person or entity
controlling, controlled by or under common control with such Investor.
4.9 PROHIBITED TRANSFERS. Any attempt by Pousti to transfer
Founders Shares in violation of Section 3 or Section 4 of this Agreement shall
be void and the Company agrees it will not effect such a transfer nor will it
treat any alleged transferee as the holder of such shares.
4.10 LEGENDED CERTIFICATES. Each certificate representing
shares of the Common Stock or Preferred Stock of the Company now or hereafter
owned by the Founder or issued to any Permitted Transferee pursuant to Section
4.6 shall bear the following legend:
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN INVESTORS' RIGHTS AGREEMENT BY AND
BETWEEN THE STOCKHOLDER, THE CORPORATION AND CERTAIN HOLDERS
OF PREFERRED STOCK OF THE CORPORATION. COPIES OF SUCH
AGREEMENT
19
<PAGE>
MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION.
5. BOARD VISITATION. Until the closing of an IPO or a merger or
acquisition of the Company by a public company, a designee of Sony shall be
permitted to attend and observe all meetings of the Company's Board of
Directors, but shall have none of the powers, rights or duties of a member of
the Board of Directors.
6. AMENDMENT, RESTATEMENT AND WAIVER OF RIGHTS OF PARTIES TO PRIOR
RIGHTS AGREEMENT; ADDITION OF PARTIES.
6.1 AMENDMENT, RESTATEMENT OF PRIOR RIGHTS AGREEMENT; APPROVAL
OF GRANT OF RIGHTS TO INVESTORS. The Company warrants that the Parties to this
Agreement are holders of a majority of the "Registrable Securities" as defined
by the Second Rights Agreement, including Convergence and Sony, as defined by
the First Rights Agreement. The Parties to the Prior Rights Agreement hereby
agree that (i) the Prior Rights Agreement is amended and restated in its
entirety by this Agreement, and (ii) the registration rights, rights of first
offer, rights of first refusal, co-sale rights and the obligations of the
holders of Registrable Securities under the Prior Rights Agreement are
exclusively as set forth in this Agreement. The parties to this Agreement agree
that any purchasers of Series C Shares subsequent to the date of this Agreement
can be added as parties to this Agreement with all of the rights and obligations
of the Investors holding Series C Shares without further approval by the parties
to this Agreement up to 11,560,694 Series C Shares.
6.2 WAIVER OF RIGHT OF FIRST REFUSAL. Pursuant to Section 6.1
of the First Rights Agreement, the parties to this Agreement waive any and all
rights granted pursuant to Section 2 of the First Rights Agreement with respect
to the sale and issuance of the Series C Shares.
7. INFORMATION RIGHTS; ADDITIONAL COVENANTS.
7.1 FINANCIAL STATEMENTS AND INFORMATION. Until the first to
occur of (a) the date on which the Company is required to file a report with the
SEC pursuant to Section 13(a) of the Exchange Act, by reason of the Company
having registered any of its securities pursuant to Section 12(g) of the
Exchange Act or (b) quotations for the Common Stock of the Company are reported
by the automated quotations system operated by the National Association of
Securities Dealers, Inc. or by an equivalent quotations system or (c) shares of
the Common Stock of the Company are listed on a national securities exchange
registered under Section 6 of the Exchange Act, the Company will furnish to each
Investor, so long as it continues to hold Series C Shares, Series C-1 Shares,
Series C-2 Shares and/or Common Stock issued upon conversion of such shares (i)
within ninety (90) days after the end of the fiscal year of the Company, a
consolidated balance sheet of the Company as of the end of such year and a
consolidated statement of income, cash flows and stockholders' equity for such
year, which year-end financial reports shall be in reasonable detail, prepared
in accordance with generally accepted accounting principles and audited and
certified by independent public accountants of nationally recognized standing
selected by the Company, and (ii) within thirty (30) days after the end of each
fiscal quarter (other than the last fiscal quarter), unaudited consolidated
statements of income for such quarter
20
<PAGE>
and a consolidated balance sheet as of the end of such quarter, certified by the
Company's chief financial officer. In addition, the Company shall deliver to
each Investor holding at least 2,000,000 Series C Shares (as adjusted for any
stock split, dividend, combination or the like) and/or Common Stock issued upon
conversion of such shares, within thirty (30) days prior to the end of each
fiscal year an annual budget and business plan for the next fiscal year,
prepared on a monthly basis and approved by the Company's Board of Directors as
well as any revisions thereto as adopted by the Board of Directors and any other
information or data provided generally to the stockholders of the Company.
7.2 INSPECTION. As long as each Investor holds at least
300,000 Series C Shares, Series C-1 Shares or Series C-2 Shares or 300,000
shares in the aggregate of either of the Series B Preferred Stock or Series B-1
Preferred Stock (as adjusted for any stock split, dividend, combination or the
like) and/or Common Stock issued upon conversion of such shares, at the expense
of each such Investor, the Company shall permit such Investor's representative,
upon reasonable prior notice to the Company, to visit the principal executive
office of the Company, to discuss the affairs, finances and accounts of the
Company and its subsidiaries with the Company's officers, and (with the consent
of the Company, which consent will not be unreasonably withheld) its independent
public accountants.
7.3 NOTICE OF CERTAIN EVENTS. Notwithstanding any time period
provided for elsewhere in this Agreement, and in addition to the notices
required elsewhere in this Agreement, for so long as an Investor holds at least
2,000,000 Series C Shares (as adjusted for any stock split, dividend,
combination or the like) and/or Common Stock issued upon conversion of such
shares, the Company shall notify such Investor, via facsimile, (i) if the
Company files a registration statement under the Securities Act for purposes of
a public offering of securities of the Company, within twenty-four hours of such
filing, (ii) if the Company issues a press release, within twenty-four hours of
such press release, and (iii) if the Company issues additional shares of
Preferred Stock, within twenty-four hours after such issuance.
8. GENERAL.
8.1 WAIVERS AND AMENDMENTS. With the written consent of the
Company and the holders of at least a majority of the Registrable Securities,
any term of this Agreement may be amended or waived (either generally or in a
particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely); provided, however, that no such
modification, amendment or waiver shall reduce the aforesaid percentage of
Registrable Securities needed to amend or waive a provision of this Agreement
without the consent of all of the Holders of the Registrable Securities or
disproportionately affect the holders of the Series B Shares, the Series B-1
Shares, the Series C Shares, the Series C-1 Shares or the Series C-2 Shares
without the approval of holders of a majority of the outstanding shares of such
series; provided, further, that no such amendment may alter the terms of Section
1.11 adversely to a party hereto holding over 2,000,000 Series C Shares without
such party's consent. Upon the effectuation of each such waiver, consent,
agreement of amendment or modification, the Company shall promptly give written
notice thereof to the record holders of the Registrable Securities who have not
previously consented thereto in writing. Any amendment or waiver effected in
accordance with this Section 8.1 shall be binding upon the Company, the holders
of Registrable Securities and any holder of Founders' Shares, and each of their
respective successors and assigns; and any
21
<PAGE>
such amendment or waiver effected in accordance with this Section 8.1 shall be
binding upon the Company, the holders of Registrable Securities and any holder
of Founders' Shares (and each of their respective successors and assigns)
notwithstanding whether NBC or any of the Versity Investors have entered into
the Agreement, however, the Company shall not issue any such Registrable
Securities to NBC or any Versity Investor unless and until NBC or such Versity
Investor executes and delivers a counterpart to this Agreement. Any provision of
Section 2.1 may be amended or waived in a manner adverse to Sony or Convergence
only with the prior written consent of the Company and Convergence or Sony, as
applicable.
8.2 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
8.4 ENTIRE AGREEMENT. Except as set forth below, this
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
8.5 NOTICES, ETC. All notices and other communications
required or permitted hereunder shall be in writing and shall be delivered
effective (i) upon personal delivery, (ii) one business day after delivery to a
reputable overnight courier service, (iii) upon the earlier of receipt or three
(3) business days after deposit in U.S. mail, if mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to the Investors, at the addresses as set forth on EXHIBIT A
hereto, or at such other addresses as any Investors shall have furnished to the
Company in writing; or (b) if to the Company, at 1010 East Second Avenue, East
Tower, Suite 600, San Diego, CA 92101, Attn.: Raffaele G. Fazio, Esq., Vice
President, Legal, or at such other address as the Company shall have furnished
to the Investors in writing.
8.6 SEVERABILITY. If any provision of this Agreement, or the
application thereof, is for any reason and to any extent determined by a court
of competent jurisdiction to be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other persons or
circumstances will be interpreted so as best to reasonably effect the intent of
the parties hereto. The parties agree to use their best efforts to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve, to the extent greatest possible, the economic,
business and other purposes of the void or unenforceable provision.
8.7 TITLES AND SUBTITLES. The titles of the sections and
Sections of this Agreement are for convenience of reference only and are not to
be considered in construing this Agreement.
22
<PAGE>
8.8 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.9 QUALIFIED SMALL BUSINESS STOCK STATUS. In the event that
the Company proposes to take an action or engage in a transaction that would
reasonably be expected to result in the Registrable Securities no longer being
"qualified small business stock" within the meaning of Section 1202(c) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Company shall notify
the Investors and consult in good faith to devise a mutually agreeable and
reasonable alternative course of action or transaction structure that would
preserve such status. In addition, the Company shall submit to the Investors and
to the Internal Revenue Service any reports that may be required under Section
1022(d)(1)(C) of the Code and any related Treasury Regulations. In addition,
within ten (10) days after any Investor has delivered to the Company a written
request therefore, the Company shall deliver to such Investor a written
statement informing the Investor whether, in the Company's good faith judgment,
after a reasonable investigation, such Investor's interest in the Company
constitutes "qualified small business stock" as defined in Section 1202(c) of
the Code. The Company's obligation to furnish a written statement pursuant to
this Section 8.9 shall continue notwithstanding the fact that a class of the
Company's stock may be traded on an established securities market.
8.10 AFFILIATED FUNDS. For purposes of counting the number of
shares held by the parties to this Agreement, shares held by partners, persons
or entities directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with a party hereto shall by
aggregated together. For so long as funds advised by Seligman own in total the
number of shares necessary to exercise the various rights set forth herein,
Seligman shall be entitled to exercise such rights on behalf of such funds.
[Remainder of page intentionally left blank]
23
<PAGE>
IN WITNESS WHEREOF, the parties hereby have executed this Investors'
Rights Agreement on the date first above written.
"COMPANY"
COLLEGECLUB.COM, INC. MICHAEL C. POUSTI
By: /s/ James B. Debello /s/ Michael E. Pousti
-------------------------------- --------------------------
James B. DeBello, President
<PAGE>
INVESTORS' RIGHTS AGREEMENT COUNTERPART SIGNATURE PAGE
SERIES B INVESTOR
/s/ Illegible
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES B INVESTOR
/s/ Keith Kelly
---------------------------------------------------
By:
------------------------------------------------
Name: Keith Kelly
-------------------------------------
Its: General Manager
--------------------------------------
SERIES B INVESTOR
/s/ Virginia Alniz
/s/ Joseph Alniz
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES B INVESTOR
/s/ Christine Kancius
/s/ Donald Sheiler
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
<PAGE>
SERIES B INVESTOR
/s/ Pao-Hang Hwang
/s/ Shiang-Ling Hwang
---------------------------------------------------
By: Pao-Hang Hwang
Shiang-Ling Hwang
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES B INVESTOR
/s/ Eric Zimmer
---------------------------------------------------
By: Eric Zimmer
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES B INVESTOR
/s/ Al DiLeonardo
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
<PAGE>
SERIES B INVESTOR
/s/ William McKee
---------------------------------------------------
By: William McKee
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ Allan Erlick
---------------------------------------------------
By: Allan Erlick
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ Susannah R. S. Jonas
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
<PAGE>
SERIES C INVESTOR
/s/ Al DiLeonardo
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
Vanguard Web Ventures LLC
---------------------------------------------------
By: /s/ Stephen A. Childs
------------------------------------------------
Name: Stephen A. Childs
-------------------------------------
Its: Managing Member
--------------------------------------
SERIES C INVESTOR
/s/ Daniel P. Bruce
---------------------------------------------------
By: Daniel P. Bruce
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
Kendell Communications, Inc.
---------------------------------------------------
By: /s/ Paul Zindell
------------------------------------------------
Name: Paul Zindell
-------------------------------------
Its: Pres./CEO
--------------------------------------
<PAGE>
SERIES C INVESTOR
/s/ James V. Bent
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
ABS Employees' Venture Fund LP
---------------------------------------------------
By: /s/ Margaret-Mary V. Preston
------------------------------------------------
Name: Margaret-Mary V. Preston
-------------------------------------
Its: VP of Alex. Brown Investments,
--------------------------------------
Inc. - GP of the Fund
SERIES C INVESTOR
Bastech, Inc.
---------------------------------------------------
By: /s/ RP Basso
------------------------------------------------
Name: R.P. Basso
-------------------------------------
Its: Pres.
--------------------------------------
SERIES C INVESTOR
/s/ Morris Helman
---------------------------------------------------
By: H & K, LCC
------------------------------------------------
Name: Morris Helman
-------------------------------------
Its: Member
--------------------------------------
<PAGE>
SERIES C INVESTOR
/s/ Robert C. Bantle
---------------------------------------------------
By:
------------------------------------------------
Name: Robert C. Bantle
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ P. Mark Moore
---------------------------------------------------
By: MTV Capitol Limited Partnership
------------------------------------------------
Name: P. Mark Moore
-------------------------------------
Its: Manager
--------------------------------------
SERIES B INVESTOR
/s/ Dale F. Kruse
/s/ Karen K. Kruse 3/8/00
---------------------------------------------------
By: Dale F. Kruse
Karen K. Kruse
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES B INVESTOR
/s/ Salvatore Imburgia
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
<PAGE>
SERIES B INVESTOR
/s/ Hagadon Partners,L.P.
---------------------------------------------------
By: /s/ Illegible
------------------------------------------------
Name: Illegible
-------------------------------------
Its: General Partner
--------------------------------------
SERIES B INVESTOR
KRSJ Investment Partrnership
A General Partnership
---------------------------------------------------
By: /s/ Alan I. Kazden
------------------------------------------------
Name: Alan I. Kazden
-------------------------------------
Its: General Partner
--------------------------------------
SERIES B INVESTOR
/s/ Robert S. London
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ George F. Eyde
---------------------------------------------------
By: George F. Eyde Limited Family
------------------------------------------------
Partnership
Name:
-------------------------------------
Its: General Partner
--------------------------------------
<PAGE>
SERIES B INVESTOR
/s/ Grossman
---------------------------------------------------
By: B. Grossman
------------------------------------------------
Name: Partner
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
---------------------------------------------------
By: /s/ Shirley Bluh
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ Morris Wolfson
---------------------------------------------------
By: WO College LLC
------------------------------------------------
Name: Morris Wolfson
-------------------------------------
Its: Member
--------------------------------------
SERIES C INVESTOR
/s/ Michael Weisberg
---------------------------------------------------
By: Michael Weisberg
------------------------------------------------
Name: Michael Weisberg
-------------------------------------
Its:
--------------------------------------
<PAGE>
SERIES C INVESTOR
Alfred J. Anzalone Family Partnership
---------------------------------------------------
By: /s/ Alfred J. Anazalone, General Partner
------------------------------------------------
Name: Alfred J. Anazalone
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
Geneva Venture Partners LLC
---------------------------------------------------
By: /s/ Robert Troy
------------------------------------------------
Name: Robert Troy
-------------------------------------
Its: Principal
--------------------------------------
SERIES C INVESTOR
US Development Capital Investment Company
---------------------------------------------------
By: /s/ Raymond L. Moss
------------------------------------------------
Name: Raymond L. Moss
-------------------------------------
Its: Secretary
--------------------------------------
SERIES C INVESTOR
/s/ Wendy M. Snow for Lamoreaux Partners
---------------------------------------------------
By:
------------------------------------------------
Name: Lamoreaux Partners
-------------------------------------
Its:
--------------------------------------
<PAGE>
SERIES C INVESTOR
/s/ Illegible
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ Adolfo Besamat
---------------------------------------------------
By:
------------------------------------------------
Name: Adolfo Besamat
-------------------------------------
Its: 3/6/00
--------------------------------------
SERIES C INVESTOR
/s/ Hans Davidson
---------------------------------------------------
By:
------------------------------------------------
Name: Hans Davidson
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ John S. Boggs
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its: John S. Boggs
--------------------------------------
<PAGE>
SERIES C INVESTOR
/s/ Raymond A. Woolbridge
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ Lawrence D. Buhl, III
---------------------------------------------------
By:
------------------------------------------------
Name: Lawrence D. Buhl, III
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ Peter Friedli
---------------------------------------------------
By: Peter Friedli
------------------------------------------------
Name: Venturetec, Inc.
-------------------------------------
Its: President
--------------------------------------
SERIES C INVESTOR
Venture Associates Fund I
---------------------------------------------------
By: /s/ King C. Tang
------------------------------------------------
Name: King C. Tang
-------------------------------------
Its: General Partner
--------------------------------------
<PAGE>
SERIES C INVESTOR
Ottley Properties LLC
---------------------------------------------------
By: /s/ Illegible
------------------------------------------------
Name: Illegible
-------------------------------------
Its: President
--------------------------------------
SERIES C INVESTOR
JPK Partners
---------------------------------------------------
By: /s/ Peter E. Haas, Jr.
------------------------------------------------
Name: Peter E. Haas, Jr.
-------------------------------------
Its: Managing General
--------------------------------------
Partner
SERIES C INVESTOR
/s/ Jacob Safer
---------------------------------------------------
By:
------------------------------------------------
Name: Jacob Safer
-------------------------------------
Its: Pres
--------------------------------------
SERIES C INVESTOR
/s/ Sharon Kiss
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
<PAGE>
SERIES C INVESTOR
Odyssey Capital, L.P., by its General Partner,
---------------------------------------------------
Odyssey Capital, Inc.
By: /s/Andrew L. Barroway
------------------------------------------------
Name: Andrew L. Barroway
-------------------------------------
Its: Partner
--------------------------------------
SERIES C INVESTOR
Malcolm Berman IRA
---------------------------------------------------
By: /s/ Malcolm Berman
------------------------------------------------
Name: Malcolm Berman
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
/s/ Clark Anderson
---------------------------------------------------
By: Willow & Co
------------------------------------------------
Name: Clark Anderson
-------------------------------------
Its: Vice President
--------------------------------------
SERIES C INVESTOR
Nicholas H. Felzen & Anthony S. Felzen
---------------------------------------------------
By: /s/ Paul Felzen
------------------------------------------------
Name: /s/ Paul Felzen
-------------------------------------
Its: PZ (AUTH. AGENT)
--------------------------------------
<PAGE>
SERIES C INVESTOR
/s/ Shirley Bluh
---------------------------------------------------
By: Alfred Bluh & Shirley Bluh Joint Tenants
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
Dotson Interactive, Inc
---------------------------------------------------
By: /s/ G. Kenneth Dotson
------------------------------------------------
Name: G. Kenneth Dotson
-------------------------------------
Its: President
--------------------------------------
SERIES C INVESTOR
South Street Funds L.L.C.
---------------------------------------------------
By: /s/ Illegible
------------------------------------------------
Name: Illegible
-------------------------------------
Its: Managing Member
--------------------------------------
SERIES C INVESTOR
Trans Cosmos USA, Inc.
---------------------------------------------------
By: /s/ Illegible
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
<PAGE>
SERIES C INVESTOR
/s/ Carsten Anderson
---------------------------------------------------
By: Carsten Anderson
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
Peter T. Barnhart
---------------------------------------------------
By: /s/ Peter T. Barnhart
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C SERIES C INVESTOR
USA Fund, LLP
---------------------------------------------------
By: /s/ Marc Blum
------------------------------------------------
Name: Marc Blum
-------------------------------------
Its: CEO
--------------------------------------
SERIES C INVESTOR
/s/ Alfred Robert Heiman
------------------------------------------
Boatright Irrevocable Trust
By: /s/ Alfred Robert Heiman
------------------------------------------------
Name: Alfred Robert Heiman
-------------------------------------
Its: Trustee
--------------------------------------
<PAGE>
SERIES C INVESTOR
/s/ Paul S. Otellini
---------------------------------------------------
By:
------------------------------------------------
Name: Paul S. Otellini
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
Abacus Capitol Ventures - III LLC
---------------------------------------------------
By: /s/ Edward S. Abbott
------------------------------------------------
Name: Edward S. Abbott
-------------------------------------
Its: Managing Member
--------------------------------------
SERIES C INVESTOR
/s/ J. Ben Bourgeois
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
SERIES C INVESTOR
Illegible
---------------------------------------------------
By: /s/ Illegible
------------------------------------------------
Name: Illegible
-------------------------------------
Its:
--------------------------------------
<PAGE>
SERIES C INVESTOR
BT Investment Partners, Inc.
---------------------------------------------------
By: /s/ Kristine Cicardo
------------------------------------------------
Name: Kristine Cicardo
-------------------------------------
Its: Vice President
--------------------------------------
<PAGE>
SERIES C INVESTOR:
SELIGMAN NEW TECHNOLOGIES FUND, INC.
---------------------------------------------------
By: J.& W. Seligman & Co., Incorporated,
its investment advisor
By: /s/ Al DiLeonardo
------------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Address: c/o J.& W. Seligman & Co., Incorporated
100 Park Avenue
New York, NY 10017
SERIES C INVESTOR:
SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC.
By: J.& W. Seligman & Co., Incorporated,
its investment advisor
By: /s/ Al DiLeonardo
------------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Address: c/o J.& W. Seligman & Co., Incorporated
100 Park Avenue
New York, NY 10017
<PAGE>
SERIES C INVESTOR:
SELIGMAN INVESTMENT OPPORTUNITIES
(MASTER) FUND - NTV PORTFOLIO
By: J.& W. Seligman & Co., Incorporated,
its investment advisor
------------------------------------------------
By: /s/ Al DiLeonardo
------------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Address: c/o J.& W. Seligman & Co., Incorporated
100 Park Avenue
New York, NY 10017
SERIES C INVESTOR:
SELIGMAN NEW TECHNOLOGIES FUND, INC.
By: J.& W. Seligman & Co., Incorporated,
its investment advisor
By: /s/ Richard R. Schmaltz
------------------------------------------------
Name: Richard R. Schmaltz
-------------------------------------
Title: Managing Director
------------------------------------
Address: c/o J.& W. Seligman & Co., Incorporated
100 Park Avenue
New York, NY 10017
<PAGE>
SERIES C INVESTOR:
SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC.
By: J.& W. Seligman & Co., Incorporated,
its investment advisor
By:
------------------------------------------------
Name: /s/ Richard R. Schmaltz
-------------------------------------
Title: Managing Director
------------------------------------
Address: c/o J.& W. Seligman & Co., Incorporated
100 Park Avenue
New York, NY 10017
SERIES C INVESTOR:
SELIGMAN INVESTMENT OPPORTUNITIES
(MASTER) FUND - NTV PORTFOLIO
By: J.& W. Seligman & Co., Incorporated,
its investment advisor
------------------------------------------------
By: /s/ Richard R. Schmaltz
------------------------------------------------
Name: Richard R Schmaltz
-------------------------------------
Title: Managing Director
------------------------------------
Address: c/o J.& W. Seligman & Co., Incorporated
100 Park Avenue
New York, NY 10017
<PAGE>
INVESTORS' RIGHTS AGREEMENT COUNTERPART SIGNATURE PAGE
COLLEGESTUDENT.COM INVESTOR
/s/ Al DiLeonardo
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
VERSITY.COM INVESTOR
/s/ Al DiLeonardo
---------------------------------------------------
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
<PAGE>
INVESTORS' RIGHTS AGREEMENT COUNTERPART SIGNATURE PAGE
CONVERGENCE VENTURES I, L.P.
By: Convergence Partners, L.P.
Title: General Partner
By: /s/ Eric DiBenedetto
------------------------------------------------
Name: Eric DiBenedetto
-------------------------------------
Its General Partner
--------------------------------------
CONVERGENCE ENTREPRENEURS FUND I, L.P.
By: Convergence Partners, L.P.
Title: General Partner
By: /s/ Eric DiBenedetto
------------------------------------------------
Name: Eric DiBenedetto
-------------------------------------
Title: General Partner
--------------------------------------
SONY CORPORATION OF AMERICA
By: /s/ Illegible
------------------------------------------------
Name: Illegible
-------------------------------------
Title: Secretary
--------------------------------------
<PAGE>
INVESTORS' RIGHTS AGREEMENT COUNTERPART SIGNATURE PAGE
SERIES C-2 INVESTOR
NBC Interactive Media, Inc., a Delaware
corporation
By:
------------------------------------------------
Name:
-------------------------------------
Its:
--------------------------------------
<PAGE>
EXHIBIT A
Schedule of Investors
HOLDERS OF SHARES OF SERIES B PREFERRED STOCK
---------------------------------------------
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Convergence Ventures I, L.P. 1,403,508
Convergence Entrepreneurs Fund I, L.P. 56,139
Geneva Venture Partners LLC 175,440
Viventures S.A. 526,314
King Chuen Tang 35,088
Marvin Brown 19,002
Alex Polinsky 18,996
Scott Goverman 9,477
Bruce Amlicke 7,584
Howard Gwynn 9,459
Joe McGillian 9,180
Salvatore Imburgia 9,174
Frank DiMaggio 3,669
Al DiLeonardo 36,681
Dean Stull 9,165
Bill & Caren Skutch 18,324
Dan St. Cyr 18,324
Amar & Mickelle Dave 4,581
Loyd & Tammy Regan 4,581
Dean Stull 14,661
Sheila Ginsberg 3,666
Todd Johnston & Angela McGuirt 3,660
Marie Kirk Johnston 3,660
Stephen Ciarrochi 5,481
Lori Zaeger 9,156
P.B. Bry 10,578
Dr. Thomas Sticha 9,144
James Clyma 18,216
Heath & Michelle Welsh 5,460
Gregory & Lynne Gallo 3,642
Salvatore Imburgia 10,902
Michael Kaiser 15,255
Edwin & Roberta Bailey 9,096
Ken Kramer 9,075
MIG General Partners 10,896
Al Kaiser 14,541
Don & Barb Liberati 21,159
John Sarappa, Jr. 3,633
<PAGE>
9200 Club 9,111
Kevin Orton 3,630
Maya Saoud 18,129
Bill McKee 18,099
Goerge Eyde Ltd. Family Part. 90,468
Hagadorn Partners, L.P. 90,468
Keith Azar 9,051
J. Patrick McDevitt 9,054
Harold Coughlin 3,621
Bill McKee 7,227
Steven Brandt 9,030
Jacob Gerhart 9,030
Andrew & Linda Barrick 9,021
Alan & Francis Barrick 18,060
Randall and Susan Seavers 9,021
Theodore & Kathryn D. Creznic 18,054
Robert Bettman 9,036
Martin Domitrovich 9,048
Harvey & Sandra Ebersole 3,603
Jeff & Anne Ebersole 3,603
Bob & Stephanie Ebersole 3,603
Telefuture 64,833
Styn Family Trust 5,391
Frank Nawrotzki 19,086
Salvatore Imburgia 19,755
Bill McKee 14,367
Alan & Natalie Kazden 17,955
Loyd Regan 2,694
Amar Dave 7,185
Louis Del Pozzo 12,594
Salvatore Imburgia 28,674
Jimmy & Barbara Wyrosdick 8,961
David Goldfader 8,961
Richard Reid 8,955
Heath & Michelle Welsh 1,431
Brian Niemi 8,952
Salvatore Imburgia 1,791
Salvatore Imburgia 3,579
Jeffrey Ebersole 1,788
Don Sheller and Christine Kancius 22,188
Telefuture 10,740
Allan & Linda Birnbaum 19,518
<PAGE>
Telefuture 1,788
Peter Perry 8,934
Bill McKee 19,653
Michael Dunham 8,928
Dale & Karen Kruse 21,429
Michael Regan 8,913
Ali Foughi 17,856
Stephen Ciarrocchi 5,349
Joseph Devine 8,913
Thomas R. Turner 8,907
Salvatore Imburgia 14,250
John & Jenny Tay 8,913
Salvatore Imburgia 1,779
KRSJ Investment Partnership, a General Partner 71,067
Rodney D. Brady, DDS 17,766
Michael Rich 8,883
Pao Hang & Shiang-Ling Hwang 35,541
Victor & Mary Ellen Arone 14,238
Tom Stanfanelli 14,238
Don & Barb Liberati 1,779
Don & Barb Liberati 2,667
Richard & Norma Perry 8,883
Lou Ferris 8,886
Evelyn Campbell 8,889
Mary Ann Dhillon 8,886
Joseph & Virginia Alaniz 26,640
Allan Erlick 17,739
Robert S. London 354,798
Jerry Low 8,892
William Hurst III 17,733
Eric Reuscher 7,092
Craig Creelman 8,865
Ryan Fitzsimmons 8,865
Vanguard Web Ventures 354,645
Howard Phanstiel 17,733
Thomas Nelson 17,736
Kenneth Satterlee 35,472
J. Ben Bourgeois 35,472
Eric Zimmer 26,604
St. Croix Capital Corp. Pension Plan 8,868
Relocation Coordinates, Inc. 17,733
<PAGE>
Kendell Communications, Inc. 88,662
Kevin Orton 9,753
Larry Blocker 23,052
Jerry Crabtree, SR. 8,895
Stephen Nancy Graham 17,736
Dan St. Cyr 19,509
Robert Bettman 8,871
Robert & Amy Uecker 24,837
George Eyde Ltd. Family Part. 88,680
Sam Eyde 88,680
J. Anthony antonelli (A&B Family Trust) 88,680
Joyce Ricks Family Trust 17,733
Dean Stull 12,048
Jim Whipple 17,709
Michael Cornette 17,709
Aldo Parcesepe 17,709
Tom & Marjan Pousti 3,531
Thomas Tellefsen 8,451
Theodore Tellefsen 3,522
Roger Goetz 23,571
Vernon Yates 13,902
Charles Matthews 13,902
Hooward Karr 2,280
Cynthia Karr 1,053
Elizabeth Karr 1,053
Charles Mathews 13,902
Overly Publishing 7,896
Joseph Ngai 79,494
Fred Yau 62,169
Albert Lee 45,864
Jeff Kaplan 38,727
David Kaplan 4,077
Net for All 510
Mark Lee 13,044
Peter Voutov 15,084
Leslie Lee 8,154
Daniel Shu Ming Lee 8,154
Edwin Lin 4,077
George Jian Chuang 4,077
Eugene Wang Hei Wong 4,077
Kenneth Koo 4,077
Sophia Shuk Yee Cheung 4,077
<PAGE>
Victor H.Y. Koong 4,077
Kwok Hang YUEN 4,077
Wen Hsuan Hsieh 4,077
Harold Wong 2,040
Nina Tao 2,040
Joseph Ngai 19,872
Fred Yau 15,540
Albert Lee 11,463
Jeff Kaplan 9,681
David Kaplan 1,017
Net for All 126
Mark Lee 3,261
Peter Voutov 3,768
Leslie Lee 2,037
Daniel Shu Ming Lee 2,037
Edwin Lin 1,017
George Jian Chuang 1,017
Eugene Wang Hei Wong 1,017
Kenneth Koo 1,017
Sophia Shuk Yee Cheung 1,017
Victor H.Y. Koong 1,017
Kwok Hang YUEN 1,017
Wen Hsuan Hsieh 1,017
Harold Wong 507
Nina Tao 507
Don & Barb Liberati 9,081
Don & Barb Liberati 16,404
<PAGE>
Delaware Charter Guarantee & Trust for the
benefit of Scott Goverman 9,477
Frank G. Nawrotzki 5,583
Frank G. Nawrotzki 13,158
Lori Zager 9,156
Sony Corporation of America 1,769,922
Dan DeAngelis 12,518
</TABLE>
HOLDERS OF SHARES OF SERIES B-1 PREFERRED STOCK
-----------------------------------------------
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Sony Corporation of America 761,259
</TABLE>
HOLDERS OF SHARES OF SERIES C PREFERRED STOCK
---------------------------------------------
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Convergence Partners 456,878
Geneva Group International 29,166
J & W Seligman 2,196,531
Sony Corporation 292,870
Viventures 87,379
ABS Employees' Venture Fund Limited Partnership 393,800
Charles F. Adams 21,839
Carsten S. Andersen 50,000
Alfred J. Anzalone Family Limited Partnership 25,188
Howard Balter 72,214
Robert Bantle 21,839
Peter T. Barnhart 21,840
Bastech, Inc. 21,840
James V. Bent 22,669
Richard M. Berkeley 10,000
Malcolm Berman IRA 21,839
Adolfo Bezamat 43,678
Alfred Bluh & Shirley Bluh JT TEN 21,863
Boatright Irrevocable Trust 21,839
John S. Boggs IRA 21,839
Donald L. Braddock, Trustee Chartered PSP 21,839
Daniel R. Breen 21,839
Bridgewood Capital Partners, L.P. 52,023
Lawrence D. Buhl III 28,900
Jerry L. Cain & Taryn D. Cain Intervivos Trust 21,839
Angelo C. Cavallaro, Trustee of the Olivia M.
Cavallaro Family Trust 21,588
<PAGE>
Chesel Congregations of America 43,678
Jonathan Cohen/Turtle & Co. 21,839
Convergence Entrepreneurs Fund I, L.P. 4,624
Convergence Ventures I, L.P. 115,607
Jeffrey E. Cooley Revocable Trust of 1998 21,839
Cotran Investments Ltd. 121,800
John D. Craft 21,839
Christopher W. Cramer 30,000
Crestwood Capital International, Ltd. 205,202
Crestwood Capital Partners II, L.P. 28,902
Crestwood Capital Partners, LP 291,908
Alexander T. Daignault, Jr. 25,188
Hans Davidsson 43,353
T. Wayne Davis 21,840
John Anthony DeBello 12,000
Dotson Interactive Inc. 36,398
E Technology Group LLC 100,000
Everest Venture Partners - I, LP 21,839
F & F Partners 21,839
David Falk 21,839
Farley Family Trust Dated 3/23/98 21,839
Nicholas H. Felzen & Anthony S. Felzen, JT 72,255
William Ferguson, Jr. 21,839
Laurel Finch 867
Paul Fiorita 21,839
Laurence Freed as Trustee of the Declaration Trust of
Laurence Freed Dated 8/5/96 21,839
David A. Friedman Revocable Trust 21,839
David E. Gernert 21,840
Kirt H. Gilliland 2,168
Greystone Ltd 21,839
Christopher C. Grieb 25,188
Gunpowder Ventures, LLC 21,839
Robert P. Guyton, Jr. 36,270
H & K Partnership LLC 40,300
HBA Partnership 36,421
Charles R. Hart, Jr. 15,113
John T. Hayt 21,839
Grace Clark Hornby 21,839
William Howell 29,119
Jason W. Hughes 25,000
David S. Hungerford 21,839
James R. Hunter 21,839
<PAGE>
Craig Irving 25,000
Robert K. Jermain 21,839
Philip C. Johnson 5,000
Scott and Marie Johnson 21,839
Susannah R.S. Jonas 50,375
James F. Jordan 22,669
Michael Jordan 21,839
JPK Partners 72,797
Steven M. Kaplan 29,167
John N. Kapoor Trust, Dated 9/20/89 36,399
Dean P. Kasperzak Revocable Trust of 1998 21,839
Sara Jane Kasperzak 21,840
KBCS Inc. 21,839
Kendell Communications, Inc. 72,254
Sharon Kiss 43,353
Albert Lamar 28,900
Lamoreaux Partners 502,890
Jonathan Larkin 21,839
Mr. and Mrs. W. Robert Lepczyk 21,839
Robert J. Lichter, Trustee for Lichter Venture
Group-Defined Benefit Plan Trust 36,127
Robert J. Lichter, Trustee for Lichter Family Trust 36,127
Lincoln Trust Co. Custodian FBO Charles Hart 25,188
James V. Mahern, Jr. 4,335
Simon S. Mani, Trustee for the Simon Mani Family Trust 30,225
Lawrence Marcus 5,780
Maresol LP 21,676
David B. Marino 15,000
Joe Marsh 21,839
Roger R. Mayer Revocable Living Trust 43,826
Mark A. Medearis 1,445
MLS-1, LP, LLP 21,839
Richard Moran 21,863
MTV Capital Limited Partnership 3600 West Main 100,578
Lily Mulvany 22,165
Joerg Neumann 21,000
Albert and Pearl Nipon 21,839
Northport II Private Equity LLC 21,839
Donald D. Notman, Jr. 2,168
<PAGE>
Odyssey Capital, L.P., By Its General Partner,
Odyssey Capital, Inc. 75,433
Paul Otellini 43,353
Ottley Properties, LLC 43,353
James B. Pace 21,840
Ari & Ruthy Parnes 65,517
Loren C. Paulsen Jr. 43,353
Guilermo Perales 43,353
Charles A. Perry, Jr. 21,839
Russell D. Phelon Rev. Lvg. Trust Dated 6/12/90 21,839
Pictet & Cie 300,000
Robert D. Pinsky 21,839
John C. Pohlhaus 21,839
Curtis Polk 21,839
W. James Price Revocable Trust dated 11/6/91 22,669
Prism VIII Investment Partnership 37,127
Roderick K. Randall 21,839
Ric-Tech Ltd. 62,862
Ritek Corporation 73,093
David B. Rogers 5,000
Jacob Safier 21,839
Wayne Saker 22,669
Kenneth R. Satterlee 36,500
Douglas C. Schluter 21,839
Thomas J. Shannon, Jr. 21,839
Sherwood Manor Partners 25,188
Robert D. Siegfried 22,669
Sledmere, Inc. 22,165
South Street Funds LLC 43,678
South Street Tech, LLC 70,525
Warren H. Spar 21,839
St. Croix Capital 29,000
Standard Mortgage Holding Corporation 60,450
Hans Strom 12,000
Charles L. Switzer Family Partnership, LP 21,839
James K. Tang Family Partnership 36,522
Tek-Pan Investment Group 300,000
TPB, LLC 29,119
Trans Cosmos USA, Inc. 418,772
Triventures 14,559
Merrilee Turley 14,451
US Development Capital Investment Company 289,017
<PAGE>
U.S.A. Fund, LLLP 90,675
Vanguard Web Ventures LLC 144,509
Venture Associates Fund I 289,018
Venturetec Inc. 70,783
VLG Investments 1999 6,358
Vogel Investments 21,839
The Warmenhoven 1987 Revocable Trust,
dated 12/16/87 as amended 43,500
James T. Willoughby 21,839
Willow & Co. 251,517
WO College LLC 72,255
Peter J. Wood 21,587
Raymond A. Wooldridge 146,088
WOTS 14,559
</TABLE>
HOLDERS OF SHARES OF SERIES C-1 PREFERRED STOCK
-----------------------------------------------
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Abacus Ventures-III, L.L.C.
Attn: Edward S. Abbott 1,298,948
601 Montgomery Street, Suite 830
San Francisco, California 94111
Christopher Bancroft
Bancroft Operations 272,602
1621 North Elm Street
Denton, Texas 76201
Glynn Investment Co., L.L.C.
c/o Mr. John Glynn 40,890
Glynn Capital Management
300 Sand Hill Road
Building 4, Suite 235
Menlo Park, California 94025
Martin Fenton III
2901 Barton Skyway 24,537
Austin, Texas 78746
</TABLE>
HOLDERS OF SHARES OF SERIES C-2 PREFERRED STOCK
-----------------------------------------------
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
National Broadcasting Company, Inc. 970,874
</TABLE>
<PAGE>
HOLDERS OF SHARES OF COMMON STOCK
---------------------------------
PURSUANT TO AGREEMENT OF MERGER
-------------------------------
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Abode Development L.L.C.
715 West 23rd Street, Suite M 2,394,380
Austin, Texas 78705
Douglas A. Batson
4131 Spicewood Springs Road 401,608
Suite A-5
Austin, Texas 78759
Edward S. Abbott
The Abacus Companies 207,127
601 Montgomery Street, Suite 830
San Francisco, California 94111
The Schmidt Family Trust
c/o Chauncey E. Schmidt, Trustee 218,028
525 Middlefield Road, Suite 140
Menlo Park, California 94025
Brian Kraff
6111 Goldtree Way 158,337
Bethesda, Maryland 20817
The Adrenaline Group, Inc.
Attn: Greg Dupertius 10,703
1050 Potomac Street N.W.
Washington, D.C. 20007
Austin Furst
138 Frogtown Road 18,866
New Canaan, Connecticut 06840
Oliver Sockwell
1685 Myrtle Street N.W. 11,336
Washington, D.C. 20012
The Robert J. and Carol Ann
Wagman Trust 6,802
Attn: Carol Ann Wagman, Trustee
8707 Burning Tree Road
Bethesda, Maryland 20817-3054
Ron Friedmann
5151 10th Road North 6,416
Arlington, Virginia 22314
Leslie Kraff
8608 Honeybee Lane 7,143
Bethesda, Maryland 20814
Steven Aldrich
825 Rivergate Place 7,143
Alexandria, Virginia 22205-2505
<PAGE>
The Benjamin K. and Jonathan G. Abbott Irrevocable Trust
Attn: Edward S. Abbott, Trustee 10,901
64 Parker Avenue
San Francisco, California 94118
Alecia C. Batson
9803 Ravenwood Cove 10,467
Austin, Texas 78750
Davis A. Batson
9803 Ravenwood Cove 10,467
Austin, Texas 78750
</TABLE>
HOLDERS OF SHARES OF COMMON STOCK PURSUANT TO
---------------------------------------------
VERSITY MERGER AGREEMENT
------------------------
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
TO BE COMPLETED TO BE COMPLETED
</TABLE>
<PAGE>
EXHIBIT 10.2
PUBLIC ONLINE COMMUNICATIONS CORPORATION
SERIES A PREFERRED STOCK SUBSCRIPTION AGREEMENT
Public Online Communications Corporation
6620 Convoy Court
San Diego, California 92111
Attention: Michael C. Pousti
Gentlemen:
1. SUBSCRIPTION. The undersigned (the "undersigned" or the
"Purchaser"), intending to be legally bound, hereby irrevocably purchases from
Public Online Communications Corporation, a California corporation (the
"Company") the number of shares of Series A Preferred Stock, no par value, of
the Company, set forth on the signature page hereof (the "Shares"), at a
purchase price of Four Dollars and Twelve Cents ($4.12) per Share (the "Purchase
Price"). This subscription is submitted to you in accordance with and subject
to the terms and conditions described in this Subscription Agreement, and will
be binding upon acceptance by the Company, which acceptance may be denied or
delayed for any reason. The Purchaser acknowledges that it is purchasing the
Shares without being offered or furnished any offering literature or prospectus
However, to the extent the undersigned has had any questions about the Company,
the undersigned acknowledges that it has had the opportunity to discuss the
affairs of the Company with Company management, that it has received the
information requested from the Company and that the information received from
the Company is sufficient and complete supplementary information on which it is
relying to consummate the purchase of the Shares. In addition, the undersigned
acknowledges that he has received and reviewed carefully a copy of the Company's
confidential business plan and the Company's Amended and Restated Articles of
Incorporation.
2. SUBSCRIPTION AND PAYMENT. As payment in full for the Shares being
purchased by it under this Agreement, the undersigned shall return to the
Company for cancellation, that certain convertible promissory note of the
Company dated October 7, 1996 and in the amount of $375,000 and that certain
convertible promissory note of the Company dated December 20, 1996 and in the
amount of $125,000 held by tile Purchaser (collectively the Convertible
Promissory Notes) and the accrued interest thereon. Upon receipt of the
Convertible Promissory Notes, the Company shall issue and deliver to the
undersigned a stock certificate or certificates, registered in tile name of the
undersigned, representing the Shares being purchased.
3. ACCEPTANCE OF SUBSCRIPTION. The undersigned understands and
agrees that the Company in its sole discretion reserves the right to accept or
reject this or any other subscription for Shares, in whole or in part. Tile
Company shall have no obligation hereunder until the Company shall execute and
deliver to the undersigned an executed copy of this Subscription Agreement.
This Subscription Agreement shall continue in full force and effect to the
extent this subscription was accepted.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES. The undersigned hereby
acknowledges, represents, warrants and agrees as follows:
a. None of the Shares are registered under the Securities Act
of 1933 (as amended, the "Securities Act") or any state securities laws. The
undersigned understands that the sale of the Shares is intended to be exempt
from registration under Section 4(2) of the Securities Act and/or the provisions
of Regulation D promulgated thereunder, based, in part, upon the
representations, warranties and agreements contained in this Subscription
Agreement;
b. Neither the Securities and Exchange Commission nor any
state securities commission has approved any of the Shares or passed upon or
endorsed the merits of this transaction;
c. The undersigned acknowledges that all documents, records
and books pertaining to the investment in the Shares have been made available
for inspection by it, its attorney, accountant, purchaser representative and tax
advisor (collectively, the "Advisors") and that the undersigned has carefully
reviewed and understands the information contained therein;
d. The undersigned and the Advisors have had a reasonable
opportunity to ask questions of and receive answers from a person or persons
acting on behalf of the Company concerning the offer and sale of the Shares and
all such questions have been answered to the full satisfaction of the
undersigned and its Advisors;
e. In evaluating the suitability of an investment in the
Company, the undersigned has not relied upon any representation or other
information (oral or written) other than as contained in documents or answers to
questions so furnished to the undersigned or its Advisors by the Company;
f The undersigned, together with the Advisors, have such
knowledge and experience in financial, tax and business matters so as to enable
each of them to utilize the information made available to each of them in
connection with the purchase of the Shares to evaluate the merits and risks of
an investment in the Shares and to make an informed investment decision with
respect thereto;
g. The undersigned is not relying on the Company with respect
to the tax and other economic considerations of an investment in the Shares, and
the undersigned has relied on the advice, or has consulted with, only its own
Advisors;
h. The undersigned is acquiring the Shares solely for its own
account for investment and not with a view to resale or distribution,
i. The undersigned must bear the economic risk of the
investment indefinitely because none of the Shares may be sold, hypothecated or
otherwise disposed of unless subsequently registered under the Securities Act
and applicable state securities laws or an exemption from registration is
available. Legends shall be placed on the Shares to the effect that
2
<PAGE>
they have not been registered under the Securities Act or applicable state
securities laws and appropriate notations thereon will be made in the Company's
stock books;
j. The undersigned has adequate means of providing for the
undersigned's current needs and foreseeable contingencies and has no need for
the undersigned's investment in the Shares to be liquid;
k. The undersigned is aware that an investment in the
Shares involves a number of very significant risks and, in particular,
acknowledges that the Company is in the development stage. The undersigned
understands that the risks associated with an investment in the Shares could
result in, and the undersigned can sustain, a complete loss of its investment;
1. The undersigned meets the requirements of at least one of
the suitability standards for an "accredited investor" as set forth on the page
hereof entitled "Accredited Investor Certification";
m. The undersigned represents that it has full power and
authority to execute and deliver this Subscription Agreement and all other
related agreements and certificates and to carry out the provisions hereof and
thereof and to purchase and hold the Shares, and this Subscription Agreement is
a legal, valid and binding obligation of the undersigned. The execution and
delivery of this Subscription Agreement will not violate or be in conflict with
any order, judgment, injunction, agreement or controlling document to which the
undersigned is a party or by which it is bound;
n. The undersigned represents to the Company that the
information contained herein is complete and accurate and may be relied upon
by the Company in determining the availability of an exemption from
registration under federal and state securities laws. The undersigned
further represents and warrants that it will notify the Company immediately
upon the occurrence of any material change to the information contained
herein occurring prior to the Company's issuance of the Shares;
o. The undersigned is unaware of, and in no way relying on,
any form of general solicitation or general advertising in connection with the
offer and sale of the Shares.
5. COMPLIANCE WITH REGULATION D AND APPLICABLE STATE SECURITIES LAWS
The undersigned understands and agrees that the following restrictions and
limitations are applicable to its purchase of the Shares and any resales,
mortgages, pledges, hypothecations, or other transfers thereof, pursuant to
Regulation D under the Securities Act and applicable state securities laws:
a. The undersigned agrees that the Shares may not be sold,
mortgaged, pledged, hypothecated or otherwise transferred unless the Shares are
registered under the Securities Act and applicable state securities laws or are
exempt from registration thereunder.
3
<PAGE>
b. A legend in substantially the following form will be placed
on the certificate(s) evidencing the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, AND NOT WITH
A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933, OR UNLESS AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
c. FOR CALIFORNIA RESIDENTS ONLY: THE SALE OF THE SECURITIES
THAT IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM SUCH
QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS SUBSCRIPTION
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN
EXEMPTION THEREFROM BEING AVAILABLE.
6. IRREVOCABILITY, BINDING EFFECT. The undersigned hereby
acknowledges and agrees that the subscription hereunder is irrevocable by the
undersigned, except as required by applicable law, and that this Subscription
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, legal representatives, and permitted assigns.
7. REGISTRATION.
a. DEFINITIONS. As used in this Section 7:
i. The terms "register", "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and the declaration
or ordering of the effectiveness of such registration statement;
ii. The term "Registrable Securities" means: (i) any
Common Stock of the Company issued or to be issued pursuant to conversion of the
Shares issued hereunder, and (ii) any other Common Stock of the Company issued
as a dividend or other distribution with respect to, or in exchange for or in
replacement of, the Shares or the shares of Common Stock of the Company issued
pursuant to conversion of the Shares;
iii. The term "Holder" means any holder of outstanding
Registrable Securities who acquired such Registrable Securities in a transaction
or series of transactions not involving any registered public offering;
4
<PAGE>
b. COMPANY REGISTRATION.
i. NOTICE OF REGISTRATION. If at any time or from time
to time, the Company shall determine to register any of its securities, either
for its own account or the account of a security holder or holders (other than a
registration relating solely to employee stock option or purchase plans or
relating solely to an SEC Rule 145 transaction or to debt securities) the
Company will:
(A) promptly give to each Holder written notice
thereof; and
(B) include in such registration (and any related
qualification under state securities laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, received within twenty (20) days after such written
notice from the Company, by any Holder or Holders, except as set forth in
Section 7(b)(ii) below.
ii. UNDERWRITING. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 7(b)(i)(A). In such event the right of any
Holder to registration pursuant to Section 7(b) shall be conditioned upon the
inclusion of such Holder's Registrable Securities in the underwriting. All
Holders proposing to distribute their securities shall (together with the
Company and other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 7(b), if the underwriter
determines that marketing factors require a limitation of the number of
Registrable Securities to be included in the registration on a pro rata basis
based on the total number of the Registrable Securities held by the Holders and
based on the total number of securities (other than Registrable Securities)
entitled to registration held by other persons or organizations selling
securities pursuant to registration rights granted them by the Company, provided
that no such reduction shall be made with respect to securities being offered by
holders of securities who have requested the Company to register such securities
pursuant to a mandatory registration obligation of the Company similar to the
one contained in Section 7(b) hereof ("Other Shareholder Demand Offering"), and
provided further that if such offering is other than the first registered
offering of the Company's securities to the public or is not an Other
Shareholder Demand Offering, the underwriter may not limit the Registrable
Securities to be included in such offering to less than 30% of the securities
included therein (based on aggregate market values). The Company shall advise
all Holders of Registrable Securities which would otherwise be registered and
underwritten pursuant herto of any such limitations, and the number of shares of
Registrable Securities that may be included in the registration. If any Holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any securities
excluded or withdrawn from such underwriting shall not be transferred prior to
90 days after the effective date of the registration statement for such
underwriting, or such shorter period as the underwriter may require.
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<PAGE>
c. EXPENSES OF REGISTRATION. All expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 7, including all registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for the Company, and expenses of any
special audits incidental to such registration, shall be borne by the Company;
provided, however, the Company shall not be required to pay underwriters'
discounts, commissions, or stock transfer taxes relating to Registrable
Securities or the fees of any counsel retained by the Holders.
d. REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to Section 7, the
Company will keep each Holder participating therein advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Company will:
i. keep such registration, qualification or compliance
pursuant to Section 7(b), effective for a period of three months or until the
Holder or Holders have completed the distribution described in the registration
statement relating thereto, whichever first occurs; and
ii. furnish such number of prospectuses and other
documents incident thereto as a Holder from time to time may reasonably request.
e. INDEMNIFICATION.
i. The Company will indemnify each Holder of
Registrable Securities, each of its officers, directors and partners, and each
person controlling such Holder, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 7 and
each underwriter, if any, and each person who controls any underwriter of the
Registrable Securities held by or issuable to such Holder, against all claims,
losses, damages, costs, expenses and liabilities whatsoever (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement,
prospectus, offering circular or other documents (including any related
registration, statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any state securities law or of any rule or
regulation promulgated under the Securities Act or any state securities law
applicable to the Company and relating to action or inaction required of tile
Company in connection with any such registration, qualification or compliance,
and will reimburse each such Holder, each of its officers and directors, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, cost, expense, liability or action, provided that the Company will not
be liable in any such case to the extent that any such claim, loss, damage,
cost, expense, or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by any Holder or underwriter and stated to be
specifically fo use therein.
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<PAGE>
ii. Each Holder will, if Registrable Securities held by
or issuable to such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers who sign such registration
statement, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company within the
meaning of the Securities Act, and each other Holder, each of such other
Holder's officers and directors and each person controlling such other Holder,
against all claims, losses, damages, costs, expenses and liabilities whatsoever
(or actions in respect thereof arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other documents
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such other Holders, such directors, officers,
persons or underwriters for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
cost, expense, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Holder and stated to be specifically for use therein; provided, however, that
the foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any such untrue statement (or alleged untrue statement) or omision
(or alleged omission) made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the time the
registration statement becomes effective or the amended prospectus filed with
the SEC pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity
agreement shall not inure to the benefit of any underwriter or any Holder, if
there is no underwriter, if a copy of the Final Prospectus was furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such action is required by the Securities Act; and provided further,
the total amount for which any Holder shall be liable under this Section 7(d)
shall not in any event exceed the aggregate proceeds received by such Holder
from the sale of Registrable Securities held by such Holder in such
registration.
iii. Each party entitled to indemnification under this
Section 7(e) (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
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, 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 Section 7. 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
7
<PAGE>
release from any liability in respect to such claim or litigation. If any
such Indemnified Party shall have been advised by counsel chosen by it that
there may be one or more legal defenses available to such Indemnified Party
which are different from or additional to those available to the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense
of such action on behalf of such Indemnified Party and will reimburse such
Indemnified Party and any person controlling such Indemnified Party for the
reasonable fees and expenses of any counsel retained by the Indemnified
Party, it being understood that the Indemnifying Party shall not, in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys for such Indemnified Party or controlling
person, which firm shall be designated in writing by the Indemnified Party to
the Indemnifying Party.
f. INFORMATION BY HOLDER. The Holder or Holders of
Registrable Securities included in any registration shall furnish to the Company
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 7.
g. SALE WITHOUT REGISTRATION. If at the time of any transfer
(other than a transfer not involving a change in beneficial ownership) of any
Shares or Registrable Securities, such Shares or Registrable Shares shall not be
registered under the Securities Act, the Company may require, as a condition of
allowing such transfer, that the Holder or transferee furnish to the Company (i)
such information as is necessary in order to establish that such transfer may be
made without registration under the Securities Act; and (ii) at the expense of
the Holder or transferee, an opinion by legal counsel designated by such Holder
or transferee and satisfactory to the Company, satisfactory in form and
substance to the Company, to the effect that such transfer may be made without
registration under such Act; provided that nothing contained in this Section 7
shall relieve the Company from complying with any request for registration,
qualification or compliance made pursuant to the other provisions of this
Section 7.
h. RULE 144 REPORTING. With a view to making available to the
Purchasers the benefits of certain rules and regulations of the U.S. Securities
and Exchange Commission ("SEC") which may permit the sale of the Shares or
Registrable Securities to the public without registration, the Company agrees
to:
i. make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration filed by the Company
which involves a sales of securities of the Company to the general public;
ii. file with the SEC in a timely manner all reports and
other documents required by the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"); and
8
<PAGE>
iii. furnish to Purchasers so long as Purchasers own any
Shares or Registrable Securities forthwith upon request a written statement by
the Company that it has complied with the reporting requirements of said Rule I
44 (at any time after ninety (90) days after the effective date of said first
registration statement filed by the Company) and of the Securities Act and the
Securities Exchange Act (at any time after it has become subject to such
reporting requirements), a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed by the Company as may
be reasonably requested in availing Purchasers of any rule or regulation of the
SEC permitting the selling of any such securities without registration.
i. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted by the Company under Section 7(b), may be
assigned by any Purchaser to a transferee or assignee who acquires at least
twenty percent (20%) of the Shares acquired pursuant to the terms of this
Subscription Agreement, or an equivalent amount of Registrable Securities issued
upon conversion thereof (adjusted for any dividends, subdivisions, combinations
or reclassifications with respect to such shares), provided that such transfer
may otherwise be effected in accordance with applicable securities laws and
provided further that the Company is given written notice by such Purchaser at
the time of or within a reasonable time after said transfer, stating the name
and address of said transferee or assignee and identifying, the securities with
respect to which such registration rights are being assigned.
j. "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees
that, during the period of duration specified by the Company and an underwriter
of common stock or other securities of the Company (such period shall not exceed
one hundred eighty (180) days), following the effective date of a registration
statement of the Company filed under the Securities Act, it shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that such agreement shall not be required
unless all officers and directors of the Company and all other persons with
registration rights (whether or not pursuant to a Subscription Agreement) or
purchasing common stock of the Company enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares of securities of every other person subject to the
foregoing restriction) until the end of such period.
k. EXPIRATION OF RIGHTS. All registration rights shall expire
and not apply to any Holder upon the earlier of the date seven (7) years from
the date of acceptance by the Company of this Subscription Agreement or the date
such Holder is eligible to sell in a three- month period pursuant to SEC Rule
144 all Registrable Securities held by such Holder.
8. MODIFICATION. This Agreement shall not be modified or waived
except by an instrument in writing signed by the party against whom any such
modification or waiver is sought.
9
<PAGE>
9. AUDITED FINANCIAL STATEMENTS. For so long as the Purchaser holds
any of the Shares, as soon as practicable after the end of each fiscal year of
the Company; and in any event within one hundred twenty (120) days thereafter,
the Company shall furnish to the Purchaser a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income, shareholders' equity and cash flows of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and with an a audit opinion thereon from independent public accountants
of recognized national standing selected by the Company.
10. NOTICES. A notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given (a) if to the Company, at the address set forth above, or (b) if
to the undersigned, at the address set forth on the signature page hereof (or,
in either case, to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section 10). Any notice or
other communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof.
11. ASSIGNABILITY. This Agreement and the rights, interests and
obligations hereunder are not transferable or assignable by the undersigned,
except to an affiliate of the undersigned who qualifies as an "accredited
investor," and the undersigned further agrees that the transfer or assignment of
the Shares shall be made only in accordance with all applicable laws.
12. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California without regard
to its conflicts of laws principles.
13. BLUE SKY QUALIFICATION. The undersigned's right to purchase the
Shares under this Subscription Agreement is expressly conditioned upon the
exemption from qualification of the offer and sale of the Shares from applicable
federal and state securities laws. The Company shall not be required to qualify
this transaction under the securities laws of any jurisdiction and, should
qualification be necessary, the Company shall be released from any and all
obligations to maintain its offer, and may rescind any sale contracted, in the
jurisdiction.
14. CONFIDENTIALITY. The undersigned acknowledges and agrees that any
information or data it has acquired from or about the Company, not otherwise
properly in the public domain, was received in confidence. The undersigned
agrees not to divulge, communicate or disclose, except as may be required by law
or for the performance of this Agreement, or use to the detriment of the Company
or for the benefit of any other person or persons, or misuse in any way, any
confidential information of the Company, including any scientific, technical,
trade or business secrets of the Company and any scientific, technical, trade or
business materials that are treated by the Company as confidential or
proprietary, including, but not limited to, ideas, discoveries, inventions,
developments and improvements belonging to the Company and
10
<PAGE>
confidential information obtained by or given to the Company about or belonging
to third parties.
15. Miscellaneous.
a. This Agreement constitutes the entire agreement between the
undersigned and the Company with respect to the subject matter hereof and
supersedes all prior oral or written agreements and understandings, if any,
relating to the subject matter hereof. The terms and provisions of this
Agreement may be waived, or consent for the departure therefrom granted, only by
a written document executed by the party entitled to the benefits of such terms
or provisions.
b. The undersigned's representations and warranties made in
this Agreement shall survive the execution and delivery hereof and of the
Shares.
c. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated.
d. All pronouns and any variations thereof used herein shall
be deemed to be to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.
e. This Agreement may be executed in one or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
f. Each provision of this Agreement shall be considered
separable and if for any reason any provision or provisions hereof are
determined to be invalid or contrary to applicable law, such invalidity shall
not impair the operation of or affect the remaining portions of this Agreement.
g. Paragraph titles are for descriptive purposes only and
shall not control or alter the meaning of this Agreement as set forth in the
text.
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<PAGE>
ACCREDITED INVESTOR CERTIFICATION
(Check the appropriate box(es))
_____ i. I am a natural person who had individual Income of
more than $200,000 in each of the most recent two years or joint
income with my spouse in excess of $300,000 in each of the most
recent two years and reasonably expect to reach that same income
level for the current year;
_____ ii. I am a natural person whose individual net worth, or
joint net worth with my spouse, will at the time of purchase of
the Shares be in excess of $1,000,000;
_____ iii. The undersigned is an institutional investor
satisfying the requirements of Section 501(a)(1), (2) or (3) of
Regulation D promulgated under the Securities Act;
_____ iv. The undersigned is a trust, which trust has total
assets in excess of $5,000,000, which is not formed for the
specific purpose of acquiring the Shares offered hereby and whose
purchase is directed by a sophisticated person as described in
Rule 506(b)(2)(ii) of Regulation D and who has such knowledge and
experience in financial and business matters that it is capable of
evaluating the risks and merits of an investment in the Shares;
_____ v. I am a director or executive officer of the Company;
or
_____ vi. The undersigned is an entity (other than a trust) in
which all of the equity owners meet the requirements of at least
one of the above subparagraphs.
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement
this __ day of __________________, 1997.
Shares subscribed for:
133,678 x $4.12 = $550,753.36
(Shares being (Share Price) Subscription Price
purchased)
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If the purchaser is an INDIVIDUAL, and if purchased INDIVIDUALLY, as JOINT
TENANTS, as TENANTS IN COMMON, or as COMMUNITY PROPERTY:
- ------------------------------------ -------------------------------------
Print Name(s) Social Security Number(s)
- ------------------------------------ -------------------------------------
Signature(s) of Purchaser(s)
- ------------------------------------ -------------------------------------
Date
-------------------------------------
Address
If the purchaser is a PARTNERSHIP, CORPORATION, or TRUST:
----------------------------- -------------------------------------
Name of Partnership Federal Taxpayer Identification Number
Corporation or Trust
- ------------------------------------
Date
By:
--------------------------------- -------------------------------------
State of Organization
Name:
---------------------------
Title:
-------------------------- ----------------------------
----------------------------
AGREEMENT ACCEPTED AND AGREED
this __ day of __________, 1997.
PUBLIC ONLINE COMMUNICATIONS CORPORATION
By
-----------------------------------------------
Michael C. Pousti, President
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<PAGE>
EXHIBIT 10.3
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE LAW, AND NO INTEREST HEREIN MAY BE SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION AND
QUALIFICATION WITHOUT AN OPINION OF LEGAL COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
Right to Purchase Fifty Thousand (50,000)
Shares of Common Stock of Public Online
Communications Corporation
No. 1
PUBLIC ONLINE COMMUNICATIONS CORPORATION
COMMON STOCK PURCHASE WARRANT
PUBLIC ONLINE COMMUNICATIONS CORPORATION, a California corporation (the
"Company"), hereby certifies that, for good and valuable consideration, receipt
of which is hereby acknowledged, DANIEL MIRICH (the "Purchaser"), or his
successors or registered assigns, is entitled, upon the terms and subject to the
conditions set forth below, to purchase from the Company at any time or from
time to time after the date hereof and before 5:00 p.m., Pacific Standard Time,
on the Expiration Date (as hereinafter defined), fifty thousand (50,000) fully
paid and nonassessable shares of Common Stock, no par value, of the Company, at
a purchase price of Sixty-Six Cents ($0.66) per share (the "Purchase Price").
The number and character of such shares of Common Stock and the Purchase Price
are subject to adjustment as provided in this Warrant.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Public Online
Communications Corporation and any corporation that shall succeed to or assume
the obligations of Public Online Communications Corporation hereunder.
(b) The term "Common Stock" includes (i) the Company's Common
Stock, as authorized on the date hereof and (ii) any other securities into which
or for which any the securities described in (i) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
(c) The term "Other Securities" refers to any stock (other
than Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time shall be
entitled to receive, or shall have received, on the
<PAGE>
exercise of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock.
(d) The term "Expiration Date" refers to the earlier of (i)
the tenth anniversary of the date of this Warrant, and (ii) the closing of a
bona fide firm commitment underwritten public offering of shares of the
Company's Common Stock registered under the Securities Act of 1933, as amended
("IPO"), and (iii) the closing of the sale, acquisition or merger of the Company
in which the shareholders of the Company before the transaction own less than
51% of the voting stock of the surviving entity ("Acquisition"); provided,
however, that as to an Acquisition or an IPO, adequate notice, as provided in
Section 12 below, has been given.
1. EXERCISE OF WARRANT. This Warrant may be exercised, in
whole or in part, by the holder hereof by surrender of this Warrant, with the
form of subscription at the end hereof 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 being exercised by the Purchase Price then in effect.
2. NET ISSUE EXERCISE. Notwithstanding any provisions herein
to the contrary, in lieu of exercising this Warrant for cash, the holder thereof
may elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Company together with a properly endorsed notice of
exercise and notice of such election in which event the Company shall issue to
the Holder a number of shares of Common Stock computed using the following
formula:
Y (A-B)
-------
X = A
Where X = the number of shares of Common Stock to be
issued to the holder of the Warrant,
Y = the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the
Warrant being canceled (at the date of such
calculation),
A = the fair market value of one share of the
Company's Common Stock (at the date of such
calculation), and
B = the Warrant Price (as adjusted to the date of
such calculation).
For purposes of the above calculation, fair market value of one share
of Common Stock shall be as determined by the Company's Board of Directors in
good faith. Notwithstanding the
2
<PAGE>
foregoing, in the event the Warrant is exercised in connection with an IPO, the
fair market value per share of Common Stock shall be the per share offering
price to the public in the IPO.
3. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon
as practicable after the exercise of this Warrant, and in any event within ten
(10) days thereafter, the Company at its expense (including the payment by it of
any applicable issue or stamp 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 (or Other
Securities) to which such holder shall be entitled on such exercise in such
denominations as may be requested by such holder, plus, in lieu of any
fractional share to which such holder would otherwise be entitled, cash equal to
such fraction multiplied by the then current fair market value of one full
share, as determined in good faith by the board of directors of the Company upon
review of relevant factors, 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 2 or otherwise. The Company agrees
that the shares so purchased shall be deemed to be issued to the holder hereof
as the record owner of such shares as of the close of business on the date on
which this Warrant shall have been delivered to the Company and payment made for
such shares as aforesaid.
4. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities on
property (other than cash) by way of dividend, or
(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 (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5, then and in each such case the holder of this Warrant, on the
exercise hereof as provided in Section 1 or 2, 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 which such holder
would hold on the date of such exercise if on the date hereof it 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 it
as aforesaid during such period.
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<PAGE>
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 or reclassify its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of 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 subsection
5. The Holder of this Warrant shall thereafter, on the exercise hereof as
provided in Section 1 or 2, be entitled to receive that number of shares of
Common Stock determined by multiplying the number of shares of Common Stock
which would be issuable on such exercise as of immediately prior to such
issuance by a fraction of which (i) the numerator is the Purchase Price in
effect immediately prior to such issuance and (ii) the denominator is the
Purchase Price in effect on the date of such exercise.
6. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF
WARRANTS. The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of this Warrant, all shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of the
Warrant.
7. TRANSFER OF WARRANT. This Warrant may not be transferred or
assigned by the Purchaser without prior written consent of the Company;
provided, however, the consent of the Company shall not be required if the
Purchaser proposes to effect a transfer or assignment to an affiliate of the
Purchaser or, if the Purchaser is a partnership, to a partner of such partner of
such partnership and; provided, further, the consent of the Company shall not be
unreasonably withheld if the proposed transfer is effected in accordance with
applicable securities laws.
8. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
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.
9. COMPLIANCE WITH SECURITIES LAWS. The Purchaser of this
Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of
Common Stock to be issued upon exercise hereof are being acquired solely for the
Purchaser's own account and not as a nominee for any other party, and for
investment, and that the Purchaser will not offer, sell or otherwise dispose of
this Warrant or any shares of Common Stock to be issued upon exercise hereof
except under circumstances that will not result in a violation of the Securities
Act of 1933, as amended (the "Act"), or any state securities laws. Upon exercise
of this Warrant, the Purchaser shall, if requested by the Company, confirm in
writing, in a form satisfactory to the
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<PAGE>
Company, that the shares of Common Stock so purchased are being acquired solely
for the Purchaser's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale.
All shares of Common Stock issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form (in addition to any
legend required by state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE LAW, AND NO
INTEREST THEREIN MAY BE SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION
WITHOUT AN OPINION OF LEGAL COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
10. "MARKET STAND-OFF" AGREEMENT. The holder hereby agrees
that in connection with an IPO, during the period of duration (not to exceed 180
days) specified in writing by the Company and its lead underwriter following the
effective date of the Company's registration statement filed under the
Securities Act of 1933, as amended, with respect to the IPO, the holder shall
not, to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase, pledge or otherwise transfer or
dispose of (other than to donees who agree to be similarly bound) this Warrant
or any securities of the Company issued or issuable upon exercise hereof at any
time during such period except for any Common Stock included in the IPO
registration.
11. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company; provided that nothing herein shall be construed to
affect any rights a holder hereof may have under the Agreement. No provision of
this Warrant, in the absence of affirmative action by the holder hereof to
purchase Common Stock, and no mere enumeration herein of the rights or
privileges of the holder hereof, shall give rise to any liability of such holder
for the Purchase Price or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
12. NOTICES. The Company shall provide the Purchaser at least
thirty (30) days notice prior to the consummation of an IPO or an Acquisition.
All notices and other communications from the Company to the registered 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 at the following address:
------------------------------
------------------------------
5
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13. 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. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of California. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
Executed at San Diego, California as of November 13, 1996.
PUBLIC ONLINE COMMUNICATIONS
CORPORATION, a California corporation
By: /s/ Michael C. Pousti
------------------------------------
Michael C. Pousti, President
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<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: Public Online Communications Corporation
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 Public Online Communications Corporation
and requests that the certificates for such shares be issued in the name of, and
delivered to, ___________________________, whose address is ____________________
________________________________________________________.
The undersigned elects to make payment therefor by (check
one):
/ / Cash or check payable to the Company, as provided in
Section 1 of the Warrant.
/ / Net issue exercise, as provided in Section 2 of the
Warrant.
Dated: ___________________ ________________________________________
(Signature must conform to name of
holder as specified on the face of the
Warrant)
Address: ______________________________________
______________________________________
Tax I.D. No.: ______________________________________
--------------------------------
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 Public Online Communications Corporation
to which the within Warrant relates, and appoints ______________________________
Attorney to transfer such right on the books of Public Online Communications
Corporation, with full power of substitution in the premises.
Dated:__________________ ____________________________________
(Signature must conform to name of
holder as specified on the face of the
Warrant)
<PAGE>
EXHIBIT 10.4
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
COLLEGE CLUB.COM
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Heidrick & Struggles, Inc.
("Holder") is entitled to purchase twenty thousand (20,000) shares of Common
Stock ("Warrant Shares") of COLLEGE CLUB.COM, a California corporation (the
"Company"), at the Warrant Price (as defined in subsection l(i) below) of
sixty-six cents ($0.66), subject to adjustments and all other terms and
conditions set forth in this Warrant.
1. DEFINITIONS. As used herein, the following terms, unless the
context otherwise requires, shall have the following meanings:
(a) "Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(b) "Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Act.
(c) "Common Stock" shall mean shares of the Company's
presently or subsequently authorized Common Stock, and any stock into which such
Common Stock may hereafter be exchanged.
(d) "Company" shall mean COLLEGE CLUB.COM, a California
corporation, and any corporation which shall succeed to or assume the
obligations of COLLEGE CLUB.COM under this Warrant.
(e) "Date of Grant" shall mean April 13, 1999.
(f) "Exercise Date" shall mean the effective date of the
delivery of the Notice of Exercise pursuant to Sections 4 and 11 below.
(g) "Holder" shall mean Heidrick & Struggles, Inc. or any
other person or entity who shall at the time be the registered holder of this
Warrant.
<PAGE>
(h) "Shares" shall mean shares of the Company's Common
Stock, as described in the Company's Articles of Incorporation.
(i) "Warrant Price" shall mean $0.66 per share.
2. ISSUANCE OF WARRANT AND CONSIDERATION THEREFOR. This Warrant
is issued in consideration of Holder's assistance with the Company's search for
a President of Company.
3. TERM. The purchase right represented by this Warrant is
exercisable only during the period commencing upon the date hereof and ending on
April 13, 2006.
4. EXERCISE OF WARRANT.
(a) EXERCISE. This Warrant may be exercised, in whole or in
part, by the Holder hereof by surrender of this Warrant, with the form of
subscription at the end hereof duly executed by the Holder, to the Company at
its principal office, accompanied by payment, (i) in cash or by certified or
official bank check payable to the order of the Company, or (ii) in cancellation
of fees due Holder from the Company for legal services rendered, in the amount
obtained by multiplying the number of Warrant Shares for which this Warrant is
being exercised by the Warrant Price then in effect.
(b) RIGHT TO CONVERT WARRANT. Notwithstanding the
payment provisions of subsection 4(a) hereof:
(i) The Holder shall have the right (the
"Conversion Right") to require the Company to convert this Warrant, in whole or
in part, at any time into shares of Common Stock as provided for in this
subsection (b). At the sole option of the Holder, upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment by
the holder of any Warrant Price) that number of shares of Common Stock equal to
the quotient obtained by dividing (x) the value of the Warrant at the time the
Conversion Right is exercised (determined by subtracting the aggregate Warrant
Price for the number of Warrant Shares then issuable upon exercise of this
Warrant in effect immediately prior to the exercise of the Conversion Right from
the aggregate Fair Market Value (as defined below) of such number of Warrant
Shares immediately prior to the exercise of the Conversion Right) by (y) the
Fair Market Value of one share of Common Stock immediately prior to the exercise
of the Conversion Right.
(ii) The Conversion Right may be exercised by the
Holder, at any time, or from time to time, on any business day by delivering a
written notice (the "Conversion Notice") to the Company exercising the
Conversion Right and specifying (i) the total number of Warrant Shares the
Holder will purchase pursuant to such conversion and (ii) a place and date not
less than one nor more than 20 business days from the date of the Conversion
Notice for the closing of such purchase.
(iii) Fair Market Value of a share of Common
Stock as of a particular date (the "Determination Date") shall mean:
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<PAGE>
(1) If the Company's Common Stock is
traded on an exchange or is quoted on the Nasdaq National Market, then the
closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(2) If the Company's Common Stock is not
traded on an exchange or on the Nasdaq National Market but is traded in the
over-the-counter market, then the mean of the closing bid and asked prices
reported for the last business day immediately preceding the Determination Date.
(3) If the Company's Common Stock is not
publicly traded, then as determined in good faith by the Company's Board of
Directors upon review of relevant factors.
(4) If the Determination Date is the
date on which the Company's Common Stock is first sold to the public by the
Company in a firm commitment public offering under the Act, then the initial
public offering price (before deducting commissions, discounts or expenses) at
which the Common Stock is sold in such offering.
(c) DELIVERY OF CERTIFICATE. In the event of
any exercise of the purchase right represented by this Warrant, certificates for
the Warrant Shares so purchased shall be delivered to the Holder within thirty
(30) days of delivery of the notice of exercise (the "`Notice of Exercise") in
the form of EXHIBIT A attached hereto and, unless this Warrant has been fully
exercised or has expired, a new warrant representing the portion of the Warrant
Shares with respect to which this Warrant shall not then have been exercised
shall also be issued to the Holder within such thirty (30) day period.
(d) NO FRACTIONAL SHARES. No fractional shares
shall be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Fair Market Value of a share of Common Stock as of the Exercise Date.
(e) COMPANY'S REPRESENTATIONS.
(i) All Warrant Shares which may be
issued upon the exercise of the purchase right represented by this Warrant
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except for restrictions on
transfer provided for herein or under applicable federal and state securities
laws. During the period within which the purchase right represented by this
Warrant may be exercised, the Company shall at all times have authorized, and
reserved for the purpose of issuance upon exercise of the purchase right
represented by this Warrant, a sufficient number of Warrant Shares to provide
for the exercise of the purchase right represented by this Warrant;
(ii) This Warrant has been duly
authorized and executed by the Company and is a valid and binding obligation of
the Company enforceable in accordance with
3
<PAGE>
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting the enforcement of
creditors' rights;
(iii) The execution and delivery of this
Warrant are not, and the issuance of the Warrant Shares upon exercise of this
Warrant in accordance with the terms hereof will not be inconsistent with the
Charter or Bylaws, do not and will not contravene any law, governmental rule or
regulation, judgment or order applicable to the Company, and do not and will not
conflict with or contravene any provision of, or constitute a material default
under, any material indenture, mortgage, contract or other instrument of which
the Company is a party or by which it is bound or require the consent or
approval of, the giving of notice to, the registration or filing with or the
taking of any action in respect of or by, any federal, state or local government
authority or agency (other than such consents, approvals, notices, actions,
filings, etc. as have already been obtained or made, as the case may be).
5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The
number of securities issuable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time
or from time to time the holders of the Common Stock of the Company (or any
shares of stock or other securities at the time receivable upon the exercise of
this Warrant) shall have received or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock of the Company by way of
dividend then, and in each case, the Holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Warrant
Shares receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional stock of the Company which such
Holder would hold on the date of such exercise had it been the holder of record
of Warrant Shares on the date hereof and had thereafter, during, the period from
the date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock receivable by it as aforesaid during such
period, giving effect to all adjustments called for during such period by
subparagraphs (b) and (c) of this Paragraph 5.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION.
In case of any reclassification or change of the outstanding securities of the
Company or of any reorganization of the Company, then and in each such case the
Holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, chance, or reorganization, shall be
entitled to receive, in lieu of or in addition to the stock or other securities
and property receivable upon the exercise hereof prior to such consummation, the
stock or other securities to which such Holder would have been entitled upon
such consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in subparagraphs (a) and
(c); in each such case, the terms of this Paragraph 5 shall be applicable to the
shares of stock or other securities and property receivable upon the exercise of
this Warrant after such consummation.
(c) STOCK SPLITS AND REVERSE. If the Company shall
subdivide its outstanding shares of Common Stock into a greater number of
shares, the Warrant Price in effect
4
<PAGE>
immediately prior to such subdivision shall thereby be proportionately reduced
and the number of Warrant Shares receivable upon exercise of this Warrant shall
thereby be proportionately increased; and, conversely, if the outstanding number
of shares of Common Stock shall be combined into a smaller number of shares, the
Warrant Price in effect immediately prior to such combination shall thereby be
proportionately increased and the number of Warrant Shares receivable upon
exercise of the Warrant shall be proportionately decreased.
6. NOTICES OF RECORD DATE, ETC. In the event of (a) any taking
by the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution (the "Distribution"), (b) any capital
reorganization or reclassification of the stated capital of the Company or any
consolidation or merger of the Company with any other corporation or
corporations (other than a wholly-owned subsidiary), or the sale or distribution
of all or substantially all of the Company's property and assets (the
"Reorganization Event"), or (c) any proposed filing of a registration statement
under the Act in connection with a primary public offering of the Company's
Common Stock (the "Registration Event"), the Company will mail or cause to be
mailed to the Holder a notice specifying (i) the date of any such Distribution
stating the amount and character of such Distribution, (ii) the date on which
any such Reorganization Event or Registration Event is expected to become
effective, and (iii) the time, if any, that is to be fixed as to when the
holders of record of the Company's securities shall be entitled to exchange
their shares of the Company's securities for securities or other property
deliverable upon such Reorganization Event. Such notice shall be mailed at least
thirty (30) days prior to the date therein specified.
7. Compliance with Act; Transferability and Negotiability of
Warrant; Disposition of Shares.
(a) COMPLIANCE WITH ACT. The Holder, by acceptance hereof,
agrees that this Warrant and the Warrant Shares to be issued upon the exercise
hereof are being acquired solely for its own account and not as a nominee for
any other party and not with a view toward the resale or distribution thereof
and that it will not offer, sell or otherwise dispose of this Warrant or any
Warrant Shares to be issued upon the exercise hereof except under circumstances
which will not result in a violation of the Act. Upon the exercise of this
Warrant, the Holder shall confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so issued are being acquired solely for its own
account and not as a nominee for any other party and not with a view toward
resale or distribution thereof in violation of the Act. This Warrant and the
Warrant Shares to be issued upon the exercise hereof (unless registered under
the Act and unless, in the case of the Warrant Shares, such Shares may thereupon
be sold pursuant to Commission Rule 144(k)) shall be imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER
5
<PAGE>
THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
In addition, this Warrant and the Warrant Shares to be issued upon the
exercise hereof shall bear any legends required by the securities laws of any
applicable states.
(b) TRANSFERABILITY AND NEGOTIABILITY OF WARRANT. This
Warrant may not be transferred or assigned in whole or in part without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, if requested by the Company and the transfer is to a person other than
a general partner of the initial Holder). Subject to the provisions of this
Warrant with respect to compliance with the Act, title to this Warrant may be
transferred by endorsement and delivery in the same manner as a negotiable
instrument transferable by endorsement and delivery; provided, however, that
prior to the Company's initial public offering neither this Warrant nor the
Warrant Shares purchasable with this Warrant may be transferred to any entity or
person which the Company reasonably determines to be an actual competitor of the
Company. The Company shall act promptly to record transfers of this Warrant on
its books, but the Company may treat the registered holder of this Warrant as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.
(c) DISPOSITION OF WARRANT SHARES. With respect to any
offer, sale, transfer or other disposition of any Warrant Shares acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
Shares, except for any such offer, sale, transfer or other disposition of
Warrant Shares to a partner of the initial Holder, the Holder and each
subsequent holder of this Warrant agrees to give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of legal counsel for such holder, reasonably satisfactory to the Company
and its legal counsel, if requested by the Company, to the effect that such
offer, sale or other disposition may be effected without registration or
qualification (under the Act or any other federal or state securities laws) of
such Warrant Shares and indicating whether or not under the Act, certificates
for such Warrant Shares to be sold or otherwise disposed of require any
restrictive legend as to the applicable restrictions on transferability in order
to ensure compliance with the Act. Promptly upon receiving such written notice
and reasonably satisfactory opinion, if so requested, the Company, as promptly
as practicable, shall notify such holder that such holder may sell or otherwise
dispose of such Warrant Shares, all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
subsection (c) that the opinion of legal counsel for the holder is not
reasonably satisfactory to the Company and its legal counsel, the Company shall
so notify the holder promptly after such determination has been made.
Notwithstanding the foregoing, such Warrant Shares may be offered, sold or
otherwise disposed of in accordance with Rule 144, provided that the Company
shall have been furnished with such information as the Company
6
<PAGE>
may reasonably request to provide a reasonable assurance that the provisions of
Rule 144 have been satisfied. Each certificate representing the Warrant Shares
thus transferred (except a transfer pursuant to Rule 144(k) or an effective
registration statement) shall bear a restrictive legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the aforesaid opinion of legal counsel for the holder, such legend is
not required in order to ensure compliance with the Act. The Company may issue
stop transfer instructions to its transfer agent in connection with such
restrictions.
8. RIGHTS OF SHAREHOLDERS. No Holder shall be entitled to vote
or receive dividends or be deemed the holder of Warrant Shares or any other
securities of the Company which may at any time be issuable on the exercise of
this Warrant for any purpose, nor shall anything contained herein be construed
to confer upon the Holder, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares issuable upon exercise hereof shall have become
deliverable, as provided herein.
9. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
10. EXCHANGE OF WARRANT. Subject to the other provisions of this
Warrant, on surrender of this Warrant for exchange, properly endorsed and
subject to the provisions of this Warrant with respect to compliance with the
Act, the Company at its expense shall issue to or on the order of the Holder a
new warrant or warrants of like tenor, in the name of the Holder or as the
Holder (on payment by the Holder of any applicable transfer taxes) may direct,
for the number of Shares issuable upon exercise thereof.
11. NOTICES. All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or three days after being mailed by first-class registered
or certified mail, postage prepaid, at such address as may have been furnished
to the Company or the Holder, as the case may be, in writing by the Company or
such Holder from time to time.
12. WAIVER. 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.
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<PAGE>
13. GOVERNING LAW. This Warrant shall be governed by and
construed in accordance with the laws of the State of California, as such laws
are applied to agreements entered into in California and to be performed solely
by California residents.
14. TITLES AND SUBTITLES; FORMS OF PRONOUNS. The titles of the
Sections and Subsections of this Warrant are for convenience only and are not to
be considered in construing this Warrant. All pronouns used in this Warrant
shall be deemed to include masculine, feminine and neuter forms.
15. EXPIRATION. Subject to the provisions of Section 3 above, the
right to exercise this Warrant shall expire at 5:00 P.M. California time, on
April 1 2006.
Dated: April 13, 1999
COLLEGE CLUB.COM
By: /s/ Eric D. Rindahl
------------------------------------
Eric Rindahl, Chief Financial Officer
8
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be signed only on exercise of Warrant)
TO: COLLEGE CLUB.COM
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 COLLEGE CLUB.COM and herewith makes payment of $____________
therefor (either in cash or in cancellation of fees due for legal services
rendered or in accordance with the cashless exercise provisions of Section 4(b))
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)
<PAGE>
EXHIBIT 10.5
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
COLLEGE CLUB.COM, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Executive One Associates
("Holder") is entitled to purchase six thousand (6,000) shares of Common Stock
("Warrant Shares") of COLLEGE CLUB.COM, INC., a Delaware corporation (the
"Company"), at the Warrant Price (as defined in subsection 1(J) below) of Three
Dollars and Forty-Six Cents ($3.46), subject to adjustments and all other terms
and conditions set forth in this Warrant.
1. DEFINITIONS. As used herein, the following terms, unless the context
otherwise requires, shall have the following meanings:
(a) "Acquisition" means any sale or other disposition of all
or substantially all of the asset of the company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than fifty percent (50%)
of the outstanding voting securities of the surviving, entity after the
transaction.
(b) "Act" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(c) "Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Act.
(d) "Common Stock" shall mean shares of the Company's
presently or subsequently authorized Common Stock, and any stock into which such
Common Stock may hereafter be exchanged.
(e) "Company" shall mean COLLEGE CLUB.COM. INC., a Delaware
corporation, and any corporation which shall succeed to or assume the
obligations of COLLEGE CLUB.COM, INC., under this Warrant.
<PAGE>
(f) "Date of Grant" shall mean November 23, 1999.
(g) "Exercise Date" shall mean the effective date of the
delivery of the Notice of Exercise pursuant to Sections 4 and 12 below.
(h) "Holder" shall mean EXECUTIVE ONE ASSOCIATES. or any other
person or entity who shall at the time be the registered holder of this Warrant.
(i) "Shares" shall mean shares of the Company's Common Stock,
as described in the Company's Articles of Incorporation.
(j) "Warrant Price" shall mean $3.46 per share.
2. ISSUANCE OF WARRANT AND CONSIDERATION THEREFOR. This Warrant is
issued in consideration of Holder's agreement to lease office space to the
Company.
3. TERM. The purchase right represented by this Warrant is exercisable
only during the period commencing upon the date hereof and ending on November
23, 2004.
4. EXERCISE OF WARRANT.
(a) EXERCISE. This Warrant may be exercised, in whole or in
part, by the Holder hereof by surrender of this Warrant with the form of
subscription at the end hereof duly executed by the 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 Warrant Shares for which this Warrant is being
exercised by the Warrant Price then in effect.
(b) DELIVERY OF CERTIFICATE. In the event of any exercise of
the purchase right represented by this Warrant, certificates for the Warrant
Shares so purchased shall be delivered to the Holder within thirty (30) days of
delivery of the notice of exercise (the "Notice of Exercise") in the form of
EXHIBIT A attached hereto and, unless this Warrant has been fully exercised or
has expired, a new warrant representing the portion of the Warrant Shares with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder within such thirty (30) day period.
(c) NO FRACTIONAL SHARES. No fractional shares shall be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Fair Market
Value of a share of Common Stock as of the Exercise Date. Fair Market Value of a
share of Common Stock as of a particular date (the "Determination Date") shall
mean:
(i) If the Company's Common Stock is traded on an
exchange or is quoted on the Nasdaq National Market, then the closing or last
sale price, respectively, reported for the last business day immediately
preceding the Determination Date.
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<PAGE>
(ii) If the Company's Common Stock is not traded on
an exchange or on the Nasdaq National Market but is traded in the
over-the-counter market, then the mean of the closing bid and asked prices
reported for the last business day immediately preceding the Determination Date.
(iii) If the Company's Common Stock is not publicly
traded, then as determined in good faith by the Company's Board of Directors
upon review of relevant factors.
(iv) If the Determination Date is the date on which
the Company's Common Stock is first sold to the public by the Company in a firm
commitment public offering under the Act, then the initial public offering price
(before deducting commissions, discounts or expenses) at which the Common Stock
is sold in such offering.
(d) COMPANY'S REPRESENTATIONS.
(i) All Warrant Shares which may be issued upon the
exercise of the purchase right represented by this Warrant shall, upon issuance,
be duly authorized, validly issued, fully paid and nonassessable, and free of
any liens and encumbrances except for restrictions on transfer provided for
herein or under applicable federal and state securities laws. During the period
within which the purchase right represented by this Warrant may be exercised,
the Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of the purchase right represented by this Warrant, a
sufficient number of Warrant Shares to provide for the exercise of the purchase
right represented by this Warrant;
(ii) This Warrant has been duly authorized and
executed by the Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting the" enforcement of creditors' rights;
(iii) The execution and delivery of this Warrant are
not, and the issuance of the Warrant Shares upon exercise of this Warrant in
accordance, with the terms hereof will not be inconsistent with the Charter or
Bylaws, do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a material default under, any
material indenture, mortgage, contract or other instrument of which the Company
is a party or by which it is bound or require the consent or approval of, the
giving of notice to, the registration or filling with or the taking of any
action in respect of or by, any federal, state or local government authority or
agency (other than such consents, approvals, notices, actions, filings, etc., as
have already been obtained or made, as the case may be).
5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The number
of securities issuable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
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<PAGE>
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or
from time to time the holders of the Common Stock of the Company (or any shares
of stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock of the Company by way of
dividend then, and in each case, the Holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Warrant
Shares receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional stock of the Company which such
Holder would hold on the date of such exercise had it been the holder of record
of Warrant Shares on the date hereof and had thereafter, during, the period from
the date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock receivable by it as aforesaid during such
period, giving effect to all adjustments called for during such period by
subparagraphs (b) and (c) and of this Paragraph 5.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case
of any reclassification or change of the outstanding securities of the Company
or of any reorganization of the Company, then and in each such case the Holder
of this Warrant, upon the exercise hereof at any time after the consummation of
such reclassification, change, or reorganization, shall be entitled to receive,
in lieu of or in addition to the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the stock or
other securities to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in subparagraphs (a) and
(c); in each such case, the terms of this Paragraph 5 shall be applicable to the
shares of stock or other securities and property receivable upon the exercise of
this Warrant after such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If the Company
shall subdivide its outstanding shares of Common Stock into a greater number of
shares, the Warrant Price in effect immediately prior to such subdivision shall
thereby be proportionately reduced and the number of Warrant Shares receivable
upon exercise of this Warrant shall thereby be proportionately increased; and,
conversely, if the outstanding number of shares of Common Stock shall be
combined into a smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall thereby be proportionately increased
and the number of Warrant Shares receivable upon exercise of the Warrant shall
be proportionately decreased.
6. TERMINATION ON ACQUISITION. This Warrant shall terminate, if not
earlier exercised, in the event of an Acquisition. In the event the Company is
proposed to be acquired, in addition to the notice requirements of Section 7
hereof, the Company shall provide the Holder with all information with respect
to the Acquisition that is otherwise provided to shareholders 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. The Holder shall have the right to exercise this Warrant on or
prior to the closing date with respect to the proposed Acquisition; if the
Warrant is not exercised on or prior to such closing date, the Warrant shall
expire upon the occurrence of the closing of the Acquisition.
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<PAGE>
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 of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution (the "Distribution"), (b) any capital reorganization or
reclassification of the stated capital of the Company or any consolidation or
merger of the Company with any other corporation or corporations (other than a
wholly-owned subsidiary), or the sale or distribution of all or substantially
all of the Company's property and assets (the "Reorganization Event"), or (c)
any proposed filing, of a registration statement under the Act in connection
with a primary public offering of the Company's Common Stock (the "Registration
Event"), the Company will mail or cause to be mailed to the Holder a notice
specifying (i) the date of any such Distribution stating the amount and
character of such Distribution, (ii) the date on which any such Reorganization
Event or Registration Event is expected to become effective, and (iii) the time,
if any, that is to be fixed as to when the holders of record of the Company's
securities shall be entitled to exchange their shares of the Company's
securities for securities or other property deliverable upon such Reorganization
Event. Such notice shall be mailed at least thirty (30) days prior to the date
therein specified.
8. Compliance with Act; Transferability and Negotiability of Warrant;
Disposition of Shares.
(a) COMPLIANCE WITH ACT. The Holder, by acceptance hereof,
agrees that this Warrant and the Warrant Shares to be issued upon the exercise
hereof are being acquired solely for its own account and not as a nominee for
any other party and not with a view toward the resale or distribution thereof
and that it will not offer, sell or otherwise dispose of this Warrant or any
Warrant Shares to be issued upon the exercise hereof except under circumstances
which will not result in a violation of the Act. Upon the exercise of this
Warrant, the Holder shall confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so issued are being acquired solely for its own
account and not as a nominee for any other party and not with a view toward
resale or distribution thereof in violation of the Act. This Warrant and the
Warrant Shares to be issued upon the exercise hereof (unless registered under
the Act and unless, in the case of the Warrant Shares, such Shares may thereupon
be sold pursuant to Commission Rule 144(k)) shall be imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER
THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
5
<PAGE>
In addition, this Warrant and the Warrant Shares to be issued upon the
exercise hereof shall bear any legends required by the securities laws of any
applicable states.
(b) TRANSFERABILITY AND NEGOTIABILITY OF WARRANT. This Warrant
may not be transferred or assigned in whole or in part without the written
consent of the Company and compliance with all applicable federal and state
securities laws by the transferor and the transferee (including the delivery of
investment representation letters and legal opinions reasonably satisfactory to
the Company, if requested by the Company and the transfer is to a person other
than a general partner of the initial Holder). Subject to the provisions of this
Warrant with respect to compliance with the Act, title to this Warrant may be
transferred by endorsement and delivery in the same manner as a negotiable
instrument transferable by endorsement and delivery; provided, however, that
prior to the Company's initial public offering neither this Warrant nor the
Warrant Shares purchasable with this Warrant may be transferred to any entity or
person which the Company reasonably determines to be an actual competitor of the
Company. The Company shall act promptly to record transfers of this Warrant on
its books, but the Company may treat the registered holder of this Warrant as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.
(c) DISPOSITION OF WARRANT SHARES. With respect to any offer,
sale, transfer or other disposition of any Warrant Shares acquired pursuant to
the exercise of this Warrant prior to registration of such Warrant Shares,
except for any such offer, sale, transfer or other disposition of Warrant Shares
to a partner or affiliate of the initial Holder, the Holder and each subsequent
holder of this Warrant agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of legal counsel for such holder, reasonably satisfactory to the Company and its
legal counsel, if requested by the Company, to the effect that such offer, sale
or other disposition may be effected without registration or qualification
(under the Act or any other federal or state securities laws) of such Warrant
Shares and indicating whether or not under the Act, certificates for such
Warrant Shares to be sold or otherwise disposed of require any restrictive
legend as to the applicable restrictions on transferability in order to ensure
compliance with the Act. Promptly upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify such holder that such holder may sell or otherwise
dispose of such Warrant Shares, all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
subsection (c) that the opinion of legal counsel for the holder is not
reasonably satisfactory to the Company and its legal counsel, the Company shall
so notify the holder promptly after such determination has been made. Not
withstanding the foregoing, such Warrant Shares may be offered, sold or
otherwise disposed of in accordance with Rule 144, provided that the Company
shall have been furnished with such information as the Company may reasonably
request to provide a reasonable assurance that the provisions of Rule 144 have
been satisfied. Each certificate representing the Warrant Shares thus
transferred (except a transfer pursuant to Rule 144(k) or an effective
registration statement) shall bear a restrictive legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the aforesaid opinion of legal counsel for the holder, such legend is
not required in order to ensure compliance with the Act. The Company may issue
stop transfer instructions to its transfer agent in connection with such
restrictions.
6
<PAGE>
9. RIGHTS OF SHAREHOLDERS. No Holder shall be entitled to vote or
receive dividends or be deemed the holder of Warrant Shares or any other
securities of the Company which may at any time be issuable on the exercise of
this Warrant for any purpose, nor shall anything contained herein be construed
to confer upon the Holder, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares issuable upon exercise hereof shall have become
deliverable, as provided herein.
10. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
11. EXCHANGE OF WARRANT. Subject to the other provisions of this
Warrant, on surrender of this Warrant for exchange, properly endorsed and
subject to the provisions of this Warrant with respect to compliance with the
Act, the Company at its expense shall issue to or on the order of the Holder a
new warrant or warrants of like tenor, in the name of the Holder or as the
Holder (on payment by the Holder of any applicable transfer taxes) may direct,
for the number of Shares issuable upon exercise thereof.
12. NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or three days after being mailed by first-class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company or the Holder, as the case may be, in writing by the Company or such
Holder from time to time.
13. WAIVER. 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.
14. GOVERNING LAW, This Warrant shall be governed by and construed in
accordance with the laws of the State of California, as such laws are applied to
agreements entered into in California and to be performed solely by California
residents.
15. TITLES AND SUBTITLES; FORMS OF PRONOUNS. The titles of the Sections
and Subsections of this Warrant are for convenience only and are not to be
considered in construing this Warrant. All pronouns used in this Warrant shall
be deemed to include masculine, feminine and neuter forms.
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<PAGE>
16. EXPIRATION. Subject to the provisions of Section 3 above, the right
to exercise this Warrant shall expire at 5:00 P.M. California time, on November
23, 2004.
Dated: November 23, 1999
COLLEGE CLUB.COM, INC.
By: /s/ Eric F. Rindahl
-------------------------------------
Eric F. Rindahl, CFO
8
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be signed only on exercise of Warrant)
TO: COLLEGE CLUB.COM, 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 COLLEGE CLUB.COM, INC., and herewith makes payment of
$________________ therefor in cash 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)
<PAGE>
EXHIBIT 10.6
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
COLLEGECLUB.COM, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Alan Weisman ("Holder") is entitled
to purchase fifty thousand (50,000) shares of Common Stock ("Warrant Shares")
of COLLEGECLUB.COM, INC., a Delaware corporation (the "Company"), at the
Warrant Price (as defined in subsection 1(j) below) of sixty-six cents
($0.66), subject to adjustments and all other terms and conditions set forth
in this Warrant.
1. DEFINITIONS. As used herein, the following terms, unless the context
otherwise requires, shall have the following meanings:
(a) "Acquisition" means any sale or other disposition of all
or substantially all of the assets of the company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than fifty percent (50%)
of the outstanding voting securities of the surviving entity after the
transaction.
(b) "Act" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(c) "Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Act.
(d) "Common Stock" shall mean shares of the Company's
presently or subsequently authorized Common Stock, and any stock into which such
Common Stock may hereafter be exchanged.
(e) "Company" shall mean COLLEGECLUB.COM, INC., a Delaware
corporation, and any corporation which shall succeed to or assume the
obligations of COLLEGECLUB.COM, INC., under this Warrant.
<PAGE>
(f) "Date of Grant" shall mean May 29, 1998.
(g) "Exercise Date" shall mean the effective date of the
delivery of the Notice of Exercise pursuant to Sections 4 and 13 below.
(h) "Holder" shall mean Alan Weisman or any other person or
entity who shall at the time be the registered holder of this Warrant.
(i) "Shares" shall mean shares of the Company's Common Stock,
as described in the Company's Certificate of Incorporation.
(j) "Warrant Price" shall mean $0.66 per share.
2. ISSUANCE OF WARRANT AND CONSIDERATION THEREFOR. This Warrant is
issued in consideration of Holder's agreement to cancel that certain Sales
Representative Agreement dated October 7, 1996, and in full satisfaction of any
and all commissions due Holder thereunder.
3. TERM. The purchase right represented by this Warrant is exercisable
only during the period commencing upon the date hereof and ending on May 28,
2003.
4. EXERCISE OF WARRANT.
(a) EXERCISE. This Warrant may be exercised, in whole or in
part, by the Holder hereof by surrender of this Warrant with the form of
subscription at the end hereof duly executed by the 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 Warrant Shares for which this Warrant is being
exercised by the Warrant Price then in effect.
(b) DELIVERY OF CERTIFICATE. In the event of any exercise of
the purchase right represented by this Warrant, certificates for the Warrant
Shares so purchased shall be delivered to the Holder within thirty (30) days of
delivery of the notice of exercise (the "Notice of Exercise") in the form of
EXHIBIT A attached hereto and, unless this Warrant has been fully exercised or
has expired, a new warrant representing the portion of the Warrant Shares with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder within such thirty (30) day period.
(c) NO FRACTIONAL SHARES. No fractional shares shall be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Fair Market
Value of a share of Common Stock as of the Exercise Date. Fair Market Value of a
share of Common Stock as of a particular date (the "Determination Date") shall
mean:
(i) If the Company's Common Stock is traded on an
exchange or is quoted on the Nasdaq National Market, then the closing or last
sale price, respectively, reported for the last business day immediately
preceding the Determination Date.
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(ii) If the Company's Common Stock is not traded on
an exchange or on the Nasdaq National Market but is traded in the
over-the-counter market, then the mean of the closing bid and asked prices
reported for the last business day immediately preceding the Determination Date.
(iii) If the Company's Common Stock is not publicly
traded, then as determined in good faith by the Company's Board of Directors
upon review of relevant factors.
(iv) If the Determination Date is the date on which
the Company's Common Stock is first sold to the public by the Company in a firm
commitment public offering under the Act, then the initial public offering price
(before deducting commissions, discounts or expenses) at which the Common Stock
is sold in such offering.
(d) COMPANY'S REPRESENTATIONS.
(i) All Warrant Shares which may be issued upon the
exercise of the purchase right represented by this Warrant shall, upon issuance,
be duly authorized, validly issued, fully paid and nonassessable, and free of
any liens and encumbrances except for restrictions on transfer provided for
herein or under applicable federal and state securities laws. During the period
within which the purchase right represented by this Warrant may be exercised,
the Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of the purchase right represented by this Warrant, a
sufficient number of Warrant Shares to provide for the exercise of the purchase
right represented by this Warrant;
(ii) This Warrant has been duly authorized and
executed by the Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting the enforcement of creditors' rights;
(iii) The execution and delivery of this Warrant are
not, and the issuance of the Warrant Shares upon exercise of this Warrant in
accordance with the terms hereof will not be inconsistent with the Charter or
Bylaws, do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a material default under, any
material indenture, mortgage, contract or other instrument of which the Company
is a party or by which it is bound or require the consent or approval of, the
giving of notice to, the registration or filing with or the taking of any action
in respect of or by, any federal, state or local government authority or agency
(other than such consents, approvals, notices, actions, filings, etc., as have
already been obtained or made, as the case may be).
5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The number
of securities issuable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
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(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or
from time to time the holders of the Common Stock of the Company (or any shares
of stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock of the Company by way of
dividend then, and in each case, the Holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Warrant
Shares receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional stock of the Company which such
Holder would hold on the date of such exercise had it been the holder of record
of Warrant Shares on the date hereof and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock receivable by it as aforesaid during such
period, giving effect to all adjustments called for during such period by
subparagraphs (b) and (c) and of this Paragraph 5.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case
of any reclassification or change of the outstanding securities of the Company
or of any reorganization of the Company, then and in each such case the Holder
of this Warrant, upon the exercise hereof at any time after the consummation of
such reclassification, change, or reorganization, shall be entitled to receive,
in lieu of or in addition to the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the stock or
other securities to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in subparagraphs (a) and
(c); in each such case, the terms of this Paragraph 5 shall be applicable to the
shares of stock or other securities and property receivable upon the exercise of
this Warrant after such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If, after the date
hereof, the Company shall subdivide its outstanding shares of Common Stock into
a greater number of shares, the Warrant Price in effect immediately prior to
such subdivision shall thereby be proportionately reduced and the number of
Warrant Shares receivable upon exercise of this Warrant shall thereby be
proportionately increased; and, conversely, if the outstanding number of shares
of Common Stock shall be combined into a smaller number of shares, the Warrant
Price in effect immediately prior to such combination shall thereby be
proportionately increased and the number of Warrant Shares receivable upon
exercise of the Warrant shall be proportionately decreased.
6. TERMINATION ON ACQUISITION. This Warrant shall terminate, if not
earlier exercised, in the event of an Acquisition. In the event the Company is
proposed to be acquired, in addition to the notice requirements of Section 7
hereof, the Company shall provide the Holder with all information with respect
to the Acquisition that is otherwise provided to shareholders 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. The Holder shall have the right to exercise this Warrant on or
prior to the closing date with respect to the proposed Acquisition; if the
Warrant is not exercised on or prior to such closing date, the Warrant shall
expire upon the occurrence of the closing of the Acquisition.
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<PAGE>
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 of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution (the "Distribution"), (b) any capital reorganization or
reclassification of the stated capital of the Company or any consolidation or
merger of the Company with any other corporation or corporations (other than a
wholly-owned subsidiary), or the sale or distribution of all or substantially
all of the Company's property and assets (the "Reorganization Event"), or (c)
any proposed filing of a registration statement under the Act in connection with
a primary public offering of the Company's Common Stock (the "Registration
Event"), the Company will mail or cause to be mailed to the Holder a notice
specifying (i) the date of any such Distribution stating the amount and
character of such Distribution, (ii) the date on which any such Reorganization
Event or Registration Event is expected to become effective, and (iii) the time,
if any, that is to be fixed as to when the holders of record of the Company's
securities shall be entitled to exchange their shares of the Company's
securities for securities or other property deliverable upon such Reorganization
Event. Such notice shall be mailed at least thirty (30) days prior to the date
therein specified.
8. Compliance with Act; Transferability and Negotiability of Warrant;
Disposition of Shares.
(a) COMPLIANCE WITH ACT. The Holder, by acceptance hereof,
agrees that this Warrant and the Warrant Shares to be issued upon the exercise
hereof are being acquired solely for its own account and not as a nominee for
any other party and not with a view toward the resale or distribution thereof
and that it will not offer, sell or otherwise dispose of this Warrant or any
Warrant Shares to be issued upon the exercise hereof except under circumstances
which will not result in a violation of the Act. Upon the exercise of this
Warrant, the Holder shall confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so issued are being acquired solely for its own
account and not as a nominee for any other party and not with a view toward
resale or distribution thereof in violation of the Act. This Warrant and the
Warrant Shares to be issued upon the exercise hereof (unless registered under
the Act and unless, in the case of the Warrant Shares, such Shares may thereupon
be sold pursuant to Commission Rule 144(k)) shall be imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER
THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
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In addition, this Warrant and the Warrant Shares to be issued upon the
exercise hereof shall bear any legends required by the securities laws of any
applicable states.
(b) TRANSFERABILITY AND NEGOTIABILITY OF WARRANT. This Warrant may not
be transferred or assigned in whole or in part without the prior written consent
of the Company, which consent shall not be unreasonably withheld, and compliance
with all applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if requested by the
Company and the transfer is to a person other than a general partner of the
initial Holder). Subject to the provisions of this Warrant with respect to
compliance with the Act, title to this Warrant may be transferred by endorsement
and delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery; provided, however, that prior to the Company's initial
public offering neither this Warrant nor the Warrant Shares purchasable with
this Warrant may be transferred to any entity or person which the Company
reasonably determines to be an actual competitor of the Company. The Company
shall act promptly to record transfers of this Warrant on its books, but the
Company may treat the registered holder of this Warrant as the absolute owner of
this Warrant for all purposes, notwithstanding any notice to the contrary.
(c) DISPOSITION OF WARRANT SHARES. With respect to any offer, sale,
transfer or other disposition of any Warrant Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant Shares, except
for any such offer, sale, transfer or other disposition of Warrant Shares to a
partner or affiliate of the initial Holder, the Holder and each subsequent
holder of this Warrant agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of legal counsel for such holder, reasonably satisfactory to the Company and its
legal counsel, if requested by the Company, to the effect that such offer, sale
or other disposition may be effected without registration or qualification
(under the Act or any other federal or state securities laws) of such Warrant
Shares and indicating whether or not under the Act, certificates for such
Warrant Shares to be sold or otherwise disposed of require any restrictive
legend as to the applicable restrictions on transferability in order to ensure
compliance with the Act. Promptly upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify such holder that such holder may sell or otherwise
dispose of such Warrant Shares, all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
subsection (c) that the opinion of legal counsel for the holder is not
reasonably satisfactory to the Company and its legal counsel, the Company shall
so notify the holder promptly after such determination has been made.
Notwithstanding the foregoing, such Warrant Shares may be offered, sold or
otherwise disposed of in accordance with Rule 144, provided that the Company
shall have been furnished with such information as the Company may reasonably
request to provide a reasonable assurance that the provisions of Rule 144 have
been satisfied. Each certificate representing the Warrant Shares thus
transferred (except a transfer pursuant to Rule 144(k) or an effective
registration statement) shall bear a restrictive legend as to the applicable
restrictions on transferability in order to ensure compliance with the Act,
unless in the aforesaid opinion of legal counsel for the holder, such legend is
not
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<PAGE>
required in order to ensure compliance with the Act. The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions.
9. RIGHTS OF SHAREHOLDERS. No Holder shall be entitled to vote or
receive dividends or be deemed the holder of Warrant Shares or any other
securities of the Company which may at any time be issuable on the exercise of
this Warrant for any purpose, nor shall anything contained herein be construed
to confer upon the Holder, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares issuable upon exercise hereof shall have become
deliverable, as provided herein.
10. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
11. "MARKET STAND-OFF"AGREEMENT. Holder hereby agrees that in
connection with any underwritten public offering by the Company, Holder shall
not, to the extent requested by the Company and an underwriter of Common Stock
of the Company, directly or indirectly sell, offer to sell, contract to sell,
grant any option to purchase, pledge or otherwise transfer or dispose of any
securities of the Company held by the Holder for a period of one hundred eighty
(180) days following the effective date of the registration statement of the
Company filed under the Act with respect to such offering.
12. EXCHANGE OF WARRANT. Subject to the other provisions of this
Warrant, on surrender of this Warrant for exchange, properly endorsed and
subject to the provisions of this Warrant with respect to compliance with the
Act, the Company at its expense shall issue to or on the order of the Holder a
new warrant or warrants of like tenor, in the name of the Holder or as the
Holder (on payment by the Holder of any applicable transfer taxes) may direct,
for the number of Shares issuable upon exercise thereof.
13. NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or three days after being mailed by first-class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company or the Holder, as the case may be, in writing by the Company or such
Holder from time to time.
14. WAIVER. 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.
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<PAGE>
15. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, as such laws are applied to
agreements entered into in California and to be performed solely by California
residents.
16. TITLES AND SUBTITLES; FORMS OF PRONOUNS. The titles of the Sections
and Subsections of this Warrant are for convenience only and are not to be
considered in construing this Warrant. All pronouns used in this Warrant shall
be deemed to include masculine, feminine and neuter forms.
17. EXPIRATION. Subject to the provisions of Section 3 above, the right
to exercise this Warrant shall expire at 5:00 P.M. California time, on May 28,
2003.
Effective as of May 29, 1998
COLLEGE CLUB.COM, INC.
By: /s/ Raffaele G. Fazio
-----------------------------------
Raffaele G. Fazio
Vice President, Legal
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<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be signed only on exercise of Warrant)
TO: COLLEGECLUB.COM, 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 COLLEGECLUB.COM, INC., and herewith makes payment of
$________________ therefor in cash 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>
EXHIBIT 10.7
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
COLLEGE CLUB.COM, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Alan Weisman ("Holder") is
entitled to purchase one hundred thousand (100,000) shares of Common Stock
("Warrant Shares") of COLLEGE CLUB.COM, a Delaware corporation (the "Company"),
at the Warrant Price (as defined in subsection 1(j) below) of three dollars and
forty-six cents ($3.46), subject to adjustments and all other terms and
conditions set forth in this Warrant.
1. DEFINITIONS. As used herein, the following terms, unless the context
otherwise requires, shall have the following meanings:
(a) "Acquisition" means any sale or other disposition of all
or substantially all of the asset of the company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than fifty percent (50%)
of the outstanding voting securities of the surviving entity after the
transaction.
(b) "Act" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(c) "Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Act.
(d) "Common Stock" shall mean shares of the Company's
presently or subsequently authorized Common Stock, and any stock into which such
Common Stock may hereafter be exchanged.
(e) "Company" shall mean COLLEGE CLUB.COM, INC., a Delaware
corporation, and any corporation which shall succeed to or assume the
obligations of COLLEGE CLUB.COM, INC., under this Warrant.
<PAGE>
(f) "Date of Grant" shall mean March 15, 2000.
(g) "Exercise Date" shall mean the effective date of the
delivery of the Notice of Exercise pursuant to Sections 4 and 13 below.
(h) "Holder" shall mean Alan Weisman or any other person or
entity who shall at the time be the registered holder of this Warrant.
(i) "Shares" shall mean shares of the Company's Common Stock,
as described in the Company's Certificate of Incorporation.
(j) "Warrant Price" shall mean $3.46 per share.
2. ISSUANCE OF WARRANT AND CONSIDERATION THEREFOR. This Warrant is
issued in consideration of Holder's agreement to terminate that certain CASS
On-Line Recruiter (CORE) Agreement dated October 7, 1996 and in full
satisfaction of any and all obligations of the Company thereunder.
3. TERM. The purchase right represented by this Warrant is exercisable
only during the period commencing upon the date hereof and ending on March 15,
2005.
4. EXERCISE OF WARRANT.
(a) EXERCISE. This Warrant may be exercised, in whole or in
part, by the Holder hereof by surrender of this Warrant with the form of
subscription at the end hereof duly executed by the 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 Warrant Shares for which this Warrant is being
exercised by the Warrant Price then in effect.
(b) DELIVERY OF CERTIFICATE. In the event of any exercise of
the purchase right represented by this Warrant, certificates for the Warrant
Shares so purchased shall be delivered to the Holder within thirty (30) days of
delivery of the notice of exercise (the "Notice of Exercise") in the form of
EXHIBIT A attached hereto and, unless this Warrant has been fully exercised or
has expired, a new warrant representing the portion of the Warrant Shares with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder within such thirty (30) day period.
(c) NO FRACTIONAL SHARES. No fractional shares shall be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Fair Market
Value of a share of Common Stock as of the Exercise Date. Fair Market Value of a
share of Common Stock as of a particular date (the "Determination Date") shall
mean:
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<PAGE>
(i) If the Company's Common Stock is traded on an
exchange or is quoted on the Nasdaq National Market, then the closing or last
sale price, respectively, reported for the last business day immediately
preceding the Determination Date.
(ii) If the Company's Common Stock is not traded on
an exchange or on the Nasdaq National Market but is traded in the
over-the-counter market, then the mean of the closing bid and asked prices
reported for the last business day immediately preceding the Determination Date.
(iii) If the Company's Common Stock is not publicly
traded, then as determined in good faith by the Company's Board of Directors
upon review of relevant factors.
(iv) If the Determination Date is the date on which
the Company's Common Stock is first sold to the public by the Company in a firm
commitment public offering under the Act, then the initial public offering price
(before deducting commissions, discounts or expenses) at which the Common Stock
is sold in such offering.
(d) COMPANY'S REPRESENTATIONS.
(i) All Warrant Shares which may be issued upon the
exercise of the purchase right represented by this Warrant shall, upon issuance,
be duly authorized, validly issued, fully paid and nonassessable, and free of
any liens and encumbrances except for restrictions on transfer provided for
herein or under applicable federal and state securities laws. During the period
within which the purchase right represented by this Warrant may be exercised,
the Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of the purchase right represented by this Warrant, a
sufficient number of Warrant Shares to provide for the exercise of the purchase
right represented by this Warrant;
(ii) This Warrant has been duly authorized and
executed by the Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting the enforcement of creditors' rights;
(iii) The execution and delivery of this Warrant are
not, and the issuance of the Warrant Shares upon exercise of this Warrant in
accordance with the terms hereof will not be inconsistent with the Charter or
Bylaws, do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a material default under, any
material indenture, mortgage, contract or other instrument of which the Company
is a party or by which it is bound or require the consent or approval of, the
giving of notice to, the registration or filing or the taking of any action in
respect of or by, any federal, state or local government authority or agency
(other than such consents, approvals, notices, actions, filings, etc., as have
already been obtained or made, as the case may be).
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<PAGE>
5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The number
of securities issuable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or
from time to time the holders of the Common Stock of the Company (or any shares
of stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock of the Company by way of
dividend then, and in each case, the Holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Warrant
Shares receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional stock of the Company which such
Holder would hold on the date of such exercise had it been the holder of record
of Warrant Shares on the date hereof and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock receivable by it as aforesaid during such
period, giving effect to all adjustments called for during such period by
subparagraphs (b) and (c) and of this Paragraph 5.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case
of any reclassification or change of the outstanding securities of the Company
or of any reorganization of the Company, then and in each such case the Holder
of this Warrant, upon the exercise hereof at any time after the consummation of
such reclassification, change, or reorganization, shall be entitled to receive,
in lieu of or in addition to the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the stock or
other securities to which such Holder would have been entitled upon such
consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in subparagraphs (a) and
(c); in each such case, the terms of this Paragraph 5 shall be applicable to the
shares of stock or other securities and property receivable upon the exercise of
this Warrant after such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If, after the date
hereof, the Company shall subdivide its outstanding shares of Common Stock into
a greater number of shares, the Warrant Price in effect immediately prior to
such subdivision shall thereby be proportionately reduced and the number of
Warrant Shares receivable upon exercise of this Warrant shall thereby be
proportionately increased, and, conversely, if the outstanding number of shares
of Common Stock shall be combined into a smaller number of shares, the Warrant
Price in effect immediately prior to such combination shall thereby be
proportionately increased and the number of Warrant Shares receivable upon
exercise of the Warrant shall be proportionately decreased.
6. TERMINATION ON ACQUISITION. This Warrant shall terminate, if not
earlier exercised, in the event of an Acquisition. In the event the Company is
proposed to be acquired, in addition to the notice requirements of Section 7
hereof, the Company shall provide the Holder with all information with respect
to the Acquisition that is otherwise provided to shareholders 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. The
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<PAGE>
Holder shall have the right to exercise this Warrant on or prior to the closing
date with respect to the proposed Acquisition; if the Warrant is not exercised
on or prior to such closing date, the Warrant shall expire upon the occurrence
of the closing of the Acquisition.
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 of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution (the "Distribution"), (b) any capital reorganization or
reclassification of the stated capital of the Company or any consolidation or
merger of the Company with any other corporation or corporations (other than a
wholly-owned subsidiary), or the sale or distribution of all or substantially
all of the Company's property and assets (the "Reorganization Event"), or (c)
any proposed filing of a registration statement under the Act in connection with
a primary public offering of the Company's Common Stock (the "Registration
Event"), the Company will mail or cause to be mailed to the Holder a notice
specifying (i) the date of any such Distribution stating the amount and
character of such Distribution, (ii) the date on which any such Reorganization
Event or Registration Event is expected to become effective, and (iii) the time,
if any, that is to be fixed as to when the holders of record of the Company's
securities shall be entitled to exchange their shares of the Company's
securities for securities or other property deliverable upon such Reorganization
Event. Such notice shall be mailed at least thirty (30) days prior to the date
therein specified.
8. Compliance with Act; Transferability and Negotiability of Warrant;
Disposition of Shares.
(a) COMPLIANCE WITH ACT. The Holder, by acceptance hereof,
agrees that this Warrant and the Warrant Shares to be issued upon the exercise
hereof are being acquired solely for its own account and not as a nominee for
any other party and not with a view toward the resale or distribution thereof
and that it will not offer, sell or otherwise dispose of this Warrant or any
Warrant Shares to be issued upon the exercise hereof except under circumstances
which will not result in a violation of the Act. Upon the exercise of this
Warrant, the Holder shall confirm in writing in a form satisfactory to the
Company, that the Warrant Shares so issued are being acquired solely for its own
account and not as a nominee for any other party and not with a view toward
resale or distribution thereof in violation of the Act. This Warrant and the
Warrant Shares to be issued upon the exercise hereof (unless registered under
the Act and unless, in the case of the Warrant Shares, such Shares may thereupon
be sold pursuant to Commission Rule 144(k)) shall be imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER
THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER,
5
<PAGE>
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
In addition, this Warrant and the Warrant Shares to be issued upon the
exercise hereof shall bear any legends required by the securities laws of any
applicable states.
(b) TRANSFERABILITY AND NEGOTIABILITY OF WARRANT. This Warrant
may not be transferred or assigned in whole or in part without the written
consent of the Company and compliance with all applicable federal and state
securities laws by the transferor and the transferee (including the delivery of
investment representation letters and legal opinions reasonably satisfactory to
the Company, if requested by the Company and the transfer is to a person other
than a general partner of the initial Holder). Subject to the provisions of this
Warrant with respect to compliance with the Act, title to this Warrant may be
transferred by endorsement and delivery in the same manner as a negotiable
instrument transferable by endorsement and delivery; provided, however, that
prior to the Company's initial public offering neither this Warrant nor the
Warrant Shares purchasable with this Warrant may be transferred to any entity or
person which the Company reasonably determines to be an actual competitor of the
Company. The Company shall act promptly to record transfers of this Warrant on
its books, but the Company may treat the registered holder of this Warrant as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.
(c) DISPOSITION OF WARRANT SHARES. With respect to any offer,
sale, transfer or other disposition of any Warrant Shares acquired pursuant to
the exercise of this Warrant prior to registration of such Warrant Shares,
except for any such offer, sale, transfer or other disposition of Warrant Shares
to a partner or affiliate of the initial Holder, the Holder and each subsequent
holder of this Warrant Shares to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of legal counsel for such holder, reasonably satisfactory to the Company and its
legal counsel, if requested by the Company, to the effect that such offer, sale,
or other disposition may be effected without registration or qualification
(under the Act or any other federal or state securities laws) of such Warrant
Shares and indicating whether or not under the Act, certificates for such
Warrant Shares to be sold or otherwise disposed of require any restrictive
legend as to the applicable restrictions on transferability in order to ensure
compliance with the Act. Promptly upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify such holder that such holder may sell or otherwise
dispose of such Warrant Shares, all in accordance with the terms of the notice
delivered to the Company. If a determination has been made pursuant to this
subsection (c) that the opinion of legal counsel for the holder is not
reasonably satisfactory to the Company and its legal counsel, the Company shall
so notify the holder promptly after such determination has been made.
Notwithstanding the foregoing, such Warrant Shares may be offered, sold or
otherwise disposed of in accordance with Rule 144, provided that the Company
shall have been furnished with such information as the Company may reasonably
request to provide a reasonable assurance that the provisions of Rule 144 have
been satisfied. Each certificate representing the Warrant Shares thus
transferred (except a transfer pursuant to Rule 144(k) or an effective
registration statement) shall bear a restrictive legend as to the applicable
restrictions on transferability in order to ensure compliance
6
<PAGE>
with the Act, unless in the aforesaid opinion of legal counsel for the holder,
such legend is not required in order to ensure compliance with the Act. The
Company may issue stop transfer instructions to its transfer agent in connection
with such restrictions.
9. RIGHTS OF SHAREHOLDERS. No Holder shall be entitled to vote or
receive dividends or be deemed the holder of Warrant Shares or any other
securities of the Company which may at any time be issuable on the exercise of
this Warrant for any purpose, nor shall anything contained herein be construed
to confer upon the Holder, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares issuable upon exercise hereof shall have become
deliverable, as provided herein.
10. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
11. "MARKET STAND-OFF" AGREEMENT. Holder hereby agrees that in
connection with any underwritten public offering by the Company, Purchaser shall
not, to the extent requested by the Company and an underwriter of Common Stock
of the Company, directly or indirectly sell, offer to sell, contract to sell,
grant any option to purchase, pledge or otherwise transfer or dispose of any
securities of the Company held by the Holder for a period of one hundred eighty
(180) days following the effective date of the registration statement of the
Company filed under the Act with respect to such offering.
12. EXCHANGE OF WARRANT. Subject to the other provisions of this
Warrant, on surrender of this Warrant for exchange, properly endorsed and
subject to the provisions of this Warrant with respect to compliance with the
Act, the Company at its expense shall issue to or on the order of the Holder a
new warrant or warrants of like tenor, in the name of the Holder or as the
Holder (on payment by the Holder of any applicable transfer taxes) may direct,
for the number of Shares issuable upon exercise thereof.
13. NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or three days after being mailed by first-class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company or the Holder, as the case may be, in writing by the Company or such
Holder from time to time.
7
<PAGE>
14. WAIVER. 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.
15. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, as such laws are applied to
agreements entered into in California and to be performed solely by California
residents.
16. TITLES AND SUBTITLES; FORMS OF PRONOUNS. The titles of the Sections
and Subsections of this Warrant are for convenience only and are not to be
considered in construing this Warrant. All pronouns used in this Warrant shall
be deemed to include masculine, feminine and neuter forms.
17. EXPIRATION. Subject to the provisions of Section 3 above, the right
to exercise this Warrant shall expire at 5:00 P.M. California time, on March 15,
2005.
Effective as of March 15, 2000
COLLEGE CLUB.COM, INC.
By: /s/ Raffaele G. Fazio
----------------------------------
Raffaele G. Fazio
Vice President, Legal
8
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be signed only on exercise of Warrant)
TO: COLLEGE CLUB.COM, 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 COLLEGE CLUB.COM, INC., and herewith makes payment of
$________________ therefor in cash 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)
<PAGE>
EXHIBIT 10.8
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
COLLEGE CLUB.COM, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, ________________ ("Holder"), is
entitled to purchase ______________________ (_________) shares of Common
Stock ("Warrant Shares") of COLLEGE CLUB.COM, INC., a Delaware corporation
(the "Company"), at the Warrant Price (as defined in subsection 1(j) below)
of sixty-six cents ($0.66), subject to adjustments and all other terms and
conditions set forth in this Warrant.
1. DEFINITIONS. As used herein, the following terms, unless the context
otherwise requires, shall have the following meanings:
(a) "Acquisition" means any sale or other disposition of all or
substantially all of the asset of the company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than fifty percent (50%)
of the outstanding voting securities of the surviving entity after the
transaction.
(b) "Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(c) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Act.
(d) "Common Stock" shall mean shares of the Company's presently or
subsequently authorized Common Stock, and any stock into which such Common Stock
may hereafter be exchanged.
(e) "Company" shall mean COLLEGE CLUB.COM, INC., a Delaware
corporation, and any corporation which shall succeed to or assume the
obligations of COLLEGE CLUB.COM, INC., under this Warrant.
<PAGE>
(f) "Date of Grant" shall mean December 23, 1998.
(g) "Exercise Date" shall mean the effective date of the delivery of
the Notice of Exercise pursuant to Sections 4 and 12 below.
(h) "Holder" shall mean Gowan Company or any other person or entity
who shall at the time be the registered holder of this Warrant.
(i) "Shares" shall mean shares of the Company's Common Stock, as
described in the Company's Certificate of Incorporation.
(j) "Warrant Price" shall mean $0.66 per share.
2. ISSUANCE OF WARRANT AND CONSIDERATION THEREFOR. This Warrant is issued
in consideration of Holder entering into that certain Final Settlement Agreement
between Holder and the Company dated as of March 27, 2000.
3. TERM. The purchase right represented by this Warrant is exercisable only
during the period commencing upon the date hereof and ending on December 23,
2004.
4. EXERCISE OF WARRANT.
(a) EXERCISE. This Warrant may be exercised, in whole or in part, by
the Holder hereof by surrender of this Warrant with the form of subscription at
the end hereof duly executed by the Holder, to the Company at its principal
office, accompanied by payment either (i) 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 Warrant Shares for which this Warrant is being
exercised by the Warrant Price then in effect (the "Exercise Price") or (ii) by
delivery to the Company of shares of Common Stock with an aggregate Fair Market
Value equal to the Exercise Price.
(b) DELIVERY OF CERTIFICATE. In the event of any exercise of the
purchase right represented by this Warrant, certificates for the Warrant Shares
so purchased shall be delivered to the Holder within thirty (30) days of
delivery of the notice of exercise (the "Notice of Exercise") in the form of
EXHIBIT A attached hereto and, unless this Warrant has been fully exercised or
has expired, a new warrant representing the portion of the Warrant Shares with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder within such thirty (30) day period.
(c) NO FRACTIONAL SHARES. No fractional shares shall be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Fair Market
Value of a share of Common Stock as of the Exercise Date. Fair Market Value of a
share of Common Stock as of a particular date (the "Determination Date") shall
mean:
(i) If the Company's Common Stock is traded on an exchange or is
quoted on the Nasdaq National Market, then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date.
2
<PAGE>
(ii) If the Company's Common Stock is not traded on an exchange
or on the Nasdaq National Market but is traded in the over-the-counter market,
then the mean of the closing bid and asked prices reported for the last business
day immediately preceding the Determination Date.
(iii) If the Company's Common Stock is not publicly traded, then
as determined in good faith by the Company's Board of Directors upon review of
relevant factors.
(iv) If the Determination Date is the date on which the Company's
Common Stock is first sold to the public by the Company in a firm commitment
public offering under the Act, then the initial public offering price (before
deducting commissions, discounts or expenses) at which the Common Stock is sold
in such offering.
(d) COMPANY'S REPRESENTATIONS.
(i) All Warrant Shares which may be issued upon the exercise of
the purchase right represented by this Warrant shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws. During the period within
which the purchase right represented by this Warrant may be exercised, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of the purchase right represented by this Warrant, a
sufficient number of Warrant Shares to provide for the exercise of the purchase
right represented by this Warrant.
(ii) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting the
enforcement of creditors' rights.
(iii) The execution and delivery of this Warrant are not, and the
issuance of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof will not be inconsistent with the Charter or Bylaws, do not and
will not contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and do not and will not conflict with or contravene
any provision of, or constitute a material default under, any material
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any federal, state or local government authority or agency
(other than such consents, approvals, notices, actions, filings, etc., as have
already been obtained or made, as the case may be).
(iv) As of the Date of Grant, the issued and outstanding capital
stock of the Company consisted of 5,388,670 shares of Common Stock and 512,179
shares of Series A Preferred Stock. The Warrant Shares represent 0.075% of the
outstanding capital stock of the Company as of the Date of Grant. In addition,
as of the Date of Grant, the Company had 9,812,172 shares of Common Stock issued
and outstanding on a fully diluted basis.
3
<PAGE>
5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The number of
securities issuable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or from
time to time following the Date of Grant the holders of the Common Stock of the
Company (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or, on or after the record
date fixed for the determination of eligible stockholders, shall have become
entitled to receive, without payment therefor, other or additional stock of the
Company by way of dividend then, and in each case, the Holder of this Warrant
shall, upon the exercise hereof, be entitled to receive, in addition to the
number of Warrant Shares receivable thereupon, and without payment of any
additional consideration therefor, the amount of such other or additional stock
of the Company which such Holder would hold on the date of such exercise had it
been the holder of record of Warrant Shares on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock receivable
by it as aforesaid during such period, giving effect to all adjustments called
for during such period by subparagraphs (b) and (c) and of this Paragraph 5.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case of any
reclassification or change of the outstanding securities of the Company or of
any reorganization of the Company following the Date of Grant, then and in each
such case the Holder of this Warrant, upon the exercise hereof at any time after
the consummation of such reclassification, change, or reorganization, shall be
entitled to receive, in lieu of or in addition to the stock or other securities
and property receivable upon the exercise hereof prior to such consummation, the
stock or other securities to which such Holder would have been entitled upon
such consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in subparagraphs (a) and
(c); in each such case, the terms of this Paragraph 5 shall be applicable to the
shares of stock or other securities and property receivable upon the exercise of
this Warrant after such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If, following the Date of
Grant, the Company shall subdivide its outstanding shares of Common Stock into a
greater number of shares, the Warrant Price in effect immediately prior to such
subdivision shall thereby be proportionately reduced and the number of Warrant
Shares receivable upon exercise of this Warrant shall thereby be proportionately
increased; and, conversely, if the outstanding number of shares of Common Stock
shall be combined into a smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall thereby be proportionately increased
and the number of Warrant Shares receivable upon exercise of the Warrant shall
be proportionately decreased.
6. TREATMENT ON ACQUISITION. In the event the Company is proposed to be
acquired, in addition to the notice requirements of Section 7 hereof, the
Company shall provide the Holder with all information with respect to the
Acquisition that is otherwise provided to shareholders 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.
4
<PAGE>
(a) ACQUISITION PRIOR TO INITIAL PUBLIC OFFERING. In case of any
Acquisition of the Company prior to the Company's initial public offering, then
the Holder of this Warrant, upon the exercise hereof at any time after the
consummation of such Acquisition, shall be entitled to receive, in lieu of or in
addition to the stock or other securities and property receivable upon the
exercise hereof prior to such consummation, the stock or other securities and
property receivable upon the exercise hereof prior to such consummation, the
stock or other securities to which such Holder would have been entitled upon
such consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in Paragraph 5 hereof.
The terms of Paragraph 5 shall be applicable to the shares of stock or other
securities and property receivable upon the exercise of this Warrant after such
consummation.
(b) ACQUISITION FOLLOWING INITIAL PUBLIC OFFERING. After the Company's
initial public offering, this Warrant shall terminate, if not earlier exercised,
in the event of an Acquisition. The Holder shall have the right to exercise this
Warrant on or prior to the closing date with respect to a proposed Acquisition
following the Company's initial public offering; if the Warrant is not exercised
on or prior to such closing date, the Warrant shall expire upon the occurrence
of the closing of the Acquisition.
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 of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution (the "Distribution"), (b) any capital reorganization or
reclassification of the stated capital of the Company or any consolidation or
merger of the Company with any other corporation or corporations (other than a
wholly-owned subsidiary), or the sale or distribution of all or substantially
all of the Company's property and assets (the "Reorganization Event"), or (c)
any proposed filing of a registration statement under the Act in connection with
a primary public offering of the Company's Common Stock (the "Registration
Event"), the Company will mail or cause to be mailed to the Holder a notice
specifying (i) the date of any such Distribution stating the amount and
character of such Distribution, (ii) the date on which any such Reorganization
Event or Registration Event is expected to become effective, and (iii) the time,
if any, that is to be fixed as to when the holders of record of the Company's
securities shall be entitled to exchange their shares of the Company's
securities for securities or other property deliverable upon such Reorganization
Event. Such notice shall be mailed at least thirty (30) days prior to the date
therein specified.
8. COMPLIANCE WITH ACT; TRANSFERABILITY AND NEGOTIABILITY OF WARRANT;
DISPOSITION OF WARRANT SHARES; "MARKET STAND-OFF" AGREEMENT.
(a) COMPLIANCE WITH ACT. The Holder, by acceptance hereof, agrees that
this Warrant and the Warrant Shares to be issued upon the exercise hereof are
being acquired solely for its own account and not as a nominee for any other
party and not with a view toward the resale or distribution thereof and that it
will not offer, sell or otherwise dispose of this Warrant or any Warrant Shares
to be issued upon the exercise hereof except under circumstances which will not
result in a violation of the Act. Upon the exercise of this Warrant, the Holder
shall confirm in writing, in a form satisfactory to the Company, that the
Warrant Shares so issued are being acquired solely for its own account and not
as a nominee for any other party and not with a view toward resale or
distribution thereof in violation of the Act. This Warrant and the Warrant
Shares to be issued upon the exercise hereof (unless registered under the Act
and unless, in the case of
5
<PAGE>
the Warrant Shares, such Shares may thereupon be sold pursuant to Commission
Rule 144(k)) shall be imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
In addition, this Warrant and the Warrant Shares to be issued upon the
exercise hereof shall bear any legends required by the securities laws of any
applicable states.
(b) TRANSFERABILITY AND NEGOTIABILITY OF WARRANT. Prior to the
Company's initial public offering, this Warrant may not be transferred or
assigned in whole or in part without the written consent of the Company, which
may not be unreasonably withheld; provided, however, that prior to the Company's
initial public offering neither this Warrant nor the Warrant Shares purchasable
with this Warrant may be transferred to any entity or person which the Company
reasonably determines to be an actual competitor of the Company. This Warrant
may not be transferred or assigned in whole or in part at any time without prior
written notice to the Company and compliance with all applicable federal and
state securities laws by the transferor and the transferee (including the
delivery of investment representation letters and legal opinions reasonably
satisfactory to the Company, if requested by the Company and the transfer is to
a person other than a general partner of the initial Holder). Subject to the
provisions of this Warrant with respect to compliance with the Act, title to
this Warrant may be transferred by endorsement and delivery in the same manner
as a negotiable instrument transferable by endorsement and delivery. The Company
shall act promptly to record transfers of this Warrant on its books, but the
Company may treat the registered holder of this Warrant as the absolute owner of
this Warrant for all purposes, notwithstanding any notice to the contrary.
(c) DISPOSITION OF WARRANT SHARES. With respect to any offer, sale,
transfer or other disposition of any Warrant Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant Shares, except
for any such offer, sale, transfer or other disposition of Warrant Shares to a
partner or affiliate of the initial Holder, the Holder and each subsequent
holder of this Warrant agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of legal counsel for such holder, reasonably satisfactory to the Company and its
legal counsel, if requested by the Company, to the effect that such offer, sale
or other disposition may be effected without registration or qualification
(under the Act or any other federal or state securities laws) of such Warrant
Shares and indicating whether or not under the Act, certificates for such
Warrant Shares to be sold or otherwise disposed of require any restrictive
legend as to the applicable restrictions on
6
<PAGE>
transferability in order to ensure compliance with the Act. Promptly upon
receiving such written notice and reasonably satisfactory opinion, if so
requested, the Company, as promptly as practicable, shall notify such holder
that such holder may sell or otherwise dispose of such Warrant Shares, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this subsection (c) that the opinion of
legal counsel for the holder is not reasonably satisfactory to the Company and
its legal counsel, the Company shall so notify the holder promptly after such
determination has been made. Notwithstanding the foregoing, such Warrant Shares
may be offered, sold or otherwise disposed of in accordance with Rule 144,
provided that the Company shall have been furnished with such information as the
Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 have been satisfied. Each certificate representing the
Warrant Shares thus transferred (except a transfer pursuant to Rule 144(k) or an
effective registration statement) shall bear a restrictive legend as to the
applicable restrictions on transferability in order to ensure compliance with
the Act, unless in the aforesaid opinion of legal counsel for the holder, such
legend is not required in order to ensure compliance with the Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
(d) "MARKET STAND-OFF" AGREEMENT. The Holder and each subsequent
holder of this Warrant agrees that in connection with any underwritten public
offering by the Company, such holder shall not, to the extent requested by the
Company and an underwriter of Common Stock of the Company, directly or
indirectly sell, offer to sell, contract to sell, grant any option to purchase,
pledge or otherwise transfer or dispose of: (i) any of the Warrant Shares for a
period of thirty (30) days following the effective date of the registration
statement of the Company filed under the Act with respect to such offering, or
(ii) seventy-five percent (75%) of the Warrant Shares for a period of one
hundred eighty (180) days following the effective date of the registration
statement of the Company filed under the Act with respect to such offering.
9. RIGHTS OF SHAREHOLDERS. No Holder shall be entitled to vote or receive
dividends or be deemed the holder of Warrant Shares or any other securities of
the Company which may at any time be issuable on the exercise of this Warrant
for any purpose, nor shall anything contained herein be construed to confer upon
the Holder, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares issuable upon exercise hereof shall have become
deliverable, as provided herein.
10. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, on surrender and cancellation of this Warrant, the Company
at its expense shall execute and deliver, in lieu of this Warrant, a new warrant
of like tenor.
11. EXCHANGE OF WARRANT. Subject to the other provisions of this Warrant,
on surrender of this Warrant for exchange, properly endorsed and subject to the
provisions of this
7
<PAGE>
Warrant with respect to compliance with the Act, the Company at its expense
shall issue to or on the order of the Holder a new warrant or warrants of like
tenor, in the name of the Holder or as the Holder (on payment by the Holder of
any applicable transfer taxes) may direct, for the number of Shares issuable
upon exercise thereof.
12. NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or three days after being mailed by first-class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company or the Holder, as the case may be, in writing by the Company or such
Holder from time to time.
13. WAIVER. 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.
14. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, as such laws are applied to
agreements entered into in California and to be performed solely by California
residents.
15. TITLES AND SUBTITLES; FORMS OF PRONOUNS. The titles of the Sections and
Subsections of this Warrant are for convenience only and are not to be
considered in construing this Warrant. All pronouns used in this Warrant shall
be deemed to include masculine, feminine and neuter forms.
16. EXPIRATION. Subject to the provisions of Section 3 above, the right to
exercise this Warrant shall expire at 5:00 P.M. California time, on December 23,
2004.
Effective as of December 23, 1998
COLLEGE CLUB.COM, INC.
By: ___________________________________
Raffaele G. Fazio,
Vice President, Legal and Secretary
8
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
(To be signed only on exercise of Warrant)
TO: COLLEGE CLUB.COM, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder,
________ shares of Common Stock of COLLEGE CLUB.COM, INC. (the "Company"), and
herewith makes payment of $________________ in cash and/or ________ shares of
the Company's Common Stock 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)
<PAGE>
SCHEDULE
<TABLE>
<CAPTION>
WARRANTHOLDER NUMBER OF SHARES
- ------------- ----------------
<S> <C>
The Jessen Family Limited Partnership, a 280,291
Texas limited partnership
Gowan Company, an Arizona corporation 14,752
The Jessen Family Limited Partnership, a 84,087
Texas limited partnership
Gowan Company, an Arizona corporation 4,426
</TABLE>
<PAGE>
EXHIBIT 10.9
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE PREFERRED STOCK
Issue Date:
-----------------
Expiration Date:
-----------------
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, receipt
of which is hereby acknowledged, __________________________, or its assigns
("Holder") is entitled to purchase __________________________ fully paid and
nonassessable shares of Series B Preferred Stock (the "Shares") of College
Club.com (the "Company") at the initial exercise price per Share of $8.55 (the
"Warrant Price") as adjusted pursuant to Article 2 of this Warrant, subject to
the provisions and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 METHOD OF EXERCISE. At any time prior to the expiration or
termination of this Warrant, Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.3.
1.3 FAIR MARKET VALUE. The fair market value of Series B Preferred
Stock shall be (i) the price per share that the Company received for the sale of
Preferred Stock occurring most recently prior to the Holder's exercise of this
Warrant, or (ii) if the exercise is made in contemplation of an initial public
offering of stock ("IPO"), then the mid-point of the price range specified on
the Company's preliminary prospectus for the IPO.
1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new warrant
<PAGE>
in substantially identical form representing the Shares not so acquired. The
foregoing notwithstanding, after the conversion of the Company's outstanding
Series B Preferred Stock pursuant to ARTICLE FOURTH, Section B4(a) of the
Company's Certificate of Incorporation, this Warrant shall be exercisable for
shares of the Company's Common Stock only and any Common Stock issued upon
exercise of this Warrant shall be deemed "Shares" for all purposes hereunder.
1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant in substantially identical form.
1.6 TERMINATION ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
1.6.1 "ACQUISITION". For the purpose of this Warrant,
"Acquisition" means any sale or other disposition of all or substantially all of
the assets of the Company, or any reorganization, consolidation, or merger of
the Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.6.2 TERMINATION ON ACQUISITION. This Warrant shall terminate,
if not earlier exercised, in the event of an Acquisition. In the event the
Company is proposed to be acquired, in addition to the notice requirements of
Section 3.2 hereof, the Company shall provide the Holder with all information
with respect to the Acquisition that is otherwise provided to shareholders 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. The Holder shall have the right to exercise this Warrant
on or prior to the closing date with respect to the proposed Acquisition; if the
Warrant is not exercised on or prior to such closing date, the Warrant shall
expire upon the occurrence of the closing of the Acquisition.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC.
(A) If the Company declares or pays a dividend on its
common stock (or the Shares if the Shares are securities other than common
stock) payable in common stock, or other securities, subdivides the outstanding
common stock into a greater amount of common stock, or;
(B) if the Shares are securities other than common
stock, subdivides the Shares in a transaction that increases the amount of
common stock into which the Shares are convertible, then upon exercise of this
Warrant, for each Share acquired, Holder shall receive, without cost to Holder,
the total number and kind of securities to which Holder would have been
2
<PAGE>
entitled had Holder owned the Shares of record as of the date the dividend or
subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. The Company or its successor shall promptly issue to Holder a new
warrant for such new securities or other property. The new warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding
Shares are combined or consolidated, by reclassification or otherwise, into a
lesser number of shares, the Warrant Price shall be proportionately increased
and the number of Shares issuable upon exercise of this Warrant shall be
proportionately decreased.
2.4 NO IMPAIRMENT. The Company shall not, by amendment of its
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the
Company takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.5 FRACTIONAL SHARES. No fractional Shares shall be issuable
upon exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying the Holder an amount
computed by multiplying the fractional interest by the fair market value of a
full Share.
2.6 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of an officer of the Company
setting forth such adjustment and the facts upon which such adjustment is based
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
3
<PAGE>
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Holder that all Shares which may be issued upon
the exercise of the purchase right represented by this Warrant, and all
securities, if any, issuable upon conversion of the Shares, shall, upon issuance
in accordance with the terms of this Warrant, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any
time (a) to declare any dividend or distribution upon its common stock, whether
in cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; or (d) to merge or consolidate with or into any other corporation, or
sell, lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up, then, in connection with each such event, the
Company shall give Holder (1) at least twenty (20) days prior written notice of
the date on which a record will be taken for such dividend, distribution, or
subscription rights (and specifying the date on which the holders of common
stock will be entitled thereto) or for determining rights to vote, if any, in
respect of the matters referred to in (c) and (d) above; and (2) in the case of
the matters referred to in (c) and (d) above at least twenty (20) days prior
written notice of the date when the same will take place (and specifying the
date on which the holders of common stock will be entitled to exchange their
common stock for securities or other property deliverable upon the occurrence of
such event).
ARTICLE 4. REPRESENTATIONS OF HOLDER.
In connection with the proposed purchase of the Warrant, Holder hereby
represents as follows:
4.1 INVESTMENT. Holder is purchasing the Warrant and/or the
Shares for its own account for investment purposes only and not with a view to,
or for the resale in connection with, any "distribution" thereof for purposes of
the Securities Act of 1933, as amended (the "Securities Act").
4.2 KNOWLEDGE. Holder is aware of the Company's business
affairs and financial condition, and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Warrant.
4.3 REGISTRATION. Holder understands that the Warrant has not
been registered under the Securities Act in reliance upon a specific exemption
therefor, which exemption depends upon, among other things, the bona fide nature
of Holder's investment intent as expressed herein. In this connection, Holder
understands that, in the view of the Securities and Exchange Commission ("SEC"),
the statutory basis for such exemption may be unavailable if Holder's
representation was predicated solely upon a present intention to hold this
Warrant and/or the Shares for the minimum capital gains period specified under
tax statutes, for a
4
<PAGE>
deferred sale, for or until an increase or decrease in the market price of the
Warrant and/or the Shares, or for a period of one year or any other fixed period
in the future. Holder further understands that the Warrant and/or the Shares
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from registration is otherwise available. Moreover,
Holder understands that the Company is under no obligation to register the
Warrant. In addition, Holder understands that the certificates evidencing the
Warrant and the Shares will be imprinted with the legend referred to in the
Warrant.
4.4 RULE 144.
4.4.1 RESALE CONDITIONS. Holder is aware of the provisions of
Rule 144, promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions, if
applicable, including, among other things: (i) the availability of certain
public information about the Company; (ii) the resale occurring not less than
one (1) year after the party has purchased and paid for the securities to be
sold; (iii) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Warrant Exchange Act of 1934) and the amount of securities
being sold during any three-month period not exceeding the specified limitations
stated therein.
4.4.2 RESALE RESTRICTIONS. Holder further understands that at
the time it wishes to sell the Warrant and/or the Shares there may be no public
market upon which to make such a sale, and that, even if such a public market
upon which to make such a sale then exists, the Company may not be satisfying
the current public information requirements of Rule 144, and that, in such
event, Holder may be precluded from selling the Warrant and/or the Shares under
Rule 144 even if the one-year minimum holding period had been satisfied.
4.5 NON-RULE 144 EXEMPTION. Holder further understands that in the
event all of the requirements of Rule 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
ARTICLE 5. MISCELLANEOUS.
5.1 TERM. This Warrant is exercisable, in whole or in part, at any
time and from time to time on or before the Expiration Date set forth above.
5.2 LEGENDS. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
5
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
5.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder without
consideration or if there is no material question as to the availability of
current information as referenced in Rule 144(c), Holder represents that it has
complied with Rule 144(d) and (e) in reasonable detail, the selling broker
represents that it has complied with Rule 144(f), and the Company is provided
with a copy of Holder's notice of proposed sale in compliance with Rule 144(h).
5.4 TRANSFER PROCEDURE. This Warrant and all rights hereunder may not
be transferred by the Holder, except to one or more subsidiaries, affiliates or
successors to all the business of the Holder, or to the underwriters in
connection with a public offering of equity securities by the Company. Subject
to the provisions of Section 5.3, Holder may transfer all or any of the Shares
issued upon exercise of this Warrant (or the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) by giving the Company notice
of the Shares being transferred, setting forth the name, address and taxpayer
identification number of transferees and surrendering the certificate(s) for the
Shares being transferred to the Company for reissuance to the transferee(s) (and
Holder if applicable).
5.5. NO RIGHTS AS STOCKHOLDERS. Except as provided herein, this
Warrant does not entitle the Holder to any voting rights as a stockholder of the
Company prior to the exercise of this Warrant.
5.6 NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
5.7 WAIVER. 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.
6
<PAGE>
5.8 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
5.9 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
COMPANY
College Club.com
By:
----------------------------------
7
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _____________ shares of
the Series B Preferred Stock of College Club.com pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised with
respect to ___________ of the Shares covered by the Warrant.
3. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:
-------------------------------
(Name)
-------------------------------
-------------------------------
-------------------------------
(Address)
4. The undersigned represents it is acquiring the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable
securities laws.
-------------------------------
(Signature)
- -------------------------------
(Date)
<PAGE>
SCHEDULE
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
WARRANTHOLDER DATE SHARES PRICE
- ------------- ---- ------ -----
<S> <C> <C> <C>
Amlicke, Bruce 06/08/99 1,517 $2.85
Bill & Caren Skutch 06/08/99 13,743 $2.85
Brown, Marvin 06/08/99 3,800 $2.85
Bry, P.B. 06/08/99 2,116 $2.85
Ciarrocchi, Stephen 06/08/99 1,096 $2.85
Clyma, James 06/08/99 3,643 $2.85
Cruttenden Roth 06/08/99 268,773 $3.42
Dave, Amar & Michelle 06/08/99 916 $2.85
DiLeonardo, Al 06/08/99 14,672 $2.85
DiMaggio, Frank 06/08/99 734 $2.85
Domitrovich, Martin 06/08/99 1,810 $2.85
Gallo, Gregory & Lynne 06/08/99 728 $2.85
George Eyde Ltd Family Part. 06/08/99 18,094 $2.85
Ginsberg, Sheila 06/08/99 733 $2.85
Goverman, Scott 06/08/99 1,896 $2.85
Gwynn, Howard 06/08/99 1,892 $2.85
Hagadorn Partners, L.P. 06/08/99 18,094 $2.85
Imburgia, Salvatore 06/08/99 1,835 $2.85
J. Anthony Antonelli (A&B Family 06/08/99 13,302 $2.85
Trust)
Johnston, Marie Kirk 06/08/99 732 $2.85
Johnston, Todd & Angela McGuirt 06/08/99 732 $2.85
Liberati, Don and Barb 06/08/99 4,304 $2.85
McGillian, Joe 06/08/99 1,836 $2.85
McKee, Bill 06/08/99 3,620 $2.85
Polinsky, Alex 06/08/99 3,799 $2.85
Regan, Loyd & Tammy 06/08/99 916 $2.85
Sarappa, John Jr. 06/08/99 726 $2.85
Silicon Valley Bank 07/20/99 60,000 $3.56
St. Cyr, Dan 06/08/99 3,665 $2.85
Stull, Dean 06/08/99 1,833 $2.85
Stull, Dean 06/08/99 2,932 $2.85
Welsh, Heath & Michelle 06/08/99 1,092 $2.85
Zager, Lori 06/08/99 1,831 $2.85
</TABLE>
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
EXHIBIT 10.10
WARRANT TO PURCHASE PREFERRED STOCK
Issue Date: September 16, 1999
Expiration Date: September 16, 2006
THIS WARRANT CERTIFIES THAT, for good and valuable consideration,
receipt of which is hereby acknowledged, SILICON VALLEY BANK, or its assigns
("Holder") is entitled to purchase 20,000 fully paid and nonassessable shares of
Series B Preferred Stock (the "Shares") of COLLEGE CLUB.COM (the"Company") at
the initial exercise price per Share of $10.69 (the "Warrant Price") as adjusted
pursuant to Article 2 of this Warrant, subject to the provisions and upon the
terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 METHOD OF EXERCISE. At any time prior to the expiration or
termination of this Warrant, Holder may exercise this Warrant by surrendering
this Warrant and delivering a duly executed Notice of Exercise in substantially
the form attached as Appendix 1 to the principal office of the Company. Unless
Holder is exercising the conversion right set forth in Section 1.2, Holder shall
also deliver to the Company a check for the aggregate Warrant Price for the
Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified
in Section 1. 1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.3.
1.3 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported on the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgement. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree on a reputable
investment banking firm to undertake such valuation.
<PAGE>
If the valuation of such investment banking firm is greater than that determined
by the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees shall
be paid by Holder.
1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new warrant in substantially
identical form representing the Shares not so acquired. The foregoing
notwithstanding, after the conversion of the Company's outstanding Series B
Preferred Stock pursuant to ARTICLE III, Section D of the Company's Articles of
Incorporation, this Warrant shall be exercisable for shares of the Company's
Common Stock only and any Common Stock issued upon exercise of this Warrant
shall be deemed "Shares" for all purposes hereunder.
1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new Warrant in substantially identical form.
1.6 SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
1.6.1 "ACQUISITION". For the purpose of this Warrant,
"Acquisition" means any sale or other disposition of all or substantially all of
the assets of the Company, or any reorganization, consolidation, or merger of
the Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.6.2 ASSUMPTION OR NONASSUMPTION OF WARRANT. If, on the
record date for any Acquisition, the fair market value of the Shares (or other
Securities issuable upon exercise of this Warrant) is greater than or equal to
three (3) times the Warrant Price, then the successor entity may, at its option.
either assume the obligations of the Company under this Warrant or not assume
the obligations of the Company under this Warrant. If, on the record date for
any Acquisition, the fair market value of the Shares (or other securities
issuable upon exercise of this Warrant) is less than three (3) times the Warrant
Price, then the successor entity shall assume the obligations of the Company
under this Warrant. If the successor entity assumes the obligations of the
Company under this Warrant (whether voluntarily or involuntarily), then this
Warrant shall be exercisable for the same class and amount of securities, cash,
and/or other property as would be payable for the Shares issuable upon exercise
of this Warrant as if such Shares were outstanding on the record date for the
Acquisition. If the successor entity does not assume the obligations of the
Company under this Warrant, then this Warrant shall be deemed to have been
automatically converted pursuant to Section 1.2 and thereafter Holder shall
participate in the Acquisition as a holder of the Shares (or other securities
issuable upon exercise of this Warrant) on the same terms as other holders of
the same class of securities of the Company.
2
<PAGE>
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC.
(A) If the Company declares or pays a dividend on its
common stock (or the Shares if the Shares are securities other than common
stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or;
(B) if the Shares are securities other than common stock,
subdivides the Shares in a transaction that increases the amount of common
stock into which the Shares are convertible, then upon exercise of this
Warrant, for each Share acquired, Holder shall receive, without cost to
Holder, the total number and kind of securities to which Holder would have
been entitled had Holder owned the Shares of record as of the date the
dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had
been exercised immediately before such reclassification, exchange,
substitution, or other event. The Company or its successor shall promptly
issue to Holder a new warrant for such new securities or other property. The
new warrant shall provide for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Article 2
including, without limitation, adjustments to the Warrant Price and to the
number of securities or property issuable upon exercise of the new Warrant.
The provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the- Warrant Price shall be proportionately increased and
the number of Shares issuable upon exercise of this Warrant shall be
proportionately decreased.
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon
conversion of the Shares, shall be subject to adjustment, from time to time
in the mariner set forth on Exhibit A attached hereto in the event of
Diluting Issuances (as defined on EXHIBIT A).
2.5 NO IMPAIRMENT. The Company shall not, by amendment of' its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed under this Warrant by the Company,
but shall at all times in good faith assist in carrying out of all the
provisions of this Article 2 and in taking all such action as may be
necessary or appropriate to protect Holder's
3
<PAGE>
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying the Holder an amount
computed by multiplying the fractional interest by the fair market value of a
full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of an officer of the
Company setting forth such adjustment and the facts upon which such
adjustment is based. The Company shall, upon written request, furnish Holder
a certificate setting forth the Warrant Price in effect upon the date thereof
and the series of adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and Warrants to the Holder that all Shares which may be issued upon the
exercise of the purchase right represented by this Warrant, and all
securities, if any, issuable upon conversion of the Shares, shall, upon
issuance in accordance with the terms of this Warrant, be duly authorized,
validly issued, fully paid and nonassessable, and free of any liens and
encumbrances except for restrictions on transfer provided for herein or upon
applicable federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class
or series of its stock any additional shares of stock of any class or series
or other rights; (c) to effect any reclassification or recapitalization of
common stock; or (d) to merge or consolidate with or into any other
corporation, or sell, lease, license, or convey all or substantially all of
its assets, or to liquidate, dissolve or wind up, then, in connection with
each such event, the Company shall give Holder (1) at least 20 days prior
written notice of the date on which a record will be taken for such dividend,
distribution. or subscription rights (and specifying the date on which the
holders of common stock will be entitled thereto) or for determining rights
to vote, if any, in respect of the matters referred to in (c) and (d) above;
and (2) in the case of the matters referred to in (c) and (d) above at least
20 days prior written notice of the date when the same will take place (and
specifying the date on which the holders of common stock will be entitled to
exchange their common stock for securities or other property deliverable upon
the occurrence of such event).
4
<PAGE>
3.3 INFORMATION RIGHTS. So long, as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a)
promptly after mailing, copies of all notices or other written communications
to the shareholders of the Company, (b) within ninety (90) days after the end
of each fiscal year of the Company, the annual audited financial statements
of the Company certified by independent public accountants of recognized
standing and (c) such other financial statements required under and in
accordance with any loan documents between Holder and the Company (or if
there are no such requirements
[or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of
each fiscal year, the Company's quarterly, unaudited financial statements.
3.4 REGISTRATION RIGHTS. The Company agrees that the shares or, if
the shares are convertible into Common Stock of the Company, such Common
Stock shall be subject to the registration rights set forth on EXHIBIT B.
3.5 "MARKET STANDOFF" AGREEMENT. Holder agrees that, during the
period of duration (not to exceed one hundred eighty (180) days) specified by
the Company and an underwriter of Common Stock or other securities of the
Company, following the effective date of a registration statement of the
Company filed for a Registration, it shall not, to the extent requested by
the Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) this Warrant or any of the Shares acquirable
or acquired upon the exercise hereof except Shares included in such
Registration; PROVIDED, HOWEVER, that all officers, directors and holders of
one percent (1%) or more of the Company's securities and all other persons
with registration rights enter into similar agreements. In order to enforce
the foregoing covenant, the Company may impose stop-transfer instructions
with respect to this Warrant and the Shares acquirable or acquired upon the
exercise hereof (and the shares or securities of every other person subject
to the foregoing restriction) until the end of such period. This covenant
shall survive the termination of this Warrant.
ARTICLE 4. MISCELLANEOUS.
4.1 TERM. This Warrant is exercisable, in whole or in part, at any
time and from time to time on or before the Expiration Date set forth above.
4.2 LEGENDS. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any)
shall be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
5
<PAGE>
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and
the Shares issuable upon exercise of this Warrant (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) may
not be transferred or assigned in whole or in part, without compliance with
applicable federal and state securities laws by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonable requested by the Company). The Company shall not
require Holder to provide an opinion of counsel if the transfer is to an
affiliate of Holder without consideration or if three is on material question
as to the availability of current information as referenced in Rule 144(c),
Holder represents that is has it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has compiled with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale in compliance with Rule 144(h).
4.4 TRANSFER PROCEDURE. This Warrant and all rights hereunder may,
not be transferred by the Holder, except to one or more subsidiaries,
affiliates or successors to all the business of the Holder, or to the
underwriters in connection with a public offering of equity securities by the
Company. Subject to the provisions of Section 4.3, Holder may transfer all or
any of the Shares issued upon exercise of this Warrant (or the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) by
giving the Company notice of the Shares being transferred, setting, forth the
name, address and taxpayer identification number of transferees and
surrendering the certificate(s) for the Shares being transferred to the
Company for reissuance to the transferee(s) (and Holder if applicable).
4.5 NO RIGHTS AS STOCKHOLDERS. Except as provided herein, this
Warrant does not entitle the Holder to any voting rights as a stockholder of
the Company prior to the exercise of this Warrant.
4.6 NOTICES. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when
given personally or mailed by first-class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may be, in writing, by the Company or such holder
from time to time.
4.7 WAIVER. 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.
4.8 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.9 GOVERNING LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, without giving effect
to its principles regarding conflicts of law.
6
<PAGE>
COMPANY
College Club.com
By: /s/ Eric H. Rindall
-----------------------------------
CFO
7
<PAGE>
APPENDIX I
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase __________ shares of
the Series B Preferred Stock of College Club.com pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. The undersigned hereby elects to convert the attached Warrant
into Shares in the manner specified in the Warrant. This conversion is
exercised with respect to _____________ of the Shares covered by the Warrant.
3. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
____________________________________
(Name)
____________________________________
____________________________________
____________________________________
(Address)
4. The undersigned represents it is acquiring- the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable
securities laws.
____________________________________
(Signature)
_________________________
(Date)
<PAGE>
EXHIBIT A
Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company,
after the issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
("the Provisions") of the Company's Articles of Incorporation which apply to
Diluting Issuances.
The Company agrees the Provisions, as in effect on the Issue Date,
shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination thereof
by the Company's shareholders.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
2
<PAGE>
EXHIBIT B
The shares (if common stock), or the common stock issuable upon
conversion of the Shares, shall be deemed "registrable securities" or otherwise
entitled to "piggy back" registration rights and S-3 registration rights in
accordance with the terms of the following agreement (the "Agreement") between
the Company and its investor(s):
College Club.com Investor Rights Agreement, dated as of June 7, 1999.
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holder's registration rights thereunder
without the consent of Holder. By acceptance of the Warrant to which this
Exhibit B is attached, Holder shall be deemed to be a party to the Agreement,
unless Holder otherwise elects not to become or to cease being a party thereto.
3
<PAGE>
COLLEGECLUB.COM, INC.
AMENDMENT NO. 1 TO WARRANT TO PURCHASE PREFERRED STOCK
This Amendment No. 1 (this "Amendment") to Warrant to Purchase
Preferred Stock dated September 16, 1999 (the "Warrant") is made as of March 30,
2000, and is effective as of September 16, 1999 by and among CollegeClub.com,
Inc., a Delaware corporation (the "Company") and Silicon Valley Bank (the
"Holder"). The Company and the Holder are each a "Party" and together are the
"Parties" to this Amendment.
RECITALS
WHEREAS, the Parties desire to amend the Warrant as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration the receipt of which is
hereby acknowledged, the Parties agree as follows:
1. AMENDMENT TO THE WARRANT. Section 2.4 of the Warrant is hereby
amended and restated in its entirety as follows:
"2.4.1 ADJUSTMENTS FOR DILUTING ISSUANCES. The
Warrant Price and the number of Shares issuable upon exercise
of this Warrant, or if the Shares are Preferred Stock, the
number of shares of common stock issuable upon conversion of
the Shares, shall be subject to adjustment, from time to time
in the manner set forth on EXHIBIT A attached hereto in the
event of Diluting Issuances (as defined on EXHIBIT A).
2.4.2. TERMINATION OF ADJUSTMENTS FOR DILUTING
ISSUANCES. Upon the closing of a Qualified IPO, as such term
is defined in the Company's Certificate of Incorporation, as
amended, the Warrant Price and the number of Shares issuable
upon exercise of this Warrant, or if the Shares are Preferred
Stock, the number of shares of common stock issuable upon
conversion of the Shares, shall no longer be subject to
adjustment for Diluting Issuances and the provisions of this
Section 2.4 and EXHIBIT A hereto shall terminate."
(b) EXHIBIT A of the Warrant is hereby amended and restated in
its entirety as follows:
"EXHIBIT A
Anti-Dilution Provisions
<PAGE>
In the event of the issuance (a "Diluting Issuance")
by the Company, after the Issue Date of the Warrant, of
securities at a price per share less than $3.46 (subject to
appropriate adjustments for stock splits, dividends,
combinations or other recapitalizations), then the number of
shares of common stock issuable upon conversion of the Shares
shall be adjusted in accordance with those provisions ("the
Provisions") of the Company's Certificate of Incorporation
which apply to Diluting Issuances.
The Company agrees the Provisions, as in effect on
the Issue Date, shall be deemed to remain in full force and
effect during the term of the Warrant notwithstanding any
subsequent amendment, waiver or termination thereof by the
Company's shareholders.
Under no circumstances shall the aggregate Warrant
Price payable by the Holder upon exercise of the Warrant
increase as a result of any adjustment arising from a Diluting
Issuance."
2. EFFECT OF AMENDMENT. Except as expressly modified by this Amendment,
the Warrant shall remain unmodified and in full force and effect.
3. ENTIRE AGREEMENT. This Amendment together with the Warrant and all
documents referred to herein and therein constitute the full and entire
understanding and agreement between the Parties with regard to the subjects
hereof and thereof.
4. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Amendment shall inure to the benefit of and be
binding upon the respective successors and assigns of the Parties. Nothing in
this Amendment, express or implied, is intended to confer upon any party other
than the Parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Amendment,
except as expressly provided in this Amendment.
5. ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Amendment, the prevailing Party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such Party may be entitled.
6. FURTHER ASSURANCES. The Parties agree to execute such further
instruments, agreements and documents and to take such further action as may
reasonably be necessary to carry out the intent of this Amendment.
7. SEVERABILITY. If one or more provisions of this Amendment are held
to be unenforceable under applicable law, such provision shall be excluded from
this Amendment and the balance of the Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
2
<PAGE>
8. GOVERNING LAW. This Amendment will be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
9. SEPARATE COUNSEL. The Holder acknowledges and agrees that Brobeck,
Phleger & Harrison LLP represents solely the Company and has not represented the
Holder's interests and that the Holder has been provided the opportunity and
encouraged to consult with counsel of the Holder's own choosing with respect to
this Amendment. The Holder certifies and acknowledges that it has carefully read
all of the provisions of this Amendment and that the such fully understands and
shall fully and faithfully comply with such provisions.
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
THE COMPANY: COLLEGECLUB.COM, INC.
By: /s/ Eric D. Rindahl
--------------------------------------
Eric D. Rindahl, Chief Financial Officer
Address: 1010 Second Ave. Suite 600
San Diego, CA
Fax No.: (619) 237-7001
THE HOLDER: SILICON VALLEY BANK
By: /s/ Illegilbe
--------------------------------------
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO WARRANT TO PURCHASE
PREFERRED STOCK]
<PAGE>
EXHIBIT 10.11
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE PREFERRED STOCK
Issue Date: June 7, 1999
Expiration Date: June 7, 2004
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, receipt
of which is hereby acknowledged, CRUTTENDEN ROTH INCORPORATED, or its assigns
("Holder") is entitled to purchase 89,591 fully paid and nonassessable shares of
Series B Preferred Stock (the "Shares") of COLLEGECLUB.COM (the "Company") at
the initial exercise price per Share of $10.26 (the "Warrant Price") as adjusted
pursuant to Article 2 of this Warrant, subject to the provisions and upon the
terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 METHOD OF EXERCISE. At any time prior to the expiration or
termination of this Warrant, Holder may exercise this Warrant by surrendering
this Warrant and delivering a duly executed Notice of Exercise in substantially
the form attached as Appendix 1 to the principal office of the Company. Unless
Holder is exercising the conversion right set forth in Section 1.2, Holder shall
also deliver to the Company a check for the aggregate Warrant Price for the
Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.3.
1.3 FAIR MARKET VALUE. If the Shares are traded in a public market,
the fair market value of the Shares shall be the average closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the 20 business days before Holder delivers its Notice
of Exercise to the Company. If the Shares are not traded in a public market,
the Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgement. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree on a reputable
investment banking firm to undertake such valuation.
<PAGE>
If the valuation of such investment banking firm is greater than that determined
by the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees shall
be paid by Holder.
1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new warrant in substantially
identical form representing the Shares not so acquired. The foregoing
notwithstanding, after the conversion of the Company's outstanding Series B
Preferred Stock pursuant to Section 5(b) of the Company's Certificate of
Incorporation, this Warrant shall be exercisable for shares of the Company's
Common Stock only and any Common Stock issued upon exercise of this Warrant
shall be deemed "Shares" for all purposes hereunder.
1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant in substantially identical form.
1.6 TERMINATION ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
1.6.1 "ACQUISITION". For the purpose of this Warrant,
"Acquisition" means any sale or other disposition of all or substantially all of
the assets of the Company, or any reorganization, consolidation, or merger of
the Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.6.2 TERMINATION ON ACQUISITION. This Warrant shall terminate,
if not earlier exercised, in the event of an Acquisition. In the event the
Company is proposed to be acquired, in addition to the notice requirements of
Section 3.2 hereof, the Company shall provide the Holder with all information
with respect to the Acquisition that is otherwise provided to shareholders 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. The Holder shall have the right to exercise this Warrant
on or prior to the closing date with respect to the proposed Acquisition; if the
Warrant is not exercised on or prior to such closing date, the Warrant shall
expire upon the occurrence of the closing of the Acquisition.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC.
(A) If the Company declares or pays a dividend on its common
stock (or the Shares if the Shares are securities other than common stock)
payable in common stock, or other securities, subdivides the outstanding common
stock into a greater amount of common stock, or;
2
<PAGE>
(B) if the Shares are securities other than common stock,
subdivides the Shares in a transaction that increases the amount of common stock
into which the Shares are convertible, then upon exercise of this Warrant, for
each Share acquired, Holder shall receive, without cost to Holder, the total
number and kind of securities to which Holder would have been entitled had
Holder owned the Shares of record as of the date the dividend or subdivision
occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. The Company or its successor shall promptly issue to Holder a new
warrant for such new securities or other property. The new warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased and the number
of Shares issuable upon exercise of this Warrant shall be proportionately
decreased.
2.4 NO IMPAIRMENT. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the
Company takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.5 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying the Holder an amount
computed by multiplying the fractional interest by the fair market value of a
full Share.
2.6 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of an officer of the Company
setting forth such adjustment and the facts upon which
3
<PAGE>
such adjustment is based. The Company shall, upon written request, furnish
Holder a certificate setting forth the Warrant Price in effect upon the date
thereof and the series of adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance in accordance with
the terms of this Warrant, be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except for restrictions on
transfer provided for herein or under applicable federal and state securities
laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a)
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; or (d)
to merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; and (2) in the case of the matters referred to
in (c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event).
3.3 REGISTRATION RIGHTS. The Company agrees that the shares or, if
the shares are convertible into Common Stock of the Company, such Common Stock
shall be subject to the registration rights set forth on EXHIBIT A.
3.4 "MARKET STANDOFF" AGREEMENT. Holder agrees that, during the
period of duration (not to exceed one hundred eighty (180) days) specified by
the Company and an underwriter of Common Stock or other securities of the
Company, following the effective date of a registration statement of the Company
filed for a Registration, it shall not, to the extent requested by the Company
and such underwriter, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) this Warrant or any of the Shares acquirable or acquired
upon the exercise hereof except Shares included in such Registration. In order
to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to this Warrant and the Shares acquirable or acquired
upon the exercise hereof (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period. This
covenant shall survive the termination of this Warrant.
4
<PAGE>
ARTICLE 4. MISCELLANEOUS.
4.1 TERM. This Warrant is exercisable, in whole or in part, at any
time and from time to time on or before the Expiration Date set forth above;
provided, however, that any partial exercise of this Warrant shall be for a
minimum of twenty-five thousand (25,000) Shares, unless fewer than twenty-five
thousand Shares remain subject to this Warrant, in which case any subsequent
exercise shall be for the remaining number of Shares.
4.2 LEGENDS. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder without
consideration or if there is no material question as to the availability of
current information as referenced in Rule 144(c), Holder represents that it has
complied with Rule 144(d) and (e) in reasonable detail, the selling broker
represents that it has complied with Rule 144(f), and the Company is provided
with a copy of Holder's notice of proposed sale in compliance with Rule 144(h).
4.4 TRANSFER PROCEDURE. This Warrant and all rights hereunder may not
be transferred by the Holder, except to one or more subsidiaries, affiliates or
successors to all the business of the Holder, or to the underwriters in
connection with a public offering of equity securities by the Company. Subject
to the provisions of Section 4.3, Holder may transfer all or any of the Shares
issued upon exercise of this Warrant (or the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) by giving the Company notice
of the Shares being transferred, setting forth the name, address and taxpayer
identification number of transferees and surrendering the certificate(s) for the
Shares being transferred to the Company for reissuance to the transferee(s) (and
Holder if applicable).
4.5 NO RIGHTS AS STOCKHOLDERS. Except as provided herein, this
Warrant does not entitle the Holder to any voting rights as a stockholder of the
Company prior to the exercise of this Warrant.
5
<PAGE>
4.6 NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.7 WAIVER. 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.
4.8 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.9 GOVERNMENTAL LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
COMPANY
CollegeClub.com
By: /s/ Eric D. Rindahl
----------------------------------
Eric D. Rindahl, Chief Financial
Officer
6
<PAGE>
EXHIBIT A
The Shares or the common stock issuable upon conversion of the Shares,
shall be entitled to "piggy back" registration rights in accordance with the
terms of the following agreement (the "Agreement") between the Company and its
investor(s):
CollegeClub.com Investor Rights Agreement, dated as of June 7, 1999.
The Company agrees that no amendments will be made to the Agreement which
would have an adverse impact on Holder's registration rights thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit A is
attached, Holder shall be deemed to be a party to the Agreement with respect to
Section 1.3 thereof, unless Holder otherwise elects not to become or to cease
being a party thereto.
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ________ shares of the
Series B Preferred Stock of CollegeClub.com pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. The undersigned hereby elects to convert the attached Warrant
into Shares in the manner specified in the Warrant. This conversion is
exercised with respect to ______________ of the Shares covered by the Warrant.
3. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:
-------------------------------
(Name)
-------------------------------
-------------------------------
-------------------------------
(Address)
4. The undersigned represents it is acquiring the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable
securities laws.
-------------------------------
(Signature)
- -------------------------------
(Date)
<PAGE>
EXHIBIT 10.12
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
COLLEGECLUB.COM, INC.
SERIES C PREFERRED STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, _______________ ("Holder") is
entitled to purchase ________________ (____) shares of Series C Preferred Stock
of COLLEGECLUB.COM, INC., a Delaware corporation (the "Company"), at the Warrant
Price (as defined in subsection 1(h) below), subject to adjustments and all
other terms and conditions set forth in this Warrant.
1. DEFINITIONS. As used herein, the following terms, unless the context
otherwise requires, shall have the following meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(b) "Certificate of Amendment" shall mean the Company's
Certificate of Amendment to Certificate of Designations, Preferences and Rights
substantially in the form attached as EXHIBIT A to this Warrant.
(b) "Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Act.
(c) "Company" shall mean COLLEGECLUB.COM, INC., a Delaware
corporation, and any corporation which shall succeed to or assume the
obligations of COLLEGECLUB.COM, INC., under this Warrant.
(d) "Date of Grant" shall mean ______________.
<PAGE>
(e) "Exercise Date" shall mean the effective date of the
delivery of the Notice of Exercise pursuant to Sections 3 and 10 below.
(f) "Holder" shall mean Holder or any other person or entity
who shall at the time be the registered holder of this Warrant.
(g) "Series C Preferred Stock" shall mean shares of the
Company's Series C Preferred Stock to be authorized after the Date of Grant upon
the filing by the Company of the Certificate of Amendment.
(h) "Warrant Price" shall mean $3.46 per share.
(i) "Warrant Shares" shall mean shares of the Company's Series
C Preferred Stock, as described in the Company's Certificate of Amendment;
provided, however, in the event of the automatic conversion after the Date of
Grant of the Company's then outstanding Series C Preferred Stock into Common
Stock pursuant to the provisions of Section 5(b) of the Certificate of
Amendment, then, effective upon such conversion, "Warrant Shares" shall
thereafter mean shares of the Company's Common Stock.
2. TERM. The purchase right represented by this Warrant is exercisable
during the period commencing upon the Company's filing of the Certificate of
Amendment with the Delaware Secretary of State and ending on the earlier of (a)
the closing date of the acquisition or merger of the Company by or with another
entity provided that, after such transaction, the stockholders of the Company
before the transaction own less than 50% of the voting stock of the acquiring
entity, or (b) ________________.
3. EXERCISE OF WARRANT.
(a) EXERCISE. This Warrant may be exercised, in whole or in
part, by the Holder hereof by surrender of this Warrant, with the form of
subscription at the end hereof duly executed by the Holder, to the Company at
its principal office, accompanied by payment of the Warrant Price in cash or by
certified or official bank check payable to the order of the Company.
(b) RIGHT TO CONVERT WARRANT. Notwithstanding the payment
provisions of subsection 3(a) hereof;
(i) The Holder shall have the right (the "Conversion
Right") to require the Company to convert this Warrant, in whole or in part, at
any time into Warrant Shares as provided for in this subsection (b). At the sole
option of the Holder, upon exercise of the Conversion Right, the Company shall
deliver to the Holder (without payment by the Holder of any Warrant Price) that
number of Warrant Shares equal to the quotient obtained by dividing (x) the
value of the Warrant at the time the Conversion Right is exercised (determined
by subtracting the aggregate Warrant Price for the number of Warrant Shares then
issuable upon exercise of this Warrant in effect immediately prior to the
exercise of the Conversion Right from the aggregate Fair Market Value (as
defined below) of such number of Warrant Shares immediately prior to
2
<PAGE>
the exercise of the Conversion Right) by (y) the Fair Market Value of one
Warrant Share immediately prior to the exercise of the Conversion Right.
(ii) The Conversion Right may be exercised by the
Holder, at any time, or from time to time, on any business day by delivering a
written notice (the "Conversion Notice") to the Company exercising the
Conversion Right and specifying (i) the total number of Warrant Shares the
Holder will purchase pursuant to such conversion and (ii) a place and date not
less than one nor more than 20 business days from the date of the Conversion
Notice for the closing of such purchase.
(iii) Fair Market Value of a Warrant Share as of a
particular date (the "Determination Date") shall mean:
(1) If the Company's Warrant Shares are
traded on an exchange or are quoted on the Nasdaq National Market, then the
closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
(2) If the Company's Warrant Shares are not
traded on an exchange or on the Nasdaq National Market but are traded in the
over-the-counter market, then the mean of the closing bid and asked prices
reported for the last business day immediately preceding the Determination Date.
(3) If the Company's Warrant Shares are not
publicly traded, then as determined in good faith by the Company's Board of
Directors upon review of relevant factors.
(c) DELIVERY OF CERTIFICATE. In the event of any
exercise of the purchase right represented by this Warrant, certificates for the
Warrant Shares so purchased shall be delivered to the Holder within thirty (30)
days of delivery of the notice of exercise (the "Notice of Exercise") in the
form of EXHIBIT B attached hereto and, unless this Warrant has been fully
exercised or has expired, a new warrant representing the portion of the Warrant
Shares with respect to which this Warrant shall not then have been exercised
shall also be issued to the Holder within such thirty (30) day period.
(d) NO FRACTIONAL SHARES. No fractional shares shall
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Fair Market Value of a Warrant Share as of the Exercise Date.
(e) COMPANY'S REPRESENTATIONS.
(i) All Warrant Shares which may be issued
upon the exercise of the purchase right represented by this Warrant shall, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable, and
free of any liens and encumbrances except for restrictions on transfer provided
for herein or under applicable federal and state securities laws. During the
period within which the purchase right represented by this Warrant may be
exercised,
3
<PAGE>
the Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of the purchase right represented by this Warrant, a
sufficient number of Warrant Shares to provide for the exercise of the purchase
right represented by this Warrant;
(ii) This Warrant has been duly authorized
and executed by the Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting the enforcement of creditors' rights;
(iii) The execution and delivery of this
Warrant are not, and the issuance of the Warrant Shares upon exercise of this
Warrant in accordance with the terms hereof will not be inconsistent with the
Company's Certificate of Incorporation or Bylaws, do not and will not contravene
any law, governmental rule or regulation, judgment or order applicable to the
Company, and do not and will not conflict with or contravene any provision of,
or constitute a material default under, any material indenture, mortgage,
contract or other instrument of which the Company is a party or by which it is
bound or require the consent or approval of, the giving of notice to, the
registration or filing with or the taking of any action in respect of or by, any
federal, state or local government authority or agency (other than such
consents, approvals, notices, actions, filings, etc., as have already been
obtained or made, as the case may be).
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The number
of Warrant Shares issuable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or
from time to time the holders of Warrant Shares of the Company (or any shares of
stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock of the Company by way of
dividend then, and in each case, the Holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Warrant
Shares receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional stock of the Company which such
Holder would hold on the date of such exercise had it been the holder of record
of Warrant Shares on the date hereof and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock receivable by it as aforesaid during such
period, giving effect to all adjustments called for during such period by
subparagraphs (b) and (c) of this Paragraph 4.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case
of any reclassification or change of the outstanding Warrant Shares of the
Company or of any reorganization of the Company, then and in each such case the
Holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change, or reorganization, shall be
entitled to receive, in lieu of or in addition to the stock or other securities
and property receivable upon the exercise hereof prior to such consummation, the
stock or other securities to which such Holder would have been entitled upon
such consummation if such
4
<PAGE>
Holder had exercised this Warrant immediately prior thereto, all subject to
further adjustment as provided in subparagraphs (a) and (c); in each such case,
the terms of this Paragraph 4 shall be applicable to the shares of stock or
other securities and property receivable upon the exercise of this Warrant after
such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If the Company
shall subdivide its outstanding Warrant Shares into a greater number of shares,
the Warrant Price in effect immediately prior to such subdivision shall thereby
be proportionately reduced and the number of Warrant Shares receivable upon
exercise of this Warrant shall thereby be proportionately increased; and,
conversely, if the outstanding number of Warrant Shares shall be combined into a
smaller number of shares, the Warrant Price in effect immediately prior to such
combination shall thereby be proportionately increased and the number of Warrant
Shares receivable upon exercise of the Warrant shall be proportionately
decreased.
5. NOTICES OF RECORD DATE, ETC. In the event of (a) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution (the "Distribution"), (b) any capital reorganization or
reclassification of the stated capital of the Company or any consolidation or
merger of the Company with any other corporation or corporations (other than a
wholly-owned subsidiary), or the sale or distribution of all or substantially
all of the Company's property and assets (the "Reorganization Event"), or (c)
any proposed filing of a registration statement under the Act in connection with
a primary public offering of the Company's Common Stock (the "Registration
Event"), the Company will mail or cause to be mailed to the Holder a notice
specifying (i) the date of any such Distribution stating the amount and
character of such Distribution, (ii) the date on which any such Reorganization
Event or Registration Event is expected to become effective, and (iii) the time,
if any, that is to be fixed as to when the holders of record of the Company's
securities shall be entitled to exchange their shares of the Company's
securities for securities or other property deliverable upon such Reorganization
Event. Such notice shall be mailed at least thirty (30) days prior to the date
therein specified.
6. COMPLIANCE WITH ACT; TRANSFERABILITY AND NEGOTIABILITY OF WARRANT;
DISPOSITION OF SHARES.
(a) COMPLIANCE WITH ACT. The Holder, by acceptance hereof,
agrees that this Warrant and the Warrant Shares to be issued upon the exercise
hereof are being acquired solely for its own account and not as a nominee for
any other party and not with a view toward the resale or distribution thereof
and that it will not offer, sell or otherwise dispose of this Warrant or any
Warrant Shares to be issued upon the exercise hereof except under circumstances
which will not result in a violation of the Act. Upon the exercise of this
Warrant, the Holder shall confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so issued are being acquired solely for its own
account and not as a nominee for any other party and not with a view toward
resale or distribution thereof in violation of the Act. This Warrant and the
Warrant Shares to be issued upon the exercise hereof (unless registered under
the Act and unless, in the case of the Warrant Shares, such Shares may thereupon
be sold pursuant to Commission Rule 144(k)) shall be imprinted with a legend in
substantially the following form:
5
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER
THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT.
In addition, this Warrant and the Warrant Shares to be issued upon the
exercise hereof shall bear any legends required by the securities laws of any
applicable states.
(b) TRANSFERABILITY AND NEGOTIABILITY OF WARRANT. This Warrant
may not be transferred or assigned in whole or in part without compliance with
all applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if requested by the
Company and the transfer is to a person other than a general partner of the
initial Holder). Subject to the provisions of this Warrant with respect to
compliance with the Act, title to this Warrant may be transferred by endorsement
and delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery. The Company shall act promptly to record transfers of
this Warrant on its books, but the Company may treat the registered holder of
this Warrant as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
(c) DISPOSITION OF WARRANT SHARES. With respect to any offer,
sale, transfer or other disposition of any Warrant Shares acquired pursuant to
the exercise of this Warrant prior to registration of such Warrant Shares,
except for any such offer, sale, transfer or other disposition of Warrant Shares
to a partner of the initial Holder, the Holder and each subsequent holder of
this Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of legal
counsel for such holder, reasonably satisfactory to the Company and its legal
counsel, if requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Act or any other federal or state securities laws) of such Warrant Shares
and indicating whether or not under the Act, certificates for such Warrant
Shares to be sold or otherwise disposed of require any restrictive legend as to
the applicable restrictions on transferability in order to ensure compliance
with the Act. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such holder that such holder may sell or otherwise dispose of such
Warrant Shares, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this subsection (c) that
the opinion of legal counsel for the holder is not reasonably satisfactory to
the Company and its legal counsel, the Company shall so notify the
6
<PAGE>
holder promptly after such determination has been made. Notwithstanding the
foregoing, such Warrant Shares may be offered, sold or otherwise disposed of in
accordance with Rule 144, provided that the Company shall have been furnished
with such information as the Company may reasonably request to provide a
reasonable assurance that the provisions of Rule 144 have been satisfied. Each
certificate representing the Warrant Shares thus transferred (except a transfer
pursuant to Rule 144(k) or an effective registration statement) shall bear a
restrictive legend as to the applicable restrictions on transferability in order
to ensure compliance with the Act, unless in the aforesaid opinion of legal
counsel for the holder, such legend is not required in order to ensure
compliance with the Act. The Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions.
7. RIGHTS OF STOCKHOLDERS. No Holder shall be entitled to vote or
receive dividends or be deemed the holder of Warrant Shares or any other
securities of the Company which may at any time be issuable on the exercise of
this Warrant for any purpose, nor shall anything contained herein be construed
to confer upon the Holder, 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 stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares issuable upon exercise hereof shall have become
deliverable, as provided herein.
8. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
9. EXCHANGE OF WARRANT. Subject to the other provisions of this
Warrant, on surrender of this Warrant for exchange, properly endorsed and
subject to the provisions of this Warrant with respect to compliance with the
Act, the Company at its expense shall issue to or on the order of the Holder a
new warrant or warrants of like tenor, in the name of the Holder or as the
Holder (on payment by the Holder of any applicable transfer taxes) may direct,
for the number of Warrant Shares issuable upon exercise thereof.
10. NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or three days after being mailed by first-class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company or the Holder, as the case may be, in writing by the Company or such
Holder from time to time.
11. WAIVER. 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.
7
<PAGE>
12. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, as such laws are applied to
agreements entered into in California and to be performed solely by California
residents.
13. TITLES AND SUBTITLES; FORMS OF PRONOUNS. The titles of the Sections
and Subsections of this Warrant are for convenience only and are not to be
considered in construing this Warrant. All pronouns used in this Warrant shall
be deemed to include masculine, feminine and neuter forms.
14. EXPIRATION. Subject to the provisions of Section 2 above, the right
to exercise this Warrant shall expire at 5:00 P.M. California time, on
__________________.
Dated:__________________
COLLEGECLUB.COM, INC.
By:_____________________________________________
Eric D. Rindahl, Chief Financial Officer
8
<PAGE>
EXHIBIT A
Certificate of Amendment to Certificate of Designations, Preferences and Rights
Filed as Exhibit 3.2 to this Registration Statement
<PAGE>
EXHIBIT B
NOTICE OF EXERCISE
(To be signed only on exercise of Warrant)
TO: COLLEGECLUB.COM, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, shares of
______ Stock of CollegeClub.com, Inc. and herewith makes payment of
$_______________ therefor (either in cash or in cancellation of fees due for
legal services rendered or in accordance with the cashless exercise provisions
of Section 3(b)) 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)
By:________________________________________
Name:______________________________________
Title:_____________________________________
____________________________________________
(Address)
____________________________________________
<PAGE>
SCHEDULE
<TABLE>
<CAPTION>
NUMBER OF
WARRANTHOLDER DATE SHARES TERM EXPIRATION
------------- ---- --------- ---- ----------
<S> <C> <C> <C> <C>
Convergence Entrepreneurs Fund I, L.P. 10/28/99 554 October 28, 2004 October 28, 2004
Convergence Entrepreneurs Fund I, L.P. 10/28/99 313 October 28, 2004 October 28, 2004
Convergence Ventures I, L.P. 10/28/99 21,676 October 28, 2004 October 28, 2004
Deutsch Bank Securities 10/28/99 313,215 October 28, 2004 October 28, 2004
Seligman Communications and Information Fund 10/28/99 14,415 October 28, 2004 October 28, 2004
Seligman Investment Opportunities Fund-NTV 10/28/99 19,725 October 28, 2004 October 28, 2004
Portfolio
Seligman New Technologies 10/28/99 74,241 October 28, 2004 October 28, 2004
Sony Corp. of America 10/28/99 14,451 October 28, 2004 October 28, 2004
Geneva 11/12/99 1,445 November 12, 2004 November 12, 2004
ViVentures 11/17/99 4,335 November 17, 2004 November 12, 2004
</TABLE>
<PAGE>
EXHIBIT 10.13
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
COLLEGECLUB.COM, INC.
SERIES C PREFERRED STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Deutsche Bank Securities, Inc.
("Holder") is entitled to purchase One Hundred Four Thousand Four Hundred Five
(104,405) shares of Series C Preferred Stock of COLLEGECLUB.COM, INC., a
Delaware corporation (the "Company"), at the Warrant Price (as defined in
subsection 1(h) below), subject to adjustments and all other terms and
conditions set forth in this Warrant.
1. DEFINITIONS. As used herein, the following terms, unless the
context otherwise requires, shall have the following meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(b) "Certificate of Amendment" shall mean the Company's
Certificate of Amendment to Certificate of Designations, Preferences and Rights
substantially in the form attached as EXHIBIT A to this Warrant.
(b) "Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Act.
(c) "Company" shall mean COLLEGECLUB.COM. INC., a Delaware
corporation, and any corporation which shall succeed to or assume the
obligations of COLLEGECLUB.COM, INC., under this Warrant.
(d) "Date of Grant" shall mean August 23, 1999.
(e) "Exercise Date" shall mean the effective date of the
delivery of the Notice of Exercise pursuant to Sections 3 and 10 below.
<PAGE>
(f) "Holder" shall mean Holder or any other person or entity
who shall at the time be the registered holder of this Warrant.
(g) "Series C Preferred Stock" shall mean shares of the
Company's Series C Preferred Stock to be authorized after the Date of Grant upon
the filing by the Company of the Certificate of Amendment.
(h) "Warrant Price" shall mean $10.38 per share.
(i) "Warrant Shares" shall mean shares of the Company's Series
C Preferred Stock, as described in the Company's Certificate of Amendment;
provided, however, in the event of the automatic conversion after the Date of
Grant of the Company's then outstanding Series C Preferred Stock into Common
Stock pursuant to the provisions of Section 5(b) of the Certificate of
Amendment, then, effective upon such conversion, "Warrant Shares" shall
thereafter mean shares of the Company's Common Stock.
2. TERM. The purchase right represented by this Warrant is
exercisable during the period commencing upon the Company's filing of the
Certificate of Amendment with the Delaware Secretary of State and ending on the
earlier of (a) the closing, date of the acquisition or merger of the Company by
or with another entity provided that, after such transaction, the stockholders
of the Company before the transaction own less than 50% of the voting stock of
the acquiring entity, or (b) August 23, 2004.
3. EXERCISE OF WARRANT.
(a) EXERCISE. This Warrant may be exercised, in whole or in
part, by the Holder hereof by surrender of this Warrant, with the form of
subscription at the end hereof duly executed by the Holder, to the Company at
its principal office, accompanied by payment of the Warrant Price in cash or by
certified or official bank check payable to the order of the Company.
(b) RIGHT TO CONVERT WARRANT. Notwithstanding, the payment
provisions of subsection 3(a) hereof:
(i) The Holder shall have the right (the "Conversion
Right") to require the Company to convert this Warrant, in whole or in part, at
any time into Warrant Shares as provided for in this subsection (b). At the
sole option of the Holder, upon exercise of the Conversion Right, the Company
shall deliver to the Holder (without payment by the Holder of any Warrant Price)
that number of Warrant Shares equal to the quotient obtained by dividing (x) the
value of the Warrant at the time the Conversion Right is exercised (determined
by subtracting the aggregate Warrant Price for the number of Warrant Shares then
issuable upon exercise of this Warrant in effect immediately prior to the
exercise of the Conversion Right from the aggregate Fair Market Value (as
defined below) of such number of Warrant Shares immediately prior to the
exercise of the Conversion Right) by (y) the Fair Market Value of one Warrant
Share immediately prior to the exercise of the Conversion Right.
2
<PAGE>
(ii) The Conversion Right may be exercised by the Holder,
at any time, or from time to time, on any business day by delivering a written
notice (the "Conversion Notice") to the Company exercising the Conversion Right
and specifying (i) the total number of Warrant Shares the Holder will purchase
pursuant to such conversion and (ii) a place and date not less than one nor more
than 20 business days from the date of the Conversion Notice for the closing of
such purchase.
(iii) Fair Market Value of a Warrant Share as of a
particular date (the "Determination Date") shall mean:
(1) If the Company's Warrant Shares are traded on
an exchange or are quoted on the Nasdaq National Market, then the closing or
last sale price, respectively, reported for the last business day immediately
preceding the Determination Date.
(2) If the Company's Warrant Shares are not
traded on an exchange or on the Nasdaq National Market but are traded in the
over-the-counter market, then the mean of the closing bid and asked prices
reported for the last business day immediately preceding the Determination Date.
(3) If the Company's Warrant Shares are not
publicly traded, then as determined in good faith by the Company's Board of
Directors upon review of relevant factors.
(c) DELIVERY OF CERTIFICATE. In the event of any exercise of
the purchase right represented by this Warrant, certificates for the Warrant
Shares so purchased shall be delivered to the Holder within thirty (30) days of
delivery of the notice of exercise (the "Notice of Exercise") in the form of
EXHIBIT B attached hereto and, unless this Warrant has been fully exercised or
has expired, a new warrant representing the portion of the Warrant Shares with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder within such thirty (30) day period.
(d) NO FRACTIONAL SHARES. No fractional shares shall be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Fair Market
Value of a Warrant Share as of the Exercise Date.
(e) COMPANY'S REPRESENTATIONS.
(i) All Warrant Shares which may be issued upon the
exercise of the purchase right represented by this Warrant shall, upon issuance,
be duly authorized, validly issued, fully paid and nonassessable, and free of
any liens and encumbrances except for restrictions on transfer provided for
herein or under applicable federal and state securities laws. During the period
within which the purchase right represented by this Warrant may be exercised,
the Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of the purchase right represented by this Warrant, a
sufficient number of Warrant Shares to provide for the exercise of the purchase
right represented by this Warrant.
3
<PAGE>
(ii) This Warrant has been duly authorized and executed
by the Company and is a valid and binding obligation of the Company enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting, the
enforcement of creditors' rights.
(iii) The execution and delivery of this Warrant are not,
and the issuance of the Warrant Shares upon exercise of this Warrant in
accordance with the terms hereof will not be inconsistent with the Company's
Certificate of Incorporation or Bylaws, do not and will not contravene any law,
governmental rule or regulation, judgment or order applicable to the Company,
and do not and will not conflict with or contravene any provision of, or
constitute a material default under, any material indenture, mortgage, contract
or other instrument of which the Company is a party or by which it is bound or
require the consent or approval of, the giving of notice to, the registration or
filing with or the taking of any action in respect of or by, any federal, state
or local government authority or agency (other than such consents, approvals,
notices, actions, filings, etc., as have already been obtained or made, as the
case may be).
4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The
number of Warrant Shares issuable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) ADJUSTMENT FOR DIVIDENDS IN STOCK. In case at any time or
from time to time the holders of Warrant Shares of the Company (or any shares of
stock or other securities at the time receivable upon the exercise of this
Warrant) shall have received or, on or after the record date fixed for the
determination of eligible stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock of the Company by way of
dividend then, and in each case, the Holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Warrant
Shares receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional stock of the Company which such
Holder would hold on the date of such exercise had it been the holder of record
of Warrant Shares on the date hereof and had thereafter, during, the period from
the date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock receivable by it as aforesaid during such
period, giving effect to all adjustments called for during such period by
subparagraphs (b) and (c) of this Paragraph 4.
(b) ADJUSTMENT FOR RECLASSIFICATION OR REORGANIZATION. In case
of any reclassification or change of the outstanding Warrant Shares of the
Company or of any reorganization of the Company, then and in each such case the
Holder of this Warrant, upon the exercise hereof at any time after the
consummation of such reclassification, change; or reorganization, shall be
entitled to receive, in lieu of or in addition to the stock or other securities
and property receivable upon the exercise hereof prior to such consummation, the
stock or other securities to which such Holder would have been entitled upon
such consummation if such Holder had exercised this Warrant immediately prior
thereto, all subject to further adjustment as provided in subparagraphs (a) and
(c); in each such case, the terms of this Paragraph 4 shall be
4
<PAGE>
applicable to the shares of stock or other securities and property receivable
upon the exercise of this Warrant after such consummation.
(c) STOCK SPLITS AND REVERSE STOCK SPLITS. If the Company
shall subdivide its outstanding Warrant Shares into a greater number of shares,
the Warrant Price in effect immediately prior to such subdivision shall thereby
be proportionately reduced and the number of Warrant Shares receivable upon
exercise of this Warrant shall thereby be proportionately increased; and,
conversely, if the outstanding number of Warrant Shares shall be combined into a
smaller number of shares, the Warrant Price in effect immediately prior to such
combination shall thereby be proportionately increased and the number of Warrant
Shares receivable upon exercise of the Warrant shall be proportionately
decreased.
5. NOTICES OF RECORD DATE, ETC. In the event of (a) any taking by
the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution (the "Distribution"), (b) any capital
reorganization or reclassification of the stated capital of the Company or any
consolidation or merger of the Company with any other corporation or
corporations (other than a wholly-owned subsidiary), or the sale or distribution
of all or substantially all of the Company's property and assets (the
"Reorganization Event"), or (c) any proposed filing of a registration statement
under the Act in connection with a primary public offering of the Company's
Common Stock (the "Registration Event"), the Company will mail or cause to be
mailed to the Holder a notice specifying (i) the date of any such Distribution
stating the amount and character of such Distribution, (ii) the date on which
any such Reorganization Event or Registration Event is expected to become
effective, and (iii) the time, if any, that is to be fixed as to when the
holders of record of the Company's securities shall be entitled to exchange
their shares of the Company's securities for securities or other property
deliverable upon such Reorganization Event. Such notice shall be mailed at
least thirty (30) days prior to the date therein specified.
6. COMPLIANCE WITH ACT; TRANSFERABILITY AND NEGOTIABILITY OF WARRANT;
DISPOSITION OF SHARES.
(a) COMPLIANCE WITH ACT. The Holder, by acceptance hereof,
agrees that this Warrant and the Warrant Shares to be issued upon the exercise
hereof are being acquired solely for its own account and not as a nominee for
any other party and not with a view toward the resale or distribution thereof
and that it will not offer, sell or otherwise dispose of this Warrant or any
Warrant Shares to be issued upon the exercise hereof except under circumstances
which will not result in a violation of the Act. Upon the exercise of this
Warrant, the Holder shall confirm in writing, in a form satisfactory to the
Company, that the Warrant Shares so issued are being acquired solely for its own
account and not as a nominee for any other party and not with a view toward
resale or distribution thereof in violation of the Act. This Warrant and the
Warrant Shares to be issued upon the exercise hereof (unless registered under
the Act and unless, in the case of the Warrant Shares, such Shares may thereupon
be sold pursuant to Commission Rule 144(k)) shall be imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF
5
<PAGE>
1933. AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
In addition, this Warrant and the Warrant Shares to be issued upon the
exercise hereof shall bear any legends required by the securities laws of any
applicable states.
(b) TRANSFERABILITY AND NEGOTIABILITY OF WARRANT. This Warrant
may not be transferred or assigned in whole or in part without compliance with
all applicable federal and state securities laws by the transferor and the
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Company, if requested by the
Company and the transfer is to a person other than a general partner of the
initial Holder). Subject to the provisions of this Warrant with respect to
compliance with the Act, title to this Warrant may be transferred by endorsement
and delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery. The Company shall act promptly to record transfers of
this Warrant on its books, but the Company may treat the registered holder of
this Warrant as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
(c) DISPOSITION OF WARRANT SHARES. With respect to any offer,
sale, transfer or other disposition of any Warrant Shares acquired pursuant to
the exercise of this Warrant prior to registration of such Warrant Shares,
except for any such offer, sale, transfer or other disposition of Warrant Shares
to a partner of the initial Holder, the Holder and each subsequent holder of
this Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of legal
counsel for such holder, reasonably satisfactory to the Company and its legal
counsel, if requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Act or any other federal or state securities laws) of such Warrant Shares
and indicating whether or not under the Act, certificates for such Warrant
Shares to be sold or otherwise disposed of require any restrictive legend as to
the applicable restrictions on transferability in order to ensure compliance
with the Act. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such holder that such holder may sell or otherwise dispose of such
Warrant Shares, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this subsection (c) that
the opinion of legal counsel for the holder is not reasonably satisfactory to
the Company and its legal counsel, the Company shall so notify the holder
promptly after such determination has been made. Notwithstanding the foregoing,
such
6
<PAGE>
Warrant Shares may be offered, sold or otherwise disposed of in accordance with
Rule 144, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 have been satisfied. Each certificate
representing the Warrant Shares thus transferred (except a transfer pusuant to
Rule 144(k) or an effective registration statement) shall bear a restrictive
legend as to the applicable restrictions on transferability in order to ensure
compliance with the Act, unless in the aforesaid opinion of legal counsel for
the holder, such legend is not required in order to ensure compliance with the
Act. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
7. RIGHTS OF STOCKHOLDERS. No Holder shall be entitled to vote or
receive dividends or be deemed the holder of Warrant Shares or any other
securities of the Company which may at any time be issuable on the exercise of
this Warrant for any purpose, nor shall anything, contained herein be construed
to confer upon the Holder, 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 stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation, merger, transfer of assets or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Warrant Shares issuable upon exercise hereof shall have become
deliverable, as provided herein.
8. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
9. EXCHANGE OF WARRANT. Subject to the other provisions of this
Warrant, on surrender of this Warrant for exchange, properly endorsed and
subject to the provisions of this Warrant with respect to compliance with the
Act, the Company at its expense shall issue to or on the order of the Holder a
new warrant or warrants of like tenor, in the name of the Holder or as the
Holder (on payment by the Holder of any applicable transfer taxes) may direct,
for the number of Warrant Shares issuable upon exercise thereof.
10. NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or three days after being mailed by first-class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company or the Holder, as the case may be, in writing by the Company or such
Holder from time to time.
11. WAIVER. 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.
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<PAGE>
12. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, as such laws are applied to
agreements entered into in California and to be performed solely by California
residents.
13. TITLES AND SUBTITLES; FORMS OF PRONOUNS. The titles of the
Sections and Subsections of this Warrant are for convenience only and are not to
be considered in construing this Warrant. All pronouns used in this Warrant
shall be deemed to include masculine, feminine and neuter forms.
14. EXPIRATION. Subject to the provisions of Section 2 above, the
right to exercise this Warrant shall expire at 5:00 P.M. California time, on
August 23, 2004.
Dated: August 23, 1999
COLLEGECLUB.COM, INC.
By: /s/ Eric D. Rindahl
-------------------------------------
Eric D. Rindahl
Chief Financial Officer
8
<PAGE>
EXHIBIT A
Certificate of Amendment to Certificate of Designations, Preferences and Rights
Filed as Exhibit 3.2 to the Registration Statement
<PAGE>
EXHIBIT B
NOTICE OF EXERCISE
(To be signed only on exercise of Warrant)
TO: COLLEGECLUB.COM, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, shares of _____
Stock of ColleceClub.com, Inc. and herewith makes payment of $ ______________
therefor (either in cash or in cancellation of fees due for legal services
rendered or in accordance with the cashless exercise provisions of Section 3(b))
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)
--------------------------------------------
(Name)
--------------------------------------------
(Address)
<PAGE>
EXHIBIT 10.14
JOINT MARKETING AGREEMENT
between
College Club-com
and
Overly Publishing
This Agreement, effective June 25, 1999 (the "Effective Date") is
entered into by and between College Club.com ("COLLEGE CLUB"), a California
corporation, with offices at 5353 Mission Center Road, Suite 310, San Diego,
California 92108, California, and Overly Publishing ("Overly"), a _____________
corporation with offices at _____________________________.
RECITALS
A. COLLEGE CLUB has developed an Online Service (as defined below) through
which college students can obtain phone and e-mail service, access chat
and interest groups, access online games and music videos, and obtain a
discount card to numerous vendors.
B. Overly has developed and sells Student Planners (as defined below).
C. COLLEGE CLUB and Overly desire to enter into a joint marketing
arrangement pursuant to which Overly will market COLLEGE CLUB's Online
Service in connection with the Student Planners as more particularly
set forth in this Agreement.
D. COLLEGE CLUB and Overly have entered into a letter of understanding
dated May 12, 1999 (the "Letter of Understanding") which sets forth the
general parameters of such joint marketing arrangement.
E. This parties desire to enter into this Agreement to establish in detail
the joint marketing responsibilities of the parties with respect to the
marketing and promotion of the Online Service with the Student Planner.
F. A separate transaction is being pursued simultaneously with the
execution of this Agreement whereby COLLEGE CLUB is acquiring
substantially all of the operating assets of CollegeBeat, Inc., an
affiliate of Overly.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agrees as follows:
<PAGE>
1. DEFINITIONS
1.1 "ADVERTISING STRIP" has the meaning set forth in Section 4(b)
("Advertising Strip").
1.2 "CAMPUS DATA" shall mean information from college campuses served by
Overly during the term of this Agreement, as more particularly
described in EXHIBIT C hereto.
1.3 "COLLEGE CLUB MEMBERSHIP CARD" means the card issued by COLLEGE CLUB
which provides information regarding services contained with the Online
Service. a sample of which is attached as EXHIBIT D hereto.
1.4 "COLLEGE CLUB SERVICE" means the College Club online service, as
further described in EXHIBIT A hereto.
1.5 "COLLEGE CLUB REGISTERED USER" has the meaning set forth in Section 5
("Registered Users").
1.6 "EFFECTIVE DATE" means the date set forth in the introductory paragraph
of this Agreement.
1.7 "STUDENT PLANNER" means the Overly student planner (and Marketing
Materials), as further described in EXHIBIT B hereto.
1.8 "MARKETING MATERIALS" shall mean the temporary College Club Membership
Card and/or the alternative marketing materials of COLLEGE CLUB as
described in Section 4(a)(ii) herein.
1.9 "OTHER MARKETING EFFORTS" shall have the meaning set forth in Section
6(b) ("Registered User Fee").
1.10 "COLLEGE CLUB TRADEMARKS" shall have the meaning set forth in Section
3(a) ("License").
1.11 "REGISTERED USER FEE" shall have the meaning set forth in Section 6(b)
("Registered User Fee").
1.12 "INTELLECTUAL PROPERTY RIGHTS" means copyright rights, trademark
rights, patent rights, trade secrets, moral rights, right of publicity,
authors' rights, contract and licensing rights, goodwill and all other
intellectual property rights as may exist now and/or hereafter come
into existence, and all renewals and extensions thereof, regardless of
whether such rights arise under the law of the United States of any
other state, country or jurisdiction.
2. PROVISION OF CAMPUS DATA. For a period of ten (10) years from the
Effective Date of this Agreement, Overly agrees to compile and organize local
campus information which it collects for insertion into its Student Planners and
Student Handbooks in a format acceptable to COLLEGE CLUB from all of the college
campuses Overly serves during the term of this
2
<PAGE>
Agreement. Overly agrees that the minimum number of such campuses for the
duration of this Agreement shall be two hundred (200) campuses. Overly will
undertake commercially reasonable efforts to compile such information (the
"Campus Data") which shall include, but not be limited to the categories of
information, set forth in EXHIBIT C ("Campus Data") hereto. Overly will provide
the Campus Data to COLLEGE CLUB in a preliminary fashion no later than May 15
and the complete Campus Data no later than July 15 for each Fall semester and no
later than December 15 for each Spring Semester for each year of the term of
this Agreement.
3. LICENSE.
a. GRANT. Subject to the terms and conditions set forth
herein, COLLEGE CLUB grants to Overly, and Overly hereby accepts, a limited,
nontransferable, nonexclusive license to (i) reproduce the College Club
Membership Card and include it with the Student Planners; and (ii) use COLLEGE
CLUB's Trademarks for purposes of the Advertising Strip and any approved
materials used with Other Marketing Efforts which may be agreed to by COLLEGE
CLUB and Overly. Use of COLLEGE CLUB's Trademarks shall be in accordance with
any guidelines provided by COLLEGE CLUB to Overly. For the purposes of this
Agreement, "COLLEGE CLUB's Trademarks" shall mean those trademarks of COLLEGE
CLUB to be used by Overly in connection with the activities contemplated by this
Agreement which are designated by COLLEGE CLUB to Overly in writing during the
term of this Agreement.
b. RESERVATION OF RIGHTS. All Intellectual Property rights
owned by a party as of the Effective Date shall remain the property of such
party and no license or other rights with respect to such Intellectual Property
are granted to the other party except as otherwise expressly set forth in this
Agreement.
4. STUDENT PLANNER ADVERTISING.
a. MEMBERSHIP CARD. On the date hereof, Overly will begin
including a temporary College Club Membership Card located immediately inside
the front cover of all Student Planners sold by Overly.
i. On or before December 1 of each calendar year,
COLLEGE CLUB will provide to Overly a sample of the College Club Membership Card
to be included in the Student Planners for the following academic year. Overly
will be responsible, at Overly's cost. for producing sufficient quantities of
the College Club Membership Card to be included with the Student Planners.
COLLEGE CLUB may provide Overly with new versions of the College Club Membership
Card from time to time during the term of this Agreement. Overly will undertake
commercially reasonable efforts to include the College Club Membership Card in
all Student Planners it sells except in those sold to any customer that requests
that the College Club Membership card not be included and Overly promptly
notifies College Club. College Club agrees (a) to provide a link from its
website to websites maintained by an Overly customer that has agreed to have
College Club membership cards included and (b) to provide such customers an
opportunity to sell discounted products in the locally focused discount section
of College Club's website.
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<PAGE>
ii. At COLLEGE CLUB's sole option and discretion,
COLLEGE CLUB may require that Overly provide marketing materials of reasonable
size and nature other than the College Club Membership Card in the Student
Planners. If COLLEGE CLUB desires to so change the marketing materials, COLLEGE
CLUB shall so inform Overly on or before December 1 of the year prior to the
beginning of the academic year in which the change will take effect, and COLLEGE
CLUB will provide to Overly a sample of the new marketing materials. Overly will
be responsible, at Overly's cost, for producing sufficient quantities of the new
marketing materials to be included with the Student Planners; provided, however,
that the cost to Overly to produce the new marketing materials shall not exceed
$.05 per unit. In the event Overly anticipates that the cost will exceed $.05
per unit, Overly will notify COLLEGE CLUB and provide documentation of such
cost, and COLLEGE CLUB will either modify the marketing materials so that the
cost to COLLEGE CLUB will be less than $.05 per unit or COLLEGE CLUB may agree
to reimburse Overly for the cost of the marketing materials in excess of $.05
per unit.
b. ADVERTISING STRIP. In addition to inserting the College
Club Membership Card inside the Student Planners, Overly shall include an
advertising strip ("Advertising Strip")located in front of the cover of the
Student Planners. Such advertising strip shall describe the existence of the
College Club Membership Card as well as some of its features (e.g., discounts,
voicemail, e-mail, etc.), with the specific format of the advertising strip to
be mutually agreed to by Overly and COLLEGE CLUB. Overly will be responsible for
producing sufficient quantities of the Advertising Strip. COLLEGE CLUB shall
reimburse Overly for Overly's direct out-of pocket expenses incurred to print
the Advertising Strip, not to exceed $.03 per unit, within thirty (30) days
after receipt of Overly's invoice for such costs. If requested by COLLEGE CLUB,
Overly shall provide COLLEGE CLUB with documentation and back-up evidencing such
expenses.
5. REGISTERED USERS. For the purposes of this Agreement, "College
Club Registered User" means any new user that registers at COLLEGE CLUB's web
site, www.collegeclub.com/savemoney (or such other URL as mutually agreed upon
by COLLEGE CLUB and Overly) and returns to such site at least once during the
period 31 to 90 days following such registration and has registered at COLLEGE
CLUB's web site as set forth in (a) through (c) below:
a. Any new user registers via the bridge page
www.collegectub.com/savemoney (or other such URL as mutually agreed upon by
COLLEGE CLUB and Overly);
b. Any new user that upon registration (by any means)
identifies Overly's Media as the source of reference in the "How Heard" section
of the online registration form of COLLEGE CLUB's web site; or
c. Any new user that logs on to COLLEGE CLUB's web site with a
password that has been preassigned to such user by any of Overly's media.
4
<PAGE>
6. CONSIDERATION.
a. EQUITY SECURITIES. As consideration for providing the
marketing initiatives set forth in Section 4 above ("Student Planner
Advertising"), COLLEGE CLUB shall issue to Overly Equity Securities (hereinafter
defined) on the terms summarized below. The Equity Securities shall be issued in
accordance with and subject to the terms of the Stock Subscription Agreement
attached hereto as EXHIBIT E.
i. Equity Securities having an aggregate value of
$75,000 (determined as set forth below), $7,500 of which shall be issued on the
Effective Date and Equity Securities having a value of $11,250 shall be issued
on each of the next six anniversaries thereof during the term of this Agreement.
ii. Equity Securities having a value of up to
$150,000 (determined as set forth below), $15,000 of which shall be issued on
the Effective Date, with the balance of such Equity Securities to be issued from
time to time during the term of this Agreement, in the amounts indicated below,
within thirty (30) days after the achievement of the performance criteria
relating to the number of Student Planners distributed by Overly or the number
of College Club Registered Users registered as a result of the activities
contemplated by this Agreement, as follows:
Overly College Club
Student Planners Registered Users Value of Eguity % of Total
<TABLE>
<CAPTION>
OVERLY COLLEGE CLUB
STUDENT PLANNERS REGISTERED USERS VALUE OF EQUITY % OF TOTAL
---------------- ---------------- --------------- ----------
<S> <C> <C> <C>
0 0 $ 15,000 10%
600,000 10,000 $ 30,000 20%
1,200,000 20,000 $ 60,000 40%
1,800,000 30,000 $ 90,000 60%
2,400,000 40,000 $ 120,000 80%
3,000,000 50,000 $ 150,000 100%
</TABLE>
For the purposes of this section, "Equity Securities" shall initially mean
COLLEGE CLUB's Series B Preferred Stock ("Series B Stock"). In the event of the
automatic conversion of COLLEGE CLUB's Series B Stock (in accordance with its
Articles of Incorporation), "Equity Securities" shall, thereafter mean shares of
COLLEGE CLUB's Common Stock. Further, for so long as COLLEGE CLUB is obligated
to issue Series B Stock pursuant to this Section 6a, the per share value thereof
shall be equal to the liquidation preference of the Series B Shares (the "Series
B Preference"). Thereafter, the per share value of Equity Securities issued by
COLLEGE CLUB shall be equal to the Series B Preference as in effect on the date
of the automatic conversion of the Series B Stock, as adjusted for subsequent
stock splits, stock dividends, recapitalizations and the like. College Club
agrees to use commercially reasonable efforts to maintain its website and the
bridge page www.collegeclub.com/planner (or such other applicable URL) in
sufficient working order to adequately record new College Club Registered Users
and to include on such
5
<PAGE>
sites information with respect to local merchants from the areas in which Seiler
is distributing Student Planners.
b. REGISTERED USER FEE. For a period of ten (10) years from
the Effective Date of this Agreement, COLLEGE CLUB shall pay to Overly a fee of
$3.00 ("Registered User Fee") per new College Club Registered User that becomes
a College Club Registered User as a result of marketing efforts for any of
COLLEGE CLUB's products or services undertaken by Overly that are other than
those set forth in this Agreement ("Other Marketing Efforts"). Overly shall
obtain COLLEGE CLUB's prior written approval before commencing any such Other
Marketing Efforts. The Registered User Fees shall be payable by COLLEGE CLUB to
Overly on or before every June I and December I during the term of this
Agreement. Prior to the implementation of any Other Marketing Efforts, COLLEGE
CLUB and Overly shall agree as to how to determine whether a new College Club
Registered User "results" from the Other Marketing Efforts; i.e., whether the
determination is the same as set forth in this Agreement or by other means.
7. TERM AND TERMINATION.
a. Initial Term. The initial term of this Agreement shall
commence as of the Effective Date and shall continue until the earlier of (i)
ten (10) years after the Effective Date of this Agreement; (ii) the sale of
three million (3,000,000) Student Planners containing the COLLEGE CLUB Marketing
Materials; or (iii) the addition of fifty thousand (50,000) new College Club
Registered Users that "result" from such COLLEGE CLUB Marketing Materials
included in the Overly Student Planners. For the purposes of this Agreement,
College Club Registered Users shall be considered to have "resulted" from the
COLLEGE CLUB Marketing Materials if they become College Club Registered Users
via the criteria set forth in Section 5 above ("Registered Users").
b. Extended Tenn. In the event the initial term expires prior
to ten (10) years after the Effective Date as a result of Overly satisfying
either 7(a)(ii) or 7(a)(iii) above, the COLLEGE CLUB shall have the right, at
its sole option and discretion, to continue the term of this Agreement and
purchase the Overly Student Planner advertising space as described in Section 4
above ("Student Planner Advertising") for the remainder of the ten (10) year
period at the following cost: (i) for years I through 5, the cost shall be $.015
per planner; and (ii) for years 6 through 10, the cost shall be $.015 per
planner plus an Inflation Premium, where such Inflation Premium shall be a
constant and shall $.015 time an agreed upon inflation rate representing the
compounded United States inflation rate experienced during years 1 through 5.
c. TERMINATION FOR CAUSE. If either party is in material
breach of the terms of this Agreement, the non-breaching party may give written
notice of such breach to the breaching party and an opportunity to cure the
breach within thirty (30) days. If such breach is not cured within such thirty
(30) day period, the non-breaching party may immediately terminate this
Agreement by subsequent written notice to the party in breach.
d. TERMINATION FOR INSOLVENCY. This Agreement may be
terminated (i) upon the institution by or against either party of insolvency,
receivership or bankruptcy proceedings or
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<PAGE>
any other proceeding for the settlement of either party's debts; (ii) upon
either party making an assignment for the benefit of creditors, or (iii) upon
either party's dissolution or ceasing to do business but only if the party
described in (i), (ii) or (iii) is in breach of its obligations under this
Agreement and the other party so desires to terminate this Agreement by giving
written notice.
e. EFFECT OF TERMINATION.
i. Within thirty (30) days after the effective date
of termination of this Agreement, Overly shall stop selling Student Planners
containing the Marketing Materials and shall stop any Other Marketing Efforts;
ii. Within ten (10) days after the effective date of
termination of this Agreement, each party shall return all Confidential
Information received from the other party or destroy such Confidential
Information and provide the other party with a signed statement from an officer
certifying that it has complied with the foregoing obligations;
iii. Any license rights granted from COLLEGE CLUB to
Overly shall terminate;
iv. Overly shall be entitled to retain any
consideration paid pursuant to Section 4 ("Consideration") and Overly shall be
entitled to receive any consideration to which it would otherwise have been
entitled under the terms of this Agreement as of the effective time of the
termination or expiration of this Agreement but which had not been paid as of
such time;
v. All claims for damages caused by any breach
occurring prior to the termination shall survive and remain enforceable;
vi. neither party shall be relieved from any
obligation accrued prior to the date of such termination; and
vii. The following Sections shall survive the
termination or expiration of this Agreement: Sections I ("Definitions"), 6
("Consideration"), 9 ("Information and Reports"), 3(b) ("Reservation of Rights);
11 ("Confidentiality"), 13 ("Limitation of Liability"), 14 ("Indemnification");
7 ("Term and Termination"); 15 ("General Terms and Conditions").
8. COVENANT NOT TO COMPETE. Overly agrees to exclusively market only
COLLEGE CLUB's products and services with respect to the college marketplace for
online services. Specifically, Overly agrees to (i) not use any of its
properties or marketing initiatives to promote or advertise any other company
which could be viewed as a direct competitor to either COLLEGE CLUB defined as
any such company that offers a college-focussed web site that is either
e-commerce or advertising based ("Direct Competitor"); and (ii) not provide the
Campus Data to any Direct Competitor. Furthermore, in the event that over 50% of
Overly's voting or economic stock is sold or otherwise transferred (a "Change of
Control") to a Direct Competitor, then COLLEGE CLUB, at its sole option and
discretion, may terminate this Agreement as set forth in Section 7 ("Term and
Termination"). Any consideration paid to Overly pursuant to Section 6
("Consideration") prior to such change in control shall be not reversible or
refundable.
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9. INFORMATION AND REPORTS.
a. DISTRIBUTION OF STUDENT PLANNERS. Overly shall provide to
COLLEGE CLUB, on a quarterly basis, status reports detailing the distribution of
Student Planners containing the College Club Marketing Materials, which reports
shall contain all such information as may be reasonably requested by COLLEGE
CLUB but which in any event shall include without limitation the quantity of
Student Planners distributed and the names of the colleges at which the Student
Planners were distributed. Such reports shall be received by COLLEGE CLUB no
later than January 3 1, April 30, July 31 and October 31 of each year.
b. REGISTERED USERS. COLLEGE CLUB shall provide to Overly, on
a quarterly basis, a status report summarizing the number of new College Club
Registered Users that have become College Club Registered Users as a result of
the activities set forth in Section 4 above ("Student Planner Advertising").
c. AUDIT RIGHTS. On reasonable written notice, either party,
at its own expense, shall have the right to have an independent certified public
accountant inspect and audit the books and records of the other party during
usual business hours for the sole purpose of determining the correctness of
payments due under this Agreement. Such examination with respect to any fiscal
year shall not take place later than three (3) years following the expiration of
such period. The expense of such audit shall be borne by the auditing party;
provided, however, that if the audit discloses an error in excess of 2% in favor
of the party being audited, then the party being audited shall immediately pay
the cost of the audit to the auditing party, as well as the amount of the
outstanding discrepancy.
10. REPRESENTATIONS TO CUSTOMERS. Neither party shall make any
representations, oral or written, in connection with the other party's products
or services other than those provided by the other party in writing.
11. CONFIDENTIALITY.
a. GENERALLY. Each Party ("the Receiving Party") acknowledges
that by reason of its relationship with the other party ("the Disclosing Party")
hereunder, the Receiving Party might have access to certain information and
materials concerning the Disclosing Party's business, its financial, business
and technical plans and strategies, inventions, new products or services, and
technology ("Confidential Information"). Without limiting the foregoing, the
terms and conditions set forth in this Agreement shall be Confidential
Information. The Receiving Party acknowledges and agrees that the Disclosing
Party's Confidential Information is of substantial value to the Disclosing
Party, which value would be harmed if such information were disclosed to third
parties. The Receiving Party agrees that it shall not use (except in the
performance of its obligations under this Agreement) in any way for its own
account or any account of any third party, nor disclose to any third party such
Confidential Information except as required by law. The Receiving Party may
disclose the Disclosing Party's Confidential Information to its employees and
contractors who need to know such information, provided such employees and
contractor have signed confidentiality agreement with terms no less restrictive
than the terms in this Agreement. The Receiving Party shall not publish in any
form the
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<PAGE>
Disclosing Party's Confidential Information beyond any descriptions published by
the Disclosing Party. The obligations in this Section shall survive the
termination of this Agreement.
b. EXCLUSIONS. Confidential Information does not include any
information that the Receiving Party can demonstrate by written records (a) was
known to the Receiving Party prior to its disclosure hereunder by the Disclosing
Party; (b) was independently developed by the Receiving Party; (c) is or becomes
publicly known through no wrongful act of the Receiving Party; (d) has been
rightfully received from a third party whom the Receiving Party has reasonable
grounds to believe is authorized to make such disclosure without restriction; or
(e) has been approved for public release by the Disclosing Party's prior written
authorization. Confidential Information may be disclosed pursuant to applicable
law, regulations or court order, provided that the Receiving Party provides
prompt advance notice thereof to enable the Disclosing Party to seek a
protective order or otherwise prevent such disclosure. In addition, COLLEGE CLUB
and Overly may disclose the existence and terms of this Agreement in connection
with a potential acquisition of substantially the entire business of COLLEGE
CLUB or a private or public offering of COLLEGE CLUB's securities or Overly's
securities.
c. AGREEMENT. For a period of two (2) years after the
Effective Date of this Agreement, neither party may disclose to the public or
any third party the existence of the Letter of Understanding or this Agreement
or any of the provisions of either document other than with the express prior
written consent of the other party, except as may be required by law.
12. WARRANTIES.
a. OVERLY. Overly hereby represents and warrants to COLLEGE
CLUB that Overly is authorized, empowered, and able to enter into and fully
perform its obligations under this Agreement.
b. COLLEGE CLUB. COLLEGE CLUB hereby represents and warrants
to Overly that COLLEGE CLUB is authorized, empowered, and able to enter into and
fully perform its obligations under this Agreement.
13. LIMITATION OF LIABILITY. EXCEPT FOR LIABILITY ARISING UNDER SECTION
I 1 ("CONFIDENTIALITY"), IN NO EVENT SHALL EITHER PARTY BE LIABLE TO OTHER PARTY
FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES (INCLUDING
WITHOUT LIMITATION LOST PROFITS) ARISING OUT OF THIS AGREEMENT (WHETHER FOR
BREACH OF CONTRACT, TORT, OR NEGLIGENCE) OR ITS TERMINATION AND IRRESPECTIVE OF
WHETHER SUCH PARTY-HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR
DAMAGE.
14. INDEMNIFICATION.
a. INDEMNIFICATION BY OVERLY. Subject to the provisions of
this Section, Overly agrees to indemnify, defend and hold harmless COLLEGE CLUB
and its officers, directors, employees and agents from and against any and all
losses, liabilities, claims,
9
<PAGE>
obligations, costs, expenses (including, without limitation, reasonable
attorneys' fees) which result from, arise in connection with or are related in
any way to claims by third parties arising out of a breach of a representation
or warranty or obligation of Overly in this Agreement. The obligations of this
Section are contingent on COLLEGE CLUB (a) giving Overly prompt written notice
of any such claim; and (b) providing reasonable cooperation in the defense and
all related settlement negotiations.
b. INDEMNIFICATION BY COLLEGE CLUB. Subject to the provisions
of this Section, COLLEGE CLUB agrees to indemnify, defend and hold harmless
Overly and its officers, directors, employees and agents from and against any
and all losses, liabilities, claims, obligations, costs, expenses (including,
without limitation, reasonable attorneys' fees) which result from, arise in
connection with or are related in any way to claims by third parties arising out
of a breach of a representation or warranty or obligation of COLLEGE CLUB in
this Agreement. The obligations of this Section are contingent on Overly (a)
giving COLLEGE CLUB prompt written notice of any such claim; and (b) providing
reasonable cooperation in the defense and all related settlement negotiations.
15. GENERAL TERMS AND CONDITIONS.
a. EXPENSES. Except as may be expressly set forth herein, each
party will be responsible for its own expenses incurred in connection with all
matters relating to the fulfillment of the duties described herein, including
the preparation and execution of this Agreement.
b. GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the United States of America and the State of
California, excluding the application of its conflict or choice of law rules as
well as the application to this Agreement of the United Nations Convention on
Contracts for the International Sale of Goods. The parties irrevocably submit to
the exclusive jurisdiction of the Superior Court of the State of California, San
Diego County and the San Diego Division of the United States District Court for
the Southern District of California for disputes arising under this Agreement.
The parties will not raise in connection therewith, and hereby waive, any
defenses based on the venue, the inconvenience of the forum, the lack of
personal jurisdiction, the sufficiency of service process, or the like in any
such action brought in the State of California. The parties agree that service
of a complaint may be provided to a party in accordance with the terms of
Section 15(c) ("Notices") for any dispute, litigation or other action arising
under this Agreement or to interpret or enforce this Agreement. The prevailing
party in any such litigation or dispute shall be entitled to recover from the
other party its costs, including attorneys' fees, associated with such
litigation or dispute.
c. NOTICES. All notices or reports permitted or required under
this Agreement shall be in writing and shall be delivered by personal delivery,
facsimile (provided that proof of transmission is retained), or by certified or
registered mail, return receipt requested, and shall be deemed given upon
personal delivery, five (5) days after deposit in the mail or upon
acknowledgment of receipt of electronic transmission. Notices shall be sent to
the address set forth in the first paragraph of this Agreement or in the
signature block below, or other such address as either party may specify in
writing.
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<PAGE>
d. INJUNCTIVE RELIEF. It is expressly agreed that a breach of
Section 11 ("Confidentiality") of this Agreement will cause irreparable harm to
either party and that a remedy at law would be inadequate. Therefore, in
addition to any and all remedies available at law, the aggrieved party will be
entitled to an injunction or other equitable remedies in all legal proceedings
in the event of any threatened or actual violation of any or all of the above
provisions.
e. WAIVER. No failure or delay on the part of either party in
exercising any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or remedy preclude any
other or further exercise thereof or of any other right or remedy. No provision
of this Agreement may be waived except in a writing signed by the party granting
such waiver.
f. SEVERABILITY. In the event that any provision of this
Agreement shall be unenforceable or invalid under any applicable law or be so
held by applicable court decision, such unenforceability or invalidity shall not
render this Agreement unenforceable or invalid as a whole, and in such event,
such provision shall be changed and interpreted so as to best accomplish the
objectives of such unenforceable or invalid provision within the limits of
applicable law or applicable court decisions.
g. HEADINGS. The section headings in this Agreement are
inserted as a matter of convenience and in no way define, limit, or describe the
scope of extent of such section, or affect the interpretation of this Agreement.
h. ASSIGNMENTS. This Agreement may not be assigned by either
party without the prior written consent of the other party which consent shall
not be unreasonably withheld; provided, however, that either party may assign
all of its rights and obligations under.. this Agreement to (i) a subsidiary or
parent of either party or an entity under common control with such party, (ii) a
purchaser of all or substantially all of the stock or assets, or (iii) a third
party participating in a merger or other business combination in which either
party is a constituent corporation. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
i. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which taken together shall constitute one single agreement
between the parties.
j. ENTIRE AGREEMENT. This Agreement and the Exhibits attached
hereto, which are hereby incorporated by reference, constitutes the entire
agreement between the parties with ` respect to the subject matter hereof. This
Agreement supersedes, and the terms of this Agreement govern, any prior or
collateral agreements, whether oral or written, with respect to the subject
matter hereof with the exception of any prior confidentiality agreements between
the parties. This Agreement may only be changed by mutual agreement of
authorized representatives of parties in writing.
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IN WITNESS WHEREOF, authorized representatives of the parties have
executed this Agreement as of the Effective Date.
COLLEGECLUB.COM
By: /s/ Michael C. Pousti
-------------------------------------
Michael C. Pousti,
Chief Executive Officer
OVERLY PUBLISHING
By: /s/ [ILLEGIBLE]
-------------------------------------
Title: President
----------------------------------
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EXHIBIT A
ONLINE SERVICE
<PAGE>
EXHIBIT B
STUDENTPLANNER
<PAGE>
EXHIBIT C
CAMPUS DATA
Academic Schedules
Sports Schedules
Campus Phone Numbers (e.g., ______________________)
<PAGE>
EXHIBIT D
COLLEGE CLUB MEMBERSHIP CARD
<PAGE>
EXHIBIT E
STOCK SUBSCRIPTION AGREEMENT
<PAGE>
EXHIBIT 10.15
EQUITY SECURITIES SUBSCRIPTION AGREEMENT
THIS EQUITY SECURITIES SUBSCRIPTION AGREEMENT is made effective as of the 25th
day of June, 1999, (the "Effective Date") by and between College Club.com, a
California corporation (the "Corporation"), and Overly Publishing, (the
"Purchaser").
WITNESSETH:
WHEREAS, the Corporation and Purchaser have entered into a Joint Marketing
Agreement as of the Effective Date to which this Agreement is attached as
EXHIBIT E (the "Marketing Agreement");
WHEREAS, the Marketing Agreement provides for the Corporation's issuance to the
Purchaser from time to time of Equity Securities (as defined therein) on the
terms set forth therein; and
WHEREAS, the Corporation and the Purchaser desire to set forth the terms upon
which the Equity Securities will be issued by the Corporation to the Purchaser.
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. ISSUANCE OF EQUITY SECURITIES. The Purchaser hereby agrees that all
Equity Securities issued from time to time by the Corporation pursuant to the
terms of Section 6a of the Marketing Agreement shall be issued subject to the
terms and conditions of this Agreement. Concurrently with the execution of this
Agreement, the Corporation shall deliver to Purchaser a certificate for 2632
shares of Series B Preferred Stock as provided in subsections 6a(i) and 6(a)(ii)
of the Marketing Agreement.
2. RIGHT OF FIRST REFUSAL. Before any shares of Equity Securities
registered in the name of Purchaser may be sold or transferred (including
transfer by operation of law) other than as set forth in Section 2(e) below,
such shares shall first be offered to the Corporation, which will have the right
to purchase all or any part of the shares proposed to be transferred ("Right of
First Refusal"), in the following manner:
(a) The Purchaser or its successors and assigns shall first
give written notice (the "Transfer Notice") of any proposed transfer to the
Corporation. The Transfer Notice shall name the proposed transferee, state the
number of shares of Equity Securities to be transferred, and if the transfer is
voluntary, the price per share and all other terms of the offer. The Transfer
Notice shall be signed by the Purchaser or its successors and assigns and the
prospective transferee and must constitute a binding agreement for the transfer
of the Equity Securities subject only to the Right of First Refusal.
(b) Within thirty (30) days of delivery of the Purchaser's
notice of a proposed voluntary transfer, the Corporation's Board of Directors
shall determine the bona fide nature of
<PAGE>
the proposed voluntary transfer and give the Purchaser written notice of its
determination. If the proposed transfer is deemed to be bona fide, the remaining
subsections of this section shall apply to the sale. If the proposed transfer is
deemed not to be bona fide, the Purchaser will be responsible for providing
additional information to the Board to show the bona fide nature of the proposed
transfer and no Equity Securities will be transferred on the books of the
Corporation until the Board has approved the proposed transfer as bona fide.
(c) If the Corporation fails to exercise in full the Right of
First Refusal within thirty (30) days from the later of the date the Transfer
Notice is delivered to the Corporation or thirty (30) days after the date the
transfer is determined to be bona fide (if the Purchaser is required to provide
additional information as provided in Section 2(b) above), the Purchaser may,
not later than one hundred twenty (120) days following delivery to the
Corporation of the Transfer Notice, conclude a transfer of the shares of Equity
Securities subject to the Transfer Notice which have not been purchased by the
Corporation pursuant to exercise of the Right of First Refusal on the terms and
conditions described in the Transfer Notice. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Purchaser, shall again be subject to the
Right of First Refusal and shall require compliance by the Purchaser with the
procedure described in this Section 2. If the Corporation exercises the Right
of First Refusal, the parties shall consummate the sale of shares of Equity
Securities on the terms set forth in the Transfer Notice by the later of sixty
(60) days after the delivery of the Transfer Notice to the Corporation or thirty
(30) days after the date the transfer is determined to be bona fide (if the
Purchaser is required to provide additional information as provided in Section
2(b) above); provided, however, in the event the Transfer Notice provides for
the payment for the shares of Equity Securities other than in cash, the
Corporation shall have the option of paying for the shares of Equity Securities
by the discounted cash equivalent of the consideration described in the Transfer
Notice as reasonably determined by the Corporation.
(d) All transferees of shares of Equity Securities or any
interest therein other than the Corporation shall be required as a condition of
such transfer to agree in writing (in a form satisfactory to the Corporation)
that they will receive and hold such shares of Equity Securities or interests
subject to the provisions of this Agreement, including the Right of First
Refusal.
(e) The Right of First Refusal shall terminate at such time as
a public market exists for the Corporation's Common Stock. For the purpose of
this Agreement, a "public market" shall be deemed to exist if (i) such Common
Stock is listed on a national securities exchange (as that term is used in the
Securities Exchange Act of 1934) or (ii) such Common Stock is traded on the
over-the-counter market and prices therefore are published daily on business
days in a recognized financial journal.
3. "MARKET STAND-OFF' AGREEMENT. The Purchaser hereby agrees that, during
the period of duration (not to exceed 180 days) specified by the Company and an
underwriter of common stock or other securities of the Company following the
effective date of a registration statement of the Company filed under the
Securities Act of 1933, as amended ("Act"), it shall not, to the extent
requested by the Company and such underwriter, directly or indirectly sell,
offer to sell,
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<PAGE>
contract to sell (including, without limitation, any short sale), grant any
option to purchase, pledge or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) the shares of Equity Securities at any
time during such period except shares of Equity Securities included in such
registration; provided, however, that such agreement shall not be required
unless all officers and directors and key employees of the Company and all other
persons purchasing common Equity Securities of the Company enter into similar
agreements.
4. LEGENDS. All certificates representing any shares of Equity Securities
subject to the provisions of this Agreement shall have endorsed thereon the
following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A RIGHT OF FIRST REFUSAL IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH
IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR HIS OR HER
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
TIES CORPORATION."
(b) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
5. WARRANTIES AND REPRESENTATIONS. In connection with the proposed purchase
of the Equity Securities, the Purchaser hereby agrees, represents and warrants
as follows:
(a) The Purchaser is purchasing the Equity Securities solely
for its own account for investment and not with a view to, or for resale in
connection with, any distribution thereof within the meaning of the Act. The
Purchaser further represents that it does not have any present intention of
selling, offering to sell or otherwise disposing of or distributing the Equity
Securities or any portion thereof; and that the entire legal and beneficial
interest of the Equity Securities it is purchasing is being purchased for, and
will be held for the account of, the Purchaser only and neither in whole nor in
part for any other person.
(b) The Purchaser is aware of the Corporation's business
affairs and financial condition and has acquired sufficient information about
the Corporation to reach an informed and knowledgeable decision to acquire the
Equity Securities. The Purchaser further represents and wanants that it has
discussed the Corporation and its plans, operations and finance condition with
its officers, has received all such information as it deems necessary and
appropriate to enable it to evaluate the financial risk inherent in making an
investment in the Equity Securities and has received satisfactory and complete
information concerning the business and financial condition of the Corporation
in response to all inquiries in respect thereof.
- 3 -
<PAGE>
(c) The Purchaser realizes that its purchase of the Equity
Securities will be a highly speculative investment, and it is able, without
impairing its financial condition, to hold the Equity Securities for an
indefinite period of time and to suffer a complete loss on its investment.
(d) The Corporation has disclosed to the Purchaser that:
(i) The sale of the Equity Securities has not been
registered under the Act, and the Equity Securities must be held indefinitely
unless a transfer thereof is subsequently registered under the Act or an
exemption from such registration is available, and that the Corporation is under
no obligation to register the Equity Securities;
(ii) The Corporation will make a notation in its records
of the aforementioned restrictions on transfer and legends.
(e) The Purchaser is aware of the provisions of Rule 144,
promulgated under the Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or an affiliate of such issuer), in a non-public offering subject to
the satisfaction of certain conditions, including among other things: the resale
occurring not less than one year from the date the Purchaser has purchased and
paid for the Equity Securities; the availability of certain public information
concerning the Corporation; the sale being through a broker in an unsolicited
"broker's transaction" or in a transaction directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and that any sale of
the Equity Securities may be made by him/her only in limited amounts during any
three-month period not exceeding specified limitations. The Purchaser further
represents that it understands that at the time it wishes to sell the Equity
Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Corporation may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, it would be precluded from selling the Equity Securities under Rule
144 even if the one-year minimum holding period had been satisfied. The
Purchaser represents that it understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Act or
compliance with an exemption from registration will be required; and that,
notwithstanding the fact that Rule 144 is not exclusive, the staff of the SEC
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
(f) Without in any way limiting the Purchaser's representations
and warranties set forth above, the Purchaser further agrees that it shall in no
event make any disposition of all or any portion of the Equity Securities which
it is purchasing unless and until:
(i) There is then in effect a Registration Statement
under the Act covering such proposed disposition and such disposition is made in
accordance with said Registration Statement; or
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<PAGE>
(ii) The Purchaser shall have (1) notified the
Corporation of the proposed disposition and finished the Corporation with a
detailed statement of the circumstances surrounding the proposed disposition,
and (2) furnished the Corporation with an opinion of its own counsel to the
effect that such disposition will not require registration of such shares under
the Act, and such opinion of its counsel shall have been concurred in by counsel
for the Corporation and the Corporation shall have advised the Purchaser of such
concurrence.
6. TRANSFERS IN VIOLATION OF AGREEMENT. The Corporation shall not be
required (i) to transfer on its books any shares of Equity Securities of the
Corporation which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (ii) to treat as owner of such shares
or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares shall have been so transferred.
7. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.
8. NOTICE. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to the other party hereto at the address
hereinafter shown below his signature or at such other address as such party may
designate by ten (10) days' advance written notice to the other party hereto.
10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of the
successors and assigns of the Corporation and, subject to the restrictions on
transfer herein set forth, be binding upon the Purchaser, its heirs, executors,
administrators, successors and assigns.
11. ENTIRE AGREEMENT; AMENDMENTS. This Agreement shall be construed under
the laws of the State of California (as it applies to agreements between
California residents, entered into and to be performed entirely within
California), and constitutes the entire agreement of the parties with respect to
the subject matter hereof superseding all prior written or oral agreements, and
no amendment or addition hereto shall be deemed effective unless agreed to in
writing by the parties hereto.
12. RIGHT TO SPECIFIC PERFORMANCE. The Purchaser agrees that the Corporation
shall be entitled to a decree of specific performance of the terms hereof or an
injunction restraining violation of this Agreement, said right to be in addition
to any other remedies available to the Corporation.
13. SEPARABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless
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continue in full force and effect without being impaired or invalidated in any
way and shall be construed in accordance with the purposes and tenor and effect
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
"PURCHASER" "CORPORATION"
OVERLY PUBLISHING COLLEGE CLUB.COM
By: /s/ Kenneth J. Davis By: /s/ Eric Rindahl
-------------------------------- -----------------------------------
Name: Kenneth J. Davis Name: Eric Rindahl
Title: President Title: Vice President of Finance
Address: 85 Speen Street Address: 5353 Mission Center Road
Framingham, MD 01701 Suite 310
San Diego, CA 92103
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EXHIBIT 10.16
STRATEGIC ALLIANCE AND SERVICES AGREEMENT
This Strategic Alliance and Services Agreement (this "Agreement") is
entered into as of February 14, 2000 (the "Effective Date") by and between
CollegeClub.com, Inc., a Delaware corporation ("CollegeClub"), and Ericsson
Inc., a Delaware corporation ("Ericsson").
RECITALS
A. CollegeClub is a leading developer of Internet communities based
on its proprietary set of integrated web communication tools and CollegeClub
operates the largest online college community.
B. Ericsson is a preeminent global supplier of wireless
telecommunications products and services.
C. CollegeClub seeks to establish itself as the premier mobile
internet "virtual college community" and to explore new business and application
opportunities within the mobile internet space.
D. CollegeClub and Ericsson desire to pursue various strategic
initiatives for the mutual benefit of each party, as more particularly described
in this Agreement.
E. From time to time it may be desirable for one party to provide
"services" to the other party and the parties agree to negotiate the terms
pursuant to which services are provided and to provide those services in
accordance with the terms of this Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants set forth in this Agreement, the parties agree as follows:
AGREEMENT
1. DEFINITIONS.
1.1 "Business Development Initiatives" means any initiative
whereby CollegeClub and Ericsson agree in writing to implement business
opportunities designed to (i) promote the business of each party and to (ii)
implement new mobile e-commerce solutions. Subject to the mutual agreement of
the parties in a Strategic Project Addendum, Business Development Initiatives
might include, without limitation, (a) *** (b) ***
***
***
1.2 "CollegeClub Background Technology" means any technology
and Intellectual Property Rights owned by or licensed to CollegeClub which are
(i) in existence prior to the Effective Date and (ii) developed after the
Effective Date outside the scope of a Statement
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of Work. CollegeClub Background Technology includes any Improvements to or upon
(i) or (ii) above whether developed by CollegeClub, Ericsson or jointly by the
parties, other than Improvements to (i) or (ii) above made by Ericsson and which
are owned by Ericsson as provided in Section 5.2 ("Ownership of Improvements").
1.3 "Deliverables" means any item developed pursuant to a
Statement of Work or Strategic Project Addendum which is identified as a
deliverable in the Statement of Work or Strategic Project Addendum, including,
but not limited to, products, software, applications, documentation, data,
reports, specifications, or other Intellectual Property. Deliverables shall not
include any materials, software, documentation or other items in existence at
the time the Statement of Work is executed by the parties.
1.4 "Development Tools" means a software product developed
pursuant to a Statement of Work or in connection with a Statement of Work which
is used to develop a Deliverable.
1.5 "Education Initiatives" means any initiative whereby
CollegeClub and Ericsson agree in writing to develop and test mobile, Internet
enabled, distance learning programs to provide untethered educational services
to college students or other students. Subject to the mutual agreement of the
parties in a Strategic Project Addendum, Education Initiatives might include,
without limitation, ***
***
***
1.6 "Ericsson Background Technology" means any technology and
Intellectual Property Rights owned by or licensed to Ericsson which are (i) in
existence prior to the Effective Date and (ii) developed after the Effective
Date outside the scope of a Statement of Work. Ericsson Background Technology
includes any Improvements to or upon (i) or (ii) above whether developed by
CollegeClub, Ericsson or jointly by the parties, other than Improvements to (i)
or (ii) above made by CollegeClub and which are owned by CollegeClub as provided
in Section 5.2 ("Ownership of Improvements").
1.7 "Improvement" means any and all enhancements,
modifications, derivative works, improvements or changes to the CollegeClub
Background Technology or to the Ericsson Background Technology, as the case may
be, including without limitation derivative works of any copyrighted material.
For purposes of this definition, an enhancement, modification, derivative work,
improvement or change conceived, reduced to practice or developed independent
of, and without benefit of, any of the CollegeClub Background Technology or the
Ericsson Background Technology, and which enhancement, modification, derivative
work, improvement or change can be practiced without using or infringing upon
any CollegeClub Background Technology or Ericsson Background Technology shall
not be considered an "Improvement" hereunder.
1.8 "Initiatives" means all Business Development Initiatives,
Education Initiatives and Marketing Initiatives.
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1.9 "Intellectual Property Rights" means copyright rights
(including, without limitation, the exclusive right to use, reproduce, modify,
distribute, publicly display and publicly perform the copyrighted work),
trademark rights (including, without limitation trade names, trademarks, service
marks and trade dress), patent rights (including, without limitation, the
exclusive right to make, use and sell), trade secrets, moral rights, right of
publicity, authors' rights, contract and licensing rights, goodwill and all
other intellectual property rights as may exist now and/or hereafter come into
existence and all renewals and extensions thereof, regardless of whether such
rights arise under the laws of the United States, or any other state, country or
jurisdiction.
1.10 "Marketing Initiatives" means any initiative whereby
CollegeClub and Ericsson agree in writing to create and implement marketing
programs which promote the products and services of each party and the strategic
plans or initiatives of each party. Subject to the mutual agreement of the
parties in a Strategic Project Addendum, Marketing Initiatives might include,
without limitation, (i) *** and (ii) ***
1.11 "Merchant Agreement" means CollegeClub's then-current
merchant agreement whereby Ericsson will become an official CollegeClub website
merchant.
1.12 "Statement of Work" means a written agreement in
substantially the same form as EXHIBIT A pursuant to which one party will
perform services for the other.
1.13 "Strategic Project Addendum" means a written agreement in
substantially the same form as EXHIBIT B, pursuant to which CollegeClub and
Ericsson agree to implement strategic Initiatives.
2. SERVICES.
2.1 REQUEST FOR SERVICES. Either party (the "Requesting
Party") may, during the term of this Agreement, submit a request to the other
party (the "Developing Party") requesting the Developing Party to perform
services for the Requesting Party. Each such request shall include an overview
of the nature of the services requested and the Deliverables to be delivered.
Subject to the availability of resources, each party agrees to work together in
good faith with the other party to further define the services and Deliverables
and negotiate the terms of a Statement of Work applicable to the requested
services. Absent the execution of a Statement of Work, neither party shall be
required to provide technical or consulting services to the other party. Unless
agreed otherwise in writing, this Agreement shall govern the performance of
services by one party for the other party. At such time as the parties agree on
the terms of the provision of services and the delivery of Deliverables the
parties shall execute a Statement of Work. It is the intent of the parties to
discuss the following services during the two (2) month period following the
Effective Date: (i) *** and (ii) ***
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2.2 CONTENT OF THE STATEMENTS OF WORK. The parties agree that
each Statement of Work will include and address each of the items in EXHIBIT A.
2.3 PERFORMANCE OF SERVICES AND DELIVERY OF DELIVERABLES. Each
party agrees to use commercially reasonable efforts to perform those obligations
assigned to it in each Statement of Work and to deliver the Deliverables
assigned to it in each Statement of Work, all in accordance with the milestone
schedule set forth in the Statement of Work. Each party acknowledges and agrees
that the other party may subcontract the performance of services under a
Statement of Work, provided that such party will remain responsible for the
performance of the subcontractor. If a party knows, at the time a Statement of
Work is executed, that one or more subcontractors will perform the services
described in that Statement of Work, then such party shall include the names of
such subcontractors in the Statement of Work.
2.4 ACCEPTANCE OF DELIVERABLES AND SERVICES. Unless otherwise
agreed in a Statement of Work, during the thirty (30) day period following the
delivery of a Deliverable (the "Evaluation Period"), the party to whom the
Deliverable is delivered (the "Receiving Party") shall have the right to
evaluate and test the Deliverable in order to determine if it conforms with the
functional and technical specifications and other acceptance criteria set forth
in the Statement of Work for such Deliverable. In the event that the
Deliverable does not conform to such specifications, the Receiving Party will
provide written notice to the other party (the "Developing Party") describing
the non-conformity(ies) in sufficient detail to allow the Developing Party to
replicate the non-conformity(ies). The Developing Party agrees to use
commercially reasonable efforts to correct all such non-conformities and
redeliver the corrected Deliverable to the Receiving Party for re-evaluation and
re-testing as provided in this Section. If the Receiving Party does not report
a non-conformity during the Evaluation Period, the Receiving Party will be
deemed to have accepted the Deliverable or the corrected version of the
Deliverable, if applicable. If the Developing Party is not able to correct a
non-conformity within a reasonable time, then the Receiving Party may, in its
discretion (i) modify the specifications so that the Deliverable conforms, (ii)
accept such non-conformity, or (iii) terminate the Statement of Work and receive
a refund of amounts paid to the Developing Party, if any. In the event of such
termination all licenses granted in the Statement of Work, if any, shall
terminate.
2.5 MARKET INTELLIGENCE. The parties agree to work together
in good faith to identify, design and conduct periodic market intelligence,
including without limitation (i) *** and (ii)***. In addition, the parties
shall work together in good faith to identify, develop and implement third
party research programs, including but not limited to ***. If the parties
agree to conduct specific market intelligence, the parties' agreement shall
be set forth in a writing substantially similar to a Statement of Work,
including the applicable components of a Statement of Work as set forth in
Section 2.2 ("Content of the Statements of Work").
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2.6 COSTS. The parties agree that each party will pay for its
own costs and expenses incurred in its performance of its obligations under any
Statement of Work, except as otherwise provided in a Statement of Work.
3. STRATEGIC INITIATIVES.
3.1 MONTHLY MEETINGS. The parties agree to meet at least one
time per calendar month to (i) identify potential Initiatives to be developed
and pursued by the parties, (ii) actually develop and document such Initiatives
and (iii) discuss the implementation of Initiatives which the parties have
agreed to pursue (the "Monthly Meeting"). The Monthly Meeting may be conducted
telephonically, via videoconference or in person and will generally take place
on or about the fifteenth day of each month. At least one Monthly Meeting each
calendar quarter will take place in person, at a mutually agreed upon location,
with representatives from each party being present. Either party (the
"Requesting Party") may, during the term of this Agreement, submit to the other
party (the "Other Party") a request to pursue a specific Initiative. Each such
request shall include an overview of the nature of the proposed Initiative.
Subject to the availability of resources, each party agrees to work together in
good faith with the other party to further define the proposed Initiative and
negotiate the terms of a Strategic Project Addendum applicable to the proposed
Initiative. Absent the execution of a Strategic Project Addendum, neither party
shall be required to participate in a proposed Initiative. Unless agreed
otherwise in writing, this Agreement shall govern all proposed Initiatives. At
such time as the parties agree on the terms of a proposed Initiative the parties
shall execute a Strategic Project Addendum.
3.2 CONTENT OF THE STRATEGIC PROJECT ADDENDA. The parties
agree that each Strategic Project Addendum will include and address each of the
items in EXHIBIT B.
3.3 IMPLEMENTATION OF INITIATIVES. Each party agrees to use
commercially reasonable efforts to perform its obligations under each Strategic
Project Addendum in a professional manner and in accordance with the schedule
set forth in the Strategic Project Addendum. The parties agree that the
acceptance and evaluation process more particularly described in Section 2.4
("Acceptance of Deliverables and Services") shall apply to any Deliverables
delivered under a Strategic Project Addendum.
3.4 COSTS. The parties agree that each party will pay for its
own costs incurred in its performance of its obligations under any Strategic
Project Addendum, except as otherwise provided in the Strategic Project
Addendum.
4. MERCHANT AGREEMENT. At such time as the parties may agree that
Ericsson shall be an official merchant on the CollegeClub Website, then the
parties shall execute a Merchant Agreement.
5. PROPRIETARY RIGHTS.
5.1 OWNERSHIP OF BACKGROUND TECHNOLOGY. CollegeClub shall
be the sole and exclusive owner of all right, title and interest in and to
the CollegeClub Background Technology. Ericsson shall be the sole and
exclusive owner of all right, title and interest in and to
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the Ericsson Background Technology. Except as otherwise provided in Section 5.7
("License to Background Technology") or as agreed in any Statement of Work or
Strategic Project Addendum no licenses or other rights with respect to such
Background Technology are granted to the other party.
5.2 OWNERSHIP OF IMPROVEMENTS. Notwithstanding anything to the
contrary in this Agreement, nothing in this Agreement shall preclude either
party from making Improvements to the Background Technology of the other party
which is in the public domain (by reason of the publication of a patent or
otherwise) provided that any such activity (i) does not breach any provision of
this Agreement, (ii) infringe such other party's Intellectual Property Rights,
or (iii) does not result in the use of any Confidential Information of the other
party. Subject to the ownership provisions of Section 5.3 ("Ownership of
Deliverables"), the party making such Improvements to the public domain
Background Technology of the other party shall be the owner of such Improvements
and any Intellectual Property Rights therein. The party owning any such
Improvement to public domain Background Technology of the other party as
provided in this Section, hereby grants to such other party a non-exclusive,
worldwide, assignable, royalty-free, irrevocable, perpetual license (with the
right to sublicense through multiple tiers of distribution) to use, make, have
made, offer for sale, sell, have sold, and import products which incorporate any
such Improvement.
5.3 OWNERSHIP OF DELIVERABLES. Except as otherwise expressly
provided in a Statement of Work or a Strategic Project Addendum, CollegeClub
shall be, upon payment of amounts due under the applicable Statement or Work or
Strategic Project Addendum, the sole and exclusive owner of all right, title and
interest in and to (i) the Deliverables (excluding any Ericsson Background
Technology included therein), (ii) any Improvements to public domain CollegeClub
Background Technology made by Ericsson which are included in a Deliverable or
which are required to use, make or sell the Deliverable, and (iii) all
Intellectual Property Rights in the Deliverables and such Improvements. If a
Statement of Work or a Strategic Project Addendum provides that Ericsson will be
the exclusive owner of one or more of the Deliverables, then Ericsson shall be
the owner of all right, title and interest in and to (i) such Deliverables
(excluding any CollegeClub Background Technology included therein), (ii)
Improvements to public domain Ericsson Background Technology made by CollegeClub
which are included in a Deliverable or which are required to use, make or sell
the Deliverable, and (iii) all Intellectual Property Rights in such Deliverables
and such Improvements.
5.4 OWNERSHIP OF DEVELOPMENT TOOLS. In the event that a
Development Tool is developed pursuant to a Statement of Work or in connection
with a Statement of Work or a Strategic Project Addendum, the terms of this
Section shall govern the ownership of and rights in such Development Tool. The
party that paid for the development of the Development Tool shall be the Owning
Party (as defined below). If the non-Owning Party prepared the functional
specifications (i.e., the requirements document which specifies in general terms
the functionality or performance of the development tool), the Owning Party
hereby grants and agrees to grant to the other party a non-exclusive,
royalty-free, worldwide license, with rights to grant sublicenses, to use,
reproduce, modify, distribute, publicly display, make, have made, sell, offer to
sell and import such Development Tool or any product of such other party
requiring or incorporating such Development Tool. If the parties jointly fund
the development of a
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Development Tool, then the party that prepared the functional specification for
the Development Tool shall be the Owning Party. In such event, the Owning Party
hereby grants and agrees to grant to the other party a non-exclusive,
royalty-free, worldwide license, with rights to grant sublicenses, to use,
reproduce, modify, distribute, publicly display, make, have made, sell, offer to
sell and import such Development Tool or any product of such other party
requiring or incorporating such Development Tool. If the parties jointly fund
the development of a Development Tool and jointly develop the functional
specification for the Development Tool, Ericsson shall be the Owning Party. In
such event, Ericsson hereby grants and agrees to grant to CollegeClub a
non-exclusive, royalty-free, worldwide license, with rights to grant
sublicenses, to use, reproduce, modify, distribute, publicly display, make, have
made, sell, offer to sell and import such Development Tool or any product of
CollegeClub requiring or incorporating such Development Tool.
5.5 DELIVERY OF DEVELOPMENT TOOLS. If a Development Tool is
owned by or licensed to the party who did not develop the Development Tool, then
the party developing the Development Tool agrees to deliver a copy of the
Development Tool and all related documentation to the non-developing party to
enable such non-developing party to exploit such ownership and/or license
rights.
5.6 ASSIGNMENT. For purposes of this Agreement, the "Owning
Party" shall mean the owner of a Deliverable, Development Tool or an Improvement
and the "Assigning Party" shall mean the other party. The Assigning Party
hereby assigns and agrees to assign to the Owning Party all of the Assigning
Party's entire worldwide right, title and interest in and to any Deliverables,
Improvements and Development Tools which the Owning Party owns as provided in
this Agreement (excluding any of the Assigning Party's Background Technology
included therein) and all Intellectual Property Rights in any of the foregoing.
The foregoing assignment does not include an assignment of any of the Assigning
Party's Background Technology. The Assigning Party agrees to execute upon the
Owning Party's request a signed transfer of such Deliverables, Development
Tools, Improvements and their associated Intellectual Property Rights to the
Owning Party. The Assigning Party agrees to assist the Owning Party in any
reasonable manner to obtain, perfect and enforce, for the Owning Party's
benefit, the Owning Party's rights, title and interest in any and all countries,
in and to all patents, copyrights, moral rights, mask works, trade secrets, and
other property rights in each such Deliverables, Development Tools and
Improvements. If called upon to render assistance under this Section, the
Assigning Party shall be entitled to reimbursement of all reasonable expenses
incurred at the prior written request of the Owning Party.
5.7 LICENSE TO BACKGROUND TECHNOLOGY. In the event that the
Assigning Party's Background Technology (i) is included within or embodied in a
Deliverable or Development Tool owned by the Owning Party or (ii) is necessary
to exploit a Deliverable owned by the Owning Party, then the Assigning Party
hereby grants to the Owning Party a non-exclusive, worldwide, non-assignable
(except as provided in Section 12.2 ("No Assignment")), royalty-free, perpetual
license (with the right to sublicense through multiple tiers of distribution) to
use, reproduce, modify, distribute, publicly display, make, have made, sell,
have sold, offer for sale such Background Technology solely as incorporated into
or embodied in the Deliverable. All rights not granted above in the Assigning
Party's Background Technology, shall be retained
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by the Assigning Party. Such license shall be irrevocable; provided however,
that such license shall be revocable if: (i) the licensee is in material breach
of the scope of the license granted in this Section, and (ii) such breach
remains uncured for a period of ten (10) business days after receipt of written
notice. Except as otherwise provided in a Statement of Work or Strategic Project
Addendum, no rights are granted to CollegeClub in any Ericsson Background
Technology for the purpose of (i) making or having made any product which
competes with an Ericsson product or (ii) offering a service which competes with
an Ericsson service.
5.8 RESTRICTIONS. Notwithstanding anything to the contrary in
this Agreement, Ericsson agrees that it shall not have the right to sublicense,
transfer, sell, assign or otherwise distribute a (i) Development Tool owned by
CollegeClub, (ii) Deliverables owned by Ericsson or (iii) CollegeClub Background
Technology which is licensed to Ericsson pursuant to this Agreement, to any
third party which competes with CollegeClub. Such restrictions shall be
commence on the date such Development Tool, Deliverable, or product
incorporating the CollegeClub Background Technology is first commercialized by
Ericsson and shall end two (2) years after such date. Nothing in this Section
shall be construed to expand any license granted to Ericsson in this Agreement.
A third party will be deemed to compete with CollegeClub if such third party
offers products or services directed primarily to a demographic consisting of
high school students or college or post graduate students. Further,
notwithstanding anything to the contrary in this Agreement, no license is
granted under any Ericsson Background patents except the right for CollegeClub
and CollegeClub customers to use Deliverables and Development Tools.
6. WARRANTIES.
6.1 MUTUAL REPRESENTATIONS. Each party represents and warrants
to the other party that, during the term of this Agreement, it possesses and
will possess the full power and authority to enter into this Agreement and any
subsequent Statement of Work, Strategic Project Addendum, or Merchant Agreement
Each party further represents and warrants that it has full power and authority
to fulfill its obligations hereunder and under any subsequent Statement of Work,
Strategic Project Addendum, or Merchant Agreement, and the performance according
to the terms of this Agreement or any subsequent Statement of Work, Strategic
Project Addendum, or Merchant Agreement shall not breach any separate agreement
by which such party is bound.
6.2 WARRANTIES REGARDING PERFORMANCE OF DELIVERABLES. Except
as otherwise set forth in a Statement of Work or Strategic Project Addendum,
each party as the developer of a Deliverable (the "Developing Party"), warrants
to the other party (the "Other Party") that, for a period of twelve (12) months
after the acceptance of the Deliverable, the Deliverable will perform
substantially in accordance with the applicable specifications and/or acceptance
testing criteria. In the event of a breach of the foregoing warranty, the
Developing Party shall, at its cost and expense, repair or replace the
Deliverable so that it conforms to the foregoing warranty. In the event that
such repair or replacement is not commercially reasonable, then the parties will
negotiate in good faith a refund of all or a portion of the fees paid by the
Other Party for such Deliverable, or if no such payment was made for the
Deliverable, then a fair and equitable amount. The foregoing shall be the Other
Party's sole and exclusive remedy in the event of a breach of warranty.
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6.3 WARRANTY DISCLAIMERS. EXCEPT FOR THE FOREGOING LIMITED
WARRANTIES, NO OTHER WARRANTIES OF ANY NATURE, EXPRESS, IMPLIED OR STATUTORY, AS
TO THE DELIVERABLES OR A PARTY'S PERFORMANCE UNDER THIS AGREEMENT, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NONINFRINGEMENT ARE MADE BY EITHER PARTY TO THE OTHER UNDER THIS AGREEMENT AND
BOTH PARTIES DISCLAIM ALL SUCH IMPLIED WARRANTIES.
7. INDEMNIFICATION.
7.1 INDEMNIFICATION BY COLLEGECLUB. CollegeClub agrees to
defend, indemnify and hold harmless Ericsson from and against any third party
claims, actions or demands (a "Claim") alleging that (i) the CollegeClub
Background Technology or (ii) Deliverables or Development Tools developed by
CollegeClub (except for Development Tools for which Ericsson provided the
functional specification and the infringement is the result of such
specification) infringe any copyrights, patents, trade secrets, mask works or
other proprietary rights of any third-parties arising under United States law.
CollegeClub further agrees to indemnify and hold harmless Ericsson from and
against any final award of damages or final settlement amount with respect to
any such Claim.
7.2 INDEMNIFICATION BY ERICSSON. Ericsson agrees to defend,
indemnify and hold harmless CollegeClub from and against any third party claims,
actions or demands (a "Claim") alleging that (i) the Ericsson Background
Technology or (ii) Deliverables or Development Tools developed by Ericsson
(except for Development Tools for which CollegeClub provided the functional
specification and the infringement is the result of such specification) infringe
any copyrights, patents, trade secrets, mask works or other proprietary rights
of any third-parties arising under United States law. Ericsson further agrees
to indemnify and hold harmless CollegeClub from and against any final award of
damages or final settlement amount with respect to any such Claim.
7.3 LIMITATIONS. The obligations of a party to indemnify (the
"Indemnifying Party") the other (the "Indemnified Party") is contingent upon (i)
the Indemnified Party giving prompt written notice to the Indemnifying Party of
any such claim, action or demand, (ii) the Indemnified Party allowing the
Indemnifying Party to control the defense and related settlement negotiations,
and (iii) the Indemnified Party cooperating in the defense. The Indemnifying
Party will have no obligation under this Agreement for any such claims, actions
or demands to the extent that such claims, demands or actions result from (i)
the use of its proprietary rights in a combination with materials or products
not supplied by the Indemnifying Party; (ii) the modification or attempted
modification of Deliverables, Intellectual Property Rights, materials or
processes by third parties; or (iii) the use or distribution of such modified
Deliverables, Intellectual Property Rights, materials or processes. In the event
that any such claim, action or demand is made, the Indemnifying Party will
promptly furnish the Indemnified Party with copies of any and all documents
(inclusive of all correspondence and pleadings other than related
attorney-client communications). The Indemnifying Party will also keep the
Indemnified Party
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continuously and fully informed in a timely manner as to the status of the same
and will provide the Indemnified Party with copies of any additional documents.
7.4 OTHERS ACTIONS. In the event of a Claim, the indemnifying
party may, at its option, (i) replace or modify the infringing product or
intellectual property with non-infringing ones which are functionally
equivalent, or (ii) obtain a license for the indemnified party to continue to
exercise the licenses granted in this Agreement. If neither (i) nor (ii) are
commercially reasonable, the parties agree to negotiate in good faith how to
resolve the indemnified party's inability to continue to exercise its rights
under this Agreement.
7.5 SOLE AND EXCLUSIVE REMEDY. THIS SECTION STATES
COLLEGECLUB'S AND ERICSSON'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO CLAIMS OF
INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS OF ANY KIND.
8. LIMITATIONS ON DAMAGES.
8.1 LIMITATION OF LIABILITY. EXCEPT FOR LIABILITY ARISING
UNDER SECTION 7 ("INDEMNIFICATION") OR SECTION 9 ("CONFIDENTIALITY"), IN NO
EVENT SHALL EITHER PARTY'S MAXIMUM AGGREGATE LIABILITY FOR ALL CLAIMS ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY STATEMENT OF WORK OR STRATEGIC
PROJECT ADDENDUM EXCEED THE AMOUNTS PAID BY COLLEGECLUB TO ERICSSON OR ERICSSON
TO COLLEGECLUB, AS THE CASE MAY BE, UNDER THIS AGREEMENT. THIS LIMITATION SHALL
APPLY NOTWITHSTANDING ANY FAILURE OF PURPOSE OF ANY LIMITED REMEDY SET FORTH IN
THIS AGREEMENT.
8.2 NO CONSEQUENTIAL DAMAGES. EXCEPT FOR LIABILITY ARISING
UNDER SECTION 7 ("INDEMNIFICATION") OR SECTION 9 ("CONFIDENTIALITY"), IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER PERSON OR
ENTITY FOR THE COST OF SUBSTITUTE GOODS, ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL,
INDIRECT, EXEMPLARY OR PUNITIVE DAMAGES, HOWEVER CAUSED, WHETHER FOR BREACH OF
CONTRACT, TORT, NEGLIGENCE, STRICT PRODUCT LIABILITY OR OTHERWISE (INCLUDING,
WITHOUT LIMITATION, DAMAGES BASED ON LOSS OF PROFITS, DATA OR BUSINESS
OPPORTUNITY), AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY FAILURE OF
ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.
9. CONFIDENTIALITY.
9.1 DEFINITION OF CONFIDENTIAL INFORMATION. "Confidential
Information" as used in this Agreement shall mean any and all technical and
non-technical information including patent, copyright, trade secret, and
proprietary information, techniques, sketches, drawings, models, inventions,
know-how, processes, apparatus, equipment, algorithms, software programs,
software source documents, and formulae related to the current, future and
proposed products
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and services of each of the parties, and includes, without limitation, each
party's respective information concerning research, experimental work,
development, design details and specifications, engineering, financial
information, procurement requirements, purchasing, manufacturing, customer
lists, business forecasts, sales and merchandising, and marketing plans and
information. "Confidential Information" also includes proprietary or
confidential information of any third party who may disclose such information to
either party in the course of the other party's business. The terms of this
Agreement and the terms of any Statement of Work or Strategic Project Addendum
shall be deemed Confidential Information.
9.2 NONDISCLOSURE AND NONUSE OBLIGATION. Each party (the
"Receiving Party") agrees that it will not use, disseminate, or in any way
disclose any Confidential Information of the other party (the "Disclosing
Party"), to any person, firm or business, except that the Receiving Party may
use the Disclosing Party's Confidential Information to the extent necessary to
perform its obligations under this Agreement. Furthermore, the existence of any
business negotiations, discussions, consultations or agreements in progress
between the parties shall not be released to any form of public media without
written approval of both parties. The Receiving Party agrees that it shall
treat all Confidential Information of the Disclosing Party with the same degree
of care as the Receiving Party accords to its own Confidential Information, but
in no case less than reasonable care. The Receiving Party agrees that it shall
disclose Confidential Information of the other party, only to those of its
employees and contractors who need to know such information, and the Receiving
Party certifies that such employees and contractors have previously agreed,
either as a condition to employment or in order to obtain the Confidential
Information of the Disclosing Party, to be bound by terms and conditions
substantially similar to those terms and conditions applicable to the Receiving
Party under this Agreement. The Receiving Party shall immediately give notice
to the Disclosing Party of any unauthorized use or disclosure of Disclosing
Party's Confidential Information. The Receiving Party agrees to assist the
Disclosing Party in remedying any such unauthorized use or disclosure of
Disclosing Party's Confidential Information.
9.3 EXCLUSIONS FROM NONDISCLOSURE AND NONUSE OBLIGATIONS. The
obligations under Section 9.2 ("Nondisclosure and Nonuse Obligations") of the
Receiving Party, with respect to any portion of the Confidential Information of
the Disclosing Party, shall not apply to such portion that such Recipient can
document: (i) was in the public domain at or subsequent to the time such
portion was communicated to the Receiving Party by the Disclosing Party through
no fault of the Receiving Party, (ii) was rightfully in the Receiving Party's
possession free of any obligation of confidence at or subsequent to the time
such portion was communicated to the Receiving Party by the Disclosing Party,
(iii) was developed by employees or agents of such Receiving Party independently
of and without reference to any information communicated to the Receiving Party
by the Disclosing Party, or (iv) was communicated by the Disclosing Party to an
unaffiliated third party free of any obligation of confidence. A disclosure by
the Receiving Party of Confidential Information of the Disclosing Party, either
(i) in response to a valid order by a court or other governmental body, (ii)
otherwise required by law, or (iii) necessary to establish the rights of either
party under this Agreement, shall not be considered to be a breach of this
Agreement by the Receiving Party or a waiver of confidentiality for other
purposes; provided, however, the Receiving Party shall provide prompt prior
written notice
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thereof to the Disclosing Party to enable the Disclosing Party to seek a
protective order or otherwise prevent such disclosure.
9.4 OWNERSHIP AND RETURN OF CONFIDENTIAL INFORMATION AND OTHER
MATERIALS. All Confidential Information of the Disclosing Party, and any
Derivatives thereof whether created by the Disclosing Party or the Receiving
Party, shall remain the property of the Disclosing Party, and no license or
other rights to the Disclosing Party's Confidential Information or Derivatives
is granted or implied hereby, except as expressly set forth in this Agreement.
For purposes of this Agreement, "Derivatives" shall mean: (i) for copyrightable
or copyrighted material, any translation, abridgment, revision or other form in
which an existing work may be recast, transformed or adapted; (ii) for
patentable or patented material, any improvement thereon until a patent for such
material is issued, making such information publicly available; and (iii) for
material which is protected by trade secret, any new material derived from such
existing trade secret material, including new material which may be protected
under copyright, patent and/or trade secret laws. All materials (including,
without limitation, documents, drawings, models, apparatus, sketches, designs,
lists and all other tangible media of expression) furnished by the Disclosing
Party to the Receiving Party shall remain the property of the Disclosing Party.
At the Disclosing Party's request and no later than five (5) business days after
such request, the Receiving Party shall promptly destroy or deliver to the
Disclosing Party, at the Disclosing Party's option, (i) all materials furnished
to the Receiving Party, (ii) all tangible media of expression in such Receiving
Party's possession or control to the extent that such tangible media incorporate
any of the Disclosing Party's Confidential Information, and (iii) written
certification of the Receiving Party's compliance with such obligations under
this sentence.
9.5 INDEPENDENT DEVELOPMENT. Each of the parties, as a
Disclosing Party, understands that the other party, as a Receiving Party, may
currently or in the future be developing information internally, or receiving
information from other parties that may be similar to the Disclosing Party's
Confidential Information. Accordingly, nothing in this Agreement will be
construed as a representation or inference that such Receiving Party will not
develop products or services, or have products or services developed for it,
that, without violation of this Agreement, compete with the products or systems
contemplated by the Disclosing Party's Confidential Information.
9.6 DISCLOSURE OF THIRD PARTY INFORMATION. Neither party shall
communicate any information to the other in violation of the proprietary rights
of any third party.
10. PUBLICITY. The parties intend to publicly announce the existence
of the strategic alliance created by this Agreement on or before February 29,
2000. The parties shall, prior to such public announcement, mutually agree in
writing as to the nature, content and scope of such announcement. Except as to
the foregoing public announcement, announcements regarding the relationship of
the parties under this Agreement or the existence of this Agreement shall not be
made by either party absent the written consent of the other party. If a party
desires to make a public announcement regarding the subject matter of this
Agreement or any Statement of Work or Strategic Project Addendum, it shall
provide a copy of the proposed announcement to the other party for review and
approval. The receiving party agrees to accept or reject the
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announcement within five (5) business days after receipt of the proposed
announcement. If it rejects the announcement the rejection notice shall include
a description of the changes necessary to make the announcement acceptable (all
such changes shall be reasonable). If the receiving party fails to reject the
announcement as provided in this Section within such five (5) business day
period, the other party may issue such announcement.
11. TERM AND TERMINATION.
11.1 TERM OF AGREEMENT. Unless earlier terminated as provided
in this Agreement, this Agreement shall commence on the Effective Date and shall
terminate two (2) years after the Effective Date.
11.2 TERM OF STATEMENTS OF WORK AND STRATEGIC PROJECT ADDENDA.
Each Statement of Work and Strategic Project Addendum shall be effective on the
date of execution and shall continue until the later of (i) the date the last to
be delivered Deliverable is accepted as provided in this Agreement or (ii) the
date on which the last task or obligation of a party under the Statement of Work
or Strategic Project Addendum has been performed in full.
11.3 TERMINATION FOR CAUSE.
11.3.1 THE AGREEMENT. If either party is in
material breach of the terms of this Agreement, the non-breaching party may give
written notice of such breach to the breaching party and an opportunity to cure
the breach within thirty (30) days. If such breach is not cured within such
thirty (30) day period, the non-breaching party may immediately terminate this
Agreement by subsequent written notice to the party in breach.
11.3.2 STATEMENTS OF WORK AND STRATEGIC PROJECT
ADDENDUM. If either party is in material breach of the terms of a Statement of
Work or a Strategic Project Addendum, the non-breaching party may give written
notice of such breach to the breaching party and an opportunity to cure the
breach within thirty (30) days. If such breach is not cured within such thirty
(30) day period, the non-breaching party may immediately terminate the
applicable Statement of Work or a Strategic Project Addendum by subsequent
written notice to the party in breach. The termination of an individual
Statement of Work or Strategic Project Addendum pursuant to this Section shall
not result in the termination of this Agreement or any other Statement of Work
or a Strategic Project Addendum.
11.3.3 REMEDIES IN THE EVENT OF TERMINATION FOR
CAUSE. In the event a party terminates this Agreement or a Statement of Work or
Strategic Project Addendum pursuant to this Section 11.3 ("Termination for
Cause"), then such party shall, subject to the terms of this Agreement, be
entitled to seek available remedies at law or in equity, including without
limitation damages for unperformed services in a Statement of Work or Strategic
Project Addendum, if any.
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11.4 EFFECT OF TERMINATION.
11.4.1 ENTIRE AGREEMENT. Upon termination or
expiration of this Agreement for any reason (i) except as otherwise provided in
this Agreement, all licenses granted in this Agreement shall terminate, (ii) all
unperformed Statements of Work or a Strategic Project Addenda shall terminate,
(iii) all partially or fully completed Deliverables associated with any
terminated Statement of Work or Strategic Project Addendum which a party will
own as provided in this Agreement shall be delivered to such party and (iv) all
amounts due one party from the other party under this Agreement or any Statement
of Work or Strategic Project Addendum shall be immediately due and payable.
11.4.2 STATEMENT OF WORK OR STRATEGIC PROJECT
ADDENDUM. Upon termination or expiration of a Statement of Work or a Strategic
Project Addendum (i) all licenses granted in such Statement of Work or a
Strategic Project Addendum shall terminate, unless otherwise provided in the
Statement of Work or the Strategic Project Addendum, (ii) all partially or fully
completed Deliverables associated with the terminated Statement of Work or
Strategic Project Addendum which a party will own as provided in this Agreement
shall be delivered to such party and (iv) all amounts due one party from the
other party under the Statement of Work or a Strategic Project Addendum shall be
immediately due and payable.
11.5 SURVIVAL. The provisions of the following sections shall
survive any termination of this Agreement: Section 5 ("Proprietary Rights"),
Section 6 ("Warranties"), Section 7 ("Indemnification"), Section 8 ("Limitations
on Damages"), Section 9 ("Confidentiality"), Section 11 ("Term and Termination")
and Section 12 ("General Provisions").
12. GENERAL PROVISIONS.
12.1 GOVERNING LAW. This Agreement is governed in all respects
by the laws of the United States of America and the State of California as such
laws are applied to agreements entered into and to be performed entirely within
California between California residents. The parties agree that service of a
complaint may be provided to a party in accordance with the terms of Section
12.4 ("Notices") for any dispute, litigation or other action arising under this
Agreement or to interpret or enforce this Agreement. The prevailing party in
any litigation or dispute arising under this Agreement or any Statement of Work
or Strategic Project Addendum shall be entitled to recover from the other party
its costs and fees, including attorneys' fees, associated with such litigation
or dispute.
12.2 NO ASSIGNMENT. Neither party shall assign or transfer this
Agreement or any rights or obligations under this Agreement without the prior
written consent of the other party, provided however, that either party may
assign this Agreement without such consent in connection with a merger,
reorganization or sale of all or substantially all of a party's assets or voting
securities.
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12.3 INDEPENDENT CONTRACTOR. The relationship between the
parties is that of independent contractors, and nothing in this agreement is
intended to, or should be construed to, create a partnership, agency, joint
venture or employment relationship.
12.4 NOTICES. All notices or reports permitted or required
under this Agreement shall be in writing and shall be by personal delivery,
telegram, telex, telecopier, facsimile transmission, or by certified or
registered mail, return receipt requested, and deemed given upon personal
delivery, five (5) days after deposit in the mail, or upon acknowledgment of
receipt of electronic transmission. Notices shall be sent to the addresses set
forth below or such other address as either party may specify in writing.
If to CollegeClub:
CollegeClub.com, Inc.
1010 Second Avenue, Suite 600
San Diego, California 92101
Attention: Vice President, Legal
If to Ericsson:
Ericsson Inc.
EWIS
7001 Development Drive
P.O. Box 1369
Research Triangle Park, North Carolina 27709
Attention: Vice President and General Manager
With a Copy to: Legal Counsel
12.5 SEVERABILITY. If any provision of this Agreement is
unenforceable or invalid under any applicable law or be so held by applicable
court decision, such unenforceability or invalidity shall not render this
Agreement unenforceable or invalid as a whole. In such event, such provision
shall be changed and interpreted so as to best accomplish the objectives of such
unenforceable or invalid provision within the limits of applicable law or court
decisions.
12.6 WAIVER. The failure of either party to require performance
by the other party of any provision hereof shall not affect the full right to
require such performance at any time thereafter; nor shall the waiver by either
party of a breach of any provision hereof be taken or held to be a waiver of the
provision itself.
12.7 FORCE MAJEURE. Neither party shall be liable hereunder by
reason of any failure or delay in the performance of its obligations hereunder
(except for the payment of money) on account of strikes, shortages, riots,
insurrection, fires, flood, storm, explosions, acts of God, war, governmental
action, labor conditions, earthquakes, material shortages, or any other cause
beyond the reasonable control of such party.
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12.8 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto
and all Statements of Work and Strategic Project Addenda completely and
exclusively state the agreement of the parties regarding their subject matter.
Their terms supersede and govern, all prior proposals, agreements, or other
communications between the parties, oral or written, regarding such subject
matter. This Agreement shall not be modified except by a subsequently dated
written amendment signed on behalf of CollegeClub and Ericsson by their duly
authorized representatives.
12.9 COUNTERPARTS. This Agreement may be executed in
counterparts, all of which taken together shall constitute one single agreement
between the parties. The parties may sign and exchange facsimile copies of this
Agreement. Each party agrees to provide to the other a signed original at the
request of such other party.
12.10 FACSIMILE SIGNATURES. Any signature page delivered by a
fax machine or telecopy machine shall be binding to the same extent as an
original signature page, with regard to any agreement subject to the terms
hereof or any amendment thereto. Any party who delivers such a signature page
agrees to later deliver an original counterpart to any party which requests it.
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IN WITNESS THEREOF, the parties have executed this agreement as of the
Effective Date written above.
CollegeClub.com, Inc. Ericsson, Inc.
By: /s/ James DeBello By: /s/ Hans Davidsson
--------------------------------- ----------------------------
James DeBello Hans Davidsson
President and Chief Operating Officer Vice President and General Manager
Ericsson Wireless Internet Solution
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EXHIBIT A
STATEMENT OF WORK
SECTION 1: GENERAL SCOPE AND NATURE OF THIS STATEMENT OF WORK:
SECTION 2: THE PARTIES' SPECIFIC RESPONSIBILITIES AND TASKS:
COLLEGECLUB'S RESPONSIBILITIES:
ERICSSON'S RESPONSIBILITIES:
SECTION 3: DELIVERABLES
SECTION 4 FUNCTIONAL AND TECHNICAL SPECIFICATIONS
SECTION 5: ACCEPTANCE TESTING AND ACCEPTANCE CRITERIA
SECTION 6: PERFORMANCE WARRANTY FOR DELIVERABLES
SECTION 7: PAYMENT AMOUNT AND PAYMENT TERMS
SECTION 8: SCHEDULE OF PERFORMANCE:
SERVICE OR DELIVERABLE DATE TO BE PROVIDED
SECTION 9: OWNERSHIP OF IP RIGHTS (IF DIFFERENT THAN AS PROVIDED FOR IN THE
AGREEMENT):
SECTION 10: LICENSES GRANTED, AND LICENSES GRANTED BACK, IF ANY:
SECTION 11: COMPETING PRODUCTS AND/OR SERVICES. Except as otherwise set forth
below, products and services which are developed, or which are the
result of the Services performed, under this Statement of Work are
not competitive with Ericsson products and services for purposes
of Section 5.7 ("License to Background Technology") of the
Agreement.
SECTION 12: DEVELOPMENT TOOLS TO BE DEVELOPED, IF ANY, AND OWNERSHIP THEREOF
(IF DIFFERENT THAN AS PROVIDED FOR IN THE AGREEMENT
SECTION 13: TRADEMARK LICENSE
SECTION 14: PROJECT MANAGERS
NOTE: This Statement of Work is governed by the terms of that certain Strategic
Alliance and Services Agreement in effect between CollegeClub and Ericsson. Any
item in this Statement of Work that is inconsistent with the Agreement is
invalid.
IN WITNESS WHEREOF, the parties have executed this Statement of Work as of the
date last written below.
COLLEGECLUB ERICSSON
By: By:
----------------------------- ---------------------------------
Name: Name:
--------------------------- -------------------------------
Title: Title:
-------------------------- ------------------------------
Date: Date:
--------------------------- -------------------------------
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EXHIBIT B
STRATEGIC PROJECT ADDENDUM
SECTION 1: GENERAL SCOPE AND NATURE OF THIS STRATEGIC PROJECT ADDENDUM:
SECTION 2: THE PARTIES' SPECIFIC RESPONSIBILITIES (INCLUDING THE FUNCTIONAL
AND TECHNICAL SPECIFICATIONS OF DELIVERABLES, AND PAYMENT TERMS):
COLLEGECLUB'S RESPONSIBILITY:
ERICSSON'S RESPONSIBILITY:
SECTION 3: SCHEDULE OF PERFORMANCE:
SERVICE OR DELIVERABLE DATE TO BE PROVIDED
SECTION 4: OWNERSHIP OF IP RIGHTS (IF DIFFERENT THAN AS PROVIDED FOR IN THE
AGREEMENT):
SECTION 5: LICENSES GRANTED, AND LICENSES GRANTED BACK:
SECTION 6: TRADEMARK LICENSE
SECTION 7: COMPETING PRODUCTS AND/OR SERVICES. Except as otherwise set forth
below, products and services which are developed pursuant to this
Strategic Project Addendum are not competitive with Ericsson
products and services for purposes of Section 5.7 ("License to
Background Technology") of the Agreement.
NOTE: This Strategic Project Addendum is governed by the terms of that certain
Strategic Alliance and Services Agreement in effect between CollegeClub and
Ericsson. Any item in this Strategic Project Addendum and that is inconsistent
with the Agreement is invalid.
IN WITNESS WHEREOF, the parties have executed this Strategic Project
Addendum of the date last written below.
COLLEGECLUB ERICSSON
By: By:
----------------------------- ---------------------------------
Name: Name:
---------------------------- ---------------------------------
Title: Title:
-------------------------- --------------------------------
Date: Date:
--------------------------- ---------------------------------
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EXHIBIT 10.17
SOFTWARE LICENSE AND SERVICES AGREEMENT
This Software License and Services Agreement ("Agreement"), effective as
of September 15, 1999 ("Effective Date") is made by and between
collegestudent.com, Inc., a Texas corporation ("Licensor"), on the one hand, and
CourseWeb, L.L.C., a Delaware limited liability company, and the National
Association of College Stores ("NACS") (collectively "Licensees", a
_____________ corporation, on the other hand (all of the foregoing hereinafter
collectively referred to as the "Parties" or individually as a "Party").
RECITALS
A. Licensor is engaged in and has expertise in developing, supporting
and promoting commerce-enabled internet web sites for the purpose
of selling products to college students;
B. Licensees are engaged in and have considerable expertise in
organizing, promoting and marketing products to stores located on
college campuses (hereinafter "College Stores") and desire to use
that expertise to sell products through a commerce-enabled web
site ("Web Storefront");
C. College Store members of NACS periodically collect information on
schedules, textbooks and other materials for college courses and
desire to make such data available on a Web Storefront so that
college students and others may purchase materials for college
courses and other products through an internet web site that uses
the name of a College Store but is hosted by Licensor and
supported by Licensees;
D. Licensor has developed software to create, manage and host
commerce-enabled web sites and desires to modify portions of that
software and develop additional software to use college course
information to create, manage and host such Web Storefronts; and
E. Licensees and Licensor mutually desire to market and promote
subscriptions to such Web Storefronts to College Store members of
NACS.
ACCORDINGLY, the Parties agree as follows:
1. DEFINITIONS
1.1 The following and derivatives thereof are definitions for certain
capitalized terms that may be used in this Agreement:
1.1.1 "Advertisement" means a third party's product and
service advertising, marketing and other promotional
information.
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1.1.2 "Authorized Use" means to receive or review College
Store Data by an End User for the purpose of ordering,
seeking to order or gathering purchasing information on
any product or service on a Web Storefront of a College
Store or gathering course related information provided
on such storefront Such Authorized Use is subject to the
terms and conditions of Licensor Online User
Documentation, if any, this Agreement, and the End User
Agreement.
1.1.3 "Ceubic Software" is the software prepared for NACS by
Ceubic for the purpose of managing Course Information.
1.1.4 "College Store" means any legal entity that is a
bookstore member of NACS or any other legal entity,
which typically derives at least half of its revenues
from selling to students course text(s), custom
published texts and other published materials for
college courses.
1.1.5 "College Store Data" means any information related to
(i) any College Store Product of such College Store
including SKU numbers, specific College Store pricing,
descriptive information, and other information relevant
to an informed purchase; (ii) inventory availability for
any College Store Product, and (iii) Course Information.
1.1.6 "College Store Product" mean any product marketed and/or
distributed, by sale, lease, or otherwise, by a College
Store. Such College Store Products include (i) books
and other textual material, (ii) supplies such as
notebooks and writing utensils, (iii) computer related
products such as desktop and notebook computers,
computer peripherals, printers, and software, and (iv)
all other products such as clothing and services
traditionally sold by a College Store.
1.1.7 "College Storefront License and Services Agreement"
means an agreement that includes, and is consistent
with, the terms and conditions of the agreement attached
as Schedule D hereto.
1.1.8 "Course Information" means information on academic
and/or recreational classes including course schedules,
instructors, required and optional course and supply
materials.
1.1.9 "Course Management Software" means the Object Code
version only of the portion of the Storefront Software
that stores, manages and retrieves the Course
Information.
1.1.10 "End-User" is any person who has agreed to the terms and
conditions of the End User Agreement and other Licensor
Online User Documentation, if any.
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1.1.11 "End-Users Agreement" means an agreement granting a
person a license to access and use a Web Storefront
through the Storefront Software.
1.1.12 "Licensor Online College Store Documentation" means any
terms or conditions as may be developed by Licensor from
time to time regarding College Store access or use of
the Storefront Software or any Web Storefront created
therewith.
1.1.13 "Licensor Online User Documentation" means any terms or
conditions as may be developed by Licensor from time to
time regarding an Authorized User's access or use of the
Storefront Software or any Web Storefront created
therewith.
1.1.14 "Storefront Software" means the Object Code for software
that has the functionality to create, manage and host
one or more Web Storefronts thereby providing one or
more web pages where an End User may obtain Course
Information and browse or purchase College Store
Products and other products; specifically including (i)
the Object Code version of the software specified in
Schedule B, hereto, (ii) software developed by Licensor
pursuant to this Agreement, (iii) any related
documentation that Licensor makes generally available to
licensees under this Agreement, (iv) bug fixes and error
corrections for the Storefront Software, (v) any Web
Storefront created using the Storefront Software, and
(vi) all updates, enhancements, and new releases of the
Storefront Software licensed hereunder which Licensor
does not elect to separately price or market and which
are made available to Licensor's general client base.
1.1.15 "Subscribed College Store" means a College Store that
has agreed to and complied with the terms and conditions
of Licensor's On-line College Store Documentation and an
agreement that includes and is consistent with the terms
and conditions of the College Storefront License and
Services Agreement.
1.1.16 "Subscription" means a license, including, and
consistent with, the terms and conditions of College
Storefront License and Services Agreement, to one (1)
Web Storefront.
1.1.17 "URL" means a uniform resource locator.
1.1.18 "Web" means the World Wide Web.
1.1.19 "Web Storefront" means one or more web pages that are
created, managed and hosted using the Storefront
Software for the purpose of allowing End Users to review
Course Information and to browse and order College Store
Products and other products.
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1.2 DERIVATIONS, CONTEXT. Defined terms shall include derivations
thereof. Where the context so indicates, a word in the singular
form shall include the plural and vice-versa. The term "include"
and similar terms (e.g., includes, including, included, comprises,
comprising, such as, e.g., for example), when used as part of a
phrase including one or more specific items, are used by way of
example and not of limitation.
2. WEB STOREFRONT PROJECT
2.1 GENERAL. The parties agree to work together, in general and as
set forth herein, to promote the purchase of Subscriptions to Web
Storefronts by College Stores. Each Party shall have the right to
grant or convey such Subscriptions pursuant to the terms of this
Agreement; however, such right is exclusive to the Parties and a
Party shall not sell, convey or assign such right without the
express consent of any non-assigning Parties. Subscription fees
paid by such College Stores to one Party pursuant to Section 2.6
and such fees shall be divided between the Parties pursuant to
Schedule A.
2.2 SCOPE OF WORK AND DELIVERY. Licensor shall develop or license
software to perform the functions of the Storefront Software.
Licensor shall maintain, upgrade and enhance the Storefront
Software and related materials as is commercially reasonable in
consideration of Licensor's available resources and the
competitiveness of the Storefront Software.
2.3 HOSTING WEB STOREFRONTS.
2.3.1 LICENSOR HOSTING SERVICES. Licensor shall provide the
following hosting services ("Hosting Services"):
2.3.1.1 host the Web Storefronts at a location
selected by Licensor ("Hosting Site").
2.3.1.2 provide personnel and communication lines as
are commercially reasonable to provide
Hosting Services that are generally available
24 hours a day and seven (7) days a week,
provided that such services may be
interrupted from time to time to provide
maintenance, and provided that such services
may be interrupted due to hardware or
software failure, due to the introduction of
a virus, due to a disruption caused by a
third party, or for other reasons not
foreseen by Licensor.
2.3.1.3 provide third party software and modules of
the Software developed by Licensor pursuant
to Section 2.2.
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2.3.1.4 respond to interruptions and other problems
within its control in a commercially
reasonable manner in order to reduce the
number and length of such interruptions.
2.3.2 LICENSEES RESPONSIBILITIES. Licensees shall provide
Licensor with hardware and licenses to third-party,
off-the-shelf software as requested by Licensor which
Licensor deems necessary, in Licensor's reasonable
opinion, to provide the Hosting Services.
2.4 OWNERSHIP.
2.4.1 SOFTWARE AND DATA. This Agreement is a license only,
and no transfer of ownership or title (including any
intellectual property) to Licensees is contemplated by
or will result from this Agreement. By signing this
Agreement, Licensees irrevocably acknowledge that they
have no ownership interest in the Storefront Software,
including any copies thereof, custom modifications
thereof, Web Storefronts created therewith, or any other
changes thereto, or data collected and/or maintained by
Licensor at the Hosting Site or elsewhere. Unless
otherwise expressly provided herein, Licensor and its
third party licensors, if any, retain all rights, title,
and interest in and to the Storefront Software, all
copies thereof, derivative works thereof, data collected
therewith (excluding Course Information licensed from a
College Store or Licensees) and other materials relating
thereto, including, without limitation, any Software
enhancements or modifications, any custom programs
developed therewith, Web Storefronts created therewith,
and all copyright, trade secret, patent, trademark and
other rights relating thereto.
2.4.2 IMPROVEMENTS. Unless otherwise expressly agreed in
writing, all suggestions, solutions, improvements,
corrections, and other contributions provided by
Licensees or a College Store regarding data, the
Storefront Software, Course Management Software, any Web
Storefront to the extent licensed to Licensee, or any
other Licensor software programs hereafter developed to
manipulate or present data (including any intellectual
property, such as patents, trademarks and copyrights
related to the foregoing) shall become the property
of-Licensor, and Licensees hereby assign any rights to
such items to Licensor.
2.4.3 HARDWARE AND THIRD-PARTY SOFTWARE. Licensees shall own
all hardware and licenses to third-party, off-the-shelf
web software purchased by Licensees or Licensor, and
reimbursed by Licensees, which are used to provide the
Hosting Services hereunder, pursuant to Section 2.3.1
above, provided that such software has not been modified
by Licensor.
2.4.4 LICENSEES RIGHT TO GRANT SUBSCRIPTIONS. Commencing on
the Effective Date of this Agreement, and subject to the
terms and conditions set forth
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herein, Licensor grants to Licensees and Licensees
accept a nontransferable (except as provided herein)
right to sell Subscriptions to Web Storefronts to
College Stores subject to the terms and conditions set
forth in a College Storefront License and Services
Agreement.
2.4.5 LICENSEES RIGHT TO USE THE STOREFRONT SOFTWARE.
Commencing on the effective date of this Agreement, and
subject to the terms and conditions set forth herein,
Licensor grants to Licensees and Licensees accept a
nontransferable (except as provided herein), right to
use and display the Storefront Software solely for the
purposes of (i) promoting, offering for sale or selling
Subscriptions to Web Storefronts to College Stores and
(ii) providing technical supports to such College Stores
pursuant to Section 2.10.2 herein.
2.4.6 LICENSOR RIGHT TO USE COLLEGE STORE TRADEMARKS.
Commencing on the Effective Date of this Agreement and
subject to the terms and conditions set forth herein,
Licensees grant to Licensor and Licensor accepts a
nontransferable (except as provided herein),
nonexclusive right to use and display any trademark;
trade name, service mark or logo used on the Web
Storefront of a College Store, to the extent such rights
have been or, in the futures, are licensed or assigned
to Licensees.
2.5 SOFTWARE RESTRICTIONS. Licensees hereby agree to abide by the
following restrictions which pertain to the Storefront Software:
2.5.1 NO TRANSFER. Licensees hereby shall not rent, lease,
loan, sell, sublicense, assign or otherwise transfer the
Storefront Software in whole or in part, to any third
party including any subsidiaries and affiliates of
Licensees, except as provided herein or as otherwise
mutually agreed upon in writing.
2.5.2 ADDITIONAL USE RESTRICTIONS. Unless otherwise expressly
permitted in this Agreement, Licensees shall not and
shall not permit others to: (i) use the Storefront
Software in a manner not provided for in this Agreement;
(ii) disassemble, decompile or reverse engineer the
Storefront Software; or (iii) unless otherwise permitted
in this Agreement, permit any subsidiaries, affiliated
entities or third parties to use the Storefront
Software.
2.5.3 REGISTRATION, LOGIN ID, AND PASSWORD. Licensor may
require all or selected Authorized Users to register by
providing identity information prior to ordering
products or services through a Web Storefront. Licensor
may provide such Authorized Users with respective login
names and passwords following registration. Licensor
may condition licensed access to the Storefront
Software, or any portion thereof, by all or selected
Authorized Users upon validation of a login name and/or
password and/or Authorized User identification and
compliance with the End-User License Agreement and
Licensor Online User Documentation, if any.
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2.5.4 NOTICE OF INFRINGEMENT OR BREACH. In the event
Licensees acquire actual knowledge of copyright
infringement, trademark infringement, patent
infringement, software piracy, breach by any College
Store of a College Storefront License and Services
Agreement or breach by any End User of an End User
Agreement, Licensees shall promptly notify Licensor.
Licensees further agree to cooperate with Licensor to
determine the existence and extent of any such
infringement, piracy or breach and to cooperate with
Licensor to remedy same.
2.5.5 OBJECT CODE ONLY. All software licensed in this
Agreement pertains to Object Code only.
2.5.6 LICENSED USE ONLY. Licensees shall use the Storefront
Software solely as provided in this Agreement. In
addition, Licensee shall use commercially reasonable
efforts to insure that the College Stores use the
Storefront Software solely as provided in this
Agreement, Licensor's Online College Store Documentation
and the College Storefront License and Services
Agreement executed by such College Store.
2.5.7 RESERVATION OF RIGHTS. Licensor reserves all rights and
licenses not expressly granted herein to Licensees or
any College Store or End User.
2.6 WEB STOREFRONT SUBSCRIPTION PROCEDURES.
2.6.1 GATHER LICENSES AND DATA. For each Web Storefront, the
party initiating the Subscription shall:
2.6.1.1 obtain a fully executed College Storefront
License and Services Agreement, in the form
set forth in Exhibit D, from the interested
College Store and provide Licensor a copy
thereof;
2.6.1.2 provide Licensor with a written request to
activate a Web Storefront for the interested
College Store; and
2.6.1.3 provide Licensor any other setup information
as may be reasonably requested by Licensor.
2.6.2 ACTIVATE WEB STOREFRONT. Upon fulfillment of the
obligations specified in Section 2.6. 1, Licensor shall
activate a Web Storefront by:
2.6.2.1 ENABLING WEB STOREFRONT CUSTOMIZATION -
allowing a College Store to access the
customization features of the Storefront
Software to customize the user interface of
the Web Storefront for that College Store to
display a logo, trademark or trade name and
to include other design features so that the
Web Storefront, when accessed by
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an Authorized User, appears as a web site for
the College Store; and
2.6.2.2 ENABLING E-COMMERCE SERVER SOFTWARE -
enabling Authorized Users to access the
Storefront Software via the Web Storefront of
the College Store.
2.6.3 END USER AGREEMENT NOTIFICATION. The party initiating
the Subscription shall notify each College Store (i) of
the Web Storefront access and use provisions contained
in the End User Agreement, and (ii) that use of the Web
Storefront is contingent upon Authorized Users
acceptance of and compliance with the terms and
conditions of such End User Agreement and Licensor
Online User Documentation, if any. The parties
acknowledge and agree that an Authorized User's
rejection of such agreements or noncompliance therewith
shall prevent such Authorized User from ordering
products through a Web Storefront.
2.6.4 INFORMATION TO SUBSCRIBER. The party initiating the
Subscription shall provide each Subscribed College Store
with sufficient information to enable Authorized Users
to access and use the Storefront Software.
2.7 LICENSOR RIGHTS TO USE COURSE INFORMATION AND COLLEGE STORE DATA.
2.7.1 Licensees grant to Licensor, to the extent such rights
have been or in the future are granted to Licensees by a
College Store, and Licensor accepts a nontransferable,
nonexclusive, royalty free, worldwide right and license
to reproduce, modify, manipulate, adapt, format,
display, use and allow Authorized Users to display any
Course Information and other College Store Data for
purpose of assisting, facilitation or allowing College
Stores to conduct electronic commerce via the internet
or an intranet.
2.7.2 Licensees agree that during the term of this Agreement,
Licensees shall not provide nor assist any third parties
in providing on behalf of Licensees any services whereby
College Store Products are sold or offered for sale by a
College Store through a Web site or Course Information
is made available through a web site, except as
otherwise allowed herein.
2.8 END USER AGREEMENT.
2.8.1 AUTOMATIC DISPLAY. A copy of the End User Agreement
shall automatically be loaded and displayed before an
End User is allowed to order any product from a Web
Storefront
2.8.2 ASSENT. Each Authorized User's use of a Web Storefront
to order products is contingent upon the user's
acceptance of the terms and conditions of the End User
Agreement and Licensor Online User Documentation.
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2.9 COLLEGE STORE AGREEMENT.
The parties agree that the creation of a Web Storefront by College
Store is contingent upon the College Store agreeing in writing to
and complying with Licensor's Online College Store Documentation,
if any, and the College Storefront License and Services Agreement
The parties agree that the terms and conditions of such College
Storefront License and Services Agreement may be modified only
upon mutual, written agreement by the parties.
2.10 SOFTWARE MAINTENANCE AND SUPPORT
2.10.1 Licensor Maintenance and Support Services. Commencing
on the Effective Date or the date on which the software
is available for license hereunder, whichever is later,
and terminating upon termination of the Agreement,
Licensor shall provide the maintenance and support
services to Licensees listed below:
2.10.1.1 Use all commercially reasonable efforts to
provide Licensees with available solutions
and corrections for reported problems, which
are demonstrated to Licensor as material
defects in the Storefront Software, so that
the Storefront Software materially conforms
with the functionality in the applicable
documentation. Support is limited to
telephone and e-mail support to two Licensees
contacts whom Licensees has designated in
writing (or via e-mail) as Licensees' support
representatives (the "Support
Representatives") and does not include onsite
support at a College Store's, End User's or
Licensees' location;
2.10.1.2 Provide reasonable telephone support during
the period of 9:00 am to 5:00 p.m. CST,
e-mail support during the period of 7:00 am
to 7:00 p.m. CST, Monday through Friday and
exclusive of holidays observed by Licensor,
and pager/cellular phone support 24 hours a
day, 7 days a week in response to calls and
e-mail from the Support Representatives.
Holidays currently observed by Licensor
which may change from time to time at the
sole discretion of Licensor; and
2.10.1.3 Provide, at no additional charge, (i) all bug
fixes and error corrections to Storefront
Software and (ii) any updates, enhancements,
and new releases of the Storefront Software
as licensed hereunder.
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2.10.1.4 Licensor shall not be obligated to provide
Maintenance and Support Services for any
Storefront Software other than the current
release.
2.10.2 LICENSEES MAINTENANCE AND SUPPORT SERVICES. Commencing
on the Effective Date or the date on which the Software
is available for license hereunder, whichever is later,
and terminating upon termination of this Agreement,
Licensees shall:
2.10.2.1 Provide maintenance and support services to
College Stores and Authorized Users during
the period of 9:00 am to 5:00 p.m. EST, email
support during the period of 7:00 am to 7:00
p.m. EST, Monday through Friday and exclusive
of holidays observed by Licensees, and
pager/cellular phone support 24 hours a day,
7 days a week in response to calls and e-mail
from any College Store or Authorized User.
Holidays currently observed by Licensees
which may change from time to time at the
sole discretion of Licensees; and
2.10.2.2 Provide Licensor with the names of two
designated Support Representatives within
thirty (30) business days from the Effective
Date, and all information and materials
reasonably requested by Licensor for use in
replicating, diagnosing, and correcting a
particular problem reported by Licensees.
2.10.3 DATA RETENTION. Licensor shall have no responsibility,
whatsoever, for reproducing, reconstructing or archiving
any Course Information or other College Store Data,
except for information or data entered by a Subscribed
College Store in its then current Web Storefront.
Licensor may, at any time and in accordance with
Licensor's operational procedures, destroy files
pertaining to outdated Course Information or other
College Store Data in order to maintain current
information.
2.11 ADVERTISING, PROMOTION, AND OTHER LINKS AND DATA.
2.11.1 SALES AND ADVERTISING PROGRAM. The parties agree to
develop a mutual sales and Advertising program for
Advertising on Web Storefronts.
2.11.2 EXCLUSIVE ADVERTISING SERVICE ADMINISTRATOR. Licensor
shall be the exclusive administrator of the marketing
and Advertising content displayed on any Web Storefront.
2.11.3 LICENSOR ADVERTISING SALES. Subject to Section 2.11.4
herein, Licensor shall have the exclusive solicit and
sell Advertising and promotional
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content for Web Storefronts, provided that each
Subscribed College Stores shall have the right to
solicit and sell Advertising and promotional contents
for its Web Storefront.
2.11.4 LICENSEES ADVERTISING SALES. Licensees reserve the
right to, unilaterally or jointly with Licensor upon
Licensees' request, solicit and sell Advertising and
promotional content for Web Storefront from those
entities, listed in Schedule E, with which Licensees
have an existing Advertising and promotion sales
relationship.
2.11.5 LICENSEES WEB SITES AND LICENSOR WEB SITES. The parties
agree that Licensor is allowed to provide Advertisements
via the Licensees Web Sites and Licensor Web Sites to
the Authorized Users via each Authorized User's access
and use of the Storefront Software, provided that such
Advertisements shall not be displayed on the Web
Storefront of a Subscribed College Store without the
store's approval as required herein.
2.11.6 LICENSOR MARKETING AND PROMOTIONAL ACTIVITIES.
Licensees shall make reasonable efforts to secure
permission from Subscribed College Stores to allow
Licensor to conduct marketing and promotional activities
in or around Web Storefront of such stores, or such
other web sites or territory as controlled or accessible
by such College Stores.
2.11.7 NAVIGATION. Licensor shall provide each Web Storefront
of a Subscribed College Store with a URL link from
Licensor's web site, only if and as long as, the
Subscribed College Store includes in its Web Storefront
a URL link to Licensor's Web page and appropriate
Licensor branding, including Licensor's logo and company
name. Licensees shall use reasonable efforts to secure
permission from each Subscribed College Store having a
Web Storefront to include a Licensor URL link on such
Web Storefront and to include appropriate Licensor
branding, including Licensor's logo, Licensor's URL, and
Licensor's company name, in such stores marketing and
Advertising efforts.
2.11.8 FEES. The parties agree to allocate and distribute the
Advertisement, promotion fees and performance based
revenues as set forth in Schedule A hereto.
2.12 TRADEMARK OWNERSHIP AND LICENSES.
2.12.1 LICENSED USE. To the extent necessary to carry out the
purpose of this Agreement and the obligations of the
Parties thereunder, each Party ("Trademark Owner") that
owns a Trademark identified on Schedule C (individually
"Trademark" or collectively "Trademarks") grants to the
other Parties ("Trademark Users") a license for the
duration of this Agreement to reproduce and use the
Trademark Owner's Trademarks
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solely in conjunction with (i) the promotion and sale of
Subscriptions to College Stores, (ii) the promotion of
Web Storefronts of Subscribed College Stores, (iii) the
promotion and sale of College Store Products sold or
offered for sale through the Web Storefront of a
Subscribed College Store, and (iv) services and products
traditionally associated with the Trademarks of the
Trademark Owner.
2.12.2 NO TITLE TO USERS. The Trademark Users by their use of
any Trademark shall not create any right, title or
interest therein, other than the goodwill associated
with the mark, which is assigned to the Trademark Owner.
2.12.3 QUALITY OF USE. The Trademark Users shall not use a
Trademark in a manner that diminishes the quality of
such mark, and all such use shall be for the benefit of
the Trademark Owner.
2.12.4 APPROVAL BY OWNER. The Trademark Users shall submit to
the Trademark Owner, upon the owner's reasonable
request, any representations of the Trademark that the
user intends to use, for Trademark Owner's approval of
the design, color and other details. Upon the Trademark
Owner's reasonable request the Trademark Users shall
submit to the owner prior to publication any
advertising, press release, promotion or marketing
materials using a Trademark.
2.12.5 TRANSFER OF GOODWILL. If the Trademark Users acquire
any goodwill through use of a Trademark of another, all
such goodwill shall automatically vest in the Trademark
Owner on an on-going basis and is hereby assigned to the
Trademark Owner. Such acquisition of goodwill or
reputation occurs, as well as at the expiration or
termination of this agreement, without any separate
payment or other consideration of any kind by the
Trademark Owner and the Trademark Users agree to take
all actions necessary to effect such vesting.
2.12.6 NO CONFUSINGLY SIMILAR USES. During the term of this
agreement, the Trademark Users shall not adopt, use or
register, whether as a corporate name, trademark,
service mark, URL or other indication of origin, any of
the Trademarks, or any word or mark confusingly similar
to the Trademarks, in any jurisdiction, other than as
expressly permitted in this agreement or as otherwise
agreed in writing by the Trademark Owner.
3. LICENSEES RESPONSIBILITIES
3.1 Licensees agree to use commercially reasonable efforts to:
3.1.1 Promote and sell subscriptions to Web Storefronts, as
well as support Subscribed College Stores in their
efforts to fully utilize the Web Storefront to their
full advantage;
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3.1.2 Work with Licensor to identify and define enhancements
and extensions to the Storefront Software;
3.1.3 Assist College Stores with entering and maintaining
Course Information and other College Store Data for each
Subscribed College Store in a Web Storefront;
3.1.4 Provide to Licensor updated Course Information and other
College Store Data as soon as it is made available to
Licensees;
3.1.5 Assist College Stores in providing the highest possible
quality of Course Information and other College Store
Data is provided to Authorized Users;
3.1.6 Obtain agreements between Licensees and all College
Stores, said Agreement including, and consistent with,
the terms and conditions of the College Store License
and Services Agreement;
3.1.7 Educate Subscribed College Stores on the importance of
promoting the use of their respective Web Storefront;
3.1.8 Encourage Subscribed College Stores to engage in
promotional activities and provide promotional materials
to assist in promoting the use of their respective Web
Storefront;
3.1.9 Pursue mutually acceptable joint advertising, promotion,
and marketing including issuance of a joint press
release within fifteen (I 5) days of the Effective Date
which is mutually acceptable to Licensor and announces
the strategic relationship between Licensor and
announces the strategic relationship between Licensor
and Licensees;
3.1.10 Endorse a written testimonial, acceptable to Licensees,
promptly after the Effective Date which outlines the
benefits of Licensor's services received by Licensees
and detailing the relationship between the parties; and
3.1.11 Have joint meetings with the press promptly after the
Effective Date to promote the benefits of the Agreement.
3.2 WEB PAGE MARKINGS AND CONTENT. Licensees and Licensor shall
mutually agree upon the content and location of a Web page on the
Web site www.NACS.org, said Web page generally describing the
relationship of the Parties, promoting Subscriptions to College
Stores, and promoting the Web Storefronts of Subscribed College
Stores. Licensees shall place a "collegestudent.com" logo
("Logo"), to be provided by Licensor, in the top portion of such
Web page. The Logo shall occupy at least an area of approximately
88x31 pixels and shall include the URL link(s) to Licensor's
then-current home Web page. As of the Effective Date, Licensor's
home Web page URL is www.collegestudent.com.
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3.3 FACILITIES, MATERIALS, PERSONNEL. To the extent reasonably
required by a visiting party, each party shall make available to
the other party certain of the hosting party's facilities,
computer resources, software programs, personnel and business
information as are reasonably required to perform services
hereunder. While on the other party's premises, the visiting
party and its third party contractor(s) agree to comply with the
hosting party's rules and regulations regarding safety, security,
conduct and operational procedures and practices that are conveyed
to the visiting party.
4. RECORDS AND CONTACT INFORMATION
4.1 RECORDS. Each party shall keep an accurate to-date and complete
record of:
4.1.1 the number of Web Storefront requests;
4.1.2 all agreements between each party and Subscribed College
Stores related to Web Storefront Subscriptions pursuant
to Section 2.6. 1. 1;
4.1.3 the amount of advertising, promotion, and order based
revenues received and/or generated by each party
pursuant to this Agreement; and
4.1.4 identity and contact information on all Subscribed
College Stores.
4.2 MONTHLY REPORT. Each party shall provide monthly reports to the
other party within fifteen (I 5) days after the end of each month
containing updated records of Section 4. 1.
4.3 VERIFICATION. Each party agrees that the other party may, upon
five (5) business days' prior written notice, enter such party's
premises to verify such party's compliance with the provisions of
this Agreement. Inspections shall be limited to (i) one annual
inspection (unless the requesting party believes that it has just
cause for multiple inspections); and (ii) during the audited
party's normal business hours. If the audited party is found not
to be in substantial compliance with the Agreement, the audited
party shall pay the reasonable expenses incurred by requesting
party associated with such inspection. Each party's rights of
inspection shall remain in effect through the period ending six
(6) months from the termination or expiration of this Agreement
and any applicable license hereunder.
4.4 RECORDS RETENTION, USAGE. Each Party shall have the right to
retain and review all records, information and data controlled or
maintained by the Storefront Software, including input, quotations
and orders pertaining to an Authorized User's access to the
Storefront Software or any Web Storefront. Each Party shall also
have the right to disclose such records, information or data
provided that (i) the written consent of the other Party to this
Agreement is obtained in advance, and such consent shall not be
unreasonably withheld, and Cu) such items are disclosed in
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aggregate form without identifying any particular association of a
Subscribed College Store or End User to such information.
4.5 CONTACT INFORMATION.
4.5.1 Licensor contact information, which may be changed from
time to time upon written notice to Licensees, is as
follows:
ATTN: Mr. Eben Miller
Collegestudent.Com, Inc.
715 West 23d Street, Suite M
Austin, Texas 78705
(512) 477-7444 (Telephone)
(512) 474-6013) (Facsimile)
[email protected] (e-mail)
4.5.2 Licensees' contact information, which may change from
time to time upon written notice to Licensor, is as
follows:
ATTN: Mr. Gary Swisher
CourseWeb LLC
500 East Lorain Street
Oberlin, OH 44074
(440) 775-7777
(440) 775-4769 (fax)
[email protected]
5. FEES AND PAYMENT
5.1 PAYMENT TERMS - GENERAL. The entire amount of all amounts
required to be paid by one party to the other party under this
Agreement shall be on the fifteenth (15th) day of each month
following the month in which such amounts are accrued unless
otherwise expressly provided herein. In the event that a payment
schedule is set forth herein, payments shall be due in accordance
with such payment schedule. Any late payment shall be subject to
any costs of collection (including reasonable legal fees) and
shall bear interest at the rate of one and one-half (1.5) percent
per month (prorated for partial periods) or at the maximum rate
permitted by law, whichever is less.
5.2 PAYMENTS. The parties agree to the payment terms as set forth in
Schedule A.
5.3 AMOUNTS NOT INCLUDED IN PAYMENT. The fees and other amounts
required to be paid hereunder do not include any amount for taxes,
duties, or levies (including interest and penalties). Each party
shall bear all sales, use, excise, property, or other taxes,
levies, or duties required to correct or remit to applicable tax
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authorities according to the percentages outlined in Schedule A.
Neither party shall be responsible for the other party's income or
franchise taxes.
5.4 U.S. DOLLARS. All dollar amounts listed in this Agreement are in
U.S. Dollars, and all payments shall be made in U.S. Dollars.
5.5 PRICING FOR SERVICES. Unless otherwise agreed in writing
Consulting Services provided by Licensor shall be at Licensor's
then current applicable standard time and material rates and
charges plus reasonable expenses.
5.6 EXPENSES. Expenses are not included in the fees specified in this
Agreement.
6. CONSULTING SERVICES
6.1 GENERAL. Licensor may provide consulting services (the
"Consulting Services"), which may include software development,
integration, implementation, customization, data integration, and
training as requested by Licensees. Consulting Services shall be
provided in accordance with a mutually agreed upon Statement of
Work.
6.2 RESOURCES. Licensor shall provide resources and use qualified
employees and/or consultants as it deems necessary to perform the
Consulting Services.
7. CONFIDENTIALITY
7.1 DEFINITION. "Confidential Information" includes all information
disclosed by the parties, before or after the Effective Date, and
generally not publicly known, whether tangible or intangible and
in whatever form or median provided, as well as any information
generated by a Party to the extent that it contains, reflects, or
is derived from Confidential Information. Confidential
Information includes, without limitation, the Storefront Software,
User Documentation, training materials, security procedure
information and other information identified as "confidential" or
the like. The terms and conditions of this Agreement are
Confidential Information; however, the existence of this Agreement
is not Confidential Information.
7.2 PROPRIETARY NATURE. All Confidential Information of the
disclosing party is proprietary to the disclosing party or its
third party licensors and includes trade secrets and the
unpublished copyrighted material of the disclosing party and its
third party licensors.
7.3 RESTRICTED USE AND PROTECTION. Except as expressly permitted in
this Agreement, Confidential Information may not be copied,
reproduced, or distributed, and the receiving party shall not
sell, lease, license, assign, transfer, or disclose the
Confidential Information to any third party. The receiving party
shall protect Confidential Information of the disclosing party by
using the same degree of care
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but no less than a reasonable degree of care as it uses to
safeguard its own confidential or proprietary information of a
like nature from unauthorized use, disclosure, or dissemination.
7.4 NO REVERSE ENGINEERING. Licensees shall not reverse engineer,
disassemble, decompile, or apply any procedure or process to the
Storefront Software in order to ascertain, derive, and/or
appropriate for any reason or purpose, the source code or source
listings for the Storefront Software, any trade secret
information, process, or other information contained in the
Storefront Software.
7.5 RESTRICTED ACCESS. The receiving party agrees to restrict access
to Confidential Information of the disclosing party to only its
employees and contractors who require such access in the course of
their assigned duties and responsibilities and who have been
informed of the receiving party's obligations of confidence and
have agreed in writing to preserve the confidentiality of such
information under terms and conditions no less restrictive than
those set forth herein. The receiving party shall enforce such
obligations unless otherwise authorized in writing by the
disclosing party.
7.6 NO COMPETITOR ACCESS. No contractor or potential Authorized User
who is a competitor of the disclosing party may have access to
Confidential Information of the disclosing party. The receiving
party agrees to promptly notify the disclosing party regarding the
competitive status of any potential contractor or potential
Authorized User which may possibly be a competitor with the
disclosing party. The receiving party agrees to abide by any
competitive determination reasonably made by the disclosing party
regarding any contractor or potential Authorized User.
7.7 NO OWNERSHIP CONVEYED. Nothing in this Agreement shall be
construed to convey to Licensor or to Licensees any title or
ownership rights to the other party's Confidential Information or
to any software, patent, copyright, trademark, or trade secret of
the other party or grant any other right, title, or ownership
interest to the other party's Confidential Information except as
may be provided by this Agreement.
7.8 EXCEPTIONS. Without granting any right or license, the foregoing
obligations shall not apply to disclosure of any Confidential
Information which the receiving party can document and that: (i)
was in the possession of or known by the receiving party without
an obligation of confidentiality prior to receipt from the
disclosing party, (ii) is or becomes general public knowledge
through no fault or acts of the receiving party; (iii) is or
becomes lawfully available to the receiving party from a third
party without an obligation of confidentiality; (iv) is
independently developed by the receiving party without use of any
Confidential Information; or (v) is required to be disclosed
pursuant to any law, code or regulation, provided the disclosing
party is given ten (10) days written notice prior to such
requirement in order that it may seek a protective order.
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7.9 REMEDIES, INJUNCTIVE RELIEF. Each party acknowledges that the
disclosing party shall have the right to take all reasonable steps
to protect its Confidential Information, and that in the event of
a violation of this section, the disclosing party may be
irreparably harmed and may suffer significant injury that will not
be compensable by damages alone. The disclosing party may
therefore be entitled to obtain injunctive relief in addition to
any other remedies and damages that may be available at law or in
equity (including costs and reasonable legal fees).
8. TERM AND TERMINATION
8.1 INITIAL TERM, RENEWAL. The Agreement shall remain in effect for
three (3) years from the Effective Date ("Initial Term"). The
Agreement shall renew for successive three (3) year periods
("Renewal Term") until such time as either party provides the
other party with written notice at least six months prior to the
end of the Initial Term or the then-current Renewal Term of its
election not to renew the Agreement and the licenses granted
hereunder.
8.2 NO INITIAL RENEWAL BY LICENSOR. If Licensor elects not to renew
this Agreement for a first Renewal Term, the Initial Term shall be
extended by six (6) months, and the Agreement shall terminate at
the end of that six (6) month period.
8.3 TERMINATION EVENTS. This Agreement and any license issued
hereunder and any respective Schedule may be respectively
terminated earlier in accordance with the following:
8.3.1 By a Party due to the other Party's failing to make any
payments due hereunder within thirty (30) days after
delivery of written notice of such default.
8.3.2 By a non-defaulting Party on thirty (30) days written
notice to the defaulting Party if the defaulting Party
fails to perform any material obligation required of it
under this Agreement and such failure is not cured
within such thirty (30) day period.
8.3.3 By either Party if the other files a petition for
bankruptcy or insolvency, has an involuntary petition
filed against it which is not dismissed within ninety
(90) days following the filing of such petition,
commences an action providing for relief under
bankruptcy laws, files for the appointment of a
receiver, or is adjudicated a bankrupt concern.
8.4 DAMAGES. Neither party shall be liable to the other party for
damages of any sort solely as a result of terminating this
Agreement in accordance with its terms. Termination of this
Agreement shall be without prejudice to any other right or remedy
of either party.
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8.5 SURVIVAL. Upon termination of this Agreement, the provisions of
Sections 5. 1, 7, 9.2, 9.4, 10, 11, 12.2, 12.3, 12.4, 12.5, 12.6,
14, 15.4, 15.5 and 15.6 shall survive termination of this
Agreement and continue in effect and shall inure to the benefit
and be binding upon the parties, including their legal
representatives, heirs, successors, and assigns.
9. WARRANTY AND REMEDIES
9.1 GENERAL. Each party represents and warrants to the other that it
has the right to enter into this Agreement and to perform its
obligations under this Agreement. Without limitation, Licensor
represents and warrants that it has the right to grant to
Licensees licenses as provided herein. Without limitation,
Licensees represent and warrant that they either have or will use
commercially reasonable efforts to obtain a fully executed College
Storefront License and Services Agreement from each past, present
or future Subscribed College Store. Each party represents and
warrants that it has the right to disclose to other and grant the
other party access to any information disclosed to the other
party. Licensor represents, to the best of its knowledge, that
the Software does not infringe any patent or copyright or violate
any other proprietary rights of a third party including Ceubic.
9.2 DATA PROVIDED BY LICENSOR TO AUTHORIZED USERS "AS IS".
Information and data provided by Licensor to Licensees, College
Stores, authorized users or anyone else is provided "AS IS" and is
not verified or expressly or implicitly warranted by Licensor.
Licensor cannot and does not represent that such information and
data is error free and shall not be liable or responsible for any
pricing, configuration, availability or other errors contained in
any information and data provided to Licensees, any College Store
or any Authorized User.
9.3 SERVICES WARRANTY. Licensor wan-ants that all services performed
under the Agreement shall be performed in a workmanlike and
professional manner by its employees or by third party
contractors.
9.4 WARRANTY DISCLAIMER. EXCEPT AS OTHERWISE STATED IN THIS
AGREEMENT, LICENSOR MAKES NO OTHER WARRANTIES, EXPRESS, IMPLIED,
OR STATUTORY, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGENMNT.
10. INDEMNITY
10.1 INDEMNITY OBLIGATION OF LICENSOR. Licensor will indemnify,
defend, hold harmless or, at its sole option, settle any action or
claim brought against Licensee to the extent that it is based upon
a claim that the Storefront Software directly infringes any
copyright or patent rights or incorporates any misappropriated
trade secrets (a "Claim"). Licensor will pay any judgment awarded
against Licensee that is attributable to such Claim or settlement
approved in advance by Licensor,
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provided that: (i) Licensee promptly notifies Licensor in writing
of the Claim or any threat thereof, (ii) Licensee grants Licensor
sole control of the defense and settlement of the Claim, and (iii)
Licensee provides Licensor with all assistance, information and
authority reasonably required for the defense and settlement of
the Claim at Licensor's expense. Licensor shall not be responsible
for damages or costs under any settlement or compromise made
without its consent. Licensee may retain their own counsel (at
their expense) to monitor and/or participate in the defense and
settlement of the Claim. The foregoing indemnity does not apply
to: (i) any misuse of the Storefront Software by using the
Storefront Software other than for its intended purpose, whether
by Licensee, a College Store, an End User or anyone else or (ii)
any Claim based on a version of the Storefront Software that is
not the current version.
10.2 ADDITIONAL REMEDIES. If Licensee's use of the Storefront Software
hereunder becomes subject to a Claim, or in Licensor's opinion is
likely to become subject to a Claim, Licensor may, at its sole
option and expense: (i) procure for Licensee the right to continue
using such Storefront Software under the terms of this Agreement;
(ii) replace or modify such Storefront Software so that it is
non-infringing, provided, however, that any such efforts not
substantially Finish the functionality of the Storefront Software
as it exists on the date of this Agreement; or (iii) if (i) and
(ii) above are not achieved by Licensor through commercially
reasonable efforts, Licensor may immediately terminate this
Agreement, at which time Licensee will use its best efforts to
cease all use, performance, display, installation and/or sales
activities for the Storefront Software, Technical Documentation,
and User Documentation ("Complete Cessation of Use"). In any
event, Licensee shall achieve Complete Cessation of Use within
three (3) days of receipt of such termination notice. Any use of
the Storefront Software subsequent to three days of receipt of
such termination notice under this section is not included within
Licensor's indemnification obligations of this section.
10.3 INDEMNITY OBLIGATION OF LICENSEE. Licensee will indemnify,
defend, hold harmless or, at its sole option, settle any action or
claim brought against Licensor to the extent that it is based upon
a claim that Licensor has infringed any copyright or patent rights
or misappropriated trade secrets in the Cuebic Software. Licensee
will pay any judgment awarded against Licensor that is
attributable to such claim or settlement approved in advance by
Licensee, provided that: (i) Licensor promptly notifies Licensee
in writing of such a claim or any threat thereof, (ii) Licensor
grants Licensee sole control of the defense and settlement of such
claim, and (iii) Licensor provides Licensee with all assistance,
information and authority reasonably required for the defense and
settlement of the claim at Licensee's expense. Licensee shall not
be responsible for damages or costs under any settlement or
compromise made without its consent. Licensor may retain their
own counsel (at its expense) to monitor and/or participate in the
defense and settlement of such a claim.
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10.4 SOLE REMEDY. THE PROVISIONS OF THIS SECTION 10 SET FORTH EACH
PARTY'S SOLE AND EXCLUSIVE OBLIGATIONS AND REMEDIES, WITH RESPECT
TO ANY CLAIMS OF INFRINGEMENT OR MISAPPROPRIATION OF INTELLECTUAL
PROPERTY RIGHTS OF ANY KIND.
11. LIMITATION OF LIABILITY
11.1 LIMITATION OF LIABILITY. IN NO EVENT SHALL A PARTY ("LIABLE
PARTY") BE LIABLE TO ANOTHER PARTY, WHETHER IN AN EQUITABLE,
LEGAL, OR COMMON LAW ACTION ARISING UNDER OR RELATED TO THE
AGREEMENT AND ARISING UNDER ANY THEORY OF LIABILITY INCLUDING
CONTRACT, STRICT LIABILITY, INDEMNITY, TORT (INCLUDING
NEGLIGENCE), OR OTHERWISE, FOR DAMAGES WHICH, IN THE AGGREGATE,
EXCEED THE AMOUNT OF THE FEES RECEIVED BY THE LIABLE PARTY UNDER
THIS AGREEMENT DURING THE MOST RECENT EIGHTEEN (18) MONTH PERIOD.
11.2 NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL LICENSOR BE LIABLE FOR
ANY SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY
KIND AND HOWEVER CAUSED (INCLUDING NEGLIGENCE), INCLUDING BUT NOT
LIMITED TO LOSS OF PROFITS OR BUSINESS INTERRUPTION EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGE, AND NOTWITHSTANDING
THE FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY.
11.3 NO LIABILITY ARISING FROM DATA. LICENSEES HEREBY AGREES THAT
LICENSOR SHALL NOT BE LIABLE FOR ANY PRICING, AVAILABILITY, OR
OTHER ERROR CONTAINED IN ANY COLLEGE STORE DATA, COURSE
INFORMATION OR OTHER DATA, INCLUDING ADVERTISING AND PROMOTIONAL
INFORMATION, PROVIDED TO AUTHORIZED USERS.
11.4 FORCE MAJEURE. Neither party shall be liable for any delay or
failure to perform its obligations and services hereunder for
causes that are beyond its reasonable control except for the
payment of monies. For illustrations purposes, and without
limiting the generality thereof, such causes shall include, but
are not limited to, acts of nature, floods, fires, loss of
electricity or other utilities, lack of Licensees support
necessary for the timely provision of Services, or delays by
Licensees in providing any required information, personnel, or
performing any other obligation hereunder.
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12. EXCLUSIVITY, NON-COMPETE, SOLICITATION OF EMPLOYMENT
12.1 EXCLUSIVITY.
12.1.1 BY LICENSOR. During the Term of this Agreement,
Licensor shall not license the use of the Storefront
Software to any third party for the purpose of allowing
such third party to provide Web Storefronts to College
Stores without the prior written consent of Licensees,
except as otherwise allowed herein.
12.1.2 BY LICENSEES. Licensees hereby agree that the use of
College Store Course Information as licensed herein and
the advertising administration services provided herein
are exclusive relationships between Licensor and
Licensees. Therefore, during the Term of this
Agreement, Licensees shall not assist, directly or
indirectly, a third party in creating, maintaining or
supporting a commerce enabled Web site for College
Stores and shall not permit any third parties to provide
the advertising administration for a Web Storefront as
set forth in Section 2.11.2 herein, provided that, if
this Agreement is not renewed pursuant to Section 8.2,
licensees may, upon receipt of a non-renewal notice
pursuant to that section, independently on its own or
with the assistance of a third party, design and develop
software to create, support and host commerce enabled
Web sites to be used for the promotion and sale of
College Store Products after termination of this
Agreement.
12.2 LIMITED COVENANT NOT TO COMPETE. Because the receiving Party will
have access to and become acquainted with the Confidential
Information of the disclosing Party, the unauthorized use,
disclosure, or dissemination of which may cause irreparable harm
and significant injury to the disclosing Party, and because of
each Party's substantial investment in providing the Web
Storefront services to College Store and for providing the
exclusive relationships established herein, each Party agrees
with, and represents to, the other Party that, except as otherwise
allowed in this Agreement, it does not (as of the Effective Date)
and shall not during the Term of this Agreement anywhere in the
world: (i) render directly or indirectly through an entity owned
or partially owned by any Party, or any member thereof, services
to any College Store whereby College Store Products are sold or
offered for sale by a College Store through a Web Site; or (ii)
provide such services for or on behalf of any third party, either
directly or indirectly through an entity owned or partially owned
by a Party, or any member thereof.
12.3 SCOPE. Each party specifically agrees that the covenants in this
section are an integral part of this Agreement and these covenants
shall be specifically enforceable by the other party and its
successor and assigns. Each party acknowledges that the
limitations as to time, geographical area, and scope of activity
restrained as set forth in the limited covenant in this section
are reasonable and do not impose a greater restraint on it than is
necessary to protect
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the integrity of the proprietary information and the goodwill and
other business interest of the other party, as well as the
competitive benefit of engaging the other party. If for any reason
the covenants stated in this section are deemed unenforceable by a
court or other adjudicative body, the parties specifically request
such court or adjudicative body to reform the covenants as to make
them enforceable and, as so reformed, enforce them to the maximum
extent permitted by law.
12.4 EFFECT OF TERMINATION/NON-RENEWAL. If the parties mutually agree
to terminate or not renew this Agreement as provided in Section 8,
then the Limited Covenant provided for in this section shall not
apply and each party shall be free to compete with the other
party. If either party causes this Agreement to terminate by such
party's material breach of the Agreement, then such party agrees
not to compete with the other party pursuant to Section 12.2 above
for a period of one year from the date of the termination of this
Agreement. The parties agree that the exercise of this section
caused by one party's material breach of the Agreement shall not
waive or otherwise limit any legal or equitable rights and
remedies of the non-breaching party.
12.5 NO SOLICITATION. During the Term of this Agreement and for a
period of one (1) year thereafter, each Party agrees not to
directly or indirectly hire, solicit, nor attempt to solicit the
services of another Party's employee, contractor or former
employee within six (6) months of employment termination from a
Party without the prior written consent of the non-soliciting
Party. Violation of this provision shall entitle the
non-soliciting Party to assert liquidated damages against the
soliciting Party equal to one hundred (100) percent of the
solicited person's gross annual compensation. The Parties agree
that the damages caused to a Party by breach of this provision is
difficult, or impossible to determine and the amount set forth
above is a reasonable estimation of the damages the non-soliciting
Party would incur.
12.6 DATA EXCHANGE UPON TERMINATION. Upon termination of this
Agreement for any reason, each party shall, upon request by a
Subscribed College Store, make available data, in a tab delimited
electronic format, for the twelve month period preceding
termination of this Agreement to the extent such data is
available. The data subject to this provision is: (1) Course
Information, (2) College Store Data, and (3) transaction
information for sales of College Store Products.
13. ESCROW OF SOFTWARE
13.1 DEPOSIT OF SOFTWARE. Within 30 days from the execution of this
Agreement or the date that the software is available for license,
whichever is later, Licensor shall deliver the Storefront Software
provided by Licensor under this agreement to an escrow agent under
a separate agreement between Licensor and such escrow agent.
Licensor shall further deposit updates to the Software on an as
needed, or periodic, basis.
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13.2 PAYMENT OF ESCROW AGENT. Licensees hereby agrees to pay any and
all fees required by such escrow agent under the aforementioned
agreement. Licensees further agrees Licensor's obligation to
deposit Storefront Software to such escrow agent is contingent
upon Licensees payment of the applicable fees.
14. RELEASE FROM ESCROW
14.1 PROCEDURE. In the event of an occurrence of the type requiring
the escrow agent to release the Software to Licensees, Licensees
shall send, by national overnight courier service, to both escrow
agent and Licensor, a signed and notarized affidavit declaring
that an event of default has occurred under the terms of this
Agreement such that the Software should be released to Licensees
and reciting the basis for such default in detail. Licensor
shall, thereupon, have 14 days to notify the escrow agent in
writing that such event has not occurred or is contested. The
escrow agent shall not release the Software until resolution of
such dispute. A lack of a timely response by Licensor shall be
deemed as Licensor's agreement to release the Software to
Licensees, which release shall occur within 30 days after receipt
of Licensees' affidavit by the escrow agent.
14.2 RELEASE EVENTS. Licensees shall be entitled to request release of
the Software under the following circumstances:
14.2.1 Licensor permanently ceases to conduct business, except
in the instance where a majority of the Licensor's
assets or issued stock are purchased or otherwise
transferred to another entity where Licensor's rights
under this Agreement are assigned or otherwise
transferred to another entity pursuant to Section 14.5
of this Agreement; or
14.2.2 Licensor is adjudged insolvent or bankrupt and Licensor
has failed to be reorganized under applicable bankruptcy
laws.
14.3 Upon release of the Software in accordance with the Escrow
Agreement, Licensees shall have the right to use the Software,
including without limitation, the right to use the Software in
source code form and to modify and create derivative works of the
Software, for the sole purpose of continuing the benefits afforded
to Licensees under this Agreement or to support and provide
maintenance to Licensor's customers and Licensees's fee payment
obligations pursuant to this Agreement shall end. Licensees shall
be obligated to maintain the confidentiality of the released
Software.
15. MISCELLANEOUS
15.1 AMENDMENTS IN WRITING. This Agreement shall not be amended unless
in writing signed by each party. All changes to this Agreement
shall be made by written
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amendment and any alterations made on the Agreement document
itself shall be of no force or effect.
15.2 NOTICES. Any notice required under the Agreement shall be given
in writing and shall be deemed effective upon delivery to the
party to whom addressed. All notices shall be sent to the
applicable address specified in Section 4.5 hereof or to such
other address as the parties may designate in writing.
15.3 SEVERABILITY. If any term or provision of this Agreement is
determined to be invalid or unenforceable for any reason, it shall
be reformed rather than voided, if possible, to achieve the intent
of the parties to the fullest extent possible. In any event, all
other terms and provisions shall be deemed valid and enforceable
to the maximum extent possible.
15.4 ASSIGNMENTS. It is understood that this Agreement is personal to
the parties, and accordingly neither this Agreement nor any duty,
obligation, right or interest herein may be assigned or
transferred without the prior express written consent of the other
party, which consent shall not be unreasonably withheld, provided
however that no such consent shall be required for assignment to a
successor to a majority ownership of the assigning party's
business or assets. It shall be reasonable for either party to
object to the assignment of any duty, obligation, right or
interest herein to a direct competitor of such party, as
reasonably determined by such party. Any assignment in violation
of this section shall be void and without effect.
15.5 ARBITRATION.
15.5.1 Any dispute or claim arising out of or in connection
with this Agreement shall be settled by binding
arbitration in Travis County, Texas, or as mutually
agreed by the parties, under the Commercial Arbitration
Rules of the American Arbitration Association ( the
"AAA") by three (3) arbitrators appointed in accordance
with such rules. Each party shall select an arbitrator
according to such AAA rules, provided that each party
shall selects one of the arbitrators and the two chosen
arbitrators select the third arbitrator. Judgment on
the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. The parties
agree to adopt reasonable procedures, including limited
discovery and use of an expedited scheduling order, to
expedite the resolution of any dispute as may be
implemented by the arbitrators.
15.5.2 Notwithstanding the arbitration provisions of this
section, either party may obtain an injunction,
provisional, or ancillary remedies from a court of
competent jurisdiction before, after, or during the
pendency of arbitration. The exercise of a remedy shall
not waive any rights of either party to resort to
arbitration.
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15.6 GOVERNING LAW AND VENUE. THE AGREEMENT AND ANY RELATED ACTION
SHALL BE GOVERNED AND INTERPRETED BY THE LAWS OF THE STATE OF
TEXAS EXCEPT FOR THE CONFLICT OF LAWS PROVISIONS THEREOF. SUBJECT
TO SECTION 14.5, VENUE FOR ANY ACTION ARISING UNDER THIS AGREEMENT
SHALL BE IN SOLELY IN STATE OR FEDERAL COURTS LOCATED IN AUSTIN,
TEXAS.
15.7 NO WAIVER. The failure of a party to enforce any provision of
this Agreement or any Schedule hereto shall not constitute a
waiver of such provision, remedy, or the right of such party to
enforce such provision or any other provision.
15.8 RELATIONSHIP OF PARTIES. The parties are independent contractors
and nothing in the Agreement shall be deemed to make a party an
agent, employee, partner or joint venturer of the other. Neither
party shall have authority to bind, commit, or otherwise obligate
the other party in any manner whatsoever.
15.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all proposals and prior discussions and writings
between the parties with respect thereto.
15.10 RIGHT TO ENGAGE THIRD PARTIES. Licensor shall have the right to
use third parties in performance of its obligations and Services
hereunder and, for purposes of the Agreement, all references to
Licensor or its employees shall be deemed to include such third
parties.
15.11 COUNTERPARTS. This Agreement may be signed in one or more
counterparts, each of which is an original for all purposes but
all of which taken together constitute only a single instrument.
15.12 COMPLIANCE WITH LAW. Licensees hereby certifies that it shall not
directly or indirectly export, re-export, transship, or transmit
the Storefront Software, or any portion thereof, or related
information, media, or products in violation of United States laws
and regulations. In addition, Licensees agrees to comply with all
applicable laws, regulations, and ordinances relating to its
performance under this Agreement.
15.13 NO ADDITIONAL, INCONSISTENT TERMS. The terms and conditions of
any purchase order or other document issued by Licensees in
connection with this Agreement which are in addition to or
inconsistent with the terms and conditions of this Agreement shall
not be binding on Licensor.
15.14 RESERVATION OF RIGHTS. Each party reserves all rights not
specifically granted herein.
15.15 HEADINGS. Headings and subheadings are for reference purposes
only, have no substantive effect, and shall not enter into the
interpretation hereof.
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15.16 INTEGRATION. This Agreement incorporates this Software License
and Services Agreement and Schedules that reference this Agreement
and are mutually agreed upon in writing by authorized
representatives of the parties.
15.17 EFFECT OF CONFLICTING TERMS. In the event of a conflict between
the terms and conditions of the Software License and Services
Agreement and any Schedule thereto, the terms and conditions of
the Software License and Services Agreement shall prevail.
By signing below, each party acknowledges that it has read, understands, and
agrees to the terms of this Agreement
collegestudent.com, Inc.:
By: September 17, 1999
------------------------------
Signature Date
/s/ Illegible
- ---------------------------------
Name
/s/ CEO
- ---------------------------------
Title
National Association of College Stores
By: September 15, 1999
------------------------------
Signature Date
/s/ Brian E. Cartier
- ---------------------------------
Name
/s/ Chief, Staff Officer
- ---------------------------------
Title
NACS/CourseWeb, L.L.C.
By: September 15, 1999
------------------------------
Signature Date
/s/ Gary F. Swisker
- ---------------------------------
Name
/s/ Managing Director
- ---------------------------------
Title
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SCHEDULE A
TO THE SOFTWARE LICENSE AND SERVICES AGREEMENT
FEES AND EXPENSES
Al. LICENSE FEES. As part of the consideration for the licenses granted
herein, Licensees have paid Licensor one hundred thousand dollars
($100,000).
A2. LICENSE AND MAINTENANCE FEES. Licensees shall receive sixty percent
(60%) and Licensor shall receive forty percent (40%) of the license and
maintenance fees paid by each Subscribed College Store under College
Storefront Licensees and Services Agreement or similar agreement.
A3. ADVERTISING REVENUE. Advertising revenue received from Advertisements
shall be divided as follows:
a) SALES MADE EXCLUSIVELY BY LICENSEES: Licensees shall receive
seventy percent (70%) of all advertising revenues generated from
advertising sales made exclusively by Licensees under section ___,
and Licensor shall receive thirty percent (30%) of all such
revenues.
b) SALES MADE EXCLUSIVELY BY LICENSOR: Licensees shall receive forty
percent (40%) of all advertising revenues generated from
advertising sales made exclusively by Licensor, and Licensor shall
receive sixty percent (60%) of all such Revenues.
c) JOINT SALES. For advertising revenues generated via joint
advertising sales, the party initiating the sale shall receive
sixty percent (60%) of all such revenues, and the other party
shall receive forty percent (40%) of all such revenues. In the
unlikely event that (1) a sale is jointly initiated or (2) the
initiator of a sale cannot be readily ascertainable, the parties
shall each receive fifty percent (50%) of all such revenues.
A4. TRANSACTION FEES. Licensor shall receive sixty percent (60%) and
Licensees shall receive forty percent (40%) of the Transaction Fees after
payment of fees levied by credit card or processing entities, if any.
Licensor shall bear the costs associated with processing electronic
transactions, except for the payment of bank fees which shall be borne by
the applicable Subscribed College Store. "Transaction Fees" means all
fees, except for license and maintenance fees, collected by Licensees or
Licensor which result from Authorized Use of the Software.
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SCHEDULE B
TO THE SOFTWARE LICENSE AND SERVICES AGREEMENT
LIST OF LICENSED SOFTWARE
College Store Storefront Module
Course Materials Management Module
College Store Payment Engine
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SCHEDULE C
TO THE SOFTWARE LICENSE AND SERVICES AGREEMENT
LICENSED TRADEMARKS
LICENSOR TRADEMARKS LICENSED TO LICENSEES
collegestudent.com
College Store
Collegstore.com
Shag Magazine
LICENSEES TRADEMARKS LICENSED TO LICENSOR
NACS
National Association of College Stores
CourseWeb
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SCHEDULE D
TO THE SOFTWARE LICENSE AND SERVICES AGREEMENT
COLLEGE STOREFRONT LICENSE AND SERVICES AGREEMENT
This COLLEGE STOREFRONT LICENSE AND SERVICES AGREEMENT ("Agreement) is
made and entered into as of 1999 ("Effective Date"), by and between CourseWeb,
L.L.C. ("We" or "Us" or "Our") and ____________________ ("You" or "Your"). We
own rights in the Storefront Software and related web site technology which will
enable You to provide a unique Web Storefront on the internet as more fully
described below. You desire to acquire from Us a license under those rights to
use the Storefront Software and obtain related services from Us as more fully
described below. Therefore, we agree as follows:
1. DEFINITION
"Storefront Software" means the object code for internet-based templates and
other programs, and related documentation, that will allow You to create and
operate a unique commerce-enabled internet site for a college store ("Web
Storefront"). The Storefront Software will allow You to create and operate a
Web Storefront where You can (1) post information including information relating
to course schedules, course materials and other store merchandise, (2) post
advertising and other promotional materials on your Web Storefront, and (3)
provide for on-line purchasing ("e-commerce") of course materials and other
merchandise. The Storefront Software includes any upgrades or modifications
made by or on behalf of Us and Web Storefronts created by You.
2. LICENSE GRANT
We grant to You a nonexclusive right to access, display and use the
Storefront Software to create and operate a Web Storefront for your store,
which will allow users of Your Web Storefront to view information and purchase
products from You. Your license is limited to these stated uses or as otherwise
set forth in this Agreement and to the terms and conditions of any on-line
documentation of the service provider for the Storefront Software. In using the
Storefront Software, You are not required to use any particular brand name.
In order for Us to host, maintain and support Your Web Storefront. You
grant to Us a nonexclusive right to use, display and archive any information
that You add to Your Web Storefront, including information on course schedules.
course materials and other store merchandise. You also grant to Us a
nonexclusive license to use and display solely on Your Web Storefront any
trademark, trade name or copyrighted work you add to Your Web Storefront
3. OWNERSHIP AND RIGHTS
Except for the license granted above, neither this agreement nor your use
of the Storefront Software will grant You any rights in the software. The
creator of that software is the exclusive owner of the Storefront Software and
all accompanying intellectual property rights. On the other hand, information
on schedules, course materials and other store merchandise You add to Your Web
Storefront shall belong to You.
4. HOSTING SERVICES
We agree to maintain Your Web Storefront on Our web servers for the term
of this Agreement and to make maintenance and upgrade modifications to Your Web
Storefront from time to time as they become generally available to all
Storefront Software subscribers. As part of this service. We will provide to
You a secure method for processing commerce transactions on Your Web Storefront
As part of this service, We will make commercially reasonable efforts to make
Your Web Storefront available to Internet users approximately 24 hours per day,
to back-up Your Web Storefront on a regular basis, and to store these back-up
materials in a safe and secure environment.
5. TRAINING AND TECHNICAL SUPPORT
We shall provide to You initial and ongoing training and technical
support to enable You to initiate and operate Your Web Storefront. This
training includes written instructions regarding the use of the Storefront
Software and access via telephone and e-mail to Our support staff. In addition,
We will provide assistance in transferring Your information contained in Your
textbook management system to the Web Storefront
6. ADVERTISING AND PROMOTIONS FOR YOUR WEB STOREFRONT
We will also provide to You turnkey advertising and promotional materials
that you may choose to use on Your Web Storefront. You may include Your own
additional advertising and promotional materials on Your Web Storefront, in
addition to those offered by Us.
7. LINKS BETWEEN YOUR WEB SITE AND COLLEGESTUDENT.COM
We will provide You an opportunity to reciprocally link to and from Your
web site to the collegestudent.com home page, to assist in directing internet
traffic to Your Web Storefront.
8. FEES AND PAYMENT
The payment terms and fees to be paid by You are set forth on the current
CourseWeb Payment and Fee Schedule provided to you. The fees may not be
increased for at least six (6) months from the Effective Date of this Agreement
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Thereafter, We may modify this fee schedule upon 60 days written notice to You.
9. E-COMMERCE TRANSACTION TRADING
We shall have the right to track Your e-commerce transactions on Your Web
Storefront in order to determine the per transaction fees due to Us.
10. CONFIDENTIALITY OF YOUR INFORMATION
Unless you agree to disclosure, we shall keep confidential all
information You provide about Your store operations and customer information.
We shall use Our best efforts to prohibit any use or disclosure of such
information, except as necessary to perform work under this Agreement.
11. TERM AND TERMINATION
You agree to create a Web Storefront using the Storefront Software and
operate that Web Storefront for a minimum of six (6) months. After the initial
six (6) month period, You may cancel this Agreement upon 30 days written notice
to Us.
We may cancel this Agreement at any time if. (1) You post content on your
Web Storefront that is lewd, profane, defamatory, libelous or otherwise
objectionable, which is not removed within a reasonable period after You receive
notice of Our objection to the content; (2) We go out of business (3) You are in
default under this agreement and fail to remedy such default within 60 days from
receipt of notice in writing from Us specifying the default; (4) You become
bankrupt or insolvent or Your business is placed into the hands of a receiver,
assignee, or trustee in bankruptcy, whether by voluntary act or otherwise; (5)
by mutual agreement of the parties; or (6) upon 90 days notice.
12. WARRANTY
You warrant that You will not use, display or post on Your Web Storefront
any trademark, trade name or copyrighted work without first obtaining the
express, written authority to do so from the appropriate person or entity.
We warrant that we have no knowledge of any person or entity that has
superior rights in the Storefront Software.
We make no warranty, either express or implied, that the Storefront
Software, other materials, information or services provided under this Agreement
will be free from defects or interruption. WE MAKE NO IMPLIED WARRANTY
REGARDING THE MERCHANTABILITY OR THE FITNESS FOR A PARTICULAR PURPOSE OF
STOREFRONT AND ALL OTHER MATERIALS, INFORMATION, OR SERVICES PROVIDED UNDER THIS
AGREEMENT.
Upon notification of an interruption of service or defects in the
Storefront Software, other materials, information, or services provided under
this Agreement We shall use Our best efforts to verify and address such
interruptions or defects on a timely basis.
13. LIMITATION OF LIABILITY
You alone arc responsible for the content on your Web Storefront.
Neither We, nor any other service provider for the Storefront Software, will be
responsible for monitoring the content on your Web Site. Thus, neither We, nor
any other service provider for the Storefront Software, will be responsible for
the content displayed on your Web Storefront. In addition, We do not assure or
guarantee that You will achieve any level of success or performance on Your Web
Storefront or that internet access will be provided without interruption. Thus,
neither We, nor any other service provider for the Storefront Software, will be
liable for any damages or harm arising out of an interruption of access to your
Web Storefront via the Internet. Neither We, nor any other service provider for
the Storefront Software, will be liable to You for any damages or harm arising
out of this Agreement, including special incidental, or consequential damages,
arising from breach of warranty, breach of contract, negligence, strict
liability on tom or any other legal theory. Our maximum liability, and that of
any service provider for the Storefront Software, for any damages relating to
any such claim shall be in the amount of the fees paid under this Agreement for
the twelve (12) months prior to the date of Your claim.
14. MUTUAL INDEMNIFICATION
We shall mutually exonerate, indemnify, and hold each other harmless from
and against all claims. made against the other based upon, arising out of or in
any way related to the conduct or actions of either of us. This shall include
all fees (including attorneys' fees), costs, and other expense incurred in the
investigation of or any defense against any such claim.
2 of 27
<PAGE>
15. ENTIRE AGREEMENT/ASSIGNMENT
This Agreement represents the entire agreement by and between the parties
concerning the matters described in this Agreement. The severability,
invalidity, or unenforceability of any provision herein shall not impair the
validity or enforceability of the obligations of any party. You shall not
assign, sublicense or otherwise transfer any of its rights under this Agreement
or the license granted thereby without Our prior written consent.
16. LAW
This Agreement shall be governed by the laws of the State of Ohio.
The parties have each executed this Agreement effective as of the date
above first written.
COURSEWEB, LLC
BY:
----------------------------------
NAME:
--------------------------------
TITLE:
-------------------------------
YOU/SUBSCRIBER
BY:
----------------------------------
NAME:
--------------------------------
TITLE:
-------------------------------
3 of 27
<PAGE>
SCHEDULE E
TO THE SOFTWARE LICENSE AND SERVICES AGREEMENT
LIST OF SUBSCRIBED COLLEGE STORES
<TABLE>
<CAPTION>
STORE NAME UNIVERSITY
<S> <C>
University of St. Francis Bookstore University of St. Francis
Northern Kentucky University Bookstore Northern Kentucky University
Collegiate Bookstores at York College City University of New York - York College
Delaware Technical & Community College Bookstore Delaware Technical & Community College
USCA Bookstore University of South Carolina Aiken
University Bookstore Iowa State University
Uconn Co-op University of Connecticut
WCTC Bookstore Waukesha County Technical College
Grinnell College Bookstore Grinnell College
Charles County Community College Bookstore Charles County Community College
Pace University Campus Bookstore Pace University
Hawaii Pacific University Bookstore Hawaii Pacific University
Varney's Bookstore Kansas State University
Collegiate Bookstores in Lehman College City University of New York - Herbert H. Lehman
College
Everett Community College Bookstore Everett Community College
Texas Textbooks University of Texas at Austin
Matthews Logan College of Chiropractic Bkstr Matthews Logan College of Chiropractic
Collegiate Bookstores at Bronx Community College City University of New York - Bronx Community
College
Collegiate Bookstores in LaGuardia Community College City University of New York - LaGuardia
Community College
Collegiate Bookstores at SUNY Old Westbury City University of New York - Old Westbury
Bismarck State College Bookstore Bismarck State College
Concordia University Bookstore Concordia University
Beck's Bookstore Loyola University of Chicago
Colby Bookstore Colby College
Marian College Bookstore Marian College
Lee College Bookstore Lee College
Nova Books Nova Southeastern University
R&R Bookstore San Antonio College, Palo Alto College, St.
Philip's College, Northwest Vista College,
University of Texas at San Antonio
Collegiate Bookstores at Mercy College Mercy College
TBC-Palo Alto College Bookstore Palo Alto College
TBC-San Antonio College Bookstore San Antonio College
TBC-St. Phillips College Bookstore St. Phillips College
1
<PAGE>
Collegiate Bookstores at Hostos Community College City University of New York - Hostos Community
College
UOP School of Dentistry Student Store School of Dentistry - University of Pacific
Collegiate Bookstores at Ulster County Community Ulster County Community College
College
Collegiate Bookstores at College of Aeronautics College of Aeronautics
Collegiate Bookstores at Yeshiva University Yeshiva University
TBC-University of Texas at Tyler Bookstore University of Texas at Tyler
Collegiate Bookstores at Monroe College Monroe College
U.N.O. Bookstore University of Nebraska, Omaha
Princeton University Store Princeton University
Wheelock Books Dartmouth College
Cornell Campus Bookstore Cornell University
Campus Bookstore University of Southern Maine
New York University Book Centers New York University
Vision Computer Services Georgia State University, University of Georgia
at Atlanta
Boomer Book Company University of Oklahoma
That Texbook Place Western Washington University
ProTech Books, LLC Johns Hopkins University
Rocky top Books University of Tennessee at Knoxville
The Florence O. Wilson Bookstore The College of Wooster
Reed College Bookstore Reed College
Tech Bookstore South Dakota School of Mines & Technology
Texas Lutheran University Bookstore Texas Lutheran University
University Store East Stroudsburg University
The University Store Central Washington University
La Sierra University Bookstore La Sierra University
Washburn University Bookstore Washburn University
Collegiate Bookstores Cardozzo School of Law, Katherine Gibbs School,
Gibbs College, New School University, Parsons
School of Design, Technical Career Institute,
Berkeley College
Auraria Book Center University of Colorado at Denver, Metropolitan
State College of Denver, Community College of
Denver
Spartan Bookstore San Jose State University
WWU Tech Bookstore West Virginia University Institute of
Technology
HSU Bookstore Humboldt State University
Beck's Bookstore City Colleges of Chicago
Westmont College Bookstore Westmont College
DuBois Book Store Kent State University
2 of 27
<PAGE>
TBC-Northwest Vista College Bookstore Northwest Vista College
CU Book Store University of Colorado at Boulder
Roberts Bookstore San Jose State University
Clark College Bookstore Clark College
Houston Baptist University Bookstore Houston Baptist University
Christopher Newport University Bookstore Christopher Newport University
University Bookstore Texas A&M University-Corpus Christi
MCTC Bookstore Minneapolis Community and Technical College
Bookstore - Sonoma State University Sonoma State University
Allegheny College Book Store Allegheny College
NIACC Bookstore North Iowa Area Community College
Bearkat Books Sam Houston State University
Lemox Book Co. Pensacola Junior College, University of West
Florida
Century Bookstore Century College
New Mexico Junior College Bookstore New Mexico Junior College
Exeter Bookstore Phillips Exeter Academy
University Store Central Missouri State University
College Bookstore Anne Arundel Community College
Principia College Bookstore Principia College
Clearyinghouse Bookstore Cleary College
The Evergreen State College Bookstore The Evergreen State College
St. Mary's Campus Store St. Mary's College of Maryland
Northwest State Community College Northwest State Community College
Waldorf College Bookstore Waldorf College
The College Bookshelf Michigan Technological University
University Bookstore University of Georgia
Baptist Bible College Bookstore Baptist Bible College and Seminary
</TABLE>
3 of 27
<PAGE>
SCHEDULE F
TO THE SOFTWARE LICENSE AND SERVICES AGREEMENT
LIST OF EXISTING LICENSEES ADVERTISING RELATIONSHIPS
1
<PAGE>
EXHIBIT 10.19
EMPLOYEE INNOVATIONS AND PROPRIETARY RIGHTS
ASSIGNMENT AGREEMENT
In return for my new or continued employment by CollegeClub.com, Inc., a
Delaware Corporation ("CollegeClub"), and other good and valuable consideration,
the receipt and sufficiency of which I hereby acknowledge, I acknowledge and
agree that:
1. PRIOR WORK. All previous work done by me for CollegeClub relating
in any way to the conception, reduction to practice, creation, derivation,
design, development, manufacture, sale or support of products or services for
CollegeClub is the property of CollegeClub, and I hereby assign to CollegeClub
all of my right, title and interest in and to such previous work.
2. PROPRIETARY INFORMATION. My employment creates a relationship of
confidence and trust between CollegeClub and me with respect to any information:
(a) Applicable to the business of CollegeClub; or
(b) Applicable to the business of any client or customer of
CollegeClub, which may be made known to me by CollegeClub or by any client or
customer of CollegeClub, or learned by me in such context during the period of
my employment.
All such information has commercial value in the business in which CollegeClub
is engaged and is hereinafter called "Proprietary Information." By way of
illustration, but not limitation, Proprietary Information includes any and all
technical and non-technical information including patent, copyright, trade
secret, and proprietary information, techniques, sketches, drawings, models,
inventions, know-how, processes, apparatus, equipment, algorithms, software
programs, software source documents, and formulae related to the current, future
and proposed products and services of CollegeClub, and includes, without
limitation, respective information concerning research, experimental work,
development, design details and specifications, engineering, financial
information, procurement requirements, purchasing manufacturing, customer lists,
business forecasts, sales and merchandising and marketing plans and information
"Proprietary Information" also includes proprietary or confidential information
of any third party who may disclose such information to CollegeClub or to me in
the course of CollegeClub's business.
3. OWNERSHIP AND NONDISCLOSURE OF PROPRIETARY INFORMATION. All
Proprietary Information is the sole property of CollegeClub, CollegeClub's
assigns, and CollegeClub's customers, and CollegeClub, CollegeClub's assigns and
CollegeClub's customers shall be the sole and exclusive owner of all patents,
copyrights, mask works, trade secrets and other rights in the Proprietary
Information. I hereby do and will assign to CollegeClub all rights, title and
interest I may have or acquire in the Proprietary Information. At all times,
both during my employment by CollegeClub and after termination of such
employment, I will keep in confidence and trust all Proprietary Information, and
I will not use or disclose any Proprietary Information or anything directly
relating to Proprietary Information without the written consent of CollegeClub,
except as may be necessary in the ordinary course of performing my duties as an
employee of CollegeClub.
<PAGE>
4. OWNERSHIP AND RETURN OF MATERIALS. All materials (including,
without limitation, documents, drawings, models, apparatus, sketches, designs,
lists, and all other tangible media of expression) furnished to me by
CollegeClub shall remain the property of CollegeClub. Upon termination of my
employment, or at any time on the request of CollegeClub before termination, I
will promptly (but no later than five (5) days after the earlier of my
employment's termination or CollegeClub's request) destroy or deliver to
CollegeClub, at CollegeClub's option, (a) all materials furnished to me by
CollegeClub, (b) all tangible media of expression which are in my possession and
which incorporate any Proprietary Information or otherwise relate to
CollegeClub's business, and (c) written certification of my compliance with my
obligations under this sentence.
5. INNOVATIONS. As used in this Agreement, the term "Innovations"
means all processes, machines, manufactures, compositions of matter,
improvements, inventions (whether or not protectable under patent laws), works
of authorship, information fixed in any tangible medium of expression (whether
or not protectable under copyright laws), moral rights, mask works, trademarks,
trade names, trade dress, trade secrets, know-how, ideas (whether or not
protectable under trade secret laws), and all other subject matter protectable
under patent, copyright, moral right, mask work, trademark, trade secret or
other laws, and includes without limitation all new or useful art, combinations,
discoveries, formulae, manufacturing techniques, technical developments,
discoveries, artwork, software, and designs. "Innovations" includes
"Inventions," which is defined to mean any inventions protected under patent
laws.
6. DISCLOSURE OF PRIOR INNOVATIONS. I have identified on Exhibit A
("Prior Innovations") attached hereto all Innovations, applicable to the
business of CollegeClub or relating in any way to CollegeClub's business or
demonstrably anticipated research and development or business, which were
conceived, reduced to practice, created, derived, developed, or made by me prior
to my employment with CollegeClub (collectively, the "Prior Innovations"), and I
represent that such list is complete. I represent that I have no rights in any
such Innovations other than those Prior Innovations specified in Exhibit A
("Prior Innovations"). If there is no such list on Exhibit A ("Prior
Innovations"), I represent that I have neither conceived, reduced to practice,
created, derived, developed nor made any such Prior Innovations at the time of
signing this Agreement.
7. ASSIGNMENT OF INNOVATIONS; LICENSE OF PRIOR INNOVATIONS. I hereby
agree promptly to disclose and describe to CollegeClub, and I hereby do and will
assign to CollegeClub or CollegeClub's designee my entire right, title, and
interest in and to, (a) each of the Innovations (including Inventions), and any
associated intellectual property rights, which I may solely or jointly conceive,
reduce to practice, create, derive, develop or make during the period of my
employment with CollegeClub, which either (i) relate, at the time of conception,
reduction to practice, creation, derivation, development, or making of such
Innovation, to CollegeClub's business or actual or demonstrably anticipated
research or development, or (ii) were developed on any amount of CollegeClub's
time or with the use of any of CollegeClub's equipment, supplies, facilities or
trade secret information, or (iii) resulted from any work I performed for
CollegeClub, and (b) each of the Innovations which is not an Invention (as
demonstrated by me by evidence meeting the clear and convincing standard of
proof), and any associated intellectual property rights, which I may solely or
jointly conceive, develop, reduce to
2
<PAGE>
practice, create, derive, develop, or make during the period of my employment
with CollegeClub, which are applicable to the business of CollegeClub
(collectively, the Innovations identified in clauses (a) and (b) are hereinafter
the "CollegeClub Innovations"). To the extent any of the rights, title and
interest in and to CollegeClub Innovations cannot be assigned by me to
CollegeClub, I hereby grant to CollegeClub an exclusive, royalty-free,
transferable, irrevocable, worldwide license (with rights to sublicense through
multiple tiers of sublicensees) to practice such non-assignable rights, title
and interest. To the extent any of the rights, title and interest in and to
CollegeClub Innovations can be neither assigned nor licensed by me to
CollegeClub, I hereby irrevocably waive and agree never to assert such
non-assignable and non-licensable rights, title and interest against CollegeClub
or any of CollegeClub's successors in interest to such non-assignable and
non-licensable rights. I hereby grant to CollegeClub or CollegeClub's designees
a royalty free, irrevocable, worldwide license (with rights to sublicense
through multiple tiers of sublicensees) to practice all applicable patent,
copyright, moral right, mask work, trade secret and other intellectual property
rights relating to any Prior Innovations which I incorporate, or permit to be
incorporated, in any CollegeClub Innovations. Notwithstanding the foregoing, I
agree that I will not incorporate, or permit to be incorporated, any Prior
Innovations in any CollegeClub Innovations without CollegeClub's prior written
consent.
8. FUTURE INNOVATIONS. I recognize that Innovations or Proprietary
Information relating to my activities while working for CollegeClub and
conceived, reduced to practice, created, derived, developed, or made by me,
alone or with others, within three (3) months after termination of my employment
may have been conceived, reduced to practice, created, derived, developed, or
made, as applicable, in significant part while employed by CollegeClub.
Accordingly, I agree that such Innovations and Proprietary Information shall be
presumed to have been conceived, reduced to practice, created, derived,
developed, or made, as applicable, during my employment with CollegeClub and are
to be promptly assigned to CollegeClub unless and until I have established the
contrary by written evidence satisfying the clear and convincing standard of
proof.
9. COOPERATION IN PERFECTING RIGHTS TO PROPRIETARY INFORMATION AND
INNOVATIONS.
(a) I agree to perform, during and after my employment, all
acts deemed necessary or desirable by CollegeClub to permit and assist
CollegeClub, at CollegeClub's expense, in obtaining and enforcing the full
benefits, enjoyment, rights and title throughout the world in the Proprietary
Information and Innovations assigned or licensed to, or whose rights are
irrevocably waived and shall not be asserted against, CollegeClub under this
Agreement. Such acts may include, but are not limited to, execution of
documents and assistance or cooperation (i) in the filing, prosecution,
registration, and memorialization of assignment of any applicable patents,
copyrights, mask work, or other applications, (ii) in the enforcement of any
applicable patents, copyrights, mask work, moral rights, trade secrets, or other
proprietary rights, and (iii) in other legal proceedings related to the
Proprietary Information or Innovations.
(b) In the event that CollegeClub is unable for any reason to
secure my signature to any document required to file, prosecute, register, or
memorialize the assignment of any patent, copyright, mask work or other
applications or to enforce any patent, copyright, mask
3
<PAGE>
work, moral right, trade secret or other proprietary right under any Proprietary
Information (including improvements thereof) or any Innovations (including
derivative works, improvements, renewals, extensions, continuations,
divisionals, continuations in part, continuing patent applications, reissues,
and reexaminations thereof), I hereby irrevocably designate and appoint
CollegeClub and CollegeClub's duly authorized officers and agents as my agents
and attorneys-in-fact to act for and on my behalf and instead of me, (i) to
execute, file, prosecute, register and memorialize the assignment of any such
application, (ii) to execute and file any documentation required for such
enforcement, and (iii) to do all other lawfully permitted acts to further the
filing, prosecution, registration, memorialization of assignment, issuance, and
enforcement of patents, copyrights, mask works, moral rights, trade secrets or
other rights under the Proprietary Information, or Innovations, all with the
same legal force and effect as if executed by me.
10. NO VIOLATION OF RIGHTS OF THIRD PARTIES. My performance of all
the terms of this Agreement and as an employee of CollegeClub does not and will
not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by me prior to my employment with CollegeClub, and I
will not disclose to CollegeClub, or induce CollegeClub to use, any confidential
or proprietary information or material belonging to any previous employer or
others. I am not a party to any other agreement which will interfere with my
full compliance with this Agreement. I agree not to enter into any agreement,
whether written or oral, in conflict with the provisions of this Agreement.
11. SURVIVAL. This Agreement (a) shall survive my employment by
CollegeClub; (b) does not in any way restrict my right or the right of
CollegeClub to terminate my employment at any time, with or without cause; (c)
inures to the benefit of successors and assigns of CollegeClub; and (d) is
binding upon my heirs and legal representatives.
12. NONASSIGNABLE INVENTIONS. This Agreement does not apply to an
Invention which qualifies fully as a nonassignable invention under the
provisions of Section 2870 of the California Labor Code. I acknowledge that a
condition for an Invention to qualify fully as a nonassignable invention under
the provisions of Section 2870 of the California Labor Code is that the
invention must be protected under patent laws. I have reviewed the notification
in Exhibit B ("Limited Exclusion Notification") and agree that my signature
acknowledges receipt of the notification. However, I agree to disclose promptly
in writing to CollegeClub all Innovations (including Inventions) conceived,
reduced to practice, created, derived, developed, or made by me during the term
of my employment and for three (3) months thereafter, whether or not I believe
such Innovations are subject to this Agreement, to permit a determination by
CollegeClub as to whether or not the Innovations should be the property of
CollegeClub. Any such information will be received in confidence by
CollegeClub.
13. INJUNCTIVE RELIEF. A breach of any of the promises or agreements
contained herein will result in irreparable and continuing damage to CollegeClub
for which there will be no adequate remedy at law, and CollegeClub shall be
entitled to injunctive relief and/or a decree for specific performance, and such
other relief as may be proper (including monetary damages if appropriate).
4
<PAGE>
14. NOTICES. Any notice required or permitted by this Agreement shall
be in writing and shall be delivered as follows, with notice deemed given as
indicated: (a) by personal delivery, when delivered personally; (b) by
overnight courier, upon written verification of receipt; (c) by telecopy or
facsimile transmission, upon acknowledgment of receipt of electronic
transmission; or (d) by certified or registered mail, return receipt requested,
upon verification of receipt. Notices to me shall be sent to any address in
CollegeClub's records or such other address as I may specify in writing.
Notices to CollegeClub shall be sent to CollegeClub's Human Resources Department
or to such other address as CollegeClub may specify in writing.
15. GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the United States of America and by the laws of the State of
California, as such laws are applied to agreements entered into and to be
performed entirely within California between California residents. Each of the
parties irrevocably consents to the exclusive personal jurisdiction of the
federal and state courts located in California, as applicable, for any matter
arising out of or relating to this Agreement, except that in actions seeking to
enforce any order or any judgment of such federal or state courts located in
California, such personal jurisdiction shall be nonexclusive.
16. SEVERABILITY. If any provision of this Agreement is held by a
court of law to be illegal, invalid or unenforceable, (a) that provision shall
be deemed amended to achieve as nearly as possible the same economic effect as
the original provision, and (b) the legality, validity and enforceability of the
remaining provisions of this Agreement shall not be affected or impaired
thereby.
17. WAIVER; AMENDMENT; MODIFICATION. The waiver by CollegeClub of a
term or provision of this Agreement, or of a breach of any provision of this
Agreement by me, shall not be effective unless such waiver is in writing signed
by CollegeClub. No waiver by CollegeClub of, or consent by CollegeClub to, a
breach by me, will constitute a waiver of, consent to or excuse of any other or
subsequent breach by me. This Agreement may be amended or modified only with
the written consent of both me and CollegeClub. No oral waiver, amendment or
modification shall be effective under any circumstances whatsoever.
18. ENTIRE AGREEMENT. This Agreement represents my entire
understanding with CollegeClub with respect to the subject matter of this
Agreement and supersedes all previous understandings, written or oral.
5
<PAGE>
I certify and acknowledge that I have carefully read all of the
provisions of this Agreement and that I understand and will fully and faithfully
comply with such provisions.
CollegeClub.com, Inc., a Delaware Corporation: [EMPLOYEE]
By: By:
----------------------------- --------------------------
Title: Printed Name:
-------------------------- ----------------
Dated: Dated:
-------------------------- -----------------------
6
<PAGE>
EXHIBIT A
PRIOR INNOVATIONS
<PAGE>
EXHIBIT B
LIMITED EXCLUSION NOTIFICATION
THIS IS TO NOTIFY you in accordance with Section 2872 of the California
Labor Code that the foregoing Agreement between you and CollegeClub does not
require you to assign or offer to assign to CollegeClub any invention that you
developed entirely on your own time without using CollegeClub's equipment,
supplies, facilities or trade secret information except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the
invention to CollegeClub's business, or actual or demonstrably anticipated
research or development of CollegeClub; or
(2) Result from any work performed by you for CollegeClub.
To the extent a provision in the foregoing Agreement purports to require
you to assign an invention otherwise excluded from the preceding paragraph, the
provision is against the public policy of this state and is unenforceable.
This limited exclusion does not apply to any patent or invention covered
by a contract between CollegeClub and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.
I ACKNOWLEDGE RECEIPT of a copy of this notification.
By:
-----------------------------------
--------------------------------------
[INSERT NAME OF EMPLOYEE]
Date:
---------------------------------
Witnessed by:
- ---------------------------------------
- ---------------------------------------
[INSERT NAME OF COMPANY REPRESENTATIVE]
Dated:
---------------------------------
7
<PAGE>
EXHIBIT 10.20
[COLLEGE CLUB www.collegeclub.com
---------------------------------------------------------------
LOGO] 5353 Mission Center Road - Suite 310 - San Diego CA 92108 - Tel:
(619) 718.6800 Fax: (619) 718.6801
March 30, 1999
James B. DeBello
2505 Evergreen Street
San Diego, California 92106
Dear Jim:
I am pleased to offer you a position with College Club (the Company) as the
Company's President and Chief Operating Officer reporting to the Chief Executive
Officer of the Company, commencing on or before April 19,1999, subject to the
satisfactory completion of our reference checking.
SALARY
You will receive an annual base salary of $225,000, which will be paid in
accordance with College Club's customary payroll procedures as in effect from
time to time. As a College Club employee, you are also eligible to receive the
Company's executive employee benefits package which will be established within
60 days of your employment. This salary includes compensation for any Board of
Directors participation, if that becomes applicable.
BONUS
In addition to your base compensation, you will participate in an annual
incentive bonus program under which you will be entitled to earn incentive
compensation of up to 50% of your base salary, based upon the satisfaction of
certain performance goals, paid annually in cash at the conclusion of the
calendar year. The bonus will be earned upon the attainment of goals as
determined by me in consultation with you within the first 30 days of your
employment.
SIGNING BONUS
You will receive a $100,000 signing bonus payable in either cash or stock
options at your discretion. The signing bonus will be paid within 5 days of the
close of the next round of private financing of $5,000,000 or more following the
date of your execution of the employment contract. In the event no financing
takes place prior to the IPO, you will be granted additional common stock
options at the time of the IPO in the amount equivalent to $100,000 divided by
the issue price of common shares at the time of the public offering.
INCENTIVE STOCK OPTION
You will be granted an incentive stock option entitling you to purchase a number
of shares of the Company's Common Stock equal to 3.3% of the outstanding shares
on a fully diluted basis, equal to 271,092 common shares with an exercise price
of $0.66, as of the date of your acceptance of
<PAGE>
this offer. The option will become exercisable according to a four year exercise
schedule, which calls for an initial vesting of 12.5% of the total shares after
the first 6 months of continuous service to the Company, and thereafter the
vesting of the remaining shares in 42 equal monthly installments at the close of
each month during which you remain employed with the Company.
INCENTIVE STOCK OPTION BONUS
In addition to your incentive stock option, you will participate in an incentive
stock option bonus program under which you will be entitled to earn an
additional stock option of up to 1.7% of the shares outstanding on a fully
diluted basis, equal to 139,653 shares, as described above, based upon the
satisfaction of certain performance goals which will be determined by me in
consultation with you within 30 days of your employment with the Company. These
bonus common share options will be issued as of the date of your acceptance of
this offer, and will be subject to the terms of a repurchase agreement with the
Company which requires the return of the bonus common share options to the
Company in the amount unearned per the terms as defined in this paragraph.
OPTION VESTING UPON CHANGE OF CONTROL
If there is a change of control and the change of control occurs with my consent
and support, all of your granted option shares (excluding any un-granted
incentive stock option bonus shares) will be deemed to have vested. Otherwise,
your granted option shares will continue to vest according to the original
schedule.
EMPLOYMENT GUARANTEE
While we look forward to a long and profitable relationship, should you decide
to accept our offer, you will be an at-will employee of the Company, which means
the employment relationship can be terminated by either of us for any reason at
any time. If you elect to terminate your employment at any time, the Company
will have no ongoing obligation to pay your base salary. If your employment is
terminated by the Company without cause within the first 6 months, the Company
will continue to pay your base salary at a rate of $225,000 per year for six
months, in monthly installments, following the date when such a termination of
employment is effective. If your employment is terminated without cause after
the first 6 months, the Company will continue to pay your base salary at a rate
of $225,000 per year for twelve months, in monthly installments, following the
date when such a termination of employment is effective. Cause for termination
shall mean the occurrence of any of the following: (1) any action or inaction by
you which causes a material detriment to the Company; (2) any refusal to follow
the reasonable directives of the CEO or the Board of Directors; (3) conviction
for a felony; (4) embezzlement of funds from the Company; or (5) determination
of a chemical or alcohol dependency.
POST IPO ACCELERATED OPTION VESTING
In the event the Company executes an initial public offering, the Company will
immediately deem vested additional common stock options from your initial grant,
the number of which will be equal to a market value of $500,000 at the date of
such offering. For example, an initial public offering common share price of
$25 would result in an immediate vesting of 20,000 shares.
<PAGE>
To indicate your acceptance and agreement of this offer, please sign and date
this letter in the space provided below and return it to me. This agreement
sets forth the terms of your employment with College Club and will supersede any
prior representations or agreements, whether written or oral.
Jim, I am very excited to have you on board with College Club and I believe that
with your help we have a fantastic and profitable ride ahead of us.
Sincerely,
/s/ Michael C. Pousti
Michael C. Pousti
Chairman and CEO
Accepted and Agreed:
/s/ James B. DeBello 3-30-99
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James B. DeBello Date
<PAGE>
PAYROLL CHANGE FORM
EMPLOYEE NAME: James DeBello
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EFFECTIVE DATE: 4/13/99
------------------------------------
DESCRIPTION OF CHANGE
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New Hire -- President
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMOUNT OF CHANGE: 18,750 PER: YEAR MONTH PAY PERIOD ONE TIME
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(CIRCLE ONE)
APPROVAL:
NAME: illegible SIGNED: /s/ illegible DATE: 4/13/99
--------------- -------------------------------- ------------
<PAGE>
EXHIBIT 10.23
COLLEGECLUB.COM
1996 STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The CollegeClub.com 1996 Stock Option Plan
(the "PLAN") (formerly the Public Online Communications Corporation 1996 Stock
Option Plan) is hereby established effective as of August 29, 1996 (the
"EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its shareholders by providing
an incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Options
shall be granted, if at all, within ten (10) years from the earlier of the date
the Plan is adopted by the Board or the date the Plan is duly approved by the
shareholders of the Company.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or
other committee of the Board duly appointed to administer the Plan and having
such powers as shall be specified by the Board. Unless the powers of the
Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
amend or terminate the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law.
(d) "COMPANY" means CollegeClub.com, a Delaware
corporation, or any successor corporation thereto.
<PAGE>
(e) "CONSULTANT" means any person, including an
advisor, engaged by a Participating Company to render services other than as an
Employee or a Director.
(f) "DIRECTOR" means a member of the Board or of the
board of directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an
employee (including an officer or a Director who is also treated as an employee)
in the records of a Participating Company; provided, however, that neither
service as a Director nor payment of a director's fee shall be sufficient to
constitute employment for purposes of the Plan.
(h) "FAIR MARKET VALUE" means, as of any date, the
value of a share of stock or other property as determined by the Board, in its
sole discretion, or by the Company, in its sole discretion, if such
determination is expressly allocated to the Company herein.
(i) "INCENTIVE STOCK OPTION" means an Option intended
to be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.
(j) "NONSTATUTORY STOCK OPTION" means an Option not
intended to be (as set forth in the Option Agreement) or which does not qualify
as an Incentive Stock Option.
(k) "OPTION" means a right to purchase Stock (subject
to adjustment as provided in Section 4.2) pursuant to the terms and conditions
of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(l) "OPTION AGREEMENT" means a written agreement
between the Company and an Optionee setting forth the terms, conditions and
restrictions of the Option granted to the Optionee and any shares acquired upon
the exercise thereof.
(m) "OPTIONEE" means a person who has been granted
one or more Options.
(n) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(o) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(p) "PARTICIPATING COMPANY GROUP" means, at any point
in time, all corporations collectively which are then Participating Companies.
(q) "STOCK" means the common stock, without par
value, of the Company, as adjusted from time to time in accordance with Section
4.2.
(r) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary
<PAGE>
corporation" of the Company, as defined in Section 424(f) of the Code.
(s) "TEN PERCENT OWNER OPTIONEE" means an Optionee
who, at the time an Option is granted to the Optionee, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
the term "or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board, including any duly appointed Committee of the Board.
All questions of interpretation of the Plan or of any Option shall be determined
by the Board, and such determinations shall be final and binding upon all
persons having an interest in the Plan or such Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.
3.2 POWERS OF THE BOARD. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Board shall
have the full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or
times at which, Options shall be granted and the number of shares of Stock to be
subject to each Option;
(b) to designate Options as Incentive Stock Options
or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of
Stock or other property;
(d) to determine the terms, conditions and
restrictions applicable to each Option (which need not be identical) and any
shares acquired upon the exercise thereof, including, without limitation, (i)
the exercise price of the Option, (ii) the method of payment for shares
purchased upon the exercise of the Option, (iii) the method for satisfaction of
any tax withholding obligation arising in connection with the Option or such
shares, including by the withholding or delivery of shares of stock, (iv) the
timing, terms and conditions of the exercisability of the Option or the vesting
of any shares acquired upon the exercise thereof, (v) the time of the expiration
of the Option, (vi) the effect of the Optionee's termination of employment or
service with the Participating Company Group on any of the foregoing, and (vii)
all other terms, conditions and restrictions applicable to the Option or such
shares not inconsistent with the terms of the Plan;
<PAGE>
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, or renew, or grant a
new Option in substitution for, any Option or to waive any restrictions or
conditions applicable to any Option or any shares acquired upon the exercise
thereof;
(g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an Optionee's
termination of employment or service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines
and policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Option Agreement and to make all
other determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the Plan
and applicable law.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be Eight Hundred Thousand (800,000) and shall
consist of authorized but unissued or reacquired shares of Stock or any
combination thereof. If an outstanding Option for any reason expires or is
terminated or canceled or shares of Stock acquired, subject to repurchase, upon
the exercise of an Option are repurchased by the Company, the shares of Stock
allocable to the unexercised portion of such Option, or such repurchased shares
of Stock, shall again be available for issuance under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Options and in the exercise price per
share of any outstanding Options. If a majority of the shares which are of the
same class as the shares that are subject to outstanding Options are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event, as defined in Section 8.1) shares of another corporation
(the "NEW SHARES"), the Board may unilaterally amend the outstanding Options to
provide that such Options are exercisable for New Shares. In the event of any
such amendment, the number of shares subject to, and the exercise price per
share of, the outstanding Options shall be adjusted in a fair and equitable
manner as determined by the Board, in its sole discretion. Notwithstanding the
foregoing, any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded up or down to the nearest whole number, as
determined by the Board, and in no event may the exercise price of any Option be
decreased to an amount less than the par value, if any, of the stock subject to
the Option. The adjustments determined by the Board pursuant to this Section 4.2
shall be final, binding and conclusive.
<PAGE>
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only
to Employees, Consultants, and Directors. For purposes of the foregoing
sentence, "Employees" shall include prospective Employees to whom Options are
granted in connection with written offers of employment with the Participating
Company Group, and "Consultants" shall include prospective Consultants to whom
Options are granted in connection with written offers of engagement with the
Participating Company Group. Eligible persons may be granted more than one (1)
Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an
Employee on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a
prospective Employee upon the condition that such person become an Employee
shall be deemed granted effective on the date such person commences service with
a Participating Company, with an exercise price determined as of such date in
accordance with Section 6.1.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that the
aggregate Fair Market Value of stock with respect to which options designated as
Incentive Stock Options are exercisable by an Optionee for the first time during
any calendar year (under all stock option plans of the Participating Company
Group, including the Plan) exceeds One Hundred Thousand Dollars ($100,000), the
portion of such options which exceeds such amount shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5.3, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of stock shall be determined as of
the time the option with respect to such stock is granted. If the Code is
amended to provide for a different limitation from that set forth in this
Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Optionee may designate which
portion of such Option the Optionee is exercising and may request that separate
certificates representing each such portion be issued upon the exercise of the
Option. In the absence of such designation, the Optionee shall be deemed to have
exercised the Incentive Stock Option portion of the Option first.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
Option Agreements specifying the number of shares of Stock covered thereby, in
such form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
6.1 EXERCISE PRICE. The exercise price for each Option shall
be established in the sole discretion of the Board; provided, however, that (a)
the exercise price per share for an Incentive Stock Option shall be not less
than the Fair Market Value of a share of Stock on the effective date of grant of
the Option, (b) the exercise price per share for a Nonstatutory Stock Option
shall be not less than eighty-five percent (85%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option, and (c) no Option
granted to a Ten Percent Owner Optionee shall have an exercise price per share
less than one hundred ten percent (110%) of the Fair Market Value of a share of
Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower
<PAGE>
than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner
qualifying under the provisions of Section 424(a) of the Code.
6.2 EXERCISE PERIOD. Options shall be exercisable at such time
or times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to a prospective Employee or prospective Consultant
may become exercisable prior to the date on which such person commences service
with a Participating Company.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of shares of Stock
owned by the Optionee having a Fair Market Value (as determined by the Company
without regard to any restrictions on transferability applicable to such stock
by reason of federal or state securities laws or agreements with an underwriter
for the Company) not less than the exercise price, (iii) by the assignment of
the proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
"CASHLESS EXERCISE"), (iv) by the Optionee's promissory note in a form approved
by the Company, (v) by such other consideration as may be approved by the Board
from time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by adoption
of or by amendment to the standard forms of Option Agreement described in
Section 7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.
(b) TENDER OF STOCK. Notwithstanding the foregoing,
an Option may not be exercised by tender to the Company of shares of Stock to
the extent such tender of Stock would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the Company's
stock. Unless otherwise provided by the Board, an Option may not be exercised by
tender to the Company of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any
and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note
shall be permitted if the exercise of an Option using a promissory note would be
a violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is
<PAGE>
granted. The Board shall have the authority to permit or require the Optionee to
secure any promissory note used to exercise an Option with the shares of Stock
acquired upon the exercise of the Option or with other collateral acceptable to
the Company. Unless otherwise provided by the Board, if the Company at any time
is subject to the regulations promulgated by the Board of Governors of the
Federal Reserve System or any other governmental entity affecting the extension
of credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.
6.4 TAX WITHHOLDING. The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to such Option or the shares acquired upon the exercise thereof. Alternatively
or in addition, in its sole discretion, the Company shall have the right to
require the Optionee, through payroll withholding, cash payment or otherwise,
including by means of a Cashless Exercise, to make adequate provision for any
such tax withholding obligations of the Participating Company Group arising in
connection with the Option or the shares acquired upon the exercise thereof. The
Company shall have no obligation to deliver shares of Stock or to release shares
of Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
6.5 REPURCHASE RIGHTS. Shares issued under the Plan may be
subject to a right of first refusal, one or more repurchase options, or other
conditions and restrictions as determined by the Board in its sole discretion at
the time the Option is granted. The Company shall have the right to assign at
any time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Optionee shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided by the
Board at the time the Option is granted, an Option designated as an "Incentive
Stock Option" shall comply with and be subject to the terms and conditions set
forth in the form of Incentive Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise provided by
the Board at the time the Option is granted, an Option designated as a
"Nonstatutory Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of Nonstatutory Stock Option Agreement adopted
by the Board concurrently with its adoption of the Plan and as amended from time
to time.
7.3 STANDARD TERM OF OPTIONS. Except as otherwise provided in
Section 6.2 or by the Board in the grant of an Option, any Option granted
hereunder shall have a term of ten (10) years
<PAGE>
from the effective date of grant of the Option.
7.4 AUTHORITY TO VARY TERMS. The Board shall have the
authority from time to time to vary the terms of any of the standard forms of
Option Agreement described in this Section 7 either in connection with the grant
or amendment of an individual Option or in connection with the authorization of
a new standard form or forms; provided, however, that the terms and conditions
of any such new, revised or amended standard form or forms of Option Agreement
shall be in accordance with the terms of the Plan. Such authority shall include,
but not by way of limitation, the authority to grant Options which are
immediately exercisable subject to the Company's right to repurchase any
unvested shares of Stock acquired by an Optionee upon the exercise of an Option
in the event such Optionee's employment or service with the Participating
Company Group is terminated for any reason, with or without cause.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange
in a single or series of related transactions by the shareholders of the Company
of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or transfer of all
or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
<PAGE>
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of
a Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. Any Options which are
neither assumed or substituted for by the Acquiring Corporation in connection
with the Transfer of Control nor exercised as of the date of the Transfer of
Control shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control. Notwithstanding the foregoing, shares acquired upon
exercise of an Option prior to the Transfer of Control and any consideration
received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of the Option Agreement
evidencing such Option except as otherwise provided in such Option Agreement.
Furthermore, notwithstanding the foregoing, if the corporation the stock of
which is subject to the outstanding Options immediately prior to an Ownership
Change Event described in Section 8.1(a)(i) constituting a Transfer of Control
is the surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power of
its voting stock is held by another corporation or by other corporations that
are members of an affiliated group within the meaning of Section 1504(a) of the
Code without regard to the provisions of Section 1504(b) of the Code, the
outstanding Options shall not terminate unless the Board otherwise provides in
its sole discretion.
9. PROVISION OF INFORMATION. At least annually, copies of the Company's
balance sheet and income statement for the just completed fiscal year shall be
made available to each Optionee and purchaser of shares of Stock upon the
exercise of an Option. The Company shall not be required to provide such
information to persons whose duties in connection with the Company assure them
access to equivalent information.
10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
11. TRANSFER OF COMPANY'S RIGHTS. In the event any Participating
Company assigns, other than by operation of law, to a third person, other than
another Participating Company, any of the Participating Company's rights to
repurchase any shares of Stock acquired upon the exercise of an Option, the
assignee shall pay to the assigning Participating Company the value of such
right as determined by the Company in the Company's sole discretion. Such
consideration shall be paid in cash. In the event such repurchase right is
exercisable at the time of such assignment, the value of such right shall be not
less than the Fair Market Value of the shares of Stock which may be repurchased
under such right (as determined by the Company) minus the repurchase price of
such shares. The requirements of this Section 11 regarding the minimum
consideration to be received by the assigning Participating Company shall not
inure to the benefit of the Optionee whose shares of Stock are being
repurchased. Failure of a Participating Company to comply with the provisions of
this Section 11 shall not constitute a defense or otherwise prevent the exercise
of the repurchase right by the assignee of such right.
12. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of
<PAGE>
the Board and any officers or employees of the Participating Company Group to
whom authority to act for the Board is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.
13. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend
the Plan at any time. However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the Company's
shareholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no expansion in the class of persons
eligible to receive Nonstatutory Stock Options. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Option or any
unexercised portion thereof, without the consent of the Optionee, unless such
termination or amendment is required to enable an Option designated as an
Incentive Stock Option to qualify as an Incentive Stock Option or is necessary
to comply with any applicable law or government regulation.
14. SHAREHOLDER APPROVAL. The Plan or any increase in the maximum
number of shares of Stock issuable thereunder as provided in Section 4.1 (the
"MAXIMUM SHARES") shall be approved by the shareholders of the Company within
twelve (12) months of the date of adoption thereof by the Board. Options granted
prior to shareholder approval of the Plan or in excess of the Maximum Shares
previously approved by the shareholders shall become exercisable no earlier than
the date of shareholder approval of the Plan or such increase in the Maximum
Shares, as the case may be.
<PAGE>
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing CollegeClub.com 1996 Stock Option Plan was duly adopted by
the Board on August 29, 1996.
/s/ Michael Pousti
---------------------------------
Michael C. Pousti
<PAGE>
EXHIBIT 10.24
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933
COLLEGECLUB.COM
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the
"OPTION AGREEMENT") is made and entered into as of ________, by and between
CollegeClub.com and ______________ (the "OPTIONEE").
The Company has granted to the Optionee pursuant to the CollegeClub.com
1996 Stock Option Plan (the "PLAN") (formerly the Public Online Communications
Corporation 1996 Stock Option Plan) an option to purchase certain shares of
Stock, upon the terms and conditions set forth in this Option Agreement (the
"OPTION"). The Option shall in all respects be subject to the terms and
conditions of the Plan, the provisions of which are incorporated herein by
reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means __________.
<PAGE>
(b) "NUMBER OF OPTION SHARES" means __________ of
Stock, as adjusted from time to time pursuant to Section 9.
(c) "EXERCISE PRICE" means $________ per share of
Stock, as adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means the Date of Option
Grant.
(e) "INITIAL VESTING DATE" means the date occurring
one (1) year after (check one):
X the Date of Option Grant.
____________________, the date the
Optionee's Service commenced.
(f) "VESTED RATIO" means, on any relevant date, the
ratio determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee's Service has 1/5
not terminated prior to such date
PLUS
For each full month of the Optionee's continuous Service from 1/60
the Initial Vesting Date until the Vested Ratio equals 1/1, an
additional
</TABLE>
(g) "OPTION EXPIRATION DATE" means the date ten (10)
years after the Date of Option Grant.
(h) "SERVICE" means the Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. The Optionee's Service shall not be deemed
to have terminated merely because of a change in the capacity in which the
Optionee renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. Furthermore,
the Optionee's Service with the Participating Company Group shall not be deemed
to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of absence approved by the
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Company; provided, however, that if any such leave exceeds ninety (90) days, on
the ninety-first (91st) day of such leave the Optionee's Service shall be deemed
to have terminated unless the Optionee's right to return to Service with the
Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or
required by law, a leave of absence shall not be treated as Service for purposes
of determining the Optionee's Vested Ratio. The Optionee's Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the corporation for which the Optionee performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its sole
discretion, shall determine whether the Optionee's Service has terminated and
the effective date of such termination. (NOTE: If the Option is exercised more
than three (3) months after the date on which the Optionee ceased to be an
Employee (other than by reason of death or a permanent and total disability as
defined in Section 22(e)(3) of the Code), the Option will be treated as a
Nonstatutory Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.)
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of
the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Service terminates, (b) the Optionee is an Insider and, under
certain circumstances, exercises the Option within six (6) months of the Date of
Option Grant (if a
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<PAGE>
class of equity security of the Company is registered under Section 12 of the
Exchange Act), or (c) the Optionee is subject to a restriction on transfer to
comply with "Pooling-of-Interests Accounting" rules. Failure to file an election
under Section 83(b), if appropriate, may result in adverse tax consequences to
the Optionee. The Optionee acknowledges that the Optionee has been advised to
consult with a tax advisor prior to the exercise of the Option regarding the tax
consequences to the Optionee of the exercise of the Option. AN ELECTION UNDER
SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE
PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES
THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE
RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE
TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION.
All questions of interpretation concerning this Option
Agreement shall be determined by the Board. All determinations by the Board
shall be final and binding upon all persons having an interest in the Option.
Any officer of a Participating Company shall have the authority to act on behalf
of the Company with respect to any matter, right, obligation, or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE.
(a) Except as otherwise provided herein, the Option
shall be exercisable on and after the Initial Exercise Date and prior to the
termination of the Option (as provided in Section 6) in an amount not to exceed
the Number of Option Shares less the number of shares previously acquired upon
exercise of the Option, subject to the Optionee's agreement that any shares
purchased upon exercise are subject to the Company's repurchase rights set forth
in Section 11 and Section 12. Notwithstanding the foregoing, except as provided
in Section 4.1(b), the aggregate Fair Market Value of the shares of Stock with
respect to which the Optionee may exercise the Option for the first time during
any calendar year, when added to the aggregate Fair Market Value of the shares
subject to any other options designated as Incentive Stock Options granted to
the Optionee under all stock option plans of the Participating Company Group
prior to the Date of Option Grant with respect to which such options are
exercisable for the first time during the same calendar year, shall not exceed
One Hundred Thousand Dollars ($100,000). For purposes of the preceding sentence,
options designated as Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of shares of stock
shall be determined as of the time the option with respect to such shares is
granted. Such limitation on exercise shall be referred to in this Option
Agreement as the "ISO EXERCISE LIMITATION." If Section 422 of the Code is
amended to provide for a different limitation from that set forth in this
Section 4.1(a), the ISO Exercise
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<PAGE>
Limitation shall be deemed amended effective as of the date required or
permitted by such amendment to the Code. The ISO Exercise Limitation shall
terminate upon the earlier of (i) the Optionee's termination of Service, (ii)
the day immediately prior to the effective date of a Change in Control in which
the Option is not assumed or substituted for by the Acquiring Corporation as
provided in Section 8, or (iii) the day ten (10) days prior to the Option
Expiration Date. Upon such termination of the ISO Exercise Limitation, the
Option shall be deemed a Nonstatutory Stock Option to the extent of the number
of shares subject to the Option which would otherwise exceed the ISO Exercise
Limitation.
(b) Notwithstanding any other provision of this
Option Agreement, if compliance with the ISO Exercise Limitation as set forth in
Section 4.1(a) will result in the exercisability of any Vested Shares (as
defined in Section 11.2) being delayed more than thirty (30) days beyond the
date such shares become Vested Shares (the "VESTING DATE"), the Option shall be
deemed to be two (2) options. The first option shall be for the maximum portion
of the Number of Option Shares that can comply with the ISO Exercise Limitation
without causing the Option to be unexercisable in the aggregate as to Vested
Shares on the Vesting Date for such shares. The second option, which shall not
be treated as an Incentive Stock Option as described in section 422(b) of the
Code, shall be for the balance of the Number of Option Shares; that is, those
such shares which, on the respective Vesting Date for such shares, would be
unexercisable if included in the first option and thereby made subject to the
ISO Exercise Limitation. Shares treated as subject to the second option shall be
exercisable on the same terms and at the same time as set forth in this Option
Agreement; provided, however, that (i) the second sentence of Section 4.1(a)
shall not apply to the second option and (ii) each such share shall become a
Vested Share on the Vesting Date such share must first be allocated to the
second option pursuant to the preceding sentence. Unless the Optionee
specifically elects to the contrary in the Optionee's written notice of
exercise, the first option shall be deemed to be exercised first to the maximum
possible extent and then the second option shall be deemed to be exercised.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the
Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by (i) full
payment of the aggregate Exercise Price for the number of shares of Stock being
purchased and (ii) an executed copy, if required herein, of the then current
form of escrow agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreement.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by
5
<PAGE>
tender to the Company of whole shares of Stock owned by the Optionee having a
Fair Market Value (as determined by the Company without regard to any
restrictions on transferability applicable to such stock by reason of federal or
state securities laws or agreements with an underwriter for the Company) not
less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise,
as defined in Section 4.3(c), or (iv) by any combination of the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing,
the Option may not be exercised by tender to the Company of shares of Stock to
the extent such tender of Stock would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the Company's
stock. The Option may not be exercised by tender to the Company of shares of
Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means
the assignment in a form acceptable to the Company of the proceeds of a sale or
loan with respect to some or all of the shares of Stock acquired upon the
exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Optionee is cautioned that
the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be
able to exercise the Option when desired even though the Option is vested, and
the Company shall have no obligation to issue a certificate for such shares or
release such shares from any escrow provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF
SHARES. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to
6
<PAGE>
compliance with all applicable requirements of federal, state or foreign law
with respect to such securities. The Option may not be exercised if the issuance
of shares of Stock upon exercise would constitute a violation of any applicable
federal, state or foreign securities laws or other law or regulations or the
requirements of any stock exchange or market system upon which the Stock may
then be listed. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act shall at the time of exercise of
the Option be in effect with respect to the shares issuable upon exercise of the
Option or (ii) in the opinion of legal counsel to the Company, the shares
issuable upon exercise of the Option may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO
EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability
of the Company to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by the Company's legal counsel to be necessary to the
lawful issuance and sale of any shares subject to the Option shall relieve the
Company of any liability in respect of the failure to issue or sell such shares
as to which such requisite authority shall not have been obtained. As a
condition to the exercise of the Option, the Company may require the Optionee to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION.
The Option may be exercised during the lifetime of the
Optionee only by the Optionee or the Optionee's guardian or legal representative
and may not be assigned or transferred in any manner except by will or by the
laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent provided in Section 7, may be exercised by the Optionee's
legal representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and distribution.
6. TERMINATION OF THE OPTION.
The Option shall terminate and may no longer be exercised on
the first to occur of (a) the Option Expiration Date, (b) the last date for
exercising the Option following termination of the Optionee's Service as
described in Section 7, or (c) a Change in Control to the extent provided in
Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
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<PAGE>
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. (NOTE: If
the Option is exercised more than three (3) months after the date on which the
Optionee's Service as an Employee terminated as a result of a Disability other
than a permanent and total disability as defined in Section 22(e)(3) of the
Code, the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)
(b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death at any time prior to the expiration of six (6)
months after the date on which the Optionee's Service terminated, but in any
event no later than the Option Expiration Date. The Optionee's Service shall be
deemed to have terminated on account of death if the Optionee dies within one
(1) month after the Optionee's termination of Service.
(c) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within one (1) month (or such other longer period of
time as determined by the Board, in its sole discretion) after the date on which
the Optionee's Service terminated, but in any event no later than the Option
Expiration Date.
7.2 ADDITIONAL LIMITATIONS ON OPTION EXERCISE. Notwithstanding
the provisions of Section 7.1, the Option may not be exercised after the
Optionee's termination of Service to the extent that the shares to be acquired
upon exercise of the Option would be subject to the Unvested Share Repurchase
Option as provided in Section 11.
7.3 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.6, the
Option shall remain exercisable until one (1) month after the date the Optionee
is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as to
the tax consequences of any such delayed exercise. The Optionee should consult
with the Optionee's own tax advisor as to the tax consequences of any such
delayed exercise.
7.4 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject
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<PAGE>
to such suit, (ii) the one hundred and ninetieth (190th) day after the
Optionee's termination of Service, or (iii) the Option Expiration Date. The
Company makes no representation as to the tax consequences of any such delayed
exercise. The Optionee should consult with the Optionee's own tax advisor as to
the tax consequences of any such delayed exercise.
8. CHANGE IN CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange
in a single or series of related transactions by the shareholders of the Company
of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party; or
(iii) the sale, exchange, or transfer of all
or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF CHANGE IN CONTROL ON OPTION. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. For purposes of this Section 8.2, the Option
shall be deemed assumed if, following the Change in Control, the Option confers
the right to purchase
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in accordance with its terms and conditions, for each share of Stock subject to
the Option immediately prior to the Change in Control, the consideration
(whether stock, cash or other securities or property) to which a holder of a
share of Stock on the effective date of the Change in Control was entitled. The
Option shall terminate and cease to be outstanding effective as of the date of
the Change in Control to the extent that the Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control. Notwithstanding
the foregoing, shares acquired upon exercise of the Option prior to the Change
in Control and any consideration received pursuant to the Change in Control with
respect to such shares shall continue to be subject to all applicable provisions
of this Option Agreement except as otherwise provided herein. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject
to the Option immediately prior to an Ownership Change Event described in
Section 8.1(a)(i) constituting a Change in Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the Option shall not
terminate unless the Board otherwise provides in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
In the event of any stock dividend, stock split, reverse stock
split, recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Price and class of shares of stock subject to the Option. If a
majority of the shares which are of the same class as the shares that are
subject to the Option are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event) shares of another
corporation (the "NEW SHARES"), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner, as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 9 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the
Exercise Price be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The adjustments determined by the Board pursuant to
this Section 9 shall be final, binding and conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT.
The Optionee shall have no rights as a shareholder with
respect to any shares covered by the Option until the date of the issuance of a
certificate for the shares for which the Option has been exercised (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Section 9. If the Optionee is
an Employee, the Optionee understands and acknowledges that, except as otherwise
provided in a separate, written employment agreement between a Participating
Company and the Optionee, the Optionee's employment is "at will" and is
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for no specified term. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. UNVESTED SHARE REPURCHASE OPTION.
11.1 GRANT OF UNVESTED SHARE REPURCHASE OPTION. In the event
the Optionee's Service with the Participating Company Group is terminated for
any reason or no reason, with or without cause, or, if the Optionee, the
Optionee's legal representative, or other holder of shares acquired upon
exercise of the Option attempts to sell, exchange, transfer, pledge, or
otherwise dispose of (other than pursuant to an Ownership Change Event) any
shares acquired upon exercise of the Option which exceed the Vested Shares as
defined in Section 11.2 below (the "UNVESTED SHARES"), the Company shall have
the right to repurchase the Unvested Shares under the terms and subject to the
conditions set forth in this Section 11 (the "UNVESTED SHARE REPURCHASE
Option").
11.2 VESTED SHARES AND UNVESTED SHARES DEFINED. The "VESTED
SHARES" shall mean, on any given date, a number of shares of Stock equal to the
Number of Option Shares multiplied by the Vested Ratio determined as of such
date and rounded down to the nearest whole share. On such given date, the
"UNVESTED Shares" shall mean the number of shares of Stock acquired upon
exercise of the Option which exceed the Vested Shares determined as of such
date.
11.3 EXERCISE OF UNVESTED SHARE REPURCHASE OPTION. The Company
may exercise the Unvested Share Repurchase Option by written notice to the
Optionee within sixty (60) days after (a) termination of the Optionee's Service
(or exercise of the Option, if later) or (b) the Company has received notice of
the attempted disposition of Unvested Shares. If the Company fails to give
notice within such sixty (60) day period, the Unvested Share Repurchase Option
shall terminate unless the Company and the Optionee have extended the time for
the exercise of the Unvested Share Repurchase Option. The Unvested Share
Repurchase Option must be exercised, if at all, for all of the Unvested Shares,
except as the Company and the Optionee otherwise agree.
11.4 PAYMENT FOR SHARES AND RETURN OF SHARES TO COMPANY. The
purchase price per share being repurchased by the Company shall be an amount
equal to the Optionee's original cost per share, as adjusted pursuant to Section
9 (the "REPURCHASE PRICE"). The Company shall pay the aggregate Repurchase Price
to the Optionee in cash within thirty (30) days after the date of the written
notice to the Optionee of the Company's exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled. The shares being repurchased shall be delivered to
the Company by the Optionee at the same time as the delivery of the Repurchase
Price to the Optionee.
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11.5 ASSIGNMENT OF UNVESTED SHARE REPURCHASE OPTION. The
Company shall have the right to assign the Unvested Share Repurchase Option at
any time, whether or not such option is then exercisable, to one or more persons
as may be selected by the Company.
11.6 OWNERSHIP CHANGE EVENT. Upon the occurrence of an
Ownership Change Event, any and all new, substituted or additional securities or
other property to which the Optionee is entitled by reason of the Optionee's
ownership of Unvested Shares shall be immediately subject to the Unvested Share
Repurchase Option and included in the terms "Stock" and "Unvested Shares" for
all purposes of the Unvested Share Repurchase Option with the same force and
effect as the Unvested Shares immediately prior to the Ownership Change Event.
While the aggregate Repurchase Price shall remain the same after such Ownership
Change Event, the Repurchase Price per Unvested Share upon exercise of the
Unvested Share Repurchase Option following such Ownership Change Event shall be
adjusted as appropriate. For purposes of determining the Vested Ratio following
an Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.
12. RIGHT OF FIRST REFUSAL.
12.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in
Section 12.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested
Shares (the "TRANSFER SHARES") to any person or entity, including, without
limitation, any shareholder of the Participating Company Group, the Company
shall have the right to repurchase the Transfer Shares under the terms and
subject to the conditions set forth in this Section 12 (the "RIGHT OF FIRST
REFUSAL").
12.2 NOTICE OF PROPOSED TRANSFER. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall deliver written notice (the
"TRANSFER NOTICE") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "PROPOSED TRANSFEREE") and, if the transfer is voluntary, the
proposed transfer price, and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the Fair
Market Value of the Transfer Shares, as determined by the Board in good faith.
If the Optionee proposes to transfer any Transfer Shares to more than one
Proposed Transferee, the Optionee shall provide a separate Transfer Notice for
the proposed transfer to each Proposed Transferee. The Transfer Notice shall be
signed by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the transfer
of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal.
12.3 BONA FIDE TRANSFER. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the
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<PAGE>
Optionee's failure to comply with the procedure described in this Section 12,
and the Optionee shall have no right to transfer the Transfer Shares without
first complying with the procedure described in this Section 12. The Optionee
shall not be permitted to transfer the Transfer Shares if the proposed transfer
is not bona fide.
12.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all, but not less than all, of the Transfer Shares (except as
the Company and the Optionee otherwise agree) at the purchase price and on the
terms set forth in the Transfer Notice by delivery to the Optionee of a notice
of exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the present
value cash equivalent of the consideration described in the Transfer Notice as
reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
12.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the
Company fails to exercise the Right of First Refusal in full (or to such lesser
extent as the Company and the Optionee otherwise agree) within the period
specified in Section 12.4 above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described
in the Transfer Notice, provided such transfer occurs not later than ninety (90)
days following delivery to the Company of the Transfer Notice. The Company shall
have the right to demand further assurances from the Optionee and the Proposed
Transferee (in a form satisfactory to the Company) that the transfer of the
Transfer Shares was actually carried out on the terms and conditions described
in the Transfer Notice. No Transfer Shares shall be transferred on the books of
the Company until the Company has received such assurances, if so demanded, and
has approved the proposed transfer as bona fide. Any proposed transfer on terms
and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this Section 12.
12.6 TRANSFEREES OF TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions
of this Option
13
<PAGE>
Agreement, including this Section 12 providing for the Right of First Refusal
with respect to any subsequent transfer. Any sale or transfer of any shares
acquired upon exercise of the Option shall be void unless the provisions of this
Section 12 are met.
12.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The
Right of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 12.9 below result in a termination of the Right
of First Refusal.
12.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall
have the right to assign the Right of First Refusal at any time, whether or not
there has been an attempted transfer, to one or more persons as may be selected
by the Company.
12.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the occurrence of
a Change in Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or (b)
the existence of a public market for the class of shares subject to the Right of
First Refusal. A "PUBLIC MARKET" shall be deemed to exist if (i) such stock is
listed on a national securities exchange (as that term is used in the Exchange
Act) or (ii) such stock is traded on the over-the-counter market and prices
therefor are published daily on business days in a recognized financial journal.
13. ESCROW.
13.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to
the Unvested Share Repurchase Option will be available for repurchase, the
Company may require the Optionee to deposit the certificate evidencing the
shares which the Optionee purchases upon exercise of the Option with an agent
designated by the Company under the terms and conditions of escrow and security
agreements approved by the Company. If the Company does not require such deposit
as a condition of exercise of the Option, the Company reserves the right at any
time to require the Optionee to so deposit the certificate in escrow. Upon the
occurrence of an Ownership Change Event or a change, as described in Section 9,
in the character or amount of any of the outstanding stock of the corporation
the stock of which is subject to the provisions of this Option Agreement, any
and all new, substituted or additional securities or other property to which the
Optionee is entitled by reason of the Optionee's ownership of shares of Stock
acquired upon exercise of the Option that remain, following such Ownership
Change Event or change described in Section 9, subject to the Unvested Share
Repurchase Option shall be immediately subject to the escrow to the same extent
as such shares of Stock immediately before such event. The Company shall bear
the expenses of the escrow.
14
<PAGE>
13.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable
after the expiration of the Unvested Share Repurchase Option, but not more
frequently than twice each calendar year, the escrow agent shall deliver to the
Optionee the shares and any other property no longer subject to such
restrictions and no longer securing any promissory note.
13.3 NOTICES AND PAYMENTS. In the event the shares and any
other property held in escrow are subject to the Company's exercise of the
Unvested Share Repurchase Option or the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent, and any
payment required to be given to the Optionee shall be given to the escrow agent.
Within thirty (30) days after payment by the Company, the escrow agent shall
deliver the shares and any other property which the Company has purchased to the
Company and shall deliver the payment received from the Company to the Optionee.
14. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT.
If, from time to time, there is any stock dividend, stock
split or other change, as described in Section 9, in the character or amount of
any of the outstanding stock of the corporation the stock of which is subject to
the provisions of this Option Agreement, then in such event any and all new,
substituted or additional securities to which the Optionee is entitled by reason
of the Optionee's ownership of the shares acquired upon exercise of the Option
shall be immediately subject to the Unvested Share Repurchase Option and the
Right of First Refusal with the same force and effect as the shares subject to
the Unvested Share Repurchase Option and the Right of First Refusal immediately
before such event.
15. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION.
The Optionee shall dispose of the shares acquired pursuant to
the Option only in accordance with the provisions of this Option Agreement. In
addition, the Optionee shall promptly notify the Chief Financial Officer of the
Company if the Optionee disposes of any of the shares acquired pursuant to the
Option within one (1) year after the date of the Optionee exercises all or part
of the Option or within two (2) years after the Date of Option Grant. Until such
time as the Optionee disposes of such shares in a manner consistent with the
provisions of this Option Agreement, unless otherwise expressly authorized by
the Company, the Optionee shall hold all shares acquired pursuant to the Option
in the Optionee's name (and not in the name of any nominee) for the one-year
period immediately after the exercise of the Option and the two-year period
immediately after Date of Option Grant. At any time during the one-year or
two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the Option requesting the
transfer agent for the Company's stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such
transfer shall continue notwithstanding that a legend has been placed on the
certificate pursuant to the preceding sentence.
15
<PAGE>
16. LEGENDS.
The Company may at any time place legends referencing the
Unvested Share Repurchase Option, the Right of First Refusal, and any applicable
federal, state or foreign securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to carry out the provisions of
this Section. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
16.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
16.2 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THIS CORPORATION."
16.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR
SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
16.4 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO TWO YEARS AFTER THE DATE OF
GRANT AND ONE YEAR AFTER THE EXCERSISE DATE. SHOULD THE REGISTERED HOLDER ELECT
TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT,
THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE
16
<PAGE>
CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED
UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE
NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED
ABOVE."
17. PUBLIC OFFERING.
The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including an initial public offering of
stock, made by the Company pursuant to an effective registration statement filed
under the Securities Act, the Optionee shall not offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act. The Optionee shall be subject to this Section provided and only
if the officers and directors of the Company are also subject to similar
arrangements.
18. RESTRICTIONS ON TRANSFER OF SHARES.
No shares acquired upon exercise of the Option may be sold,
exchanged, transferred (including, without limitation, any transfer to a nominee
or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed
of, including by operation of law, in any manner which violates any of the
provisions of this Option Agreement and, except pursuant to an Ownership Change
Event, until the date on which such shares become Vested Shares, and any such
attempted disposition shall be void. The Company shall not be required (a) to
transfer on its books any shares which will have been transferred in violation
of any of the provisions set forth in this Option Agreement or (b) to treat as
owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares will have been so transferred.
19. BINDING EFFECT.
Subject to the restrictions on transfer set forth herein, this
Option Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
20. TERMINATION OR AMENDMENT.
The Board may terminate or amend the Plan or the Option at any
time; provided, however, that except as provided in Section 8.2 in connection
with a Change in Control, no such termination or amendment may adversely affect
the Option or any unexercised portion hereof without the consent of the Optionee
unless such termination or amendment is necessary to comply
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<PAGE>
with any applicable law or government regulation or is required to enable the
Option to qualify as an Incentive Stock Option. No amendment or addition to this
Option Agreement shall be effective unless in writing.
21. NOTICES.
Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given (except to the extent that this
Option Agreement provides for effectiveness only upon actual receipt of such
notice) upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address shown below that party's signature or at such other
address as such party may designate in writing from time to time to the other
party.
22. INTEGRATED AGREEMENT.
This Option Agreement and the Plan constitute the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein and therein and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those as set forth or provided for herein or therein. To the
extent contemplated herein or therein, the provisions of this Option Agreement
shall survive any exercise of the Option and shall remain in full force and
effect.
[Remainder of this page intentionally left blank]
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<PAGE>
23. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
COLLEGECLUB.COM
By:
------------------------------------
Address: 1010 Second Avenue
Suite 600
San Diego, CA 92101
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in Section 11 and the Right of First Refusal set forth in
Section 12, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement. The undersigned acknowledges receipt of a
copy of the Plan.
OPTIONEE
Date:
------------------------ ---------------------------------------
Name
Optionee's Address:
---------------------------------------
---------------------------------------
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<PAGE>
Optionee:
-----------------------
Date:
-----------------------
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION
EXERCISE NOTICE
CollegeClub.com
1010 Second Avenue, Suite 600
San Diego, CA 92101
Attention: Treasurer
Ladies and Gentlemen:
1. EXERCISE OF OPTION. I was granted an incentive stock option (the
"OPTION") to purchase shares of the common stock of CollegeClub.com (the
"COMPANY") on ___________________, 19___, pursuant to the Company's 1996 Stock
Option Plan (the "PLAN") and pursuant to the Immediately Exercisable Incentive
Stock Option Agreement dated __________________, 19___ (the "OPTION AGREEMENT").
The Grant Number of the Option is _____________. I hereby elect to exercise the
Option as to a total of __________________ shares of the common stock of the
Company (the "SHARES"), of which ________________ are Vested Shares and
______________ are Unvested Shares as determined in accordance with the Option
Agreement.
2. PAYMENTS. Enclosed herewith is full payment in the aggregate amount
of $_____________ (representing $_______ per share) for the Shares in the manner
set forth in the Option Agreement. I authorize payroll withholding and otherwise
will make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any.
3. BINDING EFFECT. I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Unvested Share Repurchase Option and the Right
of First Refusal set forth therein, to all of which I hereby expressly assent.
This Agreement shall inure to the benefit of and be binding upon the my heirs,
executors, administrators, successors and assigns. I agree to deposit the
certificate or certificates evidencing the Shares, along with a blank stock
assignment separate from certificate executed by me, with an escrow agent
designated by the Company, to be held by such escrow agent pursuant to the
Company's standard Joint Escrow Instructions, an executed copy of which I have
delivered herewith.
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4. TRANSFER. I am aware that Rule 144, promulgated under the Securities
Act, which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. I understand that
any sale of the Shares that might be made in reliance upon Rule 144 may only be
made in limited amounts in accordance with the terms and conditions of such rule
and that a copy of Rule 144 will be delivered to me upon request.
I agree that I will promptly notify the Chief Financial Officer of the
Company if I transfer any of the Shares acquired pursuant to the Option within
one (1) year from the date I exercise all or part of the Option or within two
(2) years of the date of grant of the Option.
My address of record is:
-------------------------------------------------------------
-------------------------------------------------------------
My Social Security Number is:
-----------------------------------------
5. ELECTION UNDER SECTION 83(b) OF THE CODE. I understand and
acknowledge that if I am exercising the Option to purchase Unvested Shares
(i.e., shares that remain subject to the Company's Unvested Share Repurchase
Option), that I should consult with my tax advisor regarding the advisability of
filing with the Internal Revenue Service an election under Section 83(b) of the
Code, which must be filed no later than thirty (30) days after the date on which
I exercise the Option.
I acknowledge that I have been advised to consult with a tax advisor
prior to the exercise of the Option regarding the tax consequences to me of
exercising the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30
DAYS AFTER THE DATE ON WHICH I PURCHASE SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. I ACKNOWLEDGE THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS MY
SOLE RESPONSIBILITY, EVEN IF I REQUEST THE COMPANY OR ITS REPRESENTATIVES TO
FILE SUCH ELECTION ON MY BEHALF.
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I understand that I am purchasing the Shares pursuant to the terms of
the CollegeClub.com 1996 Stock Option Plan and my Option Agreement, copies of
which I have received and carefully read and understand.
Very truly yours,
------------------------------------
(Signature)
------------------------------------
(Optionee's Name Printed)
Receipt of the above is hereby acknowledged.
COLLEGECLUB.COM
By:
-----------------------------
Title:
--------------------------
Dated:
--------------------
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EXHIBIT 10.25
COLLEGECLUB.COM, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the
"OPTION AGREEMENT") is made and entered into as of the Date of Option Grant by
and between CollegeClub.com, Inc. and ___________________ (the "OPTIONEE").
The Company has granted to the Optionee pursuant to the Company's 1996
Stock Option Plan (the "PLAN") an option to purchase certain shares of Stock,
upon the terms and conditions set forth in this Option Agreement (the "OPTION").
The Option shall in all respects be subject to the terms and conditions of the
Plan, the provisions of which are incorporated herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means
____________________.
(b) "NUMBER OF OPTION SHARES" means _________ shares
of Stock, as adjusted from time to time pursuant to Section 9.
(c) "EXERCISE PRICE" means $________ per share of
Stock, as adjusted from time to time pursuant to Section 9.
(d) "INITIAL VESTING DATE" means the date occurring
one year after (check one):
-TM- the Date of Option Grant.
pi December 10, 1999, the date the
Optionee's Service commenced.
<PAGE>
(e) "VESTED RATIO" means, on any relevant date, the
ratio determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee's Service has 1/5
not terminated prior to such date
PLUS
For each full month of the Optionee's continuous Service from 1/60
the Initial Vesting Date until the Vested Ratio equals
1/1, an additional
</TABLE>
Notwithstanding the foregoing, in the event of a Termination Without
Cause, the Vested Ratio shall be increased to 1/1 as of the date of the
Optionee's termination of Service.
(f) "OPTION EXPIRATION DATE" means the date ten (10)
years after the Date of Option Grant.
(g) "SERVICE" means the Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. The Optionee's Service shall not be deemed
to have terminated merely because of a change in the capacity in which the
Optionee renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. Furthermore,
the Optionee's Service with the Participating Company Group shall not be deemed
to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day
of such leave the Optionee's Service shall be deemed to have terminated unless
the Optionee's right to return to Service with the Participating Company Group
is guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence shall
not be treated as Service for purposes of determining the Optionee's Vested
Ratio. The Optionee's Service shall be deemed to have terminated either upon an
actual termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its sole discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.
(NOTE: If the Option is exercised more than three (3) months after the date on
which the Optionee ceased to be an Employee (other than by reason of death or a
permanent and total disability as defined in Section 22(e)(3) of the
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<PAGE>
Code), the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)
(h) "TERMINATION WITHOUT CAUSE" means a termination
by the Company of the Optionee's Service as an Employee Without Cause.
(i) "WITHOUT CAUSE" means the definition assigned to
such term in the Executive Employment Agreement between the Company and the
Optionee dated effective as of December 10, 1999.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of
the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, they are unvested and are subject to a right of the
Company to repurchase such shares at the Optionee's original purchase price if
the Optionee's Service terminates. Failure to file an election under Section
83(b), if appropriate, may result in adverse tax consequences to the Optionee.
The Optionee acknowledges that the Optionee has been advised to consult with a
tax advisor prior to the exercise of the Option regarding the tax consequences
to the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b)
MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES
SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT
TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY,
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EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH
ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION.
All questions of interpretation concerning this Option
Agreement shall be determined by the Board. All determinations by the Board
shall be final and binding upon all persons having an interest in the Option.
Any officer of a Participating Company shall have the authority to act on behalf
of the Company with respect to any matter, right, obligation, or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein,
the Option shall be exercisable on and after the Date of Option Grant and prior
to the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares less the number of shares previously acquired
upon exercise of the Option, subject to the Optionee's agreement that any shares
purchased upon exercise are subject to the Company's repurchase rights set forth
in Section 11 and Section 12.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the
Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by (i) full
payment of the aggregate Exercise Price for the number of shares of Stock being
purchased and (ii) an executed copy, if required herein, of the then current
form of escrow agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreement.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of Stock owned by the Optionee having a Fair Market Value (as determined
by the Company without regard to any restrictions on transferability applicable
to such stock by reason of federal or state securities laws or agreements with
an underwriter for the Company) not less than the aggregate Exercise Price,
(iii) by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by
any combination of the foregoing.
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(b) TENDER OF STOCK. Notwithstanding the foregoing,
the Option may not be exercised by tender to the Company of shares of Stock to
the extent such tender of Stock would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the Company's
stock. The Option may not be exercised by tender to the Company of shares of
Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means
the assignment in a form acceptable to the Company of the proceeds of a sale or
loan with respect to some or all of the shares of Stock acquired upon the
exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Optionee is cautioned that
the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be
able to exercise the Option when desired even though the Option is vested, and
the Company shall have no obligation to issue a certificate for such shares or
release such shares from any escrow provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF
SHARES. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to such securities.
The Option may not be exercised if the issuance of shares of Stock upon exercise
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
the Option may not be exercised unless (i) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with
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respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares subject to the Option shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which
such requisite authority shall not have been obtained. As a condition to the
exercise of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION.
The Option may be exercised during the lifetime of the
Optionee only by the Optionee or the Optionee's guardian or legal representative
and may not be assigned or transferred in any manner except by will or by the
laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent provided in Section 7, may be exercised by the Optionee's
legal representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and distribution.
6. TERMINATION OF THE OPTION.
The Option shall terminate and may no longer be exercised on
the first to occur of (a) the Option Expiration Date, (b) the last date for
exercising the Option following termination of the Optionee's Service as
described in Section 7, or (c) a Change in Control to the extent provided in
Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. (NOTE: If
the Option is exercised more than three (3) months after the date on which the
Optionee's Service as an Employee terminated as a result of a Disability other
than a permanent and total disability as defined in Section
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22(e)(3) of the Code, the Option will be treated as a Nonstatutory Stock Option
and not as an Incentive Stock Option to the extent required by Section 422 of
the Code.)
(b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death at any time prior to the expiration of six (6)
months after the date on which the Optionee's Service terminated, but in any
event no later than the Option Expiration Date. The Optionee's Service shall be
deemed to have terminated on account of death if the Optionee dies within thirty
(30) days after the Optionee's termination of Service.
(c) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within thirty (30) days (or ninety (90) days if the
Company terminates the Optionee's Service as an Employee Without Cause) after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date.
7.2 ADDITIONAL LIMITATION ON OPTION EXERCISE. Notwithstanding
the provisions of Section 7.1, the Option may not be exercised after the
Optionee's termination of Service to the extent that the shares to be acquired
upon exercise of the Option would be subject to the Unvested Share Repurchase
Option as provided in Section 11.
7.3 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.6, the
Option shall remain exercisable until one (1) month after the date the Optionee
is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as to
the tax consequences of any such delayed exercise. The Optionee should consult
with the Optionee's own tax advisor as to the tax consequences of any such
delayed exercise.
7.4 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisor as to the tax consequences of any such delayed exercise.
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8. CHANGE IN CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange
in a single or series of related transactions by the stockholders of the Company
of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or transfer of all
or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF CHANGE IN CONTROL ON OPTION. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. For purposes of this Section 8.2, the Option
shall be deemed assumed if, following the Change in Control, the Option confers
the right to purchase in accordance with its terms and conditions, for each
share of Stock subject to the Option immediately prior to the Change in Control,
the consideration (whether stock, cash or other securities or property) to which
a holder of a share of Stock on the effective date of the Change in Control was
entitled. The Option shall terminate and cease to be outstanding effective as of
the date of the Change in Control to the extent that the Option is neither
assumed or substituted for by the Acquiring Corporation in connection with the
Change in Control nor exercised as of
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the date of the Change in Control. Notwithstanding the foregoing, shares
acquired upon exercise of the Option prior to the Change in Control and any
consideration received pursuant to the Change in Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Change in Control is the surviving or continuing corporation and
immediately after such Ownership Change Event less than fifty percent (50%) of
the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
In the event of any stock dividend, stock split, reverse stock
split, recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Price and class of shares of stock subject to the Option. If a
majority of the shares which are of the same class as the shares that are
subject to the Option are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event) shares of another
corporation (the "NEW SHARES"), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner, as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 9 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the
Exercise Price be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The adjustments determined by the Board pursuant to
this Section 9 shall be final, binding and conclusive.
10. RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT.
The Optionee shall have no rights as a stockholder with
respect to any shares covered by the Option until the date of the issuance of a
certificate for the shares for which the Option has been exercised (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Section 9. If the Optionee is
an Employee, the Optionee understands and acknowledges that, except as otherwise
provided in a separate, written employment agreement between a Participating
Company and the Optionee, the Optionee's employment is "at will" and is for no
specified term. Nothing in this Option Agreement shall confer upon the Optionee
any right to continue in the Service of a Participating Company or interfere in
any way with any right of the Participating Company Group to terminate the
Optionee's Service as an Employee or Consultant, as the case may be, at any
time.
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11. UNVESTED SHARE REPURCHASE OPTION.
11.1 GRANT OF UNVESTED SHARE REPURCHASE OPTION. In the event
the Optionee's Service with the Participating Company Group is terminated for
any reason or no reason, with or without cause, or, if the Optionee, the
Optionee's legal representative, or other holder of shares acquired upon
exercise of the Option attempts to sell, exchange, transfer, pledge, or
otherwise dispose of (other than pursuant to an Ownership Change Event) any
shares acquired upon exercise of the Option which exceed the Vested Shares as
defined in Section 11.2 below (the "UNVESTED SHARES"), the Company shall have
the right to repurchase the Unvested Shares under the terms and subject to the
conditions set forth in this Section 11 (the "UNVESTED SHARE REPURCHASE
Option").
11.2 VESTED SHARES AND UNVESTED SHARES DEFINED. The "VESTED
SHARES" shall mean, on any given date, a number of shares of Stock equal to the
Number of Option Shares multiplied by the Vested Ratio determined as of such
date and rounded down to the nearest whole share. On such given date, the
"UNVESTED SHARES" shall mean the number of shares of Stock acquired upon
exercise of the Option which exceed the Vested Shares determined as of such
date.
11.3 EXERCISE OF UNVESTED SHARE REPURCHASE OPTION. The Company
may exercise the Unvested Share Repurchase Option by written notice to the
Optionee within sixty (60) days after (a) termination of the Optionee's Service
(or exercise of the Option, if later) or (b) the Company has received notice of
the attempted disposition of Unvested Shares. If the Company fails to give
notice within such sixty (60) day period, the Unvested Share Repurchase Option
shall terminate unless the Company and the Optionee have extended the time for
the exercise of the Unvested Share Repurchase Option. The Unvested Share
Repurchase Option may be exercised for all or a portion of the Unvested Shares,
as determined by the Company.
11.4 PAYMENT FOR SHARES AND RETURN OF SHARES TO COMPANY. The
purchase price per share being repurchased by the Company shall be an amount
equal to the Optionee's original cost per share, as adjusted pursuant to Section
9 (the "REPURCHASE PRICE"). The Company shall pay the aggregate Repurchase Price
to the Optionee in cash within thirty (30) days after the date of the written
notice to the Optionee of the Company's exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled. The shares being repurchased shall be delivered to
the Company by the Optionee at the same time as the delivery of the Repurchase
Price to the Optionee.
11.5 ASSIGNMENT OF UNVESTED SHARE REPURCHASE OPTION. The
Company shall have the right to assign the Unvested Share Repurchase Option at
any time, whether or not such option is then exercisable, to one or more persons
as may be selected by the Company.
11.6 OWNERSHIP CHANGE EVENT. Upon the occurrence of an
Ownership Change Event, any and all new, substituted or additional securities or
other property to which the Optionee is entitled by reason of the Optionee's
ownership of Unvested Shares shall be
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immediately subject to the Unvested Share Repurchase Option and included in the
terms "Stock" and "Unvested Shares" for all purposes of the Unvested Share
Repurchase Option with the same force and effect as the Unvested Shares
immediately prior to the Ownership Change Event. While the aggregate Repurchase
Price shall remain the same after such Ownership Change Event, the Repurchase
Price per Unvested Share upon exercise of the Unvested Share Repurchase Option
following such Ownership Change Event shall be adjusted as appropriate. For
purposes of determining the Vested Ratio following an Ownership Change Event,
credited Service shall include all Service with any corporation which is a
Participating Company at the time the Service is rendered, whether or not such
corporation is a Participating Company both before and after the Ownership
Change Event.
12. RIGHT OF FIRST REFUSAL.
12.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in
Section 12.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested
Shares (the "TRANSFER SHARES") to any person or entity, including, without
limitation, any stockholder of the Participating Company Group, the Company
shall have the right to repurchase the Transfer Shares under the terms and
subject to the conditions set forth in this Section 12 (the "RIGHT OF FIRST
REFUSAL").
12.2 NOTICE OF PROPOSED TRANSFER. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall deliver written notice (the
"TRANSFER NOTICE") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "PROPOSED TRANSFEREE") and, if the transfer is voluntary, the
proposed transfer price, and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the Fair
Market Value of the Transfer Shares, as determined by the Board in good faith.
If the Optionee proposes to transfer any Transfer Shares to more than one
Proposed Transferee, the Optionee shall provide a separate Transfer Notice for
the proposed transfer to each Proposed Transferee. The Transfer Notice shall be
signed by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the transfer
of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal.
12.3 BONA FIDE TRANSFER. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 12, and the Optionee shall have no right
to transfer the Transfer Shares without first complying with the procedure
described in this Section 12. The Optionee shall not be permitted to transfer
the Transfer Shares if the proposed transfer is not bona fide.
12.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all or a portion of the Transfer Shares at the purchase price
and on the terms set forth in the Transfer Notice by
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delivery to the Optionee of a notice of exercise of the Right of First Refusal
within thirty (30) days after the date the Transfer Notice is delivered to the
Company. The Company's exercise or failure to exercise the Right of First
Refusal with respect to any proposed transfer described in a Transfer Notice
shall not affect the Company's right to exercise the Right of First Refusal with
respect to any proposed transfer described in any other Transfer Notice, whether
or not such other Transfer Notice is issued by the Optionee or issued by a
person other than the Optionee with respect to a proposed transfer to the same
Proposed Transferee. If the Company exercises the Right of First Refusal, the
Company and the Optionee shall thereupon consummate the sale of the Transfer
Shares to the Company on the terms set forth in the Transfer Notice within sixty
(60) days after the date the Transfer Notice is delivered to the Company (unless
a longer period is offered by the Proposed Transferee); provided, however, that
in the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for the
Transfer Shares by the present value cash equivalent of the consideration
described in the Transfer Notice as reasonably determined by the Company. For
purposes of the foregoing, cancellation of any indebtedness of the Optionee to
any Participating Company shall be treated as payment to the Optionee in cash to
the extent of the unpaid principal and any accrued interest canceled.
12.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the
Company fails to exercise the Right of First Refusal in full within the period
specified in Section 12.4 above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described
in the Transfer Notice, provided such transfer occurs not later than ninety (90)
days following delivery to the Company of the Transfer Notice. The Company shall
have the right to demand further assurances from the Optionee and the Proposed
Transferee (in a form satisfactory to the Company) that the transfer of the
Transfer Shares was actually carried out on the terms and conditions described
in the Transfer Notice. No Transfer Shares shall be transferred on the books of
the Company until the Company has received such assurances, if so demanded, and
has approved the proposed transfer as bona fide. Any proposed transfer on terms
and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this Section 12.
12.6 TRANSFEREES OF TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions
of this Option Agreement, including this Section 12 providing for the Right of
First Refusal with respect to any subsequent transfer. Any sale or transfer of
any shares acquired upon exercise of the Option shall be void unless the
provisions of this Section 12 are met.
12.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The
Right of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 12.9 below result in a termination of the Right
of First Refusal.
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12.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall
have the right to assign the Right of First Refusal at any time, whether or not
there has been an attempted transfer, to one or more persons as may be selected
by the Company.
12.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the occurrence of
a Change in Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or (b)
the existence of a public market for the class of shares subject to the Right of
First Refusal. A "PUBLIC MARKET" shall be deemed to exist if (i) such stock is
listed on a national securities exchange (as that term is used in the Exchange
Act) or (ii) such stock is traded on the over-the-counter market and prices
therefor are published daily on business days in a recognized financial journal.
13. ESCROW.
13.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to
the Unvested Share Repurchase Option will be available for repurchase, the
Company may require the Optionee to deposit the certificate evidencing the
shares which the Optionee purchases upon exercise of the Option with an agent
designated by the Company under the terms and conditions of escrow and security
agreements approved by the Company. If the Company does not require such deposit
as a condition of exercise of the Option, the Company reserves the right at any
time to require the Optionee to so deposit the certificate in escrow. Upon the
occurrence of an Ownership Change Event or a change, as described in Section 9,
in the character or amount of any of the outstanding stock of the corporation
the stock of which is subject to the provisions of this Option Agreement, any
and all new, substituted or additional securities or other property to which the
Optionee is entitled by reason of the Optionee's ownership of shares of Stock
acquired upon exercise of the Option that remain, following such Ownership
Change Event or change described in Section 9, subject to the Unvested Share
Repurchase Option shall be immediately subject to the escrow to the same extent
as such shares of Stock immediately before such event. The Company shall bear
the expenses of the escrow.
13.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable
after the expiration of the Unvested Share Repurchase Option, but not more
frequently than twice each calendar year, the escrow agent shall deliver to the
Optionee the shares and any other property no longer subject to such
restrictions and no longer securing any promissory note.
13.3 NOTICES AND PAYMENTS. In the event the shares and any
other property held in escrow are subject to the Company's exercise of the
Unvested Share Repurchase Option or the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent, and any
payment required to be given to the Optionee shall be given to the escrow agent.
Within thirty (30) days after payment by the Company, the escrow agent shall
deliver the shares and any other property which the Company has purchased to the
Company and shall deliver the payment received from the Company to the Optionee.
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<PAGE>
14. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT.
If, from time to time, there is any stock dividend, stock
split or other change, as described in Section 9, in the character or amount of
any of the outstanding stock of the corporation the stock of which is subject to
the provisions of this Option Agreement, then in such event any and all new,
substituted or additional securities to which the Optionee is entitled by reason
of the Optionee's ownership of the shares acquired upon exercise of the Option
shall be immediately subject to the Unvested Share Repurchase Option and the
Right of First Refusal with the same force and effect as the shares subject to
the Unvested Share Repurchase Option and the Right of First Refusal immediately
before such event.
15. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION.
The Optionee shall dispose of the shares acquired pursuant to
the Option only in accordance with the provisions of this Option Agreement. In
addition, the Optionee shall promptly notify the Chief Financial Officer of the
Company if the Optionee disposes of any of the shares acquired pursuant to the
Option within one (1) year after the date of the Optionee exercises all or part
of the Option or within two (2) years after the Date of Option Grant. Until such
time as the Optionee disposes of such shares in a manner consistent with the
provisions of this Option Agreement, unless otherwise expressly authorized by
the Company, the Optionee shall hold all shares acquired pursuant to the Option
in the Optionee's name (and not in the name of any nominee) for the one-year
period immediately after the exercise of the Option and the two-year period
immediately after Date of Option Grant. At any time during the one-year or
two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the Option requesting the
transfer agent for the Company's stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such
transfer shall continue notwithstanding that a legend has been placed on the
certificate pursuant to the preceding sentence.
16. LEGENDS.
The Company may at any time place legends referencing the
Unvested Share Repurchase Option, the Right of First Refusal, and any applicable
federal, state or foreign securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to carry out the provisions of
this Section. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
16.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE
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<PAGE>
144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
16.2 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THIS CORPORATION."
16.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR
SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
16.4 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT LATER OF TWO YEARS
AFTER DATE OF OPTION GRANT OR ONE YEAR AFTER DATE OF EXERCISE]. SHOULD THE
REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND
FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE
CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED
UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE
NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED
ABOVE."
17. PUBLIC OFFERING.
The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including an initial public offering of
stock, made by the Company pursuant to an effective registration statement filed
under the Securities Act, the Optionee shall not offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
15
<PAGE>
limitation shall not apply to shares registered in the public offering under the
Securities Act. The Optionee shall be subject to this Section provided and only
if the officers and directors of the Company are also subject to similar
arrangements.
18. RESTRICTIONS ON TRANSFER OF SHARES.
No shares acquired upon exercise of the Option may be sold,
exchanged, transferred (including, without limitation, any transfer to a nominee
or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed
of, including by operation of law, in any manner which violates any of the
provisions of this Option Agreement and, except pursuant to an Ownership Change
Event, until the date on which such shares become Vested Shares, and any such
attempted disposition shall be void. The Company shall not be required (a) to
transfer on its books any shares which will have been transferred in violation
of any of the provisions set forth in this Option Agreement or (b) to treat as
owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares will have been so transferred.
19. BINDING EFFECT.
Subject to the restrictions on transfer set forth herein, this
Option Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
20. TERMINATION OR AMENDMENT.
The Board may terminate or amend the Plan or the Option at any
time; provided, however, that except as provided in Section 8.2 in connection
with a Change in Control, no such termination or amendment may adversely affect
the Option or any unexercised portion hereof without the consent of the Optionee
unless such termination or amendment is necessary to comply with any applicable
law or government regulation or is required to enable the Option to qualify as
an Incentive Stock Option. No amendment or addition to this Option Agreement
shall be effective unless in writing.
21. NOTICES.
Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given (except to the extent that this
Option Agreement provides for effectiveness only upon actual receipt of such
notice) upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address shown below that party's signature or at such other
address as such party may designate in writing from time to time to the other
party.
22. INTEGRATED AGREEMENT.
This Option Agreement and the Plan constitute the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject
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<PAGE>
matter contained herein and therein and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than those
as set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
23. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of Texas as such laws are applied to agreements between Texas
residents entered into and to be performed entirely within the State of Texas.
COLLEGECLUB.COM, INC.
By:
----------------------------------------
Title:
-------------------------------------
Address: 1010 2nd Avenue,
East Tower, 6th Floor
San Diego, CA 92101
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in Section 11 and the Right of First Refusal set forth in
Section 12, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement. The undersigned acknowledges receipt of a
copy of the Plan.
OPTIONEE
------------------------------------
Optionee's Address:
------------------------------------
------------------------------------
17
<PAGE>
Optionee:
-----------------------
Date:
-----------------------
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION
EXERCISE NOTICE
CollegeClub.com, Inc.
1010 2nd Avenue, East Tower, 6th Floor
San Diego, CA 92101
Attention: Corporate Controller
Ladies and Gentlemen:
1. EXERCISE OF OPTION. I was granted an incentive stock option (the
"OPTION") to purchase shares of the common stock of CollegeClub.com, Inc. (the
"COMPANY") on ___________________, 2000, pursuant to the Company's 1996 Stock
Option Plan (the "PLAN") and an Immediately Exercisable Incentive Stock Option
Agreement (the "OPTION AGREEMENT"). The Grant Number of the Option is
_____________. I hereby elect to exercise the Option as to a total of
__________________ shares of the common stock of the Company (the "SHARES"), of
which ________________ are Vested Shares and ______________ are Unvested Shares
as determined in accordance with the Option Agreement.
2. PAYMENT. Enclosed herewith is full payment in the aggregate amount
of $_____________ (representing $_______ per share) for the Shares in the manner
set forth in the Option Agreement. I authorize payroll withholding and otherwise
will make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any.
3. BINDING EFFECT. I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Unvested Share Repurchase Option and the Right
of First Refusal set forth therein, to all of which I hereby expressly assent.
This Agreement shall inure to the benefit of and be binding upon the my heirs,
executors, administrators, successors and assigns. If required by the Company, I
agree to deposit the certificate or certificates evidencing the Shares, along
with a blank stock assignment separate from certificate executed by me, with an
escrow agent designated by the Company, to be held by such escrow agent pursuant
to the Company's standard Joint Escrow Instructions.
4. TRANSFER. I am aware that Rule 144, promulgated under the Securities
Act, which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. I understand that
any sale of the Shares that might be made in reliance upon Rule 144 may only be
made in limited amounts in accordance with the terms and conditions of such rule
and that a copy of Rule 144 will be delivered to me upon request.
I agree that I will promptly notify the Corporate Controller of the
Company if I transfer any of the Shares acquired pursuant to the Option within
one (1) year from the date I exercise all or part of the Option or within two
(2) years of the date of grant of the Option.
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<PAGE>
My address of record is:
-------------------------------------------
-------------------------------------------
My Social Security Number is:
------------------------
5. ELECTION UNDER SECTION 83(b) OF THE CODE. I understand and
acknowledge that if I am exercising the Option to purchase Unvested Shares
(i.e., shares that remain subject to the Company's Unvested Share Repurchase
Option), that I should consult with my tax advisor regarding the advisability of
filing with the Internal Revenue Service an election under Section 83(b) of the
Code, which must be filed no later than thirty (30) days after the date on which
I exercise the Option.
I acknowledge that I have been advised to consult with a tax advisor
prior to the exercise of the Option regarding the tax consequences to me of
exercising the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30
DAYS AFTER THE DATE ON WHICH I PURCHASE SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. I ACKNOWLEDGE THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS MY
SOLE RESPONSIBILITY, EVEN IF I REQUEST THE COMPANY OR ITS REPRESENTATIVES TO
FILE SUCH ELECTION ON MY BEHALF.
I understand that I am purchasing the Shares pursuant to the terms of
the Plan and my Option Agreement, copies of which I have received and carefully
read and understand.
Very truly yours,
------------------------------------
(Signature)
------------------------------------
(Optionee's Name Printed)
Receipt of the above is hereby acknowledged.
COLLEGECLUB.COM, INC.
By:
------------------------------
Title:
----------------------------
Dated:
---------------------------
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<PAGE>
EXHIBIT 10.26
COLLEGECLUB.COM, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the
"OPTION AGREEMENT") is made and entered into as of the Date of Option Grant by
and between CollegeClub.com, Inc. and ___________________ (the "OPTIONEE").
The Company has granted to the Optionee pursuant to the Company's 1996
Stock Option Plan (the "PLAN") an option to purchase certain shares of Stock,
upon the terms and conditions set forth in this Option Agreement (the "OPTION").
The Option shall in all respects be subject to the terms and conditions of the
Plan, the provisions of which are incorporated herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means __________________.
(b) "NUMBER OF OPTION SHARES" means _________ shares
of Stock, as adjusted from time to time pursuant to Section 9.
(c) "EXERCISE PRICE" means $________ per share of
Stock, as adjusted from time to time pursuant to Section 9.
(d) "INITIAL VESTING DATE" means the date occurring
one year after (check one):
-TM- the Date of Option Grant.
pi December 10, 1999, the date the
Optionee's Service commenced.
<PAGE>
(e) "VESTED RATIO" means, on any relevant date, the
ratio determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee's Service has 1/5
not terminated prior to such date
PLUS
For each full month of the Optionee's continuous Service from 1/60
the Initial Vesting Date until the Vested Ratio equals 1/1,
an additional
</TABLE>
(f) "OPTION EXPIRATION DATE" means the date ten (10)
years after the Date of Option Grant.
(g) "SERVICE" means the Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. The Optionee's Service shall not be deemed
to have terminated merely because of a change in the capacity in which the
Optionee renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. Furthermore,
the Optionee's Service with the Participating Company Group shall not be deemed
to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day
of such leave the Optionee's Service shall be deemed to have terminated unless
the Optionee's right to return to Service with the Participating Company Group
is guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence shall
not be treated as Service for purposes of determining the Optionee's Vested
Ratio. The Optionee's Service shall be deemed to have terminated either upon an
actual termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its sole discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.
(NOTE: If the Option is exercised more than three (3) months after the date on
which the Optionee ceased to be an Employee (other than by reason of death or a
permanent and total disability as defined in Section 22(e)(3) of the Code), the
Option will be treated as a Nonstatutory Stock Option and not as an Incentive
Stock Option to the extent required by Section 422 of the Code.)
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<PAGE>
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of
the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, they are unvested and are subject to a right of the
Company to repurchase such shares at the Optionee's original purchase price if
the Optionee's Service terminates. Failure to file an election under Section
83(b), if appropriate, may result in adverse tax consequences to the Optionee.
The Optionee acknowledges that the Optionee has been advised to consult with a
tax advisor prior to the exercise of the Option regarding the tax consequences
to the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b)
MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES
SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT
TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY,
EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH
ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION.
All questions of interpretation concerning this Option
Agreement shall be determined by the Board. All determinations by the Board
shall be final and binding upon all persons having an interest in the Option.
Any officer of a Participating Company shall have the authority to act on behalf
of the Company with respect to any matter, right, obligation, or
3
<PAGE>
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such
matter, right, obligation, or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein,
the Option shall be exercisable on and after the Date of Option Grant and prior
to the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares less the number of shares previously acquired
upon exercise of the Option, subject to the Optionee's agreement that any shares
purchased upon exercise are subject to the Company's repurchase rights set forth
in Section 11 and Section 12.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the
Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by (i) full
payment of the aggregate Exercise Price for the number of shares of Stock being
purchased and (ii) an executed copy, if required herein, of the then current
form of escrow agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreement.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of Stock owned by the Optionee having a Fair Market Value (as determined
by the Company without regard to any restrictions on transferability applicable
to such stock by reason of federal or state securities laws or agreements with
an underwriter for the Company) not less than the aggregate Exercise Price,
(iii) by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by
any combination of the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing,
the Option may not be exercised by tender to the Company of shares of Stock to
the extent such tender of Stock would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the Company's
stock. The Option may not be exercised by tender to the Company of shares of
Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.
4
<PAGE>
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means
the assignment in a form acceptable to the Company of the proceeds of a sale or
loan with respect to some or all of the shares of Stock acquired upon the
exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Optionee is cautioned that
the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be
able to exercise the Option when desired even though the Option is vested, and
the Company shall have no obligation to issue a certificate for such shares or
release such shares from any escrow provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF
SHARES. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to such securities.
The Option may not be exercised if the issuance of shares of Stock upon exercise
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
the Option may not be exercised unless (i) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel
5
<PAGE>
to be necessary to the lawful issuance and sale of any shares subject to the
Option shall relieve the Company of any liability in respect of the failure
to issue or sell such shares as to which such requisite authority shall not
have been obtained. As a condition to the exercise of the Option, the Company
may require the Optionee to satisfy any qualifications that may be necessary
or appropriate, to evidence compliance with any applicable law or regulation
and to make any representation or warranty with respect thereto as may be
requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION.
The Option may be exercised during the lifetime of the
Optionee only by the Optionee or the Optionee's guardian or legal representative
and may not be assigned or transferred in any manner except by will or by the
laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent provided in Section 7, may be exercised by the Optionee's
legal representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and distribution.
6. TERMINATION OF THE OPTION.
The Option shall terminate and may no longer be exercised on
the first to occur of (a) the Option Expiration Date, (b) the last date for
exercising the Option following termination of the Optionee's Service as
described in Section 7, or (c) a Change in Control to the extent provided in
Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. (NOTE: If
the Option is exercised more than three (3) months after the date on which the
Optionee's Service as an Employee terminated as a result of a Disability other
than a permanent and total disability as defined in Section 22(e)(3) of the
Code, the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)
(b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death at any time prior to the expiration of six (6)
months after the date
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on which the Optionee's Service terminated, but in any event no later than
the Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within thirty (30) days
after the Optionee's termination of Service.
(c) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within thirty (30) days (or such other longer period
of time as determined by the Board, in its sole discretion) after the date on
which the Optionee's Service terminated, but in any event no later than the
Option Expiration Date.
7.2 ADDITIONAL LIMITATION ON OPTION EXERCISE. Notwithstanding
the provisions of Section 7.1, the Option may not be exercised after the
Optionee's termination of Service to the extent that the shares to be acquired
upon exercise of the Option would be subject to the Unvested Share Repurchase
Option as provided in Section 11.
7.3 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.6, the
Option shall remain exercisable until one (1) month after the date the Optionee
is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as to
the tax consequences of any such delayed exercise. The Optionee should consult
with the Optionee's own tax advisor as to the tax consequences of any such
delayed exercise.
7.4 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisor as to the tax consequences of any such delayed exercise.
8. CHANGE IN CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange
in a single or series of related transactions by the stockholders of the Company
of more than fifty percent (50%) of the voting stock of the Company;
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(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or transfer of all
or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF CHANGE IN CONTROL ON OPTION. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. For purposes of this Section 8.2, the Option
shall be deemed assumed if, following the Change in Control, the Option confers
the right to purchase in accordance with its terms and conditions, for each
share of Stock subject to the Option immediately prior to the Change in Control,
the consideration (whether stock, cash or other securities or property) to which
a holder of a share of Stock on the effective date of the Change in Control was
entitled. The Option shall terminate and cease to be outstanding effective as of
the date of the Change in Control to the extent that the Option is neither
assumed or substituted for by the Acquiring Corporation in connection with the
Change in Control nor exercised as of the date of the Change in Control.
Notwithstanding the foregoing, shares acquired upon exercise of the Option prior
to the Change in Control and any consideration received pursuant to the Change
in Control with respect to such shares shall continue to be subject to all
applicable provisions of this Option Agreement except as otherwise provided
herein. Furthermore, notwithstanding the foregoing, if the corporation the stock
of which is subject to the Option immediately prior to an Ownership Change Event
described in Section 8.1(a)(i) constituting a Change in Control is the surviving
or continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the
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provisions of Section 1504(b) of the Code, the Option shall not terminate
unless the Board otherwise provides in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
In the event of any stock dividend, stock split, reverse stock
split, recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Price and class of shares of stock subject to the Option. If a
majority of the shares which are of the same class as the shares that are
subject to the Option are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event) shares of another
corporation (the "NEW SHARES"), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner, as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 9 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the
Exercise Price be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The adjustments determined by the Board pursuant to
this Section 9 shall be final, binding and conclusive.
10. RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT.
The Optionee shall have no rights as a stockholder with
respect to any shares covered by the Option until the date of the issuance of a
certificate for the shares for which the Option has been exercised (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Section 9. If the Optionee is
an Employee, the Optionee understands and acknowledges that, except as otherwise
provided in a separate, written employment agreement between a Participating
Company and the Optionee, the Optionee's employment is "at will" and is for no
specified term. Nothing in this Option Agreement shall confer upon the Optionee
any right to continue in the Service of a Participating Company or interfere in
any way with any right of the Participating Company Group to terminate the
Optionee's Service as an Employee or Consultant, as the case may be, at any
time.
11. UNVESTED SHARE REPURCHASE OPTION.
11.1 GRANT OF UNVESTED SHARE REPURCHASE OPTION. In the event
the Optionee's Service with the Participating Company Group is terminated for
any reason or no reason, with or without cause, or, if the Optionee, the
Optionee's legal representative, or other holder of shares acquired upon
exercise of the Option attempts to sell, exchange, transfer, pledge, or
otherwise dispose of (other than pursuant to an Ownership Change Event) any
shares acquired upon exercise of the Option which exceed the Vested Shares as
defined in Section 11.2 below (the "UNVESTED SHARES"), the Company shall have
the right to repurchase the Unvested Shares under the terms and subject to the
conditions set forth in this Section 11 (the "UNVESTED SHARE REPURCHASE
Option").
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11.2 VESTED SHARES AND UNVESTED SHARES DEFINED. The "VESTED
SHARES" shall mean, on any given date, a number of shares of Stock equal to the
Number of Option Shares multiplied by the Vested Ratio determined as of such
date and rounded down to the nearest whole share. On such given date, the
"UNVESTED SHARES" shall mean the number of shares of Stock acquired upon
exercise of the Option which exceed the Vested Shares determined as of such
date.
11.3 EXERCISE OF UNVESTED SHARE REPURCHASE OPTION. The Company
may exercise the Unvested Share Repurchase Option by written notice to the
Optionee within sixty (60) days after (a) termination of the Optionee's Service
(or exercise of the Option, if later) or (b) the Company has received notice of
the attempted disposition of Unvested Shares. If the Company fails to give
notice within such sixty (60) day period, the Unvested Share Repurchase Option
shall terminate unless the Company and the Optionee have extended the time for
the exercise of the Unvested Share Repurchase Option. The Unvested Share
Repurchase Option may be exercised for all or a portion of the Unvested Shares,
as determined by the Company.
11.4 PAYMENT FOR SHARES AND RETURN OF SHARES TO COMPANY. The
purchase price per share being repurchased by the Company shall be an amount
equal to the Optionee's original cost per share, as adjusted pursuant to Section
9 (the "REPURCHASE PRICE"). The Company shall pay the aggregate Repurchase Price
to the Optionee in cash within thirty (30) days after the date of the written
notice to the Optionee of the Company's exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled. The shares being repurchased shall be delivered to
the Company by the Optionee at the same time as the delivery of the Repurchase
Price to the Optionee.
11.5 ASSIGNMENT OF UNVESTED SHARE REPURCHASE OPTION. The
Company shall have the right to assign the Unvested Share Repurchase Option at
any time, whether or not such option is then exercisable, to one or more persons
as may be selected by the Company.
11.6 OWNERSHIP CHANGE EVENT. Upon the occurrence of an
Ownership Change Event, any and all new, substituted or additional securities or
other property to which the Optionee is entitled by reason of the Optionee's
ownership of Unvested Shares shall be immediately subject to the Unvested Share
Repurchase Option and included in the terms "Stock" and "Unvested Shares" for
all purposes of the Unvested Share Repurchase Option with the same force and
effect as the Unvested Shares immediately prior to the Ownership Change Event.
While the aggregate Repurchase Price shall remain the same after such Ownership
Change Event, the Repurchase Price per Unvested Share upon exercise of the
Unvested Share Repurchase Option following such Ownership Change Event shall be
adjusted as appropriate. For purposes of determining the Vested Ratio following
an Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.
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12. RIGHT OF FIRST REFUSAL.
12.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in
Section 12.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested
Shares (the "TRANSFER SHARES") to any person or entity, including, without
limitation, any stockholder of the Participating Company Group, the Company
shall have the right to repurchase the Transfer Shares under the terms and
subject to the conditions set forth in this Section 12 (the "RIGHT OF FIRST
REFUSAL").
12.2 NOTICE OF PROPOSED TRANSFER. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall deliver written notice (the
"TRANSFER NOTICE") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "PROPOSED TRANSFEREE") and, if the transfer is voluntary, the
proposed transfer price, and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the Fair
Market Value of the Transfer Shares, as determined by the Board in good faith.
If the Optionee proposes to transfer any Transfer Shares to more than one
Proposed Transferee, the Optionee shall provide a separate Transfer Notice for
the proposed transfer to each Proposed Transferee. The Transfer Notice shall be
signed by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the transfer
of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal.
12.3 BONA FIDE TRANSFER. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 12, and the Optionee shall have no right
to transfer the Transfer Shares without first complying with the procedure
described in this Section 12. The Optionee shall not be permitted to transfer
the Transfer Shares if the proposed transfer is not bona fide.
12.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all or a portion of the Transfer Shares at the purchase price
and on the terms set forth in the Transfer Notice by delivery to the Optionee of
a notice of exercise of the Right of First Refusal within thirty (30) days after
the date the Transfer Notice is delivered to the Company. The Company's exercise
or failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice
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provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the
present value cash equivalent of the consideration described in the Transfer
Notice as reasonably determined by the Company. For purposes of the
foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to
the extent of the unpaid principal and any accrued interest canceled.
12.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the
Company fails to exercise the Right of First Refusal in full within the period
specified in Section 12.4 above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described
in the Transfer Notice, provided such transfer occurs not later than ninety (90)
days following delivery to the Company of the Transfer Notice. The Company shall
have the right to demand further assurances from the Optionee and the Proposed
Transferee (in a form satisfactory to the Company) that the transfer of the
Transfer Shares was actually carried out on the terms and conditions described
in the Transfer Notice. No Transfer Shares shall be transferred on the books of
the Company until the Company has received such assurances, if so demanded, and
has approved the proposed transfer as bona fide. Any proposed transfer on terms
and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this Section 12.
12.6 TRANSFEREES OF TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions
of this Option Agreement, including this Section 12 providing for the Right of
First Refusal with respect to any subsequent transfer. Any sale or transfer of
any shares acquired upon exercise of the Option shall be void unless the
provisions of this Section 12 are met.
12.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The
Right of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 12.9 below result in a termination of the Right
of First Refusal.
12.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall
have the right to assign the Right of First Refusal at any time, whether or not
there has been an attempted transfer, to one or more persons as may be selected
by the Company.
12.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the occurrence of
a Change in Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or (b)
the existence of a public market for the class of shares subject to the Right of
First Refusal. A
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"PUBLIC MARKET" shall be deemed to exist if (i) such stock is listed on a
national securities exchange (as that term is used in the Exchange Act) or
(ii) such stock is traded on the over-the-counter market and prices therefor
are published daily on business days in a recognized financial journal.
13. ESCROW.
13.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to
the Unvested Share Repurchase Option will be available for repurchase, the
Company may require the Optionee to deposit the certificate evidencing the
shares which the Optionee purchases upon exercise of the Option with an agent
designated by the Company under the terms and conditions of escrow and security
agreements approved by the Company. If the Company does not require such deposit
as a condition of exercise of the Option, the Company reserves the right at any
time to require the Optionee to so deposit the certificate in escrow. Upon the
occurrence of an Ownership Change Event or a change, as described in Section 9,
in the character or amount of any of the outstanding stock of the corporation
the stock of which is subject to the provisions of this Option Agreement, any
and all new, substituted or additional securities or other property to which the
Optionee is entitled by reason of the Optionee's ownership of shares of Stock
acquired upon exercise of the Option that remain, following such Ownership
Change Event or change described in Section 9, subject to the Unvested Share
Repurchase Option shall be immediately subject to the escrow to the same extent
as such shares of Stock immediately before such event. The Company shall bear
the expenses of the escrow.
13.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable
after the expiration of the Unvested Share Repurchase Option, but not more
frequently than twice each calendar year, the escrow agent shall deliver to the
Optionee the shares and any other property no longer subject to such
restrictions and no longer securing any promissory note.
13.3 NOTICES AND PAYMENTS. In the event the shares and any
other property held in escrow are subject to the Company's exercise of the
Unvested Share Repurchase Option or the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent, and any
payment required to be given to the Optionee shall be given to the escrow agent.
Within thirty (30) days after payment by the Company, the escrow agent shall
deliver the shares and any other property which the Company has purchased to the
Company and shall deliver the payment received from the Company to the Optionee.
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14. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT.
If, from time to time, there is any stock dividend, stock
split or other change, as described in Section 9, in the character or amount of
any of the outstanding stock of the corporation the stock of which is subject to
the provisions of this Option Agreement, then in such event any and all new,
substituted or additional securities to which the Optionee is entitled by reason
of the Optionee's ownership of the shares acquired upon exercise of the Option
shall be immediately subject to the Unvested Share Repurchase Option and the
Right of First Refusal with the same force and effect as the shares subject to
the Unvested Share Repurchase Option and the Right of First Refusal immediately
before such event.
15. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION.
The Optionee shall dispose of the shares acquired pursuant to
the Option only in accordance with the provisions of this Option Agreement. In
addition, the Optionee shall promptly notify the Chief Financial Officer of the
Company if the Optionee disposes of any of the shares acquired pursuant to the
Option within one (1) year after the date of the Optionee exercises all or part
of the Option or within two (2) years after the Date of Option Grant. Until such
time as the Optionee disposes of such shares in a manner consistent with the
provisions of this Option Agreement, unless otherwise expressly authorized by
the Company, the Optionee shall hold all shares acquired pursuant to the Option
in the Optionee's name (and not in the name of any nominee) for the one-year
period immediately after the exercise of the Option and the two-year period
immediately after Date of Option Grant. At any time during the one-year or
two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the Option requesting the
transfer agent for the Company's stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such
transfer shall continue notwithstanding that a legend has been placed on the
certificate pursuant to the preceding sentence.
16. LEGENDS.
The Company may at any time place legends referencing the
Unvested Share Repurchase Option, the Right of First Refusal, and any applicable
federal, state or foreign securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to carry out the provisions of
this Section. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
16.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF
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COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT."
16.2 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THIS CORPORATION."
16.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR
SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
16.4 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO
ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT LATER OF TWO YEARS
AFTER DATE OF OPTION GRANT OR ONE YEAR AFTER DATE OF EXERCISE]. SHOULD THE
REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND
FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE
CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED
UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE
NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED
ABOVE."
17. PUBLIC OFFERING.
The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including an initial public offering of
stock, made by the Company pursuant to an effective registration statement filed
under the Securities Act, the Optionee shall not offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act. The
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Optionee shall be subject to this Section provided and only if the officers
and directors of the Company are also subject to similar arrangements.
18. RESTRICTIONS ON TRANSFER OF SHARES.
No shares acquired upon exercise of the Option may be sold,
exchanged, transferred (including, without limitation, any transfer to a nominee
or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed
of, including by operation of law, in any manner which violates any of the
provisions of this Option Agreement and, except pursuant to an Ownership Change
Event, until the date on which such shares become Vested Shares, and any such
attempted disposition shall be void. The Company shall not be required (a) to
transfer on its books any shares which will have been transferred in violation
of any of the provisions set forth in this Option Agreement or (b) to treat as
owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares will have been so transferred.
19. BINDING EFFECT.
Subject to the restrictions on transfer set forth herein, this
Option Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
20. TERMINATION OR AMENDMENT.
The Board may terminate or amend the Plan or the Option at any
time; provided, however, that except as provided in Section 8.2 in connection
with a Change in Control, no such termination or amendment may adversely affect
the Option or any unexercised portion hereof without the consent of the Optionee
unless such termination or amendment is necessary to comply with any applicable
law or government regulation or is required to enable the Option to qualify as
an Incentive Stock Option. No amendment or addition to this Option Agreement
shall be effective unless in writing.
21. NOTICES.
Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given (except to the extent that this
Option Agreement provides for effectiveness only upon actual receipt of such
notice) upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address shown below that party's signature or at such other
address as such party may designate in writing from time to time to the other
party.
22. INTEGRATED AGREEMENT.
This Option Agreement and the Plan constitute the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein and therein and there are no
agreements, understandings, restrictions,
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<PAGE>
representations, or warranties among the Optionee and the Participating
Company Group with respect to such subject matter other than those as set
forth or provided for herein or therein. To the extent contemplated herein or
therein, the provisions of this Option Agreement shall survive any exercise
of the Option and shall remain in full force and effect.
23. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of Texas as such laws are applied to agreements between Texas
residents entered into and to be performed entirely within the State of Texas.
COLLEGECLUB.COM, INC.
By:
------------------------------------------
Title:
---------------------------------------
Address: 1010 2nd Avenue
East Tower, 6th Floor
San Diego, CA 92101
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in Section 11 and the Right of First Refusal set forth in
Section 12, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement. The undersigned acknowledges receipt of a
copy of the Plan.
OPTIONEE
---------------------------------
Optionee's Address:
---------------------------------
---------------------------------
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<PAGE>
Optionee:
----------------------
Date:
----------------------
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION
EXERCISE NOTICE
CollegeClub.com, Inc.
1010 2nd Avenue, East Tower, 6th Floor
San Diego, CA 92101
Attention: Corporate Controller
Ladies and Gentlemen:
1. EXERCISE OF OPTION. I was granted an incentive stock option (the
"OPTION") to purchase shares of the common stock of CollegeClub.com, Inc. (the
"COMPANY") on ___________________, 2000, pursuant to the Company's 1996 Stock
Option Plan (the "PLAN") and an Immediately Exercisable Incentive Stock Option
Agreement (the "OPTION AGREEMENT"). The Grant Number of the Option is
_____________. I hereby elect to exercise the Option as to a total of
__________________ shares of the common stock of the Company (the "SHARES"), of
which ________________ are Vested Shares and ______________ are Unvested Shares
as determined in accordance with the Option Agreement.
2. PAYMENT. Enclosed herewith is full payment in the aggregate amount
of $_____________ (representing $_______ per share) for the Shares in the manner
set forth in the Option Agreement. I authorize payroll withholding and otherwise
will make adequate provision for foreign, federal and state tax withholding
obligations of the Company, if any.
3. BINDING EFFECT. I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Unvested Share Repurchase Option and the Right
of First Refusal set forth therein, to all of which I hereby expressly assent.
This Agreement shall inure to the benefit of and be binding upon the my heirs,
executors, administrators, successors and assigns. If required by the Company, I
agree to deposit the certificate or certificates evidencing the Shares, along
with a blank stock assignment separate from certificate executed by me, with an
escrow agent designated by the Company, to be held by such escrow agent pursuant
to the Company's standard Joint Escrow Instructions.
4. TRANSFER. I am aware that Rule 144, promulgated under the Securities
Act, which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. I understand that
any sale of the Shares that might be made in reliance upon Rule 144 may only be
made in limited amounts in accordance with the terms and conditions of such rule
and that a copy of Rule 144 will be delivered to me upon request.
I agree that I will promptly notify the Corporate Controller of the
Company if I transfer any of the Shares acquired pursuant to the Option within
one (1) year from the date I exercise all or part of the Option or within two
(2) years of the date of grant of the Option.
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My address of record is:
-------------------------------------------
-------------------------------------------
My Social Security Number is:
---------------------
5. ELECTION UNDER SECTION 83(b) OF THE CODE. I understand and
acknowledge that if I am exercising the Option to purchase Unvested Shares
(i.e., shares that remain subject to the Company's Unvested Share Repurchase
Option), that I should consult with my tax advisor regarding the advisability of
filing with the Internal Revenue Service an election under Section 83(b) of the
Code, which must be filed no later than thirty (30) days after the date on which
I exercise the Option.
I acknowledge that I have been advised to consult with a tax advisor
prior to the exercise of the Option regarding the tax consequences to me of
exercising the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30
DAYS AFTER THE DATE ON WHICH I PURCHASE SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. I ACKNOWLEDGE THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS MY
SOLE RESPONSIBILITY, EVEN IF I REQUEST THE COMPANY OR ITS REPRESENTATIVES TO
FILE SUCH ELECTION ON MY BEHALF.
I understand that I am purchasing the Shares pursuant to the terms of
the Plan and my Option Agreement, copies of which I have received and carefully
read and understand.
Very truly yours,
------------------------------------
(Signature)
------------------------------------
(Optionee's Name Printed)
Receipt of the above is hereby acknowledged.
COLLEGECLUB.COM, INC.
By:
-----------------------------------------
Title:
--------------------------------------
Dated:
--------------------------------------
2
<PAGE>
EXHIBIT 10.27
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
COLLEGECLUB.COM
IMMEDIATELY EXERCISABLE
NONSTATUTORY STOCK OPTION AGREEMENT
THIS IMMEDIATELY EXERCISABLE NONSTATUTORY STOCK OPTION AGREEMENT (the
"OPTION AGREEMENT") is made and entered into as of _________, by and between
COLLEGECLUB.COM and ______________ (the "OPTIONEE").
The Company has granted to the Optionee pursuant to the Collegeclub.com
1996 Stock Option Plan (the "Plan") (formerly the Public Online Communications
Corporation 1996 Stock Option Plan) an option to purchase certain shares of
Stock, upon the terms and conditions set forth in this Option Agreement (the
"OPTION"). The Option shall in all respects be subject to the terms and
conditions of the Plan, the provisions of which are incorporated herein by
reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means ___________.
(b) "NUMBER OF OPTION SHARES" means __________ shares
of Stock, as adjusted from time to time pursuant to Section 9.
<PAGE>
(c) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
(d) "EXERCISE PRICE" means $__________ per share of
Stock, as adjusted from time to time pursuant to Section 9.
(e) "INITIAL EXERCISE DATE" means the Date of Option
Grant.
(f) "INITIAL VESTING DATE" means (check one):
X the Date of Option Grant.
---
--- ___________, 199 , the date the
Optionee's Service commenced.
(g) "VESTED RATIO" means, on any relevant date, the
ratio determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date 100%
</TABLE>
(h) "OPTION EXPIRATION DATE" means the date ten (10)
years after the Date of Option Grant.
(i) "COMPANY" means Collegeclub.com, a Delaware
corporation, or any successor corporation thereto.
(j) "DISABILITY" means the inability of the Optionee,
in the opinion of a qualified physician acceptable to the Company, to perform
the major duties of the Optionee's position with the Participating Company Group
because of the sickness or injury of the Optionee.
(k) "SECURITIES ACT" means the Securities Act of
1933, as amended.
(l) "SERVICE" means the Optionee's employment or
service with the Participating Company Group, whether in the capacity of an
Employee, a Director or a Consultant. The Optionee's Service shall not be deemed
to have terminated merely because of a change in the capacity in which the
Optionee renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. The
Optionee's
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<PAGE>
Service shall be deemed to have terminated either upon an actual termination
of Service or upon the corporation for which the Optionee performs Service
ceasing to be a Participating Company. Subject to the foregoing, the Company,
in its sole discretion, shall determine whether the Optionee's Service has
terminated and the effective date of such termination.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be a
Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option
within the meaning of Section 422(b) of the Code.
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Service terminates, or (b) the Optionee is subject to a
restriction on transfer to comply with "Pooling-of-Interests Accounting" rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS
THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. Exercise of the Option.
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<PAGE>
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein,
the Option shall be exercisable on and after the Initial Exercise Date and prior
to the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares less the number of shares previously acquired
upon exercise of the Option, subject to the Optionee's agreement that any shares
purchased upon exercise are subject to the Company's repurchase rights set forth
in Section 11 and Section 12.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the
Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by (i) full
payment of the aggregate Exercise Price for the number of shares of Stock being
purchased and (ii) an executed copy, if required herein, of the then current
forms of escrow and security agreement referenced below. The Option shall be
deemed to be exercised upon receipt by the Company of such written notice, the
aggregate Exercise Price, and, if required by the Company, such executed
agreements.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of Stock owned by the Optionee having a Fair Market Value (as determined
by the Company without regard to any restrictions on transferability applicable
to such stock by reason of federal or state securities laws or agreements with
an underwriter for the Company) not less than the aggregate Exercise Price,
(iii) by means of a Cashless Exercise, as defined in Section 4.3(c), (iv) in the
Company's sole discretion at the time the Option is exercised, by the Optionee's
promissory note for the aggregate Exercise Price, or (v) by any combination of
the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing,
the Option may not be exercised by tender to the Company of shares of Stock to
the extent such tender of Stock would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the Company's
stock. The Option may not be exercised by tender to the Company of shares of
Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means
the assignment in a form acceptable to the Company of the proceeds of a sale or
loan with respect to some or all of the shares of Stock acquired upon the
exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
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<PAGE>
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note
shall be permitted if an exercise of the Option using a promissory note would be
a violation of any law. The promissory note permitted in clause (iv) of Section
4.3(a) shall be a full recourse note in a form satisfactory to the Company, with
principal payable no more than four (4) years after the date the Option is
exercised. Interest on the principal balance of the promissory note shall be
payable in annual installments at the minimum interest rate necessary to avoid
imputed interest pursuant to all applicable sections of the Code. Such recourse
promissory note shall be secured by the shares of Stock acquired pursuant to the
then current form of security agreement as approved by the Company. At any time
the Company is subject to the regulations promulgated by the Board of Governors
of the Federal Reserve System or any other governmental entity affecting the
extension of credit in connection with the Company's securities, any promissory
note shall comply with such applicable regulations, and the Optionee shall pay
the unpaid principal and accrued interest, if any, to the extent necessary to
comply with such applicable regulations. Except as the Company in its sole
discretion shall determine, the Optionee shall pay the unpaid principal balance
of the promissory note and any accrued interest thereon upon termination of the
Optionee's Service with the Participating Company Group for any reason, with or
without cause.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Optionee is cautioned that
the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be
able to exercise the Option when desired even though the Option is vested, and
the Company shall have no obligation to issue a certificate for such shares or
release such shares from any escrow provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF
SHARES. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to such securities.
The Option may not be exercised if the issuance of shares of Stock upon exercise
5
<PAGE>
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
the Option may not be exercised unless (i) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares subject to the Option shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which
such requisite authority shall not have been obtained. As a condition to the
exercise of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or (c) a Transfer of Control to the extent
provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
6
<PAGE>
(b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's legal representative, or other person who acquired the right to
exercise the Option by reason of the Optionee's death) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. The
Optionee's Service shall be deemed to have terminated on account of death if the
Optionee dies within thirty (30) days after the Optionee's termination of
Service other than a Termination for Cause (as defined below).
(c) TERMINATION AFTER TRANSFER OF CONTROL. If the
Optionee's Service with the Participating Company Group is terminated because of
a Termination After Transfer of Control (as defined below), (i) the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's guardian
or legal representative) at any time prior to the expiration of six (6) months
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date, and (ii) the Option shall become
immediately vested in full and the Vested Ratio shall be deemed to be 1/1 as of
the date on which the Optionee's Service terminated. The Company makes no
representation as to the tax consequences if the Option is exercised more than
three (3) months after the date on which the Optionee's Service as an Employee
terminated. The Optionee should consult with the Optionee's own tax advisor as
to the tax consequences to the Optionee of any such delayed exercise.
(d) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability, death, or Termination After Transfer of Control, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee's Service terminated, may be exercised by the Optionee within thirty
(30) days (or such other longer period of time as determined by the Board, in
its sole discretion) after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.
7.2 CERTAIN DEFINITIONS.
(a) "TERMINATION AFTER TRANSFER OF CONTROL" shall
mean either of the following events occurring within twelve (12) months after a
Transfer of Control (as defined in Section 8.1(b) below):
(i) termination by the Participating Company
Group of the Optionee's Service with the Participating Company Group for any
reason other than a Termination For Cause; or
(ii) the Optionee's resignation from Service
with the Participating Company Group within a reasonable period of time
following any Constructive Termination (as defined below).
Notwithstanding any provision herein to the contrary, Termination After Transfer
of Control shall not include any termination of the Optionee's Service with the
Participating Company Group which
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<PAGE>
(1) is a Termination For Cause; (2) is a result of the Optionee's death or
Disability; (3) is a result of the Optionee's voluntary termination of
Service other than upon Constructive Termination (as defined below); or (4)
occurs prior to the effectiveness of a Transfer of Control.
(b) "TERMINATION FOR CAUSE" shall mean termination by
the Participating Company Group of the Optionee's Service with the Participating
Company Group for any of the following reasons: (i) theft, dishonesty, or
falsification of any Participating Company records; (ii) improper use or
disclosure of a Participating Company's confidential or proprietary information;
(iii) any action by the Optionee which has a detrimental effect on a
Participating Company's reputation or business; (iv) the Optionee's failure or
inability to perform any reasonable assigned duties after written notice from
the Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which breach
is not cured pursuant to the terms of such agreement; or (vi) the Optionee's
conviction of any criminal act which impairs the Optionee's ability to perform
his or her duties with the Participating Company Group.
(c) "CONSTRUCTIVE TERMINATION" shall mean any one or
more of the following:
(i) without the Optionee's express written
consent, the assignment to the Optionee of any duties, or any limitation of the
Optionee's responsibilities, substantially inconsistent with the Optionee's
positions, duties, responsibilities and status with the Participating Company
Group immediately prior to the date of the Transfer of Control;
(ii) without the Optionee's express written
consent, the relocation of the principal place of the Optionee's employment to a
location that is more than fifty (50) miles from the Optionee's principal place
of employment immediately prior to the date of the Transfer of Control, or the
imposition of travel requirements substantially more demanding of the Optionee
than such travel requirements existing immediately prior to the date of the
Transfer of Control;
(iii) any failure by the Participating
Company Group to pay, or any material reduction by the Participating Company
Group of, (1) the Optionee's base salary in effect immediately prior to the date
of the Transfer of Control (unless reductions comparable in amount and duration
are concurrently made for all other employees of the Participating Company Group
with responsibilities, organizational level and title comparable to the
Optionee's), or (2) the Optionee's bonus compensation, if any, in effect
immediately prior to the date of the Transfer of Control (subject to applicable
performance requirements with respect to the actual amount of bonus compensation
earned by the Optionee); or
(iv) any failure by the Participating
Company Group to (1) continue to provide the Optionee with the opportunity to
participate, on terms no less favorable than those in effect for the benefit of
any employee group which customarily includes a person holding the employment
position or a comparable position with the Participating Company Group then held
by the Optionee, in any benefit or compensation plans and programs, including,
but not limited to, the Participating Company Group's life, disability, health,
dental,
8
<PAGE>
medical, savings, profit sharing, stock purchase and retirement plans, if
any, in which the Optionee was participating immediately prior to the date of
the Transfer of Control, or their equivalent, or (2) provide the Optionee
with all other fringe benefits (or their equivalent) from time to time in
effect for the benefit of any employee group which customarily includes a
person holding the employment position or a comparable position with the
Participating Company Group then held by the Optionee.
7.3 ADDITIONAL LIMITATION ON OPTION EXERCISE. Notwithstanding
the provisions of Section 7.1, the Option may not be exercised after the
Optionee's termination of Service to the extent that the shares to be acquired
upon exercise of the Option would be subject to the Unvested Share Repurchase
Option as provided in Section 11. Except as the Company and the Optionee
otherwise agree, exercise of the Option pursuant to Section 7.1 following
termination of the Optionee's Service may not be made by delivery of a
promissory note as provided in Section 4.3(a).
7.4 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.6, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date.
7.5 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.
7.6 LEAVE OF ABSENCE. For purposes of Section 7.1, the
Optionee's Service with the Participating Company Group shall not be deemed to
terminate if the Optionee takes any military leave, sick leave, or other bona
fide leave of absence approved by the Company of ninety (90) days or less. In
the event of a leave of absence in excess of ninety (90) days, the Optionee's
Service shall be deemed to terminate on the ninety-first (91st) day of such
leave unless the Optionee's right to reemployment with the Participating Company
Group remains guaranteed by statute or contract. Notwithstanding the foregoing,
unless otherwise designated by the Company (or required by law), a leave of
absence shall not be treated as Service for purposes of determining the
Optionee's Vested Ratio.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
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(i) the direct or indirect sale or exchange
in a single or series of related transactions by the shareholders of the Company
of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party; or
(iii) the sale, exchange, or transfer of all
or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control. Notwithstanding the foregoing, shares acquired
upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.
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9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "NEW SHARES"), the Board may
unilaterally amend the Option to provide that the Option is exercisable for New
Shares. In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. UNVESTED SHARE REPURCHASE OPTION.
11.1 GRANT OF UNVESTED SHARE REPURCHASE OPTION. In the event
the Optionee's Service with the Participating Company Group is terminated for
any reason or no reason, with or without cause, or, if the Optionee, the
Optionee's legal representative, or other holder of shares acquired upon
exercise of the Option attempts to sell, exchange, transfer, pledge, or
otherwise dispose of (other than pursuant to an Ownership Change Event) any
shares acquired upon exercise of the Option which exceed the Vested Shares as
defined in Section 11.2 below (the "UNVESTED SHARES"), the Company shall have
the right to repurchase the Unvested Shares under the terms and subject to the
conditions set forth in this Section 11 (the "UNVESTED SHARE REPURCHASE
OPTION").
11.2 VESTED SHARES AND UNVESTED SHARES DEFINED. The "VESTED
SHARES" shall mean, on any given date, a number of shares of Stock equal to the
Number of Option Shares multiplied by the Vested Ratio determined as of such
date and rounded down to the nearest whole share. On such given date, the
"UNVESTED SHARES" shall mean the number of shares of Stock acquired upon
exercise of the Option which exceed the Vested Shares determined as of such
date.
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11.3 EXERCISE OF UNVESTED SHARE REPURCHASE OPTION. The Company
may exercise the Unvested Share Repurchase Option by written notice delivered
personally or forwarded by first class mail to the Optionee within sixty (60)
days after (a) termination of the Optionee's Service (or exercise of the Option,
if later) or (b) the Company has received notice of the attempted disposition of
Unvested Shares. If the Company fails to give notice within such sixty (60) day
period, the Unvested Share Repurchase Option shall terminate unless the Company
and the Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be exercised, if at
all, for all of the Unvested Shares, except as the Company and the Optionee
otherwise agree.
11.4 PAYMENT OF SHARES AND RETURN OF SHARES TO COMPANY. The
purchase price per share being repurchased by the Company shall be an amount
equal to the Optionee's original cost per share, as adjusted pursuant to Section
9 (the "REPURCHASE PRICE"). The Company shall pay the aggregate Repurchase Price
to the Optionee in cash within thirty (30) days after the date of personal
delivery or mailing of the written notice of the Company's exercise of the
Unvested Share Repurchase Option. For purposes of the foregoing, cancellation of
any indebtedness of the Optionee to any Participating Company shall be treated
as payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled. The shares being repurchased shall be delivered to
the Company by the Optionee at the same time as the delivery of the Repurchase
Price to the Optionee.
11.5 ASSIGNMENT OF UNVESTED SHARE REPURCHASE OPTION. The
Company shall have the right to assign the Unvested Share Repurchase Option at
any time, whether or not such option is then exercisable, to one or more persons
as may be selected by the Company.
11.6 OWNERSHIP CHANGE EVENT. Upon the occurrence of an
Ownership Change Event, any and all new, substituted or additional securities or
other property to which Optionee is entitled by reason of the Optionee's
ownership of Unvested Shares shall be immediately subject to the Unvested Share
Repurchase Option and included in the terms "Stock" and "Unvested Shares" for
all purposes of the Unvested Share Repurchase Option with the same force and
effect as the Unvested Shares immediately prior to the Ownership Change Event.
While the aggregate Repurchase Price shall remain the same after such Ownership
Change Event, the Repurchase Price per Unvested Share upon exercise of the
Unvested Share Repurchase Option following such Ownership Change Event shall be
adjusted as appropriate. For purposes of determining the Vested Ratio following
an Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.
12. RIGHT OF FIRST REFUSAL.
12.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in
Section 12.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested
Shares (the "TRANSFER SHARES") to any person or entity, including, without
limitation, any shareholder of the Participating Company Group, the Company
shall have the
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right to repurchase the Transfer Shares under the terms and subject to the
conditions set forth in this Section 11 (the "RIGHT OF FIRST REFUSAL").
12.2 NOTICE OF PROPOSED TRANSFER. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice (the
"TRANSFER NOTICE") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "PROPOSED TRANSFEREE") and, if the transfer is voluntary, the
proposed transfer price, and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the Fair
Market Value of the Transfer Shares, as determined by the Board in good faith.
If the Optionee proposes to transfer any Transfer Shares to more than one
Proposed Transferee, the Optionee shall provide a separate Transfer Notice for
the proposed transfer to each Proposed Transferee. The Transfer Notice shall be
signed by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the transfer
of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal.
12.3 BONA FIDE TRANSFER. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 12, and the Optionee shall have no right
to transfer the Transfer Shares without first complying with the procedure
described in this Section 12. The Optionee shall not be permitted to transfer
the Transfer Shares if the proposed transfer is not bona fide.
12.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all, but not less than all, of the Transfer Shares (except as
the Company and the Optionee otherwise agree) at the purchase price and on the
terms set forth in the Transfer Notice by delivery to the Optionee of a notice
of exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the present
value cash equivalent of the consideration described in the Transfer Notice as
reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
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12.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the
Company fails to exercise the Right of First Refusal in full (or to such lesser
extent as the Company and the Optionee otherwise agree) within the period
specified in Section 12.4 above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described
in the Transfer Notice, provided such transfer occurs not later than ninety (90)
days following delivery to the Company of the Transfer Notice. The Company shall
have the right to demand further assurances from the Optionee and the Proposed
Transferee (in a form satisfactory to the Company) that the transfer of the
Transfer Shares was actually carried out on the terms and conditions described
in the Transfer Notice. No Transfer Shares shall be transferred on the books of
the Company until the Company has received such assurances, if so demanded, and
has approved the proposed transfer as bona fide. Any proposed transfer on terms
and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this Section 12.
12.6 TRANSFEREES OF TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions
of this Option Agreement, including this Section 12 providing for the Right of
First Refusal with respect to any subsequent transfer. Any sale or transfer of
any shares acquired upon exercise of the Option shall be void unless the
provisions of this Section 12 are met.
12.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The
Right of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 12.9 below result in a termination of the Right
of First Refusal.
12.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall
have the right to assign the Right of First Refusal at any time, whether or not
there has been an attempted transfer, to one or more persons as may be selected
by the Company.
12.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the occurrence of
a Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or (b)
the existence of a public market for the class of shares subject to the Right of
First Refusal. A "PUBLIC MARKET" shall be deemed to exist if (i) such stock is
listed on a national securities exchange (as that term is used in the Exchange
Act) or (ii) such stock is traded on the over-the-counter market and prices
therefor are published daily on business days in a recognized financial journal.
13. ESCROW.
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13.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to
the Unvested Share Repurchase Option or the Right of First Refusal or securing
any promissory note will be available for repurchase, the Company may require
the Optionee to deposit the certificate evidencing the shares which the Optionee
purchases upon exercise of the Option with an agent designated by the Company
under the terms and conditions of escrow and security agreements approved by the
Company. If the Company does not require such deposit as a condition of exercise
of the Option, the Company reserves the right at any time to require the
Optionee to so deposit the certificate in escrow. Upon the occurrence of an
Ownership Change Event or a change, as described in Section 9, in the character
or amount of any of the outstanding stock of the corporation the stock of which
is subject to the provisions of this Option Agreement, any and all new,
substituted or additional securities or other property to which the Optionee is
entitled by reason of the Optionee's ownership of shares of Stock acquired upon
exercise of the Option that remain, following such Ownership Change Event or
change described in Section 9, subject to the Unvested Share Repurchase Option,
the Right of First Refusal or any security interest held by the Company shall be
immediately subject to the escrow to the same extent as such shares of Stock
immediately before such event. The Company shall bear the expenses of the
escrow.
13.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable
after the expiration of the Unvested Share Repurchase Option and the Right of
First Refusal and after full repayment of any promissory note secured by the
shares or other property in escrow, but not more frequently than twice each
calendar year, the escrow agent shall deliver to the Optionee the shares and any
other property no longer subject to such restrictions and no longer securing any
promissory note.
13.3 NOTICES AND PAYMENTS. In the event the shares and any
other property held in escrow are subject to the Company's exercise of the
Unvested Share Repurchase Option or the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent, and any
payment required to be given to the Optionee shall be given to the escrow agent.
Within thirty (30) days after payment by the Company, the escrow agent shall
deliver the shares and any other property which the Company has purchased to the
Company and shall deliver the payment received from the Company to the Optionee.
14. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from time to
time, there is any stock dividend, stock split or other change, as described in
Section 9, in the character or amount of any of the outstanding stock of the
corporation the stock of which is subject to the provisions of this Option
Agreement, then in such event any and all new, substituted or additional
securities to which the Optionee is entitled by reason of the Optionee's
ownership of the shares acquired upon exercise of the Option shall be
immediately subject to the Unvested Share Repurchase Option, the Right of First
Refusal, and any security interest held by the Company with the same force and
effect as the shares subject to the Unvested Share Repurchase Option, the Right
of First Refusal and such security interest immediately before such event.
15. LEGENDS. The Company may at any time place legends referencing the
Unvested Share Repurchase Option, the Right of First Refusal, and any applicable
federal, state or foreign securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in
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the possession of the Optionee in order to carry out the provisions of this
Section. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
15.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
15.2 Any legend required to be placed thereon by the
Commissioner of Corporations of the State of California.
15.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THIS CORPORATION."
15.4 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR
SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
16. PUBLIC OFFERING. The Optionee hereby agrees that in the event of
any underwritten public offering of stock, including an initial public offering
of stock, made by the Company pursuant to an effective registration statement
filed under the Securities Act, the Optionee shall not offer, sell, contract to
sell, pledge, hypothecate, grant any option to purchase or make any short sale
of, or otherwise dispose of any shares of stock of the Company or any rights to
acquire stock of the Company for such period of time from and after the
effective date of such registration statement as may be established by the
underwriter for such public offering; provided, however, that such period of
time shall not exceed one hundred eighty (180) days from the effective date of
the registration statement to be filed in connection with such public offering.
The foregoing limitation shall not apply to shares registered in the public
offering under the Securities Act. The Optionee shall be subject to this Section
provided and only if the officers and directors of the Company are also subject
to similar arrangements.
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17. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
18. TERMINATION OR AMENDMENT. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that except as provided in Section
8.2 in connection with a Transfer of Control, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation. No amendment or
addition to this Option Agreement shall be effective unless in writing.
19. INTEGRATED AGREEMENT. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Participating
Company Group with respect to the subject matter contained herein and therein
and there are no agreements, understandings, restrictions, representations, or
warranties among the Optionee and the Participating Company Group with respect
to such subject matter other than those as set forth or provided for herein or
therein. To the extent contemplated herein or therein, the provisions of this
Option Agreement shall survive any exercise of the Option and shall remain in
full force and effect.
20. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
COLLEGECLUB.COM
By:
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CollegeClub.com
1010 Second Avenue, Suire 600
San Diego, CA 92101
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in Section 11 and the Right of First Refusal set forth in
Section 12, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement. The undersigned acknowledges receipt of a
copy of the Plan.
OPTIONEE
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Date:
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Optionee: ________________
Date:________________
IMMEDIATELY EXERCISABLE
NONSTATUTORY STOCK OPTION
EXERCISE NOTICE
CollegeClub.com
1010 Second Avenue, Suite 600
San Diego, CA 92101
Attention: Treasurer
Ladies and Gentlemen:
1. EXERCISE OF OPTION. I was granted anonstatutory stock option (the
"OPTION") to purchase shares of the common stock of CollegeClub.com (the
"COMPANY") on ___________________, 19___, pursuant to the Company's 1996 Stock
Option Plan (the "PLAN") and pursuant to the Immediately Exercisable
Nonstatutory Stock Option Agreement dated __________________, 19___ (the "OPTION
AGREEMENT"). The Grant Number of the Option is _____________. I hereby elect to
exercise the Option as to a total of __________________ shares of the common
stock of the Company (the "SHARES"), of which ________________ are Vested Shares
and ______________ are Unvested Shares as determined in accordance with the
Option Agreement.
2. PAYMENTS. Enclosed herewith is full payment in the aggregate amount
of $_____________ (representing $_______ per share) for the Shares in the manner
set forth in the Option Agreement. I will make adequate provision for foreign,
federal and state tax withholdings, if any.
3. BINDING EFFECT. I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Unvested Share Repurchase Option and the Right
of First Refusal set forth therein, to all of which I hereby expressly assent.
This Agreement shall inure to the benefit of and be binding upon the my heirs,
executors, administrators, successors and assigns. I agree to deposit the
certificate or certificates evidencing the Shares, along with a blank stock
assignment separate from certificate executed by me, with an escrow agent
designated by the Company, to be held by such escrow agent pursuant to the
Company's standard Joint Escrow Instructions, an executed copy of which I have
delivered herewith.
<PAGE>
4. TRANSFER. I am aware that Rule 144, promulgated under the Securities
Act, which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. I understand that
any sale of the Shares that might be made in reliance upon Rule 144 may only be
made in limited amounts in accordance with the terms and conditions of such rule
and that a copy of Rule 144 will be delivered to me upon request.
My address of record is:
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My Social Security Number is:
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5. ELECTION UNDER SECTION 83(b) OF THE CODE. I understand and
acknowledge that if I am exercising the Option to purchase Unvested Shares
(i.e., shares that remain subject to the Company's Unvested Share Repurchase
Option), that I should consult with my tax advisor regarding the advisability of
filing with the Internal Revenue Service an election under Section 83(b) of the
Code, which must be filed no later than thirty (30) days after the date on which
I exercise the Option.
I acknowledge that I have been advised to consult with a tax advisor
prior to the exercise of the Option regarding the tax consequences to me of
exercising the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30
DAYS AFTER THE DATE ON WHICH I PURCHASE SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. I ACKNOWLEDGE THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS MY
SOLE RESPONSIBILITY, EVEN IF I REQUEST THE COMPANY OR ITS REPRESENTATIVES TO
FILE SUCH ELECTION ON MY BEHALF.
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I understand that I am purchasing the Shares pursuant to the terms of
the CollegeClub.com 1996 Stock Option Plan and my Option Agreement, copies of
which I have received and carefully read and understand.
Very truly yours,
------------------------------------
(Signature)
------------------------------------
(Optionee's Name Printed)
Receipt of the above is hereby acknowledged.
COLLEGECLUB.COM
By:
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Title:
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Dated:
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EXHIBIT 10.28
COLLEGECLUB.COM, INC.
2000 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the
interests of CollegeClub.com, Inc., a Delaware corporation, by providing
eligible persons in the Corporation's service with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in such service.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity
incentives programs:
- the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,
- the Salary Investment Option Grant Program under
which eligible employees may elect to have a portion of their base salary
invested each year in special option grants,
- the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued shares of
Common Stock directly, either through the immediate purchase of such shares or
as a bonus for services rendered the Corporation (or any Parent or Subsidiary),
- the Automatic Option Grant Program under which
eligible non-employee Board members shall automatically receive option grants at
designated intervals over their period of continued Board service, and
- the Director Fee Option Grant Program under which
non-employee Board members may elect to have all or any portion of their annual
retainer fee otherwise payable in cash applied to a special stock option grant.
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B. The provisions of Articles One and Seven shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to Section 16 Insiders. Administration of the
Discretionary Option Grant and Stock Issuance Programs with respect to all other
persons eligible to participate in those programs may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer those programs with respect to all such
persons. However, any discretionary option grants or stock issuances for members
of the Primary Committee must be authorized by a disinterested majority of the
Board.
B. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any stock option or stock issuance thereunder.
D. The Primary Committee shall have the sole and exclusive
authority to determine which Section 16 Insiders and other highly compensated
Employees shall be eligible for participation in the Salary Investment Option
Grant Program for one or more calendar years. However, all option grants under
the Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
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F. Administration of the Automatic Option Grant and Director
Fee Option Grant Programs shall be self-executing in accordance with the terms
of those programs, and no Plan Administrator shall exercise any discretionary
functions with respect to any option grants or stock issuances made under those
programs.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or
the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent
advisors who provide services to the Corporation (or any Parent or
Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive such grants, the time or times
when those grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive such issuances, the time or times when the issuances are
to be made, the number of shares to be issued to each Participant, the vesting
schedule (if any) applicable to the issued shares and the consideration for such
shares.
D. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary Option Grant
Program or to effect stock issuances in accordance with the Stock Issuance
Program.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals who
first become non-employee Board members on or after the Underwriting Date,
whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as non-employee
Board members at one or more Annual Stockholders Meetings held after the
Underwriting Date. A non-employee Board member who has previously been in the
employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to
receive an option grant
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under the Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to receive periodic option
grants under the Automatic Option Grant Program while he or she continues to
serve as a non-employee Board member.
F. All non-employee Board members shall be eligible to
participate in the Director Fee Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed
twenty-six million seven hundred thousand (26,700,000) shares. Such reserve
shall consist of (i) the number of shares estimated to remain available for
issuance, as of the Plan Effective Date, under the Predecessor Plan as last
approved by the Corporation's stockholders, including the shares subject to
outstanding options under the Predecessor Plan, (ii) plus an additional increase
of approximately six million (6,000,000) shares to be approved by the
Corporation's stockholders prior to the Underwriting Date.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of January
each calendar year during the term of the Plan, beginning with calendar year
2001, by an amount equal to five percent (5%) of the total number of shares of
Common Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall any such annual increase exceed
six million two hundred fifty thousand (6,250,000) shares.
C. No one person participating in the Plan may receive stock
options, separately exercisable stock appreciation rights and direct stock
issuances for more than one million (1,000,000) shares of Common Stock in the
aggregate per calendar year.
D. Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plan) shall
be available for subsequent issuance under the Plan to the extent (i) those
options expire or terminate for any reason prior to exercise in full or (ii) the
options are cancelled in accordance with the cancellation-regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. However,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
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issuance. Shares of Common Stock underlying one or more stock appreciation
rights exercised under Section IV of Article Two, Section III of Article Three,
Section II of Article Five or Section III of Article Six of the Plan shall NOT
be available for subsequent issuance under the Plan.
E. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made by the Plan Administrator to (i) the maximum number and/or class
of securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year, (iii) the number and/or class of securities for which grants
are subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (iv) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Plan, (v) the number and/or class of securities and exercise
price per share in effect under each outstanding option incorporated into this
Plan from the Predecessor Plan and (vi) the maximum number and/or class of
securities by which the share reserve is to increase automatically each calendar
year pursuant to the provisions of Section V.B of this Article One. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the
Plan Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I of
Article Seven and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the
Corporation,
(ii) shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date, or
(iii) to the extent the option is exercised
for vested shares, through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income
and employment taxes required to be withheld by the Corporation by
reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
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B. EXERCISE AND TERM OF OPTIONS. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise
of any options held by the Optionee at the time of cessation of Service or
death:
(i) Any option outstanding at the time of
the Optionee's cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be determined
by the Plan Administrator and set forth in the documents evidencing the
option, but no such option shall be exercisable after the expiration of
the option term.
(ii) Any option held by the Optionee at the
time of death and exercisable in whole or in part at that time may be
subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or the laws of inheritance or by the
Optionee's designated beneficiary or beneficiaries of that option.
(iii) Should the Optionee's Service be
terminated for Misconduct or should the Optionee otherwise engage in
Misconduct while holding one or more outstanding options under this
Article Two, then all those options shall terminate immediately and
cease to be outstanding.
(iv) During the applicable post-Service
exercise period, the option may not be exercised in the aggregate for
more than the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of Service. Upon
the expiration of the applicable exercise period or (if earlier) upon
the expiration of the option term, the option shall terminate and cease
to be outstanding for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable for
vested shares.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to:
(i) extend the period of time for which the
option is to remain exercisable following the Optionee's cessation of
Service from the limited exercise period otherwise in effect for that
option to such greater period of time as the Plan Administrator shall
deem appropriate, but in no event beyond the expiration of the option
term, and/or
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(ii) permit the option to be exercised,
during the applicable post-Service exercise period, not only with
respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more additional installments in
which the Optionee would have vested had the Optionee continued in
Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, Incentive Options shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or the laws of
inheritance following the Optionee's death. Non-Statutory Options shall be
subject to the same restriction, except that a Non-Statutory Option may be
assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's family or to a trust established exclusively for one
or more such family members or to Optionee's former spouse, to the extent such
assignment is in connection with the Optionee's estate plan or pursuant to a
domestic relations order. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. Notwithstanding the foregoing, the Optionee may also
designate one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall NOT be subject to the terms of this Section II.
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A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
B. EXERCISE PRICE. The exercise price per share in effect for
each Incentive Option shall not be less than one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the exercise price per share shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term shall not
exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option under the Discretionary Option Grant Program shall automatically
accelerate so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become exercisable for all the shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully vested shares of Common Stock. However, an
outstanding option shall NOT become exercisable on such an accelerated basis if
and to the extent: (i) such option is, in connection with the Corporate
Transaction, to be assumed by the successor corporation (or parent thereof) or
(ii) such option is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Corporate Transaction on any shares for which the option is not otherwise at
that time exercisable and provides for subsequent payout in accordance with the
same exercise/vesting schedule applicable to those option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.
B. All outstanding repurchase rights under the Discretionary
Option Grant Program shall automatically terminate, and the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction, except to the extent: (i) those repurchase
rights are to be assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
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C. Immediately following the consummation of the Corporate
Transaction, all outstanding options under the Discretionary Option Grant
Program shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year and (iv) the maximum number and/or class of
securities by which the share reserve is to increase automatically each calendar
year. To the extent the actual holders of the Corporation's outstanding Common
Stock receive cash consideration for their Common Stock in consummation of the
Corporate Transaction, the successor corporation may, in connection with the
assumption of the outstanding options under the Discretionary Option Grant
Program, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.
E. The Plan Administrator shall have the discretionary
authority to structure one or more outstanding options under the Discretionary
Option Grant Program so that those options shall, immediately prior to the
effective date of such Corporate Transaction, become exercisable for all the
shares of Common Stock at the time subject to those options and may be exercised
for any or all of those shares as fully vested shares of Common Stock, whether
or not those options are to be assumed in the Corporate Transaction. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall not be assignable
in connection with such Corporate Transaction and shall accordingly terminate
upon the consummation of such Corporate Transaction, and the shares subject to
those terminated rights shall thereupon vest in full.
F. The Plan Administrator shall have full power and authority
to structure one or more outstanding options under the Discretionary Option
Grant Program so that those options shall become exercisable for all the shares
of Common Stock at the time subject to those options in the event the Optionee's
Service is subsequently terminated by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of any Corporate Transaction in which those options are assumed
and do not otherwise accelerate. In addition, the Plan Administrator may
structure one or more of the Corporation's repurchase rights so that those
rights shall immediately terminate with respect to any shares held by the
Optionee at the time of his or her Involuntary Termination, and the shares
subject to those terminated repurchase rights shall accordingly vest in full at
that time.
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G. The Plan Administrator shall have the discretionary
authority to structure one or more outstanding options under the Discretionary
Option Grant Program so that those options shall, immediately prior to the
effective date of a Change in Control, become exercisable for all the shares of
Common Stock at the time subject to those options and may be exercised for any
or all of those shares as fully vested shares of Common Stock. In addition, the
Plan Administrator shall have the discretionary authority to structure one or
more of the Corporation's repurchase rights under the Discretionary Option Grant
Program so that those rights shall terminate automatically upon the consummation
of such Change in Control, and the shares subject to those terminated rights
shall thereupon vest in full. Alternatively, the Plan Administrator may
condition the automatic acceleration of one or more outstanding options under
the Discretionary Option Grant Program and the termination of one or more of the
Corporation's outstanding repurchase rights under such program upon the
subsequent termination of the Optionee's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of such Change in Control.
H. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the Discretionary
Option Grant Program (including outstanding options incorporated from the
Predecessor Plan) and to grant in substitution new options covering the same or
a different number of shares of Common Stock but with an exercise price per
share based on the Fair Market Value per share of Common Stock on the new grant
date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority
to grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the
right, exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying option for
shares of Common Stock and
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the surrender of that option in exchange for a distribution from the
Corporation in an amount equal to the excess of (a) the Fair Market
Value (on the option surrender date) of the number of shares in which
the Optionee is at the time vested under the surrendered option (or
surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.
(ii) No such option surrender shall be
effective unless it is approved by the Plan Administrator, either at
the time of the actual option surrender or at any earlier time. If the
surrender is so approved, then the distribution to which the Optionee
shall be entitled may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash, or partly in shares
and partly in cash, as the Plan Administrator shall in its sole
discretion deem appropriate.
(iii) If the surrender of an option is not
approved by the Plan Administrator, then the Optionee shall retain
whatever rights the Optionee had under the surrendered option (or
surrendered portion thereof) on the option surrender date and may
exercise such rights at any time prior to the LATER of (a) five (5)
business days after the receipt of the rejection notice or (b) the last
day on which the option is otherwise exercisable in accordance with the
terms of the documents evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the option grant
date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be
granted limited stock appreciation rights with respect to their
outstanding options.
(ii) Upon the occurrence of a Hostile
Take-Over, each individual holding one or more options with such a
limited stock appreciation right shall have the unconditional right
(exercisable for a thirty (30)-day period following such Hostile
Take-Over) to surrender each such option to the Corporation. In return
for the surrendered option, the Optionee shall receive a cash
distribution from the Corporation in an amount equal to the excess of
(A) the Take-Over Price of the shares of Common Stock at the time
subject to such option (whether or not the option is otherwise at that
time exercisable for those shares) over (B) the aggregate exercise
price payable for those shares. Such cash distribution shall be paid
within five (5) days following the option surrender date.
(iii) At the time such limited stock
appreciation right is granted, the Plan Administrator shall pre-approve
any subsequent exercise of that right in accordance with the terms of
this Paragraph C. Accordingly, no further approval of the Plan
Administrator or the Board shall be required at the time of the actual
option surrender and cash distribution.
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ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive
authority to determine the calendar year or years (if any) for which the Salary
Investment Option Grant Program is to be in effect and to select the Section 16
Insiders and other highly compensated Employees eligible to participate in the
Salary Investment Option Grant Program for such calendar year or years. Each
selected individual who elects to participate in the Salary Investment Option
Grant Program must, prior to the start of each calendar year of participation,
file with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Grant Program on the first trading day in January of the calendar
year for which the salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one
or more documents in the form approved by the Plan Administrator; PROVIDED,
however, that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three
and one-third percent (33-1/3%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common
Stock subject to the option shall be determined pursuant to the following
formula (rounded down to the nearest whole number):
X = A DIVIDED BY (B x 66-2/3%), where
X is the number of option shares,
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A is the dollar amount by which the Optionee's base
salary is to be reduced for the calendar year pursuant to his
or her election under the Salary Investment Option Grant
Program, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the EARLIER of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or the laws of inheritance or by the designated beneficiary
or beneficiaries of the option. Such right of exercise shall lapse, and the
option shall terminate, upon the EARLIER of (i) the expiration of the ten
(10)-year option term or (ii) the three (3)-year period measured from the date
of the Optionee's cessation of Service. However, the option shall, immediately
upon the Optionee's cessation of Service for any reason, terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.
III. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE
TAKE-OVER
A. In the event of a Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. Each such outstanding option shall
terminate immediately following the Corporate Transaction, except to the extent
assumed by the successor corporation (or parent thereof) in such Corporate
Transaction. Any option so assumed and shall remain exercisable for the fully
vested shares until the EARLIER of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.
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B. In the event of a Change in Control while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Change in
Control, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. The option shall remain so exercisable
until the EARLIEST to occur of (i) the expiration of the ten (10)-year option
term, (ii) the expiration of the three (3)-year period measured from the date of
the Optionee's cessation of Service, (iii) the termination of the option in
connection with a Corporate Transaction or (iv) the surrender of the option in
connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over while the
Optionee remains in Service, such Optionee shall have a thirty (30)-day period
in which to surrender to the Corporation each outstanding option held by him or
her under the Salary Investment Option Grant Program. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at
the time subject to the surrendered option (whether or not the option is
otherwise at the time exercisable for those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the surrender of the option to the Corporation.
The Primary Committee shall, at the time the option with such limited stock
appreciation right is granted under the Salary Investment Option Grant Program,
pre-approve any subsequent exercise of that right in accordance with the terms
of this Paragraph C. Accordingly, no further approval of the Primary Committee
or the Board shall be required at the time of the actual option surrender and
cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, PROVIDED the aggregate exercise price
payable for such securities shall remain the same. To the extent the actual
holders of the Corporation's outstanding Common Stock receive cash consideration
for their Common Stock in consummation of the Corporate Transaction, the
successor corporation may, in connection with the assumption of the outstanding
options under the Salary Investment Option Grant Program, substitute one or more
shares of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Corporate Transaction.
E. The grant of options under the Salary Investment Option
Grant Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
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IV. REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below. Shares of Common Stock
may also be issued under the Stock Issuance Program pursuant to share right
awards which entitle the recipients to receive those shares upon the attainment
of designated performance goals.
A. PURCHASE PRICE.
1. The purchase price per share shall be fixed by the
Plan Administrator, but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article
Seven, shares of Common Stock may be issued under the Stock Issuance Program for
any of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the
Corporation (or any Parent or Subsidiary).
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program shall be
determined by the Plan Administrator and incorporated into the Stock Issuance
Agreement. Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards which entitle the recipients to receive
those shares upon the attainment of designated performance goals.
2. Any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
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other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder rights
with respect to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall have the right to vote such
shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive
the surrender and cancellation of one or more unvested shares of Common Stock
which would otherwise occur upon the cessation of the Participant's Service or
the non-attainment of the performance objectives applicable to those shares.
Such waiver shall result in the immediate vesting of the Participant's interest
in the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
6. Outstanding share right awards under the Stock
Issuance Program shall automatically terminate, and no shares of Common Stock
shall actually be issued in satisfaction of those awards, if the performance
goals established for such awards are not attained. The Plan Administrator,
however, shall have the discretionary authority to issue shares of Common Stock
under one or more outstanding share right awards as to which the designated
performance goals have not been attained.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights
under the Stock Issuance Program shall terminate automatically, and all the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Corporate Transaction, except to the extent (i)
those repurchase rights are to be assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed in the Stock
Issuance Agreement.
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B. The Plan Administrator shall have the discretionary
authority to structure one or more of the Corporation's repurchase rights under
the Stock Issuance Program so that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).
C. The Plan Administrator shall also have the discretionary
authority to structure one or more of the Corporation's repurchase rights under
the Stock Issuance Program so that those rights shall automatically terminate in
whole or in part, and the shares of Common Stock subject to those terminated
rights shall immediately vest, either upon the occurrence of a Change in Control
or upon the subsequent termination of the Participant's Service by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of that Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
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ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates
specified below:
1. Each individual who is first elected or appointed
as a non-employee Board member at any time on or after the Underwriting Date
shall automatically be granted, on the date of such initial election or
appointment, a Non-Statutory Option to purchase fifty thousand (50,000) shares
of Common Stock, provided that individual has not previously been in the employ
of the Corporation or any Parent or Subsidiary.
2. On the date of each Annual Stockholders Meeting
held after the Underwriting Date, each individual who is to continue to serve as
a non-employee Board member, whether or not that individual is standing for
re-election to the Board at that particular Annual Meeting, shall automatically
be granted a Non-Statutory Option to purchase ten thousand (10,000) shares of
Common Stock, provided such individual has served as a non-employee Board member
for at least six (6) months. There shall be no limit on the number of such
10,000-share option grants any one non-employee Board member may receive over
his or her period of Board service, and non-employee Board members who have
previously been in the employ of the Corporation (or any Parent or Subsidiary)
or who have otherwise received one or more stock option grants from the
Corporation prior to the Underwriting Date shall be eligible to receive one or
more such annual option grants over their period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more
of the alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10)
years measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
immediately exercisable for any or all of the option shares. However, any
unvested shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares. The shares subject to each
initial 50,000-share grant shall vest, and the Corporation's repurchase right
shall
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<PAGE>
lapse, in a series of four (4) successive equal annual installments upon the
Optionee's completion of each year of service as a Board member over the four
(4)-year period measured from the option grant date. The shares subject to each
annual 10,000-share option grant shall vest in one installment upon the
Optionee's completion of the one (1)-year period of service measured from the
grant date.
E. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Five may be assigned in whole or in part during the Optionee's lifetime
to one or more members of the Optionee's family or to a trust established
exclusively for one or more such family members or to Optionee's former spouse,
to the extent such assignment is in connection with the Optionee's estate plan
or pursuant to a domestic relations order. The assigned portion may only be
exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate. The Optionee may also designate one
or more persons as the beneficiary or beneficiaries of his or her outstanding
options under this Article Five, and those options shall, in accordance with
such designation, automatically be transferred to such beneficiary or
beneficiaries upon the Optionee's death while holding those options. Such
beneficiary or beneficiaries shall take the transferred options subject to all
the terms and conditions of the applicable agreement evidencing each such
transferred option, including (without limitation) the limited time period
during which the option may be exercised following the Optionee's death.
F. TERMINATION OF BOARD SERVICE. The following provisions
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of
Optionee's death, the personal representative of the Optionee's estate
or the person or persons to whom the option is transferred pursuant to
the Optionee's will or the laws of inheritance or the designated
beneficiary or beneficiaries of such option) shall have a twelve
(12)-month period following the date of such cessation of Board service
in which to exercise each such option.
(ii) During the twelve (12)-month exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares of Common Stock for which the option is
exercisable at the time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as
a Board member by reason of death or Permanent Disability, then all
shares at the time subject to the option shall immediately vest so that
such option may, during the twelve (12)-month exercise period following
such cessation of Board service, be exercised for any or all of those
shares as fully vested shares of Common Stock.
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(iv) In no event shall the option remain
exercisable after the expiration of the option term. Upon the
expiration of the twelve (12)-month exercise period or (if earlier)
upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Board service for any reason other than death
or Permanent Disability, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.
II. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE
TAKE-OVER
A. In the event of a Corporate Transaction while the Optionee
remains a Board member, the shares of Common Stock at the time subject to each
outstanding option held by such Optionee under this Automatic Option Grant
Program but not otherwise vested shall automatically vest in full so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the option shares as fully vested shares
of Common Stock and may be exercised for any or all of those vested shares.
Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
B. In the event of a Change in Control while the Optionee
remains a Board member, the shares of Common Stock at the time subject to each
outstanding option held by such Optionee under this Automatic Option Grant
Program but not otherwise vested shall automatically vest in full so that each
such option shall, immediately prior to the effective date of the Change in
Control, become exercisable for all the option shares as fully vested shares of
Common Stock and may be exercised for any or all of those vested shares. Each
such option shall remain exercisable for such fully vested option shares until
the expiration or sooner termination of the option term or the surrender of the
option in connection with a Hostile Take-Over.
C. All outstanding repurchase rights under this under this
Automatic Option Grant Program shall automatically terminate, and the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction or Change in Control.
D. Upon the occurrence of a Hostile Take-Over while the
Optionee remains in Board service, such Optionee shall have a thirty (30)-day
period in which to surrender to the Corporation each of his or her outstanding
options under this Automatic Option Grant Program. The Optionee shall in return
be entitled to a cash distribution from the Corporation in an amount equal to
the excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution
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<PAGE>
shall be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board or any Plan Administrator shall
be required at the time of the actual option surrender and cash distribution.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, PROVIDED the aggregate exercise price
payable for such securities shall remain the same. To the extent the actual
holders of the Corporation's outstanding Common Stock receive cash consideration
for their Common Stock in consummation of the Corporate Transaction, the
successor corporation may, in connection with the assumption of the outstanding
options under the Automatic Option Grant Program, substitute one or more shares
of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Corporate Transaction.
F. The grant of options under the Automatic Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
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ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive
authority to determine the calendar year or years for which the Director Fee
Option Grant Program is to be in effect. For each such calendar year the program
is in effect, each non-employee Board member may irrevocably elect to apply all
or any portion of the annual retainer fee otherwise payable in cash for his or
her service on the Board for that year to the acquisition of a special option
grant under this Director Fee Option Grant Program. Such election must be filed
with the Corporation's Chief Financial Officer prior to the first day of the
calendar year for which the annual retainer fee which is the subject of that
election is otherwise payable. Each non-employee Board member who files such a
timely election shall automatically be granted an option under this Director Fee
Option Grant Program on the first trading day in January in the calendar year
for which the retainer fee election is in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the
terms and conditions specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three
and one-third percent (33-1/3%) of the Fair Market Value per share of Common
Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common
Stock subject to the option shall be determined pursuant to the following
formula (rounded down to the nearest whole number):
X = A DIVIDED BY (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject
to the non-employee Board member's election under this
Director Fee Option Grant Program, and
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B is the Fair Market Value per share of Common Stock
on the option grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) equal monthly installments upon the
Optionee's completion of each calendar month of Board service during the
calendar year for which the retainer fee election is in effect. Each option
shall have a maximum term of ten (10) years measured from the option grant date.
D. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Six may be assigned in whole or in part during the Optionee's lifetime
to one or more members of the Optionee's family or to a trust established
exclusively for one or more such family members or to Optionee's former spouse,
to the extent such assignment is in connection with Optionee's estate plan or
pursuant to a domestic relations order. The assigned portion may only be
exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate. The Optionee may also designate one
or more persons as the beneficiary or beneficiaries of his or her outstanding
options under this Article Six, and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee's death.
E. TERMINATION OF BOARD SERVICE. Should the Optionee cease
Board service for any reason (other than death or Permanent Disability) while
holding one or more options under this Director Fee Option Grant Program, then
each such option shall remain exercisable, for any or all of the shares for
which the option is exercisable at the time of such cessation of Board service,
until the EARLIER of (i) the expiration of the ten (10)-year option term or (ii)
the expiration of the three (3)-year period measured from the date of such
cessation of Board service. However, each option held by the Optionee under this
Director Fee Option Grant Program at the time of his or her cessation of Board
service shall immediately terminate and cease to remain outstanding with respect
to any and all shares of Common Stock for which the option is not otherwise at
that time exercisable.
F. DEATH OR PERMANENT DISABILITY. Should the Optionee's
service as a Board member cease by reason of death or Permanent Disability, then
each option held by such Optionee under this Director Fee Option Grant Program
shall immediately become exercisable for all the shares of Common Stock at the
time subject to that option, and the option may be exercised for any or all of
those shares as fully vested shares until the EARLIER of (i) the expiration of
the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from
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<PAGE>
the date of such cessation of Board service. To the extent such option is held
by the Optionee at the time of his or death, that option may be exercised by the
personal representative of the Optionee's estate or by the person or persons to
whom the option is transferred pursuant to the Optionee's will or the laws of
inheritance or by the designated beneficiary or beneficiaries of such option.
Should the Optionee die after cessation of Board
service but while holding one or more options under this Director Fee Option
Grant Program, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Board service (less any shares subsequently purchased by Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or the laws of inheritance or by the designated beneficiary or
beneficiaries of such option. Such right of exercise shall lapse, and the option
shall terminate, upon the EARLIER of (i) the expiration of the ten (10)-year
option term or (ii) the three (3)-year period measured from the date of the
Optionee's cessation of Board service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE
TAKE-OVER
A. In the event of any Corporate Transaction while the
Optionee remains a Board member, each outstanding option held by such Optionee
under this Director Fee Option Grant Program shall automatically accelerate so
that each such option shall, immediately prior to the effective date of the
Corporate Transaction, become exercisable for all the shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully vested shares of Common Stock. Each such outstanding option
shall terminate immediately following the Corporate Transaction, except to the
extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully vested shares until the EARLIER of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Board service.
B. In the event of a Change in Control while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Change in
Control, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. The option shall remain so exercisable
until the EARLIEST to occur of (i) the expiration of the ten (10)-year option
term, (ii) the expiration of the three (3)-year period measured from the date of
the Optionee's cessation of Board service, (iii) the termination of the option
in connection with a Corporate Transaction or (iv) the surrender of the option
in connection with a Hostile Take-Over.
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C. Upon the occurrence of a Hostile Take-Over while the
Optionee remains in Board service, such Optionee shall have a thirty (30)-day
period in which to surrender to the Corporation each outstanding option held by
him or her under the Director Fee Option Grant Program. The Optionee shall in
return be entitled to a cash distribution from the Corporation in an amount
equal to the excess of (i) the Take-Over Price of the shares of Common Stock at
the time subject to each surrendered option (whether or not the option is
otherwise at the time exercisable for those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the surrender of the option to the Corporation.
No approval or consent of the Board or any Plan Administrator shall be required
at the time of the actual option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, PROVIDED the aggregate exercise price
payable for such securities shall remain the same. To the extent the actual
holders of the Corporation's outstanding Common Stock receive cash consideration
for their Common Stock in consummation of the Corporate Transaction, the
successor corporation may, in connection with the assumption of the outstanding
options under the Director Fee Option Grant Program, substitute one or more
shares of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Corporate Transaction.
E. The grant of options under the Director Fee Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director
Fee Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
27
<PAGE>
ARTICLE SEVEN
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant
to pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest-bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
such shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of options or the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any
or all holders of Non-Statutory Options or unvested shares of Common Stock under
the Plan (other than the options granted or the shares issued under the
Automatic Option Grant or Director Fee Option Grant Program) with the right to
use shares of Common Stock in satisfaction of all or part of the Withholding
Taxes to which such holders may become subject in connection with the exercise
of their options or the vesting of their shares. Such right may be provided to
any such holder in either or both of the following formats:
STOCK WITHHOLDING: The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Withholding Taxes (not to exceed one hundred percent (100%))
designated by the holder.
STOCK DELIVERY: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise or share vesting triggering
the Withholding Taxes) with an aggregate Fair Market Value equal to the
percentage of the Withholding Taxes (not to exceed one hundred percent (100%))
designated by the holder.
28
<PAGE>
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately on the Plan
Effective Date. However, the Salary Investment Option Grant Program and the
Director Fee Option Grant Program shall not be implemented until such time as
the Primary Committee may deem appropriate. Options may be granted under the
Discretionary Option Grant at any time on or after the Plan Effective Date, and
the initial option grants under the Automatic Option Grant Program shall also be
made on the Plan Effective Date to any non-employee Board members eligible for
such grants at that time. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor
Plan, and no further option grants or direct stock issuances shall be made under
the Predecessor Plan after the Plan Effective Date. All options outstanding
under the Predecessor Plan on the Plan Effective Date shall be incorporated into
the Plan at that time and shall be treated as outstanding options under the
Plan. However, each outstanding option so incorporated shall continue to be
governed solely by the terms of the documents evidencing such option, and no
provision of the Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to their
acquisition of shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the EARLIEST to occur of
(i) ____________, (ii) the date on which all shares available for issuance
under the Plan shall have been issued as fully vested shares or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Should the Plan terminate on ______________, then all option
grants and unvested stock issuances outstanding at that time shall continue
to have force and effect in accordance with the provisions of the documents
evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and obligations with
respect to stock options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee or the Participant consents to such amendment
or modification. In addition, certain amendments may require stockholder
approval pursuant to applicable laws or regulations.
29
<PAGE>
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant and Salary Investment Option Grant Programs
and shares of Common Stock may be issued under the Stock Issuance Program that
are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any granted option or (ii) under the Stock Issuance Program
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the stock
options granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall have been compliance
with all applicable requirements of Federal and state securities laws, including
the filing and effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
30
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic
option grant program in effect under Article Five of the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or
control of the Corporation effected through either of the following
transactions:
(i) the acquisition, directly or indirectly
by any person or related group of persons (other than the Corporation
or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders, or
(ii) a change in the composition of the
Board over a period of thirty-six (36) consecutive months or less such
that a majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time the Board approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as
amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding
those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition
of all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
A-1.
<PAGE>
G. CORPORATION shall mean CollegeClub.com, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of CollegeClub.com, Inc. which shall by appropriate
action adopt the Plan.
H. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special
stock option grant in effect for non-employee Board members under Article Six of
the Plan.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under Article Two of the Plan.
J. EMPLOYEE shall mean an individual who is in the employ of
the Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.
K. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
L. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time
traded on the Nasdaq National Market, then the Fair Market Value shall
be the closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market and published in THE
WALL STREET JOURNAL. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time
listed on any Stock Exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question
on the Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange and published in
THE WALL STREET JOURNAL. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(iii) For purposes of any option grants made
on the Underwriting Date, the Fair Market Value shall be deemed to be
equal to the price per share at which the Common Stock is to be sold in
the initial public offering pursuant to the Underwriting Agreement.
A-2.
<PAGE>
M. HOSTILE TAKE-OVER shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal
or discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation
which materially reduces his or her duties and responsibilities or the
level of management to which he or she reports, (B) a reduction in his
or her level of compensation (including base salary, fringe benefits
and target bonus under any corporate-performance based bonus or
incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation
is effected by the Corporation without the individual's consent.
P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
R. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
S. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant, Salary Investment Option Grant, Automatic
Option Grant or Director Fee Option Grant Program.
A-3.
<PAGE>
T. PARENT shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
U. PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
W. PLAN shall mean the Corporation's 2000 Stock Incentive
Plan, as set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity,
whether the Primary Committee, the Board or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to one or more classes of eligible persons, to the extent
such entity is carrying out its administrative functions under those programs
with respect to the persons under its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean the date the Plan shall
become effective and shall be coincident with the Underwriting Date.
Z. PREDECESSOR PLAN shall mean the Corporation's 1996 Stock
Option Plan in effect immediately prior to the Plan Effective Date hereunder.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or
more non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and to administer the Salary Investment Option Grant Program solely
with respect to the selection of the eligible individuals who may participate in
such program.
BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the
salary investment option grant program in effect under Article Three of the
Plan.
CC. SECONDARY COMMITTEE shall mean a committee of one or more
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
A-4.
<PAGE>
DD. SECTION 16 INSIDER shall mean an officer or director of
the Corporation subject to the short-swing profit liabilities of Section 16 of
the 1934 Act.
EE. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant or stock issuance.
FF. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
GG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered
into by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance
program in effect under Article Four of the Plan.
II. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
JJ. TAKE-OVER PRICE shall mean the GREATER of (i) the Fair
Market Value per share of Common Stock on the date the option is surrendered to
the Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Take-Over. However, if the surrendered option is an Incentive
Option, the Take-Over Price shall not exceed the clause (i) price per share.
KK. 10% STOCKHOLDER shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).
LL. UNDERWRITING AGREEMENT shall mean the agreement between
the Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
MM. UNDERWRITING DATE shall mean the date on which the
Underwriting Agreement is executed and priced in connection with an initial
public offering of the Common Stock.
NN. WITHHOLDING TAXES shall mean the Federal, state and local
income and employment withholding taxes to which the holder of Non-Statutory
Options or unvested shares of Common Stock may become subject in connection with
the exercise of those options or the vesting of those shares.
A-5.
<PAGE>
EXHIBIT 10.29
COLLEGECLUB.COM, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of CollegeClub.com, Inc. (the
"Corporation"):
OPTIONEE:_____________________________________________________
GRANT DATE:___________________________________________________
VESTING COMMENCEMENT DATE:____________________________________
EXERCISE PRICE: $__________________________________ per share
NUMBER OF OPTION SHARES:_______________________________ shares
EXPIRATION DATE:______________________________________________
TYPE OF OPTION: ________ Incentive Stock Option
_______ Non-Statutory Stock Option
EXERCISE SCHEDULE: The Option shall become exercisable for
twenty-five percent (25%) of the Option Shares upon Optionee's
completion of one (1) year of Service measured from the
Vesting Commencement Date and shall become exercisable for the
balance of the Option Shares in a series of thirty-six (36)
successive equal monthly installments upon Optionee's
completion of each additional month of Service over the
thirty-six (36) month period measured from the first
anniversary of the Vesting Commencement Date. In no event
shall the Option become exercisable for any additional Option
Shares after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the CollegeClub.com, Inc. 2000
Stock Incentive Plan (the "Plan"). Optionee further agrees to be bound by the
terms of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as EXHIBIT A. Optionee hereby acknowledges the receipt
of a copy of the official prospectus for the Plan in the form attached hereto as
EXHIBIT B. A copy of the Plan is available upon request made to the Corporate
Secretary at the Corporation's principal offices.
<PAGE>
EMPLOYMENT AT WILL. Nothing in this Notice or in the attached
Stock Option Agreement or in the Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
DEFINITIONS. All capitalized terms in this Notice shall have
the meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
DATED:__________________________
COLLEGECLUB.COM, INC.
By:________________________________________
Title:_____________________________________
___________________________________________
OPTIONEE
Address:___________________________________
___________________________________________
ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS
2
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
Filed as Exhibit 10.30 to this Registration Statement
<PAGE>
EXHIBIT B
PLAN SUMMARY AND PROSPECTUS
<PAGE>
EMPLOYEES & CONSULTANTS
COLLEGECLUB.COM, INC.
---------------------------------------
2000 STOCK INCENTIVE PLAN
DISCRETIONARY OPTION GRANT PROGRAM
PLAN SUMMARY AND PROSPECTUS
---------------------------------------
The date of this Prospectus is ____________, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION ON THE 2000 STOCK INCENTIVE PLAN DISCRETIONARY OPTION GRANT PROGRAM.................................1
QUESTIONS AND ANSWERS ABOUT THE PLAN............................................................................1
GENERAL PLAN PROVISIONS................................................................................1
1. What is the basic structure of the Discretionary Option Grant Program?...............1
2. When did the Plan become effective?..................................................1
3. Who administers the Plan?............................................................1
4. Who is eligible to participate in the Discretionary Option Grant Program?............2
5. How many shares of Common Stock may be issued under the Plan?........................2
6. What happens if there is a change in the Corporation's capital structure?............3
7. Can the Plan be amended or terminated?...............................................3
GRANT OF OPTIONS.......................................................................................3
8. How are options granted under the Discretionary Option Grant Program?................3
9. What type of options may be granted under the Discretionary Option Grant
Program?.............................................................................3
10. How is the exercise price determined?................................................4
11. How is the fair market value of the Common Stock determined?.........................4
12. Can the Corporation cancel my option and grant me a new option?......................4
13. Can I assign or transfer my option?..................................................4
14. When do I acquire the rights of a stockholder?.......................................4
EXERCISE OF OPTIONS....................................................................................4
15. When may I exercise my option?.......................................................4
16. When will my option terminate?.......................................................5
17. How do I exercise my option?.........................................................5
18. How do I pay the exercise price?.....................................................5
INCENTIVE OPTIONS......................................................................................5
19. Who is eligible to receive an Incentive Option?......................................5
20. Is there a limitation on the number of shares for which an Incentive Option
may become exercisable in any one calendar year?.....................................5
21. Can an Incentive Option lose its qualified status?...................................6
22. What limitations apply to Incentive Options granted to a 10% stockholder?............6
EARLY TERMINATION OF OPTIONS...........................................................................6
23. What happens to my options if my service terminates?.................................6
24. What happens to my options if I am discharged from service for Misconduct?...........7
25. What happens to my options if I die or become disabled?..............................7
26. What happens to my options if the Corporation is acquired or merged?.................7
27. What happens to my options that are assumed upon a Corporate Transaction?............8
28. What happens to my options if there is a change in control of the Corporation?.......9
DISPOSITION OF OPTION SHARES...........................................................................9
29. When can I sell my shares?...........................................................9
MISCELLANEOUS..........................................................................................9
30. Is financing available under the Plan?...............................................9
31. Do I have the right to remain employed until my options under the
Discretionary Option Grant Program vest?............................................10
32. Are there any circumstances which would cause me to lose my rights with
respect to an option or a stock issuance?...........................................10
i
<PAGE>
33. Does the Plan restrict the authority of the Corporation to grant or assume
options outside of the Plan?........................................................10
34. Does the grant of an option or the issuance of shares under the Plan affect my
eligibility to participate in other plans of the Corporation?.......................10
35. What is a parent corporation?.......................................................10
36. What is a subsidiary corporation?...................................................10
37. Is the Plan subject to ERISA?.......................................................10
QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES..............................................................11
INCENTIVE OPTIONS.....................................................................................11
T1. Will the grant of an Incentive Option result in Federal income tax liability
to me?..............................................................................11
T2. Will the exercise of an Incentive Option result in Federal income tax
liability to me?....................................................................11
T3. When will I be subject to Federal income tax on shares acquired under an
Incentive Option?...................................................................11
T4. What constitutes a disposition of Incentive Option shares?..........................11
T5. How is my Federal income tax liability determined when I dispose of my shares?......11
T6. What if I make a qualifying disposition?............................................12
T7. What are the normal tax rules for a disqualifying disposition?......................12
T8. What are the Federal tax consequences to the Corporation?...........................13
T9. What are the consequences of paying the exercise price of an Incentive Option
in the form of shares of Common Stock acquired upon the exercise of an
earlier-granted Incentive Option if the delivery of the shares results in a
disqualifying disposition?..........................................................13
T10. What are the consequences of paying the exercise price of an Incentive Option
in the form of shares of Common Stock (i) acquired under an Incentive Option
and held for the requisite holding periods, (ii) acquired under a
Non-Statutory Option or (iii) acquired through open-market purchases?...............13
T11. What are the consequences of a subsequent disposition of shares purchased
under an Incentive Option with shares of Common Stock?..............................14
NON-STATUTORY OPTIONS.................................................................................14
T12. Will the grant of a Non-Statutory Option result in Federal income tax
liability to me?....................................................................14
T13. Will the exercise of a Non-Statutory Option result in Federal income tax
liability to me?....................................................................14
T14. Will I recognize additional income when I sell shares acquired under a
Non-Statutory Option?...............................................................14
T15. What are the consequences of paying the exercise price of a Non-Statutory
Option in the form of shares of Common Stock previously acquired upon the
exercise of employee options or through open-market purchases?......................14
T16. What are the Federal tax consequences to the Corporation?...........................15
FEDERAL TAX RATES.....................................................................................15
T17. What are the applicable Federal tax rates?..........................................15
ALTERNATIVE MINIMUM TAX...............................................................................16
T18. What is the alternative minimum tax ?...............................................16
T19. What is the allowable exemption amount?.............................................16
T20. How is the alternative minimum taxable income calculated?...........................16
T21. Is the spread on an Incentive Option at the time of exercise normally
includible in alternative minimum taxable income?...................................16
ii
<PAGE>
T22. How will the payment of alternative minimum taxes in one year affect the
calculation of my tax liability in a later year?....................................16
CORPORATION INFORMATION AND ANNUAL PLAN INFORMATION............................................................17
</TABLE>
iii
<PAGE>
THIS DOCUMENT CONSTITUTES PART OF THE OFFICIAL PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
INFORMATION ON THE
2000 STOCK INCENTIVE PLAN
DISCRETIONARY OPTION GRANT PROGRAM
CollegeClub.com, Inc., a Delaware corporation (the
"Corporation"), is offering shares of its common stock (the "Common Stock") to
eligible individuals in the Corporation's service pursuant to option grants and
direct stock issuances made under the Corporation's 2000 Stock Incentive Plan
(the "Plan"). The purpose of the Plan is to offer the Corporation's employees,
the non-employee members of the Board of Directors (the "Board"), and
consultants and other independent advisors who provide services to the
Corporation the opportunity to acquire an ownership interest in the Corporation
as an incentive for such persons to continue in the Corporation's service.
Unless the context indicates otherwise, all references to the Corporation in
this Plan Summary and Prospectus include CollegeClub.com, Inc. and its parent
and subsidiary corporations, whether now existing or subsequently established.
QUESTIONS AND ANSWERS ABOUT THE PLAN
This Plan Summary and Prospectus sets forth in question and
answer format the principal terms of the option grants which may be made from
time to time under the Discretionary Option Grant Program in effect under the
Plan to individuals who are NOT officers or directors of the Corporation subject
to the short-swing profit restrictions of the Federal securities laws.
GENERAL PLAN PROVISIONS
1. WHAT IS THE BASIC STRUCTURE OF THE DISCRETIONARY OPTION GRANT
PROGRAM?
The Discretionary Option Grant Program is one of several
equity incentive programs in effect under the Plan. Under the Discretionary
Option Grant Program, options may be granted to eligible persons which will
provide them with the right to purchase shares of Common Stock during their
period of service with the Corporation at a fixed price per share not less than
eighty-five percent (85%) of the fair market value of the Common Stock on the
grant date.
2. WHEN DID THE PLAN BECOME EFFECTIVE?
The Plan became effective on February 28, 2000 in
connection with the initial public offering of the Common Stock and serves as
the successor to the Corporation's 1996 Stock Option Plan (the "Predecessor
Plan").
All options outstanding under the Predecessor Plan have been
transferred to the new Plan, and no further option grants or stock issuances
will be made under the Predecessor Plan. Each option so transferred will
continue to be governed by the terms of the agreement evidencing that option,
and no provision of the new Plan will adversely affect or otherwise modify the
rights of the holders of such transferred options with respect to their
acquisition of shares of Common Stock thereunder.
3. WHO ADMINISTERS THE PLAN?
The Plan will be administered by the Compensation Committee.
This committee is comprised of two (2) or more non-employee Board members
appointed by the Board, and each member will serve for so long as the Board
deems appropriate and may be removed by the Board at any time. A secondary
committee of one or more Board members may be delegated separate but concurrent
jurisdiction with the Compensation Committee to
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administer the Discretionary Option Grant Program with respect to all employees
and consultants not subject to the short-swing profit restrictions of the
federal securities laws. The Compensation Committee and any secondary Board
committee with administrative jurisdiction under the Plan will each be referred
to in this document as the "Plan Administrator."
The Plan Administrator will have full authority, with respect
to the option grants made under the Discretionary Option Grant Program, to
determine the persons who are to be granted options, the time or times when such
option grants are to be made, the number of shares to be subject to each such
grant, the time or times when each option is to become exercisable, the vesting
schedule applicable to the option shares and the maximum period for which the
option is to remain outstanding.
4. WHO IS ELIGIBLE TO PARTICIPATE IN THE DISCRETIONARY OPTION
GRANT PROGRAM?
Employees, non-employee Board members, consultants and other
independent advisors in the Corporation's service will be eligible to
participate in the Discretionary Option Grant Program.
5. HOW MANY SHARES OF COMMON STOCK MAY BE ISSUED UNDER THE PLAN?
The maximum number of shares of Common Stock issuable over the
term of the Plan will initially be limited to twenty-six million seven hundred
thousand (26,700,000) shares (subject to adjustment for certain changes in the
Corporation's capital structure). Such share reserve consists of (i) the number
of shares which remained available for issuance under the Predecessor Plan at
the time of the initial public offering of the Common Stock, including the
shares subject to outstanding options under the Predecessor Plan transferred to
the new Plan, plus (ii) an additional increase of approximately six million
(6,000,000) shares of Common Stock.
The number of shares of Common Stock available for issuance
under the Plan will automatically increase on the first trading day in January
each calendar year, beginning with calendar year 2001, by an amount equal to
five percent (5%) of the total number of shares of Common Stock outstanding on
the last trading day in December in the immediately preceding calendar year, but
in no event will any such annual increase exceed six million two hundred fifty
thousand (6,250,000) shares.
No individual participating in the Plan may receive stock
options, separately exercisable stock appreciation rights and direct share
issuances for more than one million (1,000,000) shares of Common Stock under the
Plan per calendar year. Except for such restriction and certain other
restrictions in connection with incentive stock option grants (see the
"Incentive Options" section below), there are no limitations on the number of
shares of Common Stock for which an eligible individual may be granted options
under the Discretionary Option Grant Program.
Should one or more outstanding options under the Plan expire
or terminate for any reason prior to exercise in full, the shares of Common
Stock subject to the portion of each such option not so exercised will be
available for subsequent issuance under the Plan. Unvested shares issued under
the Plan and subsequently repurchased by the Corporation, at the original
exercise price or issue price paid per share, pursuant to the Corporation's
repurchase rights under the Plan will be added back to the number of shares of
Common Stock available for issuance under the Plan and may accordingly be
reissued through one or more subsequent option grants or direct stock issuances
under the Plan. Should the exercise price of an option under the Plan be paid
with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the withholding
taxes incurred in connection with the connection with the exercise of an option
or the vesting of a stock issuance under the Plan, then the number of shares of
Common Stock available for issuance under the Plan will be reduced by the gross
number of shares for which the option is exercised or which vest under the stock
issuance, and not by the net number of shares of Common Stock issued to the
holder of such option or stock issuance. Shares subject to options which are
surrendered pursuant to any stock appreciation rights exercised under the Plan
will not be available for subsequent issuance.
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The Common Stock will be made available either from authorized
but unissued shares of Common Stock or from shares of Common Stock reacquired by
the Corporation, including shares repurchased on the open market.
6. WHAT HAPPENS IF THERE IS A CHANGE IN THE CORPORATION'S CAPITAL
STRUCTURE?
In the event of a Recapitalization (as defined below),
appropriate adjustments will automatically be made to (i) the maximum number
and/or class of securities issuable under the Plan, (ii) the maximum number
and/or class of securities by which the share reserve is to increase
automatically each calendar year pursuant to the automatic share increase
provisions of the Plan, (iii) the maximum number and/or class of securities for
which any one person may be granted stock options and direct stock issuances per
calendar year and (iv) the number and/or class of securities and the exercise
price per share in effect under each outstanding option. The adjustments to such
outstanding options will preclude the dilution or enlargement of the rights and
benefits available under those options.
For purposes of the Plan, a Recapitalization is any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration.
7. CAN THE PLAN BE AMENDED OR TERMINATED?
Yes. The Board has exclusive authority to amend or modify the
Plan in any and all respects. However, no amendment or modification may, without
the holder's consent, adversely affect such individual's rights and obligations
under his or her outstanding options or direct stock issuances under the Plan.
In addition, certain amendments to the Plan may require approval of the
Corporation's stockholders.
The Plan will terminate upon the EARLIEST to occur of (i)
__________, ____, (ii) the date on which all shares available for issuance under
the Plan are issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction (see the "Early
Termination of Options" section below). Should the Plan terminate on __________,
____, then any option grants outstanding at that time under the Discretionary
Option Grant Program will continue to have force and effect in accordance with
the provisions of the agreements evidencing those grants.
GRANT OF OPTIONS
8. HOW ARE OPTIONS GRANTED UNDER THE DISCRETIONARY OPTION GRANT
PROGRAM?
The Plan Administrator will have complete discretion (subject
to the limitations of the Plan) to determine when and to whom options will be
granted under the Discretionary Option Grant Program and the terms of each such
grant. Each option grant will be evidenced by one or more options documents
(collectively, the "Option Agreement") executed by the Corporation and the
optionee.
9. WHAT TYPE OF OPTIONS MAY BE GRANTED UNDER THE DISCRETIONARY
OPTION GRANT PROGRAM?
The Plan Administrator may grant incentive stock options
("Incentive Options") designed to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options which do not
satisfy such requirements ("Non-Statutory Options"). For a discussion of the
difference in tax treatment under the Code between Incentive Options and
Non-Statutory Options, see the "Questions and Answers on Federal Tax
Consequences" section below.
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10. HOW IS THE EXERCISE PRICE DETERMINED?
The exercise price of an option will be determined by the Plan
Administrator. However, the exercise price of an option will not be less than
eighty-five percent (85%) of the fair market value of the Common Stock on the
grant date, and for an Incentive Stock Option, the exercise price must not be
less than one hundred percent (100%) of the fair market value of the option
shares on the grant date.
11. HOW IS THE FAIR MARKET VALUE OF THE COMMON STOCK DETERMINED?
The fair market value per share of Common Stock on any
relevant date under the Plan will be the closing selling price per share on that
date, as reported on the Nasdaq National Market and published in THE WALL STREET
JOURNAL. If the Common Stock is not traded on that day, the fair market value
will be the closing selling price per share on the last preceding date for which
such quotation exists.
12. CAN THE CORPORATION CANCEL MY OPTION AND GRANT ME A NEW
OPTION?
Yes. The Plan Administrator has the authority to cancel
outstanding options and to issue new options in replacement, but your consent
will be required in connection with your participation in any such
cancellation/regrant program. The new options can cover the same or a different
number of shares of Common Stock and will have an exercise price per share not
less than the fair market value of the Common Stock on the new grant date. In
addition, it is likely that the new options will have a vesting schedule based
on the new grant date, without any credit provided for the period the cancelled
options were outstanding.
13. CAN I ASSIGN OR TRANSFER MY OPTION?
No. Your options generally cannot be assigned or transferred,
except by the provisions of your will or the laws of inheritance following your
death or pursuant to any beneficiary designation you have in effect for the
options at the time of your death. However, one or more Non-Statutory Options
may be structured so that those options will be assignable in whole or in part
during your lifetime to one or more members of your immediate family or to a
trust established exclusively for one or more such family members. The assigned
portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. No such assignment will be
permitted, however, unless in connection with your estate plan.
14. WHEN DO I ACQUIRE THE RIGHTS OF A STOCKHOLDER?
You will not have any stockholder rights with respect to the
option shares. You will not acquire stockholder rights until you exercise the
option, pay the exercise price and become a holder of record of the purchased
shares.
EXERCISE OF OPTIONS
15. WHEN MAY I EXERCISE MY OPTION?
Your option will generally become exercisable for the option
shares in a series of installments over the period that you remain in the
Corporation's service. The exercise schedule applicable to your option will be
determined by the Plan Administrator at the time of grant and will be set forth
in the Option Agreement. You may exercise your option at any time for the shares
for which your option is exercisable, provided you do so before the option
terminates.
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16. WHEN WILL MY OPTION TERMINATE?
No option granted under the Discretionary Option Grant Program
may have a term in excess of ten (10) years. The actual expiration date of your
option will be set forth in the Option Agreement. Your option may, however,
terminate prior to its designated expiration date in the event of your
termination of service or upon the occurrence of certain other events. See the
"Early Termination of Options" section below.
17. HOW DO I EXERCISE MY OPTION?
To exercise your option, you must provide the Corporation with
written notice of the exercise in which you indicate the number of shares to be
purchased under your option. The notice must be accompanied by payment of the
exercise price for the purchased shares, together with appropriate proof that
the person exercising the option (if other than yourself) has the right to
effect such exercise. You will be required to satisfy all applicable income and
employment tax withholding requirements at that time. For information about such
tax withholding, see the "Questions and Answers on Federal Tax Consequences"
section below.
18. HOW DO I PAY THE EXERCISE PRICE?
The exercise price may be paid in cash or check payable to the
Corporation or in shares of Common Stock. Any shares delivered in payment of the
exercise price will be valued at fair market value on the exercise date and must
have been held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes (generally a six
(6)-month period).
Cashless exercises are also permitted. To use this procedure,
you must provide irrevocable instructions to a Corporation-designated brokerage
firm to effect the immediate sale of the shares of Common Stock purchased under
your option and to pay over to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable withholding
taxes. Concurrently with such instructions, you must also direct the Corporation
to deliver the certificates for the purchased shares to the brokerage firm in
order to complete the sale.
INCENTIVE OPTIONS
This section applies only to Incentive Options. Non-Statutory
Options are not subject to these provisions.
19. WHO IS ELIGIBLE TO RECEIVE AN INCENTIVE OPTION?
Incentive Options may only be granted to individuals who are
employees of the Corporation.
20. IS THERE A LIMITATION ON THE NUMBER OF SHARES FOR WHICH AN
INCENTIVE OPTION MAY BECOME EXERCISABLE IN ANY ONE CALENDAR
YEAR?
Yes. The aggregate fair market value of the shares of Common
Stock (determined at the date of grant) for which an option may for the first
time become exercisable in any calendar year as an Incentive Option under the
Federal tax laws may not exceed $100,000. To the extent you hold two (2) or more
Incentive Options which become exercisable for the first time in the same
calendar year, the $100,000 limitation will be applied on the basis of the order
in which those options were granted. Options which do not qualify for Incentive
Option treatment under the Federal tax laws by reason of this dollar limitation
may nevertheless be exercised as Non-Statutory Options in the calendar year in
which they become exercisable for the excess number of shares.
EXAMPLE: On April 1, 2000, Sam Smith is granted an
Incentive Option to purchase 20,000 shares of Common Stock at an
exercise price of $15.00 per share, the fair market value of the Common
Stock on that date. The option will become exercisable for the option
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shares in a series of four successive equal annual installments,
beginning April 1, 2001. When the option becomes exercisable for the
second annual installment on April 1, 2002, the fair market value of
the Common Stock is assumed to be $25.00 per share. On May 25, 2001,
Sam is granted a second Incentive Option to purchase 10,000 shares of
Common Stock at an exercise price of $20.00 per share, the fair market
value of the Common Stock on that date. This option will also become
exercisable for the option shares in a series of four successive equal
annual installments beginning on May 25, 2002. When the option becomes
exercisable for the first annual installment on that date, the fair
market value of the Common Stock is assumed to be $25.00 per share.
The aggregate fair market value of the 5,000 shares
of Common Stock (measured as of the grant date) which become
exercisable under the first option in calendar year 2002 is $75,000.
The aggregate fair market value of the 2,500 shares of Common Stock
(measured as of the grant date) which become exercisable under the
second option in calendar year 2002 is $50,000. Accordingly, 1,250 of
the shares which first become purchasable in calendar year 2002 under
the calendar year 2001 option will not qualify for favorable tax
treatment as Incentive Options because the aggregate value (as measured
as of the grant date) of the shares of Common Stock for which the two
options first become exercisable in calendar year 2002 exceeds $100,000
($75,000 + $50,000 = $125,000). The 1,250 shares which do not qualify
for Incentive Option treatment under the calendar year 2001 option may
be exercised as Non-Statutory Options.
21. CAN AN INCENTIVE OPTION LOSE ITS QUALIFIED STATUS?
Yes. An option granted as an Incentive Option will generally
be taxed as a Non-Statutory Option if exercised more than three (3) months after
you terminate employee status. Certain amendments or modifications to the option
may also cause the loss of Incentive Option status, but no such amendment or
modification may be made without your consent.
22. WHAT LIMITATIONS APPLY TO INCENTIVE OPTIONS GRANTED TO A 10%
STOCKHOLDER?
If an Incentive Option is granted to an individual who is at
the time the owner of stock possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation or any parent
or subsidiary corporation, then the exercise price per share cannot be less than
one hundred ten percent (110%) of the fair market value of the Common Stock on
the grant date, and the option term may not exceed five (5) years from the grant
date.
EARLY TERMINATION OF OPTIONS
23. WHAT HAPPENS TO MY OPTIONS IF MY SERVICE TERMINATES?
After your termination of service for any reason other than
death, disability or Misconduct (as defined below in Question 24), you will have
a limited period of time in which to exercise your outstanding options for any
shares of Common Stock for which those options are exercisable on the date your
service terminates. The length of this period will be set forth in your Option
Agreement and will generally not be in excess of three (3) months. However, your
option will in all events terminate on the specified expiration date of the
option term. To the extent your options are not exercisable for one or more
shares at the time of your termination of service, your options will immediately
terminate and cease to be outstanding with respect to those unexercisable
shares.
Unless your Option Agreement specifically provides otherwise,
you will be deemed to continue in service for so long as you render services on
a periodic basis to the Corporation, whether as (i) an employee, subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance, (ii) a non-employee Board member or
(iii) a consultant or other independent advisor.
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The Plan Administrator has the discretion to extend the period
during which you may exercise one or more of your options following your
termination of service and/or to permit such options to be exercised not only
with respect to the number of shares of Common Stock for which your options are
at the time exercisable but also with respect to one or more additional
installments for which your options would have become exercisable had you
continued in service. You will be notified in writing in the event the Plan
Administrator decides to provide you with any of those additional benefits.
24. WHAT HAPPENS TO MY OPTIONS IF I AM DISCHARGED FROM SERVICE FOR
MISCONDUCT?
Should you be discharged from service for Misconduct or
otherwise engage in Misconduct while your options are outstanding, then all of
your outstanding options will immediately terminate. For purposes of the Plan,
MISCONDUCT includes (i) any act of fraud, embezzlement or dishonesty, (ii) any
unauthorized use or disclosure of confidential information or trade secrets of
the Corporation or (iii) any other intentional misconduct adversely affecting
the business or affairs of the Corporation in a material manner. However, the
foregoing list is not inclusive of all the acts or omissions which may be
considered as grounds for dismissal or discharge of any individual in the
Corporation's service.
25. WHAT HAPPENS TO MY OPTIONS IF I DIE OR BECOME DISABLED?
If you die while any of your options are outstanding, the
personal representative of your estate or the person or persons to whom the
options are transferred by the provisions of your will or the laws of
inheritance or pursuant to the beneficiary designation you have in effect for
those options may exercise each of those options for any or all of the shares of
Common Stock for which the option was exercisable on the date your service with
the Corporation terminated, less any shares you may have subsequently purchased
prior to your death. The right to exercise each such option will lapse upon the
EARLIER to occur of (i) the expiration of the option term or (ii) the first
anniversary of the date of your death.
If you terminate your service with the Corporation because you
become permanently disabled, you will normally have a period of twelve (12)
months from the date of such termination of service during which to exercise
your options for any or all of the shares for which those options were
exercisable at the time of such termination. In no event, however, may you
exercise any option after the specified expiration of the option term. For
purposes of the Plan, you will be deemed to be PERMANENTLY DISABLED if you are
unable to perform any substantial gainful activity by reason of any
medically-determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) consecutive months or more.
NOTE: FOR OPTIONS TRANSFERRED FROM THE PREDECESSOR PLAN, YOU
WILL HAVE UNTIL THE EARLIER OF (i) THE EXPIRATION DATE OF THE OPTION
TERM OR (ii) THE LIMITED PERIOD PROVIDED IN THE OPTION AGREEMENT FOR
THE EXERCISE OF THAT OPTION FOLLOWING YOUR TERMINATION OF SERVICE.
26. WHAT HAPPENS TO MY OPTIONS IF THE CORPORATION IS ACQUIRED OR
MERGED?
In the event of a Corporate Transaction (as defined below),
all options outstanding under the Discretionary Option Grant Program will
automatically accelerate so that each such option will, immediately prior to the
effective date of the Corporate Transaction, become exercisable for all the
shares of Common Stock at the time subject to that option and may be exercised
for any or all of those shares as fully vested shares. However, an outstanding
option will NOT become exercisable on such an accelerated basis if and to the
extent: (i) the option is assumed by the successor corporation, (ii) such option
is replaced with a cash incentive program which preserves the option spread
existing at the time of the Corporate Transaction on any shares for which the
option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of the option is subject to other
limitations imposed by the Plan Administrator in the Option Agreement.
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All outstanding options under the Discretionary Option Grant
Program will, to the extent not assumed by the successor corporation, terminate
and cease to be outstanding immediately following the completion of the
Corporate Transaction.
Any Incentive Options accelerated upon the Corporate
Transaction will remain exercisable as Incentive Options under the Federal tax
laws only to the extent the applicable $100,000 limitation is not exceeded. If
such limitation is exceeded, the option will be exercisable for the excess
number of shares as a Non-Statutory Option.
A CORPORATE TRANSACTION will be deemed to occur upon (i) a
merger or consolidation in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different from the persons
holding those securities immediately prior to such transaction or (ii) a sale,
transfer or other disposition of all or substantially all the assets of the
Corporation in liquidation or dissolution of the Corporation.
NOTE: THE OPTIONS TRANSFERRED FROM THE PREDECESSOR PLAN WILL
VEST UPON AN ACQUISITION OF THE CORPORATION BY MERGER OR ASSET SALE AND
BECOME IMMEDIATELY EXERCISABLE FOR ALL THE OPTION SHARES AS
FULLY-VESTED SHARES, UNLESS THE REPURCHASE RIGHTS APPLICABLE TO THE
OPTION SHARES ARE TRANSFERRED TO THE ACQUIRING COMPANY. THE OPTIONS
WILL TERMINATE IMMEDIATELY AFTER THE ACQUISITION, UNLESS ASSUMED BY THE
SUCCESSOR ENTITY.
27. WHAT HAPPENS TO MY OPTIONS THAT ARE ASSUMED UPON A CORPORATE
TRANSACTION?
Each option under the Discretionary Option Grant Program which
is assumed by the successor corporation will, immediately after the Corporate
Transaction, be appropriately adjusted to apply to the number and class of
securities which would have been issued to the optionee in consummation of the
Corporate Transaction had the option been exercised immediately prior to the
Corporate Transaction. Appropriate adjustments will also be made to the exercise
price payable per share, PROVIDED the aggregate exercise price for the option
shares will remain the same. To the extent the actual holders of the
Corporation's outstanding Common Stock receive cash consideration for their
Common Stock in consummation of the Corporate Transaction, the successor
corporation may, in connection with the assumption of the option, substitute one
or more shares of its own common stock with a fair market value equivalent to
the cash consideration paid per share of Common Stock in such Corporate
Transaction.
The Plan Administrator may structure one or more options
granted under the Discretionary Option Grant Program so that those options will
immediately vest and become exercisable for all the option shares upon an
Involuntary Termination of the optionee's service within a designated period
(not to exceed eighteen (18) months) following the effective date of a Corporate
Transaction in which the options are assumed and do not otherwise vest. Any
option so accelerated will remain exercisable for the vested shares until the
expiration or sooner termination of the option term. In addition, the Plan
Administrator may structure one or more of the Corporation's outstanding
repurchase rights so that those rights will automatically terminate, and the
shares subject those terminated rights will immediately vest, upon such an
Involuntary Termination. You should review your Option Agreement to determine
whether the options you hold will in fact accelerate upon such an Involuntary
Termination.
An INVOLUNTARY TERMINATION will be deemed to occur upon (i)
the optionee's involuntary dismissal or discharge by the Corporation for reasons
other than Misconduct or (ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation which materially
reduces his or her duties and level of responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and target bonus under any
corporate performance- based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual's place of employment by
more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the optionee's consent.
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NOTE: A NUMBER OF OUTSTANDING OPTIONS TRANSFERRED FROM THE
PREDECESSOR PLAN INCLUDE A SPECIAL VESTING ACCELERATION PROVISION
PURSUANT TO WHICH THOSE OPTIONS WILL VEST AND BECOME IMMEDIATELY
EXERCISABLE FOR ALL THE OPTION SHARES AS FULLY-VESTED SHARES UPON AN
INVOLUNTARY TERMINATION OF THE OPTIONEE'S SERVICE WITHIN EIGHTEEN (18)
MONTHS FOLLOWING AN ACQUISITION OF THE CORPORATION BY A MERGER OR ASSET
SALE.
28. WHAT HAPPENS TO MY OPTIONS IF THERE IS A CHANGE IN CONTROL OF THE
CORPORATION?
The Plan Administrator may structure one or more options
granted under the Discretionary Option Grant Program so that those options will
immediately vest and become exercisable for all the option shares either upon
the occurrence of a Change in Control or upon an Involuntary Termination of the
optionee's service within a designated period (not to exceed eighteen (18)
months) following the effective date of that Change in Control. You should
review your Option Agreement to determine whether the options you hold will in
fact accelerate upon such a Change in Control or subsequent Involuntary
Termination.
Any option accelerated in connection with a Change in Control
or subsequent Involuntary Termination will remain exercisable for fully-vested
shares until the expiration or sooner termination of the option term. However,
any Incentive Option so accelerated will remain exercisable as an Incentive
Option under the Federal tax laws only to the extent the applicable $100,000
dollar limitation is not exceeded. If such limitation is exceeded, the option
may be exercised for the excess number of shares as a Non-Statutory Option.
A CHANGE IN CONTROL will be deemed to occur in the event (i)
any person directly or indirectly acquires securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders or (ii) there is a change in the composition of
the Board over a period of thirty-six (36) consecutive months or less such that
a majority of the Board ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time such election or nomination was approved by the Board.
NOTE: NONE OF THE OPTIONS INCORPORATED FROM THE PREDECESSOR
PLAN CONTAIN ANY CHANGE IN CONTROL ACCELERATION PROVISIONS.
DISPOSITION OF OPTION SHARES
29. WHEN CAN I SELL MY SHARES?
You may sell the shares you purchase under the Plan at any
time without restriction, subject to any market black-out period imposed by the
Corporation, provided you are NOT an officer or director of the Corporation
subject to the short-swing profit limitations of the Federal securities laws.
MISCELLANEOUS
30. IS FINANCING AVAILABLE UNDER THE PLAN?
The Plan Administrator may assist you in the acquisition of
shares of Common Stock under the Discretionary Option Grant Program by
permitting you to pay the purchase price for the shares through a promissory
note payable in one or more installments. The terms of any such promissory note,
including the interest rate and terms of repayment, will be established in the
sole discretion of the Plan Administrator. Promissory notes will be
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made on a full-recourse basis, and the maximum credit available to you may not
exceed the purchase price payable for the acquired shares plus any withholding
tax liability incurred by you in connection with such acquisition. In addition,
the Corporation will comply with all applicable requirements of Regulation U of
the Board of Governors of the Federal Reserve System in connection with any
financing extended under the Plan.
31. DO I HAVE THE RIGHT TO REMAIN EMPLOYED UNTIL MY OPTIONS UNDER
THE DISCRETIONARY OPTION GRANT PROGRAM VEST?
No. Nothing in the Plan or in any option grant under the
Discretionary Option Grant Program is intended to provide any person with the
right to remain in the Corporation's service for any specific period, and both
you and the Corporation will each have the right to terminate your service at
any time and for any reason, with or without cause.
32. ARE THERE ANY CIRCUMSTANCES WHICH WOULD CAUSE ME TO LOSE MY
RIGHTS WITH RESPECT TO AN OPTION OR A STOCK ISSUANCE?
Yes. The grant of options under the Discretionary Option Grant
Program and the issuance of Common Stock under those options are subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan and the securities issuable
thereunder. It is possible that the Corporation could be prevented from granting
options or from issuing shares of Common Stock under the Discretionary Option
Grant Program in the event one or more required approvals or permits were not
obtained.
33. DOES THE PLAN RESTRICT THE AUTHORITY OF THE CORPORATION TO
GRANT OR ASSUME OPTIONS OUTSIDE OF THE PLAN?
No. The Plan does not limit the authority of the Corporation
to grant options outside of the Plan or to grant options to, or assume the
options of, any person in connection with the acquisition of the business and
assets of any firm, corporation or other business entity.
34. DOES THE GRANT OF AN OPTION OR THE ISSUANCE OF SHARES UNDER
THE PLAN AFFECT MY ELIGIBILITY TO PARTICIPATE IN OTHER PLANS
OF THE CORPORATION?
No. Option grants made under the Discretionary Option Grant
Program do not in any way affect, limit or restrict your eligibility to
participate in any other stock plan or other compensation or benefit plan or
program maintained by the Corporation.
35. WHAT IS A PARENT CORPORATION?
A corporation is a parent corporation if such corporation
owns, directly or indirectly, securities representing fifty percent (50%) or
more of the total combined voting power of the Corporation's outstanding
securities.
36. WHAT IS A SUBSIDIARY CORPORATION?
A corporation is a subsidiary corporation if the Corporation
owns, directly or indirectly, securities representing fifty percent (50%) or
more of the total combined voting power of the outstanding securities of that
corporation.
37. IS THE PLAN SUBJECT TO ERISA?
The Plan is NOT subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA) or Section 401(a) of the Code.
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QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES
The following is a general description of the Federal income
tax consequences of option grants made under the Discretionary Option Grant
Program. State and local tax treatment, which is not discussed below, may vary
from such Federal income tax treatment. You should consult with your own tax
advisor as to the tax consequences of your particular transactions under the
Plan.
The tax consequences of Incentive Options and Non-Statutory
Options differ as described below.
INCENTIVE OPTIONS
T1. WILL THE GRANT OF AN INCENTIVE OPTION RESULT IN FEDERAL INCOME
TAX LIABILITY TO ME?
No.
T2. WILL THE EXERCISE OF AN INCENTIVE OPTION RESULT IN FEDERAL
INCOME TAX LIABILITY TO ME?
No. You will not recognize taxable income at the time the
Incentive Option is exercised. However, the amount by which the fair market
value (at the time of exercise) of the purchased shares exceeds the exercise
price paid for those shares will constitute an adjustment to your income for
purposes of the alternative minimum tax (see the "Alternative Minimum Tax"
section below). On or before January 31 of the calendar year following the
calendar year in which you exercise your Incentive Option, you will receive an
information statement from the Corporation indicating, among other items, the
number of shares of Common Stock you purchased in connection with such exercise,
the market price of the Common Stock on the exercise date and the price you paid
for the purchased shares.
T3. WHEN WILL I BE SUBJECT TO FEDERAL INCOME TAX ON SHARES
ACQUIRED UNDER AN INCENTIVE OPTION?
Generally, you will recognize income in the year in which you
make a disposition of the shares purchased under your Incentive Option.
T4. WHAT CONSTITUTES A DISPOSITION OF INCENTIVE OPTION SHARES?
A disposition of shares purchased under an Incentive Option
will occur in the event you transfer legal title to those shares, whether by
sale, exchange or gift, or you deliver such shares in payment of the exercise
price of any other Incentive Option you hold. However, a disposition will not
occur if you engage in any of the following transactions: a transfer of the
shares to your spouse, a transfer into joint ownership with right of
survivorship provided you remain one of the joint owners, a pledge of the shares
as collateral for a loan, a transfer by bequest or inheritance upon your death
or certain tax-free exchanges of the shares permitted under the Code.
T5. HOW IS MY FEDERAL INCOME TAX LIABILITY DETERMINED WHEN I
DISPOSE OF MY SHARES?
Your Federal income tax liability will depend upon whether you
make a qualifying or disqualifying disposition of the shares purchased under
your Incentive Option. A qualifying disposition will occur if the sale or other
disposition of the shares takes place more than two (2) years after the date the
Incentive Option was granted and more than one (1) year after the date that
option was exercised for the particular shares involved in the disposition. A
disqualifying disposition is any sale or other disposition made before both of
these requirements are satisfied.
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T6. WHAT IF I MAKE A QUALIFYING DISPOSITION?
You will recognize a long-term capital gain equal to the
excess of (i) the amount realized upon the sale or other disposition over (ii)
the exercise price paid for the shares. You will recognize a long-term capital
loss if the amount realized is lower than the exercise price paid for the
shares. (For the tax rates applicable to capital gain, please see Question T17.)
EXAMPLE: On April 1, 2000, you are granted an
Incentive Option for 1,000 shares with an exercise price of $15.00 per
share. On April 1, 2002, you exercise the option for 500 vested shares
when the market price is $25.00 per share. The purchased shares are
held until August 1, 2003, when you sell them for $30.00 per share.
Because the disposition of the shares is made more
than two (2) years after the grant date of the Incentive Option and
more than one (1) year after the option was exercised for the shares
sold on August 1, 2003, the sale represents a qualifying disposition of
such shares, and for Federal income tax purposes, there will be a
long-term capital gain of $15.00 per share.
T7. WHAT ARE THE NORMAL TAX RULES FOR A DISQUALIFYING DISPOSITION?
Normally, when you make a disqualifying disposition of shares
purchased under an Incentive Option, you will recognize ordinary income at the
time of the disposition in an amount equal to the excess of (i) the fair market
value of the shares on the option exercise date over (ii) the exercise price
paid for those shares. If the disqualifying disposition is effected by means of
an arm's length sale or exchange with an unrelated party, the ordinary income
will be limited to the amount by which (i) the amount realized upon the
disposition of the shares or (ii) their fair market value on the exercise date,
whichever is less, exceeds the exercise price paid for the shares. The amount of
your disqualifying disposition income will be reported by the Corporation on
your W-2 wage statement for the year of disposition, and any applicable
withholding taxes which arise in connection with the disqualifying disposition
will be deducted from your wages or otherwise collected from you.
Any additional gain recognized upon the disqualifying
disposition will be capital gain, which will be long-term if the shares have
been held for more than one (1) year following the exercise date of the option.
(See Question T17 below for the tax rates applicable to capital gain.)
EXAMPLE: On April 1, 2000, you are granted an
Incentive Option for 1,000 shares with an exercise price of $15.00 per
share. On April 1, 2002, you exercise this option for 500 vested shares
when the market price is $25.00 per share. The purchased shares are
held until January 15, 2003, when you sell them for $30.00 per share.
Because the disposition of the shares is made less
than one (1) year after the Incentive Option was exercised for the
shares sold on January 15, 2003, the sale represents a disqualifying
disposition of the shares, and for Federal income tax purposes, the
gain upon the sale will be divided into two (2) components:
ORDINARY INCOME: You will recognize ordinary
income in the amount of $10.00 per share, the excess of the
$25.00 per share market price of the shares on the date the
option was exercised over the $15.00 per share exercise price.
CAPITAL GAIN: You will also recognize a
short-term capital gain of $5.00 per share with respect to
each share sold.
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In the event the shares purchased under an Incentive Option
are sold in a disqualifying disposition for less than the exercise price paid
for those shares, you will not recognize any income but will recognize a capital
loss equal to the excess of (i) the exercise price paid for the shares over (ii)
the amount realized upon the disposition of those shares. For example, if the
shares in the above Example are sold for $12.00 per share in the disqualifying
disposition, you would simply recognize a short-term capital loss of $3.00 per
share.
T8. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?
If you make a QUALIFYING disposition of shares acquired upon
the exercise of an Incentive Option, then no income tax deduction may be taken
by the Corporation with respect to such shares. Should you make a DISQUALIFYING
disposition of such shares, then the Corporation will be entitled to an income
tax deduction equal to the amount of ordinary income you recognize in connection
with the disposition. The deduction will, in general, be allowed to the
Corporation in the taxable year in which the disposition occurs.
T9. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF AN
INCENTIVE OPTION IN THE FORM OF SHARES OF COMMON STOCK
ACQUIRED UPON THE EXERCISE OF AN EARLIER-GRANTED INCENTIVE
OPTION IF THE DELIVERY OF THE SHARES RESULTS IN A
DISQUALIFYING DISPOSITION?
If the delivery of the shares acquired under an earlier
granted Incentive Option results in a disqualifying disposition, then you will
be subject to ordinary income taxation on the excess of (i) the fair market
value of the delivered shares at the time of their original purchase (or at the
time any forfeiture restrictions applicable to those shares lapsed) over (ii)
the exercise price paid for the delivered shares.
The tax basis and capital gain holding periods for the shares
of Common Stock purchased upon exercise of the Incentive Option will be
determined as follows:
(i) To the extent the purchased shares equal
in number the delivered shares as to which there is a disqualifying
disposition, the basis for the new shares will be equal to the fair
market value of the delivered shares at the time they were originally
purchased, (or at the time any forfeiture restrictions applicable to
those share lapsed), and the capital gain holding period for these
shares will include the period for which the delivered shares were held
(measured from their original purchase date or (if later) from the
lapse date of any forfeiture restriction applicable to those shares).
(ii) To the extent the number of purchased
shares exceeds the number of delivered shares, the additional shares
will have a zero basis and a capital gain holding period measured (in
general) from the exercise date.
T10. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF AN
INCENTIVE OPTION IN THE FORM OF SHARES OF COMMON STOCK (I)
ACQUIRED UNDER AN INCENTIVE OPTION AND HELD FOR THE REQUISITE
HOLDING PERIODS, (II) ACQUIRED UNDER A NON-STATUTORY OPTION OR
(III) ACQUIRED THROUGH OPEN-MARKET PURCHASES?
If the exercise price for the Incentive Option is paid with
shares of Common Stock (i) acquired under an Incentive Option and held for the
requisite minimum holding periods for a qualifying disposition, (ii) acquired
under a Non-Statutory Option or (iii) acquired through open-market purchases,
you will not recognize any taxable income (other than as described in the
"Alternative Minimum Tax" section below) with respect to the shares of Common
Stock purchased upon exercise of the Incentive Option. To the extent the
purchased shares equal in number the shares of Common Stock delivered in payment
of the exercise price, the new shares will have the same basis and holding
period for capital gain purposes as the delivered shares. To the extent the
number of purchased shares exceeds the number of delivered shares, the
additional shares will have a zero basis and a capital gain holding period
measured (in general) from the exercise date.
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T11. WHAT ARE THE CONSEQUENCES OF A SUBSEQUENT DISPOSITION OF
SHARES PURCHASED UNDER AN INCENTIVE OPTION WITH SHARES OF
COMMON STOCK?
If the Incentive Option is exercised with shares of Common
Stock, then those shares purchased under the Incentive Option which have a zero
basis will be treated as the first shares sold or otherwise transferred in a
disqualifying disposition. Accordingly, upon such a disqualifying disposition,
you will recognize ordinary income with respect to the zero basis shares in an
amount equal to their fair market value on the date the option was exercised for
those shares. Any additional gain upon such disqualifying disposition will in
most instances be taxed as short-term capital gain.
NON-STATUTORY OPTIONS
T12. WILL THE GRANT OF A NON-STATUTORY OPTION RESULT IN FEDERAL
INCOME TAX LIABILITY TO ME?
No.
T13. WILL THE EXERCISE OF A NON-STATUTORY OPTION RESULT IN FEDERAL
INCOME TAX LIABILITY TO ME?
Normally, you will recognize ordinary income in the year in
which the Non-Statutory Option is exercised in an amount equal to the excess of
(i) the fair market value of the purchased shares on the exercise date over (ii)
the exercise price paid for those shares. This income will be reported by the
Corporation on your W-2 wage statement for the year of exercise (or on a Form
1099 if you are not an employee), and you will be required to satisfy the tax
withholding requirements applicable to this income.
T14. WILL I RECOGNIZE ADDITIONAL INCOME WHEN I SELL SHARES ACQUIRED
UNDER A NON-STATUTORY OPTION?
Yes. You will recognize a capital gain to the extent the
amount realized upon the sale of such shares exceeds their fair market value at
the time you recognized the ordinary income with respect to their acquisition. A
capital loss will result to the extent the amount realized upon the sale is less
than such fair market value. The gain or loss will be long-term if the shares
are held for more than one (1) year prior to the disposition. (Please see
Question T17 below for tax rates applicable to capital gain.) The holding period
will normally start at the time the Non-Statutory Option is exercised.
T15. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF A
NON-STATUTORY OPTION IN THE FORM OF SHARES OF COMMON STOCK
PREVIOUSLY ACQUIRED UPON THE EXERCISE OF EMPLOYEE OPTIONS OR
THROUGH OPEN-MARKET PURCHASES?
You will not recognize any taxable income to the extent the
shares of Common Stock received upon the exercise of the Non-Statutory Option
equal in number the shares of Common Stock delivered in payment of the exercise
price. For Federal income tax purposes, these newly-acquired shares will have
the same basis and capital gain holding period as the delivered shares. To the
extent the delivered shares were acquired under an Incentive Option, the new
shares received upon the exercise of the Non-Statutory Option will continue to
be subject to taxation as Incentive Option shares in accordance with the
Incentive Option principles discussed above.
The additional shares of Common Stock received upon the
exercise of the Non-Statutory Option will, in general, have to be reported as
ordinary income for the year of exercise in an amount equal to their fair market
value on the exercise date. These additional shares will have a tax basis equal
to such fair market value and a capital gain holding period measured (in
general) from the exercise date.
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T16. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?
The Corporation will be entitled to an income tax deduction
equal to the amount of ordinary income you recognize in connection with the
exercise of the Non-Statutory Option. The deduction will, in general, be allowed
for the taxable year of the Corporation in which you recognize such ordinary
income.
FEDERAL TAX RATES
T17. WHAT ARE THE APPLICABLE FEDERAL TAX RATES?
REGULAR TAX RATES. Effective for the 2000 calendar year,
ordinary income in excess of $288,350 ($144,175 for a married taxpayer filing a
separate return) will be subject to the maximum federal income tax rate of
39.6%. The applicable $288,350 or $144,175 threshold is subject to
cost-of-living adjustments in taxable years beginning after December 31, 2000.
Certain limitations are imposed upon a taxpayer's itemized deductions, and the
personal exemptions claimed by the taxpayer are subject to phase-out. These
limitations may result in the taxation of ordinary income at an effective top
marginal rate in excess of 39.6%.
CAPITAL GAIN TAX RATES. Short-term capital gains are subject
to the same tax rates as ordinary income. Long-term capital gain is subject to a
maximum federal income tax rate of 20%, provided the capital asset is held for
more than one (1) year prior to sale or other taxable disposition.
Beginning in 2001, capital gain recognized on the sale or
disposition of capital assets held for more than five (5) years by individuals
whose tax rate on ordinary income for the year of such sale or disposition is
below 28% will be subject to tax at a rate of 8%.
Beginning in 2006, capital gain recognized on the sale or
disposition of capital assets held for more than five (5) years by individuals
whose tax rate on ordinary income for the year of such sale or disposition is
28% or more will be taxed at a rate of 18%, provided the holding period for such
property begins after December 31, 2000. However, any capital gain recognized on
the sale or disposition of shares of the Corporation's common stock acquired
pursuant to options granted under the Discretionary Option Grant Program will
not be eligible for the 18% tax rate unless those options are granted after
December 31, 2000.
ITEMIZED DEDUCTIONS. For the tax year ending December 31,
2000, itemized deductions are reduced by 3% of the amount by which the
taxpayer's adjusted gross income for the year exceeds $128,950 ($64,475 for a
married taxpayer filing a separate return). However, the reduction may not
exceed 80% of the total itemized deductions (excluding medical expenses,
casualty and theft losses, and certain investment interest expense) claimed by
the taxpayer. The applicable $128,950 or $64,475 threshold is subject to
cost-of-living adjustments in taxable years beginning after December 31, 2000.
PERSONAL EXEMPTIONS. In addition, the deduction for personal
exemptions claimed by the taxpayer is reduced by 2% for each $2,500 ($1,250 for
a married taxpayer filing a separate return) or fraction thereof by which the
taxpayer's adjusted gross income for the year exceeds a specified threshold
amount. The applicable thresholds for 2000 are $193,400 for married taxpayers
filing joint returns (and in certain instances, surviving spouses), $161,150 for
heads of households, $128,950 for single taxpayers and $96,700 for married
taxpayers filing separate returns. Accordingly, the deduction is completely
eliminated for any taxpayer whose adjusted gross income for the year exceeds the
applicable threshold amount by more than $122,500. The threshold amounts will be
subject to cost-of-living adjustments in taxable years beginning after December
31, 2000.
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ALTERNATIVE MINIMUM TAX
T18. WHAT IS THE ALTERNATIVE MINIMUM TAX ?
The alternative minimum tax is an alternative method of
calculating the income tax you must pay each year in order to assure that a
minimum amount of tax is paid for the year. The first $175,000 ($87,500 for a
married taxpayer filing a separate return) of your alternative minimum taxable
income for the year over the allowable exemption amount is subject to
alternative minimum taxation at the rate of 26%. The balance of your alternative
minimum taxable income is subject to alternative minimum taxation at the rate of
28%. However, the portion of your alternative minimum taxable income
attributable to capital gain recognized upon the sale or disposition of capital
assets held for more than one (1) year will be subject to a reduced alternative
minimum tax rate of 20% (10% for individuals whose tax rate on ordinary income
is below 28%). Beginning in 2001, the alternative minimum tax rate applicable to
capital gain recognized upon the sale or disposition of capital assets held for
more than five (5) years will be equal to the capital gain tax rate in effect
for such gain for regular tax purposes (see Question T17 above). The alternative
minimum tax will, however, be payable only to the extent that it exceeds your
regular federal income tax for the year (computed without regard to certain
credits and special taxes).
T19. WHAT IS THE ALLOWABLE EXEMPTION AMOUNT?
The allowable exemption amount is $45,000 for a married
taxpayer filing a joint return, $33,750 for an unmarried taxpayer and $22,500
for a married taxpayer filing a separate return. The allowable exemption amount
is, however, to be reduced by $0.25 for each $1.00 by which the individual's
alternative minimum taxable income for the year exceeds $150,000 for a married
taxpayer filing a joint return, $112,500 for an unmarried taxpayer, and $75,000
for a married taxpayer filing a separate return.
T20. HOW IS THE ALTERNATIVE MINIMUM TAXABLE INCOME CALCULATED?
Your alternative minimum taxable income is based upon your
regular taxable income for the year, adjusted to (i) include certain additional
items of income and tax preference and (ii) disallow or limit certain deductions
otherwise allowable for regular tax purposes.
T21. IS THE SPREAD ON AN INCENTIVE OPTION AT THE TIME OF EXERCISE
NORMALLY INCLUDIBLE IN ALTERNATIVE MINIMUM TAXABLE INCOME?
Yes. The spread on the shares purchased under an Incentive
Option (the excess of the fair market value of the purchased shares at the time
of exercise over the aggregate exercise price paid for those shares) is normally
included in the optionee's alternative minimum taxable income at the time of
exercise, whether or not the shares are subsequently made the subject of a
disqualifying disposition.
T22. HOW WILL THE PAYMENT OF ALTERNATIVE MINIMUM TAXES IN ONE YEAR
AFFECT THE CALCULATION OF MY TAX LIABILITY IN A LATER YEAR?
If alternative minimum taxes are paid for one or more taxable
years, a portion of those taxes (subject to certain adjustments and reductions)
will be applied as a partial credit against your regular tax liability (but not
alternative minimum tax liability) for subsequent taxable years. In addition,
upon the sale or other disposition of the purchased shares, whether in the year
of exercise or in any subsequent taxable year, your basis for computing the gain
for purposes of alternative minimum taxable income (but not regular taxable
income) will include the amount of the Incentive Option spread previously
included in your alternative minimum taxable income.
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CORPORATION INFORMATION AND ANNUAL PLAN INFORMATION
CollegeClub.com, Inc. is a Delaware corporation which
maintains its principal executive offices at 3420 Ocean Park Boulevard, Suite
1040, Santa Monica, California 94045. The telephone number at the executive
offices is (310) 581-7200. You may contact the Corporation at this address or
telephone number for further information concerning the Plan and its
administration.
A copy of the Corporation's Annual Report to Stockholders for
each fiscal year will be furnished to each participant in the Plan, and
additional copies will be furnished without charge to each participant upon
written or oral request to the Corporate Secretary of the Corporation at its
principal executive office or upon telephoning the Corporation at its principal
executive office. In addition, any person receiving a copy of this Prospectus
may obtain without charge, upon written or oral request to the Corporate
Secretary, a copy of any of the documents listed below, which are hereby
incorporated by reference into this Prospectus, other than certain exhibits to
such documents.
(a) The Corporation's Registration Statement No. 333-________
on Form S-1 filed with the SEC on March ______, 2000,
together with the amendments filed thereto on Form S-1/A on
_________, 2000, _____________, 2000 and ______________,
2000, respectively.
(b) The Corporation's Prospectus filed with the SEC on
__________________, 2000 pursuant to Rule 424(b) of the
Securities Act of 1933, as amended, in connection with the
Corporation's Registration Statement No. 333-_______, in
which there is set forth the audited financial statements for
the Corporation's fiscal year ended December 31, 1999.
(c) The Corporation's Registration Statement on Form 8-A12G
filed with the SEC on ___________, 2000, in which are
described the terms, rights and provisions applicable to the
Corporation's outstanding Common Stock.
The Corporation will also deliver to each participant in the
Plan who does not otherwise receive such materials a copy of all reports, proxy
statements and other communications distributed to the Corporation's
stockholders.
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EXHIBIT 10.30
COLLEGECLUB.COM, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board (or the board
of directors of any Parent or Subsidiary) and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee,
as of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in accordance
with Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY.
(a) This option shall be neither transferable nor
assignable by Optionee other than by will or the laws of inheritance following
Optionee's death and may be exercised, during Optionee's lifetime, only by
Optionee. However, Optionee may designate one or more persons as the beneficiary
or beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding this option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation) the limited time
period during which this option may, pursuant to Paragraph 5, be exercised
following Optionee's death.
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(b) If this option is designated a Non-Statutory
Option in the Grant Notice, then this option may be assigned in whole or in part
during Optionee's lifetime to one or more members of Optionee's family or to a
trust established for the exclusive benefit of one or more such family members
or to Optionee's former spouse, to the extent such assignment is in connection
with the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.
4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(a) Should Optionee cease to remain in Service for
any reason (other than death, Permanent Disability or Misconduct) while holding
this option, then Optionee shall have a period of three (3) months (commencing
with the date of such cessation of Service) during which to exercise this
option, but in no event shall this option be exercisable at any time after the
Expiration Date.
(b) Should Optionee die while holding this option,
then the personal representative of Optionee's estate or the person or persons
to whom the option is transferred pursuant to Optionee's will or the laws of
inheritance shall have the right to exercise this option. However, if Optionee
has designated one or more beneficiaries of this option, then those persons
shall have the exclusive right to exercise this option following Optionee's
death. Any such right to exercise this option shall lapse, and this option shall
cease to be outstanding, upon the EARLIER of (i) the expiration of the twelve
(12)-month period measured from the date of Optionee's death or (ii) the
Expiration Date.
(c) Should Optionee cease Service by reason of
Permanent Disability while holding this option, then Optionee shall have a
period of twelve (12) months (commencing with the date of such cessation of
Service) during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more than
the number of Option Shares for which the option is exercisable at the time of
Optionee's cessation of Service. Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate and
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cease to be outstanding for any exercisable Option Shares for which the option
has not been exercised. However, this option shall, immediately upon Optionee's
cessation of Service for any reason, terminate and cease to be outstanding with
respect to any Option Shares for which this option is not otherwise at that time
exercisable.
(e) Should Optionee's Service be terminated for
Misconduct or should Optionee otherwise engage in any Misconduct while this
option is outstanding, then this option shall terminate immediately and cease to
remain outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) This option, to the extent outstanding at the
time of a Corporate Transaction but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of such Corporate Transaction, become exercisable for all of the
Option Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully vested shares of Common Stock. However, this
option shall NOT become exercisable on such an accelerated basis, if and to the
extent: (i) this option is, in connection with the Corporate Transaction, to be
assumed by the successor corporation (or parent thereof) or (ii) this option is
to be replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Corporate Transaction on any
Option Shares for which this option is not otherwise at that time exercisable
(the excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent payout in
accordance with the same option exercise/vesting schedule for those Option
Shares set forth in the Grant Notice.
(b) Immediately following the Corporate Transaction,
this option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.
(c) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, PROVIDED the aggregate Exercise Price shall remain the same. To
the extent the actual holders of the Corporation's outstanding Common Stock
receive cash consideration for their Common Stock in consummation of the
Corporate Transaction, the successor corporation may, in connection with the
assumption of this option, substitute one or more shares of its own common stock
with a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Corporate Transaction.
(d) This Agreement shall not in any way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
3
<PAGE>
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to
the Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not
have any stockholder rights with respect to the Option Shares until such person
shall have exercised the option, paid the Exercise Price and become a holder of
record of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to
all or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:
(i) Execute and deliver to the Corporation a
Notice of Exercise for the Option Shares for which the option is
exercised.
(ii) Pay the aggregate Exercise Price for
the purchased shares in one or more of the following forms:
(A) cash or check made payable to
the Corporation;
(B) a promissory note payable to
the Corporation, but only to the extent authorized by the Plan
Administrator in accordance with Paragraph 13;
(C) shares of Common Stock held by
Optionee (or any other person or persons exercising the
option) for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
(D) through a special sale and
remittance procedure pursuant to which Optionee (or any other
person or persons exercising the option) shall concurrently
provide irrevocable instructions (i) to a
Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all
4
<PAGE>
applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (ii) to the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise,
payment of the Exercise Price must accompany the Notice of
Exercise delivered to the Corporation in connection with the
option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of
the Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns, the legal representatives, heirs and
legatees of Optionee's estate and any beneficiaries of this option designated by
Optionee.
5
<PAGE>
12. NOTICES. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on the
Grant Notice. All notices shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares (to the extent such Exercise
Price is in excess of the par value of those shares) by delivering a
full-recourse promissory note payable to the Corporation. The terms of any such
promissory note (including the interest rate, the requirements for collateral
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion.
14. CONSTRUCTION. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the terms of the Plan. All decisions of the Plan Administrator
with respect to any question or issue arising under the Plan or this Agreement
shall be conclusive and binding on all persons having an interest in this
option.
15. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may without stockholder approval be issued under the Plan, then this
option shall be void with respect to those excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the
event this option is designated an Incentive Option in the Grant Notice, the
following terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable
tax treatment as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares: (A) more than three (3) months after
the date Optionee ceases to be an Employee for any reason other than death or
Permanent Disability or (B) more than twelve (12) months after the date Optionee
ceases to be an Employee by reason of Permanent Disability.
(b) No installment under this option shall qualify
for favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock
for which such installment first becomes exercisable hereunder would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of the Common Stock or other securities for which this option or any other
6
<PAGE>
Incentive Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand
Dollar ($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year as a
Non-Statutory Option.
(c) Should the exercisability of this option be
accelerated upon a Corporate Transaction, then this option shall qualify for
favorable tax treatment as an Incentive Option only to the extent the aggregate
Fair Market Value (determined at the Grant Date) of the Common Stock for which
this option first becomes exercisable in the calendar year in which the
Corporate Transaction occurs does not, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common Stock or
other securities for which this option or one or more other Incentive Options
granted to Optionee prior to the Grant Date (whether under the Plan or any other
option plan of the Corporation or any Parent or Subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. Should the applicable One Hundred Thousand Dollar
($100,000) limitation be exceeded in the calendar year of such Corporate
Transaction, the option may nevertheless be exercised for the excess shares in
such calendar year as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this option,
one or more other options to purchase Common Stock which become exercisable for
the first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
7
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify CollegeClub.com, Inc. (the "Corporation")
that I elect to purchase ______________ shares of the Corporation's Common
Stock (the "Purchased Shares") at the option exercise price of $ ____________
per share (the "Exercise Price") pursuant to that certain option (the
"Option") granted to me under the Corporation's 2000 Stock Incentive Plan on
_________________, _______.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
____________________, _______
Date
_______________________________________
Optionee
Address:
_______________________________
_______________________________________
Print name in exact manner
it is to appear on the
stock certificate: _______________________________________
Address to which
certificate is to be sent,
if different from address
above:
_______________________________________
_______________________________________
Social Security Number:
_______________________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the
Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. COMMON STOCK shall mean shares of the Corporation's common stock.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all
or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean CollegeClub.com, Inc., a Delaware
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of CollegeClub.com, Inc. which shall by appropriate
action adopt the Plan.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
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K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be deemed
equal to the closing selling price per share of Common Stock on the
date in question, as the price is reported by the National Association
of Securities Dealers on the Nasdaq National Market and published in
THE WALL STREET JOURNAL. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists, or
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in question
on the Stock Exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially quoted
in the composite tape of transactions on such exchange and published in
THE WALL STREET JOURNAL. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
L. GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
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<PAGE>
R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
U. PERMANENT DISABILITY shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
V. PLAN shall mean the Corporation's 2000 Stock Incentive Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
Z. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
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<PAGE>
EXHIBIT 10.31
COLLEGECLUB.COM, INC.
EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of CollegeClub.com, Inc., a Delaware corporation, by providing
eligible employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll deduction-based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to
such terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret
and construe any provision of the Plan and to adopt such rules and regulations
for administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall be limited to
five hundred thousand (500,000) shares.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first trading day of January
each calendar year during the term of the Plan, beginning with calendar year
2001, by an amount equal to one percent (1%) of the total number of shares of
Common Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall any such annual increase exceed
one million two hundred fifty (1,250,000) shares.
C. Should any change be made to the Common Stock by reason of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and class of securities
issuable under the Plan, (ii) the maximum number and class of securities
purchasable per Participant on any one Purchase Date, (iii) the maximum number
and class of securities purchasable in total by all Participants on any one
Purchase Date, (iv) the maximum number
<PAGE>
and/or class of securities by which the share reserve is to increase
automatically each calendar year pursuant to the provisions of Section III.B of
this Article One and (v) the number and class of securities and the price per
share in effect under each outstanding purchase right in order to prevent the
dilution or enlargement of benefits thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under
the Plan through a series of successive offering periods until such time as (i)
the maximum number of shares of Common Stock available for issuance under the
Plan shall have been purchased or (ii) the Plan shall have been sooner
terminated.
B. Each offering period shall be of such duration (not to
exceed twenty-four (24) months) as determined by the Plan Administrator prior to
the start date of such offering period. However, the initial offering period
shall commence at the Effective Time and terminate on the last business day in
April 2002. The next offering period shall commence on the first business day in
May 2002, and subsequent offering periods shall commence as designated by the
Plan Administrator.
C. Each offering period shall consist of a series of one or
more successive Purchase Intervals. Purchase Intervals shall run from the first
business day in May to the last business day in October each year and from the
first business day in November each year to the last business day in April in
the following year. However, the first Purchase Interval in effect under the
initial offering period shall commence at the Effective Time and terminate on
the last business day in October 2000.
D. Should the Fair Market Value per share of Common Stock on
any Purchase Date within an offering period be less than the Fair Market Value
per share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new offering
period shall have a duration of twenty (24) months, unless a shorter duration is
established by the Plan Administrator within five (5) business days following
the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start
date of any offering period under the Plan may enter that offering period on
such start date or on any subsequent Semi-Annual Entry Date within that offering
period, provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee
after the start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.
2.
<PAGE>
C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.
D. To participate in the Plan for a particular offering
period, the Eligible Employee must complete the enrollment forms prescribed by
the Plan Administrator (including a stock purchase agreement and a payroll
deduction authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock during an offering period may be
any multiple of one percent (1%) of the Cash Earnings paid to the Participant
during each Purchase Interval within that offering period, up to a maximum of
fifteen percent (15%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during the
offering period, reduce his or her rate of payroll deduction to become
effective as soon as possible after filing the appropriate form with
the Plan Administrator. The Participant may not, however, effect more
than one (1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement
of any new Purchase Interval within the offering period, increase the
rate of his or her payroll deduction by filing the appropriate form
with the Plan Administrator. The new rate (which may not exceed the
fifteen percent (15%) maximum) shall become effective on the start date
of the first Purchase Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day
administratively feasible following the Participant's Entry Date into the
offering period and shall (unless sooner terminated by the Participant) continue
through the pay day ending with or immediately prior to the last day of that
offering period. The amounts so collected shall be credited to the Participant's
book account under the Plan, but no interest shall be paid on the balance from
time to time outstanding in such account. The amounts collected from the
Participant shall not be required to be held in any segregated account or trust
fund and may be commingled with the general assets of the Corporation and used
for general corporate purposes.
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
D. The Participant's acquisition of Common Stock under the
Plan on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date, whether within the
same or a different offering period.
3.
<PAGE>
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHTS. A Participant shall be granted a
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under
the Plan to any Eligible Employee if such individual would, immediately after
the grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall
be automatically exercised in installments on each successive Purchase Date
within the offering period, and shares of Common Stock shall accordingly be
purchased on behalf of each Participant on each such Purchase Date. The purchase
shall be effected by applying the Participant's payroll deductions for the
Purchase Interval ending on such Purchase Date to the purchase of whole shares
of Common Stock at the purchase price in effect for the Participant for that
Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which
Common Stock will be purchased on the Participant's behalf on each Purchase Date
within the offering period shall be equal to eighty-five percent (85%) of the
lower of (i) the Fair Market Value per share of Common Stock on the
Participant's Entry Date into that offering period or (ii) the Fair Market Value
per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of
Common Stock purchasable by a Participant on each Purchase Date during the
offering period shall be the number of whole shares obtained by dividing the
amount collected from the Participant through payroll deductions during the
Purchase Interval ending with that Purchase Date by the purchase price in effect
for the Participant for that Purchase Date. However, the maximum number of
shares of Common Stock purchasable per Participant on any one Purchase Date
shall not exceed one thousand two hundred fifty (1,250) shares, subject to
periodic adjustments in the event of certain changes in the Corporation's
capitalization. In addition, the maximum number of shares of Common Stock
purchasable in total by all Participants on any one Purchase Date shall not
exceed one hundred fifty thousand (150,000) shares, subject to periodic
adjustments in the event of certain changes in the Corporation's capitalization.
However, the Plan Administrator shall have the discretionary authority,
exercisable prior to the start of any offering period under the Plan, to
increase or decrease the limitations to be in effect for the number of shares
purchasable per Participant and in total by all Participants on each Purchase
Date during that offering period.
4.
<PAGE>
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not
applied to the purchase of shares of Common Stock on any Purchase Date because
they are not sufficient to purchase a whole share of Common Stock shall be held
for the purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable per Participant or in
total by all Participants on the Purchase Date shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions
shall govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next
scheduled Purchase Date in the offering period, terminate his or her
outstanding purchase right by filing the appropriate form with the Plan
Administrator (or its designate), and no further payroll deductions
shall be collected from the Participant with respect to the terminated
purchase right. Any payroll deductions collected during the Purchase
Interval in which such termination occurs shall, at the Participant's
election, be immediately refunded or held for the purchase of shares on
the next Purchase Date. If no such election is made at the time such
purchase right is terminated, then the payroll deductions collected
with respect to the terminated right shall be refunded as soon as
possible.
(ii) The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
offering period for which the terminated purchase right was granted. In
order to resume participation in any subsequent offering period, such
individual must re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms) on or before his or her scheduled Entry
Date into that offering period.
(iii) Should the Participant cease to remain an
Eligible Employee for any reason (including death, disability or change
in status) while his or her purchase right remains outstanding, then
that purchase right shall immediately terminate, and all of the
Participant's payroll deductions for the Purchase Interval in which the
purchase right so terminates shall be immediately refunded. However,
should the Participant cease to remain in active service by reason of
an approved unpaid leave of absence, then the Participant shall have
the right, exercisable up until the last business day of the Purchase
Interval in which such leave commences, to (a) withdraw all the payroll
deductions collected to date on his or her behalf for that Purchase
Interval or (b) have such funds held for the purchase of shares on his
or her behalf on the next scheduled Purchase Date. In no event,
however, shall any further payroll deductions be collected on the
Participant's behalf during such leave. Upon the Participant's return
to active service (x) within ninety (90) days following the
commencement of such leave or (y) prior to the expiration of any longer
period for which such Participant's right to reemployment with the
Corporation is guaranteed by statute or contract, his or her payroll
deductions under the Plan shall automatically resume at the rate in
5.
<PAGE>
effect at the time the leave began, unless the Participant withdraws
from the Plan prior to his or her return. An individual who returns to
active employment following a leave of absence that exceeds in duration
the applicable (x) or (y) time period will be treated as a new Employee
for purposes of subsequent participation in the Plan and must
accordingly re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms) on or before his or her scheduled Entry
Date into the offering period.
G. CHANGE IN CONTROL. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Interval in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the Participant's Entry Date into the offering period in which such
Change in Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase, but not the limitation
applicable to the maximum number of shares of Common Stock purchasable in total
by all Participants on any one Purchase Date.
The Corporation shall use its best efforts to provide at least
ten (10) days' prior written notice of the occurrence of any Change in Control,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of
shares of Common Stock to be purchased pursuant to outstanding purchase rights
on any particular date exceed the number of shares then available for issuance
under the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only
by the Participant and shall not be assignable or transferable by the
Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to
acquire Common Stock pursuant to any purchase right outstanding under this Plan
if and to the extent such accrual, when aggregated with (i) rights to purchase
Common Stock accrued under any other purchase right granted under this Plan and
(ii) similar rights accrued under other employee stock purchase plans
6.
<PAGE>
(within the meaning of Code Section 423)) of the Corporation or any Corporate
Affiliate, would otherwise permit such Participant to purchase more than
Twenty-Five Thousand Dollars ($25,000.00) worth of stock of the Corporation or
any Corporate Affiliate (determined on the basis of the Fair Market Value per
share on the date or dates such rights are granted) for each calendar year such
rights are at any time outstanding.
B. For purposes of applying such accrual limitations to the
purchase rights granted under the Plan, the following provisions shall be in
effect:
(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue in a series of installments on
each successive Purchase Date during the offering period on which such
right remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
Common Stock under one or more other purchase rights at a rate equal to
Twenty-Five Thousand Dollars ($25,000.00) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the date
or dates of grant) for each calendar year such rights were at any time
outstanding.
C. If by reason of such accrual limitations, any purchase
right of a Participant does not accrue for a particular Purchase Interval, then
the payroll deductions that the Participant made during that Purchase Interval
with respect to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions
of this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on ___________, 2000, and
shall become effective at the Effective Time, provided no purchase rights
granted under the Plan shall be exercised, and no shares of Common Stock shall
be issued hereunder, until (i) the Plan shall have been approved by the
stockholders of the Corporation and (ii) the Corporation shall have complied
with all applicable requirements of the 1933 Act (including the registration of
the shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation. In the event such
stockholder approval is not obtained, or such compliance is not effected, within
twelve (12) months after the date on which the Plan is adopted by the Board, the
Plan shall terminate and have no further force or effect, and all sums collected
from Participants during the initial offering period hereunder shall be
refunded.
7.
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B. Unless sooner terminated by the Board, the Plan shall
terminate upon the earliest of (i) the last business day in April 2010, (ii) the
date on which all shares available for issuance under the Plan shall have been
sold pursuant to purchase rights exercised under the Plan or (iii) the date on
which all purchase rights are exercised in connection with a Change in Control.
No further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.
X. AMENDMENT OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan
at any time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase under the Plan,
should the financial accounting rules applicable to the Plan at the Effective
Time be subsequently revised so as to require the Corporation to recognize
compensation expense in the absence of such amendment or termination.
B. In no event may the Board effect any of the following
amendments or revisions to the Plan without the approval of the Corporation's
stockholders: (i) increase the number of shares of Common Stock issuable under
the Plan, except for permissible adjustments in the event of certain changes in
the Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify the eligibility requirements for participation in
the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of
the Plan shall be paid by the Corporation; however, each Plan Participant shall
bear all costs and expenses incurred by such individual in the sale or other
disposition of any shares purchased under the Plan.
B. Nothing in the Plan shall confer upon the Participant any
right to continue in the employ of the Corporation or any Corporate Affiliate
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Corporate Affiliate employing such
person) or of the Participant, which rights are hereby expressly reserved by
each, to terminate such person's employment at any time for any reason, with or
without cause.
C. The provisions of the Plan shall be governed by the laws of
the State of New York without resort to that State's conflict-of-laws rules.
8.
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SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
CollegeClub.com, Inc.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CASH EARNINGS shall mean (i) the regular base salary paid
to a Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, commissions, profit-sharing distributions and
other incentive-type payments received during such period. Such Cash Earnings
shall be calculated before deduction of (A) any income or employment tax
withholdings or (B) any contributions made by the Participant to any Code
Section 401(k) salary deferral plan or any Code Section 125 cafeteria benefit
program now or hereafter established by the Corporation or any Corporate
Affiliate. However, Cash Earnings shall NOT include any contributions made by
the Corporation or any Corporate Affiliate on the Participant's behalf to any
employee benefit or welfare plan now or hereafter established (other than Code
Section 401(k) or Code Section 125 contributions deducted from such Cash
Earnings).
C. CHANGE IN CONTROL shall mean a change in ownership of the
Corporation pursuant to any of the following transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
(iii) the acquisition, directly or indirectly, by a
person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by or is
under common control with the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders.
D. CODE shall mean the Internal Revenue Code of 1986, as
amended.
E. COMMON STOCK shall mean the Corporation's common stock.
A-1.
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F. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
G. CORPORATION shall mean CollegeClub.com, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of CollegeClub.com, Inc. that shall by appropriate action
adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the
Underwriting Agreement is executed and the Common Stock priced for the initial
public offering of such Common Stock. Any Corporate Affiliate that becomes a
Participating Corporation after such Effective Time shall designate a subsequent
Effective Time with respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by
a Participating Corporation on a basis under which he or she is regularly
expected to render more than twenty (20) hours of service per week for more than
five (5) months per calendar year for earnings considered wages under Code
Section 3401 (a).
J. ENTRY DATE shall mean the date an Eligible Employee first
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market and published in THE WALL STREET
JOURNAL. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange and published in THE
WALL STREET JOURNAL. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(iii) For purposes of the initial offering period
that begins at the Effective Time, the Fair Market Value shall be
deemed to be equal to the price per share at which the Common Stock is
sold in the initial public offering pursuant to the Underwriting
Agreement.
A-2.
<PAGE>
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. PARTICIPANT shall mean any Eligible Employee of a
Participating Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and
such Corporate Affiliate or Affiliates as may be authorized from time to time by
the Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
O. PLAN shall mean the Corporation's Employee Stock Purchase
Plan, as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or
more Board members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each
Purchase Interval. The initial Purchase Date shall be October 31, 2000.
R. PURCHASE INTERVAL shall mean each successive six (6)-month
period within the offering period at the end of which there shall be purchased
shares of Common Stock on behalf of each Participant.
S. SEMI-ANNUAL ENTRY DATE shall mean the first business day in
May and November each year on which an Eligible Employee may first enter an
offering period.
T. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-3.
<PAGE>
EXHIBIT 10.32
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this ___ day of __________,
2000 between CollegeClub.com, Inc., a Delaware corporation ("Corporation"),
whose address is 1010 Second Avenue, Suite 600, San Diego, California 92101 and
__________________ ("Director"), whose address is_____________________________.
RECITALS:
A. WHEREAS, Director, a member of the Board of Directors of
Corporation (the "Board"), performs a valuable service in such capacity for
Corporation; and
B. WHEREAS, the stockholders of Corporation have adopted Bylaws
(the "Bylaws") providing for the indemnification of the officers, directors,
agents and employees of Corporation to the maximum extent authorized by Section
145 of the Delaware General Corporation Law, as amended (the "Law"); and
C. WHEREAS, the Bylaws and the Law, as amended and in effect from
time to time or any successor or other statutes of Delaware having similar
import and effect, currently purport to be the controlling law governing
Corporation with respect to certain aspects of corporate law, including
indemnification of directors and officers; and
D. WHEREAS, in accordance with the authorization provided by the
Law, Corporation may from time to time purchase and maintain a policy or
policies of Directors and Officers Liability Insurance ("D & O Insurance"),
covering certain liabilities which may be incurred by its directors and officers
in the performance of services as directors and officers of Corporation; and
E. WHEREAS, as a result of developments affecting the terms,
scope and availability of D & O Insurance there exists general uncertainty as to
the extent and overall desirability of protection afforded members of the Board
of Directors by such D & O Insurance, if any, and whereas there exists general
uncertainty as to statutory and bylaw indemnification provisions; and
F. WHEREAS, in order to induce Director to continue to serve as a
member of the Board, Corporation has determined and agreed to enter into this
contract with Director.
NOW, THEREFORE, in consideration of Director's continued service as a
director after the date hereof, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. The following terms used in this
Agreement shall have the meanings set forth below. Other terms are defined where
appropriate in this Agreement.
(a) "DISINTERESTED DIRECTOR" shall mean a director of
Corporation who is not or was not a party to the Proceeding in respect of which
indemnification is being sought by Director.
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(b) "EXPENSES" shall include all direct and indirect
costs (including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
all other disbursements or out-of-pocket expenses and reasonable compensation
for time spent by Director for which he or she is otherwise not compensated by
Corporation) actually and reasonably incurred in connection with a Proceeding or
establishing or enforcing a right to indemnification under this Agreement,
applicable law or otherwise; provided, however, that "Expenses" shall not
include any Liabilities.
(c) "FINAL ADVERSE DETERMINATION" shall mean that a
determination that Director is not entitled to indemnification shall have been
made pursuant to Section 5 hereof and either (i) a final adjudication in a
Delaware court or decision of an arbitrator pursuant to Section 13(a) hereof
shall have denied Director's right to indemnification hereunder, or (ii)
Director shall have failed to file a complaint in a Delaware court or seek an
arbitrator's award pursuant to Section 13(a) for a period of one hundred twenty
(120) days after the determination made pursuant to Section 5 hereof.
(d) "INDEPENDENT LEGAL COUNSEL" shall mean a law firm or
member of a law firm selected by Corporation and approved by Director (which
approval shall not be unreasonably withheld) and that neither is presently nor
in the past five years has been retained to represent: (i) Corporation, in any
material matter, or (ii) any other party to the Proceeding giving rise to a
claim for indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Legal Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either Corporation or Director in a
Proceeding to determine Director's right to indemnification under this
Agreement.
(e) "LIABILITIES" shall mean liabilities of any type
whatsoever including, but not limited to, any judgments, fines, ERISA excise
taxes and penalties, and penalties and amounts paid in settlement (including all
interest assessments and other charges paid or payable in connection with or in
respect of such judgments, fines, penalties or amounts paid in settlement) of
any Proceeding (as defined below).
(f) "PROCEEDING" shall mean any threatened, pending or
completed action, claim, suit, arbitration, alternative dispute resolution
mechanism, investigation, administrative hearing or any other proceeding whether
civil, criminal, administrative or investigative, including any appeal
therefrom.
(g) "CHANGE OF CONTROL" shall mean the occurrence of any
of the following events after the date of this Agreement:
(i) A change in the composition of the Board, as
a result of which fewer than two-thirds (2/3) of the incumbent directors are
directors who either (1) had been directors of Corporation twenty-four (24)
months prior to such change or (2) were elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the directors who
had been directors of Corporation 24 months prior to such change and who were
still in office at the time of the election or nomination; or
2
<PAGE>
(ii) Any "person" (as such term is used in
section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
through the acquisition or aggregation of securities is or becomes the
beneficial owner, directly or indirectly, of securities of Corporation
representing twenty percent (20%) or more of the combined voting power of
Corporation's then outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at elections of
directors (the "Capital Stock"), except that any change in ownership of
Corporation's securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Capital Stock, and any decrease
thereafter in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of Corporation.
2. INDEMNITY OF DIRECTOR. Subject only to the exclusions set
forth in Section 4 hereof, Corporation hereby agrees to hold harmless and
indemnify Director against any and all Liabilities in connection with any
Proceeding (including an action by or in the right of Corporation) to which
Director is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Director is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise to the fullest extent authorized or permitted
by the provisions of the Law, as may be amended from time to time.
3. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth
in Section 4 hereof, Corporation hereby further agrees to hold harmless and
indemnify Director:
(a) against any and all Expenses in connection with any
Proceeding (including an action by or in the right of Corporation) to which
Director is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Director is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Director by Corporation under the non-exclusivity provisions of the Bylaws of
Corporation and the Law.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which the Director is
indemnified pursuant to Section 2 hereof or reimbursed pursuant to any D & O
Insurance purchased and maintained by Corporation;
(b) in respect of remuneration paid to Director if it
shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any Proceeding in which judgment is
rendered against Director for an accounting of profits made from the purchase or
sale by Director of securities of
3
<PAGE>
Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(d) on account of a Final Adverse Determination that
Director's conduct was knowingly fraudulent or deliberately dishonest or
constituted willful misconduct;
(e) provided there has been no Change of Control, on
account of or arising in response to any Proceeding (other than a Proceeding
referred to in Section 10(b) hereof) initiated by Director or any of Director's
affiliates against Corporation or any officer, director or stockholder of
Corporation unless such Proceeding was authorized in the specific case by action
of the Board of Directors of Corporation;
(f) if a final decision by a Court having jurisdiction in
the matter shall determine that such indemnification is not lawful; or
(g) on account of any Proceeding to the extent that
Director is a plaintiff, a counter-complainant or a cross-complainant therein
(other than a Proceeding permitted by Section 4(e) hereof).
5. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) Whenever Director believes that he or she is entitled
to indemnification pursuant to this Agreement, Director shall submit a written
request for indemnification to Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Director to support his or her claim for indemnification. Director shall submit
his or her claim for indemnification within a reasonable time not to exceed five
years after any judgment, order, settlement, dismissal, arbitration award,
conviction, acceptance of a plea of nolo contendere or its equivalent, final
termination or other disposition or partial disposition of any Proceeding,
whichever is the later date for which Director requests indemnification. The
President, Secretary or other appropriate officer shall, promptly upon receipt
of Director's request for indemnification, advise the Board in writing that
Director has made such a request. Determination of Director's entitlement to
indemnification shall be made not later than ninety (90) days after
Corporation's receipt of his or her written request for such indemnification.
(b) The Director shall be entitled to select the forum in
which Director's request for indemnification will be heard, which selection
shall be included in the written request for indemnification required in Section
5(a). This forum shall be any one of the following:
(i) The stockholders of Corporation;
(ii) A quorum of the Board consisting of
Disinterested Directors;
(iii) Independent Legal Counsel, who shall make
the determination in a written opinion; or
(iv) A panel of three arbitrators, one selected
by Corporation, another by Director and the third by the first two arbitrators
selected. If for any reason three arbitrators
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<PAGE>
are not selected within thirty (30) days after the appointment of the first
arbitrator, then selection of additional arbitrators shall be made by the
American Arbitration Association. If any arbitrator resigns or is unable to
serve in such capacity for any reason, the American Arbitration Association
shall select his or her replacement. The arbitration shall be conducted pursuant
to the commercial arbitration rules of the American Arbitration Association now
in effect.
If Director fails to make such designation, his or her claim shall be
determined by the forum selected by Corporation.
6. PRESUMPTION AND EFFECT OF CERTAIN PROCEEDINGS. Upon making a
request for indemnification, Director shall be presumed to be entitled to
indemnification under this Agreement and Corporation shall have the burden of
proof to overcome that presumption in reaching any contrary determination. The
termination of any Proceeding by judgment, order, settlement, arbitration award
or conviction, or upon a plea of nolo contendere or its equivalent shall not
affect this presumption or, except as may be provided in Section 4 hereof,
establish a presumption with regard to any factual matter relevant to
determining Director's rights to indemnification hereunder. If the person or
persons so empowered to make a determination pursuant to Section 5(b) hereof
shall have failed to make the requested determination within thirty (30) days
after any judgment, order, settlement, dismissal, arbitration award, conviction,
acceptance of a plea of nolo contendere or its equivalent, or other disposition
or partial disposition of any Proceeding or any other event which could enable
Corporation to determine Director's entitlement to indemnification, the
requisite determination that Director is entitled to indemnification shall be
deemed to have been made.
7. CONTRIBUTION. If the indemnification provided in Sections 2
and 3 is unavailable and may not be paid to Director for any reason other than
those set forth in Section 4, then in respect of any Proceeding in which
Corporation is or is alleged to be jointly liable with Director (or would be if
joined in such Proceeding), Corporation shall contribute to the amount of
Expenses and Liabilities paid or payable by Director in such proportion as is
appropriate to reflect (i) the relative benefits received by Corporation on the
one hand and Director on the other hand from the transaction from which such
Proceeding arose, and (ii) the relative fault of Corporation on the one hand and
of Director on the other hand in connection with the events which resulted in
such Expenses and Liabilities, as well as any other relevant equitable
considerations. The relative fault of Corporation on the one hand and of
Director on the other shall be determined by reference to, among other things,
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent the circumstances resulting in such Expenses and
Liabilities. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
8. INSURANCE AND FUNDING. Corporation hereby represents and
warrants that it shall purchase and maintain insurance to protect itself and/or
Director against any Expenses and Liabilities in connection with any Proceeding
to the fullest extent permitted by the Law.
9. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall be effective as of the date Director became a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer,
5
<PAGE>
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise) and shall continue thereafter so long
as Director shall be subject to any possible Proceeding, by reason of the fact
that Director was serving Corporation or such other entity in any capacity
referred to herein.
10. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by
Director of notice of the commencement of any Proceeding, Director will, if a
claim in respect thereof is to be made against Corporation under this Agreement,
notify Corporation of the commencement thereof; but the omission so to notify
Corporation will not relieve it from any liability which it may have to Director
otherwise than under this Agreement. With respect to any Proceeding as to which
Director notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein
at its own expense;
(b) Except as otherwise provided below, to the extent
that it may wish, Corporation jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Director. After notice from Corporation to Director
of its election to assume the defense thereof, Corporation will not be liable to
Director under this Agreement for any Expenses subsequently incurred by Director
in connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Director shall have the right to
employ his or her own counsel in such Proceeding but the Expenses associated
with the employment of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Director unless
(i) the employment of counsel by Director has been authorized by Corporation,
(ii) Director shall have reasonably concluded that there may be a conflict of
interest between Corporation and Director in the conduct of the defense of such
Proceeding or (iii) Corporation shall not in fact have employed counsel to
assume the defense of such Proceeding, in each of which cases the Expenses of
Director's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any Proceeding brought by or on
behalf of Corporation or as to which Director shall have made the conclusion
provided for in (ii) above; and
(c) Provided there has been no Change of Control,
Corporation shall not be liable to indemnify Director under this Agreement for
any amounts paid in settlement of any Proceeding effected without its written
consent, which consent shall not be unreasonably withheld. Corporation shall be
permitted to settle any Proceeding except that it shall not settle any
Proceeding in any manner which would impose any penalty, out-of-pocket
liability, or limitation on Director without Director's written consent.
11. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Director employs his or her own
counsel pursuant to Section 10(b)(i) through (iii) above, Corporation shall
advance to Director, prior to any final disposition of any Proceeding any and
all Expenses incurred in investigating or defending any such Proceeding within
ten (10) days after receiving copies of invoices presented to Director for such
Expenses.
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(b) Director agrees that Director will reimburse
Corporation for all Expenses paid by Corporation in defending any Proceeding
against Director in the event and only to the extent that there has been a Final
Adverse Determination that Director is not entitled, under the provisions of the
Law, the Bylaws, this Agreement or otherwise, to be indemnified by Corporation
for such Expenses.
12. REMEDIES OF DIRECTOR.
(a) In the event that (i) a determination pursuant to
Section 5 hereof is made that Director is not entitled to indemnification, (ii)
advances of Expenses are not made pursuant to this Agreement, (iii) payment has
not been timely made following a determination of entitlement to indemnification
pursuant to this Agreement, or (iv) Director otherwise seeks enforcement of this
Agreement, Director shall be entitled to a final adjudication in an appropriate
court of his or her rights. Alternatively, Director at his or her option may
seek an award in arbitration to be conducted by a single arbitrator pursuant to
the commercial arbitration rules of the American Arbitration Association now in
effect, whose decision is to be made within ninety (90) days following the
filing of the demand for arbitration. The Corporation shall not oppose
Director's right to seek any such adjudication or arbitration award.
(b) In the event that a determination that Director is
not entitled to indemnification, in whole or in part, has been made pursuant to
Section 5 hereof, the decision in the judicial proceeding or arbitration
provided in paragraph (a) of this Section 12 shall be made de novo and Director
shall not be prejudiced by reason of a determination that he or she is not
entitled to indemnification.
(c) If a determination that Director is entitled to
indemnification has been made pursuant to Section 5 hereof or otherwise pursuant
to the terms of this Agreement, Corporation shall be bound by such determination
in the absence of (i) a misrepresentation of a material fact by Director or (ii)
a specific finding (which has become final) by an appropriate court that all or
any part of such indemnification is expressly prohibited by law.
(d) In any court proceeding pursuant to this Section 12,
Corporation shall be precluded from asserting that the procedures and
presumptions of this Agreement are not valid, binding and enforceable. The
Corporation shall stipulate in any such court or before any such arbitrator that
Corporation is bound by all the provisions of this Agreement and is precluded
from making any assertion to the contrary.
(e) Expenses reasonably incurred by Director in
connection with his or her request for indemnification under this Agreement,
enforcement of this Agreement or to recover damages for breach of this Agreement
shall be borne by Corporation.
(f) Corporation and Director agree herein that a monetary
remedy for breach of this Agreement, at some later date, will be inadequate,
impracticable and difficult to prove, and further agree that such breach would
cause Director irreparable harm. Accordingly, Corporation and Director agree
that Director shall be entitled to temporary and permanent injunctive relief to
enforce this Agreement without the necessity of proving actual damages or
irreparable harm. The Corporation and Director further agree that Director shall
be entitled to
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such injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, without the necessity of posting bond or
other undertaking in connection therewith. Any such requirement of bond or
undertaking is hereby waived by Corporation, and Corporation acknowledges that
in the absence of such a waiver, a bond or undertaking may be required by the
court.
13. ENFORCEMENT. Corporation expressly confirms and agrees that it
has entered into this Agreement and assumed the obligations imposed on
Corporation hereby in order to induce Director to continue as a director of
Corporation, and acknowledges that Director is relying upon this Agreement in
continuing in such capacity.
14. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any or
all of the provisions hereof shall be held to be invalid or unenforceable to any
extent for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof, or the obligation of
the Corporation to indemnify the Director to the full extent provided by the
Bylaws or the Law, and the affected provision shall be construed and enforced so
as to effectuate the parties' intent to the maximum extent possible.
15. GOVERNING LAW. This Agreement shall be governed by and
interpreted and enforced in accordance with the internal laws of the State of
Delaware.
16. CONSENT TO JURISDICTION. The Corporation and Director each
irrevocably consent to jurisdiction of the courts of the State of Delaware for
all purposes in connection with any Proceeding which arises out of or relates to
this Agreement and agree that any Proceeding instituted under this Agreement
shall be brought only in the state courts of the State of Delaware.
17. BINDING EFFECT. This Agreement shall be binding upon Director
and upon Corporation, its successors and assigns, and shall inure to the benefit
of Director, his or her heirs, executors, administrators, personal
representatives and assigns and to the benefit of Corporation, its successors
and assigns.
18. ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties hereto and there are no other agreements,
contracts or understandings between the parties hereto with respect to the
subject matter of this Agreement, except as specifically referred to herein.
This Agreement supersedes any and all agreements regarding indemnification
heretofore entered into by the parties.
19. AMENDMENT AND TERMINATION. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be effective for any purpose
unless set forth in writing signed by both parties hereto.
20. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
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21. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Director by
this Agreement shall not be exclusive of any other right which Director may have
or hereafter acquire under any statute, provision of Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
22. SURVIVAL OF RIGHTS. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of Corporation or such other entity.
23. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be addressed to Director
or to Corporation, as the case may be, at the address shown on page 1 of this
Agreement, or to such other address as may have been furnished by either party
to the other, and shall be deemed to have been duly given if (a) delivered by
hand and receipted for by the party to whom said notice or other communication
shall have been directed, or (b) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
DIRECTOR: CollegeClub.com, Inc.,
a Delaware corporation
By:
- ------------------------------ -------------------------------
Its:
------------------------------
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EXHIBIT 10.33
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this ___ day of _________, 2000
between CollegeClub.com, Inc., a Delaware corporation ("Corporation"), whose
address is 1010 Second Avenue, Suite 600, San Diego, California 92101 and
__________________ ("Officer"), whose address is
__________________________________.
RECITALS:
A. WHEREAS, Officer, an officer of Corporation (but not currently
a member of the Board of Directors of Corporation (the "Board")), performs a
valuable service in such capacity for Corporation; and
B. WHEREAS, the stockholders of Corporation have adopted Bylaws
(the "Bylaws") providing for the indemnification of the officers, directors,
agents and employees of Corporation to the maximum extent authorized by Section
145 of the Delaware General Corporation Law, as amended (the "Law"); and
C. WHEREAS, the Bylaws and the Law, as amended and in effect from
time to time or any successor or other statutes of Delaware having similar
import and effect, currently purport to be the controlling law governing
Corporation with respect to certain aspects of corporate law, including
indemnification of directors and officers; and
D. WHEREAS, in accordance with the authorization provided by the
Law, Corporation may from time to time purchase and maintain a policy or
policies of Directors and Officers Liability Insurance ("D & O Insurance"),
covering certain liabilities which may be incurred by its directors and officers
in the performance of services as directors and officers of Corporation; and
E. WHEREAS, as a result of developments affecting the terms,
scope and availability of D & O Insurance there exists general uncertainty as to
the extent and overall desirability of protection afforded officers by such D &
O Insurance, if any, and whereas there exists general uncertainty as to
statutory and bylaw indemnification provisions; and
F. WHEREAS, in order to induce Officer to continue to serve as an
officer of Corporation, Corporation has determined and agreed to enter into this
contract with Officer.
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. The following terms used in this
Agreement shall have the meanings set forth below. Other terms are defined where
appropriate in this Agreement.
(a) "DISINTERESTED DIRECTOR" shall mean a director of
Corporation who is not or was not a party to the Proceeding in respect of which
indemnification is being sought by Officer.
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(b) "EXPENSES" shall include all direct and indirect
costs (including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
all other disbursements or out-of-pocket expenses and reasonable compensation
for time spent by Officer for which he or she is otherwise not compensated by
Corporation) actually and reasonably incurred in connection with a Proceeding or
establishing or enforcing a right to indemnification under this Agreement,
applicable law or otherwise; provided, however, that "Expenses" shall not
include any Liabilities.
(c) "FINAL ADVERSE DETERMINATION" shall mean that a
determination that Officer is not entitled to indemnification shall have been
made pursuant to Section 5 hereof and either (i) a final adjudication in a
Delaware court or decision of an arbitrator pursuant to Section 13(a) hereof
shall have denied Officer's right to indemnification hereunder, or (ii) Officer
shall have failed to file a complaint in a Delaware court or seek an
arbitrator's award pursuant to Section 13(a) for a period of one hundred twenty
(120) days after the determination made pursuant to Section 5 hereof.
(d) "INDEPENDENT LEGAL COUNSEL" shall mean a law firm or
member of a law firm selected by Corporation and approved by Officer (which
approval shall not be unreasonably withheld) and that neither is presently nor
in the past five years has been retained to represent: (i) Corporation, in any
material matter, or (ii) any other party to the Proceeding giving rise to a
claim for indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Legal Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either Corporation or Officer in a
Proceeding to determine Officer's right to indemnification under this Agreement.
(e) "LIABILITIES" shall mean liabilities of any type
whatsoever including, but not limited to, any judgments, fines, ERISA excise
taxes and penalties, and penalties and amounts paid in settlement (including all
interest assessments and other charges paid or payable in connection with or in
respect of such judgments, fines, penalties or amounts paid in settlement) of
any Proceeding (as defined below).
(f) "PROCEEDING" shall mean any threatened, pending or
completed action, claim, suit, arbitration, alternative dispute resolution
mechanism, investigation, administrative hearing or any other proceeding whether
civil, criminal, administrative or investigative, including any appeal
therefrom.
(g) "CHANGE OF CONTROL" shall mean the occurrence of any
of the following events after the date of this Agreement:
(i) A change in the composition of the Board, as
a result of which fewer than two-thirds (2/3) of the incumbent directors are
directors who either (1) had been directors of Corporation twenty-four (24)
months prior to such change or (2) were elected, or nominated for election, to
the Board with the affirmative votes of at least a majority of the directors who
had been directors of Corporation 24 months prior to such change and who were
still in office at the time of the election or nomination; or
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(ii) Any "person" (as such term is used in
section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
through the acquisition or aggregation of securities is or becomes the
beneficial owner, directly or indirectly, of securities of Corporation
representing twenty percent (20%) or more of the combined voting power of
Corporation's then outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at elections of
directors (the "Capital Stock"), except that any change in ownership of
Corporation's securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Capital Stock, and any decrease
thereafter in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of Corporation.
2. INDEMNITY OF OFFICER. Subject only to the exclusions set forth
in Section 4 hereof, Corporation hereby agrees to hold harmless and indemnify
Officer against any and all Liabilities in connection with any Proceeding
(including an action by or in the right of Corporation) to which Officer is, was
or at any time becomes a party, or is threatened to be made a party, by reason
of the fact that Officer is, was or at any time becomes a director, officer,
employee or agent of Corporation, or is or was serving or at any time serves at
the request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise to the fullest extent authorized or permitted by the provisions of
the Law, as may be amended from time to time.
3. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth
in Section 4 hereof, Corporation hereby further agrees to hold harmless and
indemnify Officer:
(a) against any and all Expenses in connection with any
Proceeding (including an action by or in the right of Corporation) to which
Officer is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Officer is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Officer by Corporation under the non-exclusivity provisions of the Bylaws of
Corporation and the Law.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which the Officer is
indemnified pursuant to Section 2 hereof or reimbursed pursuant to any D & O
Insurance purchased and maintained by Corporation;
(b) in respect of remuneration paid to Officer if it
shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any Proceeding in which judgment is
rendered against Officer for an accounting of profits made from the purchase or
sale by Officer of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
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(d) on account of a Final Adverse Determination that
Officer's conduct was knowingly fraudulent or deliberately dishonest or
constituted willful misconduct;
(e) provided there has been no Change of Control, on
account of or arising in response to any Proceeding (other than a Proceeding
referred to in Section 10(b) hereof) initiated by Officer or any of Officer's
affiliates against Corporation or any officer, director or stockholder of
Corporation unless such Proceeding was authorized in the specific case by action
of the Board;
(f) if a final decision by a Court having jurisdiction in
the matter shall determine that such indemnification is not lawful; or
(g) on account of any Proceeding to the extent that
Officer is a plaintiff, a counter-complainant or a cross-complainant therein
(other than a Proceeding permitted by Section 4(e) hereof).
5. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) Whenever Officer believes that he or she is entitled
to indemnification pursuant to this Agreement, Officer shall submit a written
request for indemnification to Corporation. Any request for indemnification
shall include sufficient documentation or information reasonably available to
Officer to support his or her claim for indemnification. Officer shall submit
his or her claim for indemnification within a reasonable time not to exceed five
years after any judgment, order, settlement, dismissal, arbitration award,
conviction, acceptance of a plea of nolo contendere or its equivalent, final
termination or other disposition or partial disposition of any Proceeding,
whichever is the later date for which Officer requests indemnification. The
President, Secretary or other appropriate officer shall, promptly upon receipt
of Officer's request for indemnification, advise the Board in writing that
Officer has made such a request. Determination of Officer's entitlement to
indemnification shall be made not later than ninety (90) days after
Corporation's receipt of his or her written request for such indemnification.
(b) The Officer shall be entitled to select the forum in
which Officer's request for indemnification will be heard, which selection shall
be included in the written request for indemnification required in Section 5(a).
This forum shall be any one of the following:
(i) The stockholders of Corporation;
(ii) A quorum of the Board consisting of
Disinterested Directors;
(iii) Independent Legal Counsel, who shall make
the determination in a written opinion; or
(iv) A panel of three arbitrators, one
selected by Corporation, another by Officer and the third by the first two
arbitrators selected. If for any reason three arbitrators are not selected
within thirty (30) days after the appointment of the first arbitrator, then
selection of additional arbitrators shall be made by the American Arbitration
Association. If any arbitrator resigns or is unable to serve in such capacity
for any reason, the American Arbitration
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Association shall select his or her replacement. The arbitration shall be
conducted pursuant to the commercial arbitration rules of the American
Arbitration Association now in effect.
If Officer fails to make such designation, his or her claim shall be
determined by the forum selected by Corporation.
6. PRESUMPTION AND EFFECT OF CERTAIN PROCEEDINGS. Upon making a
request for indemnification, Officer shall be presumed to be entitled to
indemnification under this Agreement and Corporation shall have the burden of
proof to overcome that presumption in reaching any contrary determination. The
termination of any Proceeding by judgment, order, settlement, arbitration award
or conviction, or upon a plea of nolo contendere or its equivalent shall not
affect this presumption or, except as may be provided in Section 4 hereof,
establish a presumption with regard to any factual matter relevant to
determining Officer's rights to indemnification hereunder. If the person or
persons so empowered to make a determination pursuant to Section 5(b) hereof
shall have failed to make the requested determination within thirty (30) days
after any judgment, order, settlement, dismissal, arbitration award, conviction,
acceptance of a plea of nolo contendere or its equivalent, or other disposition
or partial disposition of any Proceeding or any other event which could enable
Corporation to determine Officer's entitlement to indemnification, the requisite
determination that Officer is entitled to indemnification shall be deemed to
have been made.
7. CONTRIBUTION. If the indemnification provided in Sections 2
and 3 is unavailable and may not be paid to Officer for any reason other than
those set forth in Section 4, then in respect of any Proceeding in which
Corporation is or is alleged to be jointly liable with Officer (or would be if
joined in such Proceeding), Corporation shall contribute to the amount of
Expenses and Liabilities paid or payable by Officer in such proportion as is
appropriate to reflect (i) the relative benefits received by Corporation on the
one hand and Officer on the other hand from the transaction from which such
Proceeding arose, and (ii) the relative fault of Corporation on the one hand and
of Officer on the other hand in connection with the events which resulted in
such Expenses and Liabilities, as well as any other relevant equitable
considerations. The relative fault of Corporation on the one hand and of Officer
on the other shall be determined by reference to, among other things, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent the circumstances resulting in such Expenses and Liabilities.
Corporation agrees that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation or any other
method of allocation which does not take account of the foregoing equitable
considerations.
8. INSURANCE AND FUNDING. Corporation hereby represents and
warrants that it shall purchase and maintain insurance to protect itself and/or
Officer against any Expenses and Liabilities in connection with any Proceeding
to the fullest extent permitted by the Law.
9. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall be effective as of the date the Officer
became a director, officer, employee or agent of Corporation (or is or was
serving at the request of Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise) and shall continue thereafter so long as Officer shall be
subject to any
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possible Proceeding, by reason of the fact that Officer was serving Corporation
or such other entity in any capacity referred to herein.
10. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by
Officer of notice of the commencement of any Proceeding, Officer will, if a
claim in respect thereof is to be made against Corporation under this Agreement,
notify Corporation of the commencement thereof; but the omission so to notify
Corporation will not relieve it from any liability which it may have to Officer
otherwise than under this Agreement. With respect to any Proceeding as to which
Officer notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein
at its own expense;
(b) Except as otherwise provided below, to the extent
that it may wish, Corporation jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Officer. After notice from Corporation to Officer of
its election to assume the defense thereof, Corporation will not be liable to
Officer under this Agreement for any Expenses subsequently incurred by Officer
in connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Officer shall have the right to
employ his or her own counsel in such Proceeding but the Expenses associated
with the employment of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Officer unless
(i) the employment of counsel by Officer has been authorized by Corporation,
(ii) Officer shall have reasonably concluded that there may be a conflict of
interest between Corporation and Officer in the conduct of the defense of such
Proceeding or (iii) Corporation shall not in fact have employed counsel to
assume the defense of such Proceeding, in each of which cases the Expenses of
Officer's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any Proceeding brought by or on
behalf of Corporation or as to which Officer shall have made the conclusion
provided for in (ii) above; and
(c) Provided there has been no Change of Control,
Corporation shall not be liable to indemnify Officer under this Agreement for
any amounts paid in settlement of any Proceeding effected without its written
consent, which consent shall not be unreasonably withheld. Corporation shall be
permitted to settle any Proceeding except that it shall not settle any
Proceeding in any manner which would impose any penalty, out-of-pocket
liability, or limitation on Officer without Officer's written consent.
11. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Officer employs his or her own
counsel pursuant to Section 10(b)(i) through (iii) above, Corporation shall
advance to Officer, prior to any final disposition of any Proceeding any and all
Expenses incurred in investigating or defending any such Proceeding within ten
(10) days after receiving copies of invoices presented to Officer for such
Expenses.
(b) Officer agrees that Officer will reimburse
Corporation for all Expenses paid by Corporation in defending any Proceeding
against Officer in the event and only to the
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extent that there has been a Final Adverse Determination that Officer is not
entitled, under the provisions of the Law, the Bylaws, this Agreement or
otherwise, to be indemnified by Corporation for such Expenses.
12. REMEDIES OF OFFICER.
(a) In the event that (i) a determination pursuant to
Section 5 hereof is made that Officer is not entitled to indemnification, (ii)
advances of Expenses are not made pursuant to this Agreement, (iii) payment has
not been timely made following a determination of entitlement to indemnification
pursuant to this Agreement, or (iv) Officer otherwise seeks enforcement of this
Agreement, Officer shall be entitled to a final adjudication in an appropriate
court of his or her rights. Alternatively, Officer at his or her option may seek
an award in arbitration to be conducted by a single arbitrator pursuant to the
commercial arbitration rules of the American Arbitration Association now in
effect, whose decision is to be made within ninety (90) days following the
filing of the demand for arbitration. The Corporation shall not oppose Officer's
right to seek any such adjudication or arbitration award.
(b) In the event that a determination that Officer is not
entitled to indemnification, in whole or in part, has been made pursuant to
Section 5 hereof, the decision in the judicial proceeding or arbitration
provided in paragraph (a) of this Section 12 shall be made de novo and Officer
shall not be prejudiced by reason of a determination that he or she is not
entitled to indemnification.
(c) If a determination that Officer is entitled to
indemnification has been made pursuant to Section 5 hereof or otherwise pursuant
to the terms of this Agreement, Corporation shall be bound by such determination
in the absence of (i) a misrepresentation of a material fact by Officer or (ii)
a specific finding (which has become final) by an appropriate court that all or
any part of such indemnification is expressly prohibited by law.
(d) In any court proceeding pursuant to this Section 12,
Corporation shall be precluded from asserting that the procedures and
presumptions of this Agreement are not valid, binding and enforceable. The
Corporation shall stipulate in any such court or before any such arbitrator that
Corporation is bound by all the provisions of this Agreement and is precluded
from making any assertion to the contrary.
(e) Expenses reasonably incurred by Officer in connection
with his or her request for indemnification under this Agreement, enforcement of
this Agreement or to recover damages for breach of this Agreement shall be borne
by Corporation.
(f) Corporation and Officer agree herein that a monetary
remedy for breach of this Agreement, at some later date, will be inadequate,
impracticable and difficult to prove, and further agree that such breach would
cause Officer irreparable harm. Accordingly, Corporation and Officer agree that
Officer shall be entitled to temporary and permanent injunctive relief to
enforce this Agreement without the necessity of proving actual damages or
irreparable harm. The Corporation and Officer further agree that Officer shall
be entitled to such injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, without the necessity of
posting bond or other undertaking in connection therewith. Any such
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requirement of bond or undertaking is hereby waived by Corporation, and
Corporation acknowledges that in the absence of such a waiver, a bond or
undertaking may be required by the court.
13. ENFORCEMENT. Corporation expressly confirms and agrees that it
has entered into this Agreement and assumed the obligations imposed on
Corporation hereby in order to induce Officer to continue as an officer of
Corporation, and acknowledges that Officer is relying upon this Agreement in
continuing in such capacity.
14. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any or
all of the provisions hereof shall be held to be invalid or unenforceable to any
extent for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof, or the obligation of
the Corporation to indemnify the Officer to the full extent provided by the
Bylaws or the Law, and the affected provision shall be construed and enforced so
as to effectuate the parties' intent to the maximum extent possible.
15. GOVERNING LAW. This Agreement shall be governed by and
interpreted and enforced in accordance with the internal laws of the State of
Delaware.
16. CONSENT TO JURISDICTION. The Corporation and Officer each
irrevocably consent to jurisdiction of the courts of the State of Delaware for
all purposes in connection with any Proceeding which arises out of or relates to
this Agreement and agree that any Proceeding instituted under this Agreement
shall be brought only in the state courts of the State of Delaware.
17. BINDING EFFECT. This Agreement shall be binding upon Officer
and upon Corporation, its successors and assigns, and shall inure to the benefit
of Officer, his or her heirs, executors, administrators, personal
representatives and assigns and to the benefit of Corporation, its successors
and assigns.
18. ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties hereto and there are no other agreements,
contracts or understandings between the parties hereto with respect to the
subject matter of this Agreement, except as specifically referred to herein.
This Agreement supersedes any and all agreements regarding indemnification
heretofore entered into by the parties.
19. AMENDMENT AND TERMINATION. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be effective for any purpose
unless set forth in writing signed by both parties hereto.
20. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
21. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Officer by this
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of
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stockholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office.
22. SURVIVAL OF RIGHTS. The rights conferred on Officer by this
Agreement shall continue after Officer has ceased to be a director, officer,
employee or other agent of Corporation or such other entity.
23. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be addressed to Officer
or to Corporation, as the case may be, at the address shown on page 1 of this
Agreement, or to such other address as may have been furnished by either party
to the other, and shall be deemed to have been duly given if (a) delivered by
hand and receipted for by the party to whom said notice or other communication
shall have been directed, or (b) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
OFFICER: CollegeClub.com, Inc.,
a Delaware corporation
By:
- ------------------------------ -------------------------------
Its:
------------------------------
10
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated February 11, 2000, except as to Note 16, which is as of
April 18, 2000, relating to the financial statements and financial statement
schedule of CollegeClub.com, our report dated February 18, 2000, except as to
Note 10, which is as of April 18, 2000 relating to the financial statements
of Versity.com and our report dated November 5, 1999 relating to the
financial statements of Collegestudent.com, which appear in such Registration
Statement. We also consent to references to us under the headings "Experts"
and "Selected Consolidated Financial Data" in such Registration Statement.
PricewaterhouseCoopers LLP
San Diego, California
April 18, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COLLEGECLUB.COM, INC. CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF
OPERATIONS AT DECEMBER 31, 1999 AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 24,740
<SECURITIES> 0
<RECEIVABLES> 1,404
<ALLOWANCES> 155,000
<INVENTORY> 0
<CURRENT-ASSETS> 31,153
<PP&E> 5,776
<DEPRECIATION> 1,551
<TOTAL-ASSETS> 56,374
<CURRENT-LIABILITIES> 6,484
<BONDS> 0
61,223
0
<COMMON> 20
<OTHER-SE> (12,706)
<TOTAL-LIABILITY-AND-EQUITY> 56,374
<SALES> 2,913
<TOTAL-REVENUES> 2,913
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 28,265
<LOSS-PROVISION> 155
<INTEREST-EXPENSE> 537
<INCOME-PRETAX> (25,540)
<INCOME-TAX> 0
<INCOME-CONTINUING> (25,540)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,540)
<EPS-BASIC> (1.56)
<EPS-DILUTED> (1.56)
</TABLE>
